Record Regulatory News (REC)

Record plc

PRESS RELEASE

12 June 2012

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2012

Record plc, the specialist currency manager, today announces its audited results for the year ended 31 March 2012.

Financial highlights:

§ AuME¹ $30.9bn at 31 March 2012 (down 2%)

§ AuME £19.3bn at 31 March 2012 (down 2%)

§ Management fee income of £20.4m (down 27%)

§ Pre-tax profit of £6.7m (down 46%)

§ Financial position remains strong with net assets of £28.6m at 31 March 2012 (2011:£30.1m); net cash of £24.6m (2011: £24.7m)

§ Operating profit margin to 31 March 2012 of 32% compared to 44% for the year ended 31 March 2011

§ Basic EPS of 2.23p per share (2011: 4.03p)

§ Proposed final dividend for the year to 31 March 2012 is 0.75p per share giving a total dividend in respect of the period of 1.50p per share (2011: 4.59p).

¹As a currency manager Record manages only the impact of foreign exchange and not the underlying assets, therefore its "assets under management" are notional rather than real. To distinguish this from the AuM of conventional asset managers, Record uses the concept of Assets under Management Equivalents (AuME) and by convention this is quoted in US dollars

Key Points:

§ Passive hedging AuME grew by 20% in the year - including three new clients

§ Client numbers fell to 41 by 31 March 2012 (2011: 46)

§ Dynamic Hedging continued to perform in line with client expectations

§ Positive investment performance in the year from Active FRB¹ and FRB Index strategies

§ Expanded range of eight products including two hedging and six return seeking strategies, plus a currency multi-strategy capability.

¹FRB =Forward Rate Bias is the observed tendency of higher interest rate currencies' total return to outperform that of lower interest rate currencies.

Commenting on the results, Neil Record, Chairman of Record plc, said:

"The economic backdrop has continued to be one of general risk aversion in financial markets. Against this backdrop it is not surprising that the business has continued to see hedging represent an increasing share of assets and income.

"Whilst overall AuME at the year end were broadly unchanged, the mix of business has seen Passive Hedging increase by 20% when compared to a decrease of 47% in Currency for Return. Our largest fee earning product, Dynamic Hedging, had a mixed year with the loss of a large US client partially offset by the addition of a UK fund. Overall AuME for this product declined by 17% during the period.

"Management fee income fell to £20.4m and as a result the operating margin fell to 32%. The balance sheet had £24.6m cash and no debt at the year end.

"Looking to the current year, we believe we are well positioned to achieve success in hedging, particularly for Passive Hedging in Switzerland. We are encouraged by the progress we have made in the US since we recruited a US sales executive and are hopeful that we will see further progress in the current financial year. Over the medium term we believe that the suite of Currency for Return products we have developed will be attractive to clients once they have established three-year track records. In the 2012/13 financial year our Emerging Market and Forward Rate Bias Index products should reach the three-year milestone."

Analyst briefing

There will be a presentation for analysts at 9.30am on Tuesday 12 June 2012 at the offices of JPMorgan Cazenove Limited at 10 Aldermanbury London EC2V 7RF. A copy of the presentation will be made available on the Group's website at www.recordcm.com.

For further information, please contact:

Record plc: +44 1753 852222

Neil Record - Chairman

James Wood-Collins - Chief Executive Officer

Paul Sheriff - Chief Financial Officer / Chief Operating Officer

MHP Communications +44 20 3128 8100

Nick Denton, John Olsen, Vicky Watkins

Consolidated statement of comprehensive income

YEAR ENDED 31 MARCH

Consolidated statement of financial position

AS AT 31 MARCH

Chairman's Statement

'Overall, hedging represented 80% of our revenue for the year ended 31 March 2012 compared with only 18% of revenue for the year ended 31 March 2009. This shows the considerable change in business mix and challenges the business has faced over the last three years.'

The year to 31 March 2012 has seen both revenues and profitability continue to decline as a result of the changing mix in our business to lower revenue and lower margin hedging products. Whilst overall Assets under Management Equivalents 'AuME' have remained broadly similar to the prior period, the proportion of lower revenue Passive Hedging has increased, offset by falling assets in Dynamic Hedging and Currency for Return products.

The Group is focussed on marketing and selling our expertise to potential clients and progress has been made over the period. The recruitment of a US sales executive has resulted in a substantial increase in marketing activity with potential US clients. We believe that the benefits of this local approach to selling in the US will become evident in the coming years. Similarly in Europe, we have a sales executive in Continental Europe, including Switzerland, where we have had recent success in Passive Hedging.

Over the last couple of years we have expanded the product range considerably and are now able to offer a suite of hedging and return seeking products to both existing and prospective clients. The product offering is now well developed and whilst we continue to look for new and innovative products we anticipate a period of slower product introduction.

Market conditions have remained unstable with the continuation of monetary intervention across the developed world, particularly in the US, the Eurozone and the UK. This has led to a difficult environment, particularly for our forward rate bias strategies. Market conditions have also been less favourable for Dynamic Hedging where certain major currency pairs have traded within relatively narrow ranges during the period as opposed to following strong trending behaviour.

Overall, hedging represented 80% of our revenue for the year ended 31 March 2012 compared with only 18% of revenue for the year ended 31 March 2009. This shows the considerable change in business mix and the challenges the business has faced over the last three years.

Financial performance

The financial performance of the Group saw management fees decrease to £20.4m for the year to 31 March 2012, a decline of 27% compared to the year ended 31 March 2011.

The operating margin, at 32%, was also less than that achieved in the year to 31 March 2011 (44%). As a result of declining profitability, measures are being taken to reduce costs. However, the extent of cost savings that can be implemented is constrained by our need to maintain an appropriate level of support for investment processes and client services. The largest reduction in cost is due to the variable nature of remuneration, whereby the Group Profit Share 'GPS' which is set at an average of 30% of pre-GPS operating profit has reduced in line with profit.

Overall, profit before tax was £6.7m and earnings per share was 2.23p per share. The proposed final dividend is 0.75p per share, which together with the interim dividend, means the total dividend for the year is 1.50p per share. When compared with earning per share of 2.23p, the dividend was 1.5 times covered during the period.

For the current financial year, the Board's current intention, subject to business conditions, is to retain the overall dividend payable at 1.50p per share. In setting the dividend, the Board will be mindful of achieving a level which it expects to be covered by earnings. The Board will defer the interim dividend that would ordinarily have been paid in December 2012 until the final dividend for the year ending 31 March 2013.

Shareholder funds were reduced at the end of the current financial year, principally due to the prior year's final dividend being paid in the period. Overall shareholder funds reduced by 9% to £26.4m. Cash balances were £24.6m, broadly unchanged in the period. The Group has a regulatory capital surplus and has cash reserves equivalent to approximately eighteen months operating costs and no debt.

Aligned incentives

The Group is a people led business and in order to generate revenues from clients and ultimately profits for shareholders, the Group needs to be able to attract and retain talented individuals. Such individuals are typically highly mobile and are highly sought after in a competitive employment market for their skills. To incentivise and motivate these individuals, Record operates a profit share scheme. Since the IPO in 2007, the Board has maintained a scheme which distributes 30% of operating profits over the medium term between all employees of the Group. This profit share is similar to that operated by many investment management businesses, and we believe that it is essential if we are to build a sustainable business for the benefit of shareholders. This aligns the interests of shareholders and employees given that the profit share moves in line with returns to shareholders and further that senior executives are required to take a proportion of this remuneration in the form of shares. In line with the overall Group's performance, the size of the profit share pool has fallen by 75% from that of three years ago, compared to a fall of 74% in earnings per share and a fall of 84% in the share price (based on 31 March 2012 closing price) over the same period.

Whilst we see no reason to fundamentally change the scheme, we will be making a small number of changes to the scheme for the 2012/13 financial year in order to make the scheme more transparent for employees. The intention is to maintain the overall scheme at 30% of operating profits over the medium term distributed between all employees of the Group. The scheme is being separated into two pools, being the Group Profit Share Scheme and a Matching Scheme. The intention is to operate the Group Profit Share Scheme and Matching Scheme at 27% and 3% respectively of pre-GPS operating profits. The Matching Scheme will operate in a similar manner to the current scheme, albeit with the funding being explicitly separate from the 'core' Profit Share Scheme.

In order to recruit at an appropriate level in the US, it was necessary to offer a sales-based incentive to our new US sales executive. The Board considers that it is appropriate to treat this cost as a cost of sale for the current financial year. When combined with the Group Profit Share Scheme and Matching Scheme, it is expected that all payments will remain below 35% of operating profit in most reasonable scenarios.

In response to the continuing decline in financial performance of the Group, each member of the Board took a voluntary ten per cent reduction in base salary from 1 December 2011. From a personal perspective, since the appointment of James Wood-Collins as CEO in October 2010, I have no longer participated in the Group Profit Share scheme. I have also offered to take a more substantial cut in salary from July 2012 to a level commensurate with a non-Executive Chairman. However, I will continue to devote substantially all my time to Record and its clients through this difficult phase for the business.

Group strategy and outlook

The broadening of the product suite is now well advanced and the priority is to reverse the decline in revenue and profitability through the acquisition of new clients. Passive and Dynamic Hedging present the most likely short-term opportunities in the US, UK and Switzerland. The sales and marketing effort is being targeted at those opportunities where there is a higher likelihood of success in the short term.

For the Currency for Return products, we expect the most likely short-term success to be in the emerging market product as the product will complete a three-year live track record in the current financial year. This is seen as a milestone in gaining acceptance for the product, particularly with investment consultants.

In the medium term, the success of one or more of the Currency for Return products is likely to drive growth.

Neil Record

Chairman

Chief Executive Officer's Statement

'Having delivered broader product diversification over the last couple of years, the Group is now focussed on the marketing and sales effort to acquire new clients alongside servicing our existing clients.'

As highlighted in the Chairman's statement, overall AuME have remained broadly stable when compared to the prior year. Passive Hedging AuME have continued to grow. Continued stress in the banking sector and increasing recognition of the benefits of an independent expert mean that our Passive Hedging expertise is being seen as valuable by clients. Whilst both Dynamic Hedging and Currency for Return AuME have fallen, these are for distinct reasons: Dynamic Hedging reflects client-specific decisions, whereas Currency for Return has suffered a market-wide cyclical decline. It is disappointing not to have made more progress with new Dynamic Hedging sales but it is anticipated that the benefit of continued marketing and communication to both consultants and potential clients will become evident in the future. The market for Currency for Return products remains subdued in this 'risk averse' phase of the economic cycle.

The Currency for Return offering has been enhanced through the addition of a multi-strategy approach that offers value and momentum strategies in addition to the established forward rate bias and emerging market strategies. Whilst marketing and selling a return seeking strategy is difficult in a 'risk averse' period, for those clients seeking to make a return from currency the product offering is now a comprehensive and compelling proposition. Furthermore the multi-strategy approach can be used as a flexible 'overlay' to help clients achieve a variety of investment objectives.

During the year we recruited a US sales executive which has resulted in a noticeable increase in the number of prospective meetings that have been held in the US and the level of client and consultant feedback on product development. In the current financial year we will see how these initial client and consultant interactions progress and will be in a better position to judge the likely investor appetite and timing for our products in this market.

The Group's principal products have had another mixed year with Dynamic Hedging seeing a reduction, Passive Hedging seeing an increase and Currency for Return continuing the trend over recent years of seeing significant reductions as detailed below:

Dynamic Hedging is our longest-standing product, with continuous client track records since 1985. AuME saw a decline, falling to $9.9bn at 31 March 2012 (2011: $11.9bn). The change in AuME principally relates to the loss of the second largest US Dynamic Hedging mandate in the year partially offset by the addition of a UK local authority mandate. Income from Dynamic Hedging accounted for 66% of the Group revenue for the year ended 31 March 2012 (2011: 62%).

Passive Hedging, at $18.9bn (2011: $15.7bn), accounts for 61% of AuME at 31 March 2012, and 15% of Group revenue in the year. We believe that our product offering has a number of differentiating features and continue to see a renewed interest in the product, particularly in Switzerland, the UK and Continental Europe.

Currency for Return comprises all the return seeking strategies, totalling $1.8bn at 31 March 2012 (2011: $3.4bn). The two largest components are the forward rate bias strategy ($1.0bn) and emerging market strategies ($0.8bn). In early April 2012, the largest remaining investor in the Active FRB pooled fund (Cash Plus) redeemed its investment. This led to the closure of the fund, with other investors either redeeming or switching into other pooled funds. Record continues to offer pooled funds in FRB Index, Emerging Market and Euro Stress strategies, as well as segregated Active FRB mandates that maintain this product's live track record.

Investment performance

The twelve months to 31 March 2012 have seen notably distinct regimes of market sentiment. The "risk on-risk off" phenomenon, in which assets historically regarded as diversified have shown much higher correlations, emerged during the financial crisis and has persisted through the year. This phenomenon has seen assets perceived as offering expected long-term positive returns in exchange for the assumption of risk by the holder (exemplified by equities) perform positively in "risk on" environments and underperform in "risk off" environments. By contrast assets perceived as offering "safe haven" characteristics in turbulent environments (exemplified by certain Government bonds) perform positively in "risk off" environments and underperform in "risk on" environments. Whilst to some extent certain assets have always exhibited this behaviour, what has been novel and unwelcome throughout this period is this behaviour becoming established as the norm for investment opportunities, rather than the exception, and the highly correlated performance seen across "risk on" or "risk off" assets respectively, regardless of their underlying nature. It remains to be seen how permanent a feature of the investment landscape this phenomenon becomes.

In broad terms, the first four months of the year (April through July) were favourable for risk assets; the next five (August through December) experienced higher levels of risk aversion and volatility in financial markets, and the last quarter (January through March) saw some return to risk appetite.

These regimes of market sentiment affect our various products in different ways. In general terms, hedging can be neither "risk on" nor "risk off", as it is dependent on the investor's base currency. The US Dollar characteristically performs well as a "safe haven" in "risk off" environments (although this needn't be the case when the US economy is itself the source of concern, as was the case in the summer of 2010). Whilst this behaviour persists, hedging for US Dollar clients can be cash-flow positive in "risk-off" environments. Sterling by contrast typically performs better in "risk on" environments - hence a geographically-diversified range of hedging business can provide some diversification of exposure to risk sentiment.

Dynamic Hedging's ability to outperform Passive Hedging is dependent on trending, rather than any measure of risk appetite. Trending has been less prevalent throughout the year than has been the case historically, with certain major currency pairs trading within relatively narrow ranges.

Our longer-established return seeking strategies, the forward rate bias and emerging market currency strategies, are founded in market risk premia, and as such perform more strongly in "risk on" environments. By contrast, value and momentum strategies are founded in market inefficiencies which are more behavioural in nature. As such they are less risk-sensitive, with value strategy returns relatively insensitive to risk sentiment, and momentum strategy returns potentially inversely correlated to risk sentiment. It is precisely this diversification of response to risk sentiment that makes us enthusiastic about the multi-strategy approach.

Finally, the Euro Stress Fund, launched in May 2011, is intended to have an inverse relationship with a specific risk factor, namely that of perceived stress in the Eurozone. This is achieved through a tactical and non-systematic approach predominantly implemented through options and option-like positions established at relatively low cost in periods of low perceived stress, which then increase in value as perceived Eurozone stress rises. The optionality in the fund's holdings offers investors the prospects of an outsized pay-off, with constrained downside.

The year ended 31 March 2012 has therefore seen performance in line with expectations in Dynamic Hedging. Net performance over the year in Currency for Return strategies has depended on the extent to which the balance between "risk on" and "risk off" environments has affected each strategy, such that forward rate bias strategies have generally performed positively, and the systematic emerging market strategy delivered aggregate negative performance over the year.

Product development

The last three years has seen the product offering expand from three strategies at the IPO to the current range of eight strategies, as well as the ability to construct multi-strategy products. This diversification, particularly in the return seeking strategies, now gives the Group a comprehensive range of currency strategies that can be offered to both existing and new clients. Whilst research continues into areas where we believe there are further opportunities, it is anticipated that the product offering will expand at a slower rate in the coming years.

In hedging, work continues on enhancements to the product offering in areas such as trading, counterparty management and changes to the hedging programs where appropriate. The ability to tailor hedging mandates to a client's specific requirements is seen as becoming increasingly important.

The addition of both value and momentum to return seeking strategies gives the Group the opportunity to combine four currency return streams (carry, momentum, value and emerging markets) in different weightings for individual clients based on their risk and return objectives. Over time a range of multi-strategy products could be envisaged that combine these return streams in differing weightings that appeal to particular market segments. Applying the multi-strategy approach as an 'overlay' can help clients achieve a variety of investment objectives such as duration matching and risk budget optimisation.

In the coming financial year, the emerging market product will pass a 'live' three-year track record. This is a key step to gaining momentum in the institutional market place where the running of 'live' money is beneficial. Whilst sales success will depend on investment performance since inception, it is hoped that progress can be made in this strategy in the coming years.

We continue to assess the investment strategy of the Euro Stress Fund in light of the steps taken by Eurozone authorities, such as the European Central Bank's Long Term Refinancing Operations, to introduce more market stability.

Marketing and Distribution

The Group's sales and marketing resources are concentrated on the UK, Europe (in particular Switzerland) and North America. Whilst this does not preclude other geographical opportunities, the Group is less pro-active in these markets.

In the UK, the marketing and distribution is to both pension schemes and also to investment consultants. The UK market has been characterised by almost no activity in Currency for Return and a small number of Request for Proposals (RFPs) for Dynamic Hedging during the year. The Group was successful in securing one mandate for Dynamic Hedging in the middle of 2011 in a more competitive environment. It is too early to ascertain the likely level of demand in the coming financial year and any future mandates will attract an increasing level of competition. Demand for Currency for Return is likely to remain subdued in the current financial year but there are likely to be further opportunities in Passive Hedging.

In Europe, in particular Switzerland, we have seen an increasing level of interest for Passive Hedging. The Group has a strong position in this marketplace, having secured a number of large schemes in recent years. From the start of the current financial year, the Group has a sales executive in Switzerland who had previously been working for the Group in the UK. The Group believes there are further opportunities in this market and that we are well positioned to capitalise on these opportunities.

In the US, the local sales executive has been very active in talking to pension plans and investment consultants that were previously less well-known or unknown to the Group. Whilst US pension plans have previously chosen mainly not to hedge their currency exposure nor to seek a return from currency, currency issues are becoming more important with an increasing level of international exposure aided by the well publicised issues with the Euro. Against this backdrop, it is hoped that sales progress can be made in the coming years. It remains to be seen how quickly sales can be built in the US but the level of demand for the Group's products should become clearer as the current financial year progresses.

In Canada, the Group undertakes marketing to institutional investors and pension plans, largely through the UK-based team. Opportunities over the medium term are expected in both Hedging and Currency for Return products.

James Wood-Collins

Chief Executive Officer

Business Review

The twelve months to 31 March 2012 saw AuME broadly unchanged with hedging representing 93% of AuME and 80% of revenue. Currency for Return products continued to see a decline in AuME representing 6% of AuME and 19% of revenue. Dynamic Hedging continued to perform in line with client expectations. Investment performance for the Active Forward Rate Bias and Forward Rate Bias Index products was positive in the year.

Introduction

The Business Review is a review of the business by management. Its purpose is to provide shareholders with a summary, setting out the business objectives of the Group, the Board's strategy to achieve those objectives, the risks faced, the regulatory and operating environment and the key performance indicators (KPIs) used to measure performance.

Overview

The twelve months to 31 March 2012 saw increasing AuME for Passive Hedging and declining AuME for Dynamic Hedging and Currency for Return. Overall, hedging represented 80% of revenue with Dynamic Hedging representing 66% of revenue. The Group saw broadly stable AuME with decreases in client numbers, revenue and operating profit. The balance sheet of the Group remains strong with substantial cash and capital resources available to the Group.

KPIs

The Board and Executive Committee use a number of key performance indicators (KPIs) to monitor the performance of the Group. A three-year history of these KPIs is shown below.

Table 1 - KPIs

¹Currency Alpha Composite - an investment return track record generated by the aggregation of all standard segregated track records for Record's Active Forward Rate Bias Currency for Return product. The Currency Alpha Composite is asset weighted, based on AuME for each account. Currency Alpha Composite is shown as a KPI for completeness although given the size of the Currency for Return mandates it is no longer seen as a key KPI and will not be included in subsequent years

Summary of highlights

§ AuME were broadly stable at $30.9bn or £19.3bn at the year end.

§ Passive Hedging AuME grew by 20% offset by reductions in Currency for Return of 47% and Dynamic Hedging of 17%.

§ Average AuME decreased by 7% to $29.2bn during the year.

§ Client numbers: this represents the number of separate legal entities that have invested in a Record fund or appointed Record directly as an investment manager. Each entity may have more than one mandate. The number of clients at 31 March 2012 was 41, a fall of 5 over the year.

§ The blended average management fee rate fell from 14.0bps to 11.2bps due to two factors: change in product mix due to both growth of the Passive Hedging product (which has a lower average management fee rate) and the further decline in Currency for Return, and a reduced average Dynamic Hedging management fee rate due to fee changes that took effect during the year.

§ A combination of reduced management fees, offset by reduced profit share cost resulted in an operating profit margin of 32% for the year to 31 March 2012.

§ The excess return of our segregated Alpha Composite, expressed as a percentage of underlying assets on an ungeared basis, was 1.68%.

§ The decrease in operating profit margin is reflected in the fall in the Group's earnings per share to 2.23p per share.

Product review

Investment performance

Our hedging products are systematic in nature. The effectiveness of each of the client mandates is assessed regularly and adjustments are made when necessary in order to respond to changing market conditions or to bring the risk profile of the hedging mandate in line with the client's risk tolerance. The performance of our Dynamic Hedging product depends on how the foreign currencies change in value relative to the base currency of a client.

During the last year, mandates for our US and UK-based Dynamic Hedging clients performed as expected in terms of allowing clients to benefit from periods of strengthening foreign currencies, whilst being protected against periods of weakening foreign currencies. However, the rapid pace at which the market changed from one environment to the other meant that over the year risk management costs built up in excess of long-term expectations. As a consequence, clients experienced negative overall returns from their hedging programmes, as the risk management costs more than offset the hedging profits.

US investors saw gains from currency in the first quarter as the US Dollar weakened, leading to higher US Dollar valuations for foreign currency investments. Record's Dynamic Hedging product performed well in this period, maintaining low hedge ratios and allowing the majority of foreign currency gains to translate into strong US Dollar performance. In the subsequent period however the US Dollar appreciated, taking an uneven path to finish the year stronger. This uneven path required larger and more frequent adjustments to hedge ratios, leading Record's risk management process to generate costs which more than offset hedging gains from a strengthening US Dollar.

UK investors saw a comparable return profile, as Sterling took a volatile path to strengthen modestly against foreign currencies. Risk management costs similarly offset hedging gains, adding to currency underperformance seen in Sterling terms as weakening foreign currencies led to less favourable Sterling valuations for international assets.

Record had four 'live' Currency for Return products in the year. The Active Forward Rate Bias (FRB), Emerging Market and Euro Stress Fund products are active and return seeking in nature, though exploit different market phenomena. The fourth return seeking product, the Forward Rate Bias Index product (Record FTSE FRB10 Index Fund) is a passive return seeking strategy that tracks the FTSE Currency FRB10 index.

For the Active FRB product, the core investment process - the Trend/Forward Rate Bias strategy - aims to buy selected developed market higher interest rate currencies and sell selected lower interest rate currencies and to manage these positions with a view to controlling downside risk. Historically this investment approach has shown positive returns due to the existence of the Forward Rate Bias and trending movements in selected currency pairs, although in the period since the beginning of the credit crunch the returns from the Forward Rate Bias have been negative. The year saw positive returns however, as relatively low interest rate currencies, particularly the Japanese Yen, weakened in the final quarter of the period. A complementary investment process - the Range Trading strategy - consistently added to returns as selected currency pairs mean reverted, generating outperformance.

Similarly, the Forward Rate Bias Index product added value as high interest rate currencies appreciated. Record remains committed to our belief that over time currency and in particular the FRB can be a persistent and uncorrelated source of returns for investors, and that the FRB will continue to generate long-term returns.

Euro area concerns dominated investment sentiment over the period, and as fears surrounding repayment of Greek sovereign debt and possible contagion to other areas of the Eurozone periphery escalated, levels of global risk aversion rose. This risk aversion led to the broad underperformance of emerging market currencies in the middle of the year, and to negative returns in Record's Emerging Market Currency Fund over the year. However, the easing of debt crisis concerns following the European Central Bank's decision to support the banking sector via its long-term refinancing operations (LTRO) and the landmark restructuring of Greek debt, combined with rising commodity prices - supportive of 'commodity currencies' - and improving US economic data generated positive performance in the final quarter.

Record believes that as a result of the convergence in the levels of economic output between emerging and developed markets, emerging market currencies appreciate over time. This currency appreciation has historically been a significant contributor of returns to (developed market) holders of emerging market assets including equities and bonds. We therefore regard emerging market currency strategies as an attractive route through which to implement emerging market local currency debt strategies, offering substantially the same elements of return, with significant implementation benefits including cost, flexibility, and security. This convergence-driven return opportunity combined with the forward rate bias from selection based on interest rate differentials and discretionary risk management, is expected to result in long-term positive performance of the strategy.

Record's Euro Stress Fund aims to add value in the event of rising levels of financial stress within the Euro area. The product performed as expected over the period, responding to developments in the debt crisis, and ultimately underperforming over the partial year to 31 March 2012 as banking sector and sovereign debt concerns eased. Underperformance resulted primarily from declining interest rates on German and Italian debt, and a decrease in the value of currency options as levels of implied volatility dropped towards the end of the year.

Table 2 - Annual returns of Record Umbrella Currency Funds; year to 31 March 2012

¹No volatility data is provided for products with less than 12 months historic data.

²FTSE FRB10 Index Fund return data is since inception in December 2010.

³Emerging Market Currency Fund return data is since inception in December 2010.

4Inception date is 31 December 1987.

5For comparison only.

6Since December 1987.

Gearing

The Currency for Return product group allows clients to pick the level of exposure they desire in the FX currency programmes. The pooled funds have historically offered clients a range of gearing and target volatility levels with either Sterling or US Dollars as the base currency. The segregated mandates allow clients to individually pick the level of gearing.

It should be emphasised that in this case 'gearing' refers to the multiple of the maximum size of the aggregate forward contracts in the currency programme, to the pooled fund's net assets or the segregated mandate size. This is limited by the willingness of counterparty banks to take exposure to the pooled fund or segregated client. Gearing in this context does not involve borrowing.

AuME development

The Group has seen broadly stable AuME of $30.9bn at the year end compared with $31.4bn at the end of the previous year.

Table 3 - AuME development ($bn)

AuME movements result from both factors within Record's control and external factors. External factors include exchange rates and the underlying asset value (usually equities) on which hedging mandates are based. External factors accounted for a decrease of $0.7bn in AuME during the year.

The Group has seen net inflows of $0.2bn from clients. Inflows from both new and existing clients totalled $8.6bn, and were offset by outflows of $8.4bn. Other movements included:

(i) a fall of $0.8bn related to movements in global stock and other markets as many mandate sizes are linked to such markets;

(ii) an increase of $0.1bn due to changes in exchange rates over the period, which affects the conversion of non-US Dollar mandate sizes into US Dollar AuME. This does not have an equivalent impact on the Sterling value of fee income; and

(iii) investment performance in the Group's pooled funds, which is compounded on a geared basis into the AuME of those funds, had no net impact on AuME in the period.

Of these movements, (i) and (ii) are outside the control of the Group. In future periods, the Group will not separately report movements due to investment performance given the overall size of the pooled funds.

When expressed in Sterling, AuME were broadly stable at £19.3bn (2011: £19.6bn). The split of AuME at the year end by base currency was 28% in Sterling, 47% in Swiss Francs, 21% in US Dollars, 2% in Canadian Dollars and 2% in Euros.

Dynamic Hedging mandates saw a decrease of 17% to $9.9bn (2011: $11.9bn). This is mainly the result of a large US client terminating their mandate in November 2011 offset by the addition of a UK client in mid 2011.

Passive Hedging AuME increased by $3.2bn, a 20% increase in the year. This increase was principally due to the combination of two factors: net inflows of $2.9bn, and a growth of $0.2bn in value of the underlying assets, typically international equities, that the hedging programme is established to hedge against. A number of mandates are linked to overall programmes under which an additional Currency for Return or Dynamic Hedging mandate incorporates an element of Passive Hedging.

Record's Currency for Return products are offered on either a segregated mandate basis or through pooled funds, where clients subscribe for units in funds for which Record is the distributor and investment manager. Segregated Currency for Return AuME fell to $1.4bn (2011: $2.2bn) due principally to the net outflows which totalled $0.7bn. Included in the segregated Currency for Return mandates are a small number of mandates for emerging market currencies totalling $0.8bn (2011: $1.1bn). Record's pooled funds experienced significant outflows with AuME falling to $0.4bn (2011: $1.2bn). In April 2012 the largest investor in the remaining Active Forward Rate Bias pooled fund redeemed their investment and as a result the fund has been closed down. In subsequent periods Currency for Return will be reported as one category.

Product mix

The Group's product mix has continued to change over the period due to the AuME movements described above. Hedging AuME have grown to 93% of AuME (2011: 88%), as a result of the growth of the Passive Hedging product, which accounts for 61% of AuME (2011: 50%). Together Currency for Return and Dynamic Hedging represent 38% of AuME (2011: 49%) being higher margin products compared to Passive Hedging. Dynamic Hedging mandates made up 32% of AuME (2011: 38%). Currency for Return pooled funds made up 1% of AuME (2011: 4%) and Currency for Return segregated funds 5% of AuME (2011: 7%). As a result of the decline in the size of the pooled funds, the Group will in future periods report on Currency for Return as an overall category and not separately report on the size of the pooled funds.

At 31 March 2012 Record had 41 clients. The Group has gained a small number of new clients in the year but overall experienced a net loss of 5 clients.

Table 4 - AuME composition by product (US Dollars)

Table 5 - AuME composition by product (Sterling)

Table 6 - AuME composition by product and base currency

Table 7 - AuME by Client type

Table 8 - AuME by client location

Strategy

The strategy of the Group remains largely unchanged even in the current period of strain in financial markets:

§ To focus on delivering sales from the expanded product range;

§ To deliver diversification benefits from the expanded product offering;

§ To increase focus on the US and Switzerland through dedicated sales resource;

§ To exploit opportunities for hedging (Dynamic and Passive) products in the current market environment;

§ To continue to research and enhance our existing products within currency management, including multi-strategy products;

§ To promote sustainable currency strategies and develop a manager-independent asset class - currency 'beta';

§ To maintain and grow Currency for Return, including emerging market currencies; and

§ To continue investment in people and infrastructure.

Market development

Currency solutions

Currency solutions potentially encompass a wide range of activities. This ranges from clients seeking to be educated about currency exposure and solutions through to bespoke and tailored solutions for clients. We continue to engage with existing and prospective clients as a result of currency issues becoming more important, particularly in the US and Switzerland. The sales and marketing initiatives being undertaken by the US sales executive could lead to a number of potentially interesting opportunities for tailored client solutions to their specific currency objectives.

Hedging opportunities

The continuing volatility in exchange rates combined with a period of uncertainty for the Euro has caused investors to think about their strategy for managing exchange rate exposure, particularly in the US and Switzerland. In the US, exposure to international assets continues to increase combined with nervousness over the plight of the Euro. In Switzerland we have seen a renewed interest in Passive Hedging partially due to the interventions that have taken place in the foreign exchange markets. Hedging now represents 93% of AuME and 80% of revenue.

Passive Hedging

We have seen heightened interest in our Passive Hedging product since 2010 and this has resulted in AuME for this product growing every year since 2009. Clients have been attracted to Record by our expertise in delivering tailored hedging programmes, because we offer independent trading relationships and by our ability to manage bank counterparty exposure on behalf of clients.

Dynamic Hedging

Record's Dynamic Hedging programme is an attractive alternative to Passive Hedging that seeks to protect clients when a client's base currency is strong and limit the costs when the base currency is weak. However, the product requires a level of confidence in Record together with a high level of understanding from the investment consultants, investment managers and trustees of a scheme. The level of interest in this product, particularly in the UK, has risen during the past twelve months and there have been a number of formal tendering processes that Record has participated in, securing one new mandate during the year. This increased level of interest has attracted a higher level of competition from existing and new entrants to the UK market. Whilst it is clearly beneficial to have a higher take up of the product, the increasing level of competition presents additional challenges. In the US we continue to market and promote the benefits of Dynamic Hedging as part of the US sales initiative.

The product itself has continued to perform in line with expectations during this period, although with higher risk management costs for clients in both the UK and US, as described in the Investment Performance section of the Business Review.

Currency for Return opportunities

Following a period of product development, Record currently has a suite of six Currency for Return strategies being Active FRB, FRB Index, Emerging Markets, Value, Momentum and Euro Stress. Additionally, Record is able to offer combinations of these strategies under a multi-strategy approach that seeks to vary the allocation to these strategies either on a fixed basis or according to market conditions. Record is able to offer many of these products in either a segregated or pooled fund offering.

At 31 March 2012, Currency for Return AuME principally comprised $1.0bn for the Active FRB and $0.8bn for Emerging Markets. The FRB Index and Euro Stress funds comprised mainly Record seed capital.

Active FRB

Record's established Active FRB strategy saw a year of positive performance. However, the longer term period of negative performance has seen continued outflows over the period and this has culminated in the closure of the last remaining pooled fund running this strategy in April 2012.

The product comprised $0.6bn in segregated accounts and $0.4bn in pooled funds at 31 March 2012. Following the closure of the last remaining pooled fund running this strategy, the product continues to be offered to segregated accounts. The strategy experienced positive investment performance during the year that contrasted with the negative performance over the preceding three years.

FRB Index

One of Record's medium to long-term aims is to develop currency as an asset class in its own right. The 'asset class project', which started in 2009, saw the launch of a second currency index, the FTSE Currency FRB10 Index, in December 2010. Record launched a pooled fund, the Record Currency FTSE FRB10 Index Fund, to track this FTSE index and invested £1m in December 2010. This product also had positive performance during the year and cumulative performance since December 2010 of 7.32%. It is envisaged that a return to more normal monetary policy conditions and a sustained period of positive performance are the precursors to material client demand for this product.

Emerging Market

Record recognises that emerging market currencies offer investors an opportunity to either seek to make a return from emerging market currencies or seek to separate the underlying overseas domestic asset performance (typically equities or bonds) from the currency effect. Record currently has a small number of segregated accounts, totalling $0.8bn of AuME for which an emerging market currency option portfolio and an emerging market currency strategy are implemented. Additionally, a pooled fund product was launched in December 2010 and seeded with a £1m investment from Record.

The Emerging Market currency strategy is approaching three years since 'live' money was invested and had positive performance of 5.25% from inception to 31 March 2012. Being able to demonstrate a three-year track record is seen as important by investment consultants in gaining acceptance of a new product.

Euro Stress

During the year, Record launched a Jersey-based fund that is positioned to generate a return in periods of strain on the European currency union. Record seeded the fund with a £1m investment. In a year in which the Euro has experienced periods of stress and periods of relative calm, the performance of the fund has tracked these sentiments. Whilst the fund initially did well towards the end of 2011, this performance reversed in the first quarter of 2012. This fund is more discretionary in style, and its investment strategy will be kept under review in light of the steps taken by Eurozone authorities to introduce more market stability.

Currency Momentum

Momentum in currency is the tendency of the spot rate to appreciate after a prior appreciation, and to depreciate after a prior depreciation. This market inefficiency has persisted across different currencies and it is present in other asset classes, such as equities. Currency is commonly thought of as trending and a momentum strategy would seek to make a return from this phenomenon.

Currency Value

Research suggests that purchasing power parity (PPP) valuation models have been relatively good predictors of the long-term direction of spot movements. For example, if a currency deviates too much from its equilibrium value (as indicated by PPP), then this deviation will be corrected. The more significant the deviation, the more pressure on the exchange rate to revert to fair value and, consequently, the more rapid the reversion. Currency value strategies exploit this insight, buying currencies that are undervalued relative to PPP and selling currencies that appear overvalued

Product development

Record has now expanded the product offering since IPO from three strategies to eight strategies, including four of the popular systematic Currency for Return strategies in FX, namely: "carry"; "value"; "momentum"; and "emerging markets". Having completed this product diversification the focus has shifted to refining the current products and offering multi-strategy products.

People management

Record's success depends on its ability to attract, retain and motivate highly talented staff.

Recruitment

The recruitment process is carefully structured to ensure that the right people are recruited into the Group. This continues with a comprehensive induction programme for all new joiners to allow them to adapt to the specialist environment within Record.

The Group has continued to recruit very selectively throughout the year in order to maintain a flexible, scalable platform for future growth. The number of employees in the Group declined during the year as a result of allowing natural attrition to reduce headcount in certain departments. Headcount at 31 March 2012 was 65 (2011: 70).

Staff retention and motivation

An effective performance review and objective setting process, personal development planning including the development of career paths, together with our open and involving office culture, are all key priorities in the development and retention of our staff. In addition, the Group Profit Share Scheme promotes the acquisition of equity in the Company by staff, improving both motivation and retention.

Board and management succession

The Board of Directors has remained unchanged through the year. 

Infrastructure development

Record is in the final stages of implementing a new middle and back office system. The system has been thoroughly tested and has been run in parallel with the existing infrastructure since the start of 2012. It is envisaged that the system will go live in the coming months and should deliver the benefits that were intended at the outset of the project for new instruments, deploying new products and portfolios, and delivering an improved level of client service.

Risk management

The Board recognises that risk is inherent in all of its business dealings, and in the markets and instruments in which the Group operates. It therefore places a high priority on ensuring that there is a strong risk management culture within the Group. Effective risk management and strong internal controls are central to the Group's business model and during the year the Group has made further progress in developing this framework.

The Audit and Risk Committee was established to provide oversight and independent challenge in relation to internal control and risk management systems and procedures. The Head of Compliance is responsible for ensuring compliance with appropriate legal and other regulatory standards, and for internal risk review of operational processes. Additionally, Deloitte LLP performed a number of pieces of assurance work in respect of Record's internal controls during the year.

The Board has established a Risk Management Committee which is chaired by the Chief Financial Officer/Chief Operating Officer and has the Head of Operations, the Head of Trading, the Head of Reporting Services, the Head of Portfolio Management, the Head of Portfolio Implementation and the Head of Compliance as members. The Committee reviews existing and new risks, and the nature of any operational incidents with the objective of ensuring that adequate systems and controls are in place to minimise and preferably eliminate such incidents and their impact on both the Group and its clients.

The Group appointed Grant Thornton UK LLP as the reporting accountant for its Audit and Assurance (AAF 01/06 and SAS 70) reports. There are two types of assurance engagements associated with the AAF framework, specifically 'reasonable' assurance engagements and 'limited' assurance engagements. The Group undertakes the higher standard of 'reasonable' assurance engagements.

The principal risks faced by the Group fall into a number of distinct categories and the means used to mitigate them are both diverse and relevant to the nature of the risk concerned. The principal risks and the means used to mitigate them are set out below:

Financial review

Total revenue decreased by 27% to £20.5m, principally due to the reduction in management fees. This is greater than the marginal reduction in average AuME during the year of 7% due to the business mix changing to include a higher percentage of Passive Hedging that attracts lower fees. Total expenditure decreased by 13% to £13.7m through a reduction in the Group Profit Share cost. Profit before tax decreased by 46% to £6.7m.

Table 9 - Profit and loss (£m) - Year ended 31 March

Fees

In the year ended 31 March 2012, the loss of a significant Dynamic Hedging client, continued decline of our Active FRB Currency for Return product and renegotiation of fee rates with our largest client, led to total fee income decreasing to £20.4m.

Table 10 - Average management fee rates by product - (bps)

Record charges fees to its clients based upon the AuME of the product provided. Both Passive and Dynamic Hedging typically have fixed fee arrangements. Record has historically offered all Currency for Return clients the choice of paying an asset-based management fee only or the alternative of management fee plus performance fee. Higher performance fee rates usually accompany lower management fee rates and vice versa. Following the closure of the remaining Active FRB pooled fund in April 2012, there are no remaining Currency for Return clients with a performance fee component. Record charges similar fees for both segregated and pooled Currency for Return mandates.

Management fees and performance fees are normally invoiced on a quarterly basis, although Record invoices management fees for some of its larger clients on a monthly basis.

Table 11 - Total fee analysis (£m)

Management fees

Management fee income during the year was £20.4m (2011: £28.1m). The table below shows growth in Passive Hedging, with management fee income attributable to Passive Hedging of £3.0m, up 11% in the period. Management fees for Dynamic Hedging of £13.5m, were down 23% and in Currency for Return management fees were £3.9m, down 51%.

Table 12 - Management fees by product (£m)

Performance fees

There were no performance fees earned in the year (2011: £nil). Performance fee structures have historically been earned in Currency for Return mandates. Following closure of the Cash Plus Fund in April 2012, there are no active mandates for Currency for Return that incorporate a performance fee component. There is one Dynamic Hedging mandate that has the potential to earn performance fees.

Other income

Other income includes gains / losses on hedging revenues denominated in currencies other than Sterling, and foreign exchange gains, in addition to revenues from activities other than currency management.

Group Profit Share Scheme

The Group operates a Group Profit Share Scheme such that a long-term average of 30% of operating profit before Group Profit Share (GPS) is made available to be awarded to employees. The Remuneration Committee has recommended that for the year ended 31 March 2012, the Group Profit Share Scheme is 30% of pre-GPS operating profit. For the year ended 31 March 2012, this represents £2.8m, a reduction of £2.5m from the previous financial year. This represents a year on year decrease of 47% compared with a 27% year on year decrease in revenue.

Directors and senior management in Record plc are required to take a proportion of this remuneration in the form of shares subject to lock-up arrangements.

Under the scheme rules, the intention is to purchase these shares in the market following the announcement of interim and full year financial results.

Operating margin

The operating profit for the year ended 31 March 2012 of £6.6m was 47% lower than the operating profit for the previous financial year (2011: £12.4m). The Group achieved an operating profit margin of 32% for the year ended 31 March 2012 (44% in 2011).

During the year ended 31 March 2012, total operating expenditure of the Group decreased by 13% to £13.7m. This results from a £2.5m reduction in the Group Profit Share Scheme and a £0.1m decrease in non-personnel costs offset by a £0.3m increase in personnel costs, and a £0.3m loss on financial instruments held as a disposal group. Group Profit Share (GPS) decreased in line with the reduction in Operating profit (pre-GPS).

The Group has taken steps to control its cost base as revenues have continued to decline in the second half of the year. The Group has seen the number of employees reduce by 7% in the year and the benefit of this reduction together with reductions in Board members' salaries of 10% from 1 December 2011 will be evident in the current financial year. Steps have also been taken to reduce non-personnel costs, although this is likely to be offset by higher system costs following the implementation of the new middle and back office system.

Cash flow

The Group's ability to generate cash has remained good, with a year end cash position of £24.6m (31 March 2011: £24.7m). The year on year change is principally due to the dividend payment in respect of the prior year offset by the consolidation of the cash positions within the seed capital funds that had previously been categorised as assets held for sale (+£4.0m). Cash generated from operating activities before tax was £5.0m, with £2.7m paid in taxation and £7.4m paid in dividends.

Dividends

Shareholders received an interim dividend of 0.75p per share paid on 20 December 2011. The Board recommends paying a final dividend of 0.75p per share, equivalent to £1.6m. This would take the overall dividend to 1.50p per share (dividend paid in respect of year ended 31 March 2011: 4.59p per share). This represents a 67% payment of profits after tax for the year ended 31 March 2012.

Subject to shareholder approval, the dividend will be paid on 1 August 2012 to shareholders on the register on 22 June 2012, the ex-dividend date being 20 June 2012. The dividend cover in the year was 1.5 (2011: 0.9).

Capital management

The Board's policy is to retain capital (being equivalent to shareholders' funds) within the business sufficient to meet continuing obligations, sustain future growth and to provide a buffer against adverse market conditions. To this end the Group has developed a financial model to assist it in forecasting future capital requirements over a four-year time horizon under various scenarios. Shareholders' funds were £26.4m at 31 March 2012 (2011: £29.1m). The Group has no debt.

Regulatory environment and regulatory capital

Record Currency Management Limited (RCML) is authorised and regulated in the UK by the Financial Services Authority. RCML is registered as an Investment Adviser with the Securities and Exchange Commission in the United States. RCML is an Exempt International Adviser with the Ontario Securities Commission in the State of Ontario, Canada and is registered as exempt with the Australian Securities & Investment Commission. RCML is approved by the Irish Financial Services Regulator to act as promoter and investment manager to Irish authorised collective investment schemes. The Group has a Jersey-based management company, Record Currency Management (Jersey) Limited, authorised by the Jersey Financial Services Commission to manage Expert Funds.

The Group has one UK regulated entity, RCML, on behalf of which half-yearly capital adequacy returns are filed. RCML held surplus capital resources relative to its requirements at all times during the period under review. The Group is also subject to consolidated regulatory capital requirements, whereby the Board is required to assess the degree of risk across the business, and hold sufficient capital within the Group against it. 

The Group has an active risk-based approach to monitoring and managing risks used for reviewing and amending its Internal Capital Adequacy Assessment Process (ICAAP). 

The Board is satisfied that the Group is adequately capitalised to continue its operations effectively given the considerable balance sheet resources maintained by the Group. At 31 March 2012, Record had Tier 1 capital of £26.3m. Further information regarding the Group's capital adequacy status can be found in the Group's Pillar 3 disclosure, which is available on our website at www.recordcm.com.

Outlook - The new financial year

The Group is focussed on its sales and marketing initiatives which seek to reverse the decline in AuME over recent years. Sales activity is focussed on pursuing those prospects that present an immediate opportunity for one of Record's products and in the short term the most attractive opportunities are likely to be in hedging, particularly Passive Hedging in Switzerland and Dynamic Hedging in the US. The UK market is likely to continue to see a small number of opportunities in the short term.

Currency for Return is likely to see a period of subdued demand, particularly for the FRB strategies where a return to more normal monetary policy conditions and a sustained period of positive returns is seen as a precursor to clients re-considering this investment strategy. 

The live track record of the Emerging Market strategy reaches its three-year anniversary in November 2012. Providing the performance track record remains attractive it is hoped that progress can be made with this strategy over the coming years.

The Group continues to market the newer products, being Euro Stress, Momentum, Value and Multi-Strategy both directly to clients and indirectly via investment consultants.

Cautionary statement

This announcement contains certain forward-looking statements with respect to the financial condition, results, operations and business of Record. These statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied in this announcement. Nothing in this announcement should be construed as a profit forecast.

Consolidated statement of comprehensive income

YEAR ENDED 31 MARCH

Consolidated statement of financial position

AS AT 31 MARCH

Company statement of financial position

AS AT 31 MARCH

Consolidated statement of changes in equity

YEAR ENDED 31 MARCH 2012

YEAR ENDED 31 MARCH 2011

Company statement of changes in equity

YEAR ENDED 31 MARCH 2012

YEAR ENDED 31 MARCH 2011

CONSOLIDATED STATEMENT OF CASH FLOW

YEAR ENDED 31 MARCH

COMPANY STATEMENT OF CASH FLOW

YEAR ENDED 31 MARCH

Notes to the financial statements for the year ended 31 March 2012

1. Accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented unless otherwise stated.

(a) Accounting convention

Basis of preparation

The Group and Company have prepared their financial statements under International Financial Reporting Standards (IFRSs) as adopted by the European Union. IFRSs comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) as adopted in the European Union as at 31 March 2012. The financial statements have been prepared on a historical cost basis, modified to include fair valuation of derivative financial instruments.

The preparation of financial statements in accordance with the recognition and measurement principles with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The bases for management judgements, estimates and assumptions are discussed further in note 2.

Impact of new accounting standards

A number of amendments to existing standards and interpretations have been issued, some of which were mandatory for periods beginning 1 April 2011, with the remaining becoming effective in future periods. The new standards and amendments to existing standards effective for the year to 31 March 2012 that have had an impact, and have been adopted by Record plc, related only to disclosure enhancements arising from the 2010 Annual Improvements.

New standards and interpretations

Other new or revised standards and interpretations issued but not yet effective include those listed below, but none of them are expected to have a significant impact of the financial statements of Record plc:

§ IFRS 9 - 'Financial Instruments'

§ IFRS 7 - 'Financial Instruments: Disclosures' - Amendments enhancing disclosures about transfers of financial assets

§ IAS 12 - 'Income Taxes' - Limited scope amendment (recovery of underlying assets)

§ IFRS 10 - 'Consolidated financial statements'

§ IFRS 11 - 'Joint Arrangements'

§ IFRS 12 - 'Disclosure of Interests in Other Entities'

§ IFRS 13 - 'Fair value measurement'

§ IAS 27 - 'Separate Financial Statements'

§ IAS 28 - 'Investments in Joint Ventures and Associates'

§ IAS 1 - 'Presentation of financial statements'

(b) Basis of consolidation

The consolidated financial information contained within the financial statements incorporates financial statements of the Company and entities controlled by the Company (its subsidiaries) drawn up to 31 March 2012. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Where the Group controls an entity, but does not own all the share capital of that entity, the interest of the other shareholders' non-controlling interests is stated within equity at the non-controlling interests' proportion of the fair value of the recognised assets and liabilities.

An Employee Benefit Trust has been established for the purposes of satisfying certain share-based awards. The Group has 'de facto' control over this special purpose entity. This trust is fully consolidated within the accounts.

The Group has investments in a number of funds where it is currently in a position to be able to control those funds. These funds are held by Record plc and represent seed capital investments by the Group. The funds are consolidated either on a line by line basis, or if they meet the definition of a current asset held for sale (disposal group), they are classified and accounted for on that basis.

The accounts of subsidiary undertakings, which are prepared using uniform accounting policies, are coterminous with those of the Company apart from those of the seeded funds which have accounting reference dates of 30 September. The consolidated accounts incorporate the financial performance of the seeded funds in the year ended 31 March 2012 and the financial position of the seeded funds as at 31 March 2012.

The Company is taking advantage of the exemption under the Companies Act 2006 s408(1) not to present its individual statement of comprehensive income and related notes that form part of the financial statements. The Group total comprehensive income for the year includes a profit of £8,523,904 attributable to the Company (2011: £5,780,963).

All intra-Group transactions, balances, income, expenses and dividends are eliminated on consolidation.

(c) Segment reporting

The Group provides its Directors with revenue information disaggregated by product, whilst operating costs, assets and liabilities are presented on an aggregated basis. This reflects the unified basis on which the products are marketed, delivered and supported, and on this basis, the Directors consider that the Group has only one segment. The Group reports its revenues by product and by two fee structures being 'management fees' and 'performance fees'. Revenue analysis is presented in note 3.

(d) Foreign currencies

The financial statements are presented in Sterling (£), which is also the functional currency of the parent company. Foreign currency transactions are translated into the functional currency of the parent company using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year end exchange rates are recognised in profit or loss.

In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts which are accounted for as financial assets/liabilities at fair value through profit or loss (see note 1(q) Financial instruments). The Group does not apply hedge accounting.

(e) Revenue recognition

Revenue is recognised in profit or loss when the amount of revenue can be measured reliably; it is probable that economic benefits will flow to the entity; the stage of completion can be measured reliably; and the costs incurred and costs to complete the transaction can be measured reliably also.

Management fees are accrued on a daily basis based upon the Assets under Management Equivalent (AuME). The Group is entitled to earn performance fees from a number of clients where the performance of the clients' assets exceeds defined benchmarks by an agreed level of outperformance over a set time period. Performance fees are recognised when the fee amount can be estimated reliably and it is probable that the fee will be received.

(f) Retirement benefits

The Group operates defined contribution pension plans for the benefit of certain employees. The Group makes contributions to independently administered plans, such contributions being recognised as an expense when they fall due. The Group has no legal or constructive obligation to make any further payments to the plans other than the contributions due.

(g) Share-based payments

The Group issues share awards to employees. Deferred share awards issued under the Group Bonus Scheme are classified as share-based payments with cash alternatives under IFRS 2. The fair value of the debt component of the amounts payable to the employee is calculated as the cash amount offered to the employee at grant date and the fair value of the equity component of the amounts payable to the employee is calculated as the market value of the share award at grant date less the cash forfeited in order to receive the share award. The debt component is charged to profit or loss over the period in which the award is earned and remeasured at fair value at each reporting date, the equity component is charged to profit or loss over the vesting period of the award.

All other awards have been classified as equity-settled under IFRS 2. The fair value of the amounts payable to employees under these awards is recognised as an expense over the vesting period of the award, with a corresponding increase in equity. All such awards made by the Group involve the parent company granting rights to its equity instruments to employees of its subsidiary. Consequently the subsidiary measures the services received from its employees in accordance with the above classification under IFRS2 and recognises a corresponding increase in equity as a contribution from the parent. The parent has the obligation to settle the transaction with the subsidiary's employees and therefore recognises an increase in its investment in the subsidiary and a corresponding increase in equity 

The fair value of options granted is measured at grant date using an appropriate valuation model. All current awards have been valued using the Black-Scholes model, taking into account the terms and conditions upon which the instruments were granted. The fair value amounts for the options issued since listing on the London Stock Exchange were determined using quoted share prices. Further details on the share-based compensation plans are included in note 21.

(h) Leases

Leases in which substantially all the risks and rewards are retained by the lessor are classified as operating leases. Payments made under these operating leases are recognised in profit or loss on a straight line basis over the term of the lease. Benefits received as an incentive to sign a lease, whatever form they may take, are credited to profit or loss on a straight line basis over the lease term.

(i) Dividend distribution

Interim and special dividends are recognised when paid and final dividends when approved by shareholders.

(j) Property, plant and equipment

All property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation of property, plant and equipment is provided to write off the cost, less residual value, on a straight line basis over the estimated useful life.

§ Computer equipment - 2-5 years

§ Fixtures and fittings - 4 years

§ Leasehold improvements - period from acquisition to next rent review

Residual values, remaining useful economic lives and depreciation methods are reviewed annually and adjusted if appropriate. Gains or losses on disposal are included in profit or loss.

(k) Intangible assets

Intangible assets are shown at historical cost less accumulated amortisation and impairment losses. Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of the intangible assets unless such lives are indefinite. Amortisation is included within operating expenses in the statement of comprehensive income. Intangible assets are amortised from the date they are available for use. Useful lives are as follows:

§ Software - 5 years

Amortisation periods and methods are reviewed annually and adjusted if appropriate. 

(l) Trade and other receivables

Trade and other receivables are stated at their original invoice value, as the interest that would be recognised from discounting future cash receipts over the short credit period is not considered to be material. Trade receivables are reduced by appropriate allowances for estimated irrecoverable amounts.

(m) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, on demand and collateral deposits held with banks, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

(n) Deferred taxation

Deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities shown on the statement of financial position. The amount of deferred tax provided is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The carrying amount of the deferred tax assets are reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

A deferred tax liability is generally recognised for all taxable temporary differences.

Deferred tax assets or liabilities arising on goodwill are not recognised but are however recognised on separately identifiable intangible assets. Deferred tax arising on the initial recognition of an asset or liability, other than a business combination, that at the time of the transaction affects neither the accounting nor taxable profit or loss, is not recognised.

(o) Assets classified as held for sale (disposal groups)

When the Group intends to sell a disposal group, and if sale within twelve months is highly probable, the disposal group is classified as 'held for sale' and presented separately in the statement of financial position.

A disposal group classified as 'held for sale' is measured at the lower of its carrying amount immediately prior to the classification as 'held for sale' and its fair value less costs to sell. Gains and losses are recognised through profit or loss.

As at 31 March 2012, the Group's held for sale assets are limited to seed capital in the Euro Stress Fund. As at 31 March 2011 the Group's held for sale assets were comprised of seed capital in the FTSE FRB10 Index Fund and the Emerging Market Currency Fund.

(p) Trade and other payables

Trade and other payables are stated at their original invoice value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.

(q) Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Financial assets and financial liabilities are measured initially at fair value plus transaction costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. Financial assets and liabilities are measured subsequently as described below.

Financial assets

For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:

§ Loans and receivables; and

§ Financial assets at fair value through profit or loss.

The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

All financial assets except those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets. 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents and trade and other receivables fall into this category of financial instruments.

Individual receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Impairment of trade receivables is presented within 'other expenses'.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets that meet certain conditions and are designated at fair value through profit or loss upon initial recognition. All derivative financial instruments fall into this category. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of derivative financial instruments are determined by reference to active market transactions.

Financial liabilities

Financial liabilities are measured at amortised cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried at fair value with gains or losses recognised through profit or loss.

Derivative financial liabilities

Derivatives are initially recognised at cost on the date on which the contract is entered into unless fair value at acquisition is different to cost, in which case fair value is recognised. Subsequently they are measured at fair value with gains and losses recognised in profit or loss. Transaction costs are immediately recognised in profit or loss.

(r) Impairment of assets

The Group typically assesses annually whether there is any indication that any of its assets have been impaired. If such an indication exists, the asset's recoverable amount is estimated and compared to its carrying value.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

In the case of the Group's current assets held for sale (disposal group), which are seed investments in funds, the Group assesses whether the assets have been impaired on a monthly basis by performing a mark to market exercise.

(s) Taxation

Current tax is the tax currently payable based on taxable profit for the year. Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

(t) Own shares

The Record plc Employee Benefit Trust (EBT) was formed to hold shares acquired under the Record plc share-based compensation plans. A total of 2,028,432 (2011: 304,964) ordinary shares were held in the EBT at the reporting date. The holding of the EBT comprises own shares that have not vested unconditionally to employees of the Group. Own shares are recorded at cost and are deducted from retained earnings. The EBT is consolidated in the Group financial statements.

Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Group statement of comprehensive income. Further information regarding the Record plc share-based compensation plans and relevant transactions made during the year are included in note 21.

(u) Group and Company reserves

The share premium account records the difference between the nominal value of shares issued and the value of the consideration received. The use of the share premium account is governed by the Companies Act 2006.

Where shares have been redeemed or purchased wholly out of the Company's profits, the Companies Act 2006 requires a transfer to the capital redemption reserve equal to the amount by which the Company's issued share capital is diminished. Furthermore the provisions of the Act relating to a reduction of the Company's share capital apply as if the capital redemption reserve were paid up share capital of the Company.

(v) Non-controlling interests

Record plc has made investments in a number of funds where it is in a position to be able to control those funds by virtue of the size of its holding. Non-controlling interests occur when Record plc is not the only investor in the fund. The non-controlling interest is measured at the fair value of the third party investment in the fund.

(w) Provisions and contingent liabilities

Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision.

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised.

2. Critical accounting estimates and judgements

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Note 18 describes the assumptions made in classifying its seed investment in new funds as assets held for sale. Note 21 covers the assumptions made in calculating the fair value of share options offered by the Group to its employees. The Directors have judged that the Group does not bear substantially all the risks and rewards of ownership of its leasehold premises and therefore accounts for the leases as operating leases as described in note 26.

3. Revenue

(a) Segmental analysis

The Directors, who together are the entity's Chief Operating Decision Maker, consider that its services comprise one operating segment (being the provision of currency management services) and that it operates in a market that is not bound by geographical constraints. The Directors receive revenue analysis disaggregated by product, whilst operating costs are presented on an aggregated basis because this reflects the unified basis in which the products are marketed, delivered and supported.

(b) Product revenues

The Group has split its currency management revenues by product and fee type. The Currency for Return product is delivered through both segregated mandates and a pooled fund structure. Revenues from the seeded fund products (Euro Stress Fund, Emerging Market Currency Fund and FTSE FRB10 Index Fund) are not material and have been included in the Currency for Return pooled funds revenues. Other Group activities include consultancy.

(c) Geographical analysis

The geographical analysis of revenue is based on the destination i.e. the location of the client to whom the services are provided. All turnover originated in the UK. All assets of the Group are located in the UK.

Other Group activities form less than 1% of the total Group income. This is not considered significant and they are not analysed by geographical region.

(d) Major clients

During the year ended 31 March 2012, £6.0m (29%) of the Group's revenue was accounted for by a single client. No other clients accounted for more than 10% of the Group's revenue during the year.

4. Operating profit

Operating profit for the year is stated after charging/(crediting):

5. Staff costs

The average number of employees, including Directors, employed by the Group during the year was:

The aggregate payroll costs of the above employees, including Directors, were as follows:

6. Finance income

7. Taxation - Group

The total charge for the year can be reconciled to the accounting profit as follows:

At the year end the Group had deferred tax liabilities of £15,438 (2011: deferred tax assets of £69,615). At the balance sheet date there were share options not exercised with an intrinsic value for tax purposes of £14,128 (2011: £70,904). The Group will be entitled to a corporation tax deduction in respect of the difference between the exercise price and the strike price upon the vesting of these options.

The standard rate of corporation tax in the UK is 26% (2011: 28%). A full corporation tax computation is prepared at the year end. The actual charge as a percentage of the profit before tax may differ from the underlying tax rate. Differences typically arise as a result of capital allowances differing from depreciation charged, and certain types of expenditure not being deductible for tax purposes, other differences may also arise.

The tax charge for the year ended 31 March 2012 was £1,803,237 (2011: £3,603,466) which was 26.9% of profit before tax (2011: 28.8%). 

8. Earnings per share

Basic earnings per share is calculated by dividing the profit for the financial year attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share is calculated as for the basic earnings per share with a further adjustment to the weighted average number of ordinary shares to reflect the effects of all potential dilution.

There is no difference between the profit for the financial year attributable to equity holders of the parent used in the basic and diluted earnings per share calculations.

The potential dilutive shares relate to the share options granted in respect of the Group's Share Scheme. There were share options and deferred share awards in place at the beginning of the period over 304,964 shares. During the year options were exercised, or share awards vested, over 176,532 shares. The Group granted a net 1,900,000 share options with a potentially dilutive effect during the year.

9. Dividends

The dividends paid by the Group during the year ended 31 March 2012 totalled £7,371,007 (3.34p per share), of which £1,645,143 (0.75p per share) was the interim dividend paid in respect of the year ended 31 March 2012 and £5,725,864 (2.59p per share) was the final dividend paid in respect of the year ended 31 March 2011. The dividends paid during the year ended 31 March 2011 totalled £5,722,996 (2.59p per share), of which £4,420,307 (2.00p per share) was the interim dividend paid in respect of the year ended 31 March 2011 and £1,302,689 (0.59p per share) was the final dividend paid in respect of the year ended 31 March 2010.

A final dividend proposed in respect of the year ended 31 March 2012 is 0.75p per share.

10. Retirement benefit obligations

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge represents contributions payable by the Group to the fund and amounted to £507,940 (2011: £470,667).

11. Property, plant and equipment - Group

The Group's property, plant and equipment comprise leasehold improvements, computer equipment, and fixtures and fittings. The carrying amount can be analysed as follows:

The Company has no property, plant and equipment as at 31 March 2012 (2011: nil).

12. Intangible assets

The Group's intangible assets comprise acquired software only. The carrying amounts can be analysed as follows:

As at 31 March 2012 the Group was in the final stages of implementation of a new back office software project. Amortisation of the capitalised development costs will commence from the date that the project is completed (expected in the current financial year). The estimated useful economic life of the completed software is five years. The annual contractual commitment for the maintenance and support of software is £120,000. All amortisation charges are included within administrative expenses.

13. Investments

Particulars of subsidiary undertakings

The Group's interest in the equity capital of subsidiary undertakings is 100% of the ordinary share capital in all cases. Record Currency Management (US) Inc is incorporated in the USA, Record Currency Management (Jersey) Limited is incorporated in Jersey, and all other subsidiaries are incorporated in the UK.

Investment in funds

In December 2010, the Company invested in the Record Currency FTSE FRB10 Index Fund and the Record Currency Emerging Market Currency Fund. These were both accounted for as a disposal group held for sale in accordance with its accounting policy defined in note 1(o). In both cases, the Group still retains control over each of the funds twelve months after the original investment. Consequently both funds ceased to be classified as held for sale and are now consolidated in full, on a line by line basis, and shown presented in investments in the Company. As at 31 March 2011, the carrying value of these funds was included in current assets held for sale (disposal group) see note 18.

14. Deferred taxation - Group

The provision for deferred taxation consists of the tax effect of temporary differences in respect of:

At the year end the Group had deferred net tax liabilities of £15,438 (2011: deferred net tax assets of £69,615) including provision for share options not exercised with an intrinsic value for tax purposes of £14,128 (2011: £70,904). On exercise the Group will be entitled to a corporation tax deduction in respect of the difference between the exercise price and the strike price. There is no other unprovided deferred taxation.

15. Trade and other receivables

All amounts are short-term. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. All of the Group's trade and other receivables have been reviewed for indicators of impairment; no such indicators were noted. The carrying amount of receivables whose terms have been renegotiated, that would otherwise be past due or impaired is £nil (2011: £nil).

16. Derivative financial assets

The Group uses forward exchange contracts to reduce the risk associated with sales denominated in foreign currencies. At 31 March 2012 there were outstanding contracts with a principal value of £2,685,811 (2011: £4,361,326) for the sale of foreign currencies in the normal course of business. The fair value of the contracts is calculated using the market forward contract rates prevailing at 31 March 2012. Further detail including sensitivity analysis on the fair value of outstanding contracts is contained in note 24.

As at 31 March 2012, the forward foreign exchange contracts used to hedge revenues denominated in foreign currencies were presented as derivative financial liabilities (see note 19)

The net gain on forward foreign exchange contracts held to hedge cash flow is as follows:

17. Cash and cash equivalents

The Group holds short-term deposits that are made for varying periods, depending on the cash requirements of the Group. These deposits earn interest at market short-term deposit rates. The Group has unrestricted access to these deposits which meet the definition of a cash equivalent.

Since 31 December 2011, the Group cash and cash equivalents balance has incorporated the cash held by the Record Currency FTSE FRB10 Index Fund and the Record Currency Emerging Market Currency Fund (refer to note 18 for explanation of accounting treatment). As at 31 March 2012, the cash held by these two funds totalled £4,241,817 (the increase in cash arising from consolidating these two funds on a line by line basis with effect from 31 December 2011 was £3,996,678).

18. Current assets held for sale (disposal group)

From time to time, the Group injects capital into funds operated by the Group to trial new products (seed capital). If the Group is able to exercise control over such a seeded fund by holding a majority interest (whether the majority interest is held by Record plc alone, or by combining the interests of Record plc and its Directors), then such funds are considered to be under control of the Group and as such the fund becomes a subsidiary of the Group in accordance with SIC-12 and IAS 27.

The Group consolidates the assets of its subsidiaries on a line by line basis, but where the Group is actively seeking to reduce its holding in the fore-mentioned funds within twelve months through the sale of further units in these funds to external investors, and the subsequent redemption of Record's own investment, the investments in the funds are classified as being a disposal group held for sale as it is considered highly probable that the funds will not remain under the control of the Group one year after the original investment was made.

If the Group still retains control of the funds after this time, the Group considers whether an extension of the one year period is applicable. If no extension to the period is applicable, then the funds will cease to be classified as held for sale and will be consolidated in full.

In May 2011, the Group invested £1,000,000 in the Record Currency - Euro Stress Fund, the only other investor in the fund is Neil Record, a Director of Record plc. At the year end the Group retained control over this fund and continues to actively market units in the fund to external investors and intends to redeem its own investment. The investment in the fund is classified as being a disposal group held for sale.

In December 2010, the Group invested £1,000,000 in the Record Currency FTSE FRB10 Index Fund and a further £1,000,000 in the Record Currency Emerging Market Currency Fund, and these were also accounted for as a disposal group held for sale on the same basis. In both cases, the Group still retains control over each of the funds twelve months after the original investment. Therefore, from 31 December 2011, both funds ceased to be classified as held for sale and are now consolidated in full, on a line by line basis.

The underlying assets of the funds are cash deposits and forward exchange contracts with tenors of three months or less which are accounted for as derivatives measured at fair value through profit or loss under IAS 39.

The net loss on financial instruments held as part of a disposal group is as follows:

The net loss on financial instruments held as part of disposal group suffered by the Group includes a loss of £7,406 attributable to non-controlling interests.

19. Current liabilities

Amounts falling due within one year

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

Current tax liabilities

Derivative financial liabilities

Two of the funds seeded by Record (the Record Currency FTSE FRB10 Index Fund and the Record Currency Emerging Market Currency Fund), use forward exchange contracts in order to achieve a return. The Record Currency - Euro Stress Fund uses a variety of instruments including forward exchange contracts in order to achieve a return. The forward exchange contracts held by the Record Currency FTSE FRB10 Index Fund and the Record Currency Emerging Market Currency Fund are classified as financial assets held for trading. At 31 March 2012 there were outstanding contracts with a principal value of £9,112,251 (at 31 March 2011 all outstanding contracts held by the Record Currency FTSE FRB10 Index Fund and the Record Currency Emerging Market Currency Fund were presented within Current assets held for sale). The fair value of the contracts was calculated using the market forward contract rates prevailing at the period end date. The instruments held by the Record Currency - Euro Stress Fund are presented within Current assets held for sale (see note 18). Further detail including sensitivity analysis on the fair value of outstanding contracts is contained in note 24.

The net gain on forward exchange contracts at fair value is included in other income. The net gain on financial assets is as follows:

The Group uses forward exchange contracts to reduce the risk associated with sales denominated in foreign currencies.

As at 31 March 2012, the forward foreign exchange contracts used to hedge revenues denominated in foreign currencies were presented as derivative financial assets (see note16).

20. Called up share capital

The share capital of Record plc consists only of fully paid ordinary shares with a par value of 0.025p. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting.

Changes to the issued share capital

The Group has established an Employee Benefit Trust (EBT) to hold shares to be used to meet future liabilities relating to the Group's share-based compensation plans. Under IFRS the EBT is considered to be under de facto control of the Group, and has therefore been consolidated into the Group. As at 31 March 2012, the EBT held 2,028,432 ordinary shares of 0.025p in Record plc (2011: 304,964).

21. Share-based payments

During the year ended 31 March 2012 the Group has managed the following share-based compensation plans:

The Record plc Group Bonus Scheme

The Record plc Group Bonus Scheme (GBS) was adopted by the company on 1 November 2007. On 30 July 2009 it was amended and became the Record plc Group Profit Share Scheme. Under the terms of the scheme rules, certain employees of the company could elect to receive a proportion of their bonus in the form of a deferred share award. The number of shares was calculated based on the residual bonus divided by the market value of the shares at grant date. The shares were available to the employee after the vesting period for nil consideration upon exercise. The Group simultaneously granted additional rights to acquire shares ('bonus' shares; equal to 20% of the shares elected for) to those same employees. Elected shares vested in two equal tranches on each of the first and second anniversary of the date of grant and bonus shares vested in full only after two years. The vesting of the shares was subject to continued employment or having left as a good leaver. The final vesting of shares under this scheme occurred in June 2011 and this scheme is now ceased.

The Record plc Group Profit Share Scheme

The Record plc Group Bonus Scheme (GBS) was amended with the approval of a general meeting of the Company's members on 30 July 2009 and became the Record plc Group Profit Share Scheme (PSS). Under the original terms of the PSS rules, employees and Directors of the company could elect to receive a proportion of their profit share in the form of a share award, with the exception of certain employees and Directors deemed significant shareholders who had to receive their profit share in cash. During the year, the scheme was modified such that all senior managers irrespective of their shareholding in the Company are now required to receive at least one third of their profit share in the form of shares. Directors and senior employees receive one third of their profit share in cash, one third in shares ('Earned Shares') and may elect to receive the final third as cash only or to allocate some, or all, of the amount for the purchase of Additional Shares. Other employees receive two thirds of their profit share in cash and may elect to receive the final third as cash only or to allocate some, or all, of the amount for the purchase of Additional Shares.

If an individual elects to receive Additional Shares, the Group simultaneously awards a Matching Share value amount using a multiple decided by the Remuneration Committee. The multiple for Directors and senior employees was 1.0 and either 0.5 or 0.2 for other employees depending on the level of seniority within that group. The number of shares is determined by the post-tax cash attributed to Earned Shares plus Additional Shares plus Matching Shares divided by the aggregate market value achieved on the purchase of all such shares in the market. All shares the subject of share awards are transferred immediately to a nominee. None of these shares are subject to any vesting or forfeiture provisions and the individual is entitled to full rights in respect of the shares purchased. No such shares can be sold, transferred or otherwise disposed of without the consent of the Remuneration Committee except as follows:

§ Earned shares - one third on each anniversary of the Profit Share Payment date; and

§ Additional or Matching shares - the third anniversary of the Profit Share Payment date for Directors and senior employees and the second anniversary of the Profit Share Payment date for all other employees.

The Record plc Share Scheme

The Record plc Share Scheme was adopted by the company on 1 August 2008. During the year ended 31 March 2009 two new senior employees were granted deferred share awards upon appointment. The number of shares for each employee was calculated based on £200,000 divided by the market price of one Record plc ordinary share on the day of appointment (or on the first business day after a close period, if the appointment occurred within a close period). The shares are available to the employee after the vesting period for nil consideration upon exercise. The shares vest equally on the second, third and fourth anniversary of appointment. The vesting of the shares is subject to continued employment (or at the Remuneration Committee's discretion, having become a good leaver). The rights to acquire the shares are issued under nil cost option agreements.

During the year the Share Scheme was amended to incorporate both an Approved and an Unapproved Option Scheme. The Approved scheme enables the Group to provide tax-approved awards to employees of Record plc or its subsidiaries and each participant may be granted approved options over shares with a total market value of up to £30,000 on the date of grant. Awards under both schemes are in the form of options with an exercise price equal to the market value of a share on the date of grant. 

The Group issued a total of 2,000,000 options during the year under the Share Scheme. Of these, 1,400,000 were under the Unapproved Scheme and 600,000 were under the Approved Scheme. A total of 100,000 of the Unapproved options issued lapsed prior to the year end. All options were granted at a strike price set at the share price prevailing at the time of grant. The options over shares under the Approved Scheme vest in full on the fourth anniversary of grant and are subject to a performance condition based on the total shareholder return value in comparison with a relevant peer group. One quarter of the Unapproved options vest each year over the next four years providing the employee has remained in employment at each vesting date.

Share-based payment transactions with cash alternatives

Deferred share awards granted under the Record plc Group Bonus Scheme and the Record plc Group Profit Share Scheme are accounted for under IFRS 2 as share-based payment transactions with cash alternatives.

Equity-settled share-based payments

Deferred share awards and options granted under the Record plc Share Scheme are accounted for under IFRS 2 as equity-settled share-based payment transactions.

At 31 March 2012, the total number of ordinary shares of 0.025p outstanding under Record plc share compensation schemes was 2,028,432 (2011: 304,964). These deferred share awards and options are over issued shares held in an Employee Benefit Trust. Details of outstanding share options and deferred shares awarded to employees are set out below:

Outstanding share options