This is the fifth annual report of the Guidelines Monitoring Group (the “Group”) and provides a summary of the private equity industry’s conformity with the Guidelines for Disclosure and Transparency in Private Equity (the “Guidelines”) following their introduction in November 2007.

The Group was established in March 2008 to monitor conformity with the Guidelines and make recommendations to the British Private Equity and Venture Capital Association (the “BVCA”) for changes to the Guidelines if required. The Group performs oversight for, and aims to guide, the industry in improving transparency and disclosure.

Key findings

• The number of portfolio companies covered by these Guidelines increased by one to seventy-nine in 2012, with the number of private equity firms falling by three to forty-five.
• Of the sample of thirty-one portfolio companies reviewed by the Group this year, twenty-seven met the enhanced disclosure requirements. n Whilst those portfolio companies previously covered by the Guidelines continued to demonstrate a basic or good level of compliance with the requirements, the quality of narrative disclosures for a new cohort of portfolio companies in the sample was notably lower in comparison. Fifteen portfolio companies were reviewed for the first time this year, of which eleven met the required threshold – a smaller proportion than in previous years.
• The Group is committed to working with portfolio companies to improve their disclosures and strongly encourages standards above the minimum requirements within the Guidelines. Where disclosures were not adequate, we will be writing to companies individually to explain specifically what is required to ensure compliance with the Guidelines as well as where further enhancements can be made.
• Twenty-three of the portfolio companies reviewed made the audited report and accounts available on their websites. The Group continues to reinforce the message that accounts should be readily accessible on the company’s website.
• Portfolio companies maintained a good standard of disclosure for areas such as the identity of the private equity firm, details of board composition, financial position and risks.
• The quality of narrative reporting was benchmarked against trends seen in the FTSE 350. In general, portfolio companies were able to reach a similar level of compliance with the requirements; but the Group recommends that Walker companies aim for best practice, even where this exceeds the standard currently being achieved by the FTSE 350.
• The private equity firms reviewed this year all met the disclosure requirements in the Guidelines and published information including details on their investment approach, UK portfolio companies, and leadership of the firm.
• The Group continues to review the Guidelines to ensure they evolve over time with developments in financial reporting and the industry. The Group is currently reviewing the enterprise value thresholds, changes to narrative reporting being implemented in the UK by regulation and whether a Walker company and/or its sponsor firm(s) should explicitly confirm that they have complied with the Guidelines.