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Intelligent
currency
management
Record plc
Annual Report 2019
Strategic report
WHERE WE OPERATE
The Group’s main geographical markets as determined by
the location of clients to whom services are provided, are
the UK, North America and Continental Europe, in particular
Switzerland. The Group also has clients elsewhere,
including Australia.
The Group’s Head Office is in Windsor, UK from where all of
its operations are performed and controlled. The Group also
has offices in New York, and in Zürich, Switzerland.
In addition to these main markets, we continue to explore
new geographical markets which we believe may offer
attractive opportunities.
Head office
Windsor
Sales office
New York
Sales office
Switzerland
AUME
75%
AUME
12%
AUME
11%
AUME
2%
Europe (excluding UK)
United Kingdom
North America
Rest of World
IFC
Strategic report
WHERE WE OPERATE
UK
$6.7bn AUME
Head office: Windsor
North America
$6.2bn AUME
Sales office: New York
Continental Europe
$43.1bn AUME
Sales office: Zürich,
Switzerland
Rest of World
$1.3bn AUME
Regions
Our clients are located in:
• Australia
• Canada
• Cayman Islands
• Channel Islands
• Finland
• Germany
•
Ireland
• Luxembourg
• Netherlands
• Portugal
• Singapore
• Sweden
• Switzerland
• United Kingdom
• United States
Visit us online
www.recordcm.com
CONTENTS
STRATEGIC REPORT
PAGES IFC TO 35
Where we operate
About us
Highlights
Chairman’s statement
Chief Executive Officer’s statement
Strategy and objectives
Key performance indicators
Business model
Business review
Market review
Operating review
Financial review
Risk management
Corporate social responsibility
GOVERNANCE
PAGES 36 TO 69
Chairman’s introduction
Board of Directors
Corporate governance report
Nomination Committee report
Audit and Risk Committee report
Remuneration report
Directors’ report
Directors’ responsibilities statement
FINANCIAL STATEMENTS
PAGES 70 TO 110
Independent auditor’s report
Financial statements
Notes to the financial statements
ADDITIONAL INFORMATION
PAGES 111 TO IBC
Five year summary
Definitions
Information for shareholders
WHERE WE
OPERATE
IFC
1
3
4
6
8
12
14
20
20
22
26
30
34
37
38
40
46
49
53
66
69
71
76
83
111
112
IBC
ABOUT US
Record is an independent currency manager with more than
35 years’ experience in delivering currency solutions. Everything
we do is for our clients – we have no proprietary business.
Our clients are largely institutions, including
pension funds, charities, foundations,
endowments, and family offices, as well as
other fund managers and corporate clients.
Our head office is in Windsor, in the UK,
and has been since our formation in 1983.
Record has always been an independent
currency specialist, and has focused on
developing a deep understanding of the risk
and reward opportunities in currency markets,
so as to offer our clients the most appropriate
solution to their needs.
Our clients benefit from our experience,
and from the continuity and consistency
with which we apply that experience. We also
attach importance to continuity of leadership
and management. Record plc has a premium
listing on the Main Market of the London
Stock Exchange, and is majority‑owned by
its Directors and employees.
Core values
Diligence
Transparency
Accountability
Probity
A client-focused approach
A culture of integrity
• Building strong, long‑term
“trusted adviser” relationships
with our clients
• Understanding clients’
currency issues fully
• Developing robust and effective
solutions, tailored for our clients’
currency requirements
•
Independent specialist
currency manager
• No proprietary business
• Strong focus on risk management
Strengths developed through
36 years of experience
• Fundamental understanding of
how currency markets operate
• Leading position in managing
currency for institutional clients
• Collaborative approach between
distribution, investment,
operational and support functions
built into infrastructure to deliver
responsive client service
1
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information Record plc Annual Report 2019
Specialists in
currency management
Key fact
The Group, founded over 35 years ago,
has a leading position in managing
currency for institutional clients.
2
Strategic report
HIGHLIGHTS
Record plc Annual Report 2019
Assets Under Management
Equivalents1 (“AUME”)
Earnings per share
$57.3bn
2018: $62.2bn
-8%
3.27p
2018: 3.03p
+8%
Revenue
Ordinary dividend per share
£25.0m
2018: £23.8m
+5%
Profit before tax
£8.0m
2018: £7.3m
+9%
2.30p
2018: 2.30p
+0%
Special dividend per share
0.69p
2018: 0.50p
+38%
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 real. To distinguish this from the AUM of conventional asset managers, Record uses the concept of Assets Under Management
Equivalents (“AUME”) and by convention this is quoted in US dollars. Further details of how Record calculates AUME are included on page 112.
3
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We have continued to see political and economic uncertainty
affecting the financial markets and by extension the asset
management industry and the currency markets in which
we operate.
Technology continues to disrupt the fundamental ways in which
financial markets operate. It brings challenges, in terms of
competition and pressure on margins, as well as opportunities
in terms of improvements to operational efficiency and price
transparency, and to the overall client experience. During the year,
we have continued to focus on, and invest in our client relationships,
our ability to innovate, our technology and our people.
My statement last year highlighted the change in mix of fees for
some products, which includes some enhanced Passive Hedging
mandates and some return‑seeking (Multi‑Strategy) mandates,
from management fee only to a reduced management fee plus
a performance fee element. During the year this has achieved
outperformance in terms of total fees earned when compared to the
fees that would have been earned on a management fee only basis.
Notwithstanding net outflows of $4.5 billion, predominantly in
the second half of the year, Record generated strong results with
revenues of £25.0 million (2018: £23.8 million), operating profit
of £7.9 million (2018: £7.3 million) and earnings per share of
3.27 pence (2018: 3.03 pence).
Further information on AUME flows and financial results can be
found on pages 23 to 29.
Group strategy
We believe that by delivering market‑leading and innovative
products and the highest levels of service to our clients, we will
generate positive returns and create shareholder value over the
long term.
Our strategy focuses on three core areas for delivery: our client
experience, innovation and talent development. Further detail on
the strategic objectives and how we performed against these can
be found under “Strategy and Objectives” on pages 8 to 13.
CHAIRMAN’S STATEMENT
The environment in which
Record operates challenges us
to continue to enhance existing
products and services, and
also to innovate new ones.
Record has the people and
resources to do so.
Neil Record
Chairman
4
Record plc Annual Report 2019Strategic report Capital and dividend
Our capital policy aims to ensure retained capital broadly equivalent
to one year’s worth of future estimated overheads (excluding
variable remuneration), in addition to capital assessed as required
for regulatory purposes, for working capital purposes and for
investing in new opportunities for the business.
Our dividend policy targets a level of dividend which is at least
covered by earnings and which allows for sustainable dividend
growth in line with the trend in profitability. It is also the Board’s
intention, subject to financial performance and market conditions at
the time, to return excess earnings over ordinary dividends for the
financial year and adjusted for changes in capital requirements, to
shareholders, normally in the form of special dividends.
The Board is recommending a final ordinary dividend of 1.15 pence
per share (2018: 1.15 pence), with the full year ordinary dividend at
2.30 pence, which is equivalent to the full year ordinary dividend in
respect of the prior year (2018: 2.30 pence). The interim dividend
of 1.15 pence per share was paid on 22 December 2018, and
the final ordinary dividend of 1.15 pence per share will be paid on
31 July 2019 to shareholders on the register at 28 June 2019,
subject to shareholders’ approval.
The Group has assessed its regulatory capital requirement
alongside its anticipated costs for the current financial year,
which has resulted in a marginal increase to capital required in line
with its policy. The net increase in capital required is equivalent to
0.28 pence per share and consequently the Board is announcing a
special dividend of 0.69 pence per share to be paid simultaneously
with the final ordinary dividend. Total dividends for the year are
2.99 pence per share (2018: 2.80 pence) compared to earnings
per share of 3.27 pence per share (2018: 3.03 pence).
The Board will continue to consider ordinary dividends and other
distributions to shareholders on a “total distribution” basis. The total
distribution for any year will be at least covered by earnings, and
will always be subject to the financial performance of the business,
the market conditions at the time and to any further capital
assessed as required under the policy described above.
The Board
David Morrison, the Senior Independent Director, resigned from the
Board with effect from 30 September 2018 having served his full
nine‑year term and hence no longer being deemed independent.
On behalf of my colleagues I would like to thank David for his
commitment and guidance to Record over his term, and to wish
him well for the future.
With effect from 1 October 2018, Jane Tufnell was appointed
Senior Independent Director and continues to chair the Nomination
Committee, and Tim Edwards was appointed as Chair of the
Remuneration Committee. The Audit and Risk Committee
continues to be chaired by Rosemary Hilary.
Outlook
Financial markets, and by extension the foreign exchange markets,
will continue to be subject to ongoing disruption in such various
forms as political instability, trade tensions, regulatory changes,
technological disruption and more fundamentally changes in the
way our markets operate.
Whilst such an environment brings a high degree of challenge, it
also provides opportunities to those market participants having the
capability and flexibility to react, including the ability to innovate
and to invest in order to meet the specific demands of clients and
potential clients. We have already shown that we have the people
and resources to meet these challenges head on, and I remain
confident that we will continue to do so going forward.
On behalf of the Board, I would like to thank everyone at Record
for their hard work and commitment during the year, and I look
forward to the challenges and further opportunities in the
year ahead.
Neil Record
Chairman
12 June 2019
5
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information In the year ended 31 March 2019, anticipated reductions in
management fees were more than offset by performance fees,
resulting in 5% growth in revenue. Some benefits of operating
leverage brought about a modest increase in operating margin
to 32%.
Looking forward, Record’s management is determined to impose
continued cost discipline, so that investment in new products and
services can be maintained without sacrificing profitability. We
are increasingly focused on being flexible and responsive to client
demand in developing these new products and strategies.
Market overview
The year to 31 March 2019 saw a moderation of economic activity
in developed market economies with the exception of the US.
With this came diminished expectations for divergence in interest
rate cycles. Political risks re‑emerged during the year with the UK
approaching its EU exit date, the US and China trade dispute, and
renewed hostilities between the Italian government and EU officials.
Emerging Market currencies came under pressure temporarily, but
the Turkish lira experienced more severe currency depreciation
during the summer.
Further information on foreign exchange markets over the period is
provided on pages 20 and 21.
Investment performance
Record’s Dynamic Hedging product increased hedge ratios in line
with US dollar strength, and helped protect clients against currency
losses. Over the year, Record’s enhanced Passive Hedging service
outperformed its relevant benchmark for most clients, though
the magnitude of outperformance was lower than the long‑term
average. Record’s Multi‑Strategy mandates combining Carry,
Emerging Market, Momentum, Value and now Range Trading
strategies delivered negative performance over the period.
Further detail on our product range is provided on pages 16 and 17,
and product performance data is provided on pages 22 and 23.
Asset flows and financial performance
AUME decreased by 8% in US dollar terms over the financial
year to $57.3 billion, and decreased by 1% in sterling terms to
£44.0 billion. Net outflows of $4.5 billion in the year were largely
driven by Passive Hedging outflows of $4.6 billion, with net inflows
in Currency for Return balanced by net outflows in Dynamic
Hedging. Detailed analysis of AUME is provided on pages 23 to 25.
The 5% total decline in management fees of £1.2 million was more
than offset by performance fees of £2.3 million, resulting in an
increase in revenue of 5% to £25.0 million. The Group’s operating
margin improved from 31% to 32%, and profit before tax increased
by 9% to £8.0 million. Basic earnings per share of 3.27 pence
represented an 8% increase on the prior financial year. The
Financial review on pages 26 to 29 gives additional commentary.
CHIEF EXECUTIVE OFFICER’S STATEMENT
We are increasingly focused
on being flexible and
responsive to client demand in
developing new products and
strategies.
James Wood-Collins
Chief Executive Officer
6
Record plc Annual Report 2019Strategic report Outlook
Record’s Board and management firmly believe that almost all
investors worldwide are affected by currency market movements,
and that the unparalleled liquidity of the foreign exchange
market means that capacity and liquidity constraints are remote.
Furthermore, our depth of experience and robust operating model
means we are very well positioned to design and implement
solutions to investors’ specific needs, whether risk management,
return‑seeking, or both.
This combination of investor relevance, market depth and
expertise should mean that Record is well positioned to generate
significant growth for shareholders. The Board and management
recognise that while long‑established products and services are
key to Record’s profitability today, we cannot rely on these alone
to take full advantage of our growth opportunities. This, as well
as fee pressure endemic to investment management, lies behind
our focus on continually enhancing our clients’ experience and
innovating new products and strategies. Achieving both of these
is in turn dependent on attracting and retaining highly‑capable
colleagues.
It also continues to be imperative that we manage the business in a
financially‑disciplined fashion, both with regard to expenditure and
balance sheet discipline. We will continue to invest in opportunities
that respond to client demand, and to challenge ourselves and our
colleagues to identify and pursue these opportunities, while also
seeking productivity enhancements in established products.
James Wood-Collins
Chief Executive Officer
12 June 2019
Strategic progress
Our strategic progress can be grouped under three headings,
as set out on page 8.
Quality client experience – our commitment to deliver
best‑in‑class client experience is manifested through building and
maintaining close “trusted adviser” relationships, and continually
enhancing the products and services we offer these clients to meet
their needs. Continual enhancement of products and services is
demonstrated through the increased adoption of enhanced Passive
Hedging amongst our clients, and by the addition of a fifth strand,
Range Trading, to our Multi‑Strategy product. The extension of our
relationship with WisdomTree to include a framework for hedging
emerging market currencies is a further example of this.
Our ability to build and maintain client relationships is critically
dependent on the individuals whose responsibility this is, and to
this end we are pleased to have increased the employees based
in our New York office covering North America, with two transfers
from Windsor and one local hire.
Innovation – innovation is demonstrated both in enhancing
existing products and services, and in developing new ones.
Given the bespoke nature of all of Record’s segregated mandates,
the distinction between enhancing existing services and developing
new ones is blurred. In addition to the continued adoption of
enhanced Passive Hedging and the addition of Range Trading,
we have developed and seeded a strategy which incorporates
Environmental, Social and Governance (“ESG”) factors into the
Multi‑Strategy currency portfolio.
Our approach of encouraging innovative ideas from colleagues
may lead to opportunities which are best exploited outside of
Record’s full ownership and control. One example spanning the
financial year end is Record’s investment in a 40% shareholding in
Trade Record Ltd, a newly‑formed company established to offer
pay‑to‑enter competitions in which subscribers trade virtual money
across asset classes.
Talent development – we have continued to pay close attention
to attracting, recruiting, retaining and developing high potential
talent across our business. We have insourced much of our
recruitment activity, with the twin objectives of identifying better
candidates earlier, and reducing costs.
We will be changing how we implement our Group Profit Share
scheme for the year ended 31 March 2020 so as to better balance
rewarding individual contribution as well as firm‑wide performance,
as described in more detail on page 53. As a result there may be
more variability in the current and future financial periods in the total
cost of the Group Profit Share scheme within the established range
of 25% to 35% of operating profits.
7
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information STRATEGY AND OBJECTIVES
Strategic goals
We are a specialist currency manager
Our goals are to meet client demand for robust and innovative
currency solutions and, in doing so, to create shareholder value
for investors over the long term.
Strategic objectives
• To build strong, long‑term “trusted adviser” relationships
with our clients
• To devise and implement new products and strategies
• To enhance existing products and strategies
• To operate a robust, scalable and profitable business model
• To attract, develop and retain a diverse pool of
high‑quality people
Strategy
The presentation of Record’s strategy section has been updated
significantly in this report. In last year’s report, the Group presented
its strategic goals, and then discussed objectives and progress in
six strategic areas. Whilst the Group’s strategy has not changed,
it now presents the same goals and objectives, but discusses its
progress within three strategic areas, in order to articulate its
strategy more clearly.
Performance measurement
We use both financial and non‑financial key performance indicators
(“KPIs”) to monitor the performance of the Group. KPIs which link
to a specific strategic area are presented on pages 9 to 11, and
those which relate to Record’s overarching strategic goals and
objectives are presented on pages 12 to 13.
The three key strategic areas are outlined below, whilst further
detail on the associated risks is provided on pages 30 to 33.
Quality client
experience
page 9
We provide the highest levels of service to our
clients through proactive relationships, informing
clients on currency markets and opportunities,
seeking to understand their currency issues and
tailoring our products to meet their individual
requirements.
Risks:
People and
employment,
regulatory
change,
investment and
operational
Measured by – client numbers, AUME, revenue
and client longevity
Innovation
page 10
We differentiate Record from our competitors
and reinforce our thought leadership through
devising and implementing innovative solutions
to meet unique client requirements.
Measured by – number of strategies and
products
Risks:
People and
employment,
regulatory
strategy and
operational
We aim to develop and retain a diverse pool of
talent which is key to delivery of a “best in class”
business model and to the long-term stability of
the business.
Measured by – employee numbers, employee
retention, employee participation in equity
Risks:
Strategic,
people and
employment,
investment and
operational
Talent
development
page 11
1
2
3
8
Record plc Annual Report 2019Strategic report 1
Quality client
experience
We provide the highest levels of service to
our clients through proactive relationships
informing clients about currency markets and
opportunities, seeking to understand their
currency issues and tailoring our products
to meet their individual requirements.
Initiatives
Progress
Priorities
•
Improve local presence in key markets
outside of the UK.
• Focus on opportunities for existing
clients to benefit from product
enhancements and complementary
services alongside current product
range.
• Expansion of US local presence by
addition of experienced local hire, and
transfers from head office in the UK.
• Continue to invest in processes and
resources to improve the service to
clients and the overall client experience.
• Transfer of some Passive Hedging clients
across to more bespoke enhanced
Passive Hedging mandates.
• Extending licensing agreement with
• Review opportunities for enhancing best
WisdomTree.
execution delivery for clients.
• New Change FX appointed to provide
independent data and enhance best
execution and price transparency.
Clients
AUME
Client numbers
AUME ($ billion)
Revenue
Revenue (£m)
Client longevity
Client longevity (%)
FY-19
FY-18
FY-17
FY-16
FY-15
65
FY-19
60
FY-18
59
FY-17
58
FY-16
55
FY-15
57.3
FY-19
62.2
FY-18
58.2
FY-17
52.9
FY-16
54.7
FY-15
25.0
0-1yrs
23.8
1-3yrs
23.0
3-6yrs
21.4
6-10yrs
20.8
>10yrs
20
22
18
18
22
Client numbers represent the
number of separate legal
entities that have appointed
Record directly as an
investment manager or
invested in a Record fund.
As a currency manager,
Record manages only the
impact of foreign exchange
and not the underlying assets
of its clients, therefore its AUM
(Assets Under Management)
are notional. 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.
Revenue is earned mainly from
the provision of currency
management services in the
form of management fees and
performance fees.
Client longevity measures how
long Record has been providing
currency management services
to each client with a mandate
active at 31 March 2019.
9
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information STRATEGY AND OBJECTIVES CONTINUED
2
Innovation
We differentiate Record from our competitors
and reinforce our thought leadership through
devising and implementing innovative
solutions to meet unique client requirements.
We constantly review our operational model
to identify opportunities for process
improvement and risk reduction.
Initiatives
Progress
Priorities
•
•
Investigate opportunities for improving
diversification and performance in
Multi‑Strategy products.
Investigate opportunities for
incorporating ESG factors into
currency‑related investment strategies.
• Diversify Record’s products and
services through investment in new
and innovative ideas.
• New Range Trading strand developed
and added to Multi‑Strategy product.
• Developed and seeded new
Multi‑Strategy factor incorporating
ESG tilt.
• Co‑investment into new start‑up
company (Trade Record Ltd) offering
a diversified business opportunity.
•
Identify more opportunities for
incorporating technological solutions
to streamline business processes.
• Continued investment in research
to enhance existing products and
services and to identify new product
opportunities.
Product development timeline
Company founded by Neil Record
Dynamic Hedging started
Currency Alpha product launched
Carry (Forward Rate Bias)
Strategy launched
Signal Hedging
launched
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
Passive Hedging started
EM Strategy launched
Currency Multi-
Strategy launched
Currency Range
Trading added to
Multi-Strategy
ESG-tilted Multi-
Strategy seeded
10
Record plc Annual Report 2019Strategic report 3
Talent
development
We aim to develop and retain a diverse pool
of talent which is key to delivery of a “best in
class” business model and to the long‑term
stability of our business.
Initiatives
Progress
Priorities
• Providing a collaborative office
•
environment which enables early‑career
employees to benefit from working
alongside senior colleagues.
Investment in technology to enhance
communication channels between Group
entities and retain close working links
with colleagues based in non‑UK offices.
• To continue to invest in the development,
retention, wellbeing and diversity of our
talented employees.
•
Increasing our pool of high potential,
early to mid‑career colleagues to
develop within Record’s business as part
of succession planning.
•
Investing in improving the physical and
mental wellbeing of our colleagues.
• Promoting innovation through alignment
with variable remuneration.
• Graduate and early to mid‑stage
career recruitment all brought in‑house,
enabling more efficient processes and
strengthening ties with several leading
universities in the UK and Switzerland.
•
Invested in third party employee survey
to measure employee satisfaction and
identify areas for improvement.
• Enhancement of employee wellbeing
through introduction of professional
assistance with mental health issues.
• Changes to the implementation of the
Group Profit Share scheme to encourage
and recognise the importance of
individual contribution and ideas.
Average number
of employees
Staff
retention
The average number of employees through
the year includes non‑executive directors.
Staff retention is the number of employees
who were employed by Record throughout
the period as a percentage of the number of
employees at the beginning of the period.
Employees with
equity interest
The percentage of employees who own
shares in Record plc at year end.
Average number of employees
Staff retention (%)
Employees with equity interest (%)
FY-19
FY-18
FY-17
FY-16
FY-15
85
FY-19
81
FY-18
73
FY-17
69
FY-16
68
FY-15
84
FY-19
93
FY-18
83
FY-17
88
FY-16
89
FY-15
70
72
68
69
76
11
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information KEY PERFORMANCE INDICATORS
Measuring our performance against our strategy.
The Board and Executive Committee use both financial and non-financial key performance
indicators (“KPIs”) to monitor the performance of the Group. KPIs which link to a specific strategy
are presented on pages 9 to 11, and those which relate to Record’s over-arching strategic goals
and objectives are presented below.
Indicator:
Average management fee rates
The Group aims to provide a premium level of service and expertise in exchange for a fair level
of remuneration.
How we performed this year:
Performance history:
• Fee rates across the product range were broadly maintained
for hedging products. However, fee rates achieved for
return‑seeking products fell during the year.
Further information on fee rates can be found
in the Financial review section on page 27.
Operating profit margin
Operating profit margin is an alternative performance measure, calculated by dividing operating
profit by revenue.
The Group aims to increase operating profit margin over the long term through investing in
resources to maintain its premium products and services whilst building profitable
and diversified revenue streams.
• Operating profit margin increased to 32% for the year.
Further information can be found under the Financial review
Operating profit margin (%)
section on page 28.
Basic earnings per share (“EPS”)
The Group’s objective is to create shareholder value over the long term, reflected in
consistent growth in EPS.
• Basic EPS increased by 8% for the year in line with
increases in revenues and operating profit.
EPS (pence per share)
Dividends per share
The Group’s objective is to pay a progressive ordinary dividend and return surplus
capital to shareholders in the form of special dividends.
• The ordinary dividend per share is unchanged on last year.
The special dividend per share has increased by 0.19 pence
resulting in a 7% increase in total dividends to 2.99 pence
per share (2018: 2.80 pence per share).
Dividends per share (pence)
FY-19
FY-18
FY-17
FY-16
FY-15
FY-19
FY-18
FY-17
FY-16
FY-15
FY-19
FY-18
FY-17
FY-16
FY-15
32
31
34
32
35
3.27
3.03
2.91
2.55
2.66
2.30
2.30
2.00
1.65
1.65
0.69
0.50
0.91
Ordinary
Special
12
Record plc Annual Report 2019Strategic report Indicator:
of remuneration.
Average management fee rates
The Group aims to provide a premium level of service and expertise in exchange for a fair level
How we performed this year:
Performance history:
• Fee rates across the product range were broadly maintained
for hedging products. However, fee rates achieved for
return‑seeking products fell during the year.
Further information on fee rates can be found
in the Financial review section on page 27.
Operating profit margin
Operating profit margin is an alternative performance measure, calculated by dividing operating
profit by revenue.
The Group aims to increase operating profit margin over the long term through investing in
resources to maintain its premium products and services whilst building profitable
and diversified revenue streams.
Basic earnings per share (“EPS”)
The Group’s objective is to create shareholder value over the long term, reflected in
consistent growth in EPS.
• Operating profit margin increased to 32% for the year.
Further information can be found under the Financial review
section on page 28.
Operating profit margin (%)
FY-19
FY-18
FY-17
FY-16
FY-15
• Basic EPS increased by 8% for the year in line with
increases in revenues and operating profit.
EPS (pence per share)
Dividends per share
The Group’s objective is to pay a progressive ordinary dividend and return surplus
capital to shareholders in the form of special dividends.
• The ordinary dividend per share is unchanged on last year.
The special dividend per share has increased by 0.19 pence
resulting in a 7% increase in total dividends to 2.99 pence
per share (2018: 2.80 pence per share).
FY-19
FY-18
FY-17
FY-16
FY-15
Dividends per share (pence)
FY-19
FY-18
FY-17
FY-16
FY-15
2.30
2.30
2.00
1.65
1.65
32
31
34
32
35
3.27
3.03
2.91
2.55
2.66
0.69
0.50
0.91
Ordinary
Special
13
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information BUSINESS MODEL
Our business model depends on our relationships and resources.
Relationships and resources
What we do
Our clients
Client relationships are the keystone of our success. Only
by building strong, long‑term “trusted adviser” relationships
with our clients can we fully understand their currency
issues and develop effective solutions for their currency
requirements.
Our experience
We are a specialist currency manager with over 35 years’
experience – we have a fundamental understanding of how
currency markets operate, which we have used to develop a
leading position in managing currency for institutional clients.
Our people
We view our ability to attract, retain and motivate
highly‑talented staff as key to organisational stability and
long‑term success.
Our recruitment process is carefully structured to ensure
that talented people with the right skills and experience are
recruited into the Group.
Our infrastructure
Our operational infrastructure is built around how we
service our clients and ensures a collaborative approach
across all sections of the business.
All of our investment, operational and support functions
are based centrally at the Head Office in Windsor, UK and
provide services to the Group as a whole.
Our financial resources
The business maintains a robust balance sheet and strong
capital position. Positive cash generation allows us to
reinvest for growth in the business and to drive shareholder
value and returns.
Our investment process
Research
Experience and know how
Innovation
Bespoke
We seek to identify and understand persistent patterns that
exist within currency markets. These patterns are rooted in
macroeconomic cycles, global risk management activity, as well
as structural and behavioural features of investment activity.
By understanding these patterns whether they be market
inefficiencies or risk premia, we can develop both risk mitigation
and value‑adding strategies.
We develop robust systematic processes, with macro‑ and
market‑informed portfolio positioning and intelligent risk
management oversight, which offer the best chance to achieve
investor objectives once implemented within our rigorous
operational environment.
We continually test the underlying assumptions that support
our investment beliefs and practices. This constant cycle of
challenging and reviewing our investment philosophies drives
product enhancement and new product development.
14
Record plc Annual Report 2019Strategic report What we do
What we deliver
Independence and transparency
We act as an independent agent for each of our clients
under an investment management agreement. Being
independent from any banks or brokerage firms, we
remain unconflicted and fully able to act in our clients’ best
interests and to fulfil our fiduciary obligations. Everything
we do is for our clients – our only source of revenue is from
client fees. We are never our clients’ counterparty and
therefore make no money from spreads.
Operational risk management
We assume full operational risk on behalf of our clients –
our infrastructure, systems and processes are designed to
mitigate and minimise the operational risk associated with
managing clients’ currency mandates.
Our distribution process
• Our products are delivered both through segregated
mandates and pooled fund structures to suit individual
client requirements.
• We distribute through both direct sales to institutional
clients, and through local and global investment
consultants.
• We build long‑term relationships with investment
consultants and help develop their understanding
of our products and services.
Our products
Bespoke solutions – we operate Hedging mandates
and unfunded Currency for Return mandates as
bespoke, segregated mandates, managing each
client’s unique characteristics through robust
operational systems built to manage exposures
efficiently and to minimise operational risk.
Currency funds – our Currency for Return strategies
are also delivered through a pooled fund structure.
Premium client service
Superior service is core to our client proposition and we
achieve this on various levels by assigning a dedicated
and experienced relationship manager to oversee each
client portfolio. Also, direct communication between our
operational and administrative specialists with each client’s
own internal functions is encouraged (for example on
rebalancing or reporting issues), building on the general
level of interaction with the client and underpinning the
overall “trusted adviser” relationship. This high level of
communication on multiple levels ensures all aspects of
the currency issues facing our clients are fully considered
and understood in terms of solutions.
Rewarding careers
At Record we have created an environment which
encourages bright, dynamic and committed individuals
to flourish. Being a small business everyone has the
opportunity to make a significant contribution to the
Company. We are able to provide excellent career
prospects and the opportunity to work closely with
senior and experienced people.
Thought leadership
Over the last 35 years Record has developed a
leading position in its sector. Our knowledge of the
currency market is sustained by our research and
results in innovative products and continued process
enhancement.
Shareholder value
We aim to operate an effective and efficient capital
policy, and to deliver business growth and maximise
shareholder returns over the long term. The Group’s
dividend policy is progressive and aims to return any
excess of future earnings over ordinary dividends
and additional capital requirements to shareholders,
potentially in the form of special dividends.
Find out more about our products on
pages 16 and 17.
15
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information BUSINESS MODEL CONTINUED
Our products
The Group’s suite of core products is split into two main categories:
Currency Hedging and Currency for Return products.
Currency Hedging
AUME $51.3bn
Record’s primary risk management
products are the hedging products and are
predominantly systematic in nature. Record
has the experience and expertise to deliver
tailored hedging programmes to suit the
individual currency needs of our clients.
We continue to enhance our product
offerings, so that they maintain their
premium product status. In a competitive
marketplace, our ability to differentiate our
hedging products is key to maintaining and
growing our market share further.
Currency for Return
AUME $2.7bn
Record’s Currency for Return strategies
have the generation of investment return as
their principal objective.
The range includes five principal strategies
being Carry, Emerging Market, Momentum,
Value and Range Trading and these
strategies can be offered in either a
segregated or pooled fund structure.
Record can combine these strategies in
different weightings that appeal to particular
market segments under the Multi‑Strategy
approach.
Passive Hedging: AUME $48.2bn
Passive Hedging mandates have the cost‑effective reduction of exposure to
currency risk as their sole objective by the symmetrical and unbiased elimination of
currency volatility from clients’ international portfolios.
Core Passive Hedging
The core Passive Hedging product
requires execution and operational
expertise to a greater extent than
investment judgement, and provides
the following benefits to clients:
•
Independent, best execution
• Custom benchmarks
• Optimised exposure capture
• Netting benefits
• Regulatory reporting
• Management of cash flows
Enhanced Passive Hedging
The enhanced Passive Hedging
product offers the same benefits and
requires the same level of execution
and operational expertise as the core
product, but recognises the
opportunities presented for adding
value by taking advantage of structural
inefficiencies and behavioural changes
arising in FX markets. It requires
continuous monitoring, and investment
judgement and skill to identify the
opportunities and then to take
advantage of them in a structured
and risk‑managed way.
Currency for Return:
The Multi‑Strategy approach can be applied as an “overlay” to help clients achieve
a variety of investment objectives, and offers clients access to the main sustainable
Carry
The Forward Rate Bias is the
observation that higher‑yielding
currencies tend to outperform lower
yielding currencies over longer time
periods, and is regarded by Record as a
fundamental and structural currency risk
premium. The Carry strategy aims to
exploit this observation and generate
returns by buying selected developed
market higher interest rate currencies
and selling selected lower interest rate
currencies.
Emerging Market (“EM”)
currency
EM currencies offer investors an
opportunity either to seek a return from
such currencies or to seek to separate
the currency effect from the underlying
overseas domestic asset performance
(typically equities or bonds). Record
believes that as a result of convergence
in the levels of economic output
between emerging and developed
markets, holding EM currencies offers
the benefit of real exchange rate
appreciation as well as offering higher
positive real yields. This currency
appreciation has been a significant
contributor of returns to (developed
market) holders of EM assets including
equities and bonds.
16
Record plc Annual Report 2019Strategic report We also offer bespoke solutions tailored
to individual client requirements.
Dynamic Hedging: AUME $3.1bn
Value is generated entirely through the
asymmetric reduction of pre‑existing
currency risk and Dynamic Hedging’s
ability to outperform Passive Hedging is
dependent on trending in currency
markets.
Record’s Dynamic Hedging product is
an attractive alternative to Passive
Hedging and has the reduction of
exposure to currency risk as its
principal objective and generating value
as a secondary objective. The Dynamic
Hedging product seeks to allow our
clients to benefit from foreign currency
strength while protecting them from
foreign currency weakness relative to
their own base currency.
Other risk management products:
Currency audit; Fiduciary execution; Signal hedging
sources of return in the currency market. Clients receive a diversified return stream
which performs well under a variety of market conditions and reduces the
correlation of their currency programme to other asset classes.
Currency Momentum
This strategy exploits the periodic
tendency of the spot exchange rate to
appreciate after a prior appreciation,
and to depreciate after a previous
depreciation. This market inefficiency
has persisted across different currencies
and is present in other asset classes,
such as equities. Currency is commonly
thought of as trending and the
Momentum strategy seeks to make
a return from this phenomenon.
Currency Value
Research suggests that purchasing
power parity (“PPP”) valuation models
have been good predictors of the
long‑term direction of spot movements.
Currency Value strategies exploit this
insight, buying currencies that are
undervalued relative to PPP and selling
currencies that appear overvalued.
Range Trading
The tendency for certain currency pairs
to trade within narrow ranges is
exploited by our Range Trading strategy.
Multi-product
AUME $3.0bn
Multi-product mandates
typically have combined
risk-reducing and
return-seeking objectives,
and are bespoke in nature.
These may include a
hedging mandate overlaid
with selected elements of
the Currency for Return
product, which cannot
readily be separated
into its hedging and
return-seeking components
for reporting purposes.
Cash and other
AUME $0.3bn
Record also provides
ancillary services including
cash and liquidity
management, collateral
management and
derivatives overlays.
17
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information BUSINESS MODEL CONTINUED
One of Record’s medium to long‑term aims is to develop currency
as an asset class in its own right. The FTSE Currency FRB10 Index
was launched in 2010, closely followed by the launch and seeding
of Record’s pooled fund, the Record Currency – FTSE FRB10 Index
Fund to track the index.
Other products
Record has a licensing agreement with WisdomTree, the New
York‑headquartered exchange‑traded fund and exchange‑
traded product sponsor and asset manager. Under the licensing
agreement, Record provides signals that are used to dynamically
hedge currency exposures within WisdomTree’s rules‑based index
family. During the year, we extended our relationship under licence
with WisdomTree to provide currency signals for use in connection
with a new range of models‑based active exchange‑traded funds,
which include Record’s first framework for hedging emerging
market currencies.
We are optimistic that our relationship with WisdomTree will allow
both dynamic and emerging market hedging strategies to be
accessible to a wider range of investors than has previously been
the case.
Since Record is not managing the exchange‑traded funds included
under the licences held by WisdomTree, assets under management
in these funds do not contribute to Record’s AUME. Record reports
revenues arising from these licensing agreements under “Other
currency services income”.
Information on product investment performance is given in the
Operating review section (pages 22 and 23).
Distribution
The Group’s sales and marketing activities are organised to ensure
that resources are deployed where opportunities have been
identified as giving the most likelihood of future success. The sales
and marketing team is split between the offices in the UK, US and
Switzerland, and a centralised team that provides comprehensive
technical and administrative support to the sales offices operates
from the headquarters based in the UK. Record’s aim over recent
years has been to increase our local presence in our core non‑UK
markets. To this end, last year we opened our Swiss office based
in Zürich, and this year strengthened our local presence in the US
market by increasing headcount through the recruitment of one
experienced hire and by the transfer of two mid‑career employees
from our UK headquarters.
We distribute through both direct sales to institutional clients, and
through local and global investment consultants. Building long‑term
relationships with investment consultants and developing their
understanding of our products and services is important to our
continued success and our ability to deliver quality services to
our clients. By working closely both with clients and investment
consultants we can identify new business opportunities as the
currency landscape continues to change and evolve.
Our market
The currency market represents the biggest and most liquid
market available with exceptionally low transaction costs and daily
FX volumes averaging $5.1 trillion per day (source: BIS Triennial
Central Bank Survey of Foreign Exchange and OTC Derivatives
Markets 2016). The FX market is essential to global trade and
finance and includes a high proportion of not‑for‑profit or forced
participants, resulting in profit‑seeking financial institutions
continuing to represent a minority of FX market participants.
Consequently, the market displays persistent patterns of behaviour
or inefficiencies which Record believes can best be exploited by a
combination of systematic and discretionary processes.
The FX market continues to offer opportunities for investors.
Record’s expertise is in identifying and understanding these
opportunities and then working with clients to understand how
such opportunities may be used to their best advantage, taking
account of each client’s individual circumstances and attitude
to risk.
Further information is given in the market review section of the
Business review starting on pages 20 and 21.
Our people
Record views its ability to attract, retain, motivate and develop
a diverse group of highly talented staff as key to organisational
stability and long‑term success.
Recruitment
The recruitment process is carefully structured and run
predominantly in‑house to ensure that talented people with the
right skills and experience are recruited into the Group. As part of
this, the Group runs a successful internship programme, which
gives the Group the opportunity to benefit from talented individuals
who are in the early stages of their career and identified as
potentially having the necessary skills required to add value to the
business in future. The process continues with a comprehensive
induction programme for all new joiners to allow them to adapt to
the specialist environment within Record.
The Group has continued to recruit selectively throughout the
year in order to maintain a flexible, scalable platform for future
growth. Continued investment in resources to underpin product
enhancements and sustain our ability to innovate has resulted in
a marginal increase in headcount during the year. The number of
employees (including Directors) in the Group at 31 March 2019
was 84 (2018: 83).
18
Record plc Annual Report 2019Strategic report Staff retention, motivation and development
We invest heavily in our people, offering opportunities and
support for them to grow their knowledge, skills and capabilities.
An effective performance review and objective‑setting process,
personal development planning including the development of
career paths, together with our open and inclusive office culture,
are all key priorities in the development and retention of our staff.
In addition, the Group Share Scheme, the Group Profit Share
Scheme and the Record plc Share Incentive Plan promote the
acquisition of equity in the Company by staff, improving motivation
and retention, as well as aligning employees’ interests with those
of our clients and shareholders. At 31 March 2019, the proportion
of employee shareholders stood at 70% (2018: 72%). Furthermore,
the business ensures that wider factors, such as market trends
in pay, are monitored closely to ensure risks to staff retention are
limited as far as possible.
The physical office environment and how this affects both the
productivity and wellbeing of our employees is also considered
crucial to the attraction, retention and motivation of our staff.
Consequently, we provide a collaborative office environment
incorporating space designed around the wellbeing of employees,
and utilising modern communication technology throughout the
business and Group.
Our infrastructure
The Group’s operational infrastructure is built around how we
service our clients and ensures a collaborative approach across all
sections of the business. To this end, our teams are deliberately
organised by function, rather than product. As such, all teams
are involved (to a greater or lesser extent) in the day‑to‑day
management or support of each client mandate. We maintain a
purpose‑built and fully integrated end‑to‑end operational process
to allow for scalable and customisable implementation of our
products. Teams take a collaborative approach to ensuring that
each stage of implementation, from data capture through to client
reporting, is seamlessly carried out with a client‑centric focus.
Trade execution
Compliance
and risk
Data
Investment
decisions
Trade
confirmation/
notification
Reporting
Reconciliation
Settlement
19
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information versus the US dollar as it became apparent that the ECB would
not raise rates in late 2019. The Bank of Japan kept policy rates
unchanged, but announced it would allow ten‑year yields to move
more freely around the zero per cent target. The Japanese yen saw
heightened volatility towards the end of the year as global equity
markets prices corrected. The Swiss National Bank continued to
pursue exceptionally low interest rates but compared to previous
years, appeared to apply only light‑touch interventions to the
currency. The franc showed mixed performance, having declined
against the US dollar but rose on a trade‑weighted basis, primarily
reflecting strength versus the euro.
Emerging Markets (“EM”)
Emerging market currencies came under pressure during the first
half of the financial year, both versus the US dollar and versus
a basket of developed market currencies. Initial weakness was
closely linked to the US dollar’s upward momentum, which exerted
pressure on the balance sheets of EM countries and drove capital
outflows both as domestic agents repaid US dollar denominated
debt, and as foreign investors weighed up the opportunity of
investing abroad versus at home. Broadly, EM central banks were
prepared with adequate levels of FX reserves and reacted by raising
real interest rates commensurately in order to lean against currency
weakness.
The largest depreciation by far was in the Turkish lira, where
worsening of diplomatic relations with the US, coupled with an
unorthodox approach to monetary policy sparked a currency
crisis and double‑digit inflation trend. With already diminished
liquidity, this led to a significant depreciation of the currency and
the emergence of a large basis between currency‑implied interest
rates and policy rates. In an unexpected act of independence, the
Central Bank of Turkey in September increased its policy rate by
6.25% in an attempt to control inflation and arrest the currency’s
decline. The economy underwent a rapid and painful adjustment
and the currency had recouped most of its losses by the end of the
financial year.
FX basis developments
Over the past few years, the historical relationship between the
interest rates observed in the money markets and those implied by
the FX forward market has weakened, largely as a consequence
of banking regulation, imbalances in the demand for hedging,
and money market reforms. This dislocation is known as the FX
basis. The FX basis typically imposes extra costs on hedgers from
Switzerland, Japan, and the Eurozone, while adding a benefit to
hedgers from the US and other higher‑yielding countries.
Over the year, the basis has been less dominated by general trends
and more by currency‑specific factors, leading to variation between
currency pairs. After starting the financial year at elevated levels,
the US dollar basis was generally stable over the first six months
of the year, before year end pressures precipitated expansion and
volatility of the FX basis in the second half of the year.
MARKET REVIEW
Political and economic
uncertainty have continued
to affect the financial markets
and by extension the asset
management industry and
the currency markets in
which we operate.
The year to 31 March 2019 saw a tempering of economic activity
in developed markets economies, with the exception of the US,
where growth was robust yet anticipated by policymakers to also
moderate. With this came diminished expectations for divergence
in monetary policy cycles. Political risks re‑emerged during the year
with the UK approaching its EU exit date, the US and China trade
dispute, and renewed hostilities between the Italian government
and EU officials. Emerging Market currencies came under
pressure temporarily, but the Turkish lira experienced more severe
currency depreciation during the summer. In spite of these events,
developed market currency volatility remained low, but occasional
large intra‑day exchange rate moves continued as a theme, driven
by recent regulatory and technological changes. These regulatory
constraints also continued to drive dislocations between FX
forwards and the money markets (FX basis).
Monetary policy and interest rates
Interest rates in developed markets remained low in relation to
historic norms, and initial expectations of further differentiation in
policy cycles faded towards the end of the year. In the US, the
Federal Reserve pushed ahead with additional interest rate hikes,
but paused at a lower level relative to past cycles due to growing
risks to its economic outlook. The US dollar appreciated on a
trade‑weighted basis, with gains concentrated in the first three
months of the year. The Bank of England hiked its policy rate
pre‑emptively amid rising domestic cost pressures, but did so
against a backdrop of political uncertainty and without conviction
over whether it will remain an appropriate stance. Ongoing Brexit
negotiations continued to cast a shadow over sterling, and political
news became the primary driver of the currency, which fell versus
the US dollar but rose marginally against a trade‑weighted basket
of currencies, as the likelihood of a no‑deal Brexit was thought to
have diminished.
Concerns over slowing growth and inflation were not confined to
the US, and as a result, monetary policy in the lower interest rate
economies of the Eurozone, Japan, and Switzerland, remained
exceptionally easy. The European Central Bank (“ECB”) maintained
its stance of ultra‑accommodative policy, though confirmed the end
of its Quantitative Easing programme. In contrast to the prior year,
economic activity suffered from a number of set‑backs and the
creation of an anti‑establishment government in Italy re‑introduced
an aspect of political risk to the currency. The euro depreciated
20
Record plc Annual Report 2019Strategic report Volatility, liquidity and market structure
During the financial year volatility in the FX market remained low
relative to history, despite ostensible risks stemming from Brexit
negotiations, Italian politics, and the threat of an escalating trade
war between the US and China. Although FX volatility remained
low, large intra‑day exchange rate moves looked to have become
more commonplace, for example, the Japanese yen “flash crash”
in January saw the yen appreciate by over three per cent in the
space of eight minutes. This phenomenon of suppressed volatility
but large and abrupt price changes is thought to have been
exacerbated by recent changes in both technology and regulation,
which in turn have affected the traditional market making function’s
ability to act as a “circuit breaker” during bouts of volatility. From
a regulatory perspective, post‑financial crisis changes to capital
requirements have made banks less keen to underwrite market risk
and provide a market during periods of financial stress.
Increasingly prevalent as alternative providers of liquidity are
algorithmic‑based and high‑frequency traders. These market
participants are thought to hold comparatively low levels of
inventory and are often governed by tighter capital at risk limits.
In effect, during periods of high volatility, algorithmic traders are
also less willing to warehouse the risk of large positions and can
withdraw liquidity from the market. As a result, a trend has emerged
of ample liquidity and well‑functioning markets during low volatility
environments, versus shallow liquidity and large intra‑day price
movements during more volatile periods. With more constrained
market making, large and price‑insensitive orders (e.g. via stop
losses) look more likely to create ripples in the market – especially
during illiquid hours and days. This, in part, may also have
contributed towards the prevalence of range trading in FX markets
during the financial year.
Brexit
Record has been planning its response to Brexit since the
June 2016 referendum, with a working group meeting regularly to
review workstreams relating to clients, colleagues and regulatory
permissions.
So‑called “passporting” permissions under the Markets in Financial
Instruments Directive (“MiFID”) have historically been one of the
main routes by which we can act for clients in the European
Union outside the UK (the “EU27”). Maintaining these permissions
in the event of a “hard Brexit” with no transition period or other
equivalence arrangements has been uppermost amongst the
Brexit‑related challenges to our business model and operations.
As discussed in last year’s Annual Report, we had prepared a
contingency plan to allow us to maintain passporting permissions
through the establishment of an authorised subsidiary in Ireland.
In the first calendar quarter of 2018, consensus emerged between
the UK and the EU on the intention to implement a transition
period, during which UK companies could continue to access
EU27 markets as if the UK was still a member of the EU. As a
result, we paused the implementation of our contingency plan,
although we recognised the risk that the transition period might
not materialise, including through Parliament not endorsing the
Withdrawal Agreement.
To address this risk we have developed further plans, including a
client‑by‑client assessment of the regulatory basis on which we
currently provide services to EU27 clients, and communication
with each such client. As a result of this, as well as industry‑wide
measures such as the Memoranda of Understanding agreed
between the Financial Conduct Authority and EU regulators
announced on 1 February 2019, at the time of writing we are
confident we will be able to continue to provide services to all
current EU27 clients post‑Brexit, even in the event of a “hard
Brexit” with no transition period or other equivalence arrangements.
This will be subject to further assessment in the light of any
regulatory changes.
In such a scenario, we would be constrained in marketing our
products and services to new clients in certain EU27 countries,
although even this constraint is moderated by enabling legislation
in many such countries which would allow authorised UK firms
to continue to market to professional clients. In this scenario we
would quickly re‑assess the costs and benefits of establishing an
authorised subsidiary within the EU27 countries, to eliminate any
such remaining constraints.
Although the main focus of our Brexit preparations has been
on these regulatory permissions, we have also considered
other effects on clients, and further consequences including the
potential impact on colleagues. None of these other effects or
consequences is expected to present a material challenge to our
business model or operations.
At the time of writing the UK Prime Minister, Theresa May, will
shortly be replaced, the Withdrawal Agreement has not been
endorsed by Parliament, and the Article 50 notice period has
been extended to 31 October 2019. Despite this uncertainty, and
as explained above, we expect to be able to continue to serve all
our current EU27 clients thereafter, irrespective of whether and
how the UK leaves the European Union.
Regulation
Record’s main regulatory focus during the financial year was
on embedding regulatory practices following the introduction of
MiFID II and reviewing relevant policies and procedures as part of
our business‑as‑usual process. The European Market Infrastructure
Regulation (“EMIR”) is undergoing changes which may affect the
reporting and other services that we provide for some of our clients
on a delegated basis. We have been assessing the impact of these
changes and communicating with the affected clients ahead of the
changes becoming effective.
The upcoming Senior Managers and Certification Regime
expansion to our sector comes into force in December 2019 and
we have been tracking and working on our project to ensure we
have the required structures, policies and procedures in place to
meet the new requirements.
21
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information OPERATING REVIEW
Product investment performance
Hedging
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.
Passive Hedging
Over the past five years, Record has developed an enhanced
Passive Hedging service. This aims to reduce the cost of hedging
by introducing new flexibility into the implementation of currency
hedges, without changing the hedge ratio. While the strategy
is partly systematic, the episodic nature of many opportunities
exploited by the strategy means it requires a higher level of
discretionary oversight than has historically been associated with
Passive Hedging. Over the year, Record’s enhanced Passive
Hedging service outperformed its relevant benchmark for most
clients, although the magnitude of outperformance was lower than
the long‑term average.
Return for
year to
31 March 2019
Return since
inception1
0.05%
0.12% p.a.
Value added by enhanced Passive
Hedging programme relative to a
fixed‑tenor benchmark
1. Since inception in October 2014.
Dynamic Hedging
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 year, US investors saw losses from currency
on international assets when valuing positions in US dollars, as the
US dollar appreciated against all G10 currencies. Record’s Dynamic
Hedging product increased hedge ratios in line with US dollar
strength, and helped protect clients against currency losses.
Currency for Return
Record had a number of Currency for Return products in the year.
The Forward Rate Bias (“FRB”, also known as Carry) strategies
and Emerging Market strategy are founded on market risk premia
and as such perform more strongly in “risk on” environments.
By contrast, Momentum, Value and the newly added Range
Trading strategies are more behavioural in nature, and as a result
are less risk‑sensitive. All five strategies can be combined to create
the Record Currency Multi‑Strategy product.
FRB
The Forward Rate Bias Index Fund saw positive returns which were
primarily driven by the relative strength of the higher yielding US
dollar versus the lower yielding euro. Record remains committed
to our belief that over time currency, and in particular the Carry
strategy, can be a persistent and uncorrelated source of returns
for investors, and that the Carry strategy will continue to generate
long‑term returns.
Emerging Market currency
Record’s Emerging Market Currency Fund generated modestly
negative returns after a volatile twelve months as emerging market
currencies generally depreciated against the basket of developed
market currencies. Returns in the Fund were mainly attributable to
the depreciation of the Turkish lira, and Brazilian real, and Central
Eastern European currencies.
Currency Multi-Strategy
Record’s principal Currency for Return product during the year was
Currency Multi‑Strategy. This combines a number of diversified
return streams. Record’s Multi‑Strategy mandates combining Carry,
Emerging Market, Momentum, Value and now Range Trading
strategies delivered negative overall performance over the period,
notwithstanding the diversification of performance returns between
the individual strategies.
22
Record plc Annual Report 2019Strategic report
Fund name
FTSE FRB10 Index Fund1
Emerging Market Currency Fund2
Currency Multi‑Strategy Fund3
Return for
12 months to
31 March 2019
%
Scaling
Return since Volatility since
inception
% p.a.
inception
% p.a.
1.8
1
4.20%
(0.31%)
1.77%
1.29%
4.5‑5
(3.90%)
(3.20%)
6.88%
6.34%
9.30%
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. Record Currency Multi‑Strategy Fund return data is since inception in February 2018, GBP base.
Index/composite returns
FTSE Currency FRB10 GBP Excess return1
Record Multi‑Strategy composite2
Return for
12 months to Return since Volatility since
inception
31 March 2019
% p.a.
%
inception
% p.a.
2.10%
(1.20%)
2.22%
1.28%
4.53%
2.73%
1. FTSE Currency FRB10 GBP Excess return data is since December 1987, GBP base.
2. Record Multi‑Strategy composite is since inception in July 2012, showing excess returns data gross of fees in USD base, and scaled to a 4% target volatility.
Scaling
The Currency for Return product group allows clients to select
the level of exposure they desire in their currency programmes.
The segregated mandates allow clients to select the level of scaling
and/or the volatility target. The pooled funds have historically
offered clients a range of scaling and target volatility levels.
It should be emphasised that in this case “scaling” refers to the
multiple of the maximum size of the aggregate forward contracts
in the currency programme, to the segregated mandate size or
the pooled fund’s net assets. This is limited by the willingness of
counterparty banks to take exposure to the segregated client or
pooled fund. The AUME of those mandates where scaling or a
volatility target is selected is represented in Record’s AUME at
the scaled value of the mandate, as opposed to the segregated
mandate size or the pooled fund’s net assets.
AUME development
AUME expressed in US dollar terms decreased by 8% during
the year ended 31 March 2019, finishing at $57.3 billion
(2018: $62.2 billion). When expressed in sterling, AUME decreased
marginally to £44.0 billion (2018: £44.3 billion).
AUME development bridge – year to 31 March 2019 ($bn)
+2.3
-4.5
-2.7
57.3
Net flows
Markets
FX effects
and scaling
adjustments
AUME at
31 March
2019
62.2
AUME at
1 April
2018
23
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
OPERATING REVIEW CONTINUED
AUME movements
The Group has seen total net outflows of $4.5 billion during the
year arising from inflows from both new and existing clients of
$10.0 billion offset by outflows of $14.5 billion.
Passive Hedging AUME fell by 9% to $48.2 billion at the end of
the year (2018: $53.0 billion), including net outflows of $4.6 billion
related to previously announced terminations of three commercial
relationships but representing eight client legal entities. Other
movements impacting Passive Hedging AUME included market
factors (+$2.5 billion) and movements in exchange rates
(‑$2.7 billion), which broadly offset each other.
Dynamic Hedging AUME ended the year at $3.1 billion
(2018: $4.3 billion), a decrease from last year of $1.2 billion.
Net outflows of $0.7 billion included inflows of $0.4 billion in the
first quarter and outflows of $1.1 billion in the final quarter. As
separately reported in March 2019, Record undertook a series of
tactical changes in order to realise gains on the market valuation
of open positions on certain Dynamically Hedged mandates,
thereby reducing the year end AUME position for Dynamic Hedging
by approximately $1.1 billion. The impact of some or all of the
reduction in AUME may prove to be temporary, although any
increase or decrease will be dependent on future movements in
underlying assets and FX markets. Market movements had an
impact of ‑$0.5 billion.
AUME composition by underlying asset class as at 31 March 2019
Passive Hedging
Dynamic Hedging
Multi‑product
The Currency for Return product saw AUME inflows of $0.9 billion
over the year, represented by inflows of $0.6 billion from a new
Australian client in the first quarter, and a $0.3 billion inflow from
an existing client into a bespoke product during the third quarter.
External factors had a net impact of +$0.2 billion. Currency for
Return AUME concluded the year at $2.7 billion (2018: $1.6 billion).
Multi‑product AUME remained stable during the year, starting and
ending the year at $3.0 billion.
Market performance
Record’s AUME is affected by movements in market levels because
substantially all the Passive and Dynamic Hedging, and some of
the Multi‑product mandates, are linked to equity, fixed income
and other market levels. Market performance increased AUME by
$2.3 billion in the year ended 31 March 2019 (2018: +$1.3 billion).
Further detail on the composition of assets underlying our Hedging
and Multi‑product mandates is provided below to help illustrate
more clearly the impact of equity and fixed income market
movements on these mandate sizes.
Equity
%
27%
95%
—%
Fixed
income
%
44%
—%
—%
Other
%
29%
5%
100%
24
Record plc Annual Report 2019Strategic report
Forex
Approximately 87% of the Group’s AUME is non‑US dollar denominated. Therefore, foreign exchange movements may have an impact on
AUME when expressing non‑US dollar denominated AUME in US dollars. Foreign exchange movements decreased AUME by $2.7 billion
over the year. This movement does not have an equivalent impact on the sterling value of fee income.
At 31 March 2019, the split of AUME by base currency was 13% in sterling, 57% in Swiss francs, 11% in US dollars, 16% in euros and
3% in other currencies.
AUME composition by base currency
Base currency
Sterling
US dollar
Swiss franc
Euro
Australian dollar
Canadian dollar
Singapore dollar
Swedish krona
Product mix
AUME composition by product
Passive Hedging
Dynamic Hedging
Currency for Return
Multi‑product
Cash
Total
31 March 2019 31 March 2018
GBP 5.7bn GBP 6.6bn
USD 6.3bn USD 6.9bn
CHF 32.5bn CHF 34.7bn
EUR 8.3bn
EUR 7.1bn
AUD 1.0bn
—
CAD 0.6bn CAD 0.5bn
SGD 0.1bn
SGD 0.1bn
SEK 3.7bn
SEK 2.6bn
31 March 2019
31 March 2018
US $bn
48.2
%
US $bn
84%
53.0
3.1
2.7
3.0
0.3
5%
5%
5%
1%
4.3
1.6
3.0
0.3
57.3
100%
62.2
%
85%
7%
3%
5%
—%
100%
Aggregate Hedging AUME represented 89% of the total AUME, down slightly on the prior year (2018: 92%). Currency for Return
AUME increased as a proportion of total AUME with inflows of +$0.9 billion, representing 5% of total AUME at year end (2018: 3%).
Multi‑product AUME remained unchanged on last year.
Client numbers
Client numbers saw a net increase of 5, ending the year at 65 (2018: 60). The net increase of five clients comprised 13 new clients
(representing seven new commercial relationships) less eight clients whose mandates were terminated, the latter representing three
commercial relationships.
25
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
FINANCIAL REVIEW
Despite a challenging
backdrop, it’s pleasing to
report growth in Group
revenues, profit and earnings
for the year.
Steve Cullen
Chief Financial Officer
26
Overview
Total revenue for the year increased by 5% to £25.0 million
(2018: £23.8 million) and operating expenses, excluding
variable remuneration, increased by 2% to £13.3 million.
Variable remuneration rose to £3.4 million (2018: £3.1 million),
with the operating profit margin increasing marginally to 32%
(2018: 31%) and profit before tax rising by 9% to £8.0 million
(2018: £7.3 million).
Profit and loss (£m)
Revenue
Cost of sales
Gross profit
Personnel (excluding GPS)
Non‑personnel cost
Other income or expense
Total expenditure (excluding GPS)
GPS
Operating profit
Operating profit margin
Net interest received
Profit before tax
Tax
Profit after tax
2019
25.0
(0.4)
24.6
(8.2)
(5.1)
—
(13.3)
(3.4)
7.9
32%
0.1
8.0
(1.6)
6.4
2018
23.8
(0.3)
23.5
(7.9)
(5.4)
0.2
(13.1)
(3.1)
7.3
31%
—
7.3
(1.2)
6.1
Revenue
Record’s revenue derives from the provision of currency
management services, fees for which can be charged through
management fee only or management plus performance fee
structures, which are available across Record’s product range.
Management fee only mandates are charged based upon the
AUME of the product, and management plus performance fee
structures include a lower percentage fee applied to AUME, and a
proportional share of the specific product performance measured
over a defined period.
Management fees are typically charged on a quarterly basis,
although Record may charge fees monthly for some of its larger
clients. Performance fees can be charged on quarterly, six‑monthly
or annual performance periods on the basis agreed with the
particular client.
As shown under AUME development on page 23, average levels
of AUME, and hence management fees, decreased over the year
predominantly as a result of net outflows of $4.5 billion more than
offsetting underlying increases in mandates due to market growth
(+$2.3 billion). In addition, some enhanced Passive Hedging clients
chose to move from management fee only to a lower management
fee with a performance related fee during the year.
Notwithstanding this backdrop, Record’s aggregate revenue for the
year increased by 5% to £25.0 million including performance fees
of £2.3 million (2018: £nil).
Record plc Annual Report 2019Strategic report
Revenue analysis (£m)
Management fees
Passive Hedging
Dynamic Hedging
Currency for Return
Multi‑product
Total management fees
Performance fees
Other currency services income
Total revenue
Year
ended
31 Mar 2019
Year
ended
31 Mar 2018
11.6
4.6
1.8
4.3
22.3
2.3
0.4
25.0
12.6
5.1
1.8
4.0
23.5
—
0.3
23.8
Management fees
Management fees earned during the year fell by 5% to £22.3 million
(2018: £23.5 million).
Record’s Enhanced Passive Hedging programme has been
developed to take advantage of changes in the FX market
structure so as to minimise costs and to add value for clients.
These mandates may be charged at reduced management fee
rates plus a performance‑related fee. As expected, there has
been a consequent reduction in the aggregate Passive Hedging
management fees for the year, exacerbated by the net outflows
seen from Passive Hedging mandates predominantly during
the second half of the year. Passive Hedging management fees
decreased by 8% to £11.6 million for the year (2018: £12.6 million).
As reported in the prior year, Record’s remaining UK‑based
Dynamic Hedging clients either converted their mandates to
Passive Hedging or terminated due to the negative returns and
cash flows caused by the persistent weakness in sterling following
the result of the EU referendum. Dynamic Hedging management
fees fell by 10% to £4.6 million (2018: £5.1 million), predominantly
reflecting the full year effect of the above changes.
Currency for Return management fees, which includes
Multi‑strategy mandates, remained broadly consistent with the
prior period notwithstanding net inflows of $0.9 billion in the year.
This is due to one new client mandate starting during the period on
a reduced management fee plus performance fee basis, and one
existing client mandate moving to a more bespoke service on a
different and lower fee rate.
Average management fee rates for most product lines have
remained broadly constant throughout the year ended
31 March 2019. Average management fee rates for Currency for
Return mandates decreased during the year for those reasons
stated above, plus the impact of increased scaling of portfolio sizes
for mandates with defined volatility targets where the fee rate is
linked to the target volatility.
Average Currency for Return fee rates on AUME can change as a
result of increasing or decreasing portfolio sizes for mandates with
defined volatility targets (“scaling”), where the fee rate is linked to
the target volatility. Certain Multi‑Strategy portfolio sizes have been
increased as volatility in the underlying strategies has fallen and as
diversification between strategies has become greater, reducing
the volatility of the aggregate return to the client. This effect may
reverse in future periods. Fee rates based on volatility targets have
not changed during the period.
Further information on the scaling of Currency for Return mandates
is given in the operating review on page 23.
Performance fees
Aggregate performance fees of £2.3 million were earned during the
year (2018: nil).
Other currency services income
Other currency services income totalled £0.4 million
(2018: £0.3 million) and consists of fees from ancillary currency
management services including revenue from the licensing
agreement with WisdomTree.
Expenditure
Operating expenditure
The Group operating expenditure (excluding variable remuneration)
increased by 2% to £13.3 million for the year (2018: £13.1 million),
reflecting the continued focus on cost discipline across the
business.
Growth in personnel costs of 4% to £8.2 million (2018: £7.9 million)
includes inflationary increases in salaries at the start of the financial
year, and reflects the growth in average employee numbers to
85 (2018: 81).
Headline non‑personnel costs decreased by 6% during the year
to £5.1 million (2018: £5.4 million), although remained broadly
consistent when considering the one‑off costs of £0.2 million
incurred last year relating to the Tender Offer in July 2017.
Other income or expenses were negligible for the year
(2018: income £0.2 million) and represent gains or losses made
on derivative financial instruments employed by the Group’s seed
funds or as a result of hedging activities, or other FX adjustments
or revaluations.
27
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
Financial stability and capital management
The Group’s balance sheet is strong and liquid with total net assets
of £27.4 million at the end of the year, including current assets
managed as cash totalling £23.7 million. The business remains
cash generative, with net cash inflows from operating activities
after tax of £7.0 million for the year (see note 25 to the financial
statements).
The Board’s capital policy is to retain minimum capital (being
equivalent to shareholders’ funds) within the business broadly
equivalent to twelve months’ worth of future estimated operating
expenses (excluding variable remuneration), plus capital assessed
as sufficient to meet regulatory capital requirements and working
capital purposes, and for investing in new opportunities for the
business. 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. Both RCML and the Group submit semi‑annual capital
adequacy returns to the FCA, and held significant surplus capital
resources relative to the regulatory financial resource requirement
throughout the year.
The Board has concluded that the Group is adequately capitalised
both to continue its operations effectively and to meet regulatory
requirements, due to the size and liquidity of balance sheet
resources maintained by the Group.
The Group held regulatory capital resources based on the audited
financial statements as at 31 March, as follows:
Regulatory capital resources (£m)
Core Tier 1 capital
Deductions: intangible assets
Regulatory capital resources
2019
27.3
(0.3)
27.0
2018
26.6
(0.2)
26.4
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.
FINANCIAL REVIEW CONTINUED
Expenditure continued
Group Profit Share (“GPS”) Scheme
The Group operates a GPS Scheme i.e. variable remuneration,
such that a long‑term average of 30% of underlying operating
profit before GPS is made available to be awarded to staff. The
Remuneration Committee has agreed that for the year ended
31 March 2019, the GPS Scheme is 30% of pre‑GPS operating
profit, which represents £3.4 million, an increase of 10% over
the previous financial year (2018: £3.1 million) and in line with
Group financial performance.
Further information on variable remuneration, and specifically the
changes to the operation of the Group Profit Share scheme from
1 April 2019 can be found in the Remuneration report starting on
page 53.
Operating profit and margin
Group operating profit increased by 8% to £7.9 million
(2018: £7.3 million) and the Group operating margin increased
marginally to 32% (2018: 31%), driven by the 5% increase in total
revenue and the maintained focus on cost discipline across the
business.
Cash flow
The Group consolidated statement of cash flows is shown on
page 79 of the financial statements.
The Group’s year end cash and cash equivalents stood at
£13.0 million (2018: £12.5 million). The cash generated from
operating activities before tax is shown in note 25 to the financial
statements and was £8.2 million (2018: £4.3 million). During the
year, taxation of £1.2 million was paid (2018: £1.6 million) and
£5.5 million was paid in dividends (2018: £6.8 million). The prior
year included a cash outflow of £10.0 million representing the
Group repurchase of 22.3 million shares via a Tender Offer.
At the year end, the Group held money market instruments with
maturities between three and twelve months, worth £10.7 million
(2018: £10.2 million). These instruments are managed as cash
by the Group but are not classified as cash under IFRS rules (see
note 17 of the financial statements for more details).
Dividends
An interim ordinary dividend of 1.15 pence per share
(2018 interim: 1.15 pence) was paid to shareholders on
28 December 2018, equivalent to £2.3 million.
As disclosed in the Chairman’s statement on page 5, the Board
is recommending a final ordinary dividend of 1.15 pence per share,
equivalent to £2.3 million, taking the overall ordinary dividend for
the financial year to 2.30 pence per share. Simultaneously, the
Board is also paying a special dividend of 0.69 pence per share
(equivalent to £1.3 million), making the total dividends paid for
the year of £5.9 million equivalent to 91% of total earnings of
3.27 pence per share.
The total ordinary and special dividends paid in respect of the
prior year ended 31 March 2018, were 2.30 pence per share,
and 0.50 pence per share respectively, equivalent to total
dividends of £5.5 million and representing 92% of total earnings
of 3.03 pence per share.
28
Record plc Annual Report 2019Strategic report
Market disruption, changes to regulation and sustained political and
economic uncertainty continue to provide challenges to the Group
and the environment in which it operates. Through continued
enhancement of its products and services and in maintaining its
approach to innovation, the Directors believe the Company to
be capable of meeting such challenges. However, the Directors
consider a three year horizon over which to assess the viability of
the Group to be appropriate under such circumstances, since any
further planning horizon provides a greater level of uncertainty to
financial projections.
As discussed in more detail in the Business review on page 21,
the Directors expect to be able to continue to serve all current
EU27 clients irrespective of whether and how the UK eventually
leaves the European Union (Brexit). For this reason the Directors
consider the level of risk posed by Brexit to the continued operation
and viability of the business to be significantly lower than the
principal risks noted on pages 30 to 33 of the Strategic report,
and the scenarios modelled through the ICAAP.
Upon review of the results of the stress testing, the Directors
concluded that the Group would have sufficient capital and liquid
resources to withstand the stressed scenarios and ensure its
ongoing viability, based on current information and the three year
viability horizon.
Cautionary statement
This Annual Report contains certain forward‑looking statements
with respect to the financial condition, results, operations and
business of Record. These statements involve risk and uncertainty
because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from those
expressed or implied in this Annual Report. Nothing in this Annual
Report should be construed as a profit forecast.
Viability statement
In accordance with the UK Corporate Governance Code, the
Directors have performed a robust assessment of the viability
of the Group considering the business model, the Group’s
expected financial position, Board strategy and risk appetite, the
Group’s solvency and liquidity and its principal risks. Based on
this assessment, the Directors have a current and reasonable
expectation that the Group will continue to operate and meet its
liabilities as they fall due up to 31 March 2022.
The Directors review the financial forecasts and position of the
Group on an ongoing basis. The capital and dividend policy
reflects the stated objectives of maintaining a strong balance sheet
whilst allowing the Group the flexibility to adapt its products and
services to market conditions, or to take advantage of emerging
business opportunities. The Group’s strategy and principal risks are
assessed and reviewed regularly by the Board, as well as by the
Executive Committee and operational sub‑committees within the
Group. Further detail on the Group’s strategy and principal risks is
given in the Strategic report on pages 8 and 30 respectively.
In assessing the viability of the Group, the Directors have
considered the principal risks affecting the Group, which underpin
the basis for the stress testing of the business plan conducted as
part of the Group’s Internal Capital Adequacy Assessment Process
(“ICAAP”). The ICAAP uses severe but plausible stress scenarios
assuming the crystallising of a number of these principal risks to
assess the options for mitigating the impact on the Group, and
for ensuring that the ongoing viability of the Group is sustained.
Such scenarios include items that may have a severe effect on
the revenue generation capability and resulting profitability of the
Group, for example:
• market downturn – resulting in AUME decreasing, either through
outflows and/or a reduction in value due to the link to other
financial markets; and
• operational risk event – causing AUME outflows and potentially
reputational damage.
The scenarios assume mitigating actions including the potential for
non‑critical cost reductions and reassessing the dividend policy,
although any mitigating actions would need to be reassessed
depending on the specific circumstances and expected duration of
the factors affecting the business model at the time. The possibility
that the impact and timing of factors potentially affecting the viability
of the Group could be more severe than assumed plausible for the
above testing should also be noted.
29
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information RISK MANAGEMENT
The Record culture is one of
integrity and accountability; core
values that are embedded into
the control environment across
all areas of the business.
The Board has ultimate responsibility for risk and the oversight of
the risk management process within the business. Recognising
that risk is inherent in all of the Group’s business dealings, and
in the markets and instruments in which the Group operates, it
places a high priority on ensuring an integrated approach and
a strong risk management culture is embedded throughout the
Group, with accountability at all levels within the business. Effective
risk management and strong internal controls are integral to the
Group’s business model and are reflected in the risk management
framework adopted within the business.
Risk management framework
Risk appetite
As part of its responsibility for the oversight of the risk management
process, the Board determines the risk appetite of the business.
This defines the risk tolerances within which the business must
operate in order to achieve its strategic and business objectives,
and takes into account the interests of clients, employees and
shareholders as well as any capital or any other regulatory
requirements. The Board’s ICAAP (Internal Capital Adequacy
Assessment Process) considers the risk appetite statement and the
process used for the monitoring of key risks against defined thresholds
to ensure adverse trends or levels of heightened risk are identified and
appropriately escalated for action if required.
During the year, an initiative to review Record’s risk management
framework was conducted by management with the support of
the Audit and Risk Committee. The focus of the review was the
improvement of the risk monitoring and reporting processes, including
the articulation of Record’s residual risks measured versus its risk
appetite. Further information can be found in the Audit and Risk
Committee report on page 50.
The Board reviews and considers the principal risks, and its risk
appetite and tolerances on a regular and ongoing basis in light
of strategic plans, and changes in the business and regulatory
environment. The Board currently considers the following categories of
risk as appropriate for determination of the risk appetite of the Group:
Capital adequacy risk
Capital adequacy risk is the risk that the Group is unable to support
its strategic business objectives due to its minimum regulatory capital
restrictions. The Group has a capital and dividend policy, which seeks
to ensure that capital retained is broadly equivalent to one year’s
worth of estimated future overheads (excluding variable remuneration),
in addition to capital assessed as required for regulatory purposes,
for working capital purposes and for investing in new opportunities
for the business. This policy ensures a significant capital buffer over
regulatory requirements, and consequently capital adequacy risk
is not considered a significant risk in terms of the principal risks
discussed further on pages 32 and 33.
30
Conduct risk
The business is also exposed to more wide‑ranging risks being
conduct risk and reputational risk. Conduct risk is defined as the risk
of causing detriment to a client or damaging the integrity of the market
because of poor systems or processes, or inappropriate judgement
by staff in execution of the Group’s business. The conduct of our staff
and the strength of our internal control systems and processes are
fundamental to the effective operation of the Group’s risk management
framework. The conduct risk is therefore evident and managed within
each individual category of risk, and when combined equates to
the overall conduct risk of the Group. Consequently, conduct risk is
not considered as a separate risk category within the Principal risks
section on pages 32 and 33.
Reputational risk
Reputational risk is the risk of loss or adverse impact arising from
an unfavourable perception of the Group on behalf of clients,
counterparties, employees, regulators, shareholders or other
stakeholders. Reputational risk can manifest as a consequence of
an occurrence of any of the Group’s principal risks, either in isolation
or together with other risks, and is therefore considered to form an
integral part of each of the Group’s principal risks. For this reason,
reputational risk is not considered as a separate risk category within
the Principal risks section on pages 32 and 33.
The remaining principal risk categories are listed below and further
detail is given on pages 32 and 33:
Strategic risk
Business risk
Market risk
Operational risk
Investment risk
Oversight
Oversight of the risk management framework is governed by various
committees as delegated by the Board.
The Board has delegated authority to the Audit and Risk Committee
to provide oversight and independent challenge in relation to internal
controls, risk management systems and procedures and external
financial reporting.
The Executive Committee is the delegated decision‑making body for
the day‑to‑day operation of the business and includes executive Board
members and other senior personnel.
The Board has delegated authority to the Investment Committee to
approve changes to any of the Group’s investment processes and to
establish and maintain policies for these processes. The Committee’s
membership includes Board members and senior personnel including
the Chief Investment Officer, the Chairman, the Chief Executive Officer,
the Head of the Client Team, the Head of Portfolio Management and
the Head of Investment Strategy. Investment Committee approval is
required prior to implementation of any new or amended investment
process or product.
Record plc Annual Report 2019Strategic report Risk management framework – overview
Record Board
Executive Committee
Audit and Risk Committee
Investment Committee
Risk Management Committee
The Board has established a Risk Management Committee which
is chaired by the Chief Operating Officer and has the Chief Financial
Officer, the Head of Operations, the Chief Technology Officer, the
Head of Trading, the Head of Portfolio Management, the Head of
Portfolio Implementation, the Head of Front Office Risk Management
and the Head of Compliance and Risk as members. As prescribed in
terms of reference determined by the Audit and Risk Committee, the
Risk Management Committee continually reviews existing and new
risks, and the nature of any operational incidents with the objective of
ensuring that adequate systems and controls are in place to minimise
and preferably eliminate such incidents and their impact on clients and
the Group.
Lines of defence
The Record culture is one of integrity and accountability; core
values that are embedded into the control environment surrounding
all areas of the business.
The overall risk management framework is underpinned by three
lines of defence and is overseen by the Audit and Risk Committee,
as delegated by the Board.
External independent assurance activity (independent assurance – PwC)
Statutory external audit
ISAE 3402 and AT-C320 service
auditor’s report on internal controls
Embedded culture of integrity and accountability
1st line of defence:
2nd line of defence:
3rd line of defence:
Within this framework the first line of defence provides
management assurance and rests with line managers within their
specific departments and with senior managers responsible for
the implementation and maintenance of higher‑level controls to
ensure adherence to quality standards and regulatory requirements.
Functions such as Front Office Risk Management, Compliance and
Risk, Legal, HR and Finance provide the second line of defence
through the drafting, implementation and monitoring of policies and
procedures to align with best practice, to ensure compliance and
to provide assurance and oversight for the Board and the Audit and
Risk Committee. The third line of defence is performed by internal
audit which provides independent assurance on the adequacy
and effectiveness of the Group’s risk management, control and
governance processes providing recommendations to improve
the control environment. Internal audit is provided by Deloitte LLP
(“Deloitte”).
External independent assurance for shareholders is gained
through the statutory annual external audit process run by
PricewaterhouseCoopers LLP (“PwC”), the Group’s external
auditor. The Group also commissions the external auditor to
perform the annual service auditor’s report in respect of Record
Currency Management Limited under both the International
Standard on Assurance Engagement (“ISAE”) 3402 and the
American Institute of Certified Public Accountants Attestation
Standard AT‑C Section 320 (“AT‑C 320”). In performing this work,
PwC reports its opinion on the description of internal controls with
respect to the investment management and information technology
activities, the suitability of the design of the relevant controls, and
the operating effectiveness of specific controls for the period 1 April
to 31 March, in line with the Group’s financial year.
Business operations
and support
Control and oversight
functions
Internal audit
(independent
assurance – Deloitte)
The Group considers the strong capital buffer retained under the
capital and dividend policy provides an effective additional line of
defence in terms of mitigation when considering its principal risks.
Principal risks
The following section shows the Board’s assessment of the principal
risks faced by the business alongside an explanation of how these
risks have been managed or mitigated, and how the significance of
the risk has changed during the year. These risks fall into a number
of distinct categories and the means to mitigate them are both
diverse and relevant to the nature of the risk concerned.
31
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information RISK MANAGEMENT CONTINUED
Strategic risk
The risk of failing to identify and implement the correct strategy would impact expected outcomes, earnings and profitability of the Group.
This risk is influenced by internal and external factors.
Risk
Rating
Change Mitigating activities
Failure to deliver strategy – risk of failure to achieve
strategic objectives through internal or external factors.
Medium
Potential impact – reduced short‑term profitability,
and growth prospects and viability limited longer‑term.
Medium
Margin compression – the risk of a lower fee
environment due to changes in investor demand or
competitive pricing pressures, and/or rising costs
within the industry arising from regulatory requirements
and/or technological advances.
Potential impact – reduced fee rates and/or
increased costs lead to decreased margins and lower
returns for shareholders.
The Board sets strategy and is responsible for ensuring
the Group has the right structure, leadership and culture
to execute.
Regular and ongoing review of strategic options,
opportunities and threats.
Bespoke solutions and added‑value to differentiate
products within the market.
Focus on offering premium service differentiates Record
from competition and builds long‑standing and “trusted
adviser” relationships.
Continued investment into resources and technology to
ensure effective and cost‑efficient processes.
Business risk
The risk of the business being unable to generate fee income and to control costs in line with business plans.
This risk is influenced by internal and external factors.
Risk
Rating
Change Mitigating activities
Concentration risk – the risk of concentration either
by product, client type or geographical location leading
to over‑reliance on any one category of revenue.
Medium
Potential impact – Record’s products are all currency
management based. A move away from currency by its
core client base or a high‑value client, or a change in
Swiss regulation could result in material outflows and
loss of revenue.
People and employment risk – the inability to attract
or retain key employees could impact the Group’s
ability to support business activities or achieve
strategic objectives.
Potential impact – not supporting business activities
or achieving the strategic objectives of the Group
would lead to a material negative impact on corporate
performance.
Medium
Regulatory change – the risk of failure by the Group
to comply with the introduction of new regulation or
changes to existing regulation.
Low
Potential impact – ability to do business may be
affected resulting in loss of revenue or regulatory
censure.
Low
Market liquidity risk – the risk of reduced or
constrained market liquidity affecting Record’s
investment process, which relies on trading a high
turnover of client positions in both size and volume.
Potential impact – a reduction in market liquidity or
the non‑functioning of financial markets could affect
Record’s ability to meet its contractual obligations to
clients, resulting in outflows and reductions to revenue.
32
Diversification of investment capabilities across
risk‑reducing and risk‑taking products.
Commitment to client services excellence and
transparent investment process is integral to retention.
Building long‑term and close trusted adviser relationships
with clients assists with retention even in the event of
regulatory change.
Continued investment in resources to broaden
capabilities in research, investment and client servicing.
Promotion of collegiate and professional culture and
office environment plus career opportunities in the form
of study support and overseas secondments.
Remuneration policy and share‑based remuneration
schemes promote key personnel retention.
Minimal reliance on key investment personnel and
products managed on a predominantly systematic
process.
Experienced Board and senior management engage
proactively with industry bodies and have a transparent
and open relationship with regulators.
Investment in expertise, systems and training to ensure
robust compliance culture maintained across the
business.
The Group trades on behalf of clients in currency and
related instruments with a large panel of banking
counterparties.
Currency is a particularly deep and liquid market that
has continued to provide sufficient daily liquidity, despite
disruptive market “shock” events such as the result of
the EU referendum in June 2016.
Record plc Annual Report 2019Strategic report Operational risk
Operational risks are broad in nature and inherent in all activities and processes performed across the business, and all other
businesses.
They include the risk that operational flaws result in business losses – through error or fraud, the inability to capitalise on market
opportunities, or weaknesses in systems and controls.
Risk
Rating
Change Mitigating activities
Medium
Technology and information security risk –
the risk of failure of the Group’s technology and
support systems, or penetration of such systems
by third parties.
Potential impact – consequential loss of data, or the
significant disruption to, or prevention of the Group’s
ability to operate, which could cause negative financial
and reputational consequences.
Comprehensive disaster recovery (“DR”) and
business contingency plans are in place and tested
on a regular basis.
Information technology policies and technical standards
are deployed across the Group, including induction and
regular security awareness training.
Cyber risk is continuously monitored within the business
and included in the ongoing risk assessment process
performed across the Group, including internal audit.
Cyber‑related metrics are monitored, reported and
reviewed in monthly management information and Board
information packs.
Operational control environment – the risk of
errors in execution and process management, dealing,
portfolio implementation, settlement, managing
bespoke requirements and reporting and the risk of
non‑compliance including monitoring of investment
breaches.
Potential impact – such errors or non‑compliance
would potentially lead to negative financial and
reputational consequences.
Low
Dedicated and experienced portfolio management team
oversees the investment process.
Dedicated and independent Front Office Risk
Management team provides pre‑ and post‑trade
compliance assurances.
Compliance and Risk department oversees adherence
to formal and established procedures via a structured
monitoring programme, reporting directly to the Risk
Management Committee.
Automated post‑trade compliance tests monitor whether
programmes are running in line with expectations and
allow timely resolution.
Internal audit function reports independently to the
Audit and Risk Committee, reviewing higher‑risk
operational areas.
Annual ISAE 3402 and AT‑C 320 service auditor’s report
on internal controls independently reviewed and tested
by PwC.
Investment risk
The risk that long‑term investment performance is not delivered, damaging prospects for winning and retaining clients, and putting
management fee rates under pressure.
Risk
Rating
Change Mitigating activities
Product underperformance – the risk that long‑term
investment performance is not delivered.
High
Potential impact – damages prospects for winning
and retaining clients, minimises revenues through
reduced management and performance fees and may
cause reputational damage.
Experienced Investment Committee meets
regularly ensuring consistent core investment
processes are applied.
Dedicated currency management research and
investment focus.
Diversification, both through offering multiple strategies
that benefit from opposing market conditions i.e. “risk‑on”
and “risk‑off”, and through a client base which is diverse
in geography and base currency.
Remuneration policy links senior management’s
remuneration to long‑term performance of the Group.
33
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information CORPORATE SOCIAL RESPONSIBILITY
The Board recognises that,
through its actions, it has a direct
impact upon its employees, the
community and the environment.
In conducting its business operations, the Group has a
responsibility to its stakeholders and the environment. Our
stakeholders, with whom we maintain an ongoing dialogue,
include shareholders, clients, employees, regulators and the
local community.
Our approach to corporate social responsibility has historically
been built around three key areas i.e. Community, Workplace
and Environment. During the year we have started to incorporate
environmental, social and governance (“ESG”) issues into some
of our currency management products. This has resulted in
Record becoming one of the first currency managers to have
been accepted as a signatory to the Principles for Responsible
Investment (as announced in June 2018) and the development of
our first return‑seeking strategy incorporating ESG factors.
Responsible investment
As part of our drive to incorporate ESG factors into active currency
products, Record has worked in collaboration with Oxford‑based
researchers to extend the boundaries of ESG beyond its existing
base in equities and bonds, to encompass the currency markets.
Our experience of existing investment strategies takes into account
the links between currency returns and productivity gains, so
we have focused on those ESG factors most clearly related to
economic productivity. As there is more ESG variability between the
emerging markets (“EM”) economies than the developed ones, our
first ESG process has been designed to tilt the EM currency strand
of the Multi‑Strategy product.
Our process applies insights on the relationship between
productivity and exchange rates to a database of country‑specific
ESG data. The result is a range of currency‑relevant ESG factors
related to the United Nations Sustainable Development Goals.
These factors (for example education, child mortality, improved
water sources and enforcement of legal contracts) are used to
construct an ESG metric which tilts the Multi‑Strategy currency
portfolio in a pro‑ESG manner. Record has seeded this strategy
and will offer it to clients in due course.
Record is keen to collaborate with external parties including
clients who might wish to apply the methodology to reflect their
own specific ESG views, and with research institutes. Record
will continue to develop the database as more material becomes
available, in particular from developing countries.
Community
Over the course of the year, the Group made charitable donations
totalling £16,839. Our charitable giving is focused on employee
choice, with the Group matching employee donations and
sponsorship. We also provide financial assistance to students
studying at Balliol College, Oxford through a half‑bursary scheme,
which provides grants to students who aim to pursue ambitions
which will benefit the wider community, for example in medical or
charitable fields.
The Group continues to encourage employees to participate in
fundraising activities for charitable causes. This year employees
participated in a variety of events, including charity lunches and
fundraising competitions. During the year a scheme allowing UK
employees to give to charity through the payroll was implemented.
Charitable donations (£’000)
FY-19
FY-18
FY-17
16.8
13.7
14.7
Human rights
Record complies fully with appropriate human rights legislation in
the countries in which it operates.
Workplace
Record’s working environment is designed to encourage bright,
dynamic and committed individuals to thrive. We believe that
investing in our staff and developing their potential is key to the
success of the business and our policies and practices reflect this.
The Group’s UK offices have been designed to allow all
departments to work together in an open plan environment.
The open plan office allows ease of communication between
departments, as well as enabling staff to work closely with senior
management. The New York and Zürich offices follow similar
principles, taking into account the smaller numbers of staff.
The office environments and culture promote staff development
and training. All staff are invited to participate in monthly company
update meetings which are led by the Chief Executive Officer.
The Group also provides study support to employees who
wish to pursue relevant professional qualifications. The Board
has established a staff‑run welfare committee which organises
team‑building and other social events enhancing interaction
between different departments within the business.
34
Record plc Annual Report 2019Strategic report
In addition, the Group has improved its maternity and shared
parental benefits during the year, and continues to provide a
number of other benefits to employees including pension, private
medical cover, life insurance, permanent health insurance and
subsidised gym membership. All employees are rewarded through
the Group Profit Share Scheme and have the opportunity to acquire
shares in Record plc through this scheme, as well as through the
Record plc Share Incentive Plan.
Environment
The Group seeks to minimise its carbon footprint through
recognising the environmental impact of its activities, reducing that
impact through responsible procurement of goods and services,
and offsetting its remaining carbon emissions. The Group first
assessed its carbon footprint in July 2006, and has offset its
carbon emissions since then through investment in renewable
energy projects, currently in Kenya.
The Group has an established internship programme for students
and during the year we welcomed interns from Oxford University,
Imperial College of London, ETH Zürich, and University of Warwick.
Staff retention (%)
FY-19
FY-18
FY-17
84%
93%
83%
Equal opportunities and diversity
The Group’s objectives include ensuring that all staff are provided
with equal opportunities and that the workplace is free of
discrimination. The Group aims to ensure that all recruitment
processes are fair and are carried out objectively, systematically
and in line with the requirements of employment law.
The Group ensures that all staff are aware that it is not acceptable
to discriminate, harass or victimise anyone, and also that it is
unlawful and that such behaviour will not be tolerated under any
circumstance.
The Group believes that valuing what is unique about individuals
and drawing on their different perspectives and experience will
add value to the way the Group does business. By accessing,
recruiting and developing talent from a diverse pool of candidates,
the Group can gain an insight into different markets and better
support client needs. The Group aims to create a productive
environment, representative of different cultures and groups,
where everyone has an equal chance to succeed.
The gender diversity within the Group is shown below:
As at 31 March 2019
Female
Male
Board Directors
Senior management
Other staff
All employees
3
3
24
30
38%
17%
41%
36%
5
15
34
54
62%
83%
59%
64%
The Group’s annual emissions1 (before offset) have been calculated
using the WRI/WBCSD Greenhouse Gas Protocol. Scope 2
emissions principally relate to electricity and heat and Scope 3
emissions principally relate to travel. Scope 3 emissions accounted
for 87% of emissions (2018: 86%).
Gross CO2 emissions (Tonnes)
FY-19
47
FY-18
58
FY-17
67
316
348
366
Scope 2
Scope 3
Gross CO2 emissions by activity (Tonnes)
FY-19
FY-18
FY-17
123
120
138
Commuting
Business
travel
184
218
215
Other
54
68
79
Gross CO2 emissions per head (Tonnes)
FY-19
FY-18
FY-17
4.4
5.3
6.7
The Company’s Strategic report is set out on pages
from IFC to 35 of the Annual Report, and is comprised
of the Introduction, Strategy and Business review, Risk
management and Corporate Social Responsibility report.
The Strategic report outlines our performance against our
strategic objectives, performance and financial position, as
well as our outlook for the future.
The Strategic report was approved by the Board on
12 June 2019 and signed on its behalf by:
James Wood-Collins
Chief Executive Officer
1. Gross emissions data relates to the calendar year preceding the given financial year.
35
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information Chairman’s introduction
Board of Directors
Corporate governance report
Nomination Committee report
Audit and Risk Committee report
Remuneration report
Directors’ report
Directors’ responsibilities statement
37
38
40
46
49
53
66
69
Compliance statement
The Company complied with the provisions of the
UK Corporate Governance Code published in April 2016, which
applied throughout the financial year ended 31 March 2019.
36
Record plc Annual Report 2019Corporate governance CHAIRMAN’S INTRODUCTION
I am pleased to introduce our corporate governance report in
which we describe the governance arrangements in place, the
operation of the Board and its Committees and how the Board
has discharged its responsibilities during the year.
I can confirm that the Board has continued to work closely with
the Group’s highly experienced management team to maintain its
strong governance framework which effectively supports Record’s
operational teams in delivering a high-quality range of products
and services. As a Board we have always believed that the
long-term growth and success of the Record Group is driven by
our focus on culture, setting the tone from the top and
establishing robust corporate governance practices.
I am confident that the Group’s current governance arrangements
are both appropriate and highly effective and that going forward
the Group will continue to embrace regulatory, governance and
best practice changes in its drive to best serve its stakeholders –
clients, shareholders, employees, suppliers, regulators and
wider society.
I would like to thank all my colleagues on the Board and our
senior management team for their continued commitment,
enthusiasm and contribution during the year.
Neil Record
Chairman
12 June 2019
Board overview
The Board is responsible for the stewardship of the Company. Further information
on the corporate governance framework is provided on pages 40 to 43.
BOARD
BOARD COMMITTEES
NOMINATION
REMUNERATION
AUDIT AND RISK
OPERATIONAL COMMITTEES
EXECUTIVE
INVESTMENT
RISK MANAGEMENT
37
Record plc Annual Report 2019GovernanceStrategic reportGovernanceFinancial statementsAdditional information The Board continues to work hard to uphold Record’s values of
diligence, transparency, accountability and probity, and to sustain
them within the Group’s culture.
Neil Record
Chairman
N
James Wood‑Collins
Chief Executive Officer
Neil founded Record in 1983 and has been its
principal shareholder and Chairman since then.
Prior to founding Record he was an economist
at the Bank of England and worked in the
commodity and currency trading department at
Mars Inc’s UK subsidiary. He is the author of
numerous books and articles on currency and
other risk management topics and is a frequent
speaker at industry conferences and seminars
worldwide.
As founder of the business Neil remains integral
to the development of Record’s products and the
direction of business strategy. As chairman he is a
strong figurehead, well-known and well-respected
within the field of currency management and as
such is an asset to the Board.
James joined Record in 2008 as a senior member
of the Client Team. He was appointed as Chief
Executive Officer in October 2010. He was
previously at J.P. Morgan Cazenove where he
had been a Managing Director advising financial
institutions on M&A, IPOs and related corporate
finance transactions.
James’s extensive experience of the corporate
finance sector means he is well placed to be
influential in driving the strategy of the business
forward. With over 10 years’ service at Record he
has thorough knowledge of the business and its
operational processes, allowing him to take an
active role in both Board activities and the
day-to-day leadership of the business.
Jane Tufnell
Senior Independent Director
A N R*
Jane was appointed as a Non-executive
Director in September 2015. Jane co-founded
the investment management firm Ruffer in 1994,
and served on its management board until her
retirement in June 2014. She is the senior
independent director of The Diverse Income Trust
plc, chair of Odyssean Investment Trust plc, and
is an independent non-executive director of both
JPMorgan Claverhouse Investment Trust plc and
ICG Enterprise Trust plc.
Jane has a wealth of investment management
expertise and her experience as a non-executive
director on other boards means she is well placed
to bring valuable market experience and good
business insight to the Board in order to drive the
business forward. Jane’s experience on other
boards also positions her well to serve as Senior
Independent Director.
A Audit and Risk Committee
N Nomination Committee
R Remuneration Committee
* Chair
38
Gender diversity
As at year end and as at the
date of report
MALE
62%
FEMALE
38%
Board tenure
As at year end
≤ 3 yrs
25%
> 3 yrs
≤ 6 yrs
13%
> 6 yrs
62%
BOARD OF DIRECTORSRecord plc Annual Report 2019Governance Steve Cullen
Chief Financial Officer
Rosemary Hilary
Non-executive Director
*
A N R
Tim Edwards
Non-executive Director
A N R *
Steve qualified as a Chartered Accountant in
1994 and gained 15 years of audit experience
within public practice. He joined Record in
October 2003, and led Record’s Finance team
for over nine years reporting directly to the Chief
Financial Officer, and was part of the internal
management team at Record involved in the
preparation for admission to trading on the
London Stock Exchange in December 2007.
Steve was appointed to the Board and made
Chief Financial Officer in March 2013.
With his FCA qualification and over 30 years’
experience, including over 15 years within
financial services, Steve brings considerable
accounting, financial and risk management
expertise to the Board.
Rosemary was appointed as a Non-executive
Director in June 2016. She was previously Chief
Audit Officer of TSB Bank, and has held senior
regulatory roles within the Bank of England,
the FSA and then the FCA. She is also a
non-executive director of Willis, the global broker,
Vitality Life and Vitality Health. She is also a
member of the MBA Advisory Board at Cass
Business School.
Rosemary is a qualified accountant with expertise
in governance, business risk and control, and has
strong knowledge of the asset management,
insurance and banking sectors. She provides
support and challenge to Record’s management,
and in doing so helps the Board maintain its
strong governance framework.
Tim Edwards is a biotech entrepreneur, who is
currently chair of both Karus Therapeutics Limited
and Storm Therapeutics Limited, and a director of
Ervaxx Limited. Previously, he was a member of
the governing Board of InnovateUK, the UK’s
innovation agency, a director of the Cell and
Gene Therapy Catapult and Chair of the UK
BioIndustry Association. He was appointed
as a non-executive director of Record on
21 March 2018.
Tim is a Chartered Accountant with a background
in corporate finance and venture investing, and he
has extensive corporate development and people
management experience. Tim adds insight to
Board discussions ensuring that the Board
continues to focus on mid- to long-term value
development.
Leslie Hill
Head of Client Team
Bob Noyen
Chief Investment Officer
Leslie joined Record in 1992 and was appointed
Head of Sales and Marketing in 1999. Her
extensive prior experience includes working at
Lloyds Bank and Merrill Lynch where she was
Director and Head of Corporate Foreign
Exchange Sales worldwide.
Bob joined Record in 1999 with responsibility
for Investment and Research. He chairs Record’s
Investment Committee and the Investment
Management Group. He previously worked as
Assistant Treasurer for Minorco (part of Anglo
American plc).
Having worked at Record for 27 years Leslie has
a deep understanding of Record’s products and
the needs of clients. As Head of the Client Team
she drives the client-focused culture of the
business and is instrumental in maintaining
existing and developing new client relationships,
as well as developing and mentoring her team.
She is therefore very well-placed to provide a
client perspective during Board discussions.
Bob has extensive knowledge of currency and
other markets and he plays a key role in the
development of Record’s products, ensuring
products evolve to meet the ever-changing needs
of clients. Bob therefore brings a product focus to
Board deliberations. He is also closely involved in
some of Record’s most significant client
relationships.
39
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information CORPORATE GOVERNANCE REPORT
Corporate culture
Since the business was first established in 1983, Record has
endeavoured to put the interests and needs of our clients first
and this cultural belief is encouraged and deeply embedded within
all business functions. The Board has worked hard to ensure that
the importance of client focus through diligence, transparency,
accountability and probity has been disseminated to all staff,
contractors and consultants across the Group.
The UK Corporate Governance Code
The Board has adopted the principles established in the UK
Corporate Governance Code April 2016 and its previous versions
(all referred to as “the Code”) since its Admission to the Official List
of the UK Listing Authority in December 2007. Copies of the Code
can be obtained from the FRC’s website at www.frc.org.uk. Listed
companies are required under the Financial Conduct Authority
Listing Rules either to comply with the provisions of the Code or
explain to investors in their next annual report why they have not
done so.
As a non-FTSE 350 company, Record plc is classed as a smaller
company under the Code. The Group has been in compliance
with the Code through the year ended 31 March 2019, except
in particular limited circumstances where the provisions apply
specifically to FTSE 350 companies:
• the Board does not comprise a majority of independent
non-executive directors on an ongoing basis (B.1.2.);
• the annual Board performance evaluation is not externally
facilitated (B.6.2.); and
• Directors have not been re-appointed on an annual basis
(B.7.2.), although they will all stand for reappointment at the
2019 AGM, and on an annual basis thereafter.
In all such instances Record plc has reviewed the appropriateness
of the provisions to determine whether they should be applied or
if departure is justified. The Board is satisfied that these decisions
are in the best interests of the business and are not detrimental to
the high standards of corporate governance it has established for
the Group.
The departures from the Code are fully explained in the
following narrative.
The latest version of the UK Corporate Governance Code was
published in July 2018 and the new Code applies to accounting
periods beginning on or after 1 January 2019. The new Code will
apply to Record with effect from 1 April 2019, and going forward
Record will adopt the principles set out in the latest Code as
deemed appropriate given the size and structure of the business.
Corporate governance framework
The Board has established a framework of committees and
sub-committees to ensure robust corporate governance practices
throughout the business. The Board is confident that this structure
is appropriate and that the delegation of responsibilities allows the
business to operate in a structured manner and to respond rapidly
when issues arise.
The diagram on page 37 gives an overview of the Group’s core
governance framework.
Further details of these committees are provided below.
The Board of Directors
Board responsibilities
The Board has a schedule of matters specifically reserved for its
decision and approval, which includes but is not limited to:
• determining the Group’s long-term strategy and objectives;
• authorising significant capital expenditure;
• approving the Group’s annual and interim reports and
preliminary announcements;
• the setting of interim and special dividends and recommendation
of final dividend payments;
• ensuring the effectiveness of internal controls;
• the authorisation of Directors’ conflicts or possible conflicts
of interest; and
• communication with shareholders and the stock market.
Board membership
The Board is headed by Neil Record (Chairman), with the
Executive Directors, James Wood-Collins (Chief Executive Officer),
Steve Cullen (Chief Financial Officer), Bob Noyen (Chief Investment
Officer) and Leslie Hill (Head of Client Team). There are currently
three Non-executive Directors, Jane Tufnell, being the Senior
Independent Director, Rosemary Hilary and Tim Edwards.
The biographical details of the Board members are set out
on pages 38 and 39.
David Morrison resigned as a Non-executive Director effective
30 September 2018 having served on the Board for nine years.
There have been no new appointments to the Board since the
appointment of Tim Edwards in March 2018.
On an ongoing basis at least half the Board members have not
been independent Non-executive Directors as required by the
Code for FTSE 350 companies but the Board does comply with
the Code’s provision for smaller companies to have at least two
independent Non-executive Directors. The Board considers that
the existing composition is appropriate given the current size and
structure of the business.
All Directors have access to independent professional advice,
when required, at the Company’s expense as well as to the advice
and services of the Company Secretary.
The division of responsibilities between Chairman and Chief
Executive Officer is clearly established, set out in writing and
agreed by the Board.
40
Record plc Annual Report 2019Governance Under the UK Corporate Governance Code July 2018, all directors
should be subject to annual election by shareholders.
The Board has reviewed the recommendations of the Code and
the provisions in the Articles and has determined that annual
re-election of all directors is appropriate, and accordingly all eight
Board Directors will stand for re-election at the 2019 AGM.
Non-executive Directors’ letters of appointment stipulate that they
are expected to commit sufficient time to discharge their duties.
Non-executive Directors are required to notify the Chairman before
taking on any additional appointments. Details of other roles held
by the Non-executives are set out in their biographies on pages 38
and 39. The Board is satisfied that all Directors continue to be
effective and demonstrate commitment to their respective roles.
The Executive Directors are employed on a full-time basis and do
not have any other significant commitments outside of the Record
Group. Neil Record, as Non-executive Chairman, works on a
part-time basis.
For details of Executive Directors’ service contracts, termination
arrangements and Non-executive Directors’ letters of appointment,
please refer to the Remuneration Report, page 57.
Board member diversity
The Board has approved a policy for ensuring Board member
diversity and has delegated the responsibility for addressing Board
diversity to the Nomination Committee. The Nomination Committee
reviews Board composition in the context of diversity and reports
its recommendations to the Board to ensure diversity is achieved.
The Board acknowledges the importance of diversity in its broadest
sense in the boardroom as a driver of board effectiveness. Diversity
encompasses diversity of perspective, experience, background,
psychological type and personal attributes. The Board recognises
that gender diversity is a significant aspect of diversity and
acknowledges the role that women with the right skills and
experience can play in contributing to diversity of perspective in
the boardroom. The Group’s Board Diversity Policy sets out that
the Board will endeavour to ensure that the minority gender on the
Board represents at least one-third of the Board.
The Board currently has three female members in a board of
eight and thus women make up 38% of the Board. The Board’s
opinion is that the current composition of members comprises a
good mixture of skills, experience, knowledge and backgrounds
and is therefore appropriate for the business at the present time.
Future executive director succession planning will take into account
the benefits of diversity including gender diversity as set out in the
Group’s Board Diversity Policy. Diversity in the workplace is detailed
on page 35.
Chairman
The Chairman is responsible for leadership of the Board.
He is also responsible for overseeing the activities of the
Chief Executive Officer and providing advice, guidance and
support to the Executive Team. He works with the Board to
develop Company strategy and support its implementation.
The Chairman is a principal ambassador of Record and a
guardian of the Group’s ethos and values.
Chief Executive Officer
The Chief Executive Officer is responsible for the executive
management of the Group to grow the business profitably
while acting in the interests of all stakeholders – clients,
shareholders, employees and industry regulators and
upholding the core values of Record.
Senior Independent Director
The Senior Independent Director’s role is to act as a
sounding board for the Chairman, oversee the evaluation
of the Chairman’s performance (see page 42) and serve as
an intermediary for the other Directors if necessary. She is
also available as an additional point of contact for
shareholders and other stakeholders should they wish to
raise matters with her rather than the Chairman or the Chief
Executive Officer.
Non-executive Directors
The Non-executive Directors are responsible for upholding
high standards of integrity and probity; providing constructive
challenge and helping to develop proposals on strategy.
Independence of the Non-executive Directors
In determining the independence of Non-executive Directors, the
Board has taken into consideration the guidance provided by the
Code. The Board considers Jane Tufnell, Rosemary Hilary and
Tim Edwards to be independent at the current time. Neil Record is
a Non-executive Chairman, although he is not considered to be
independent.
Director appointments and time commitment
The rules providing for the appointment, election, re-election and
the removal of Directors are contained in the Company’s Articles of
Association, these remain unchanged from the previous year and
are made available for inspection by the Company’s shareholders
at each AGM. The Company’s Articles of Association may be
amended by special resolution of the shareholders.
Under the Company’s Articles of Association, the minimum number
of Directors shall be two and the maximum shall be twelve.
Directors appointed by the Board must offer themselves for election
at the next Annual General Meeting of the Company following their
appointment but they are not taken into account in determining the
Directors or the number of Directors who are to retire by rotation
and stand for re-election at that meeting. The minimum number of
Directors who should retire by rotation is one third.
41
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information CORPORATE GOVERNANCE REPORT CONTINUED
The Board of Directors continued
Board meetings
The Board met six times between 1 April 2018 and 31 March 2019
to review financial performance and to follow the schedule of
matters reserved for its decision and approval. Comprehensive
Board papers, comprising an agenda and formal reports and
briefing documents are sent to Directors in advance of each
meeting. Directors are regularly informed by senior executives and
external advisers on the Group’s affairs, including commercial,
regulatory, legal, corporate governance and other relevant matters.
Appropriate and timely notice is given of all Board meetings and
all Directors receive information in advance so that if they are
unable to attend their input can be tabled and taken into
consideration. The Board has twice-yearly offsite strategy
meetings and additional meetings as required to address
specific issues. Any concerns raised by Directors which are not
resolved are recorded in the Board minutes. No such matters
were noted during the year ended 31 March 2019.
Board meeting and Committee meeting attendance
Directors are expected to attend all meetings of the Board and Committees on which they serve. Details of Board and Committee
attendance are included in the table below.
Board/Committee member
Board
Audit and Risk Committee
Remuneration Committee
Nomination Committee
Meetings in the year
Neil Record
David Morrison
Jane Tufnell
Rosemary Hilary
Tim Edwards
James Wood-Collins
Steve Cullen
Leslie Hill
Bob Noyen
6
6/6
2/3
6/6
6/6
6/6
6/6
6/6
3/6
6/6
6
n/a
3/3
6/6
5/6
6/6
n/a
n/a
n/a
n/a
7
n/a
4/4
7/7
7/7
7/7
n/a
n/a
n/a
n/a
4
3/4
3/3
4/4
4/4
3/4
n/a
n/a
n/a
n/a
David Morrison attended meetings up to his resignation, effective 30 September 2018, although he was unable to attend the Board
meeting held in June 2018 due to a prior commitment.
Leslie Hill was unable to attend the Board meetings held in July 2018 and November 2018 due to prior commitments and unable to
attend the Board meeting held in September 2018 due to a client visit.
Rosemary Hilary was unable to attend the Audit and Risk Committee meeting held in January 2019 due to a prior commitment.
Neil Record was unable to attend the Nomination Committee meeting held in May 2018 due to a prior commitment.
Tim Edwards was unable to attend the Nomination Committee meeting held in July 2018 due to a prior commitment.
Each Director unable to attend a meeting gave their apologies in advance.
The Non-executive Directors met without the Executive Directors on several occasions throughout the year, prior to scheduled meetings.
Board induction and training
New Directors appointed to the Board receive advice as to the
legal obligations arising from the role of a director of a UK-listed
company as part of a tailored induction programme. This training
includes briefings with the Chairman, Executive Directors and
senior management to help new directors to familiarise
themselves with their duties and the Group’s culture and values,
strategy, business model, businesses, operations, risks and
governance arrangements.
The Company Secretary, under the direction of the Chairman,
is responsible for maintaining an adequate continuing education
programme, reminding the Directors of their duties and obligations
on a regular basis, ensuring good information flow between the
Board, its committees and management and assisting with
Directors’ continuing professional development needs.
Board performance evaluation
The Board is required by the Code to undertake an annual
evaluation of its performance. The Code states that “evaluation
of the board should consider the balance of skills, experience,
independence and knowledge of the company on the board,
its diversity, including gender, how the board works together
as a unit, and other factors relevant to its effectiveness”.
The Code recommends that evaluation of the board of FTSE 350
companies should be externally facilitated at least every three
years. The Board agreed that an external evaluation of performance
was not necessary at the current time and delegated responsibility
for the review to Jane Tufnell, Senior Independent Director and
Chair of the Nomination Committee. Jane held individual meetings
with all the Board members to canvas opinions. The comments
made during these meetings were recorded and collated into a
report which documented the observations made and assessed
the activities and achievements of the Board and its committees
during the period under review. Members were also invited to
separately approach the Chairman or Company Secretary with
any individual concerns or comments they had. No concerns
were raised directly to the Chairman or the Company Secretary.
42
Record plc Annual Report 2019Governance
As in previous evaluations, the review of the comments made
during the evaluation process identified no serious concerns over
the functioning of the Board, its members or its Committees.
Individual appraisal of each Director’s performance is undertaken
by the Chief Executive Officer and the Chairman. The Senior
Independent Director conducts an annual appraisal of the
performance of the Chairman with input from the other Board
members. The outcome of these appraisals in 2019 was positive
and all roles were considered to be undertaken effectively.
Board committees
The Board has established three Board committees and delegated
authority to each committee to enable it to execute its duties
appropriately. The annual reports of the three committees provide
a statement of each committee’s activities in the year:
• Nomination Committee – report set out on pages 46 to 48;
• Audit and Risk Committee – report set out on pages 49 to 52;
and
• Remuneration Committee – report set out on pages 53 to 65.
The committees operate on written terms of reference, which are
reviewed annually and which are available on the Company’s
website or on request from the Company Secretary at the
registered office address. The Chair of each Committee reports
regularly to the Board.
The work undertaken by the Nomination, Audit and Risk and
Remuneration Committees was reviewed by the respective
Committee Chair to assess each committee’s effectiveness
during the year. The reviews concluded that the committees were
operating in an effective manner and no concerns were raised
and these conclusions were reported to the Board accordingly.
Operational committees
The Board has also established three committees responsible
for operational oversight and decision making as follows:
Executive Committee
The Executive Committee is the decision-making body for all
day-to-day operations as delegated from the Board and Record plc’s
subsidiaries. The Committee comprises the Chief Executive Officer
as chair, the three other Executive Directors, the Chief Operating
Officer, a Managing Director and the Head of Human Resources.
The Committee meets formally once a month and holds weekly
operational update meetings. Standing agenda review items for
formal meetings include clients and client prospects, the
management accounts, departmental KPI data, compliance issues,
systems development, projects and resourcing. Operational policy
documents are regularly reviewed by the Committee prior to formal
approval by the Board or the appropriate Board Committee. The
Head of Compliance and Risk is a regular attendee of meetings
(attending nine out of twelve meetings in the year under review).
Minutes of all meetings are circulated to the Board for review
and comment.
Investment Committee
The Board has delegated the responsibility for authorising changes
to existing investment processes and for approving new investment
strategies to the Investment Committee. The Committee consists of
the Chief Investment Officer, the Chief Executive Officer, the Head
of Client Team, the Group Chairman, the Head of Portfolio
Management, and the Head of Investment Strategy. The
Committee meets as necessary responding both to internal
developments and external events. Reports on the activities of the
Committee are presented at each formal Board meeting for review
and comment.
Risk Management Committee
The Audit and Risk Committee has delegated to the Risk
Management Committee the task of overseeing and mitigating
risks arising across the activities of Record Currency Management
Limited, the regulated entity within the Group. The Chief Operating
Officer, the Chief Financial Officer, the Chief Technology Officer, the
Head of Operations, the Head of Portfolio Management, the Head
of Portfolio Implementation, the Head of Trading, the Head of
Compliance and Risk and the Head of Front Office Risk
Management are all members of the Committee. The Committee
meets at least once a month and as necessary in response to
individual or specific events requiring review. The minutes of
meetings are circulated to the Audit and Risk Committee and a
report on the Risk Management Committee’s activities is presented
by the Chief Operating Officer, as the Committee Chair, at each
Audit and Risk Committee meeting.
Internal control and risk management
The Board has overall responsibility for the Group’s systems of
internal control and the management of significant risks. The Board
sets appropriate policies on internal control which are reviewed
annually, and authority is delegated to the following committees
and senior personnel to implement and apply those policies:
• the Executive Committee;
• the Audit and Risk Committee;
• the Investment Committee; and
• the Risk Management Committee.
The Board seeks ongoing assurance from these Committees
and senior management about the effectiveness of the internal
controls, which include operational and compliance controls,
risk management and the Group’s high-level internal control
arrangements. Such a system of internal controls is designed to
manage, rather than eliminate, risk of failure to meet business
objectives and can only provide reasonable and not absolute
assurance against material misstatements or loss.
Further information on the Group’s risk management framework is
provided on pages 30 and 31 of the Strategic report.
The Audit and Risk Committee has undertaken a review of the
effectiveness of internal controls for the year ended 31 March 2019
and is satisfied that the internal control environment is appropriate
(see “Internal controls and risk management” on page 51).
43
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information CORPORATE GOVERNANCE REPORT CONTINUED
Directors’ duties – compliance with s172 of the Companies Act 2006
Section 172 of the Companies Act 2006 requires directors to promote the success of the company for the benefit of the members
as a whole and in doing so to have regard to the interests of stakeholders including clients, employees, suppliers, regulators and the
wider society in which it operates.
The table below sets out how Record has engaged with its key stakeholders and how the Board and the business has considered
their interests.
Clients
Clients are the central focus of Record’s business. The Group’s
resilience and ongoing success is built upon the ability to
understand clients’ evolving needs and respond to them
accordingly.
• The Group’s operational infrastructure is built around the
specific requirements of our clients, including systems and
controls to reduce risk and manage each stage of the process
as efficiently as possible.
Shareholders
Record relies on the support and engagement of its shareholders
to deliver its strategic objectives and grow the business.
People
Record’s people are central to the ongoing success of the
business and the Group aims to attract, retain, develop and
motivate the right people for current and future business needs.
• The Client Team builds lasting relationships with current and
potential clients to develop a clear view of client objectives
and how these will evolve.
• Regular review meetings with clients ensure client
requirements are consistently monitored.
• The Board considered the full-year and half-year results.
Both the Group Chief Executive and Chief Financial Officer
presented them to major investors.
• Outside of results presentations, meetings are held with
investors as and when requested.
• The primary means of communicating with shareholders is
through the Annual General Meeting, the Annual Report and
Accounts, half-year results and related presentations. All of
these are available on the Company’s website and the Interim
Report and Annual Report and Accounts are posted to all
shareholders. The Group’s website also contains information
on the business of the Company, corporate governance, all
regulatory announcements, key dates in the financial calendar
and other important shareholder information.
• Record engages with its employees through a variety of
channels including a company intranet, management briefings,
email updates and presentations by the Group Chief Executive
to discuss progress made by the business, together with
future objectives and challenges.
•
In 2018 Record conducted an employee opinion survey to
assess staff sentiment and the Executive Committee and the
Board discussed the results and agreed an action plan to
address the issues raised.
• The Group seeks to encourage employees in developing their
careers, offering assistance in such forms as study support
and the possibility of secondments to overseas branches.
44
Record plc Annual Report 2019Governance Society
Record recognises the responsibility it has to the local
community, wider society and the environment.
• Record aims for high standards of governance across
the Group.
• We are proud to support the communities in which we operate
and have a long history of contributing through monetary
donations, gift giving and employee time.
• External expertise and sector experience is used to enhance
the processes and controls across Record’s suite of products
and services, for example PwC’s service auditor report
(ISAE 3402) on internal controls and Record’s relationship
with Deloitte as internal auditor.
• A close working relationship with suppliers helps to maintain
the highest quality of products and services procured in a
cost-efficient manner.
• Record engages with regulators and policymakers as
appropriate to ensure that our business understands and
contributes to evolving regulatory requirements.
• The Audit and Risk Committee receives regular reports from
the Head of Compliance and Risk which cover the Group’s
regulatory processes and procedures and its relationship with
regulators. The reports also outline the material changes in the
regulatory environment in which the Group operates. In
2018/19, these included the Group’s implementation of
GDPR, MiFID II and the possible impacts of Brexit.
External Suppliers
Record relies on the use of external suppliers to supplement the
Group’s own infrastructure benefiting from the expertise these
suppliers provide.
Regulators
As a global business, Record seeks to have transparent
and open relationships with its regulators around the world.
Regulators provide key oversight of how the business is run
thereby offering comfort to our clients.
Approved by the Board and signed on its behalf by:
Joanne Manning
Company Secretary
12 June 2019
45
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information NOMINATION COMMITTEE REPORT
Jane Tufnell
Chair of the Nomination Committee
46
Role of the Committee
The Committee serves both Record plc and the Group’s FCA
regulated entity, Record Currency Management Limited. The
Boards of the two companies are identical to facilitate full regulatory
oversight and common corporate governance practices.
References to the “Board” refer to the Boards of both Record plc
and Record Currency Management Limited.
The Nomination Committee is responsible for reviewing the
composition of the Board, the Audit and Risk Committee, the
Remuneration Committee and the Nomination Committee and
for making recommendations to the Board as necessary.
Committee duties
Under its terms of reference the Committee is tasked with the
following:
• reviewing the structure, size and composition of the Board and
making recommendations to the Board as necessary with
respect to the role, capabilities and expected time commitment
required for each appointment;
• giving full consideration to succession planning for Directors
and other senior executives in the course of its work, taking into
account the challenges and opportunities facing the Group and
the skills and expertise needed on the Board in the future;
• keeping under review the leadership needs of the Group, both
executive and non-executive, with a view to ensuring the
Group’s continued ability to compete effectively in the
marketplace;
•
identifying and nominating for the Board’s approval, candidates
to fill Board vacancies as and when they arise;
• reviewing annually the time commitment required from
non-executive Directors;
• preparing, and regularly reviewing, job specifications for the
Chairman and Chief Executive Officer, including the time
commitment expected;
• preparing, and regularly reviewing, a policy on Board diversity,
including gender, and determining measurable policy objectives
as deemed appropriate;
• overseeing Significant Influence Function competency reviews
as required by the FCA and conducted by the CEO and
Chairman on an annual basis;
• reviewing the re-appointment of any Non-executive Director
at the conclusion of their specified term of office; and
• reviewing the membership of the Audit and Risk and
Remuneration Committees, in consultation with the relevant
Committee Chairman.
The full terms of reference of the Committee comply with the UK
Corporate Governance Code (“the Code”) and are available on the
Group’s website or from the Company Secretary at the registered
office address.
Record plc Annual Report 2019Governance Membership of the Committee
The Committee has been chaired by Jane Tufnell since
September 2016. Jane is supported by the other independent
Directors, Rosemary Hilary and Tim Edwards and the Group
Chairman, Neil Record. David Morrison served on the Committee
until his resignation as a Non-executive Director, effective
30 September 2018.
Committee meetings
The Committee met on four occasions during the year ended
31 March 2019 and invited the Chief Executive Officer, Company
Secretary and the Head of Human Resources to join the meetings
as the Committee considered appropriate. Committee member
meeting attendance is detailed on page 42.
The Chair of the Nomination Committee reported regularly to the
Board on the Committee’s activities, identifying any matters where
any action was deemed to be required and recommendations as
considered appropriate.
Key Committee activities
Board diversity and membership
The Group’s Board Diversity Policy was last reviewed by the
Committee in November 2018. The Committee agreed the policy
remained appropriate. The Committee has also acknowledged that
future executive director succession planning should embrace the
benefits of diversity, including gender diversity, to ensure that any
individual selected will add to the Board’s mix of perspective,
experience, background and personal attributes.
The Committee is satisfied that the current composition of the
Board remains appropriate and meets the gender target set in
the Group’s Board Diversity Policy.
Time commitment required for Non-executive Directors
In May 2019 the Committee reviewed the roles undertaken by the
Non-executive Directors and the time necessary to undertake the
tasks required. The Committee noted that formal Board meetings
and sub-committee meetings are well attended by the
Non-executive Directors and that they are also willing to devote
the time necessary to address ad hoc issues outside scheduled
meetings to allow prompt decisions to be made. The Committee
agreed that the number of meetings is sufficient to address all
issues arising and is not excessive. The Committee therefore
agreed that the time commitment required of Non-executive
Directors is consistent with the nature and size of the business.
Review of the roles of Chairman and Chief Executive Officer
In July 2018 the Committee reviewed the job descriptions for the
Group Chairman and Chief Executive Officer in respect of their roles
for both Record plc and Record Currency Management Limited
previously approved by the Committee in 2017. The Committee
agreed that the job descriptions remained fit for purpose and
approved them accordingly. The Committee also acknowledged
that Neil Record, Group Chairman and James Wood-Collins,
Chief Executive Officer were performing their respective roles in
accordance with these job descriptions. The job descriptions for
the Group Chairman and the Chief Executive Officer will continue to
be reviewed against the roles being performed on an annual basis.
Significant Influence Function (“SIF”) competency reviews
In September 2018 the Committee considered the competency
review documents for 2018 completed in respect of the following
individuals who hold significant influence function roles as defined
by the FCA:
• James Wood-Collins, Chief Executive Officer
• Leslie Hill, Head of Client Team
• Bob Noyen, Chief Investment Officer
• Steve Cullen, Chief Financial Officer
• Joel Sleigh, Chief Operating Officer
• Dmitri Tikhonov, Managing Director
• Grady Laurie, Head of Compliance and Risk
• Kevin Ayles, Head of Human Resources
The Committee acknowledged it was content with the SIF
competency assessments made and that it had no concerns
regarding the performance of any of the individuals reviewed.
Extension of the appointment term for Jane Tufnell
In September 2018 the Committee reviewed the extension of the
appointment term for Jane Tufnell as a Non-executive Director
following its expiry after the initial three year term, Jane having
been appointed in September 2015. Jane was not present for
this review. It was agreed that it was in the interest of both
Record plc and Record Currency Management Limited that
Jane be re-appointed on the same terms for a further period
of three years, which may be extended further at the sole and
absolute discretion of Record plc and Record Currency
Management Limited. A recommendation was put to
the Board accordingly and unanimously approved.
47
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information NOMINATION COMMITTEE REPORT CONTINUED
Key Committee activities continued
Board Committee Chairs
Given David Morrison’s resignation in September 2018 the
Committee considered who should chair each of the Board
committees, effective 1 October 2018. The Committee agreed
that, given his knowledge and experience, it would be appropriate
for Tim Edwards to assume the role of Chair of the Remuneration
Committee. The Committee also agreed that Rosemary Hilary
continues to chair the Audit and Risk Committee and that Jane
Tufnell continues to chair the Nomination Committee and both
expressed their willingness to remain in these roles. Jane Tufnell put
a recommendation to the Board accordingly and the Board gave its
approval to the proposed Committee Chairs.
Committee evaluation
An internal review of Committee effectiveness was overseen by the
Chair of the Committee in May 2019. The conclusion was that the
Committee had been effective in carrying out its duties.
Annual General Meeting
The Committee has agreed that all Directors standing for re-election
continue to make a valuable contribution to the Board’s deliberations
and recommends their re-election. As required by the UK Listing
Rules, the appointment of independent Directors must be approved
by a simple majority of all shareholders and by a simple majority of
the independent shareholders. Further details are set out in the
2019 Notice of AGM.
The Chair of the Nomination Committee will be available to answer
any questions relating to the Committee and its activities at the AGM.
Looking forward
As well as considering its standing items of business, the
Committee will continue to consider the required skillset for the
Board going forward and will consider the appointment of suitable
external candidates should they present themselves.
Approved by the Committee and signed on its behalf by:
Jane Tufnell
Chair of the Nomination Committee
12 June 2019
48
Record plc Annual Report 2019Governance AUDIT AND RISK COMMITTEE REPORT
Rosemary Hilary
Chair of the Audit and Risk Committee
Role of the Committee
The role of the Audit and Risk Committee is to encourage and
safeguard a high standard of integrity in financial reporting, risk
management and internal controls for the Group, having regard to
laws and regulations applicable to the Group and the provisions of
the UK Corporate Governance Code.
The Committee serves both Record plc and the Group’s FCA
regulated entity, Record Currency Management Limited. The
Boards of the two companies are identical to facilitate full regulatory
oversight and common corporate governance practices.
References to the “Board” refer to the Boards of both Record plc
and Record Currency Management Limited.
Committee duties
Under its terms of reference the Committee is tasked with the
following:
• monitoring the integrity of the Group’s financial statements and
any other formal announcements relating to the Group’s
performance;
• overseeing whistleblowing arrangements by which staff may
raise concerns about possible improprieties in financial reporting
or other matters;
• reviewing the Group’s internal control and risk management
procedures;
• reviewing the operational conflicts of interest framework and
making recommendations to the Board and Management as
appropriate;
• monitoring and reviewing the effectiveness of the Group’s
internal audit function;
• making recommendations relating to the appointment,
re-appointment and removal of the external auditor;
• approving the remuneration and terms of engagement of
the external auditor;
• reviewing and monitoring the independence and objectivity
of the external auditor, and reviewing the effectiveness of the
audit process; and
• overseeing the provision of any non-audit services by the
external auditor.
The full terms of reference of the Committee comply with the UK
Corporate Governance Code (“the Code”) and are available on the
Group’s website or from the Company Secretary at the registered
office address.
49
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information AUDIT AND RISK COMMITTEE REPORT CONTINUED
Membership of the Committee
The Committee has been chaired by Rosemary Hilary since
September 2016. Rosemary is supported by the other independent
Directors: Jane Tufnell and Tim Edwards. David Morrison served on
the Committee until his resignation as a Non-executive Director,
effective 30 September 2018.
Given her accounting and regulatory background the Board
considers that Rosemary is the most appropriate independent
Director for the role of Audit and Risk Committee Chair and this
view is supported by the other members of the Committee.
The Board is satisfied that by virtue of their previous experience
gained in other organisations, the Committee members collectively
have competence relevant to the sector in which the Group
operates. The biographical details of the Committee members are
set out on pages 38 and 39.
The composition of the Committee complies with the Code
provision for smaller companies requiring at least two independent
Non-executive Directors throughout the year. However, Record has
confirmed with the FCA that it will have at least three independent
Non-executive Directors serving on the Committee at all times and
the Committee membership has always satisfied this undertaking.
Committee meetings
The Committee met six times during the year ending 31 March 2019,
being four quarterly meetings plus two additional meetings ahead
of results announcements. All meetings were also attended by the
Chief Executive Officer, the Head of Compliance and Risk, the Chief
Financial Officer and the Chief Operating Officer. Representatives of
the internal auditor were present at five of the meetings and the
external audit partner and external audit director attended a total of
five meetings. Two further meetings have been held since the year
end. Committee member meeting attendance is detailed on
page 42.
The Committee also separately met the Group’s external auditor
and the internal auditor after each meeting at which they were
present, providing an opportunity for them privately and in
confidence to raise matters of concern. No significant issues were
raised in these meetings.
The Committee discharged its responsibilities under the terms of
reference by the following actions:
• reviewing the form, content and integrity of financial information
prior to release, including the Annual and Interim Reports, and
each of the Interim Management Statements;
• reviewing the adequacy and effectiveness of the Group’s internal
controls and risk management systems;
• considering the Risk Appetite statement and Pillar 3 disclosures
prior to their recommendation for acceptance by the Board;
• receiving and reviewing internal audit reports and discussing
their findings and management’s responses;
• evaluating the performance of the internal auditor during the
engagement period;
• reviewing the independence of the Group’s external auditor and
the nature of non-audit services supplied by the auditor;
• reviewing the external auditor’s audit strategy and concluding
report for the 2019 financial statements; and
• evaluating the performance of the external auditor over the
period.
Standing items on the agenda for Audit and Risk Committee
meetings included:
• regular reports by the Head of Compliance and Risk reviewing
internal compliance and risk management activities and issues
which also highlighted relevant UK and global regulatory
developments which will or may impact the Group;
• review of a high level “Risk Matrix” to ensure that key risks and
risk movements are identified and addressed;
• a report from the internal auditor highlighting progress made
against the agreed Internal Audit plan, findings from the audits,
and the status of management’s responses and actions to
observations and recommendations made;
• review of departmental KPI and KRI data to ensure operational
risks are identified and appropriately addressed by
management; and
• review of Risk Management Committee meeting minutes with a
summary activity report by the Chief Operating Officer as Chair
of the Risk Management Committee.
During the year the Chair of the Committee separately met the key
people involved in the Company’s governance, including the Board
Chairman, the Chief Executive Officer, the Chief Financial Officer,
the Chief Operating Officer and the Head of Compliance and Risk
to obtain updates and insights into business activities.
The Chair of the Committee reported regularly to the Board on the
Committee’s activities, identifying any matters on which the
Committee considered that action was required, and made
recommendations on the steps to be taken.
Key Committee activities
Risk Management Framework
During the year the Committee supported and provided input to
the work being undertaken by management to conduct a thorough
review of risk management at Record in order to evolve the Group’s
long-established risk management framework to better articulate
risk appetite, clarify risk related processes, procedures and
responsibilities and improve risk monitoring and reporting.
The Committee welcomed this initiative, was impressed by the
commitment of management to the project and was pleased
with the output.
Cyber security
The Committee reviewed cyber risk defences in line with the UK’s
National Cyber Security Centre (NCSC) “10 Steps to Cyber
Maturity” framework.
The Committee remains conscious that cyber security continues
to present a significant risk to financial services companies and the
monitoring and review of the cyber security processes implemented
by Record will thus remain a focus for the Committee going forward.
50
Record plc Annual Report 2019Governance Replacement of the Head of IT
Following the resignation of the Head of IT in July 2018 the
Committee was provided with regular updates by the Chief
Executive Officer and the Chief Operating Officer detailing the
recruitment process and transition planning to ensure that IT-related
projects were appropriately prioritised, cyber security practices
were maintained and that the IT function was effectively managed.
The Committee was content with the actions taken by
management over the six month transition period.
Review of the regulatory landscape
Briefings on regulatory developments have been provided to the
Committee over the period under review by Deloitte as internal
auditor and also by the Head of Compliance and Risk. Topics
included the Group’s readiness for GDPR, the Senior Manager
and Certification Regime, MiFID II, FCA policy and discussion
statements, FRC guidance and the Group’s preparations for
managing Brexit.
Regulatory change will continue to be closely monitored by the
Committee for the foreseeable future.
Compliance and risk
Under the standing agenda item of compliance and risk the
Committee considered and confirmed it was content with the
following:
• The compliance monitoring plan for 2019, noting that it was risk
based, proportionate and appropriate for the nature and scale of
the business.
• A Financial Crime Risk Assessment prepared by the Head of
Compliance and Risk based on the FCA guidance “Financial
Crime: a Guide for Firms” published in July 2016 and concluding
that the Group continues to have proportionate and adequate
procedures and controls concerning the specific risk posed by
financial crime on its operations.
• A whistleblowing policy, updated to reflect minor housekeeping
amendments.
Financial reporting
The Committee has reviewed the half-year and annual results
and the Annual Report, before recommending them to the Board
for approval.
During the year, the Committee also considered the significant
financial and regulatory reporting issues and judgements made in
connection with the financial statements and the appropriateness
of accounting policies. In particular, the Committee considered
management reports providing an assessment of the internal
controls environment and going concern. The Committee is
satisfied that all judgements made by management which affect
financial reporting have been made in accordance with the Group’s
accounting policies.
The Committee further considered reports from the external auditor,
in particular its independent assessment of financial reporting and
key controls, the audit opinion on the Annual Report and the
independent report on the half-year results.
The Committee is satisfied that the financial reporting control
framework, including the operation of a Group-wide general ledger,
consolidation system and preventative and detective controls,
operated effectively after considering reports from both
management and the external auditor.
The Committee has reviewed the narrative statements in the
report and accounts to ensure they are fair, balanced and
understandable and consistent with the reported results, and also
the auditor’s findings report which identified no significant issues.
The Committee was satisfied with the content of the Annual
Report, confirmed there were no significant issues or concerns to
be addressed and recommended that it be approved by the Board.
Internal controls and risk management
A significant part of the work of the Committee is in providing
oversight and independent challenge to the internal controls and
risk management systems of the Group.
Over the last twelve months management has developed a
high-level “Risk Matrix” which identifies key risk areas that may
impact the Group, replacing the graphical “Risk Heat Map”
produced previously. This analysis is used by the Committee
and compared against a risk assessment prepared by the internal
auditor to ensure that material risk areas are being appropriately
identified and addressed by management and that movements
in risks and business impact are identified promptly so that
appropriate action can be taken. The “Risk Matrix” continues to
be enhanced to aid risk monitoring and such development is
welcomed by the Committee.
The Committee reviews all minutes of Risk Management
Committee meetings and the Chief Operating Officer as Chair of
the Risk Management Committee was present at all meetings to
answer questions raised.
The Committee has reviewed and evaluated the system of internal
controls and risk management operated within the Group, and is
satisfied that the internal control environment is appropriate. More
information on the Group’s risk management framework is given in
the Strategic Report on 30 and 31.
Internal audit
The internal audit function undertakes a programme of reviews as
approved by the Committee, reporting the results together with its
advice and recommendations to the Committee. The function is
provided by Deloitte LLP (“Deloitte”) under an outsourcing contract
which commenced in May 2010. The objectives and responsibilities
of internal audit are set out in a charter reviewed and approved on
an annual basis. The charter was last reviewed and approved by
the Committee in May 2019. Deloitte reports directly to the
Committee and the relationship is subject to periodic review.
The Committee and the internal auditor have developed a planning
process to ensure that the audit work performed focuses on
significant risks. The plans include thematic and risk-based reviews
as agreed by the Committee, Deloitte and management. Each
review is scoped at the start of the audit to ensure an appropriate
focus reflecting business activities, the market environment and
regulatory matters. The annual plans are periodically reviewed to
ensure they are adapted as necessary to capture changes in the
Group’s risk profile.
The Committee has received regular reports on the programme of
reviews and internal audit findings at each of its meetings during
the course of the year, has reviewed the findings and
recommendations made by the internal auditor and has ensured
that any issues arising are suitably addressed by management in an
effective and timely manner.
51
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information AUDIT AND RISK COMMITTEE REPORT CONTINUED
Internal audit continued
The Committee has reviewed Deloitte’s work and discussed the
delivery of internal audit with management and is satisfied with the
internal audit work conducted and the coverage and standard of
the reports produced. The Committee is content that sufficient and
appropriate resources are dedicated to the internal audit function
and this has been reported to and noted by the Board.
External audit
PricewaterhouseCoopers LLP (“PwC”) was appointed in 2017 to
conduct the external audit of the Record Group. The fees and the
terms of the audit engagement letter are agreed by the Committee
on an annual basis.
The Committee has reviewed reports from the external auditor on
the audit plan (including the proposed materiality level for the
performance of the annual audit), the status of its audit work and
issues arising. In particular the Committee considered the auditor’s
comments in respect of the process for determining revenue, which
involves a manual calculation of fees, noting the level of testing
performed on the effectiveness of key controls, procedures for
identifying and valuing AUME and the contractual terms associated
with individual mandates and also the reperformance of fee
calculations. The Committee discussed the findings and was
satisfied with the conclusion reached by the auditor that no further
audit testing was required and no evidence of material
misstatements was identified. The Committee has confirmed that
no material items remained unadjusted in the financial statements.
Each year, following the annual audit, the Committee evaluates the
performance of the external auditor. There were no significant
adverse findings from the May 2019 evaluation and the Committee
concluded that PwC had provided an external audit service which
was appropriate for the Group given its size and structure.
External auditor independence
Policy on provision of non-audit services by the external auditor
The Committee operates a policy covering the provision of
non-audit services by the external auditor to ensure that the
ongoing independence and objectivity of the external auditor is not
compromised. The policy ensures adherence to the Financial
Reporting Council’s revised Ethical Standard issued on 17 June
2016, which implements EU audit regulations restricting the supply
of non-audit services to Public Interest Entities (“PIEs”) by statutory
auditors, and which applies to audits for financial years beginning
on or after that date.
The policy restricts the nature and value of non-audit services that
can be provided by the external auditor by documenting a “black
list” of prohibited services, setting a cap on the level of permitted
non-audit services and establishing the requirement that permitted
services above a pre-determined limit should be approved by the
Committee before the assignment is undertaken.
Under the Ethical Standard the aggregate of fees for all non-audit
services, excluding audit related assurance services required under
regulation, may not exceed 70% of the average of the audit fees for
the preceding three year period. The Committee considers it best
practice to adhere to the fee cap on an annual basis, effective from
the first year of application for Record of the Ethical Standard (i.e.
the year ended 31 March 2018) and monitors fees accordingly.
The policy is reviewed by the Committee on an annual basis. This
review was conducted in May 2019 and it was agreed the policy
remained appropriate and it was approved by the Committee
accordingly.
52
Non-audit services undertaken by the external auditor
The following permitted non-audit services, pre-approved by the
Committee and within a pre-determined cost limit, have been
undertaken by PwC in the year under review:
• provision of other assurance services in respect of controls
reports;
•
independent auditor report to the FCA on compliance with client
asset rules;
• the interim review work performed on the half-year accounts;
and
• advice and assistance on employee work visas and applications.
Details of the total fees paid to PwC are set out in note 5 to
the accounts. Non-audit fees, excluding audit-related assurance
services required under law or regulation, were equivalent to 47%
(2018: 48%) of audit fees and were therefore within the permitted
cap of 70%.
Assessment of external auditor independence
The Committee was satisfied that the quantity and nature of
non-audit work undertaken during the year did not impair PwC’s
independence or objectivity and that its appointment for these
assignments was in the best interests of the Group and its
shareholders.
The Committee is satisfied that the external auditor has maintained
its independence and objectivity over the period of its engagement.
Committee evaluation
An internal review of Committee effectiveness was overseen by the
Company Secretary in May 2019. The review was based on input
from Board members, senior management, the internal audit
partner and the external audit partner. The conclusion was that the
Committee was effective in carrying out its duties.
Annual General Meeting
The Chair of the Audit and Risk Committee will be available to
answer any questions relating to the Committee and its activities at
the Annual General Meeting.
Looking forward
As well as considering the standing items of business, the
Committee will continue to focus on the following areas during the
year ahead:
• cyber security;
• risk monitoring; and
• the regulatory landscape.
Approved by the Committee and signed on its behalf by:
Rosemary Hilary
Chair of the Audit and Risk Committee
12 June 2019
Record plc Annual Report 2019Governance REMUNERATION REPORT
Our remuneration policy is
designed to act in the interests
of all our key stakeholders:
our clients, shareholders,
employees and regulators.
Tim Edwards
Chair of the Remuneration Committee
Remuneration Committee Chairman’s
summary statement
Introduction
I am pleased to present my first Remuneration Report for 2019.
I would like to thank David Morrison for his contribution during his
nine years as a member of the Committee, most recently as
Chairman.
We believe that our Remuneration Policy, as approved by
shareholders at our 2017 AGM, remains broadly appropriate,
although we have made changes to the operation of our Group
Profit Share Scheme with effect from 1 April 2019. These changes
are within the Remuneration Policy framework and scheme rules
but I have explained these changes further below. As required,
the Company will put a Directors’ remuneration policy to
shareholders at the 2020 AGM.
Remuneration philosophy
Our remuneration approach is driven by long-term thinking.
Identifying, developing and appropriately compensating our high
performers, at all levels of the business, is critical to long-term
business success and aligned to clients’ and shareholders’ interests.
Our key remuneration principles are to have:
• A consistent remuneration structure for all employees, not just
Executive Directors, which is transparent and straightforward,
with a single profit share pool and share option scheme.
• Two components of remuneration: (i) fixed salaries and (ii)
variable remuneration based on performance.
• A proportion of the remuneration of Executive Directors and
senior managers deferred by paying some in the form of equity.
Changes to the operation of the Group Profit Share Scheme
The Committee has made changes to the operation of the Group
Profit Share scheme which took effect from 1 April 2019 to ensure
that there is a transparent link between our business strategy and
individual objectives, that the assessment of individual performance
is clear, and that variable pay rewards high levels of performance.
To create business growth whilst managing costs we want to
reward behaviour that drives revenue generation, improved
efficiencies and reduced costs.
Annual corporate objectives have been agreed by the Board
and individual objectives have been agreed for all employees,
including Executive Directors. Individual levels of performance
will be assessed each six months against objectives and variable
remuneration will be awarded based on achievement objectives.
The Remuneration Committee will approve any payments to
Executive Directors and management will approve payments
to employees.
The Group Profit Share Pool continues to be linked to profitability
and can vary between 25% to 35% of operating profits. The
Committee has not used this flexibility in the past, preferring to
maintain the pool at 30%, but does intend to use this flexibility
in future depending on the company’s performance.
The Committee believes that these changes will drive business
performance and reward high performers in a more transparent
manner, within the existing Group Profit Share Scheme framework.
53
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information REMUNERATION REPORT CONTINUED
Remuneration Committee Chairman’s
summary statement continued
Company performance and Directors’ remuneration
The year to 31 March 2019 has seen growth in our revenue,
increase in profit before tax and a marginal increase in operating
margin. The decline in management fees was more than offset by
the rise in performance fees. However, certain costs have risen as a
result of investing in our people and resources to maintain
innovation and service enhancement.
Directors’ remuneration report
This year’s report is split into two sections. We have not
reproduced our full Remuneration Policy in this report but provided
a summary in the table on pages 55 and 56. A copy of our full
Directors’ Remuneration Policy, as approved by shareholders in
July 2017, is available in the Remuneration Section of the 2017
Annual Report and Accounts, and is available on our website
https://ir.recordcm.com/financial-information-and-reporting/
reports-and-accounts.
The Annual report on remuneration explains how the policy has
been implemented this year.
Shareholder consultation
It remains our policy to discuss any substantive proposed changes
to the Group’s remuneration structures with key external
shareholders in advance of any implementation.
An advisory vote to approve the Remuneration Committee
chairman’s summary statement and the Annual report on
remuneration will be held at the 2019 AGM.
Tim Edwards
Remuneration Committee Chairman
12 June 2019
For the year to 31 March 2019 prior to the changes referred to
above becoming effective, our Group Profit Share Scheme pool has
been set at 30% of operating profits (2018: 30%), directly linking
the Company’s financial performance to the size of the variable
remuneration pool, so the value delivered to employees under the
Group Profit Share Scheme increased by 8.5% over the period.
With a focus on maintaining profitability and managing costs, no
company-wide salary increases were made in April 2019 and none
of the Executive Directors received any salary increase.
Executive Directors were awarded profit share units by the
Remuneration Committee based on their individual level of
performance. The Committee used its discretion in setting the
awards after receiving input from the Head of Compliance and Risk,
who reports any legal or compliance issues that relate to Directors
who are due to receive awards under the Scheme. Payments were
made in accordance with the Group Profit Share Scheme rules and
were approved by the Committee.
No share options were granted to Executive Directors during the
period and each of their current share option holdings is detailed
on page 60.
Regulation
We continue to review our remuneration structures in line with
regulatory changes and good practice and have actively reviewed
and updated the FCA policy statement.
Committee membership and focus during the year
The Remuneration Committee is comprised of the Non-executive
Directors, namely Jane Tufnell, Rosemary Hilary, and myself, acting
as Chairman.
Our focus during the past year has been to review and make
changes to the Group Profit Share Scheme, including approving
objectives for Executive Directors. In addition the Committee has
reviewed the FCA policy statement, reviewed external salary and
remuneration benchmarks for all staff and approved salary, Group
Profit Share payments and vesting of share options for Executive
Directors. We have also taken into account employee views on
remuneration through our employee survey.
54
Record plc Annual Report 2019Governance Directors’ remuneration policy
Remuneration Policy summary table
This section of the remuneration report provides an overview of the key remuneration elements in place for all staff, including Executive
Directors, the Chairman and Non-Executive Directors. We have not made any changes to our Remuneration Policy and the table
summarises the policy approved by shareholders at the 2017 AGM.
Element
Current operation
for employees
Application to
Executive Directors
Base salary
Fixed remuneration that reflects
the role, responsibilities,
experience and knowledge
of the individual.
Paid monthly and reviewed annually
by management.
Any review will take into account
market rates, business performance
and individual contribution.
The Remuneration Committee
reviews salaries for Executive
Directors on an annual basis.
Any review will take into account
market rates, business performance
and individual contribution.
There is no prescribed maximum
salary. However, increases are
normally expected to be in line with
the typical level of increase awarded
across the Group.
Application to the
Chairman and
Non‑executive Directors
Salaries and fees are reviewed
annually by the Board.
Any review will take into account
market rates, business
performance and individual
contribution.
Increases are normally expected
to be in line with the typical level
of increase awarded across
the Group.
Benefits
To provide a benefits package that
provides for the wellbeing of our
colleagues.
Pension
To provide an appropriate
retirement income.
Group Profit Share Scheme
Variable remuneration scheme that
allocates 25% to 35% of operating
profits to a Group Profit Share
Pool, allocated to participants
based on their role and individual
level of performance.
A range of benefits are offered
including, but not limited to
private medical insurance,
dental insurance, permanent
health insurance, life assurance,
personal accident insurance and
annual holiday.
All staff are entitled to join the
Group Personal Pension Scheme.
This is a defined contribution plan
to which the Group makes
employer contributions and staff
can choose to make additional
personal contributions.
All staff participate in the Group
Profit Share Scheme.
Staff members can take their profit
share in cash or elect for up to a
third in shares.
Senior Managers are required to
take one third of their payment in
shares subject to lock up conditions
of one to three years and in addition
are offered the opportunity for up to
a further third of the Profit Share to
be paid in shares. The remaining
amount is in cash.
Executive Directors receive benefits
on the same basis as all other
employees.
The Chairman receives benefits on
the same basis as other
employees.
There is no maximum level of
benefit.
The Non-Executive Directors do
not receive any additional benefits.
Executive Directors receive an
employer pension contribution of
15.5% of salary which can be paid
into the Pension Scheme or
delivered as a cash allowance.
Executive Directors can choose to
make a personal contribution in
addition to the Company
contribution.
The Chairman is entitled to join the
Pension Scheme, but has chosen
to opt out and in line with the
policy for Executive Directors
receives the employer pension
contribution of 15.5% of his salary
as taxable income.
The Non-executive Directors do
not receive pension benefits.
The Chairman and the
Non-executive Directors do not
participate in the Group Profit
Share Scheme.
Executive Directors are eligible to
participate in the Group Profit Share
Scheme and the Remuneration
Committee approves all payments
to Executive Directors.
Executive Directors are required to
take one third of their payment in
shares subject to lock up conditions
of one to three years. In addition
they are offered the opportunity
for up to a further third of their
Profit Share to be paid in shares.
The remaining amount will be paid
in cash.
Clawback provisions are in place in
the event of adverse restatement of
accounts or material misconduct, at
the discretion of the Remuneration
Committee.
Whilst the profit share pool is
capped based on the profitability of
the Group and range stated above,
there is no individual maximum
entitlement set within this limit.
55
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information REMUNERATION REPORT CONTINUED
Directors’ remuneration policy continued
Remuneration Policy summary table continued
Application to the
Chairman and
Non‑executive Directors
The Chairman and the
Non-executive Directors do not
participate in the Share Scheme.
Current operation
for employees
Application to
Executive Directors
All staff members are eligible to
participate in the Share Scheme.
Executive Directors are eligible to
participate in the Share Scheme.
Any share option grants are
awarded by management on a
discretionary basis.
The Remuneration Committee limits
the value of shares over which an
option is granted to any Director in
any year to a maximum of 200% of
that Director’s salary for that year.
All share options awarded to
Executive Directors are granted with
an exercise price equal to the
market value of the shares on the
date of grant and are subject to a
performance condition based on
Record’s cumulative annual EPS
growth with vesting proportions
directly related to this growth.
Clawback provisions are in place for
all options should there be any
restatement of accounts or breach
of contract, at the discretion of the
Remuneration Committee.
All staff members are eligible to
participate in the SIP.
Executive Directors may participate
in the SIP on the same basis as
other employees.
The Chairman and the
Non-executive Directors do
not participate in the SIP.
Element
Share Scheme
The Share Scheme allows the
Remuneration Committee to grant
options over up to 2% of the
market capitalisation of Record plc
(being approximately 4 million
shares) per annum. Of this total,
1% (approximately 2 million
shares) can be granted to
Executive Directors and the other
1% can be granted to staff.
Share Incentive Plan
The Group has an approved Share
Incentive Plan (“SIP”). All staff are
able to buy shares from pre-tax
salary up to an HMRC-approved
limit (£1,800 for the financial year
ended 31 March 2019), which is
matched at a rate of 50%.
How the views of shareholders are taken into account
The Remuneration Committee takes into account shareholder
views received in relation to resolutions to be considered at the
AGM each year. The Committee values shareholder feedback when
forming remuneration policy and any material changes proposed to
Executive Directors’ remuneration will be discussed in advance with
major institutional shareholders.
56
Record plc Annual Report 2019Governance Considering the views of employees
When determining Executive Director remuneration arrangements
the Committee takes into account pay conditions throughout the
Group to ensure that the structure and quantum of Executive
Directors’ pay remains appropriate in this context. The Committee
seeks advice from the Head of Compliance and Risk prior to
approving or amending the remuneration policy.
The Committee does not consider that it is appropriate to
consult directly with colleagues when developing the Directors’
remuneration policy. However, certain questions in the employee
survey this year were specifically about remuneration and this
allowed the Committee to gain feedback from staff. A significant
proportion of our colleagues are shareholders so are able to
express their views in the same way as other shareholders.
Approach to remuneration for new
Executive Directors
On the recruitment of a new Executive Director the level of fixed
remuneration will be appropriate to the candidate’s skills and
experience and the responsibility that they will be undertaking.
New Executive Directors would be eligible to join the Group Profit
Share Scheme and would be eligible to be considered for the Share
Scheme as deemed appropriate by the Remuneration Committee.
The Remuneration Committee recognises that a new Executive
Director may forfeit remuneration as a result of leaving a previous
employer and the Committee will consider mitigating that loss or
part of that loss by making an award in addition to the
remuneration outlined above. The Committee will consider any
relevant factors including any performance conditions attached to
any previous incentive arrangements and the likelihood of these
conditions being met and will take reasonable steps to ensure that
any payment is at an appropriate level.
When recruiting a new Non-executive Director, fees will be in line
with the prevailing fee schedule paid to other Board members and
Non-executive Directors at that time.
Service contracts and loss of office payment policy
All Executive Directors have service agreements with effect from
15 November 2007, with the exception of James Wood-Collins,
who has a service agreement dated 1 October 2010, reflecting his
promotion to Chief Executive Officer and Steve Cullen who has a
service agreement dated 15 March 2013, reflecting his promotion
to Chief Financial Officer. None of the service agreements is for a
fixed term and all include provisions for termination on six months’
notice by either party. Service agreements do not contain any
contractual entitlement to receive bonuses, nor to participate in the
Group Profit Share Scheme or the Group Share Scheme, nor to
receive any fixed provision for termination compensation.
Non-executive Directors are appointed for an initial three-year
period. Their continued engagement is subject to annual re-election
by shareholders at the Company’s AGM.
The terms and conditions of appointment of the Executive Directors
and Non-executive Directors are available for inspection at the
Company’s registered office.
When an Executive Director leaves the Group, the Remuneration
Committee will review the circumstances and apply the appropriate
treatment. Any payments that are made will be in line with
contractual entitlements and statutory requirements only. Where
applicable the broad aim in making termination payments is to
avoid rewarding poor performance.
Salary and benefits will continue to be paid throughout the notice
period although the Committee has the discretion to make a
payment in lieu of notice.
The treatment of payments for the Group Profit Share Scheme and
the Share Scheme will be in accordance with the relevant scheme
rules at the time the Director leaves.
57
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information REMUNERATION REPORT CONTINUED
Directors’ remuneration policy continued
Remuneration illustrations
The charts below show the lowest, highest and average remuneration for the Executive Directors over the past three years. Fixed
remuneration is comprised of salary, pension contributions, other benefits and any cash alternative. Variable remuneration comprises Group
Profit Share, including cash and share payments. As variable remuneration is not capped at the individual level, we have used the three year
average, highest and lowest remuneration as an indication of the Executive Director’s earnings potential. Future remuneration will be
determined based on profitability and performance as described in the Remuneration policy.
Fixed
Variable
James Wood-Collins
Bob Noyen
Minimum
100%
£331,155
Minimum
100%
£331,594
3 year
low
3 year
high
3 year
average
51%
48%
49%
49%
£655,723
52%
£689,019
51%
£674,265
3 year
low
3 year
high
3 year
average
51%
48%
49%
£656,128
52%
£689,458
49%
51%
£674,678
£
0
100k 200k 300k 400k 500k 600k
700k
800k
900k
1,000k
£
0
100k 200k 300k 400k 500k 600k
700k
800k
900k
1,000k
Leslie Hill
Steve Cullen
Minimum
100%
£332,273
Minimum
100%
£152,118
3 year
low
3 year
high
3 year
average
48%
40%
44%
52%
£690,137
60%
£818,973
56%
£743,916
3 year
low
3 year
high
3 year
average
63%
37%
£235,238
58%
42%
£256,522
61%
39%
£245,617
£
0
100k 200k 300k 400k 500k 600k
700k
800k
900k
1,000k
£
0
100k
200k
300k
400k
500k
600k
700k
800k
900k
1,000k
Compliance with the FCA Remuneration Code
The Committee regularly reviews its remuneration policies to ensure compliance with the principles of the Remuneration Code of the UK
financial services regulator, as applicable to the Group. The remuneration policy is designed to be consistent with the prudent
management of risk, and the sustained, long-term performance of the Group. The Chief Financial Officer and the Head of Compliance
and Risk are involved in reviewing the remuneration policy and practice to ensure that it is aligned with sound risk management, and keep
the Committee informed of the firm’s risk profile so that this can be taken into account in remuneration decisions.
58
Record plc Annual Report 2019Governance Annual report on remuneration
This part of the report has been prepared in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended), and relevant sections of the Listing Rules. The annual report on remuneration
will be put to an advisory shareholder vote at the 2019 AGM. The information on pages 59 to 65 has been audited where required under
the regulations and is indicated as audited information where applicable.
Directors’ remuneration as a single figure (audited information)
The remuneration of the Directors for the year ended 31 March 2019 is detailed below together with their remuneration for the
previous year.
Executive Directors
Salaries and fees
Benefits1
James Wood-Collins
Leslie Hill
Bob Noyen
Steve Cullen
2019
£
2018
£
2019
£
2018
£
2019
£
2018
£
2019
£
2018
£
285,913
285,913
285,913
285,913
285,913
285,913
129,997
126,210
926
912
2,044
1,908
1,365
1,317
1,971
1,946
36,101
50,089
20,892
Short-term incentive (GPS cash)
238,576
216,388
238,576
163,563
238,576
216,388
61,981
Short-term incentive (GPS-shares)2
119,288
108,194
119,288
226,939
119,288
108,194
30,991
Pensions3
Total
44,316
44,316
44,316
44,316
44,316
44,316
20,150
689,019
655,723
690,137
722,639
689,458
656,128
245,090
235,238
Neil Record
Jane Tufnell
Rosemary Hilary
Tim Edwards
(appointed
21 March 2018)
David Morrison
(resigned
30 September 2018)
Non-executive
Directors
2019
£
2018
£
2019
£
2018
£
2019
£
2018
£
2019
£
2018
£
2019
£
2018
£
Salaries
and fees
Benefits1
79,310
79,310
53,498
42,230
49,862
48,410
43,497
7,038
31,827
61,800
2,258
2,137
Pensions3
12,293
12,293
—
—
—
—
—
—
—
—
—
—
—
—
—
—
240
—
Total
93,861
93,740
53,498
42,230
49,862
48,410
43,497
7,038
31,827
62,040
1. This value includes matching shares on SIP scheme, medical benefits, payments made in lieu of medical benefits, overtime payments and reimbursement of
taxable travel expenses.
2. There are no performance conditions attached to short-term incentives. The shares vest immediately but are subject to lock up restrictions and are calculated
based on the overall profitability of the Group.
3. This includes payments made in lieu of pension contributions.
Payments made to former Directors
Andrew Sykes, a former Non-executive Director, received £1,000 for consultancy services in the year ended 31 March 2019.
No payments were made to David Morrison following his resignation in September 2018.
Allocation of the Profit Share pool to Executive Directors
The Remuneration Committee is able to exercise discretion over the level of Group Profit Share awarded to the Executive Directors.
On two occasions during the year, the Committee has approved awards to the Directors after considering the role and performance of
each individual Director for the relevant six month period. The Committee also receives reports from the Head of Compliance and Risk,
regarding any legal or compliance issues relevant to the award.
Pensions (audited information)
Executive Directors are entitled to join the Group Personal Pension Scheme. This is a defined contribution plan and for the financial year
ending 31 March 2019, the Group made contributions of at least 15.5% of each Director’s salary which could either be paid into the
Group Personal Pension Scheme, taken as cash or a combination of the two.
All Directors who make personal contributions into the Company pension scheme via salary sacrifice receive an amount equivalent to the
employer’s national insurance saved by the Company into their pension as an additional contribution.
The employer pension contributions for the financial years ending 31 March 2018 and 31 March 2019 are detailed in the tables above.
59
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
REMUNERATION REPORT CONTINUED
Annual report on remuneration continued
Directors’ share options and share awards (audited information)
During the financial year ended 31 March 2019 no option awards were made to any Executive Directors.
All of the Executive Directors have previously been awarded share options and the table below sets out details of Executive Directors’
outstanding share option awards, which may vest in future years subject to continued service and performance conditions, as well as any
options that have lapsed or been exercised.
Total
options at
1 April 2018
Options
granted
in period
Date of grant
James
18/11/13
466,667
Wood-Collins
27/11/14
420,000
01/12/15
450,000
27/01/16
100,000
30/11/16
550,000
26/01/18
1,300,000
Leslie Hill
27/11/14
420,000
01/12/15
450,000
27/01/16
100,000
30/11/16
550,000
26/01/18
280,000
Bob Noyen
27/11/14
420,000
01/12/15
450,000
27/01/16
100,000
30/11/16
550,000
26/01/18
280,000
Steve Cullen
27/11/14
180,000
01/12/15
450,000
27/01/16
100,000
30/11/16
550,000
26/01/18
125,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Options
lapsed
in period
(350,000)
(210,000)
(150,000)
(33,333)
—
—
(210,000)
(150,000)
(33,333)
—
—
(210,000)
(150,000)
(33,333)
—
—
(90,000)
(150,000)
(33,333)
—
—
Options
exercised
in period
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
options at
31 March
2019
116,667
210,000
Exercise
price
Earliest
Exercise
Latest
exercise
30.00p
18/11/17
17/11/19
35.86p
27/11/17
26/11/20
300,000
28.875p
01/12/18
30/11/21
66,667
24.50p
27/01/19
26/01/22
550,000
34.0718p
30/11/19
29/11/22
1,300,000
43.50p
26/01/21
25/01/24
210,000
35.86p
27/11/17
26/11/20
300,000
28.875p
01/12/18
30/11/21
66,667
24.50p
27/01/19
26/01/22
550,000
34.0718p
30/11/19
29/11/22
280,000
210,000
43.50p
26/01/21
25/01/24
35.86p
27/11/17
26/11/20
300,000
28.875p
01/12/18
30/11/21
66,667
24.50p
27/01/19
26/01/22
550,000
34.0718p
30/11/19
29/11/22
280,000
43.50p
26/01/21
25/01/24
90,000
35.86p
27/11/17
26/11/20
300,000
28.875p
01/12/18
30/11/21
66,667
24.50p
27/01/19
26/01/22
550,000
34.0718p
30/11/19
29/11/22
125,000
43.50p
26/01/21
25/01/24
The outstanding share options above vest subject to performance conditions which are detailed on page 61.
There were no gains on share options by directors in the year ended 31 March 2019.
James Wood-Collins had a gain on share options of £39,872 in the year ended 31 March 2018. No other directors had gains on
share options.
60
Record plc Annual Report 2019Governance
Vesting of awards made to Executive Directors is on a stepped basis and is linked to Record’s average annualised EPS growth over the
relevant period since grant as follows:
Record’s annualised EPS growth over the period from grant to vesting
Percentage of shares subject to the award which vest
>RPI growth + 13%
>RPI growth + 10%, =RPI growth + 7%, =RPI growth + 4%, = 3 months
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Corporation tax liabilities
Financial liabilities
Derivative financial liabilities
Total current liabilities
Deferred tax liabilities
Total net assets
Equity
Issued share capital
Share premium account
Capital redemption reserve
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Approved by the Board on 12 June 2019 and signed on its behalf by:
Neil Record
Chairman
Company registered number: 1927640
Steve Cullen
Chief Financial Officer
The notes on pages 83 to 110 are an integral part of these consolidated financial statements.
Note
12
11
13
14
15
16
17
17
18
18
19
16
20
2019
£’000
288
761
1,112
—
2,161
7,562
164
10,735
12,966
31,427
33,588
2018
£’000
228
910
1,115
86
2,339
6,775
266
10,198
12,498
29,737
32,076
(2,736)
(2,630)
(692)
(399)
(2,621)
(2,467)
(109)
(29)
(6,158)
(5,525)
(29)
—
27,401
26,551
50
2,243
26
25,022
27,341
60
50
2,237
26
24,238
26,551
—
27,401
26,551
77
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2019
Called up
share
capital
£’000
50
—
—
—
—
—
—
—
50
Share
premium
account
£’000
2,237
—
—
—
—
6
—
6
2,243
Capital
redemption
reserve
£’000
Retained
earnings
£’000
Equity
attributable
to equity
holders of
the parent
£’000
Non‑
controlling
interests
£’000
26
—
—
—
—
—
—
—
26
24,238
26,551
6,430
(5,517)
—
(893)
677
87
6,430
(5,517)
—
(893)
683
87
(5,646)
(5,640)
25,022
27,341
—
—
—
60
—
—
—
60
60
Total
equity
£’000
26,551
6,430
(5,517)
60
(893)
683
87
(5,580)
27,401
As at 1 April 2018
Profit and total comprehensive
income for the year
Dividends paid
Issue of shares in subsidiary
Own shares acquired by EBT
Release of shares held by EBT
Share-based payment reserve movement
Transactions with shareholders
As at 31 March 2019
Year ended 31 March 2018
As at 1 April 2017
Profit and total comprehensive income for the year
Dividends paid
Share buy-back and cancellation
Own shares acquired by EBT
Release of shares held by EBT
Share-based payment reserve movement
Transactions with shareholders
As at 31 March 2018
Called up
share
capital
£’000
55
—
—
(5)
—
—
—
(5)
50
Share
premium
account
£’000
1,971
—
—
—
—
266
—
266
2,237
Capital
redemption
reserve
£’000
20
—
—
6
—
—
—
6
26
Retained
earnings
£’000
Total
equity
£’000
34,785
36,831
6,146
(6,810)
(10,000)
(952)
1,241
(172)
6,146
(6,810)
(9,999)
(952)
1,507
(172)
(16,693)
(16,426)
24,238
26,551
The notes on pages 83 to 110 are an integral part of these consolidated financial statements.
78
Record plc Annual Report 2019Financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 March
Net cash inflow from operating activities
Cash flow from investing activities
Purchase of intangible software
Purchase of property, plant and equipment
(Purchase)/sale of money market instruments with maturity > 3 months
Interest received
Net cash (outflow)/inflow from investing activities
Cash flow from financing activities
Subscription for shares in subsidiary
Purchase of own shares
Dividends paid to equity shareholders
Cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents in the year
Effect of exchange rate changes
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Closing cash and cash equivalents consist of:
Cash
Cash equivalents
Cash and cash equivalents
The notes on pages 83 to 110 are an integral part of these consolidated financial statements.
Note
25
2019
£’000
7,026
(134)
(72)
(537)
110
(633)
2018
£’000
2,746
(82)
(236)
7,904
77
7,663
40
—
(653)
(10,367)
9
(5,517)
(6,810)
(6,130)
(17,177)
263
205
12,498
12,966
2,150
10,816
12,966
(6,768)
146
19,120
12,498
4,411
8,087
12,498
17
79
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 March
Non‑current assets
Investments
Total non‑current assets
Current assets
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Corporation tax liabilities
Total current liabilities
Total net assets
Equity
Issued share capital
Share premium account
Capital redemption reserve
Retained earnings
Total equity
Note
13
17
18
18
20
2019
£’000
5,567
5,567
3
3
2018
£’000
5,288
5,288
2
2
5,570
5,290
(55)
(14)
(69)
5,501
50
1,809
26
3,616
5,501
(1,093)
—
(1,093)
4,197
50
1,809
26
2,312
4,197
The Company’s total comprehensive income for the year (which is principally derived from intra-group dividends) was £6,681,076
(2018: £16,688,038).
Approved by the Board on 12 June 2019 and signed on its behalf by:
Neil Record
Chairman
Company registered number: 1927640
Steve Cullen
Chief Financial Officer
The notes on pages 83 to 110 are an integral part of these consolidated financial statements.
80
Record plc Annual Report 2019Financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2019
As at 1 April 2018
Profit and total comprehensive income for the year
Dividends paid
Share option reserve movement
Transactions with shareholders
As at 31 March 2019
Year ended 31 March 2018
As at 1 April 2017
Profit and total comprehensive income for the year
Share buy back
Dividends paid
Share option reserve movement
Transactions with shareholders
As at 31 March 2018
Called up
share
capital
£’000
50
—
—
—
—
50
Called up
share
capital
£’000
55
—
(5)
—
—
(5)
50
Share
premium
account
£’000
1,809
—
—
—
—
1,809
Share
premium
account
£’000
1,809
—
—
—
—
—
1,809
Capital
redemption
reserve
£’000
Total
Retained shareholders’
equity
earnings
£’000
£’000
26
—
—
—
—
26
2,312
6,681
4,197
6,681
(5,517)
(5,517)
140
140
(5,377)
(5,377)
3,616
5,501
Capital
redemption
reserve
£’000
20
—
6
—
—
6
26
Retained
earnings
£’000
2,237
16,688
(10,000)
(6,810)
197
Total
shareholders’
equity
£’000
4,121
16,688
(9,999)
(6,810)
197
(16,613)
(16,612)
2,312
4,197
The notes on pages 83 to 110 are an integral part of these consolidated financial statements.
81
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
COMPANY STATEMENT OF CASH FLOWS
Year ended 31 March
Net cash (outflow)/inflow from operating activities
Cash flow from investing activities
Dividends received
Investment in subsidiaries
Investment in seed funds
Interest received
Net cash inflow from investing activities
Cash flow from financing activities
Purchase of own shares
Dividends paid to equity shareholders
Cash outflow from financing activities
Net increase in cash and cash equivalents in the year
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Closing cash and cash equivalents consist of:
Cash
Cash equivalents
Cash and cash equivalents
The notes on pages 83 to 110 are an integral part of these consolidated financial statements.
Note
25
2019
£’000
(1,043)
2018
£’000
1,015
6,600
16,810
(40)
—
1
(16)
(1,000)
1
6,561
15,795
—
(10,000)
9
(5,517)
(6,810)
(5,517)
(16,810)
1
2
3
3
—
3
—
2
2
2
—
2
17
82
Record plc Annual Report 2019Financial statements
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2019
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 provide more clarity to the notes to the financial statements, accounting policy descriptions appear at the beginning of the note
to which they relate, and are shown in blue 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 2019. 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. Please refer to the Directors’ report on page 68 for more detail. 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
IFRS 9 – Financial Instruments
IFRS 9 has been adopted by the Group and Company from the mandatory adoption date of 1 April 2018. IFRS 9 replaces the classification
and measurement models for financial instruments in IAS 39 “Financial Instruments: recognition and measurement” with three classification
categories: amortised cost, fair value through profit or loss and fair value through other comprehensive income.
The Group holds instruments such as investments in seed funds, derivative financial instruments and financial liabilities in respect of external
investors’ holdings in consolidated funds. These were formerly held at fair value through profit or loss (FVTPL). Under the new standard, these
instruments will continue to be held at FVTPL.
Trade and other receivables and payables principally comprise short-term settlement accounts and accruals, which are not held for trading nor
do they meet the definition of items that could be carried at fair value. Such instruments therefore remain at amortised cost.
Regarding impairment, most of Record’s revenue comes from management fees due from clients for which we provide currency management
services. These are typically paid to the Group on a quarterly basis.
It is very rare for Record to suffer any impairment in respect of trade receivables as institutional debtors rarely default. The Group has applied
the simplified expected loss model to its trade receivables, which do not have a history of credit risk or expected future recoverability issues.
Further details of the expected credit loss calculation are given in note 15.
Cash, cash equivalents and money market instruments with maturities > 3 months held with banks could be at risk should the financial
institutions holding it fail. We have neither experienced nor expect to experience credit losses arising from these counterparties.
Management considers that the adoption of IFRS 9 has not had a material impact on the financial statements.
IFRS 15 – Revenue from Contracts with Customers
IFRS 15 replaces IAS 18 Revenue and provides a new five-step revenue recognition model for determining recognition and measurement
of revenue from contracts with customers.
The adoption of this standard has had no significant impact on the timing of revenue recognition of the Group and therefore no restatement
of prior periods was required. The Group did not use any of the practical expedients permitted under IFRS 15.
The Group’s accounting policy for revenue within the scope of IFRS 15 has been updated to state that revenue is recognised as performance
obligations are satisfied.
The standard introduces a number of new disclosure requirements which are provided in note 4 of these financial statements. These include
disclosures around:
• The nature of the performance obligations within contracts with customers.
• Disaggregated revenue and its relationship with revenue reported for each reportable segment.
• Contract asset and liabilities.
There are no judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers.
Revenue from contracts with customers for the year ended 31 March 2018 consisted of £23.5 million which was previously presented as fee
income, and £0.3 million that was previously presented as other currency services income.
83
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
1. Accounting policies continued
a. Accounting convention continued
Impact of new accounting standards continued
IFRS 15 – Revenue from Contracts with Customers continued
There has been no other new or amended standards adopted in the financial year beginning 1 April 2018 which had a material impact on the
Group or Company.
The following standards and interpretations relevant to the Group’s operations were issued by the IASB but are not yet mandatory:
IFRS 16 – Leases
IFRS 16 “Leases” is effective for annual periods beginning on or after 1 January 2019 and replaces IAS 17 Leases and related interpretations.
This introduces a comprehensive model for the identification of lease arrangements and accounting treatment for both lessors and lessees,
which distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. IFRS 16 requires
operating leases, where the Group is the lessee, to be included on the Group’s statement of financial position, recognising a right-of-use (ROU)
asset and a related lease liability representing the present value obligation to make lease payments. The ROU asset will be assessed for
impairment annually (incorporating any onerous lease assessments) and depreciated on a straight-line basis, adjusted for any remeasurements of
the lease liability. The lease liability will subsequently be adjusted for lease payments and interest, as well as the impact of any lease modifications.
IFRS 16 also requires extensive disclosures detailing the impact of leases on the Group’s financial position and results.
The adoption of IFRS 16 will result in a significant gross-up of the Group’s reported assets and liabilities on the statement of financial position.
The operating lease expense which is currently recognised within occupancy costs in the Group’s income statement (note 24) will no longer be
incurred and instead depreciation expense (of the ROU asset) and interest expense (unwind of the discounted lease liability) will be recognised.
This will also result in a different total annual expense profile under the new standard (with the expense being front-loaded in the earlier years of
the lease term as the discount unwind on the lease liability reduces over time).
The adoption of IFRS 16 into the Group’s opening statement of financial position on 1 April 2019 results in a gross-up of £1.7 million for ROU
lease assets and associated deferred tax assets and £1.8 million in relation to lease liabilities, with £0.1 million deducted from brought-forward
reserves on the transition date 1 April 2019. The initial reserves impact will be offset over time by a lower annual Group income statement
charge, as the total charge over the life of each lease is the same as under the current IAS 17 requirements.
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 2019. 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.
An Employee Benefit Trust has been established for the purposes of satisfying certain share-based awards. As the Group has “de facto”
control over this special purpose entity, the trust is fully consolidated within the financial statements.
The Group has investments in four funds. These funds are held by Record plc and represent seed capital investments by the Group.
Significant judgement
The Group uses judgement to determine whether investments in its seed funds, constitute controlling interests in accordance with IFRS 10
Consolidated Financial Statements. The Group considers all relevant facts and circumstances in assessing whether it has control over specific
funds or other entities. This includes consideration of the extent of the Group’s exposure to variability of returns as an investor and the Group’s
ability to direct the relevant activities, through exercising its voting rights as an investor, or as investment manager. 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.
If the Group is in a position to be able to control a fund, then the fund is consolidated within the Group financial statements. 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.
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. In the case of
the funds controlled by the Group, the interests of any external investors are recognised as a financial liability as investments in the fund are not
considered to be equity instruments.
The financial statements 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 2019 and the financial position of the seeded funds as at
31 March 2019.
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’s total comprehensive income for the year
includes a profit of £6,681,076 attributable to the Company (2018: £16,688,038).
All intra-Group transactions, balances, income, expenses and dividends are eliminated on consolidation.
84
Record plc Annual Report 2019Financial statements Foreign currencies
c.
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 prevailing exchange rates which are updated on a monthly basis.
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 the statement of comprehensive income under “other income or expense”.
Financial instruments
d.
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.
Impairment of assets
e.
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.
Provisions and contingent liabilities
f.
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
In order to prepare the financial statements in accordance with IFRS, management make certain critical accounting estimates. Management are
also required to exercise judgement in the process of applying the Group’s accounting policies and in determining the reported amount of certain
assets and liabilities.
The estimates and associated assumptions are based on historical experience and various other factors including expectations of future events
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. As a consequence 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.
Areas of significant judgement – consolidation of seed funds
Note 1.b. describes the basis which the Group uses to determine whether it controls seed funds, further detail on consolidation of seed funds
is provided in note 13.
Sources of estimation uncertainty
Management recognise that the use of estimates is important in calculating both the fair value of share options offered by the Group to its
employees (see note 21) and deferred tax (see note 14), however the sources of estimation uncertainty do not present a significant risk of
material adjustment to the carrying amounts of assets or liabilities within the next financial year in either case.
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Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
3. 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. Revenue analysed by product is provided in note 4.
4. Revenue
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the provision of currency management services. Our revenues
typically arise from charging management fees or performance fees and both are accounted in accordance with IFRS 15 “Revenue from contracts
with customers”.
Management fees are recorded on a monthly basis as the underlying currency management service occurs, there are no other performance
obligations (excluding standard duty of care requirements). Management fees are calculated as an agreed percentage of the assets under
management equivalents (“AUME”) denominated in the client’s chosen base currency. The percentage varies depending on the nature of services
and the level of AUME. Management fees are typically invoiced to the customer quarterly with receivables recognised for unpaid invoices.
The Group is entitled to earn performance fees from some clients where the performance of the clients’ mandates exceeds defined benchmarks
over a set time period, and are recognised when the fee amount can be estimated reliably and it is highly probable that it will not be subject to
significant reversal.
Performance fee revenues are not considered to be highly probable until the end of a contractual performance period and therefore are not
recognised until they crystallise, at which time they are payable by the client and cannot be clawed back. There are no other performance
obligations or services provided which suggest these have been earned either before or after crystallisation date.
a. Revenue from contracts with customers
The following table provides a breakdown of revenue from contracts with customers, with management fees analysed by product. Other currency
services income includes fees from signal hedging and fiduciary execution.
Revenue by product type
Management fees
Dynamic Hedging
Passive Hedging
Currency for Return
Multi-Product
Total management fee income
Performance fee income
Other currency services income
Total revenue from contracts with customers
2019
£’000
2018
£’000
4,598
11,610
1,775
4,325
5,111
12,569
1,803
4,014
22,308
23,497
2,333
332
—
337
24,973
23,834
b. Contract receivables
The payment terms for invoiced revenue vary but are typically 30 days from receipt of invoice. Accrued income is recognised to account for
income earned but not yet invoiced.
The Group has recognised the following receivables, assets and liabilities in relation to contracts with customers.
Amount receivable from contracts with customers
Accrued income from contracts with customers
Total contract receivables and assets
There are no contract liabilities arising in relation to contracts with customers.
2019
£’000
4,654
1,888
6,542
2018
£’000
5,279
582
5,861
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Record plc Annual Report 2019Financial statements
c. Geographical analysis
The geographical analysis of revenue is based on the destination i.e. the location of the client to whom the services are provided. All turnover
originated in the UK.
Revenue by geographical region
Management and performance fee income
UK
US
Switzerland
Other
Total revenue
2019
£’000
2018
£’000
2,239
6,439
11,401
4,894
24,973
2,951
6,610
10,434
3,839
23,834
d. Major clients
During the year ended 31 March 2019, three clients individually accounted for more than 10% of the Group’s revenue. The three largest clients
generated revenues of £4.4 million, £3.9 million and £3.6 million in the year (2018: three largest clients generated revenues of £4.0 million,
£3.4 million and £2.9 million in the year).
5. Operating profit
Operating profit for the year is stated after charging/(crediting):
Staff costs
Depreciation of property, plant and equipment
Amortisation of intangibles
Auditor fees
Fees payable to the Group’s auditor for the audit of the Company’s annual accounts
Fees payable to the Group’s auditor for the audit of subsidiary undertakings
Fees payable to the Group’s auditor for the audit of consolidated funds
Auditor fees total
Fees payable to the Group’s auditor and its associates for other services:
Audit-related assurance services required by law or regulation
Other non-audit services
Operating lease rentals: land and buildings
Loss/(gain) on forward FX contracts held to hedge cash flow
Gain on derivative financial instruments held by seed funds
Exchange (gains)/losses on revaluation of external holding in seed funds
Other exchange (gains)/losses
2019
£’000
2018
£’000
11,574
11,062
221
74
49
42
40
131
27
61
604
242
—
(67)
(178)
206
99
45
39
32
116
26
55
596
(424)
(53)
406
265
87
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
6. Staff costs
The average number of employees, including Directors, employed by the Group during the year was:
Corporate
Client relationships
Investment research
Operations
Risk management
Support
Annual average
The aggregate costs of the above employees, including Directors, were as follows:
Wages and salaries
Social security costs
Pension costs
Other employment benefit costs
Aggregate staff costs
2019
2018
9
16
15
26
5
14
85
2019
£’000
8,900
1,239
468
967
8
15
15
26
5
12
81
2018
£’000
8,280
1,184
432
1,166
11,574
11,062
Other employment benefit costs include share-based payments, share option costs, and costs relating to the Record plc Share Incentive Plan.
7. Taxation – Group
Current tax is the tax currently payable based on taxable profit for the year. Current income tax assets and/or liabilities comprise those obligations
to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on
taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have
been enacted or substantively enacted by the end of the reporting period.
The total charge for the year can be reconciled to the accounting profit as follows:
Profit before taxation
Taxation at the standard rate of tax in the UK of 19% (2018: 19%)
Tax effects of:
Other disallowable expenses and non-taxable income
Capital allowances for the year higher than depreciation
Higher tax rates on subsidiary undertakings
Adjustments recognised in current year in relation to the current tax of prior years
Adjustments recognised in current year in relation to Research and Development claims in respect of prior years
Other temporary differences
Total tax expense
The tax expense comprises:
Current tax expense
Deferred tax expense
Total tax expense
2019
£’000
7,989
1,518
16
(20)
10
2
(93)
126
2018
£’000
7,328
1,392
51
(20)
5
(10)
(240)
4
1,559
1,182
1,445
114
1,559
1,166
16
1,182
The standard rate of UK corporation tax for the year is 19% (2018: 19%). 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 2019 was 19.5% of profit before tax (2018: 16.1%).
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Record plc Annual Report 2019Financial statements
8. Earnings per share
Basic earnings per share is calculated by dividing the profit for the financial year attributable to equity holders of the parent by the weighted
average number of ordinary shares in issue during the year.
Diluted earnings per share is calculated as for the basic earnings per share with a further adjustment to the weighted average number of
ordinary shares to reflect the effects of all potential dilution.
There is no difference between the profit for the financial year attributable to equity holders of the parent used in the basic and diluted earnings
per share calculations.
Weighted average number of shares used in calculation of basic earnings per share
Effect of potential dilutive ordinary shares – share options
2019
2018
196,655,224 202,613,441
1,462,554
3,855,924
Weighted average number of shares used in calculation of diluted earnings per share
198,117,778 206,469,365
Basic earnings per share
Diluted earnings per share
pence
3.27
3.25
pence
3.03
2.98
The potential dilutive shares relate to the share options granted in respect of the Group’s Share Scheme (see note 21). There were share options in
place at the beginning of the year over 14,343,147 shares. During the year 678,500 share options were exercised, and a further 2,307,944 share
options lapsed or were forfeited. The Group granted 935,000 share options with a potentially dilutive effect during the year. Of the 12,291,703
share options in place at the end of the period, 1,486,765 have a dilutive impact at the year end.
9. 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 2019 totalled £5,516,896 (2.80 pence per share) which comprised a final dividend
in respect of the year ended 31 March 2018 of £2,266,379 (1.15 pence per share), a special dividend in respect of the year ended 31 March 2018 of
£985,382 (0.50 pence per share) and an interim dividend for the year ended 31 March 2019 of £2,265,135 (1.15 pence per share).
The dividends paid by the Group during the year ended 31 March 2018 totalled £6,810,361 (3.235 pence per share) which comprised a final
dividend in respect of the year ended 31 March 2017 of £2,564,080 (1.175 pence per share), a special dividend in respect of the year ended
31 March 2017 of £1,985,798 (0.91 pence per share) and an interim dividend for the year ended 31 March 2018 of £2,260,483 (1.15 pence
per share).
For the year ended 31 March 2019, a final ordinary dividend of 1.15 pence per share has been proposed and a special dividend of 0.69 pence per
share has been declared.
10. Retirement benefit obligations
The Group operates defined contribution pension plans for the benefit of employees. The Group makes contributions to independently
administered plans, such contributions being recognised as an expense when they fall due. The assets of the schemes are held separately from
those of the Group in independently administered funds.
The Group 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 disclosed in note 6 to the accounts represents contributions payable by the Group to the funds.
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Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
11. Property, plant and equipment – Group
All property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation of property, plant and equipment is
provided to write off the cost, less residual value, on a straight-line basis over the estimated useful life:
• Leasehold improvements – period from lease commencement to the earlier of the lease termination date and the next rent review date
• Computer equipment – 2 to 5 years
• Fixtures and fittings – 4 to 6 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:
Leasehold
improvements
£’000
Computer
equipment
£’000
Fixtures
and fittings
£’000
661
31
—
692
150
121
—
271
421
511
671
40
—
711
425
59
—
484
227
246
324
1
—
325
171
41
—
212
113
153
Leasehold
improvements
£’000
Computer
equipment
£’000
Fixtures
and fittings
£’000
635
26
—
661
36
114
—
150
511
599
542
177
(48)
671
423
50
(48)
425
246
119
304
33
(13)
324
141
42
(12)
171
153
163
Total
£’000
1,656
72
—
1,728
746
221
—
967
761
910
Total
£’000
1,481
236
(61)
1,656
600
206
(60)
746
910
881
2019
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Depreciation
At 1 April 2018
Charge for the year
Disposals
At 31 March 2019
Net book amounts
At 31 March 2019
At 1 April 2018
2018
Cost
At 1 April 2017
Additions
Disposals
At 31 March 2018
Depreciation
At 1 April 2017
Charge for the year
Disposals
At 31 March 2018
Net book amounts
At 31 March 2018
At 1 April 2017
The Group’s tangible non-current assets are predominantly located in the UK.
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Record plc Annual Report 2019Financial statements
12. Intangible assets
Intangible assets are shown at historical cost less accumulated amortisation and impairment losses. Amortisation is charged to profit or loss on a
straight-line basis over the estimated useful lives of the intangible assets unless such lives are indefinite. Amortisation is included within operating
expenses in the statement of comprehensive income. Intangible assets are amortised from the date they are available for use. Useful lives are as
follows:
• Software – 2 to 5 years
Amortisation periods and methods are reviewed annually and adjusted if appropriate.
The Group’s intangible assets comprise both purchased software and the capitalised cost of software development. The carrying amounts can
be analysed as follows:
2019
Cost
At 1 April 2018
Additions
Disposals
At 31 March 2019
Amortisation
At 1 April 2018
Charge for the year
Disposals
At 31 March 2019
Net book amounts
At 31 March 2019
At 1 April 2018
2018
Cost
At 1 April 2017
Additions
Disposals
At 31 March 2018
Amortisation
At 1 April 2017
Charge for the year
Disposals
At 31 March 2018
Net book amounts
At 31 March 2018
At 1 April 2017
Software
£’000
Total
£’000
1,458
1,458
134
—
134
—
1,592
1,592
1,230
1,230
74
—
74
—
1,304
1,304
288
228
Software
£’000
288
228
Total
£’000
1,377
1,377
82
(1)
82
(1)
1,458
1,458
1,132
1,132
99
(1)
99
(1)
1,230
1,230
228
245
228
245
The annual contractual commitment for the maintenance and support of software is £183,976 (2018: £179,664). All amortisation charges are
included within administrative expenses.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
13. Investments
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.
Investment in subsidiaries (at cost)
Record Currency Management Limited
Record Group Services Limited
Record Portfolio Management Limited
Record Currency Management (US) Inc.
Record Currency Management (Switzerland) GmbH
Trade Record Ltd
Record Fund Management Limited
N P Record Trustees Limited
Total investment in subsidiaries (at cost)
Capitalised investment in respect of share‑based payments
Record Group Services Limited
Record Currency Management (US) Inc.
Record Currency Management (Switzerland) GmbH
Total capitalised investment in respect of share‑based payments
Total investment in subsidiaries
Particulars of subsidiary undertakings
Name
Nature of business
2019
£’000
2018
£’000
10
10
10
—
16
40
—
—
86
1,108
85
2
1,195
1,281
10
10
10
—
16
—
—
—
46
978
77
—
1,055
1,101
Record Currency Management Limited
Currency management services (FCA, SEC and CFTC registered)
Record Group Services Limited
Management services to other Group undertakings
Record Currency Management (US) Inc.
US advisory and service company (SEC and CFTC registered)
Record Currency Management (Switzerland) GmbH
Swiss advisory and service company
Trade Record Ltd
Record Portfolio Management Limited
Record Fund Management Limited
N P Record Trustees Limited
Prize competition allowing subscribers to trade virtual money
across asset classes
Dormant
Dormant
Dormant trust company
The Group’s interest in the equity capital of subsidiary undertakings is 100% of the ordinary share capital in all cases except for Trade Record Ltd
(“Trade Record”) in which the Group’s interest is 40% of the ordinary share capital. Record Currency Management (US) Inc. is incorporated in
Delaware (registered office: Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808) and Record Currency Management
(Switzerland) GmbH is incorporated in Zürich (registered office: Münsterhof 14, 8001 Zürich). Trade Record is registered in England and Wales with
its registered office at 1 Poultry, London EC2R 8JR. All other subsidiaries are registered in England and Wales with their registered office at
Morgan House, Madeira Walk, Windsor, Berkshire, SL4 1EP, UK.
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Record plc Annual Report 2019Financial statements
Investment in Trade Record
On 22 March 2019, Record plc subscribed £40,000 for 40% of the ordinary share capital of Trade Record.
Investment in funds
In addition to the subsidiaries listed above, the Company holds investments in several funds. 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.
All four fund investments are presented within investments in the Company statement of financial position, and all four fund entities are sub-funds
of the Record Umbrella Fund, an open-ended umbrella unit trust authorised in Ireland.
Group
Entities are consolidated on a line-by-line basis where the Group has determined that a controlling interest exists through an investment holding in
the entity, in accordance with IFRS 10 “Consolidated Financial Statements”. Otherwise, investments in entities are measured at fair value through
profit or loss.
Investment in Trade Record
Record plc in conjunction with two of its Directors, controls 80% of the ordinary share capital, giving the Company rights over variable returns
and the power to affect returns. Therefore the Company has the ability to control Trade Record, which is consequently recognised as a subsidiary.
In accordance with IFRS 10, the financial results of Trade Record are consolidated on a line-by-line basis within the financial statements of
the Group.
Investment in funds
Of the four funds seeded by Record plc only three have been consolidated into the Group’s financial results.
The Group has controlled both the Record Currency – FTSE FRB10 Index Fund and the Record Currency – Strategy Development Fund
throughout the year ended 31 March 2019 and the comparative year. Both funds were consolidated in full, on a line-by-line basis in the Group’s
financial statements throughout these periods.
The Group was in control of the Record Currency – Emerging Market Currency Fund until 21 March 2018, at which point the Group no longer
consolidated the fund on a line-by-line basis, but the Group did consolidate the fund in full on a line-by-line basis until that date. The fair value of
the Group’s holding in the Record Currency – Emerging Market Currency Fund was recognised as an investment from 22 March 2018 onwards.
In February 2018, the Company invested in the Record – Currency Multi-Strategy Fund. The Group has controlled this fund since inception and
the fund is consolidated in full on a line-by-line basis.
Investment in funds
Record Currency – FTSE FRB10 Index Fund
Record Currency – Emerging Market Currency Fund
Record Currency – Strategy Development Fund
Record – Currency Multi-Strategy Fund
Total investment in funds
Group
Company
2019
£’000
2018
£’000
—
—
1,112
1,115
—
—
—
—
1,112
1,115
2019
£’000
1,162
1,112
1,046
966
4,286
2018
£’000
1,116
1,115
952
1,004
4,187
93
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
14. Deferred taxation – Group
Deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities shown
on the statement of financial position. The amount of deferred tax provided is based on the expected manner of recovery or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. The carrying amount of the deferred tax assets are reviewed at each statement of financial position date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
A deferred tax liability is generally recognised for all taxable temporary differences.
Deferred tax assets or liabilities arising on goodwill are not recognised but are however recognised on separately identifiable intangible assets.
Deferred tax arising on the initial recognition of an asset or liability, other than a business combination, that at the time of the transaction affects
neither the accounting nor taxable profit or loss, is not recognised.
Charge to income statement in year
Asset brought forward
(Liability)/asset carried forward
The deferred tax (liability)/asset consists of the tax effect of temporary differences in respect of:
Deferred tax allowance on unvested share options
Shortfall of taxation allowances over depreciation on fixed assets
Total
2019
£’000
(115)
86
(29)
2019
£’000
6
(35)
(29)
2018
£’000
(16)
102
86
2018
£’000
98
(12)
86
At the year end there were share options not exercised with an intrinsic value for tax purposes of £44,534 (2018: £945,864). 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.
15. Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less loss allowances. The amortised cost of trade and other receivables is stated at 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.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECLs) for trade receivables at an amount equal to lifetime
ECLs. The ECLs on trade receivables are calculated based on actual historic credit loss experience over the preceding 10 years on the total
balance of non-credit impaired trade receivables. Accrued income relates to accrued management and performance fees earned but not yet
invoiced.
An analysis of the Group’s receivables is provided below:
Trade receivables
Accrued income
Other receivables
Prepayments
Total
2019
£’000
4,654
1,888
108
912
2018
£’000
5,279
582
56
858
7,562
6,775
All amounts are short term. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The Group has not renegotiated the terms of any receivables in the year ended 31 March 2019. The Group’s trade receivables are generally
short-term and do not contain significant financing components. Therefore, the Group has applied a simplified approach by using a provision
matrix to calculate lifetime expected credit losses based on actual credit loss experience. The Group has calculated lifetime expected credit
losses to be £nil, which is consistent with the last 25 years history of credit risk and reflects expected future recoverability issues.
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Record plc Annual Report 2019Financial statements
16. 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 assets 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 assets
Forward foreign exchange contracts held to hedge non-sterling based assets
Forward foreign exchange contracts held for trading
Total
Derivative financial liabilities
Forward foreign exchange contracts held for trading
Total
2019
£’000
106
58
164
2019
£’000
(109)
(109)
2018
£’000
199
67
266
2018
£’000
(29)
(29)
Derivative financial instruments held to hedge non-sterling based assets
At 31 March 2019 there were outstanding contracts with a principal value of £5,940,246 (31 March 2018: £9,951,185) 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 2019. The Group does not apply hedge accounting.
The net gain or loss on forward foreign exchange contracts held to hedge non-sterling based assets is as follows:
Derivative financial instruments held to hedge non-sterling based assets
Net (loss)/gain on forward foreign exchange contracts at fair value through profit or loss
2019
£’000
(242)
2018
£’000
424
Derivative financial instruments held for trading
The Record Currency – FTSE FRB10 Index Fund, the Record Currency – Emerging Market Currency Fund and the Record – Currency
Multi-Strategy 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, the Record Currency – FTSE FRB10 Index Fund
and the Record – Currency Multi-Strategy Fund were classified as held for trading throughout the period. The derivative financial instruments held
by the Record Currency – Emerging Market Currency Fund were classified as held for trading from inception until 21 March 2018 when the fund
was deconsolidated from the Group financial statements.
At 31 March 2019 there were outstanding contracts with a principal value of £24,323,080 (31 March 2018: £15,012,327).
The net gain or loss on derivative financial instruments held for trading for the year was as follows:
Derivative financial instruments held for trading
Net gain on forward foreign exchange contracts and foreign exchange options at fair value through profit or loss
2019
£’000
—
2018
£’000
53
95
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
17. 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.
Group
Company
Assets managed as cash
Bank deposits with maturities > 3 months
Treasury bills with maturities > 3 months
2019
£’000
10,735
—
2018
£’000
9,698
500
Money market instruments with maturities > 3 months
10,735
10,198
2019
£’000
2018
£’000
—
—
—
3
—
3
3
—
—
—
2
—
2
2
2,150
10,816
12,966
23,701
4,411
8,087
12,498
22,696
Group
Company
2019
£’000
10,624
2,180
73
89
2018
£’000
3,827
2,680
4,610
1,381
12,966
12,498
2019
£’000
2018
£’000
3
—
—
—
3
2
—
—
—
2
Cash
Bank deposits with maturities <= 3 months
Cash and cash equivalents
Total assets managed as cash
Cash and cash equivalents
Cash and cash equivalents – sterling
Cash and cash equivalents – USD
Cash and cash equivalents – CHF
Cash and cash equivalents – other currencies
Total cash and cash equivalents
The Group cash and cash equivalents balance incorporates the cash and cash equivalents held by any fund deemed to be under control of
Record plc (refer to notes 1 and 13 for explanation of accounting treatment). As at 31 March 2019, the cash and cash equivalents held by the
seed funds over which the Group had control totalled £5,107,670 (31 March 2018: £4,969,231) and the money market instruments with
maturities > 3 months held by these funds were £675,577 (31 March 2018: £500,000). As at 31 March 2019, the cash and cash equivalents held
by Trade Record over which the Group had control was £80,000 (31 March 2018: £nil). At 31 March 2019, Trade Record did not hold any money
market instruments with maturities > 3 months (2018: £nil).
96
Record plc Annual Report 2019Financial statements
18. 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
Trade payables
Amounts owed to Group undertaking
Other payables
Other tax and social security
Accruals
Total
Group
Company
2019
£’000
294
—
4
257
2,181
2,736
2018
£’000
325
—
4
234
2,067
2,630
2019
£’000
—
55
—
—
—
55
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
Current tax liabilities
Corporation tax
Group
Company
2019
£’000
692
2018
£’000
399
2019
£’000
14
2018
£’000
—
1,093
—
—
—
1,093
2018
£’000
—
19. Financial liabilities
Record plc has made investments in a number of funds where it is in a position to be able to control those funds by virtue of the size of its holding.
When Record plc is not the only investor in such funds and the external investment instrument does not meet the definition of an equity instrument
under IAS 32 then the instrument is classified as a financial liability. The financial liabilities are measured at cost plus movement in value of the third
party investment in the fund.
Record has seeded four funds which have been active during the year ended 31 March 2019.
The Record Currency – FTSE FRB10 Index 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 current and prior years. Similarly, the Record Currency – Strategy Development Fund is
considered to be under control of the Group as Record plc has had a 100% holding throughout both years.
The Record Currency – Emerging Market Currency Fund was under the control of the Group until 21 March 2018, when the redemption of units
by two Record plc Directors meant that Record could no longer control the fund as the combined holding of Record plc and its Directors no
longer constituted a majority interest from that point onwards. This fund has therefore been consolidated into the Group’s financial statements until
21 March 2018.
In February 2018, the Company invested in the Record – Currency Multi-Strategy Fund. The Group has controlled this fund since inception and
the fund is consolidated in full on a line-by-line basis as the combined holding of Record plc and its Directors has constituted a majority interest
since inception.
The mark to market value of units held by investors in these funds other than Record plc are shown as financial liabilities in the Group financial
statements, in accordance with IFRS.
Mark to market value of external holding in seeded funds consolidated into the accounts of the Record Group
Record Currency – FTSE FRB10 Index Fund
Record – Currency Multi-Strategy Fund
Record Currency – Strategy Development Fund
Total financial liabilities
2019
£’000
479
2,142
—
2,621
2018
£’000
459
2,008
—
2,467
The financial liabilities relate only to the fair value of the external investors’ holding in the seed funds, and are in no sense debt.
97
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
20. Issued 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.
Authorised
Ordinary shares of 0.025p each
Called up, allotted and fully paid
Ordinary shares of 0.025p each
2019
2018
£’000
Number
£’000
Number
100 400,000,000
100 400,000,000
50 199,054,325
50 199,054,325
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.
Record plc shares held by EBT as at 31 March 2017
Adjustment for net sales by EBT
Record plc shares held by EBT as at 31 March 2018
Adjustment for net purchases by EBT
Record plc shares held by EBT as at 31 March 2019
Number
3,618,995
(1,225,563)
2,393,432
592,604
2,986,036
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 21.
21. Share-based payments
During the year ended 31 March 2019 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 have been 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 allocated to the profit share pool between 25% and 35% of
operating profits. 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 £804,422 (2018: £682,758). 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.
98
Record plc Annual Report 2019Financial statements
Prior to 1 October 2017, if an individual elected to receive Additional Shares, the Group simultaneously awarded a Matching Share value amount
using a multiple decided by the Remuneration Committee. The multiple was dependent on the level of seniority of the employee. The number of
shares was 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 for the year
ended 31 March 2018 was £141,078.
From 1 October 2017, as a result of changes to the Group Profit Share Scheme, Matching Shares are no longer awarded by the group and
therefore the charge to profit or loss in respect of Matching Shares for the year ended 31 March 2019 was £nil.
Shares awarded under the Group Profit Share Scheme do not include any vesting restrictions but rather restrictions over subsequent sale and
transfer. All shares which are the subject of share awards vest immediately and are transferred to a nominee allowing the employee, as beneficial
owner to retain full rights in respect of the shares purchased. However, 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
• Matching Shares and Additional Shares received in respect of elections made prior to 1 October 2017 – 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 have been 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 and using quoted share prices.
The Record plc Share Scheme allows deferred share awards to be granted to employees and Directors in the Record Group. Part 1 of the
Record plc Share Scheme allows the grant of tax-unapproved (“Unapproved”) options to employees and Directors and Part 2 allows the grant
of HMRC tax-approved (“Approved”) options to employees and Directors. 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 have
historically been granted with a market value exercise price in the same way as for the Approved options.
Options over an aggregate of 935,000 shares were granted under the Share Scheme during the year (2018: 3,975,000), of which 370,000 were
made subject to Unapproved options and 565,000 to Approved options (2018: 2,261,000 made subject to Unapproved options and 1,714,000
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 565,000 Approved options issued to employees on 29 March 2019 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 370,000 Unapproved options issued to employees on 29 March 2019 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 fair value of the services provided by employees has been calculated indirectly by reference to the fair value of the equity instruments granted.
Fair value amounts for the options granted in the year ended 31 March 2019 were determined using a Black-Scholes option-pricing method and
the following assumptions:
Model input
Share price
Exercise price
Expected volatility
Option life
Risk-free interest rate (%)
Expected volatility is based on historical volatility.
Weighted average value
28.3p
28.3p
36%
3.4 years
1.03%
The Group share-based payment expense in respect of the Share Scheme was £140,236 for the year ended 31 March 2019 (2018: £197,740).
99
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
The Record plc Share Scheme continued
21. Share-based payments continued
b.
Outstanding share options
At 31 March 2019, the total number of ordinary shares of 0.025p outstanding under Record plc share compensation schemes was 12,291,703
(2018: 14,343,147). These deferred share awards and options are over issued shares, a proportion of which are hedged by shares held in an EBT.
Details of outstanding share options awarded to employees are set out below:
Granted
Exercised
Lapsed/ At 31 March
2019
forfeited
Earliest
vesting date
Latest
vesting date1
Exercise
price
Date of grant
18/11/13
26/11/14
24/03/15
24/03/15
01/12/15
27/01/16
27/01/16
27/01/16
27/01/16
30/11/16
30/11/16
30/11/16
31/01/17
26/01/18
26/01/18
26/01/18
26/01/18
29/03/19
29/03/19
At 1 April
2018
466,667
1,440,000
228,000
744,500
1,800,000
918,750
685,209
327,500
72,500
288,574
1,117,500
2,200,000
78,947
1,662,000
328,000
52,000
1,933,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(350,000)
116,667
18/11/16
18/11/18
£0.3000
(720,000)
720,000
26/11/17
26/11/19
£0.3586
(114,000)
114,000
24/03/19
24/03/19
£0.3450
(372,250)
(37,500)
334,750
24/03/16
24/03/19
£0.3450
—
(600,000)
1,200,000
01/12/18
01/12/20
£0.2888
(306,250)
(50,000)
562,500
27/01/17
27/01/20
£0.2450
—
—
—
—
—
—
—
—
—
—
—
—
—
(27,612)
657,597
27/01/20
27/01/20
£0.2450
(109,166)
218,334
27/01/19
27/01/21
£0.2450
(24,166)
48,334
27/01/19
27/01/21
£0.2450
—
288,574
30/11/20
30/11/20
£0.34072
(75,000)
1,042,500
30/11/17
30/11/20
£0.34072
—
—
2,200,000
30/11/19
30/11/21
£0.34072
78,947
31/01/21
31/01/21
£0.38000
(200,500)
1,461,500
26/01/22
26/01/23
£0.4350
—
—
—
—
—
328,000
26/01/19
26/01/23
£0.4350
52,000
26/01/21
26/01/24
£0.4350
1,933,000
26/01/21
26/01/24
£0.4350
565,000
29/03/23
29/03/24
£0.2830
370,000
29/03/20
29/03/24
£0.2830
—
—
565,000
370,000
Total options
14,343,147
935,000
(678,500)
(2,307,944) 12,291,703
Weighted average
exercise price of options
£0.35
£0.28
£0.30
£0.33
£0.35
1. Under the terms of the deeds of grants, options are exercisable for twelve months following the vesting date.
During the year 678,500 options were exercised. The weighted average share price at date of exercise was £0.41. At 31 March 2019 a total of
1,276,167 options had vested and were exercisable.
The Directors’ interests in the combined share schemes are as follows:
Record plc Group Profit Share Scheme (interest in restricted share awards)
James Wood-Collins
Leslie Hill
Bob Noyen
Steve Cullen
Record plc Share Scheme (interest in unvested share options)
James Wood-Collins
Leslie Hill
Bob Noyen
Steve Cullen
100
Ordinary shares held as at
31 March
2019
31 March
2018
318,832
375,408
802,837
1,008,518
318,832
324,614
264,286
361,076
2,426,667
3,286,667
1,406,667
1,800,000
1,406,667
1,800,000
1,131,667
1,405,000
Record plc Annual Report 2019Financial statements
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 an
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.
Record’s average EPS growth
>RPI growth + 13%
>RPI growth + 10%, =RPI growth + 7%, =RPI growth + 4%, = 3 months
Cash and cash equivalents
Total financial assets
2019
£’000
4,654
1,888
108
164
10,735
12,966
30,515
2018
£’000
5,279
582
56
266
10,198
12,498
28,879
102
Record plc Annual Report 2019Financial statements
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:
At 31 March 2019
Trade receivables
Accrued income
Total
At 31 March 2018
Trade receivables
Accrued income
Total
Carrying
amount
£’000
Neither
impaired nor
past due
£’000
0‑3 months
past due
£’000
More than
3 months
past due
£’000
4,654
1,888
6,542
Carrying
amount
£’000
5,279
582
5,861
4,369
1,888
6,257
96%
285
—
285
4%
—
—
—
0%
Neither
impaired nor
past due
£’000
0-3 months
past due
£’000
More than
3 months
past due
£’000
4,551
582
5,133
88%
726
—
726
12%
2
—
2
0%
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 57 debtors’ balances (2018: 52). The largest individual debtor corresponds to 19% of the total balance
(2018: 18%). Debtor days, based on the generally accepted calculation of debtor days, is 68 days (2018: 81 days). This reflects the quarterly
billing cycle used by the Group for the vast majority of its fees. As at 31 March 2019, 4.4% of debt was overdue (2018: 12.4%). No debtors’
balances have been renegotiated during the year or in the prior year.
Liquidity risk
The Group is exposed to liquidity risk, namely that it may be unable to meet its payment obligations as they fall due. The Group maintains
sufficient cash and marketable securities to be able to meet all such obligations. Management review cash flow forecasts on a regular basis to
determine whether the Group has sufficient cash reserves to meet the future working capital requirements and to take advantage of business
opportunities. The average creditor payment period is 21 days (2018: 22 days).
Contractual maturity analysis for financial liabilities:
At 31 March 2019
Trade payables
Accruals
Derivative financial liabilities
Total
At 31 March 2018
Trade payables
Accruals
Derivative financial liabilities
Total
Carrying
amount
£’000
294
2,181
109
2,584
Carrying
amount
£’000
325
2,067
29
2,421
Due or due Due between Due between
3 months
in less than
and 1 year
1 month
£’000
£’000
1 and
3 months
£’000
294
40
33
367
—
1,041
76
1,117
—
1,100
—
1,100
Due or due Due between Due between
3 months
in less than
and 1 year
1 month
£’000
£’000
1 and
3 months
£’000
325
164
25
514
—
838
4
842
—
1,065
—
1,065
103
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
22. Financial risk management continued
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 held 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.
Fixed rate Floating rate
£’000
£’000
No
interest rate
£’000
Total
£’000
4,654
1,888
108
164
10,735
12,966
30,515
4,654
1,888
108
164
—
—
6,814
(294)
(294)
(2,181)
(2,181)
(109)
(2,621)
(5,205)
No
interest rate
£’000
(109)
(2,621)
(5,205)
Total
£’000
5,279
5,279
582
56
266
—
—
6,183
582
56
266
10,198
12,498
28,879
(325)
(325)
(2,067)
(2,067)
(29)
(2,467)
(4,888)
(29)
(2,467)
(4,888)
—
—
—
—
10,735
10,816
21,551
—
—
—
—
—
—
—
—
—
—
2,150
2,150
—
—
—
—
—
Fixed rate
£’000
Floating rate
£’000
—
—
—
—
10,198
8,087
18,285
—
—
—
—
—
—
—
—
—
—
4,411
4,411
—
—
—
—
—
Interest rate profiles
At 31 March 2019
Financial assets
Trade receivables
Accrued income
Other receivables
Derivative financial assets at fair value through profit or loss
Money market instruments with maturities > 3 months
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Financial liabilities
Total financial liabilities
At 31 March 2018
Financial assets
Trade receivables
Accrued income
Other receivables
Derivative financial assets at fair value through profit or loss
Money market instruments with maturities > 3 months
Cash and cash equivalents
Total financial assets
Financial liabilities
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Financial liabilities
Total financial liabilities
104
Record plc Annual Report 2019Financial statements
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. The principal currencies giving rise to this risk are the US dollar,
the Swiss franc, the euro and the Canadian dollar.
During the year ended 31 March 2019, the Group invoiced the following amounts in currencies other than sterling:
Swiss franc (CHF)
US dollar (USD)
Euro (EUR)
Canadian dollar (CAD)
Australian dollar (AUD)
Swedish krona (SEK)
Singapore dollar (SGD)
Local
currency
value
‘000
Value in
reporting
currency
£’000
13,454
10,440
9,428
3,349
660
390
1,161
31
7,247
2,961
383
215
99
18
21,363
The value of revenues for the year ended 31 March 2019 that were denominated in currencies other than sterling was £21.4 million
(31 March 2018: £20.1 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.
The cash denominated in currencies other than sterling (refer to note 17), is covered by the Group’s hedging process, therefore the Directors
consider that the foreign currency risk on cash balances is not material.
Foreign currency risk – sensitivity analysis
The Group has considered the sensitivity to exchange rate movements by considering the impact on those revenues, costs, assets and liabilities
denominated in foreign currencies as experienced in the given period.
Sterling weakening by 10% against the dollar
Sterling strengthening by 10% against the dollar
Sterling weakening by 10% against the Swiss franc
Sterling strengthening by 10% against the Swiss franc
Impact on profit after tax
for the year ended 31 March
Impact on total equity
as at 31 March
2019
£’000
346
(346)
565
(565)
2018
£’000
469
(469)
593
(593)
2019
£’000
346
(346)
565
(565)
2018
£’000
469
(469)
593
(593)
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 on a historical basis and market expectations for future movement. When applied to the average sterling/USD exchange rate of
£/$1.31 this would result in sterling weakening to £/$1.18 and sterling strengthening to £/$1.46.
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 on a historical basis and market expectations for future movement. When applied to the average sterling/CHF exchange rate of
£/CHF1.30 this would result in sterling weakening to £/CHF1.18 and sterling strengthening to £/CHF1.44.
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.
105
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
23. 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:
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for hedging
Forward foreign exchange contracts used for seed funds
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging
Total
Financial assets at fair value through profit or loss
Forward foreign exchange contracts used for hedging
Forward foreign exchange contracts used for seed funds
Financial liabilities at fair value through profit or loss
Forward foreign exchange contracts used for hedging
Total
2019
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
106
58
(109)
55
2018
£’000
199
67
(29)
237
—
—
—
—
106
58
(109)
55
—
—
—
—
Level 1
£’000
Level 2
£’000
Level 3
£’000
—
—
—
—
199
67
(29)
237
—
—
—
—
There have been no transfers between levels in the reporting period (2018: none).
Basis for classification of financial instruments classified as level 2 within the fair value hierarchy
Both forward foreign exchange contracts and options are classified as level 2. Both of these instruments are traded on an active market. Options
are valued using an industry standard model with inputs based on observable market data whilst the fair value of forward foreign exchange
contracts may be established using interpolation of observable market data rather than from a quoted price.
Classes and fair value of financial instruments
It is the Directors’ opinion that the carrying value of all financial instruments approximates to their fair value.
106
Record plc Annual Report 2019Financial statements
Categories of financial instrument
At 31 March 2019
Trade and other receivables (excludes prepayments)
Money market instruments with maturities > 3 months
Cash and cash equivalents
Derivative financial assets at fair value through profit or loss
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Total
At 31 March 2018
Trade and other receivables (excludes prepayments)
Money market instruments with maturities > 3 months
Cash and cash equivalents
Derivative financial assets at fair value through profit or loss
Trade payables
Accruals
Derivative financial liabilities at fair value through profit or loss
Note
15
17
17
16
18
18
16
Note
15
17
17
16
18
18
16
Financial
liabilities
Liabilities
at fair value
Loans and measured at through profit through profit
or loss
receivables amortised cost
£’000
£’000
Assets at
fair value
or loss
£’000
£’000
6,650
10,735
12,966
—
—
—
—
—
—
—
—
(294)
(2,181)
—
—
—
—
164
—
—
—
30,351
(2,475)
164
—
—
—
—
—
—
(109)
(109)
Financial
liabilities
Loans and measured at
receivables amortised cost
£’000
£’000
Assets at
fair value
through profit
or loss
£’000
Liabilities
at fair value
through profit
or loss
£’000
5,917
10,198
12,498
—
—
—
—
—
—
—
—
(325)
(2,067)
—
—
—
—
266
—
—
—
—
—
—
—
—
—
(29)
(29)
Total
28,613
(2,392)
266
24. Operating lease commitments
Leases in which substantially all the risks and rewards are retained by the lessor are classified as operating leases. Payments made under these
operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Benefits received as an incentive to sign a lease,
whatever form they may take, are credited to profit or loss on a straight-line basis over the lease term.
On 7 September 2016, the Group signed a new lease on premises at Second and Third Floors, Morgan House, Madeira Walk, Windsor, at an
annual commitment of £507,603, expiring 1 September 2022.
On 16 March 2016, the Group signed a three year lease on premises in New York City, at an average annual commitment of $125,840. The lease
expired on 31 May 2019.
On 1 June 2017, the Group signed a five year lease on premises in Zürich, at an annual commitment of CHF 49,680.
The Group has considered the risks and rewards of ownership of the leased properties, and considers that they remain with the lessors.
Consequently, all property leases are recognised as operating leases.
At 31 March 2019 the Group had commitments under non-cancellable operating leases relating to land and buildings as set out below:
Not later than one year
Later than one year and not later than five years
Later than five years
Total
2019
£’000
562
1,310
—
1,872
2018
£’000
637
1,866
—
2,503
On 27 March 2019 the Group signed a contract with a 22 month rental term on offices in New York City starting 1 May 2019. Management does
not consider that this contract fulfils the definition of a lease. The contract has an average annual commitment of $83,844.
107
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
25. Cash flow from operating activities
Group
This note should be read in conjunction with the cash flow statements. It provides a reconciliation to show how operating profit, which is based on
accounting rules, translates to cash flows.
Operating profit
Adjustments for non-cash movements:
Profit on disposal of property, plant and equipment
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net release of shares previously held by EBT
Share-based payments
Decrease in cash on deconsolidation of Record Currency – Emerging Market Currency Fund (see note 13)
Other non-cash movements
Changes in working capital
(Increase)/decrease in receivables
Increase/(decrease) in payables
Decrease/(increase) in other financial assets
Increase in other financial liabilities
Cash inflow from operating activities
Interest paid
Corporation taxes paid
Net cash inflow from operating activities
Company
Operating profit/(loss)
Adjustment for:
(Gain)/loss on investments
Other
Changes in working capital
(Decrease)/increase in payables
Cash (outflow)/inflow from operating activities
Corporation taxes paid
2019
£’000
7,876
—
221
74
443
87
—
(172)
8,529
(772)
106
102
234
8,199
(22)
(1,151)
7,026
2019
£’000
99
(26)
(73)
(1,038)
(1,038)
(5)
2018
£’000
7,272
1
206
99
845
(93)
(4,062)
(270)
3,998
172
(371)
(204)
734
4,329
(10)
(1,573)
2,746
2018
£’000
(123)
7
116
1,082
1,082
(67)
Net cash (outflow)/inflow from operating activities
(1,043)
1,015
108
Record plc Annual Report 2019Financial statements
26. Related parties transactions
Company
Details of transactions between the Company and other Group undertakings, which are related parties of the Company, are shown below:
Transactions with subsidiaries
The Company’s subsidiary undertakings are listed in note 13, which includes a description of the nature of their business.
Amounts due to subsidiaries
Net dividends received from subsidiaries
2019
£’000
2018
£’000
(55)
(1,093)
6,600
16,810
Amounts owed to and by related parties will be settled in cash. No guarantees have been given or received. No provisions for doubtful debts have
been raised against amounts outstanding (2018: £nil). No expense has been recognised during the year in respect of bad or doubtful debts due
from related parties.
Investment in Trade Record
On 22 March 2019, Record plc subscribed £40,000 for 40 per cent of the ordinary share capital of Trade Record.
Group
Transactions or balances between Group entities have been eliminated on consolidation and in accordance with IAS 24, are not disclosed in
this note.
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
The dividends paid to key management personnel in the year ended 31 March 2019 totalled £2,981,053 (2018: £3,651,092).
Directors’ remuneration
Emoluments (excluding pension contribution)
Pension contribution (including payments made in lieu of pension contributions)
Total
2019
£’000
5,411
204
889
6,504
2019
£’000
2,421
165
2,586
2018
£’000
4,965
185
1,172
6,322
2018
£’000
2,357
166
2,523
During the year, one Director of the Company (2018: one) participated in the Group Personal Pension Plan, a defined contribution scheme.
Transactions with Trade Record Ltd
On 22 March 2019, Record plc directors Leslie Hill and Bob Noyen each subscribed £20,000 for 20% of the ordinary share capital of Trade
Record. The directors of Trade Record are Leslie Hill, director of Record plc, and Rebecca Venis, an existing employee of one of
Record’s subsidiary companies and who also owns 20% of the ordinary share capital of Trade Record.
109
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
For the year ended 31 March 2019
27. Capital management
The Group’s objectives when managing capital are (i) to safeguard the Group’s ability to continue as a going concern, (ii) to provide an adequate
return to shareholders, and (iii) to meet regulatory capital requirements set by the UK Financial Conduct Authority.
The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in light of
changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return capital to shareholders, or issue new shares. The Group had no debt in the
current or prior financial year and consequently does not calculate a debt-to-adjusted capital ratio.
The Group’s capital is managed within the categories set out below:
Regulatory capital
Other operating capital
Operating capital
Seed capital
Total capital
2019
£m
9.3
13.7
23.0
4.3
27.3
2018
£m
9.1
13.3
22.4
4.2
26.6
Operating capital is intended to cover the regulatory capital requirement plus capital required for day to day operational purposes and other
investment purposes. The Directors consider that the other operating capital significantly exceeds the actual day to day operational requirements.
Seed capital is the capital deployed to support the growth of new funds. Seed capital is limited to 25% of the Group’s total capital.
For regulatory capital purposes Record plc is subject to consolidated financial supervision by the Financial Conduct Authority (“FCA”). Our
regulatory capital requirements are in accordance with FCA rules and consistent with the Capital Requirements Directive. Our financial resources
have exceeded our financial resource requirements (regulatory capital requirements) at all times during the year. Further information is provided in
the Business Review.
28. Ultimate controlling party
As at 31 March 2019 the Company had no ultimate controlling party, nor at 31 March 2018.
29. Post reporting date events
No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation.
110
Record plc Annual Report 2019Financial statements
FIVE YEAR SUMMARY
Year ended 31 March
Management fees
Performance fees
Other revenue
Revenue
Cost of sales
Gross profit
Operating expenses
Other income / (expenditure)
Operating profit
Net interest
Profit before taxation
Taxation
Profit after taxation
Basic EPS (pence)
Ordinary dividend (pence)
Special dividend (pence)
Restated
2015
£’000
2016
£’000
2017
£’000
Audited
2018
£’000
2019
£’000
20,255
20,941
22,718
23,497
22,308
480
70
315
163
—
234
—
337
2,333
332
20,805
21,419
22,952
23,834
24,973
(148)
(221)
(298)
(311)
(385)
20,657
21,198
22,654
23,523
24,588
(13,373)
(14,123)
(15,067)
(16,424)
(16,704)
60
7,344
146
7,490
(1,708)
5,782
2.66
1.65
—
(154)
6,921
143
7,064
(1,523)
5,541
2.55
1.65
—
157
7,744
112
7,856
(1,540)
6,316
2.91
2.00
0.91
173
7,272
56
7,328
(1,182)
6,146
3.03
2.30
0.50
(8)
7,876
113
7,989
(1,559)
6,430
3.27
2.30
0.69
111
Record plc Annual Report 2019Strategic reportGovernanceFinancial statementsAdditional information
DEFINITIONS
“AIFMD”
“Articles”
“AUME”
“Board”
“bps”
“Companies Act”
“Company”
“$” or “dollars”
“EBT”
“EM”
“EPS”
“ESG”
“ETF”
“EU”
“FRB”
Alternative Investment Fund Managers Directive
The Articles of Association of the Company
Assets under management equivalents
Company’s Board of Directors
Basis point = 100th of a per cent
Every statute (including any orders, regulations or other subordinate legislation made under it)
from time to time in force concerning companies in so far as it applies to the Company
Record plc
All references to dollars or $ symbol are to the currency of the US unless stated otherwise
Employee Benefit Trust
Emerging Markets
Earnings per share
Environmental, social and governance
Exchange traded fund
European Union
Forward Rate Bias
“Group” or “Record”
The Company and/or any one of its subsidiary undertakings
“IAS”
International Accounting Standards
“IFRS” or “IFRSs”
International Financial Reporting Standards
“IPO”
“KPI”
“KRI”
“LGPS”
Initial Public Offering
Key Performance Indicator
Key Risk Indicator
Local Government Pension Schemes
“London Stock Exchange”
London Stock Exchange plc
“MIFID”
“Official List”
“TIPS”
“US”
Markets in Financial Instruments Directive
The official list of the Financial Conduct Authority
US government treasury inflation protected securities
United States of America
AUME definition
The basis for measuring AUME differs for each product and is detailed below:
• Dynamic Hedging mandates – total amount of clients’ investment portfolios denominated in liquid foreign currencies, and hence
capable (under the terms of the relevant mandate) of being hedged;
• Passive Hedging mandates – the aggregate nominal amount of passive hedges actually outstanding in respect of each client;
• Currency for Return mandates – the maximum aggregate nominal amount of outstanding forward contracts for each client;
• Multi-product mandates – the chargeable mandate size for each client;
• Cash – the total set aside by clients and managed and/or “equitised” using futures by Record.
112
Record plc Annual Report 2019Additional information INFORMATION FOR SHAREHOLDERS
Record plc
Record plc is a public limited company incorporated in the UK.
Registered in England and Wales
Company No. 1927640
Registered office
Morgan House
Madeira Walk
Windsor
Berkshire
SL4 1EP
United Kingdom
Tel: +44 (0)1753 852 222
Fax: +44 (0)1753 852 224
Principal UK trading subsidiaries
Record Currency Management Limited
Registered in England and Wales
Company No. 1710736
Record Group Services Limited
Registered in England and Wales
Company No. 1927639
Both principal UK trading subsidiaries are based in Windsor.
Further information on Record plc can be found on the Group’s
website: www.recordcm.com
27 June 2019
28 June 2019
25 July 2019
31 July 2019
Dates for 2019 dividend
Ex-dividend date
Record date
Annual General Meeting
Final dividend payment date
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Further information about the Registrar is available on their website
www.linkassetservices.com
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Record plc
Morgan House
Madeira Walk
Windsor
Berkshire SL4 1EP
T: +44 (0)1753 852 222
marketing@recordcm.com
www.recordcm.com