Record Regulatory News (REC)

PRESS RELEASE

Record plc

17 June 2016

FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2016

Record plc, the specialist currency manager, today announces its audited results for the year ended 31 March 2016.

Financial headlines:

§ AUME1 $53.7bn at 31 March 2016 (down 3%)

§ AUME £37.4bn at 31 March 2016 (up 0.3%)

§ Revenue of £21.1m (2015: £21.1m)

§ Pre-tax profit of £6.9m (down 10%)

§ Operating profit margin of 32% to 31 March 2016 (2015: 36%)

§ Robust financial position with net assets of £37.7m at 31 March 2016 (2015: £35.8m).

§ Basic EPS of 2.55p per share (2015: 2.66p)

§ Proposed final dividend for the year to 31 March 2016 is 0.825p per share, giving a total dividend in respect of the year of 1.65p per share (2015: 1.65p)

Key developments:

§ Client numbers continue to grow, standing at 58 at 31 March 2016 (up 3)

§ Passive Hedging is now the largest generator of management fees

§ More challenging market environment, with limited persistent trends, narrowing expectations of interest rate differentials, and a prolonged decline in emerging market currencies

§ Regulatory requirements expected to increase, including in respect of mandatory variation margin

§ Wide divergence of views has emerged amongst investors as to their preferences in managing currency risk and opportunity

§ New business opportunities include flexible and innovative solutions

§ EU referendum on 23 June 2016: anticipating potential periods of elevated volatility and managing the impact on clients' portfolios

§ Balance sheet is sufficiently strong to consider return to shareholders of future annual earnings in excess of ordinary dividends

[1] As 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.

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

"The year has been one of hesitant growth for the global economy and uncertainty in financial markets. Market sentiment continues to be driven more by political events and expectations around central bank policy than by longer-term economic factors. The effect on currency markets has been continued uncertainty and volatility in exchange rates.

"Against this challenging backdrop, revenues for the year were maintained at £21.1 million (2015: £21.1 million) and total expenditure increased to £14.1 million (2015: £13.4 million) principally due to the firm‑wide salary increase of 10% implemented on 1 May 2015. Consequently, the operating margin of the Group decreased to 32% (2015: 36%) and basic earnings per share decreased by 4% to 2.55 pence (2015: 2.66 pence).

"The Board is recommending a final ordinary dividend of 0.825 pence per share. The total ordinary dividend in respect of the year ended 31 March 2016 of 1.65 pence per share is unchanged on the previous year and in line with our intention as stated in this year's interim report.

"For the current financial year, the Board's expectation, subject to business conditions, is to maintain the total ordinary dividend at the current level. Also, the Board now considers the Group's balance sheet and regulatory capital buffer sufficiently strong to support the consideration of returning at least part of any excess of future earnings per share over ordinary dividends to shareholders, potentially in the form of special dividends.

"Since our last annual report, we've announced the appointment of Jane Tufnell and Rosemary Hilary to the Board. Both Jane and Rosemary bring a wealth of relevant experience from their respective careers and my Board colleagues and I look forward to working closely with them and in benefitting from their valuable insight and business acumen.

"In such challenging environments, there are opportunities for further engagement both with clients and prospective clients to understand their currency-related issues and specific requirements. Whether the answer lies with using our more standard hedging or currency for return products or whether circumstances require a more bespoke approach, we believe we have the people, systems, flexibility and capability to provide a solution.

"The business is well placed to face such challenging environments and to take advantage of the opportunities arising with a strong, committed team of professionals and a robust financial position."

Analyst briefing

There will be a presentation for analysts at 9.30am on Friday 17 June 2016 at Cenkos plc offices: 6-8 Tokenhouse Yard, London, EC2R 7AS. A copy of the presentation will be made available on the Group's website at www.recordcm.com.

For further information, please contact:

Year ended 31 March

As at 31 March

Overview

Record's business growth and prospects, being directly associated with the behaviour of global currency markets, are perhaps more intimately associated with the global macro position and outlook than businesses in other sectors. Hence it seems appropriate to briefly review the macro backdrop.

The year has been one of hesitant growth for the global economy and uncertainty in financial markets. Market sentiment continues to be driven more by political events and expectations around central bank policy than by longer-term economic factors. The effect on currency markets has been continued uncertainty and volatility in exchange rates.

The power of central banks and monetary policy makers to further stimulate domestic economies may, however, be approaching its limit, with quantitative easing and interest rate policies seemingly failing to boost growth and prevent deflation. In the US, for example, expectations of early interest rate rises during 2015 in response to US growth were eventually rewarded by the Federal Reserve raising rates in December 2015, with the expectation that further increases would follow further growth, which failed to materialise. The US dollar weakened over the year against most G10 currencies.

Similarly, in the UK, expectations of interest rate tightening diminished over the course of the year amidst concerns over growth and inflation. Sterling generally weakened during the year versus most other G10 currencies, weighed down further by concerns over the EU referendum towards the end of the year. More recently, in Japan, financial markets responded badly to the Bank of Japan's announcement of negative interest rates, in an attempt to boost growth and inflation levels. The consequent strength of the yen in the currency markets was the opposite reaction to that intended.

It is clear that global growth remains fragile, inflation elusive and the expectation for further interest rate tightening has, for now, abated. In such an environment, being able to sustain the levels of growth seen over the last two years has proved a challenge, but the business remains cognisant of its primary objectives of working hard to meet client demand for robust and innovative currency solutions and of creating long-term shareholder value.

Financial highlights

Client numbers grew for the fourth consecutive year, ending the year at 58 clients (2015: 55 clients). AUME fell marginally by 3% to $53.7 billion (2015: $55.4 billion) including net outflows for the year of $2.3 billion. Our Currency for Return products experienced net outflows for the year of $3.0 billion, represented principally by the tactical bespoke mandate previously identified as volatile. This was offset by net inflows to Passive Hedging of $1.8 billion, which now represents 82% of total AUME.

Revenues for the year were maintained at £21.1 million (2015: £21.1 million). Management fees increased to £20.9 million (2015: £20.3 million) predominantly due to the increase in Passive Hedging fees arising from the full year impact of the increases in Passive Hedging AUME reported in the latter part of last year. An increase in Currency for Return fees to £3.2 million (2015: £2.8 million) was primarily due to the increased size of the bespoke tactical mandate during the year, although this mandate saw outflows in the latter part of the year triggered by market movements. Performance fees of £0.3 million (2015: £0.5 million) crystallised at the end of the financial year.

Total expenditure increased in line with expectations to £14.1 million (2015: £13.4 million) following the 10% increase to fixed remuneration awarded from May 2015, although this was partially offset by the reduction of 6% in variable remuneration. The operating margin of the Group decreased to 32% (2015: 36%), flowing through to a decrease in profit before tax of 10% to £6.9 million (2015: £7.7 million). Basic earnings per share decreased by 4% to 2.55 pence (2015: 2.66 pence).

Dividend

Over recent years, our dividend policy has been both consistent and transparent with a view to achieving a level of dividend which is at least covered by earnings and which allows for sustainable dividend growth by the business in line with the trend in profitability. The dividend was increased by 10% last year to 1.65 pence per share in line with business performance.

The Board is recommending a final ordinary dividend of 0.825 pence per share. The total ordinary dividend in respect of the year ended 31 March 2016 of 1.65 pence per share is unchanged on the previous year and in line with our intention as stated in this year's interim report. Subject to shareholders' approval, the dividend will be payable on 3 August 2016 to shareholders on the register at 1 July 2016.

For the current financial year, the Board's expectation, subject to business conditions, is to maintain the total ordinary dividend at 1.65 pence per share, which the Board would expect to be payable equally in respect of an interim and a final dividend. However, in setting the interim and final dividends, the Board will be mindful of setting a level of ordinary dividend payments which it expects to be at least covered by earnings and which allows for future sustainable dividend growth by the business in line with the trend in profitability, such that the total ordinary dividend may be more or less than 1.65 pence per share.

Since listing nearly nine years ago, the Board has been attentive to its responsibilities in building and maintaining a strong and sustainable balance sheet, ensuring the business is able to invest selectively in future growth whilst maintaining cash resources sufficient to support its needs. The Board intends to continue its pragmatic approach; however it now considers the Group's balance sheet and regulatory capital buffer sufficiently strong to support the consideration of returning at least part of any excess of future earnings per share over ordinary dividends to shareholders, potentially in the form of special dividends.

The Board considers ordinary dividends plus other distributions to shareholders on a "total distribution" basis, such that the total distribution for any year is at least covered by earnings. On this basis, the decision as to the level of any excess earnings over ordinary dividends to be returned to shareholders for the current financial year will be subject to the financial performance of the business and the market conditions at the time.

Group strategy

The Group's strategy remains focused on building long‑term, sustainable growth of the business through excellent client service and relationships.

Challenging environments such as these require flexibility of approach and constant innovation. The Directors consider one of the Group's key strengths is its capability to adapt products, processes or distribution methods, or to change its approach to suit individual and sometimes exacting client requirements.

Such flexibility and innovation was demonstrated during the year through the Group's new licensing agreement with WisdomTree Investments, Inc. - more detail for which is given in the Chief Executive's statement. Whilst the product is still in its early stages, we are hopeful that this will facilitate access to an active hedging strategy for a wider audience than has previously been the case and we look forward to building the relationship further with WisdomTree.

The Group has a solid foundation of Passive Hedging clients which provides a strong and stable revenue stream - for the first time Passive Hedging management fees now account for a higher proportion of total management fees than Dynamic Hedging. The Board is conscious of the advantages brought in having a diversified revenue stream and is strategically focused on making the most of opportunities for diversifying through different products, clients and geographies going forward, subject to prevailing market conditions.

The Board

On 14 September 2015, we announced the appointment of Jane Tufnell to the Board as an independent non-executive director and more recently, on 1 June 2016, the appointment of Rosemary Hilary as an independent non-executive director. Jane co-founded the investment management firm Ruffer in 1994 and served on its management board until June 2014. Rosemary is a qualified accountant and has held senior positions in audit, risk and financial services regulation and she will become the chair of the Audit and Risk Committee following the resignation of Cees Schrauwers in September 2016. Both Jane and Rosemary bring a wealth of relevant experience from their respective careers and we look forward to working closely with them both and in benefitting from their valuable insight and business acumen.

From November of this year, two of our non-executive directors, Cees Schrauwers and Andrew Sykes, will no longer be deemed independent, having joined Record just prior to IPO in December 2007, and both will be retiring from the Board. Both Cees' and Andrew's knowledge and experience have been fundamental to the smooth transition of Record from a private company to a premium-listed public company, helping to ensure the appropriate client-centric and risk-focused culture is fully embedded across the business. I would like to take this opportunity to thank them both for their commitment to the firm, and their invaluable advice and guidance over the past nine years. Their service on the Board has encompassed difficult times for both the firm and the global economy, and they have both been pillars of wisdom and common sense.

Outlook

Fragility in global economic growth alongside continued geopolitical tensions and such influential events as the UK referendum and the forthcoming presidential election later this year in the US will no doubt continue to contribute to volatility in the currency markets.

As well as significant challenges, such environments provide opportunities for further engagement and by gaining a broader picture of our clients' investment objectives, their portfolios and constraints, we have the opportunity to understand more fully their currency-related issues and specific requirements. Whether the answer lies with using our more standard hedging or currency for return products or whether circumstances require a more bespoke approach, we believe we have the people, systems, flexibility and capability to provide a solution.

The business is well placed to face such challenging environments and to take advantage of the opportunities arising with a strong, committed team of professionals and a robust financial position.

On behalf of the Board, I would like to thank everyone at Record for their hard work and commitment during this year and I look forward to facing the challenges, and taking advantage of the opportunities that lie ahead.

Neil Record

Chairman

Record is reporting growth in both client numbers and management fees. The one-off 10% increase in firm-wide salaries in May 2015 has caused profits to diminish compared to the prior period. AUME has also declined modestly over the period, and net outflows from a tactical bespoke mandate have reduced the Group's revenue-generating AUME base at year end compared to that at the start of the year.

The market environment has become more challenging, with a general absence of persistent themes of individual currency strength or weakness, narrowing expectations of interest rate differentials, and a prolonged decline in emerging market currencies. As a result, a wide divergence of views has emerged amongst investors as to their preferences in managing currency risk and opportunity. In response, the Group continues to focus on developing flexible currency management strategies that can be tailored to the diverse interests and objectives of investors.

Market overview

The twelve months to 31 March 2016 have seen a weakening of expectations for divergence in monetary policy and interest rates. Policy measures such as quantitative easing also seem to have become less effective in influencing exchange rates. These trends have been accompanied by periodic regional and supra-regional concerns and crises.

Monetary policy divergence has not materialised in the financial year to the extent which had been anticipated. Concerns over the pace of economic growth, global deflation and financial market volatility have led policymakers to exercise greater caution over increasing interest rates. The US Federal Reserve did raise rates in December 2015, but expectations for further rate rises subsequently declined, and the US dollar's path has reflected this uncertainty. The Bank of England has also avoided raising rates, with uncertainty over the forthcoming EU referendum adding to this caution.

In those economies that have continued to pursue quantitative easing, principally the Eurozone and Japan, the effectiveness of this policy in influencing exchange rates has become less evident. Both the euro and the Japanese yen appreciated against the US dollar at times throughout the financial year.

Events that developed on regional and supra-regional scales include the re-emergence of strains in the Eurozone in the first three months of the period, widespread declines in emerging market currencies in the first nine months, and the announcement of the EU referendum in the final three months of the year.

Investment performance

Both US- and UK-based Dynamic Hedging clients experienced cumulative weakening of their base currencies against a basket of exposure currencies over the financial year. As a result, clients benefitted from currency gains in their underlying portfolios. Declining hedge ratios in their programmes reduced the extent to which hedging losses offset these gains.

Some of our Currency for Return strategies, namely Forward Rate Bias and Emerging Market, have historically performed better in market environments that are supportive of risk-seeking strategies. Both of these strategies generated negative returns for the year. In the case of Forward Rate Bias strategies, this is largely attributable to declining expectations of interest rate divergence and the reduced effect of quantitative easing in weakening low interest rate currencies. In the case of Emerging Market, this is attributable to the marked declines seen across many emerging market currencies over nine months of the year.

For the more diversifying strategies, Value performed markedly positively over the year, in part benefitting from the same appreciation of Japanese yen and euro that proved costly in Forward Rate Bias strategies. Momentum modestly underperformed over the year, contributing to net negative returns in live Multi-Strategy mandates.

Asset flows and financial performance

AUME declined by 3% over the financial year to $53.7 billion. Net outflows of $2.3 billion can be attributed entirely to Currency for Return outflows of $3.0 billion, the majority of which came from a long-standing tactical bespoke mandate. Net hedging inflows of $0.8 billion can be separated into Passive Hedging inflows of $1.8 billion and Dynamic Hedging outflows of $1.0 billion. Client numbers grew modestly to 58. External factors (i.e. equity and other market movements and the impact of exchange rates over the period) contributed $0.6 billion.

The benefit of the higher revenue margin Currency for Return mandate during the period, while temporary, allowed underlying1 revenues to increase by 2% to £21.3 million. Costs before Group Profit Share remuneration grew by 9%, most of which can be attributed to the firm-wide 10% salary increase from 1 May 2015. Continued discipline in other cost areas allowed the Group to record an underlying operating margin of 33%, underlying profit before tax of £7.0 million, and basic earnings per share of 2.55 pence.

Strategic progress

Record's strategic progress over the year can be measured against each of the objectives set out in the preceding years' Annual Reports.

Client relationships - we have further grown client numbers, and grown our mandates with certain existing clients, although other mandates have declined. Our strategy of building trusted individual relationships with clients and their advisors remains unchanged. During the year we have seen a wide divergence of views amongst investors as to their preferences in managing currency risk and opportunity. We seek to engage with these preferences wherever possible.

Innovation - enhancement of existing products and development of new ones is a constant feature at Record, driven by clients' needs and market opportunities. During the year the Group entered into a licensing agreement with WisdomTree Investments, Inc. to provide signals that will be used to dynamically hedge currency exposures within WisdomTree's rules-based index family. The Group is optimistic that this development will allow active hedging strategies to be accessible to a wider range of investors than before.

People - we have continued to attract, retain and develop high quality people, principally through intern programmes and graduate and early-stage career hires. We then focus on internal development and retention of these individuals. Mid-career lateral hires tend to be less frequent, given the highly-specialised nature of the Group's work. We have largely succeeded in retaining key staff in a highly competitive employment market. The working environment for staff is part of the Group's retention strategy, and since the end of the period we have moved our US office from Atlanta to New York, and have entered into a new lease for our office in Windsor.

Growth - we have achieved growth in client numbers, management fees and underlying revenues. AUME and profits have declined modestly over the period, due to net outflows from a tactical bespoke mandate in the former case, and the firm-wide 10% salary increase in the latter case. We continue to focus on growth from our core markets of North America, continental Europe, in particular Switzerland, and the United Kingdom, while exploring new markets.

Risk management - we continue to develop and invest in systems, people and processes to manage the operational risk that we assume from clients. The Group has continued to commit resources to emerging regulatory requirements, including transaction reporting and other disclosures, and the forthcoming revisions to the European Market Infrastructure Regulation and the Markets in Financial Instruments Directive. Since the end of the financial year, we have launched a new system to improve further our management of the wide diversity and volume of Hedging mandates.

Profitability - the Group's underlying profitability has declined modestly with an underlying operating margin of 33%. This decline can be attributed to the need to maintain competitive remuneration for skilled staff.

Outlook

In a more challenging market environment, a wide divergence of views has emerged amongst investors as to their preferences in managing currency risk and opportunity. In response, the Group continues to focus on developing flexible currency management strategies that can be tailored to the diverse interests and objectives of investors.

Our clients continue to experience a low yield environment, regulatory changes, and particularly for pension funds cash flow pressures. As a result, the need to manage increasingly scarce cash and liquidity resources is becoming more important than ever before. Record has long offered certain tools to support this, such as planning cash flows arising from a hedging programme, or managing a futures overlay to minimise the drag on returns from a cash allocation. We intend to explore more tools, strategies and products, and to engage with more clients on these, as the market environment continues to develop.

Record's management continues to be very aware of the benefits of diversification within and across our strategies. Management and staff remain wholly focused on managing programmes to meet our clients' best interests, and growing the business to create value for shareholders.

James Wood-Collins

Chief Executive Officer

[1] The Group uses non-GAAP measures such as "underlying revenue" and "underlying operating profit". These measures are calculated by removing the impact of non-controlling interests from the normal GAAP measures presented in the financial statements calculated in accordance with IFRS. The Group believes that these non-GAAP measures provide a useful indication of the performance of the business.

Key Performance Indicators

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

[1] Underlying operating profit margin is a non‑GAAP measure which represents the results prior to consolidating the non-controlling interest. This reflects internal management reporting which management consider to be more indicative of the revenues and costs driving future profitability and cash flows of the business.

How we performed this year

§ AUME remained broadly consistent with the prior year. Net outflows totalled $2.3 billion for the year, with an overall decrease in AUME of 3% in the year.

§ Client numbers grew for the fourth consecutive year and reached 58 at the end of the year.

§ Underlying operating profit margin decreased to 33% from 35% predominantly due to competitive upward pressure on fixed remuneration.

§ Increases in fixed remuneration costs contributed to a 4% decrease in EPS for the year.

Market review

The most prevalent theme in FX markets in the twelve months to 31 March 2016 has been the weakening of expectations for divergence in monetary policy and interest rates, coupled with the apparent diminishing effectiveness, in particular on exchange rates, of policy measures such as quantitative easing. This theme has been accompanied by periodic regional and supra-regional concerns and crises, including the re-emergence of strains in the Eurozone in the first three months of the period, widespread declines in emerging market currencies in the first nine months, and the announcement of the referendum as to whether the UK should remain in or leave the European Union in the final three months of the year.

This section comments on the impact of these on exchange rates and on Record's strategies.

Monetary policy and interest rates

Major developed market central banks, in particular those of the United States, the Eurozone, the United Kingdom, Japan and Switzerland, had consistently imposed unusually low interest rates as a coordinated response to the global financial crisis of the last decade. For much of the two preceding financial years, the debate had grown over the pace and extent to which this convergent monetary policy would start to diverge, with the United States Federal Reserve and the Bank of England expected to be in the forefront of tightening interest rates, and the European Central Bank, Bank of Japan and Swiss National Bank all continuing to pursue low interest rates and in the first two cases associated policies such as asset purchases, or "quantitative easing".

Monetary policy divergence has not materialised in the financial year to the extent which had been anticipated, as concerns over the pace of economic growth, global deflation and financial market volatility have led policymakers to exercise greater caution over increasing interest rates. Furthermore in those economies that have continued to pursue quantitative easing, the effectiveness of this policy has become less evident.

In the United States, the Federal Reserve had been expected first to increase interest rates at its September 2015 meeting, but chose not to do so, noting that "economic conditions did not warrant an increase". The Federal Reserve did raise the federal funds rate by 0.25% at its December 2015 meeting, but its own expectations for further rate rises in 2016 subsequently declined. The US dollar's path reflected this uncertainty, with broad-based weakening against developed market currencies in the first three months of the period (and following strong dollar appreciation in the prior financial year), strengthening against developed market currencies in the following six months in anticipation of long-awaited interest rate rises, and then weakening again in the last three months of the period, as expectations of further rate rises waned.

The Bank of England has been similarly reticent in raising interest rates, with any prospect for increases deferred due to concerns over the pace of economic growth, the absence of material inflation, the impact on financial markets, and towards the end of the period the uncertainty caused by the announcement of the referendum on whether the United Kingdom should remain in or leave the European Union (see "EU referendum" below). While sterling strengthened against a basket of developed market currencies in the first three months of the period, it weakened over the rest of the financial year.

The European Central Bank and the Bank of Japan have both continued to pursue low interest rates and asset purchase programmes throughout the year, with both having sought to amplify these programmes during the year. However, in both cases, the effectiveness of these policies in stimulating either demand for borrowing or export growth through currency depreciation has become less evident, with both the euro and the Japanese yen appreciating against the US dollar at times throughout the financial year, including in both cases the last quarter.

The Swiss National Bank has continued to pursue an interest rate path dictated by its domestic objectives. There has been no repeat of the dramatic events of January 2015, when the Swiss National Bank unexpectedly removed the ceiling on the value of the Swiss franc against the euro in parallel with cutting certain interest rates, which immediately caused the Swiss franc to appreciate dramatically. The Swiss National Bank has continued its policy of negative interest rates, and Swiss franc exchange rates have continued largely to respond to changing interest rate expectations for other developed market currencies.

Regional and supra-regional events

The year to 31 March 2016 also saw a number of events develop on regional and supra-regional scales, with varying effects on currency markets. The first notable such event was the re-emergence in the summer of 2015 of the Eurozone crisis, catalysed by the failure of the Greek government to make a payment to the International Monetary Fund on 30 June 2015. This led to a referendum and the ostensible rejection of austerity by the Greek population, and notwithstanding this a renegotiation on the terms of the Greek debt restructuring followed by a further election. As seen in previous incarnations, the effect on the value of the euro itself was muted, with perhaps the greatest consequence being official recognition that a departure by a member state of the Eurozone is not after all inconceivable.

More notable in currency markets was the rolling crisis in emerging market currencies through the first nine months of the financial year. What began as a familiar period of risk aversion in the first three months escalated in the second three months, most closely associated with China's unexpected 1.9% devaluation of the renminbi on 11 August 2015. The relatively modest scale of this adjustment and hence its impact on currency markets belied the message it sent on prospects for growth in China, China's macroeconomic policies, and emerging market economies more broadly, leading to a pronounced two weeks of equity and currency market volatility. Those currencies more sensitive to commodity prices, or suffering specific political risk concerns, continued to weaken through the third quarter of the financial year.

Towards the end of the financial year, the anticipated referendum on whether the UK should remain in or leave the European Union was announced for 23 June 2016. The effect of this announcement on currency markets, Record's strategy to mitigate its impact on clients, and possible effects on Record's business are set out under "EU referendum".

Regulation

FX markets continue to come under greater regulatory scrutiny than has been the case historically. As a specialist currency manager whose interests are completely aligned with those of its clients, Record is wholly supportive of appropriate regulation to ensure the fair, effective and open functioning of currency markets, and we seek to engage with regulators, industry bodies and others to represent effectively our clients' interests.

In particular, we are now seeing the fruition of several years' regulatory focus on derivatives markets, dating back to the "Group of 20" meeting in Pittsburgh in September 2009. These derivative market reforms are taking shape in different jurisdictions, of which the European Union (through the European Market Infrastructure Regulation, or "EMIR"), the United States (through the Dodd-Frank Wall Street Reform and Consumer Protection Act, or "Dodd-Frank"), Switzerland and Canada are amongst those most relevant to Record.

We are therefore concerned about emerging differences in regulation across these jurisdictions which may seem minor in the context of the overall regulatory picture, but which may have a disproportionate effect on Record given the nature of our business. In particular, we are concerned that whilst deliverable foreign exchange forward contracts have been exempted from the definition of "swaps" under Dodd-Frank and hence from much of the consequent regulation, the latest draft rules under EMIR continue to mandate variation margin for foreign exchange forward contracts entered into by financial counterparties, which include pension funds. Mandating variation margin is a major change from the historic practice of many of Record's clients of using non-collateralised foreign exchange credit lines. We are working hard to minimise any adverse impact on our business, both by continuing to engage wherever possible on these proposed rules, and by working with our clients, bank counterparties and service providers to manage the impact should this engagement prove unsuccessful.

Effects on Record's strategies

The environment of varying but declining expectations of monetary policy divergence brought about a year in which simple stories of persistent currency strength or weakness were largely absent. Instead most major developed market currencies experienced bouts of strength and weakness throughout the year.

In this environment, Record's Dynamic Hedging strategies responded with hedge ratios increasing in response to base currency strength, and decreasing in response to base currency weakness. The cumulative effect over the financial year for both US- and UK-based investors was of weakening of their base currencies, and hence currency gains being generated in their underlying portfolios. Declining hedge ratios in Dynamic programmes reduced the extent to which hedging losses offset these gains.

With respect to return-seeking currency strategies, an environment of diminishing expectations for interest rate differentials, coupled with a year which saw a prolonged decline in emerging market currencies, would be expected to challenge the two most persistent return sources in Record's range of strategies, and indeed the financial year saw negative performance in both Forward Rate Bias or "carry" strategies and in Emerging Market currencies.

In such an environment we would look to Momentum and Value to offer some diversification. This was true of value during the period, although less so of Momentum, and the combination served partially to offset losses from Forward Rate Bias and Emerging Market strategies in Record's Multi-Strategy products.

One persistent theme triggered by the continuing low yield environment, regulatory changes, and cash flow pressures experienced by clients is the need to manage increasingly scarce cash and liquidity resources to meet more diverse requirements than before. Some aspects of this are long-standing parts of Record's product offering, and we intend to explore further complementary strategies and products, and to engage with more clients on these, as the market environment continues to develop.

In a more challenging market environment, Record continues to focus on developing flexible currency management strategies that can be tailored to the diverse interests and objectives of clients.

On 20 February 2016, and following a European Union summit, Prime Minister David Cameron announced that the referendum on whether the United Kingdom should remain in or leave the EU would be held on 23 June 2016.

Record plc does not take a stance on political decisions, and hence the Group does not intend to contribute to or participate in the debate. Instead our focus, at the time of writing, is on the impact that the referendum has had on currency markets, and the impact that it might have on our clients and on the Group's business.

With respect to currency markets, sterling exchange rates broadly weakened following February's announcement, although as ever it is impossible to attribute any market movements to a single cause. Implied volatility as indicated by the pricing of options has risen, particularly for those options with a maturity period which includes the referendum date. This indicates that markets anticipate the risk of more volatile exchange rates in response to the outcome of the vote. More specifically, the price of options that protect against sterling weakening has risen more than those that protect against sterling strengthening, suggesting that the market sees more risk of sterling weakness.

In the absence of any directional view on sterling beyond that already priced into the market, the Group's approach to managing the impact on clients will be to anticipate periods of elevated volatility, and to take steps to manage the impact of these on our clients. In particular this means avoiding trading where possible in periods we can expect to be volatile to avoid outsized cash flows and transaction costs and helping clients plan for liquidity requirements where these arise between cash flows.

At the date of this report, and beyond the immediate impact of the referendum on currency markets and on clients, it is too soon to anticipate broader effects on Record's business, not least given the prolonged negotiation period that would follow any vote to leave. We would note though that Record and its clients are subject to extensive EU-originated legislation. That which affects our business most closely can broadly be divided into regulatory legislation such as the Markets in Financial Instruments Directive ("MiFID") and the European Market Infrastructure Regulation ("EMIR"), and enabling legislation which allows cross-border financial services such as MiFID again, the Alternative Investment Fund Managers Directive ("AIFMD") and Undertakings for Collective Investment in Transferable Securities ("UCITS").

We would note that much of the former has its origins in global initiatives such as the "Group of 20" to which the UK is an independent signatory, so it may be unrealistic to expect that this would not be replaced domestically in the event of a UK departure from the EU. Much of the latter brings material commercial benefits to the UK's investment management industry, such that maintenance of equivalent arrangements may well be one objective of any post-referendum negotiation.

Operating review

Product investment performance

Our hedging products are predominantly systematic in nature. The effectiveness of each client mandate 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 generally saw underlying gains from currency over the year as sterling weakened against most G10 currencies, leading to higher sterling valuations for foreign currency investments. UK‑based Dynamic Hedging programmes systematically decreased hedge ratios over the year in response to sterling weakness to protect against hedging losses. Following the initial strengthening of sterling in the second quarter of 2015, hedge ratios decreased in line with sterling weakness as global and domestic EU referendum-related risks weighed on the currency, thus containing hedging losses and allowing UK investors to capture gains in the underlying overseas exposures.

US investors also saw gains from currency on international assets when valuing positions in US dollars, as the US dollar weakened against most G10 currencies following a downward repricing of market expectations for US interest rates in 2016. Record's Dynamic Hedging product varied hedge ratios over the year in response to the US dollar's movements and as a result, costs from hedging were controlled relative to the underlying currency gains.

Record had a number of "live" Currency for Return products in the year. The Active Forward Rate Bias ("FRB"), Record Currency - FTSE FRB10 Index Fund, and Emerging Market products are founded on market risk premia and as such perform more strongly in "risk on" environments. By contrast, Momentum and Value strategies are more behavioural in nature, and as a result are less risk‑sensitive. Active FRB or FRB10 Index, Emerging Market, Momentum and Value can also be combined to create the Record Currency Multi‑Strategy product.

For the Active FRB product, the core investment process - the Trend/Forward Rate Bias strategy - aims to buy selected developed market higher interest rate currencies and sell selected lower interest rate currencies and to manage these positions with a view to controlling downside risk. Historically this investment approach has shown positive returns due to the existence of the Forward Rate Bias and trending movements in selected currency pairs. The year saw negative returns mainly due to the short position in the Japanese yen which appreciated sharply as declining inflation expectations in Japan improved the perceived real return available on Japanese assets. A complementary investment process - the Range Trading strategy - generated a positive return as selected currency pairs tended to mean revert, partially offsetting the underperformance of the FRB strategy.

Similarly, the Forward Rate Bias Index product, which uses more diversified allocations without active risk control, produced negative returns as low interest rate currencies appreciated. Record remains committed to our belief that over time currency, and in particular the FRB strategy, 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 negative returns over the period as emerging market currencies generally depreciated against a basket of developed market currencies. Returns in the fund were mainly attributable to the depreciation of certain "risk-on" currencies between March and December 2015, including the South African rand, Colombian peso, and Brazilian real which were impacted by a fall in global commodity prices and slowing Chinese growth.

Record's Multi‑Strategy mandates combining Active FRB or FRB10, Emerging Market, Momentum and Value strategies delivered negative performance over the period. Losses were driven by returns in the Emerging Market, FRB, and Momentum strands, although these were partially offset by gains in the Value strategy. In the Value strategy, a reversion towards value on behalf of the euro and yen - notwithstanding efforts by respective central banks to encourage easier monetary policy - primarily drove positive returns. Short positions in the New Zealand, Canadian, and Australian dollars during mean-reversionary periods delivered negative returns in the Momentum strand but were partially offset by a long position in the Japanese yen, and a short position in sterling as EU referendum worries surfaced towards the end of the period.

Returns data for Currency for Return strategies

[1] FTSE FRB10 Index Fund return data is since inception in December 2010, GBP base.

2 Record Currency - Emerging Market Currency Fund return data is since inception in December 2010, GBP base.

3 Alpha composite data is since January 2003, USD base.

4 FTSE Currency FRB10 GBP Excess return data is since December 1987, GBP base.

5 Currency Value return data is since inception in July 2012, CAD base.

6 Currency Momentum return data is since inception in July 2012, CAD base.

7 Record Multi‑Strategy return data is since inception in July 2012, CAD base.

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 overall decrease in AUME of $1.7bn (-3%) to finish the year at AUME of $53.7bn compared with $55.4bn at the end of the previous year.

When expressed in sterling, AUME increased marginally by £0.1bn to £37.4bn (2015: £37.3bn).

AUME development ($bn)

AUME movements

The Group has seen net outflows of $2.3bn during the year arising from inflows from both new and existing clients of $10.7bn offset by outflows of $13.0bn.

Dynamic Hedging AUME experienced net outflows of $1.0bn, ending the year at $7.9bn (2015: $9.2bn). The selection for a new Dynamic Hedging mandate expected to reach approximately $600m was announced in September 2015, but was subsequently suspended in January 2016 pending a potential restructuring by the client and represented an outflow of $500m. The loss of a UK Dynamic Hedging programme was reported in October 2015 and represented an outflow of $1.2bn following the client's decision to switch to a Passive Hedging strategy.

Growth of Passive Hedging AUME continued and reached $43.8bn (2015: $41.2bn) by the end of the year, an increase of 6%. Net inflows of $1.8bn were from a combination of new and existing clients with the net impact of external factors contributing a further $0.8bn.

Significant outflows from a bespoke tactical mandate previously identified as potentially volatile in size aggregated to $3.0bn, and represented the majority of the decrease in Currency for Return AUME during the year from $4.8bn to $1.8bn.

Equity and other market performance

Record's AUME is affected by movements in equity and other market levels because substantially all the Passive and Dynamic Hedging, and some of the Currency for Return mandates, are linked to equity and other market levels. Market performance increased AUME by $0.4bn in the year to 31 March 2016.

Further detail on the composition of assets underlying our Hedging mandates is provided below to help illustrate more clearly the impact of equity and fixed income market movements on these mandate sizes.

AUME composition by underlying asset class as at 31 March 2016

Forex

The percentage of the Group's AUME which is non‑US dollar denominated is 91%. The foreign exchange impact of the conversion of non‑US dollar mandate sizes into US dollar AUME had the impact of increasing AUME by $0.2bn over the year. This movement does not have an equivalent impact on the sterling value of fee income.

At 31 March 2016, the split of AUME by base currency was 21% in sterling, 64% in Swiss francs, 9% in US dollars, 6% in euros and less than 1% in Canadian and Singapore dollars.

Product mix

AUME composition by product

The growth in Passive Hedging AUME continues the upward trend of recent years, although the percentage of total AUME represented by Passive Hedging of 82% (2015: 74%) at 31 March 2016 is more pronounced due to the large aggregate net outflows of $3bn from Currency for Return during the year, as noted above. During the year, a UK Dynamic Hedging client made the decision to switch to a Passive Hedging mandate, which resulted in a Dynamic Hedging outflow of $1.2bn during the year. Consequently the proportion of total AUME represented by Dynamic Hedging decreased at 31 March 2016 to 15% (2015: 17%). Currency for Return represented 3% (2015: 9%) of total AUME at 31 March 2016.

Client numbers

Client numbers grew for the fourth consecutive year, reaching 58 clients at 31 March 2016 (2015: 55), representing a net gain of three clients over the year.

AUME composition by product and base currency

Financial review

In a challenging year, the Group's total revenue remained at a level unchanged on last year of £21.1m. Management fees for the year were up 3% to £20.9m (2015: £20.3m), maintained in part due to the Currency for Return fees generated from the tactical bespoke mandate prior to the associated net outflows occurring in the latter part of the year.

The business continues to focus on the tight control of costs. However, the decision to increase salaries firm-wide by 10% from May 2015 outside of the normal salary review round was made to recognise the trend towards higher fixed remuneration in financial services in order to ensure the business offers competitive remuneration to attract and retain high calibre employees. As expected, this contributed the majority of the increase seen in personnel costs of £0.8m (13%) for the year.

Non-personnel costs were successfully controlled, ending the year marginally higher at £4.3m (2015: £4.2m), and the Group Profit Share ("GPS") cost decreased by 6% to £3.0m, reflecting the decrease in underlying operating profit (excluding GPS).

Compared to the prior year, operating profit margin reduced to 32% (2015: 36%) mainly as a consequence of the increase in personnel costs, offset marginally by the reduction to the Group Profit Share cost.

Profit before tax decreased from £7.7m to £6.9m for the year.

Revenue

Record's revenue is principally management fees earned from the provision of currency management services.

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 some Dynamic Hedging programmes have 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

Management fee income earned during the year was £20.9m, £0.6m ahead of the previous year (2015: £20.3m).

The steady growth seen in recent years in Passive Hedging management fees has continued, with the full-year impact of last year's net inflows increasing Passive Hedging revenue to £9.4m (2015: £8.1m).

Dynamic Hedging management fees decreased by £1.1m predominantly due to the loss of the Dynamic Hedging mandate previously announced alongside adjustments to existing mandates.

The management fees earned from Currency for Return mandates in the year were bolstered from inflows into the tactical bespoke mandate announced in March 2015, resulting in an increase in Currency for Return management fees to £3.2m (2015: £2.8m) for the year. Subsequent outflows were announced from this specific mandate in the second half of the year.

Passive Hedging increased to 45% (2015: 40%) of total management fees. Dynamic Hedging represents 40% (2015: 46%) and Currency for Return 15% (2015: 14%) of total management fees.

Average management fee rates for all product lines have remained broadly constant throughout the year ended 31 March 2016.

Average management fee rates for Currency for Return products have marginally decreased as a result of the effect of the earlier inflows into the bespoke tactical mandate being on a tiered fee scale, decreasing the overall average fee rate and prior to the effect of the subsequent outflows.

Performance fees

Performance fees of £0.3m were earned in the year, (2015: £0.5m). Performance fees can be earned either from Currency for Return or Dynamic Hedging programmes, dependent on the individual client agreement. Record currently has two active mandates incorporating a performance fee component, both of which are 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 and consolidated under IFRS. It also includes hedging gains/losses on revenues denominated in currencies other than sterling, and other foreign exchange gains/losses.

Expenditure

Operating expenditure

The total operating expenditure of the Group was £14.1m during the year ended 31 March 2016, an increase of £0.7m or 5% on the prior year. The increase is due principally to the firm‑wide salary increase of 10% implemented on 1 May 2015, in response to the general trend of higher fixed remuneration in the financial service sector. Non‑personnel costs have remained broadly in line with last year at £4.3m (2015: £4.2m) through careful cost control. The expectation for the current financial year is of an increase to occupancy costs arising both from the move of the US office from Atlanta to New York just prior to 31 March 2016, and the renewal of the Group's office lease relating to its headquarters in Windsor, both at higher market rentals than was previously the case (see note 23 to the financial statements for further detail). The Group Profit Share cost decreased by £0.2m over the prior year in line with the fall in "underlying" profitability.

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 staff. The Remuneration Committee has agreed that for the year ended 31 March 2016, the Group Profit Share Scheme is 30% of pre‑GPS operating profit. This represents £3.0m, a decrease of £0.2m 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 which are subject to lock‑up arrangements under the scheme rules.

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

Operating profit and margins

On a fully consolidated basis, operating profit for the year ended 31 March 2016 of £6.8m was 10% lower than the operating profit for the previous financial year (2015: £7.5m) and the operating margin was 32% (2015: 36%).

Management also considers operating profit and profit before tax on an "underlying" basis, which excludes the impact of the income and expenditure attributable to non‑controlling interests (i.e. gains and losses attributable to other investors in the seed funds which are consolidated into the Group's financial statements on a line‑by‑line basis, as required under IFRS). This reflects the approach used for internal management reporting and is considered to represent more accurately the core revenues and costs driving current and future cash flows of the business. Underlying operating profit for the year was £6.9m (2015: £7.3m) with underlying profit before tax for the year of £7.0m (2015: £7.5m).

Cash flow

The Group's year end cash position was £21.7m (2015: £12.0m). The cash generated from operating activities before tax was £7.3m (2015: £8.0m), with £1.6m paid in taxation (2015: £1.6m) and £3.7m paid in dividends (2015: £3.3m). At the year end, the Group held money market instruments with maturities between 3 and 12 months, worth £13.0m (2015: £18.1m). These instruments are managed as cash by the Group but are not classified as cash under IFRS rules (see note 16 of the financial statements for more details).

Dividends

Shareholders received an interim ordinary dividend of 0.825p per share paid on 23 December 2015. The Board recommends paying a final ordinary dividend of 0.825p per share, equivalent to £1.8m, taking the overall ordinary dividend to 1.65p per share, in line with the prior year (ordinary dividend paid in respect of year ended 31 March 2015: 1.65p per share).

Subject to shareholder approval, the dividend will be paid on 3 August 2016 to shareholders on the register on 1 July 2016, the ex‑dividend date being 30 June 2016. The dividend cover in the year was 1.5 (2015: 1.6).

For the current financial year, the Board is considering the return of at least part of any excess of earnings per share over ordinary dividends to shareholders, potentially in the form of special dividends - subject to the financial performance of the Group for the year and the market conditions at that time.

Financial stability and capital management

The Group's financial position is strong. Consolidated net assets have grown to £37.7m (2015: £35.8m) at the end of the year represented predominantly by assets managed as cash totalling £34.7m (2015: £30.1m).

The Board's policy is to retain capital (being equivalent to shareholders' funds) within the business sufficient to meet continuing obligations, to meet regulatory capital requirements, to sustain future growth and to provide a generous buffer against adverse market conditions. To this end, the Group maintains a financial model to assist it in forecasting future capital requirements over a three year cycle under various scenarios and monitors the capital and liquidity positions of the Group on an ongoing and frequent basis. The Group has no debt.

Record Currency Management Limited ("RCML") is a BIPRU limited licence firm authorised and regulated in the UK by the Financial Conduct Authority ("FCA"), and is a wholly owned subsidiary of Record plc. RCML is required to submit semi‑annual capital adequacy returns, and it held significant surplus capital resources relative to its regulatory financial resource requirement throughout the year. Similarly the Group also submits semi‑annual capital adequacy returns but on a consolidated basis, taking account of the risks across the business assessed by the Board as requiring further capital. In assessing these risks, the Group uses an active risk‑based approach to monitoring and managing risks, which includes its Internal Capital Adequacy Assessment Process ("ICAAP").

The Board is satisfied that the Group is adequately capitalised both to continue its operations effectively and to meet regulatory requirements, due to the size and liquidity of ongoing balance sheet resources maintained by the Group. Consequently going forward the Board will consider the return of at least part of any excess of future earnings over ordinary dividends to shareholders for the current and future periods, subject to the financial performance of the Group and the market conditions prevailing at the time.

The Group held regulatory capital resources based on the audited financial statements as at 31 March, as follows:

Further information regarding the Group's capital adequacy information can be found in the Group's Pillar 3 disclosure, which is available on the Group's website at www.recordcm.com.

Viability statement

In accordance with provision C.2.2 of the UK Corporate Governance Code, the Directors have assessed the viability of the Group based on its current business model, the Group's financial position and strategy, the Board's risk appetite, and the Group's financial forecasts and its principal risks.

The Board adopts a conservative approach to strategic planning and capital management, mindful of the need to sustain a strong financial position and to ensure a robust and liquid balance sheet. This approach has served the business well over its 33-year history, allowing the Group the capability to adapt its products and services to changing market conditions through numerous market cycles. The Group's strategy and principal risks are assessed in the normal course of business and in Board discussions and regular off-site meetings as well as regular review by the Executive Committee.

The market and regulatory environment in which the Group operates is constantly evolving and for this reason the Directors consider it prudent to consider a three year horizon over which to assess the viability of the Group. This period is consistent with the Group's approach to preparing its ICAAP, which uses statistical modelling and robust downside scenarios (stress testing) to quantify the level of capital required to mitigate the financial impact on the Group, and on the Group's business model arising from its principal risks.

The principal risks of the business include operational, business, liquidity, market and credit risk. The approach to stress testing includes consideration of a range of factors which may result in AUME outflows for example, a general market downturn or a large operational risk event.

The Directors have a current, reasonable expectation that the Group will continue to operate and meet its liabilities as they fall due over the three year period of their assessment.

Year ended 31 March

As at 31 March

Year ended 31 March 2016

Year ended 31 March 2015

Year ended 31 March

As at 31 March

Year ended 31 March 2016

Year ended 31 March 2015

Year ended 31 March

These financial statements exclude disclosures that are both 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, accounting policy descriptions appear at the beginning of the note to which they relate, and are shown in italic text.

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 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 2016. The financial statements have been prepared on a historical cost basis, modified to include fair valuation of derivative financial instruments.

The Directors are satisfied that the Company and the Group have adequate resources with which to continue to operate for the foreseeable future. For this reason the financial statements have been prepared on a going concern basis.

The preparation of financial statements in accordance with the recognition and measurement principles set out in 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 2015, with the remaining becoming effective in future periods. The new standards and amendments to existing standards effective for the year to 31 March 2016 have not had a material impact on the financial statements of Record plc.

Standards and interpretations not endorsed

IFRS 16 "Leases" may have a material impact on the financial statements, as the Group would have to recognise at the commencement of any future lease for premises both a "right-of-use" asset which would be depreciated over the lease period, and a lease liability equal to the present value of future lease payments. Record's existing lease is accounted for as an operating lease and therefore is not represented on the statement of financial position (balance sheet).

No other standards or interpretations issued but not yet effective are expected to have a material impact on the Group's financial statements.

b. Basis of consolidation

The consolidated financial information contained within the financial statements incorporates financial statements of the Company and its subsidiaries drawn up to 31 March 2016. Subsidiaries are entities controlled by the Company and are included from the date that control commences until the date that control ceases. Control is achieved where the Company is exposed to or has rights over variable returns from its involvement with the entity and it has the power to affect returns. 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 financial statements.

The Group has investments in three funds. These funds are held by Record plc and represent seed capital investments by the Group. If the Group is in a position to be able to control a fund by virtue of holding a majority of units in the fund, then the fund is consolidated within the Group accounts. We consider that the Group exerts such control in cases where it (either in isolation or together with its related parties) holds a majority of units in the fund. Such funds are consolidated either on a line-by-line basis, or if it meets the definition of a disposal group held for sale it is classified and accounted for on that basis. In the case that the Group does not control a fund for the complete reporting period, then the fund is consolidated only for the part of the reporting period for which the Group has control over the entity.

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 financial statements incorporate the financial performance of the seeded funds in the year ended 31 March 2016 and the financial position of the seeded funds as at 31 March 2016.

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 £4,091,492 attributable to the Company (2015: £3,069,187).

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 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 re‑measurement 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.

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.

g. Equity

Share capital represents the nominal (par) value of shares that have been issued. Share premium includes any premium received on issue of share capital. Retained earnings includes all current and prior period retained profits and share-based employee remuneration. All transactions with owners of the parent are recorded separately within equity.

2. Critical accounting estimates and judgements

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Note 1.b. describes the basis which the Group uses to determine whether it controls seed funds. Note 19 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 23.

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, typically based upon an agreed percentage of the assets under management equivalents ("AUME") denominated in the client's chosen base currency. 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 income includes gains or losses from foreign exchange conversion, gains or losses on derivative financial instruments (see note 15), gains or losses on seed investments that have not been consolidated on a line-by-line basis and fees from other related services.

Other income includes losses attributable to the non-controlling interest's holding in the funds of £112,274 (2015: gain of £192,360).

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 income is not analysed by geographical region.

All of the Group's tangible non‑current assets are located in the UK.

c. Major clients

During the year ended 31 March 2016, five clients individually accounted for more than 10% of the Group's revenue. The five largest clients generated revenues of £2.8m, £2.8m, £2.4m, £2.4m and £2.3m in the year (2015: five largest clients generated revenues of £3.2m, £2.4m, £2.3m, £2.2m and £2.1m).

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. 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 UK corporation tax for the year is 20% (2015: 21%). 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 2016 was £1,522,827 (2015: £1,707,824) which was 22.0% of profit before tax (2015: 22.2%).

7. 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 19). There were share options in place at the beginning of the period over 9,910,750 shares. During the year 853,750 options were exercised, and a further 90,000 share options lapsed or were forfeited. The Group granted 4,402,249 share options with a potentially dilutive effect during the year. Of the 13,369,249 share options in place at the end of the period, 9,007,253 share options have a dilutive impact at the year end.

8. Dividends

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

The dividends paid by the Group during the year ended 31 March 2016 totalled £3,749,849 (1.725p per share) which comprised a final dividend in respect of the year ended 31 March 2015 of £1,962,261 (0.90p per share) and an interim dividend for the year ended 31 March 2016 of £1,787,588 (0.825p per share).

The dividends paid by the Group during the year ended 31 March 2015 totalled £3,266,329 (1.50p per share) which comprised a final dividend in respect of the year ended 31 March 2014 of £1,634,833 (0.75p per share) and an interim dividend for the year ended 31 March 2015 of £1,631,496 (0.75p per share).

The final dividend proposed in respect of the year ended 31 March 2016 is 0.825p per share.

9. 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 is not exposed to the particular risks associated with the operation of Defined Benefit plans and 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 £479,206 (2015: £416,276).

10. 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 lease commencement to the earlier of the lease termination date and the next rent review date

· 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:

11. 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 - 2-5 years

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

The Group's intangible assets comprises both purchased software and the capitalised cost of software development. The carrying amounts can be analysed as follows:

Intangible assets includes the capitalised development costs of the Group's middle and back office system which was completed in June 2012 and has an estimated useful economic life of five years. The annual contractual commitment for the maintenance and support of software is £138,112 (2015: £138,112). All amortisation charges are included within administrative expenses.

12. Investments

Group

Investments in funds which are not consolidated on a line-by-line basis are designated as fair value through profit or loss. The Group will only consolidate funds on a line-by-line basis when the Group is able to control the fund by virtue of having a majority holding in the fund either directly, or in aggregate with the holdings of the Group's related parties.

The Group may hold certain securities through its seeded fund vehicles. The Group has held US government treasury inflation protected securities ("TIPS"), which are designated as fair value through profit or loss, and the fair value is determined by reference to quoted market price. These securities are classified as a Level 1 investment.

The Group gained control of the Record Currency FTSE FRB10 Index Fund on 1 September 2015 as a result of a disinvestment from the fund by an external investor. The fund was consolidated on a line-by-line basis from 1 September 2015 until the end of the period, but prior to this, the Group's investment in the fund was designated as fair value through profit or loss. At the acquisition date, the fair value of the investment held in the fund equalled the Group's share of the fair value of the assets acquired. There were no other identifiable assets or liabilities recognised as a result of this acquisition and there was no gain or loss arising on the transaction.

The funds disposed of their TIPS holding during the period, there was no gain or loss arising on the transaction.

Company

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. Investments in funds are measured at fair value through profit or loss.

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 Delaware, and all other subsidiaries are registered in England and Wales.

Investment in funds

In addition to the subsidiaries listed above, funds are consolidated where the Group has determined that a controlling interest exists through an investment holding in the fund, in accordance with IFRS 10 Consolidated Financial Statements. These funds are seed investments, which have various investment objectives and policies and are subject to the terms and conditions of their offering documentation. The principal activity of each is to invest capital from investors in a portfolio of assets in order to provide a return for those investors.

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 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 were consolidated in full, on a line-by-line basis.

The Group has retained control of the Record Currency - Emerging Market Currency Fund throughout the period, and it remains consolidated in full, on a line-by-line basis in the Group's financial statements. The Group ceased to control the Record Currency - FTSE FRB10 Index Fund from 1 March 2015 until 31 August 2015 during which period the Group did not consolidate the fund on a line-by-line basis. It regained control of the fund on 1 September 2015 and has consolidated it in full on a line-by-line basis since that date.

In May 2013, the Company invested in the Record Currency - Global Alpha Fund which changed its name to Record Currency - Strategy Development Fund in November 2015. The Group has controlled this fund since inception, which is consolidated in full on a line-by-line basis.

All three fund investments are presented in investments in the Company statement of financial position.

All three fund entities are sub-funds of the Record Umbrella Fund, an open-ended umbrella unit trust authorised in Ireland.

13. 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 £42,850 (2015: £72,518). At the year end there were share options not exercised with an intrinsic value for tax purposes of £47,742 (2015: £327,987). 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 unprovided deferred taxation.

14. 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 administrative expenses.

An analysis of the Group's receivables is provided below:

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 Group has not renegotiated the terms of any receivables in the year ended 31 March 2016. The carrying amount of receivables whose terms have been renegotiated, that would otherwise be past due or impaired is £nil (2015: £nil).

15. Derivative financial assets and liabilities

Derivative financial instruments 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 fair values of derivative financial instruments are determined by reference to active market transactions.

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

Derivative financial instruments held to hedge cash flow

At 31 March 2016 there were outstanding contracts with a principal value of £5,996,550 (31 March 2015: £4,260,992) 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 2016. The Group does not apply hedge accounting.

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

Derivative financial instruments held for trading

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 - Strategy Development Fund may use a variety of instruments including forward foreign exchange contracts, options and futures in order to achieve a return.

All derivative financial instruments held by the Record Currency - Strategy Development Fund (formerly the Global Alpha Fund) and the Record Currency - Emerging Market Currency Fund were classified as held for trading throughout the period. The derivative financial instruments held by the Record Currency - FTSE FRB10 Index Fund were classified as held for trading until the fund was deconsolidated from the Group on 1 March 2015, and then again from 1 September 2015 when the fund was re-consolidated into the Group financial statements.

At 31 March 2016 there were outstanding contracts with a principal value of £14,621,185 (31 March 2015: £36,120,350).

The net gain or loss on derivative financial instruments held for trading for the year was as follows:

16. Cash management

The Group's cash management strategy employs a variety of treasury management instruments including cash, money market deposits and treasury bills. Whilst the Group manages and considers all of these instruments as cash, which are subject to its own internal cash management process, not all of these instruments are classified as cash or cash equivalents under IFRS.

IFRS defines cash and cash equivalents as 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. Moreover, instruments can only generally be classified as cash and cash equivalents where they are held for the purpose of meeting short‑term cash commitments rather than for investment or other purposes.

In the Group's judgement, bank deposits and treasury bills with maturities in excess of 3 months do not meet the definition of short‑term or highly liquid and are held for purposes other than meeting short‑term commitments. In accordance with IFRS, these instruments are not categorised as cash or cash equivalents and are disclosed as money market instruments with maturities >3 months.

The Group cash and cash equivalents balance incorporates the cash held by any fund deemed to be under control of Record plc (refer to note 12 for explanation of accounting treatment). As at 31 March 2016, the cash and cash equivalents held by the seed funds over which the Group had control totalled £5,380,007 (31 March 2015: £3,920,614) and the money market instruments with maturities > 3 months held by these funds were £1,502,326 (31 March 2015: £599,758).

17. 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.

Trade and other payables

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

Current tax liabilities

18. Called up share capital

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

Movement in Record plc shares held by the Record plc Employee Benefit Trust ("EBT")

The EBT was formed to hold shares acquired under the Record plc share‑based compensation plans. Under IFRS the EBT is considered to be under de facto control of the Group, and has therefore been consolidated into the Group 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.

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.

Further information regarding the Record plc share‑based compensation plans and relevant transactions made during the year is included in note 19.

19. Share‑based payments

During the year ended 31 March 2016 the Group has managed the following share‑based compensation plans:

a) The Group Profit Share Scheme: 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.

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

All obligations arising from the three schemes are fulfilled through purchasing shares in the market.

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 alternative 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 period in which the award is earned.

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. The charge to profit or loss in respect of Earned Shares in the period was £631,252 (2015: £683,978). 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. The charge to profit or loss in respect of Matching Shares in the period was £262,426 (2015: £273,155). Shares awarded under the Profit Share Scheme do not include any vesting restrictions but rather restrictions over subsequent sale and transfer. All shares the subject of share awards vest immediately and are transferred to a nominee allowing the individual to retain full rights in respect of the shares purchased. These shares cannot be sold, transferred or otherwise disposed of without the consent of the Remuneration Committee except as follows:

· Earned Shares - one third on each anniversary of the Profit Share Payment date; and

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

The Group Profit Share Scheme rules contain clawback provisions allowing for the repayment of profit share payments under certain circumstances including a material breach of contract, an error in performance of duties or a restatement of accounts which leads to a change in any prior award under the scheme.

Shares awarded under this scheme are purchased in the market.

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 IFRS 2 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, taking into account the terms and conditions upon which the instruments were granted. The fair value amounts for the options issued since flotation 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 2011, the Share Scheme was amended to include the ability to grant HMRC approved options ("Approved Options") under Part 2 of the Share Scheme alongside Part 1 which allows for the grant of unapproved options ("Unapproved Options"). In 2013, the Share Scheme was amended to allow Board Directors to participate in the grant of Unapproved Options and in 2016 was further amended to allow Board Directors to be granted Approved Options. 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 grant for Unapproved Options, which 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 for the Approved Options.

Options over an aggregate of 4,402,249 shares were granted under the Share Scheme during the year (2015: 4,327,000), of which 3,197,500 were made subject to Unapproved Options and 1,204,749 to Approved Options (2015: 4,007,000 made subject to Unapproved Options and 320,000 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 1,800,000 Unapproved Options issued on 1 December 2015 each become exercisable in three equal tranches on the third, fourth and fifth 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.

The 1,325,000 Unapproved Options issued on 27 January 2016 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 performance conditions have been satisfied.

The 877,249 Approved Options issued on 27 January 2016 each become exercisable on the 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 performance conditions have been satisfied.

The 327,500 Approved Options issued on 27 January 2016 each become exercisable in three equal tranches on the third, fourth and fifth 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 performance conditions have been satisfied.

The 72,500 Unapproved Options issued on 27 January 2016 each become exercisable in three equal tranches on the third, fourth and fifth 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 performance conditions have been satisfied.

Options without market performance conditions are valued using the Black‑Scholes method, options with market performance conditions are valued using a risk‑neutral Monte Carlo valuation. Expected volatilities used are based on historic volatilities. 

The Group share‑based payment expense in respect of the Share Scheme was £240,067 in the year ended 31 March 2016 (2015: £166,587).

Outstanding share options

At 31 March 2016, the total number of ordinary shares of 0.025p outstanding under Record plc share compensation schemes was 13,369,249 (2015: 9,910,750). These deferred share awards and options are over issued shares, a proportion of which are hedged by shares held in an Employee Benefit Trust. Details of outstanding share options and deferred shares awarded to employees are set out below:

[1] Under the terms of the deeds of grants, options are exercisable for a year following the vesting date

During the year 853,750 options were exercised. The weighted average share price at date of exercise was £0.32. At 31 March 2016 a total of 1,115,500 options had vested and were exercisable.

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

Performance measures

Performance conditions attached to all options granted to Board Directors differ to those granted for all other staff. All Executive Director option awards are subject to a performance condition and vest on each of the third, fourth and fifth anniversaries of the date of grant subject to the earnings per share ("EPS") hurdle linked to the annualised EPS growth for the respective three, four and five year periods from grant. Vesting is on a stepped basis, with 25% of each tranche vesting if EPS growth over the relevant period is at least RPI plus 4% per annum, increasing through 50%, 75% and with 100% vesting if EPS growth exceeds RPI plus 13%, as shown in the table below. Options awarded subject to EPS performance conditions are valued using a Black - Scholes model.

Approved options issued to all other staff are subject to performance measures linked to the Group's total shareholder return ("TSR") and vest on the fourth anniversary of the date of grant, subject to these measures. At vesting date, a percentage of the total options granted may vest based upon Record's TSR performance versus the median TSR performance as measured against the FTSE 350 General Financial - Price Index. Options awarded subject to TSR performance conditions are valued using a risk‑neutral Monte Carlo valuation. The performance target table is given below:

Unapproved options issued to all other staff vest in four equal tranches on the first, second, third and fourth anniversaries of the date of grant, subject to the employee being employed with the Group at the relevant vesting date and to the extent personal performance conditions have been satisfied.

Clawback provisions

In addition to the performance measures above, both Approved and Unapproved Options granted to Executive Directors under the Share Scheme are subject to claw back provisions. These provisions allow the Remuneration Committee to adjust the number of shares that may be, or were, acquired to be decreased if the committee considers that either a material breach of contract has arisen or in respect of retrospective amendments required to calculations of the Group's performance upon which vesting calculations were originally based. The claw back provisions allow the Group to take various steps until the clawback obligation is satisfied, including reduction of future share option awards, transfer of shares back to the Group for nil consideration, reduction of future payments under the Group Profit Share Scheme or payment of sales proceeds back to the Group.

c. The Record plc Share Incentive Plan

The Group operates the Record plc Share Incentive Plan ("SIP"), to encourage more widespread ownership of Record plc shares by employees. The SIP 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 49,223 free shares (2015: 40,192 free shares) to employees. The expense charged in respect of the SIP was £14,690 in the year ended 31 March 2016 (2015: £12,579).

20. 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 own holding plus those of any related party. 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.

Record has seeded three funds which have been active during the year ended 31 March 2016.

The Record Currency - Emerging Market Currency Fund was considered to be under control of the Group as the combined holding of Record plc and its Directors constituted a majority interest throughout the period. Similarly, the Record Currency - Strategic Development Fund is considered to be under control of the Group as the combined holding of Record plc and its Directors has constituted a majority interest since inception. The Record Currency - Strategic Development Fund was known previously as the Record Currency - Global Alpha Fund until it was renamed on 26 November 2015.

The Record Currency - FTSE FRB10 Index Fund was considered to be under control of the Group on 31 March 2016, but it was not under the control of the Group during the period from 28 February 2014 to 31 August 2015, when the amount of external investment meant that Record did not hold a majority interest.

The mark to market value of units held by investors in these funds other than Record plc are shown as non‑controlling interests in the Group financial statements, in accordance with IFRS. There were no other non‑controlling interests in the Group financial statements.

Summarised financial information for Record Currency - Emerging Market Currency Fund, before intra‑group eliminations, is set out below:

Summarised financial information for Record Currency - Strategy Development Fund (formerly Global Alpha Fund), before intra-group eliminations, is set out below:

Summarised financial information for Record Currency -- FTSE FRB10 Index Fund, before intragroup eliminations, is set out below:

21. 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, other receivables, money market instruments, 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 seed funds, and balances due to/from Group undertakings. Intercompany balances are classified as loans and receivables and are repayable on demand. No interest is charged on these balances. The Group has sufficient cash resources and hence management does not believe that the Company has a material exposure to credit risk. 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

The Group has established a cash management team to manage Group cash in accordance with an approved cash management policy. The policy stipulates exposure limits by instruments, counterparty, tenor and duration. Counterparty exposures are measured against ratings published by credit‑rating agencies and are monitored daily. The maximum single exposure to any counterparty under the policy is 20% of total assets managed as cash.

The primary objective of the cash management team is to diversify and manage counterparty risk within the risk appetite of the Group and the limits set by the policy. The secondary objective is to maintain yield given the constraints under the policy whilst ensuring sufficient liquidity to meet future cash flow commitments as instructed by the finance team.

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'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 trade receivables and accrued income 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 to the reporting date. The application of this policy generally results in debts that are 0‑3 months overdue not being provided for unless individual circumstances indicate that a debt is impaired.

Trade receivables are made up of 51 debtors' balances (2015: 44). The largest individual debtor corresponds to 15% of the total balance (2015: 17%). Debtor days, based on the generally accepted calculation of debtor days, is 70 days (2015: 82 days). This reflects the quarterly billing cycle used by the Group for the vast majority of its fees. As at 31 March 2016 2% of debt was overdue (2015: 0%). 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 14 days (2015: 15 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 money market instruments 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.

A sensitivity analysis has not been disclosed for the impact of interest rate changes as any reasonable range of change in interest rate would not directly have a material impact on profit or equity.

Interest rate profiles

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 foreign exchange contracts to manage the risk relating to future transactions in accordance with the Group's risk management policy.

The Group is exposed to foreign currency risk on sales and cash holdings that are denominated in a currency other than sterling, and also on assets and liabilities held by the Record Currency - Strategy Development Fund (formerly Global Alpha Fund). The principal currencies giving rise to this risk are the US dollar, the Swiss franc, the euro and the Canadian dollar.

In the year ended 31 March 2016, the Group invoiced the following amounts in currencies other than sterling:

The value of revenues for the year ended 31 March 2016 that were denominated in currencies other than sterling was £16.7 million (31 March 2015: £15.2 million).

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

The settlement of these forward foreign exchange contracts is expected to occur within the following three months. Changes in the fair values of forward foreign exchange contracts are recognised directly in profit or loss.

Of the cash denominated in currencies other than sterling (refer to note 16), only the cash holdings of the Record Currency - Strategy Development Fund (totalling £919,479) are not covered by the Group's hedging process, therefore the Directors consider that the foreign currency risk on cash balances is not material.

The Group is exposed to foreign currency risk on all the assets and liabilities held by the Record Currency - Strategy Development Fund, which are consolidated into the Group financial statements. The impact of the valuation of the net assets of this seed fund is incorporated into the analysis of sensitivity to the sterling / US dollar rate below.

Foreign currency risk - sensitivity analysis

The Group has considered the sensitivity to exchange rate movements by considering the impact on those revenues, costs and assets denominated in foreign currencies as experienced in the given period.

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 $1.51/£ this would result in a weakened exchange rate of $1.37/£ and a strengthened exchange rate of $1.67/£.

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 CHF1.46/£ this would result in a weakened exchange rate of CHF1.33/£ and a strengthened exchange rate of CHF1.62/£.

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.

Emerging Market Currency Fund

The Group seeded a product in December 2010 called the Record Currency - 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 control over the fund, it has been consolidated into the Group's primary statements. The net assets of the fund at 31 March 2016 were £4,583,029 (2015: £3,714,107).

The Group is not materially exposed to any of the 19 Emerging Market currencies traded in its portfolio, but the Group has considered sensitivity to Emerging Market currencies as a group in the following table:

The impact of a change to the portfolio value 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 expectations for future movement in emerging markets. The proportion of the impact of the change attributable to the owners of the parent and to the non-controlling interest is dependent on their respective holdings in the fund (see note 20 for further detail on relative holdings at year end).

Other market risk - sensitivity analysis

FRB10 Index Fund

The Group seeded a product in December 2010 called the Record Currency - FRB10 Index Fund, which manages a portfolio of forward exchange contracts in order to achieve a return following the FTSE FRB10 index.

As Record plc exerts control over the fund, it has been consolidated into the Group's primary statements. The net assets of the fund at 31 March 2016 were £1,496,189 (2015: £45,446,584).

The FTSE FRB10 index represents the return from the Forward Rate Bias strategy which can be derived from ten of the world's largest currencies (by turnover).The Group has provided the following data in respect of sensitivity to the FTSE FRB10 index:

The impact of a change to the FTSE FRB10 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 expectations for future movement. The proportion of the impact of the change attributable to the owners of the parent and to the non-controlling interest is dependent on their respective holdings in the fund (see note 20 for further detail on relative holdings at year end).

22. Fair value measurement

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 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: