Driving Transparency In Investment Trust Reporting: Key Insights From The FRC Thematic Review

This review by the UK Financial Reporting Council (FRC) in October 2025 looks at how well investment trusts, venture capital trusts and similar listed investment companies explain their finances in their annual reports.

You can view the full report here: Investment trusts, venture capital trusts and similar closed-ended entities

The FRC is not changing the rules. Instead, the review highlights:

• Common issues it has seen in company reports
• Examples of good practice
• What the FRC expects in future reporting

The aim is to help investors better understand company performance, value and risk, especially where investments are difficult to value.

Key messages

Valuation methods:

The review found that some companies use different methods to value different investments (for example, cash flow forecasts or market comparisons).

The FRC expects companies to:

• Clearly describe the valuation methods used
• Show how much of the portfolio uses each method
• Explain any changes in valuation methods and why they were made

This helps investors understand how values are produced, not just the final number.

The strategic report:

The strategic report should be more than positive commentary, the FRC expects the strategic report to contain:

• Clear explanations of performance
• Simple summaries showing how net asset value (NAV) moved during the year
• Discussion of both positive and negative factors

Clear performance measures:

The review found that some companies use non standard performance measures, such as ongoing changes, total return and portfolio value metrics. The FRC found that these measures are sometimes poorly defined, hard to compare and presented as more important than official accounting figures.

The FRC expects companies to:

• Clearly define these measures
• Explain how they are calculated
• Avoid implying they are “better” than standard financial results

Accounting judgements:

The review also found that some companies rely on significant judgement when deciding how to present their investments (for example, whether to treat themselves as an “investment entity”).
Where judgement is important, the FRC highlights that companies could make improvements in the following areas:

• Clearly explain their reasoning
• Use company specific explanations
• Avoid generic or boilerplate wording

Investors need to understand why a particular accounting approach was chosen.

Other areas highlighted:

The FRC also highlights the need for clearer disclosure of:

• Investment manager fees
• Performance fee arrangements
• Future investment commitments
• Any departures from industry best practice guidance

Where information is missing, the FRC highlights that companies could improve their disclosures by clearly explaining why.

What the FRC expects going forward:

• Be clearer
• Be more transparent
• Use numbers as well as narrative
• Explain assumptions, judgement and uncertainty
• Make reports easier for investors to understand

The emphasis is on helping users of accounts understand what is really going on, especially where values rely heavily on assumptions.

The FRC wants investment companies, especially those holding difficult to value assets, to be much clearer and more transparent about how values are calculated, how uncertain they are, and how performance is measured, so investors can make better informed decisions.

For more information please read the FRC review here.