Record Regulatory News (REC)

PRESS RELEASE

Record plc

11 June 2013

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2013

Record plc, the specialist currency manager, today announces its audited results for the year ended 31 March 2013.

Financial headlines:

§ AUME¹ $34.8bn at 31 March 2013 (up 13%)

§ AUME £22.9bn at 31 March 2013 (up 19%)

§ Revenue of £18.6m (down 9%)

§ Pre-tax profit of £6.1m (down 9%)

§ Operating profit margin to 31 March 2013 of 32% unchanged on prior year.

§ Financial position remains strong with net assets of £32.3m at 31 March 2013 (2012: £28.6m); net cash of £29.0m (2012: £24.6m)

§ Basic EPS of 1.98p per share (2012: 2.23p)

§ Proposed final dividend for the year to 31 March 2013 is 1.50p per share giving a total dividend in respect of the period of 1.50p per share (2012: 1.50p).

Key developments:

§ Client numbers increased to 44 by 31 March 2013 (2012: 41)

§ Product mix stable through year

§ First live multi-strategy currency mandate started during the year

§ Positive investment performance in the year from active FRB² ,FRB index and Emerging Market currency strategies

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 tangible. 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.

²FRB =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 year to 31 March 2013 saw encouraging growth in both AUME and client numbers, as well as stabilisation of the product mix and operating margin. The decline in revenue to £18.6m, whilst mitigated to some extent by a cost reduction programme, largely reflects the full-year effect of changes in product mix experienced in prior years.

"Developments in the currency markets (such as the weakness of the Japanese Yen in response to aggressive policy measures) created opportunities for our return-seeking products during the year and the tentative re-emergence of trending in certain currency pairs also benefited many of our strategies.

"We have developed our suite of Currency for Return products further through the year with the start of our first multi-strategy mandate incorporating the first live currency momentum and currency value programmes, and our emerging market currency strategy live track record passed the three year landmark, an important step in gaining acceptance in the institutional market place.

"Growth in AUME and client numbers, and stabilisation of product mix and margin, have established a firm foundation from which to grow further. It is therefore encouraging that since the start of the current financial year, we have commenced a combined passive and dynamic hedging programme with AUME of approximately $1.7 billion, and more recently have been selected (subject to contract) for a significant passive hedging mandate."

Analyst briefing

There will be a presentation for analysts at 9.30am on Tuesday 11 June 2013 in the Copperfield Room, Holborn Bars, 138-142 Holborn, London, EC1N 2NQ. 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

Steve Cullen - Chief Financial 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

Overview

The year to 31 March 2013 has seen growth in two important measures of the business for the first time in five years: growth in assets under management equivalents and growth in client numbers.

Although we have maintained broad stability in our fee rates in our main product lines, this year has seen the full effect of the change in the product mix towards currency hedging and away from currency for return. Within currency hedging, we have also seen stronger growth in passive products. This has meant that our blended fee rate has fallen. This evolution of the product mix has led to the higher-fee currency for return products now representing just 5% of total AUME compared to 43% of total AUME in the year ended 31 March 2009. In contrast, hedging AUME has increased from 54% to 95% of total AUME over the same period. As a result of this change in product mix, the average composite management fee rate has decreased from 17.1bps to 8.8bps, giving an indication of the challenges the business has faced over this extended period, and the pressure exerted on overall profit and revenues as a result.

During the year the external environment began to show some more benign features, particularly in the second half. In many ways, this reflected the more generally benign equity and credit markets over the period. The marked weakness of the Japanese Yen in the second half of the financial year, in particular, was positive for both our hedging and our currency for return products. However, the firm is cognisant that financial recovery may be temporary or fragile given the vulnerable state of many developed economies' public finances, and the extreme tensions within the Eurozone.

The resulting good performance for our currency for return products; in particular our emerging market currency product (which has now reached its third anniversary) has piqued interest amongst institutional and wealth management investors. Record managed to secure its first multi-strategy currency mandate during the year from an institutional investor - adding a further product offering to the investor marketplace.

Financial highlights

Against this backdrop Record's total revenues have fallen by 9% to £18.6 million, achieving an overall profit before tax of £6.1 million, down 9% on the year to 31 March 2012. The business has mitigated this fall in revenue in part through the success of a cost reduction programme initiated in November 2011 and the operating profit margin has remained at 32% for the year. The net client AUME inflows for the year were positive at +$1.9 billion (2012: +$0.2 billion) and AUME ended the year at $34.8 billion (2012: $30.9 billion), an increase of 13%.

Dividend

As indicated in the interim report, the Board is recommending a final dividend of 1.50p per share, payable on 31 July 2013 to shareholders on the register at 21 June 2013. The total dividend in respect of the year ended 31 March 2013 of 1.50p per share is unchanged on the previous year.

For the current financial year, the Board's intention, subject to business conditions, is to retain the overall dividend payable at 1.50p per share, which the Board would expect to be payable equally in respect of an interim and final dividend, in line with prior financial periods. In setting the dividend, the Board will be mindful of achieving a level which it expects to be covered by earnings.

Group strategy

During the risk-averse response to the financial crisis, we identified our hedging products as offering the most likely source of growth in AUME in the short term. Consequently marketing effort and resource were mainly focussed on maintaining and growing the assets in these products. This strategy, while facing a continuing difficult sales environment, succeeded in growing our AUME in both Dynamic and Passive Hedging during the year. As already mentioned, we now also have a three-year track record for our Emerging Market currency product and a live multi-strategy mandate, both of which we believe fit particular niches of investment demand among larger, mainly institutional, investors. We are now planning for these two products to receive a greater proportion of our marketing and sales effort in the coming year.

The cost reduction programme initiated in November 2011 resulted in an overall reduction in costs of £0.9m and allowed us to control and maintain our operating margin. Whilst the business will remain cost-conscious going forward, further significant cost savings are constrained by the need to maintain an appropriate level of support for investment processes and client services.

Board and senior management

Following the management reorganisation announced by the business in November 2012, our joint Chief Financial Officer and Chief Operating Officer, Paul Sheriff, left the Company on 15 March 2013 after more than four years on the Board. Paul made an important contribution to the Group over this period, including leading the implementation of a new middle and back office system, and developing the Group's corporate governance and risk framework. On behalf of the Board, I would like to thank Paul for his valuable contribution to the business during this period.

Steve Cullen, previously the Group's Financial Controller for almost 10 years, succeeded Paul on the Board as Chief Financial Officer on 15 March 2013 and Joel Sleigh was appointed Chief Operating Officer on the same date. Joel has been with Record for 17 years, and has served as a member of the Executive Committee since 2012. I would like to congratulate Joel on his promotion, and welcome Steve to the Board.

I would also like to take this opportunity to thank all of the Group's management and staff for their continued hard work and commitment throughout the year.

Outlook

As mentioned above, the Group has been through a prolonged period of change in its product mix, reflecting the outflows of AUME from its long-standing currency for return product (based around the Forward Rate Bias) and inflows into the hedging products. During this period, the business has broadened and adapted its suite of products, updated its infrastructure and increased its distribution channels in markets identified as showing good potential for growth.

As well as standard product offerings, clients are now also interested in more flexible and bespoke solutions. In a competitive environment where the importance of differentiating ourselves and our products is becoming ever more pronounced, we have already started to see the benefits of such investment through increased dialogue with clients and consultants, particularly regarding 'added-value' Hedging products and services, and more flexible multi-strategy solutions and instruments to fulfil individual client's currency requirements. We are well placed to take advantage of such opportunities as they arise.

Since the year end, the Group has announced the start of a combined passive and dynamic hedging programme with AUME of approximately $1.7 billion, and its selection for a significant passive hedging mandate (subject to contract), both of which reflect our ability to offer flexible solutions to suit individual client requirements.

Neil Record

Chairman

Chief Executive Officer's statement

Having stabilised the Group's product mix and operating margin, and grown client numbers and AUME over the year, the Group has now established a firm foundation from which to grow.

Market overview

The market factors that are most relevant to the Group's performance over the year include continued monetary intervention across developed markets, in particular the United States, the United Kingdom and most recently Japan; the on-going pattern of fluctuating market sentiment and risk appetite; and the tentative re-emergence of trending, at least in some currency pairs, towards the end of the year.

Interest rates remained low across developed market currencies, and central banks continued quantitative easing policies, throughout the year. In particular, the United States Federal Reserve launched a new, open-ended quantitative easing programme in September 2012, and the Bank of Japan launched a series of aggressive measures in the first quarter of 2013.

The three distinct phases of market sentiment most relevant to the Group's business revolve around the perception of crisis across the Eurozone. This ranged from heightened anxiety through until the end of July 2012, when a pledge from European Central Bank President Mario Draghi "to do whatever it takes to preserve the Euro" established a turning point, and a strong rally in "risk assets". This enthusiasm continued into 2013, until first the inconclusive outcome of the Italian elections and then the Cyprus bail-out reminded the market that the decisions taken in 2012 have yet to be implemented. Risk appetite appears healthy at the start of the new financial year, despite profound concerns regarding the fundamental outlook for developed economies.

The latter half of the financial year has also seen the welcome, although tentative, re-emergence of trending in certain currency pairs - i.e. continued and pronounced movements in one direction over a period of time, in contrast to trading within a relatively narrow range. The Japanese Yen has demonstrated this most clearly, with a marked depreciation since September 2012 first in anticipation, then in response to aggressive policy measures from a new prime minister and Bank of Japan governor.

Investment performance

Investment performance across the Group's products reflects their respective characteristics in the light of prevailing market conditions. Dynamic Hedging, which is neither intrinsically "risk on" nor "risk off", has benefited in the latter part of the financial year from the re-emergence of trending, as well as strengthening of base currencies such as the US Dollar and Pound Sterling against exposure currencies such as the Japanese Yen and the Euro.

Both the Emerging Market strategy and the FRB Index strategy, as exemplified by the FTSE Currency FRB10 Index, performed strongly during the year, in both cases reflecting the divergent interest rate environment between the "major" G5 developed market currencies and either emerging market or other developed market currencies respectively, as well as the bias towards a "risk on" environment over the year as a whole.

Record's first live multi-strategy mandate, which combines Active Forward Rate Bias, emerging markets, value, and momentum, was launched in the second quarter. Whilst the eight months from inception to 31 March 2013 is too short a period from which to draw firm conclusions, investment performance to year-end has been encouraging, with three out of four strategies contributing positively, and some benefits of diversification evident amongst these strategies.

Asset flows

AUME increased by 13% through the year to $34.8 billion. This was due principally to significant new Passive Hedging mandate wins, only marginally offset by client losses, driving net inflows of $1.9 billion. External factors (e.g. equity and other market movements and the impact of exchange rates over the period) also contributed +$2.0 billion.

Strategic progress

The Group has continued to develop its product offering, its sales and marketing capability, and its operational infrastructure.

With respect to product development, the Group has continued to invest in enhancing its longer-established products, particularly Hedging, as well as in further developing the new Currency for Return strategies. Within Passive Hedging in particular, the increasing level of new business interest seen in the second half of the financial year has been accompanied by increased competition, particularly from providers of more basic hedging services at significantly reduced fees. As a premium provider with a long history of bringing intellectual capital to solve clients' problems, the Group's response to this has been to seek to maintain fee rates through product enhancement.

With respect to Currency for Return strategies, the launch in the second quarter of the Group's first multi-strategy mandate was an important milestone. Research and development work continues in respect of enhancing individual strategies, as well as the approaches by which they are combined.

The Group's sales and marketing efforts continue to target those markets which we believe offer the greatest potential for our products - namely institutional investors in Switzerland, the United Kingdom, and in North America. In the United States, we have increased our local presence through the transfer of a member of our research team to Record's Atlanta office. In all geographies, we will continue to ensure that the resources focussed on each market are appropriate for the available opportunities.

The Group also continues to explore new markets which we believe may offer attractive opportunities, whether in adjacent client segments, such as the private wealth management market, or in new client geographies.

Our operational infrastructure also took a significant step forward during the year, with the completion of a long-term project to introduce a new, industry-standard, multi-asset class middle and back office system. This system gives the Group the flexibility to use a much wider range of fixed income and derivative instruments, to continue to offer innovative and value-adding currency management services.

Throughout the financial year we have paid close attention to costs, balancing our investment in the opportunities we see, with maintaining adequate profitability for the Group. This has been reflected in a reduction in the Group's administrative expenses, enabling us to maintain the Group's operating margin at 32%, in line with the prior period.

Outlook

The Group's strategic initiatives in recent years have been focussed both on keeping current client mandates and generating sales of new mandates, in order to grow revenues and profits.

The most active area for formal new business procurement processes continues to be Passive Hedging in Switzerland, where we are seeking to capitalise on our long-established client franchise and local sales presence, in order to respond to investors' concerns about hedging implementation.

In the United States, we continue to focus on helping pension plans and investment consultants understand their currency risk, which in many cases has not been managed historically, and understand the range of strategies available to manage and exploit currency risk and opportunities. In a market with less-established currency management activity, the pace of progress is necessarily less certain, but the opportunities afforded by the world's largest savings market merit the resources the Group devotes to it.

The United Kingdom continues to be a key market for the Group, albeit one that attracts significant competition for the relatively few mandates available.

Across each of our markets, two forces are making themselves felt. Decision-making processes are typically extended beyond that which has historically prevailed, resulting in a slower rate of new client acquisition. This can likely be attributed to increased due diligence requirements, and a prevailing sense of caution.

Competitive pressures are also being felt across our markets. In some products, such as Passive Hedging, the Group's response has been to seek to maintain fee rates through product enhancement, such as offering a higher level of client service and more bespoke client features. This requires more input from our skilled and committed colleagues, which in turn makes this business less scalable, with lower operating leverage.

In summary, we continue to be confident in the range of opportunities open to the Group, and in the work we have undertaken to best position ourselves to take advantage of these. Our environment will continue to evolve and change, and I am confident that the range of skills and capabilities we have built up will prove adept at responding to these changes.

James Wood-Collins

Chief Executive Officer

Key performance indicators

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.

Summary of highlights

§ AUME increased by $3.9bn (+13%) during the year, standing at $34.8bn at the year end.

§ When presented in Sterling, AUME increased by 19% to £22.9bn.

§ Passive and Dynamic Hedging AUME grew by 17% and 11% respectively. Currency for Return AUME reduced by 11%.

§ Average AUME increased by 10% to $32.2bn 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 2013 was 44, a net increase of 3 over the year.

§ The blended average management fee rate fell from 11.2 bps to 8.8 bps due mainly to the 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.

§ Record's successful cost reduction programme offset fall in revenue, so the operating profit margin is maintained at last year's level of 32%.

§ The Group's earnings per share fell to 1.98 pence per share.

Business model

The Group was founded in 1983 and this year celebrates 30 years of providing currency management services to institutional investors. The Group has established itself as a respected specialist in this sector both in the eyes of clients and their investment consultants.

The Group's one operating segment is that of Currency Management services. The Group employs over 60 employees and its operations are performed and controlled centrally from its Head Office based in Windsor, UK.

Products

The Group's suite of products is split into two main categories: Currency Hedging and Currency for Return products.

Currency Hedging comprises Passive Hedging and Dynamic Hedging. 

Currency for Return includes a range of five Currency for Return strategies being Active FRB, FRB Index, Emerging Market, Value and Momentum and these strategies can be offered in either a segregated or pooled fund structure. 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.

Currency Hedging: AUME ‑ $33.1 billion

Our hedging products are predominantly 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. Record has the expertise to deliver tailored hedging programmes to suit the currency needs of our clients. In a competitive market place, this is seen as becoming increasingly important and our work continues in differentiating our hedging products through enhancements to the product offerings.

Passive Hedging: AUME ‑ $22.1 billion

These mandates have the reduction of exposure to currency risk as their sole objective. They require execution expertise rather than investment judgement or skill. In addition to this execution expertise, clients have been attracted to Record's Passive product offering for our experience and expertise in managing bank counterparty exposure on their behalf, our ability to offer independent trading relationships and our continued innovation with respect to instruments and strategies.

Dynamic Hedging: AUME ‑ $11.0 billion

Record's Dynamic Hedging programme is an attractive alternative to Passive Hedging since these mandates have the reduction of exposure to currency risk as their principal objective and generating value as a secondary objective. The Dynamic Hedging product seeks to allow our clients to benefit from foreign currency strength while protecting them from foreign currency weakness relative to their own base currency. Value is generated entirely through the asymmetric reduction of pre-existing currency risk. Dynamic Hedging's ability to outperform Passive Hedging is dependent on trending in currency markets, rather than any measure of risk appetite.

Currency for Return: AUME ‑ $1.6 billion

Our Currency for Return strategies have the generation of investment return as their principal objective.

Record's longer-established return-seeking strategies, the forward rate bias (FRB) and emerging market currency strategies, are founded on market risk premia and as such perform more strongly in 'risk on' environments. By contrast, value and momentum strategies are founded on 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 this diversification of response to risk sentiment that makes the multi-strategy approach an attractive alternative for generating a return from currency for potential clients. Furthermore, the multi-strategy approach can be used as a flexible 'overlay' to help clients achieve a variety of investment objectives.

Active FRB ‑ FY13 performance +1.50%

The core investment process, the Trend/FRB strategy aims to generate return by buying selected developed market higher interest rate currencies and selling selected lower interest rate currencies and managing these positions with a view to controlling downside risk.

FRB Index ‑ FY13 performance +8.20% (fund)

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. 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 Currency ‑FY13 performance +6.01% (fund)

Record recognises that emerging market currencies offer investors an opportunity to either seek to make a return from such currencies or seek to separate the currency effect from the underlying overseas domestic asset performance (typically equities or bonds). Record believes that as a result of 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. Consequently we 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.

During the year, the Emerging Market currency strategy passed the three year milestone since 'live' money was invested, with a positive performance of 11.58% since inception. The three year positive track-record is seen as important by investment consultants in gaining acceptance of a new product.

Currency Value ‑FY13 performance -0.39% (since August 2012)

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 equilibrium 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.

Currency Momentum ‑FY13 performance +2.45% (since August 2012)

This strategy exploits the tendency of the spot rate to appreciate after a prior appreciation, and to depreciate after a previous 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 the momentum strategy seeks to make a return from this phenomenon.

Multi-strategy ‑FY13 performance +3.54% (since August 2012)

The multi-strategy approach can be applied as an 'overlay' to help clients achieve a variety of investment objectives. Record has the ability to combine four currency return streams (carry, momentum, value and emerging markets) in different weightings that appeal to particular market segments. Record's first multi-strategy currency mandate was launched during the year and marks an important strategic step for the Group.

Further information on product investment performance is given in the Operating Review section.

Distribution and clients

The Group's sales and marketing activities are organised to ensure that our resources are deployed where opportunities have been identified as giving the most likelihood of future success. To this end, sales and marketing are primarily focussed on the UK, North America and Switzerland with additional activity in continental Europe.

In addition to a full-time sales and marketing team based in the UK headquarters, the Group also has a sales representative based in Switzerland and a sales executive based in the US.

We distribute through both direct sales to institutional and private wealth clients, and through local and global investment consultants. By working closely with the investment consultants we can promote currency as an asset class and identify new opportunities as the currency landscape changes.

Our products are delivered both through segregated mandates and also pooled fund structures to suit individual client requirements.

Infrastructure

The Group's investment function, comprising portfolio implementation, trading and research, is almost entirely based at the Head Office in Windsor, UK.

All of the Group's operational and support functions are based at the headquarters in Windsor and include information technology, operations, risk management, compliance, finance, legal and human resources.

The Group has a US sales executive who is based in Atlanta with one member of the research team.

During the year the Group completed its key infrastructure development project, which was the implementation of a new middle and back office system at its headquarters in Windsor. The new system has already increased the Group's capability to both manage a wider variety of instruments and to deploy new products and portfolios cost effectively and will help deliver an improved level of client service in the long term.

Effective risk management and strong internal controls are key aspects of the Group's business model. The Group recognises the inherent risk associated in its business dealings, including the markets and instruments in which it operates. Effective risk management is central to being able to operate effectively and is reflected in the strong internal control culture embedded within the organisation. 

Business review

Market review

The market factors that are most relevant to the Group's performance over the twelve months to 31 March 2013 include continued monetary intervention across developed markets, in particular the United States, the United Kingdom and most recently Japan; the on-going pattern of alternating periods of risk aversion and risk appetite across markets; and the tentative re-emergence of trending, at least in some currency pairs, towards the end of the year.

Monetary intervention

Interest rates remained low across developed market currencies, and central banks continued quantitative easing policies, throughout the year. In particular, the United States Federal Reserve launched a new, open-ended quantitative easing programme in September 2012, under which it committed to purchase an additional $40 billion of mortgage-backed securities each month, as well as signalling its expectation that the federal funds interest rate would be maintained at "exceptionally low levels" at least through to mid 2015. The Bank of England similarly continued its asset purchase programme, authorising purchases of a further £50 billion of assets in July 2012, to bring the total purchased to £375 billion.

The European Central Bank also purchased assets, principally government bonds, from Eurozone banks, albeit with the stated objective of supporting the banks and indirectly the sovereign borrowers, rather than expanding the monetary base. Most recently, the Bank of Japan launched a series of new, aggressive measures in the first quarter of 2013, including explicit targets to double the monetary base, achieve a 2% inflation target within two years, and increased asset purchases and flexibility.

The effect of such measures on broad economic conditions including growth, employment and inflation continues to be uncertain and widely debated. Their impact on currency markets is more evident - although the suppression of interest rates and hence interest rate differentials between major developed market currencies has continued, forward rate bias, or "carry" returns were positive. This was because market participants priced in real-term effects of changes in macroeconomic policies (most notably in Japan) and took advantage of the higher rates prevailing amongst other developed market currencies such as the Australian and New Zealand Dollars.

More broadly, such policies are perceived to present a depreciation threat to currencies, by the very expansion of the monetary base. This depreciation risk has raised fears of "currency wars", by which economies would compete to devalue their currencies and thereby gain a export-oriented competitive advantage over their trading partners. To date, such monetary expansion has been justified as representing "domestic stimulus" rather than "currency warfare" - it remains to be seen if this can be maintained.

In an environment where such policies are widely pursued amongst major currencies, allied with other central bank actions such as the Swiss National Bank's direct intervention to cap the value of the Swiss Franc, it is impossible for all developed market currencies simultaneously to depreciate against each other. Instead exchange rate movements reflect, amongst other things, the market's assessment from time to time of each central bank's commitment to further quantitative easing, relative to that of other monetary authorities. As at the start of the new financial year, the Bank of Japan seems to be regarded as the most resolute, with the Federal Reserve potentially the first to suspend or rein in monetary expansion.

Sentiment and risk appetite

The three distinct phases of market sentiment most relevant to the Group's business revolve around the perception of crisis across the Eurozone. The financial year began in April 2012 with a heightened sense of crisis, most evidently focussed on the possibility of one or more peripheral countries leaving the Eurozone. In this environment, Neil Record being named as one of five finalists for the Wolfson Economics Prize, which challenged the world's brightest economists to prepare a contingency plan for a break-up of the Eurozone, brought welcome attention to the Group's understanding of the issues.

This "risk off" sentiment broadly persisted until the end of July 2012, with a speech in which European Central Bank President Mario Draghi pledged "to do whatever it takes to preserve the Euro" being seen as the turning point. Subsequent to this, the market's confidence in the Eurozone authorities' ability and willingness to act, allied with continued liquidity inflows from quantitative easing worldwide, resulted in a strong rally in "risk assets".

This enthusiasm continued into 2013, until first the inconclusive outcome of the Italian elections in February, followed by the Cyprus bail-out in March, reminded the market that the decisions taken in 2012 have yet to be implemented.

The impact of fluctuating sentiment and risk appetite has been amplified by the continuation throughout much of the year of the "risk on, risk off" phenomenon. In brief, this phenomenon has seen increased correlations amongst assets and instruments, with those offering expected long-term positive returns in exchange for the assumption of risk performing well in "risk on" environments, and those perceived as offering "safe haven" characteristics performing well in "risk off" environments.

Amongst the Group's return-seeking strategies, forward rate bias and emerging market strategies characteristically perform more strongly in "risk on" environments, whilst value and momentum strategies are less risk-sensitive, illustrating the benefits of the multi-strategy approach.

Whilst hedging as such is neither "risk on" nor "risk off", this is not necessarily true of investors' base currencies. In particular, since the financial crisis, the US Dollar and Japanese Yen have re-asserted their "safe haven" status, typically performing well in "risk off" environments (when equities for example underperform), whilst the Euro and to a lesser extent Pound Sterling have performed better in "risk on" environments. Whilst this heightened correlation - whether positive or negative - between equity and currency movements persists, it will subtly alter arguments around currency hedging, such that the rationale for a US Dollar investor to hedge the (correlated) currency risk overlaid on international equities has strengthened, whilst that for a Euro investor has weakened.

As at the start of the new financial year, risk appetite appears healthy, despite profound concerns regarding the fundamental outlook for developed economies. There has also been debate as to whether the "risk on, risk off" phenomenon itself has run its course. Divergent economic performance among the major developed economies has resulted in correlations weakening, but in the Group's view it is too soon to call an end to this phenomenon.

Trending

The latter half of the financial year has also seen the welcome, although tentative, re-emergence of trending in certain currency pairs - i.e. continued and pronounced movements in one direction over a period of time. This behaviour seemed to have been suppressed, or at least altered, in the range-trading environment that prevailed through much of 2011 and the first half of 2012.

The Japanese Yen has demonstrated the re-emergence of trending most clearly. Since the September 2012 election of Shinzo Abe as the Prime Minister of Japan, and accelerating with the first meeting of the Bank of Japan's monetary policy committee under new Governor Haruhiko Kuroda shortly after the end of the Group's financial year, the Japanese Yen has been on a firm downwards trend, weakening more than 20% against the US Dollar. Since the Group's (non-Japanese) hedging clients will be short Yen in their hedging programmes, and each of the forward rate bias, emerging markets and momentum strategies are short Yen, on its own this has been a rewarding move for the Group's clients.

More broadly the re-emergence, at least on a qualified basis, of trending is welcome as trending is the source of Dynamic Hedging's long-term outperformance over Passive Hedging. Trending is also the pattern of behaviour exploited in Record's momentum strategies.

Operating review

Product investment performance

Our hedging products are predominantly 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.

UK investors saw gains from currency over the year as Sterling weakened, leading to higher base valuations for foreign currency investments. UK-based Dynamic Hedging programmes progressively lowered hedge ratios over the year in response to Sterling weakness; this resulted in hedging delivering only a modest negative return, allowing the majority of the gains from foreign currency exposure to be preserved.

Conversely, US investors saw losses from currency on international exposures when valuing positions in US Dollars, as foreign currencies weakened. Record's Dynamic Hedging product generated high hedge ratios to capture US Dollar strength, leading to positive returns from hedging, in turn helping to offset losses from international currency exposure.

Record had five 'live' Currency for Return strategies in the year. The Active Forward Rate Bias (FRB), and Emerging Market strategies are both active and return-seeking in nature, although they exploit different market phenomena. The third, fourth and fifth return-seeking strategies are more passive in nature: the Record FTSE FRB10 Index Fund, a strategy that tracks the FTSE Currency FRB10 index, and the value and momentum strategies. Any combination of these Currency for Return strategies may be combined within a multi-strategy mandate.

For the Active FRB strategy, 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. The year saw positive returns as relatively low interest rate currencies, particularly the Japanese Yen, weakened. A complementary investment process - the Range Trading strategy - generated a negative return as selected currency pairs failed to mean revert, partially offsetting the positive performance of the Trend/Forward Rate Bias strategy.

Similarly, the Forward Rate Bias Index strategy added value as high interest rate currencies appreciated. Record remains committed to the 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.

Record's Emerging Market Currency Fund generated positive returns over the period as emerging market currencies appreciated against a basket of developed market currencies. A perceived reduction in the risk of outright crises in the Eurozone area and signs of growth emerging from the US combined to provide a platform for emerging market currency appreciation. This was compounded by actions in Japan to weaken the Yen, further boosting programme returns.

Record's only live multi-strategy mandate outperformed over the period. Gains were led by returns in the emerging market strand, with positive contributions from the FRB and momentum strategies. Modest negative returns from the value strand had a small offsetting impact on performance.

Record's Euro Stress Fund was terminated during the year. The decision to close the Fund came about following the ECB's announcement of a "fully effective backstop" through unlimited bond purchases, supportive verdicts from the German Constitutional Court and the Dutch electorate, and the resumption of QE 3 by the Federal Reserve which brought about a rally in risk assets and the Euro itself. While we continue to share widespread doubts about the ultimate viability of the single currency, coordinated actions within the Eurozone have arrested immediate concerns of further decline, and lessened the opportunity to capitalise on such concerns through currency markets.

Annual returns of Currency for Return products; year to 31 March 2013

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.

4An 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

Gearing

The Currency for Return product group allows clients to pick the level of exposure they desire in their currency programmes. The pooled funds have historically offered clients a range of gearing and target volatility levels. 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 an aggregate increase in AUME of $3.9bn (+13%) to finish the year at AUME of $34.8bn compared with $30.9bn at the end of the previous year.

AUME development ($bn)

AUME movements result both from factors within Record's control and external factors outside its control. External factors include exchange rates and the underlying asset value (usually equities) on which many segregated mandates are based. External factors accounted for a net increase of $2.0bn in AUME during the year, made up of:

(i) an increase of $3.2bn related to movements in global stock and other markets as many mandate sizes are linked to such markets;

(ii) a fall of $1.2bn due to changes in exchange rates over the period, which affects the conversion of non-US Dollar mandate sizes into US Dollar AUME. This movement does not have an equivalent impact on the Sterling value of fee income.

The Group has seen net inflows of $1.9bn from clients. Inflows from both new and existing clients totalled $5.1bn, and were offset by outflows of $3.2bn.

When expressed in Sterling, AUME increased by £3.6bn (+19%) to finish the year at £22.9bn (2012: £19.3bn). The split of AUME at the year end by base currency was 25% in Sterling, 49% in Swiss Francs, 20% in US Dollars, 5% in Euros and 1% in Canadian Dollars.

Dynamic Hedging AUME increased by 11% to $11.0bn (2012: $9.9bn), which was mainly the result of growth in value of the underlying assets.

Since the year end, the Group has announced the start of a new combined passive and dynamic hedging programme for a UK-based client with AUME totalling approximately $1.7 billion, including a performance fee element.

As in 2012, Passive Hedging AUME increased by $3.2bn, a 17% increase in the year (2012: 20%). This increase was principally due to the combination of two factors: net inflows of $2.0bn, and a growth of $2.1bn in value of the underlying assets, typically international equities and bonds, offset by movements in exchange rates of $0.9bn.

Record's Currency for Return AUME fell to $1.6bn (2012: $1.8bn) due principally to the net outflows which totalled $0.3bn. Included in the Currency for Return mandates are a small number of mandates for emerging market currencies totalling $0.8bn (2012: $0.8bn) and a single multi-strategy mandate of $0.3bn, which started in the year.

Product mix

The Group's product mix has shown a period of stability following a prolonged period of change. Over the last four years, Currency for Return AUME as a proportion of total AUME has decreased from 43% to 5%, as a result of the challenging environment for the Active FRB product, and consequent outflows. Conversely both Passive and Dynamic Hedging have seen increases in AUME over the same period of 70% and 175% respectively.

During the year, Hedging grew to 95% of AUME (2012: 93%), as a result of the growth of the Passive Hedging product, which accounted for 63% of AUME (2012: 61%), and the stability of the Dynamic Hedging product which accounted for 32% of AUME (2012: 32%). Together Currency for Return and Dynamic Hedging represented 37% of AUME (2012: 38%) being higher margin products compared to Passive Hedging. Currency for Return AUME represented 5% of AUME (2012: 6%) at the end of the year for the reasons stated above.

At 31 March 2013 Record had 44 clients, a net gain of 3 clients over the year.

AUME composition by product and base currency

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 remained broadly stable, and headcount at 31 March 2013 was 64 (2012: 65).

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 Share Scheme, the Group Profit Share Scheme and the Group Share Incentive Plan (SIP) promote the acquisition of equity in the Company by staff, improving motivation and retention, as well as aligning employees' interests with those of our clients and shareholders.

Board and management succession

Following the announcement on 16 November 2012 of the management reorganisation replacing the combined role of Chief Financial Officer and Chief Operating Officer, Paul Sheriff resigned from this role on 15 March 2013. Steve Cullen was appointed to the Board as Chief Financial Officer, having previously held the position of Group Financial Controller for over nine years. Joel Sleigh was appointed Chief Operating Officer having held senior management positions within the Group since 1999, and he has been a member of the Executive Committee since 2012. Both appointments were with effect from 15 March 2013.

Infrastructure development

During the year the Group completed its key infrastructure development project, which was the implementation of a new middle and back office system. The new system has already increased the Group's capability both to manage a wider variety of instruments and to deploy new products and portfolios cost effectively and it will help deliver an improved level of client service.

Financial review

Total revenue for the financial year decreased by 9% to £18.6m, principally due to the reduction in management fees. This fall is despite the increase in average AUME during the year of 10%, and is broadly a consequence of the full year effect of changes in our client base reported in 2012 i.e. the loss of our second largest client in November 2011, and the closure of the remaining Active FRB pooled fund in April 2012. These year-on-year reductions in revenue were partially offset by the continued growth in Passive Hedging revenue of 37% since last year.

Total expenditure decreased by 9% to £12.4m as a result of a programme of cost control measures, and a fall in the Group Profit Share cost which is determined by operating profit.

Profit before tax decreased by 9% to £6.1m.

Revenue

Management fees continued to make up the majority (97%) of the Group's revenue. Management fees for the year ended 31 March 2013 fell by 11% to £18.1m.

Record charges fees to its clients based upon the AUME of the product provided. Both Passive and Dynamic Hedging typically have management fee only arrangements, although the Group has recently commenced a combined passive and dynamic hedging programme with a performance fee element. Record has historically offered both management fee only, and management fee plus performance fee structures on Currency for Return mandates. Higher performance fee rates usually accompany lower management fee rates and vice versa.

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.

Management fees

Aggregate management fee income during the year was £18.1m (2012: £20.4m). The fall in Currency for Return fees of £1.8m (46%) was due to the continued decline of our Active FRB pooled fund product, whilst the decrease in Dynamic Hedging fees of £1.6m (12%) was mostly due to a full year's impact of the loss of a significant client in the previous financial year. The Passive Hedging product continued to grow strongly to £4.1m, up 37% in the period.

The blended average management fee rate fell to 8.8bps (2012: 11.2bps). Despite the product mix stabilising year on year, the decrease in the blended average management fee rate was due mainly to the increase in the average AUME attributable to the lower margin Passive Hedging product which accounted for 23% of management fees in the period (2012:15%). Slight declines in the management fee rates achieved on the higher margin products (i.e. Dynamic Hedging and Currency for Return) also contributed to the fall in the blended average management fee rate.

Performance fees

There was no performance fee earned in the year (2012: £nil). Performance fees have historically been earned from some Currency for Return and Dynamic Hedging mandates. Since the closure of the Cash Plus Fund in April 2012, there are only two active mandates that incorporate a performance fee component which are both Dynamic Hedging mandates.

Other income

Other income is principally from gains made on forward foreign exchange contracts employed by the funds seeded by the Group. It also includes gains/losses on hedging revenues denominated in currencies other than Sterling, and other foreign exchange gains/losses.

Expenditure

Operating Expenditure

The total operating expenditure of the Group decreased by £1.3m (9%) to £12.4m during the year ended 31 March 2013. Personnel costs fell by £0.4m including a full year impact of the 10% reduction in Board members' salaries made from 1 December 2011 and non-personnel costs fell by £0.3m. Losses on financial instruments held as a disposal group fell to £0.1m in the year (2012: £0.3m).

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 agreed that for the year ended 31 March 2013, the Group Profit Share Scheme is 30% of pre-GPS operating profit. This represents £2.4m, a reduction of £0.4m from the previous financial year. Directors and senior management in Record 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 2013 of £5.9m was 11% lower than the operating profit for the previous financial year (2012: £6.6m). Despite this, the Group maintained an operating profit margin of 32% for the year ended 31 March 2013 (32% in 2012), as the result of the cost reduction measures initiated in the previous financial year continuing into this financial year and partially offsetting the fall in revenue.

Cash flow

The Group's year end cash position was £29.0m (2012: £24.6m). Cash generated from operating activities before tax was £7.2m (2012: £5.0), with £1.6m paid in taxation and £1.6m paid in dividends.

Dividends

During the year, the decision was taken to defer the interim dividend payment with the intention to retain the overall dividend payable at 1.50p per share, subject to business conditions.

The Board recommends paying a final dividend of 1.50p per share (dividend paid in respect of year ended 31 March 2012: 1.50p per share), equivalent to £3.3m. This represents a 76% payment of profits after tax attributable to owners of the parent for the year ended 31 March 2013.

Subject to shareholder approval, the dividend will be paid on 31 July 2013 to shareholders on the register on 21 June 2013, the ex-dividend date being 19 June 2013. The dividend cover in the year was 1.3 times (2012: 1.5).

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 maintains a financial model to assist it in forecasting future capital requirements over a four-year time horizon under various scenarios. Shareholders' funds were £28.6m at 31 March 2013 (2012: £26.4m). The Group has no debt.

Risk management and regulation

Regulatory environment and regulatory capital

Record Currency Management Limited (RCML) is authorised and regulated in the UK by the Financial Conduct Authority (FSA prior to 1 April 2013). In the United States, RCML is registered as an Investment Adviser with the Securities and Exchange Commission and as a Commodity Trading Adviser (swaps only) with the Commodity Futures Trading Commission. 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 Central Bank 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 2013, Record had Tier 1 capital of £27.7m. 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.

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 embedded throughout 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 provides oversight and independent challenge in relation to internal control and risk management systems and procedures. The Head of Compliance and Risk 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 Operating Officer and has the Chief Financial Officer, the Head of Operations, the Head of Trading, the Head of Portfolio Management, the Head of Portfolio Implementation and the Head of Compliance and Risk 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 SSAE 16) 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 mitigating activities are set out below

Consolidated statement of comprehensive income

Year ended 31 March

Consolidated statement of financial position

As at 31 March

Consolidated statement of changes in equity

Year ended 31 March 2013

Year ended 31 March 2012

Consolidated statement of cash flows

Year ended 31 March

Company statement of financial position

As at 31 March

Company statement of changes in equity

Year ended 31 March 2013

Year ended 31 March 2012

Company statement of cash flows

Year ended 31 March

Notes to the financial statements for the year ended 31 March 2013

These financial statements exclude disclosures that are immaterial and judged to be unnecessary to understand our results and financial position.

1. Accounting policies

In order to increase the clarity of the notes to the financial statements, we have moved accounting policy descriptions to the beginning of the relevant note where appropriate, and they are shown in italics.

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out in the notes 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 2013. 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 2012, with the remaining becoming effective in future periods. The new standards and amendments to existing standards effective for the year to 31 March 2013 have not had a material impact on the financial statements of Record plc.

New standards and interpretations

New or revised standards and interpretations issued but not yet effective include those listed below:

§ IFRS 7 (Amendment) - 'Disclosures - Offsetting Financial Assets and Financial Liabilities'

§ IFRS 10 - 'Consolidated financial statements'

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

§ IFRS 13 - 'Fair value measurement'

The impact of these new and revised standards is expected to be limited to further disclosure enhancements in the financial statements of Record plc.

(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 2013. 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 disposal group held for sale 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 2013 and the financial position of the seeded funds as at 31 March 2013.

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 £1,543,196 attributable to the Company (2012: £8,523,904).

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

(c) 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.

(d) 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.

(e) Impairment of assets

The Group assesses whether there is any indication that any of its assets have been impaired at least annually. 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 and derivative financial instruments, the Group assesses whether the assets have been impaired on a monthly basis by performing a mark to market exercise.

(f) 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 on-going 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 the Group'sseed 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 25.

3. Revenue

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 equivalents (AUME). The Group is entitled to earn performance fees from some clients where the performance of the clients' mandates exceeds defined benchmarks by an agreed level of outperformance over a set time period. Performance fees are recognised at the end of each contractual performance period as this is the first point at which the fee amount can be estimated reliably and it is probable that the fee will be received.

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 Group provides 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.

(a) Product revenues

The Group has split its currency management revenues by product. Other Group activities include consultancy and gains / losses on derivative financial instruments. There were no performance fees earned in either of the reported periods.

(b) 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.

Other Group activities are not analysed by geographical region.

(c) Major clients

During the year ended 31 March 2013, two clients individually accounted for more than 10% of the Group's revenue during the year. The two largest clients generated revenues of £5.6m and £2.0m in the period (2012: one client accounted for £6.0m).

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

Other employment benefit costs include share-based payments, share option costs, and costs relating to the Record plc Share Incentive Plan.

6. Finance income

7. Taxation - Group

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.

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

The standard rate of corporation tax in the UK is 24% (2012: 26%). 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 2013 was £1,450,457 (2012: £1,803,237) which was 23.9% of profit before tax (2012: 26.9%).

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 (see note 21). There were share options and deferred share awards in place at the beginning of the period over 2,028,432 shares. During the year options were exercised, or share awards vested, over 128,432 shares. The Group granted 2,220,000 share options with a potentially dilutive effect during the year.

9. Dividends

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

The dividend paid by the Group during the year ended 31 March 2013 totalled £1,645,143 (0.75p per share) which was the final dividend paid in respect of the year ended 31 March 2012. The dividends paid 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 final dividend proposed in respect of the year ended 31 March 2013 is 1.50p per share.

Between 1 July 2008 and 31 August 2012, the Company paid dividends amounting to £38.5m. Although the Company had sufficient distributable reserves to make each dividend payment, the relevant interim accounts reflecting these profits were not prepared and filed at the appropriate time with the Registrar of Companies as required by the Companies Acts 1985 and 2006. Consequently payment of these dividends, including £1.645m paid in the year to 31 March 2013, did not comply with the technical requirements of the Companies Acts 1985 and 2006. The Company will put a resolution to the shareholders at the forthcoming AGM for their approval to take steps to address this situation. These accounts have been drawn up on the basis that the infringements referred to above will, from an accounting perspective, be regularised by the actions to be proposed to the shareholders at the forthcoming AGM. The proposals do not affect the results of the Group for the year to 31 March 2013, its net assets at 31 March 2013, nor its ability to pay future dividends. Going forward, as a matter of good governance and to reflect the adequacy of distributable reserves, interim accounts will be filed with the Registrar of Companies before dividend payments are made.

10. Retirement benefit obligations

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

The pension cost charge represents contributions payable by the Group to the funds and amounted to £449,915 (2012: £507,940).

11. Property, plant and equipment - Group

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.

§ Leasehold improvements - period from acquisition to next rent review

§ Computer equipment - 2-5 years

§ Fixtures and fittings - 4 years

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.

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

12. 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.

The Group's intangible assets comprise the capitalised cost of software development only. The carrying amounts can be analysed as follows:

During the period, the Group completed the implementation of its new back office software. Amortisation of the capitalised development costs commenced from July 2012. The estimated useful economic life of the completed software is five years. The annual contractual commitment for the maintenance and support of software is £132,494 (2012: £129,262). All amortisation charges are included within administrative expenses.

13. Investments

Investments in subsidiaries are shown at cost less impairment losses. The capitalised investment in respect of share-based payments offered by subsidiaries is equal to the cumulative fair value of the amounts payable to employees recognised as an expense by the subsidiary. Investment in funds are recognised at net assets plus movement in value.

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 registered in England and Wales.

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. Initially, these were both accounted for as a disposal group held for sale in accordance with its accounting policy defined in note 18. In both cases, the Group still retained control over each of the funds twelve months after making 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 are presented in investments in the Company statement of financial position.

14. Deferred taxation - Group

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.

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

At the year end the Group had deferred tax assets of £5,316 (2012: deferred tax liabilities of £15,438). At the year end there were share options not exercised with an intrinsic value for tax purposes of £143,094 (2012: £14,128). 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

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. 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'.

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 (2012: £nil).

16. Derivative financial assets and liabilities

Financial assets held at fair value through profit or loss

Financial assets held at fair value through profit or loss include financial assets that meet certain conditions and are held 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.

Derivative financial liabilities

Derivatives are initially recognised at cost on the date on which the contract is first entered into unless the 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.

The Group holds derivative financial instruments for two purposes. The Group uses forward exchange contracts to reduce the risk associated with sales denominated in foreign currencies, and also in order to achieve a return within its seeded investment funds. The instruments are recognised at fair value. The fair value of the contracts is calculated using the market forward contract rates prevailing at the period end date. The net gain or loss on forward foreign exchange contracts at fair value is included within revenue from other group activities.

Derivative financial instruments held to hedge cash flow

At 31 March 2013 there were outstanding contracts with a principal value of £2,875,764 (31 March 2012: £2,685,811) 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 2013.

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

Derivative financial instruments held for trading

Two of the funds seeded by Record (the Record Currency FTSE FRB10 Index Fund and the Record Currency Emerging Market Currency Fund), use forward foreign exchange contracts in order to achieve a return. The Record Currency - Euro Stress Fund used a variety of instruments including forward foreign exchange contracts in order to achieve a return. The forward foreign 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 2013 there were outstanding contracts with a principal value of £13,893,809 (31 March 2012: £9,112,251). The instruments held by the Record Currency - Euro Stress Fund were presented within Current assets held for sale (see note 18).

The net gain on forward foreign exchange contracts held for trading is as follows:

17. 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.

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 2013, the cash held by these two funds totalled £5,863,175 (31 March 2012: £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)

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.

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 seeded 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 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 accounted for as a disposal group held for sale on the basis described above. In both cases, the Group still retained control over each of the funds twelve months after the original investment. Consequently, 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.

In May 2011, the Group invested £1,000,000 in the Record Currency - Euro Stress Fund, the only other investor in the fund was Neil Record, a Director of Record plc. The Group retained control over this fund from its inception, through to its liquidation in September 2012. The investment in the fund was classified as being a disposal group held for sale.

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:

19. Current liabilities

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.

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

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 Record plc Employee Benefit Trust (EBT) was formed to hold shares acquired under the Record plc share-based compensation plans. A total of 3,805,808 (2012: 2,028,432) 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. Under IFRS the EBT is considered to be under de facto control of the Group, and has therefore been consolidated into 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.

21. Share-based payments

During the year ended 31 March 2013 the Group has managed the following share-based compensation plans:

a) The Group Profit Share Scheme : deferred share awards issued under the Group Profit Share Scheme are classified as share-based payments with cash alternatives under IFRS 2.

b) The Record plc Share Scheme: share options issued under the Record plc Share Scheme are classified as equity-settled share-based payments under IFRS 2.

a) Group Profit Share Scheme

Share-based payments with cash alternatives

These transactions are compound financial instruments, which include a debt element and a cash element. 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.

The Group Profit Share Scheme allocates a proportion of operating profits to a profit share pool to be distributed between all employees of the Group. The Remuneration Committee has the discretion to vary the proportion awarded to the profit share pool between 25% and 35% of operating profits, with the intention of maintaining an average level of 30% of operating profits over the medium term. 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 is dependent on the level of seniority of the employee. 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.

Shares awarded under the Profit Share Scheme do not include any vesting restrictions but rather restrictions over subsequent sale and transfer, as described above. The full amount of cash and shares awarded under the scheme are charged to the profit or loss over the period in which the awards are earned.

b) The Record plc Share Scheme

Equity-settled share-based payments

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 awards are valued using an appropriate valuation 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.

The Record plc Share Scheme (the "Share Scheme") was adopted by the Company on 1 August 2008 and was initially created to allow deferred share awards to be granted to new senior employees. During the year ended 31 March 2009, awards in the form of tax-unapproved options ("Unapproved Options") over shares with an aggregate value at grant of £400,000 were granted to two senior employees under the Share Scheme. The options became exercisable for nil consideration in three equal tranches on the second, third and fourth anniversary of the date of grant. The options became fully vested this year.

During 2011, the Share Scheme was amended to include the ability to grant HMRC‑approved options ("Approved Options") to employees of Record plc or its subsidiaries under a new Part 2 of the Share Scheme. Unapproved Options may still be granted under the existing unapproved part of the Share Scheme. The exercise price per share of Approved Options must be no lower than the market value of a share on the dealing day immediately preceding the date of grant. Each participant may be granted Approved Options over shares with a total market value of up to £30,000 on the date of grant. There is no such limit on the value of Unapproved Options. Unapproved Options may be granted with any exercise price (including nil), but have recently been granted with a market-value exercise price in the same way as the Approved Options.

Options over an aggregate of 2,220,000 shares were granted under the Share Scheme during the year, of which 410,000 shares were made subject to Unapproved Options and 1,810,000 to Approved Options. All options were granted with an exercise price per share equal to the share price prevailing at the time of grant. The Approved Options become exercisable on the fourth anniversary of grant, subject to the employee remaining in employment with the Group and to the extent a performance condition based on the Company's total shareholder return in comparison with a relevant peer group has been met. The Unapproved Options each become exercisable in four equal tranches on the first, second, third and fourth anniversary of the date of grant, subject to the employee being in employment with the Group at the relevant vesting date and to the extent personal performance conditions have been satisfied.

Outstanding share options

At 31 March 2013, the total number of ordinary shares of 0.025p outstanding under Record plc share compensation schemes was 4,120,000 (2012: 2,028,432). 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:

During the year, shares vested on 4 August 2012 and 1 September 2012; the fourth anniversary of the respective schemes above. The share price at each vesting date was £0.16 and £0.17 per share respectively.

The Directors' interests in the combined share schemes are as follows:

* Steve Cullen was appointed Chief Financial Officer on 15 March 2013.

** As permitted by the scheme rules, these shares are held in the name of the Director's spouse.

Performance measures

The Approved Option Scheme includes certain performance criteria. At vesting date, a percentage of the total options granted will vest according to the median Total Shareholder Return (TSR) as measured against the FTSE 350 General Financial - Price Index. The performance target table is given below:

The Record plc Share Incentive Plan

During the year, the Group started the Record plc Share Incentive Plan (SIP), to encourage more widespread ownership of Record plc shares by employees. The scheme is a tax-approved scheme offering attractive tax savings for employees retaining their shares in the scheme over the medium to long term.

As an incentive to employees, the Group matches every two shares bought by employees with a free matching share. During the year, the Group awarded 24,935 free shares to employees.

22. Non-controlling interest

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 cost plus movement in value of the third party investment in the fund.

Three Directors of Record plc and four external investors have purchased units in the two funds currently seeded by Record plc, i.e. the Record Currency - FTSE FRB10 Index Fund, the Record Currency - Emerging Market Currency Fund, and previously, also the Record Currency - Euro Stress Fund. The mark to market value of these units represents the only non-controlling interests in the Group.

The two existing funds are considered to be under control of the Group through majority interests. The Record Currency - Euro Stress Fund was considered to be under control of the Group throughout its existence.

Mark to market value of external holding in seeded funds consolidated into the accounts of the Record Group

23. Financial risk management

The Group's current activities result in the following financial risks and management responses to those risks in order to minimise any resulting adverse effects on the Group's financial performance.

Objectives, policies and processes for managing risk and the methods used to measure the risk

Financial assets principally comprise trade receivables, cash and cash equivalents and derivative financial assets. Financial liabilities comprise trade and other payables and derivative financial liabilities. The main risks arising from financial instruments are credit risk, liquidity risk, foreign currency risk and interest rate risk each of which is discussed in further detail below.

The Group monitors and mitigates financial risk on a consolidated basis. The Group has implemented a framework to manage the risks of its business and to ensure that the Directors have in place risk management practices appropriate to a listed company. The management of risk is directed by the Board and reviewed by the Audit and Risk Committee.

The Company's material financial instruments are investments in the seeded funds, and balances due to/from Group undertakings. The Company's financial risk is managed as part of the Group financial risk management process and therefore separate disclosures for the Company have not been provided.

Credit risk

Record plc's Risk Management Committee has established a credit risk policy to ensure that it only trades with counterparties that meet requirements consistent with the Group's agreed risk appetite. The Chief Financial Officer is responsible for reviewing the Group's credit exposure and ensuring that any credit concerns are raised to the Risk Management Committee and that action is taken to mitigate these risks.

The Group invests some of its surplus funds in high quality liquid market instruments. Such investments have a maturity no greater than three months. To reduce the risk of counterparty default the Group deposits the rest of its surplus funds in approved high quality banks; the financial institutions involved have high credit ratings assigned by international credit agencies. The Group operates a policy of restricting its exposure to any single bank to a maximum of £10m. All banking counterparties used to hold Group cash have a credit rating EQUIVALENT TO a3 (Moody's) or better.

The Group's maximum exposure to credit risk is as follows:

The debtors' age analysis is also evaluated on a regular basis for potential doubtful debts. It is management's opinion that no provision for doubtful debts is required. The table below is an analysis of financial assets by due date:

The Group offers standard credit terms of 30 days from invoice date. It is the Group's policy to assess debtors for recoverability on an individual basis and to make a provision where it is considered necessary. In assessing recoverability the Group takes into account any indicators of impairment up until the reporting date. The application of this policy generally results in debts between 0-3 months overdue not being provided for unless individual circumstances indicate that a debt is impaired.

Trade receivables are made up of 36 debtors' balances (2012: 37). The largest individual debtor corresponds to 31% of the total balance (2012: 33%). Debtor days, based on the generally accepted calculation of debtor days, is 95 days (2012: 76) This reflects the quarterly billing cycle used by the Group for the vast majority of its fees. As at 31 March 2013 only 2% of debt was overdue (2012: 2%) and the Directors consider this to be fully recoverable. No debtors' balances have been renegotiated during the year or in the prior year.

Liquidity risk

The Group is exposed to liquidity risk, namely that it may be unable to meet its payment obligations as they fall due. The Group maintains sufficient cash and marketable securities to be able to meet all such obligations. Management review cash flow forecasts on a regular basis to determine whether the Group has sufficient cash reserves to meet the future working capital requirements and to take advantage of business opportunities. The average creditor payment period is 21 days (2012: 16 days).

Contractual maturity analysis for financial liabilities:

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities used by the Group. Interest bearing assets comprise trade receivables and cash and cash equivalents which are considered to be short-term liquid assets. It is the Group's policy to settle trade payables within the credit terms allowed and the Group does not therefore incur interest on overdue balances.

Interest rate exposure

Foreign currency risk

Foreign currency risk refers to the risk that the value of a financial commitment or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Group makes use of forward exchange contracts to manage the risk relating to future transactions in accordance with the Group's risk management policy. The fair value of the forward contracts at 31 March 2013 was a liability of £24,610 (2012: asset of £33,175). Losses on the forward exchange contracts were £82,288 in the year (2012: gain of £68,023). The future transactions related to the forward exchange contracts are expected to occur within the next three months. Changes in the fair values of forward exchange contracts are recognised directly in profit or loss.

The Group is exposed to foreign currency risks on sales and cash holdings that are denominated in a currency other than Sterling. The principal currencies giving rise to this risk are primarily the US Dollar, the Swiss Franc, the Euro and the Canadian Dollar. 

In the year ended 31 March 2013, the Group invoiced the following amounts in currencies other than Sterling:

The value of revenues for the year ended 31 March 2013 that were denominated in currencies other than Sterling was £13.5 million (73% of total revenues). For the year ended 31 March 2012: £14.8 million (72% of total revenues).

Record plc's policy is to reduce the risk associated with the Company's sales denominated in foreign currencies by using forward fixed rate currency sales contracts, taking into account any forecast foreign currency cash flows. 

Foreign currency risk - sensitivity analysis

Sterling/US Dollar exchange rate

The impact of a change of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on a historical basis and market expectations for future movement. When applied to the average Sterling/USD exchange rate of $1.58/£ this would result in a weakened exchange rate of $1.44/£ and a strengthened exchange rate of $1.75/£. 

Sterling/Swiss Franc exchange rate

The impact of a change of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on a historical basis and market expectations for future movement. When applied to the average Sterling/CHF exchange rate of CHF1.48/£ this would result in a weakened exchange rate of CHF1.34/£ and a strengthened exchange rate of CHF1.65/£. 

Sensitivity analyses have not been disclosed for other currencies as any reasonable range of change in exchange rate would not have a material impact on profit or equity.

FTSE FRB10 Index Fund

The Group seeded a product in December 2010, which is a fund that tracks the FTSE Currency FRB10 Index by holding a portfolio of developed market currency deliverable forward exchange contracts. As Record plc exerts significant control over the fund, it has been consolidated into the Group's primary statements. The net assets of the fund at 31 March 2013 were £2,037,488 (2012: £1,605,646). The Group has provided the following data in respect of sensitivity to this product.

The impact of a change to the index of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on a historical basis and market expectations for future movement. 

Emerging Market Currency Fund

The Group seeded a product in December 2010 called the Emerging Market Currency Fund, which manages a portfolio of emerging market currency deliverable forward exchange contracts and emerging market currency non-deliverable forward exchange contracts in order to achieve a return. As Record plc exerts significant control over the fund, it has been consolidated into the Group's primary statements. The net assets of the fund at 31 March 2013 were £3,823,603 (2012: £2,561,091). The Group has provided the following data in respect of sensitivity to this product.

The impact of a change to the portfolio value of 20% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed both on a historical basis and expectations for future movement in emerging markets.

24. Additional financial instruments disclosures

Financial instruments measured at fair value

IFRS 7 (Improving Disclosures about Financial Instruments) requires the Group to present certain information about financial instruments measured at fair value in the statement of financial position.

The following table presents financial assets and liabilities measured at fair value in the consolidated statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

§ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

§ Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

§ Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement. The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:

There have been no transfers between levels in the reporting period (2012: none).

Basis for classification of financial instruments within the fair value hierarchy

Forward foreign exchange contracts

Forward foreign exchange contracts are classified as level 2. Although these instruments are traded on an active market, the fair value of forward foreign exchange contracts is established using interpolation of observable market data rather than from a quoted price. All forward foreign exchange contracts are strictly short-term in duration.

Classes and fair value of financial instruments

Financial assets

Financial liabilities

It is the Directors' opinion that the carrying value of trade receivables and trade payables approximates to their fair value.

Categories of financial instrument