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Modernisation and
diversification…
building on our
strong core
Record plc
Annual Report 2021
Our purpose
Our purpose: to deliver innovative,
thought leading and practical
solutions to the needs of currency
market users and investors,
while maintaining independence
and integrity.
Strategic report
Our highlights
Assets Under Management
Equivalents1 (“AUME”)
$80.1bn
2020: $58.6bn
Earnings per share
2.75p
2020: 3.26p
Revenue
£25.4m
2020: £25.6m
Ordinary dividend per share
2.30p
2020: 2.30p
Profit before tax
£6.2m
2020: £7.7m
Special dividend per share
0.45p
2020: 0.41p
+37%
-15.6%
-0.8%
0%
-20.5%
+9.8%
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. AUME is an alternative performance measure and further detail
on how it is defined is provided on page 136.
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10
12
16
20
24
28
36
39
42
49
51
52
54
62
64
70
86
89
91
100
107
135
135
136
Strategic report
pages 1 to 49
Our highlights
About us
Chairman’s statement
Chief Executive Officer’s statement
Business model
Products and distribution
Products
Markets
Strategic priorities and goals
Key performance indicators
Sustainability
Operating review
Financial review
Risk management
Viability statement
Governance
pages 50 to 89
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 90 to 134
Independent auditor’s report
Financial statements
Notes to the financial statements
Additional information
pages 135 and 136
Five year summary
Information for shareholders
Definitions
Strategic reportGovernanceFinancial statementsAdditional information 2
Record plc Annual Report 2021
About us
A client-focused approach.
A culture of integrity. Strengths
developed through 38 years
of experience.
$50.3bn
AUME
Europe (excluding UK)
63%
Who we are
We are an independent, specialist currency and derivatives
manager with over 38 years of experience which has allowed
us to develop a deep and fundamental understanding of the
risk and reward opportunities within those markets. Record plc
has a premium listing on the Main Market of the
London Stock Exchange.
What we do
We listen to our clients and use our years of experience
and thought leadership in currency and derivatives markets
to develop solutions tailored to their individual investment
challenges, including robust and innovative products
and market-leading service levels.
Our range of products typically assist our clients in
achieving either their risk-reduction or return-seeking
objectives, or alternatively our bespoke Multi-product
mandates have combined risk-reducing and
return-seeking objectives.
Our clients are largely institutions, including pension funds,
charities, foundations, endowments, and family offices,
as well as other fund managers and corporate clients.
Our success will depend upon reinforcing, and further
building on, the cornerstones to our strategy, which are:
Quality client
experience
Technology
and
innovation
Talent
development
New York
Quality client experience
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.
Direct communication between our
operational and administrative specialists
with each client’s own internal functions
builds on the general level of interaction
with the client and underpins the overall
“trusted adviser” relationship.
Strategic report
3
$19.2bn
$8.2bn
$2.4bn
AUME
North America
24%
AUME
United Kingdom
10%
AUME
Rest of the world
3%
Talent development
We aim to develop and retain
a diverse pool of talent which
is key to delivering our “best
in class” business model and
ensuring the long-term stability
of the business.
Windsor
Germany
Switzerland
Technology and innovation
Over the last 38 years Record
has developed a leading position
in its sector. Our knowledge of
the currency and derivatives
market is sustained by our
research, and results in
innovative products and
continued process enhancement
whilst incorporating advances
in technology.
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 the majority of its
operations are performed and
controlled. The Group also has offices
in New York, Zürich and Düsseldorf.
In addition to these main markets,
we continue to explore new
geographical markets which
we believe may offer
attractive opportunities.
Key
Head Office (Windsor)
Sales office
Client locations
Strategic reportGovernanceFinancial statementsAdditional information 4
Record plc Annual Report 2021
Chairman’s statement
In a challenging year,
our focus has been first
on resilience, and then on
creating the environment
for change.
In my statement last
year, I stated that 2020
would be noted as the
Coronavirus year,
and little did I expect
to be writing this year’s
statement whilst still
emerging from the
restrictions imposed
under the UK’s third
lockdown.
Neil Record
Chairman
In combination with the final outcome of
the Brexit negotiations, this year has indeed
been one of challenge and uncertainty
where a firm’s ability to adapt has been
fundamental to its continued success,
or in extremis its very existence.
Our business has responded well to the
challenges – our operational resilience
and commitment to both our clients and
our people remains uppermost, and our
strong and liquid balance sheet continues
to support the transition under the new
business strategy in terms of renewed
focus on growth, modernisation
and succession.
The two imperatives set out by the
Board last year were to orientate the
firm for growth, through a programme
focused on both modernisation and
diversification, and to establish a plan for
succession in the most senior executive
posts at Record. Significant progress
has been made in both with focus on the
development of new products including
Record’s EM Sustainable Finance Fund,
and also with changes seen at senior
management and Board level, further
details of which are set out below and in
Leslie Hill’s CEO report on page 6.
Financial overview
Growth in management fees of 8%
(+£1.7 million) offset the reduction in
performance fees of £1.7 million versus
FY-20, and consequently revenues
remained broadly in line with last year
at £25.4 million (2020: £25.6 million).
Increased costs linked to the restructuring
of the business and investment both in our
people and technology led to a 20%
decrease in operating profit, broadly
in line with expectations, to £6.1 million
(2020: £7.6 million), and a reduction
in earnings per share to 2.75 pence
(2020: 3.26 pence).
Further information on AUME flows and
financial results can be found in the
Operating review and Financial review
sections on pages 36 and 39 respectively.
Group strategy
Beyond ensuring Record’s ability to survive
enforced transition to home working,
the first complete year under Leslie Hill’s
leadership has been focused on delivering
modernisation, diversification and growth.
Modernisation is primarily related to the
firm’s IT capabilities. It has become clear
to the Board that Record’s IT infrastructure
is in need of upgrading and investment;
that the well-established client-server
business IT structure is giving way to
significant advances in technology.
This transition also opens the door to new
applications to streamline workflow and the
management of the large amount of data
that a modern firm like Record utilises.
To this end, approximately £0.4 million has
already been invested, with further
investment into new projects of
approximately £0.8 million anticipated in
the current financial year (FY-22), including
a mix of both operational and capital
expenditure.
Strategic report
5
The Board has also decided to
begin to diversify by widening Record’s
investment offerings beyond the existing
suite of currency-related products and
services. Several initiatives in this category
are now underway, and we will be reporting
them to investors when (and if) each
reaches implementation stage.
The Board is pleased with the progress
made in the year from the change in
strategy, as evidenced by the increases
in AUME and client numbers, the change
in revenue mix towards higher-margin
products, and the development of new
products including the Record EM
Sustainable Finance Fund.
As previously announced on 4 June,
Jane Tufnell will be stepping down from
the Board for personal reasons at the
Company AGM on 27 July. On behalf of
the Board, I would like to thank Jane for
her invaluable contribution and dedication
since joining Record’s Board back in 2015,
and wish her well for the future.
Record’s last decade was one of
consolidation following the extraordinary
period of the Global Financial Crisis.
The Board has now decided to change
the focus from consolidation to growth,
and has asked management to put growth
at the top of the priority list. As mentioned
above, it is highly likely that some new lines
of business will not include currency
management as their primary focus.
Further detail on our strategy and goals
and our progress made against initiatives
can be found under “Strategic priorities
and goals” on pages 20 to 23.
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 (2020: 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 (2020: 2.30 pence). The interim
dividend of 1.15 pence per share was
paid on 31 December 2020, and the final
ordinary dividend of 1.15 pence per share
will be paid on 10 August 2021 to
shareholders on the register at 2 July 2021,
subject to shareholders’ approval.
Notwithstanding the more positive outlook
arising from the end of the third lockdown in
the UK, the Board remains conscious of the
potential longer-term effects from the
pandemic and the uncertainty that remains
in this respect. Consequently the need
remains for a measured and prudent
approach to ensuring the business retains
sufficient capital and liquidity to withstand
any negative impacts arising, whilst also
allowing the business to continue to invest in
implementing its new strategy.
Against this backdrop, the Group has
reviewed its capital requirements taking
account of the current market conditions
and its anticipated costs and regulatory
capital requirements, set against the solid
platform for revenue growth delivered from
the increase in AUME and the expected
product launch in the current financial year.
Consequently, the Board considers the
current level of capital to be sufficient and is
announcing a special dividend of 0.45 pence
per share to be paid simultaneously with the
final ordinary dividend. Total dividends for
the year are 2.75 pence per share (2020:
2.71 pence) compared to earnings per share
of 2.75 pence per share (2020: 3.26 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
Bob Noyen stepped down from the
Board of Record plc in February 2021
and subsequently relinquished his role
as Chief Investment Officer, effective
31 March 2021. Bob agreed to assist with
the transition and maintenance of client
relationships by providing continued
support over the next financial year.
Bob’s knowledge, market experience
and energy have been invaluable over
almost 22 years at Record, and on behalf
of my colleagues I would like to thank him
and wish him well for the future.
Outlook
The covid-19 pandemic; the associated
switch to home working; and the
implications arising from the huge fiscal
support provided by many governments
has meant that the already difficult job of
forecasting the outlook has become even
more difficult. At the macro-level, the scale
of developed-country debt, the now
long-standing near-zero interest rates,
and the imperative to get economies back
on their feet means that both fiscal and
monetary policies are pointing strongly in the
same, expansionary, direction. While goods
and services inflation has been quiescent for
a decade or more, asset-price inflation,
especially in certain sectors, has been
rampant. Adding this background to a
renewed period of digitisation of core
service provision, and the rapidly rising
appetite for the elimination of fossil fuels
in industrialised economies, and there
appears to be a potent brew for change.
At a more geographic level, with Brexit
now complete, Record has established a
physical presence within the EU to minimise
any cross-border regulatory barriers.
In summary, the Board has set a course
that is designed to take advantage of the
opportunities that appear in this newly
uncertain era, while cognisant that
unpredictable change brings unanticipated
risks. I am confident that with our new
management in place we can deliver
on such opportunities.
Neil Record
Chairman
16 June 2021
Strategic reportGovernanceFinancial statementsAdditional information 6
Record plc Annual Report 2021
Chief Executive Officer’s
statement
Our AUME growth and
its diversification into our
higher-margin products
gives us a solid platform
for revenue growth
into FY-22.
Leslie Hill
Chief Executive Officer
We have had a very
busy year since our last
Annual Report to you all,
and lots of things have
gone rather well.
I see the challenges we face as similar to
those one would face when modernising
and improving a house whilst still living in it,
and also constantly receiving those much
valued paying guests who are our clients.
During the year we’ve made good progress
and we are, with care and careful planning,
seeing some real results which we can
share with you all.
Progress against strategy
Our deep desire to diversify our business,
both by showing new ideas to existing
clients, and also by engaging with entirely
new clients, is still at the heart of what we
are doing. The longevity of our client
relationships is a source of real pride to us
all and will continue; I often feel we are not
so good at getting clients (but getting
better as we offer more and better
products) but we are really good at keeping
them once we have them. Now if we can
combine that with exciting new projects
then I am confident we can move forward
over the next decade without
losing momentum.
What has gone well? I would like to show
you this by highlighting some of our key
staff and their contribution, as we are,
above all, a team effort.
Diversification
The move into some higher-margin
products, which I think should continue,
is critical to our long-term success.
Our EM Sustainable Finance Fund, which
we anticipate launching imminently, while
tricky to develop and set up, with a lot of
complex needs and requirements to
ensure it is robust and scaleable, is one
such example. We think this move into
both Impact and Sustainable investing is
one that our clients want and so will last,
and we plan to stay in the forefront of this
movement and keep investing, to ensure
we are always relevant. The Head of our
Swiss office Dr Jan Witte is to be
commended for his diligence, patience and
tenacity to get this project up and running.
He is a powerhouse, and a real pleasure
to work with.
Assets Under Management
Equivalents (“AUME”)
$80.1bn
2020: $58.6bn
+37%
Strategic report
7
Modernisation
Our modernisation plans, the work on our
tech stack, our processes and our in-house
capabilities is quite a long and complex
project. We are fortunate that the software
we need is now available at attractive
prices and we are finding that the growth
agenda at Record has increased our ability
to attract more talent into the team, from all
over the globe – perhaps one of the very
few silver linings to come out of the
pandemic. Our Director of IT and Strategic
Initiatives, Rebecca Venis, has shown us
how a really clever agile mind, coupled with
a perennial curiosity and an understanding
of the world of digital finance, together with
an apparently inexhaustible source of
energy, can be put to work with great
results. Her contribution has been and
continues to be awe-inspiring.
Succession
Our staff are our greatest asset and they
have worked hard over the last year, putting
their own wishes and desires to one side
to, in the words of Spike Lee “do the right
thing” in every way. If we did not have such
a great HR team in Kevin Ayles and
Liz Goddard we would be lost; they have
worked so hard at pastoral care throughout
a challenging period, whilst helping me
implement necessary changes to allow
for succession planning. They are both
great assets to Record – skilled, kind
and practical.
I am proud to say all of these staff are now
meaningful equity owners and we plan to
continue to roll out the share ownership
and options programme going forward,
so that everyone who is a big part of our
future can feel engaged, empowered
and sufficiently aligned.
After over 21 years at Record our CIO Bob
Noyen handed over to Dr Dmitri Tikhonov.
While we are glad to see Bob take a
well-earned reduction in hands-on
responsibility it is great to see Dmitri,
who has himself been at Record for over
18 years, step up and take the reins.
His calm and thoughtful approach to
solving our investment issues and
challenges is very welcome and his team
is delighted to have the chance to step up
themselves and take more responsibility.
Asset flows and financial performance
Solid progress has been made in growing
our AUME, which closed the year at
$80.1 billion, its highest ever level and
up 37% over last year. Total net inflows for
the year of $9.7 billion spread across our
hedging products and also our
Multi-product strategy were further
bolstered by positive movements both
in markets and FX of $8.4 billion and
$3.4 billion respectively. This AUME growth
and its diversification into our higher-margin
products, in addition to the expected new
fund launch, gives us a solid platform for
revenue growth into FY-22.
Detailed analysis of AUME is provided on
pages 36 to 38.
Whilst revenues of £25.4 million remained
broadly flat on last year, our increased
costs associated with the implementation
of our strategy have resulted in a decrease
to our short-term profitability broadly in line
with expectations, reducing our operating
margin to 24% (2020: 30%) and our
profit before tax by 19% to £6.2 million
(2020: £7.7 million).
The Financial review on pages 39 to 41
gives additional commentary.
Outlook
I am personally quite pleased with
the progress made during a difficult
and challenging first year at the helm.
Notwithstanding the short-term decrease
in our profits for FY-21, we go into FY-22
with our highest ever AUME, the
anticipated launch of our new EM
Sustainable Finance Fund in collaboration
with the largest Wealth Manager in
Switzerland, and with the benefits of our
modernisation starting to bear fruit.
First and foremost, we remain committed
to our clients and to our talented team of
employees who themselves have shown
great commitment and adaptability through
a period of external challenge and
internal change.
We also remain committed to our new
strategy, which I believe has already started
to deliver the growth, modernisation and
diversification that the business needs and
I look forward to building on this further into
FY-22 alongside the talented team we are
lucky enough to have here at Record.
Leslie Hill
Chief Executive Officer
16 June 2021
Strategic reportGovernanceFinancial statementsAdditional information 8
Record plc Annual Report 2021
Business model
Our business model depends on
our relationships and our people.
Relationships and resources
Our clients
Our experience
Our people
• We are client-led – 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 current
requirements and future
investment objectives, which
enables us to develop effective
solutions for their needs.
• We are a specialist currency
and derivatives manager
with over 38 years’ experience
– we have a fundamental
understanding of how currency
markets operate, which we
have used to develop a leading
position in managing currency and
derivatives for institutional clients.
• 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.
Technology and infrastructure
Investing in new technology is essential for ensuring our business remains competitive in terms of our client
servicing, our product innovation and productivity, and for maintaining profitability.
see page 22
Our operational infrastructure is built around how we service our clients and ensures a collaborative approach
across all sections of the business. Refer to “Technology and innovation” on page 22 for further information.
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.
see page 101
Our core stakeholder groups:
• Clients
• Our people
• Shareholders
• Society
• External suppliers
• Regulators
see pages 34
and 35
Strategic report
9
What we do
How we generate cash
Our investment process
We seek to identify and understand persistent patterns that exist
within currency markets that 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 client 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 alongside
the requirements of, and in collaboration with, our clients.
Our independence and transparency
We act as an independent agent for each of our clients.
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.
We are fully transparent in terms of our costs – our only source of
revenue is from client fees and we make no money from spreads.
Our 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 and derivatives mandates.
Our distribution
• Our products are delivered both through segregated mandates
and pooled fund structures to suit individual client requirements.
• We distribute both through 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.
More detailed information on our products and distribution
is provided on pages 10 to 14.
What we deliver
Our products see page 10
Premium client service see page 21
Rewarding careers see page 23
Thought leadership see page 22
Shareholder value see pages 24 and 25
Revenue generation
Our revenue comes from management fees and performance fees.
Management fees are charged based upon levels of Assets Under
Management Equivalents (“AUME”). Fee rates vary between
products and clients depending on factors such as product
type, mandate size and the level of tailoring to individual client
requirements. Performance fees are typically charged as a
percentage of investment performance above a benchmark
or a previous higher valuation “high water mark”.
Expenditure
Record is a service company and our biggest asset is our people.
The majority of the Group’s costs comprise personnel costs,
representing remuneration for individuals across all areas
of the business including the client-facing teams and the
teams responsible for managing the Group’s operations
and infrastructure. The Group also has non-personnel costs
representing, for example, the overheads incurred in running and
maintaining the offices day-to-day, and payments to suppliers.
Investment
Cash can be used for investment purposes such as the seeding
of new funds or investment into new infrastructure and technology.
Delivering value
By building strong relationships with our clients and providing high
levels of client service and tailored solutions, we generate value for
our clients, employees, shareholders and our other stakeholders.
Cash generative business model
Our business model is net cash generative, allowing us to remain
independent, self-financing with no external debt, and to return
surplus cash to our shareholders in the form of dividends.
Further details of cash generation can be found on page 103.
Net operating cash inflow:
£6.3 million
(FY-20: £6.5 million)
Closing share price:
70.0p
(FY-20: 26.3p)
Total dividends per share:
2.75p
(FY-20: 2.71p)
Strategic reportGovernanceFinancial statementsAdditional information 10
Record plc Annual Report 2021
Products and distribution
We aim to forge long-term partnerships with clients, acting
as their trusted adviser to fully understand their investment
objectives in order to develop effective solutions.
Another example marries Record’s in-house experience
with third party expertise, specifically in the area of supply
chain finance. In this case the core of the offering comes from
an Asian asset manager with unrivalled access to receivables
from the supply chains of leading Western corporates.
In combination with Record’s skill in designing solutions to
meet clients’ needs, as well as our investor network and client
service, we have an attractive offering to yield hungry investors,
whatever their base currency.
While we envisage that both of the strategies outlined will be
significant contributors to Record’s sales in the years to come,
we see this client-led, building block approach as being a
foundation of Record’s future success. As we develop our
collaborations and partnerships with institutional investors and
other managers, we see an expansion of our toolkit as being
a primary driver of growth in the business, increasing the value
we can add and our appeal to clients old and new.
Clients as partners
Paramount to developing desirable, valuable flagship products
is the input of, and engagement with, prospective clients so that
they truly meets their needs and are a solution to challenges
they face. Record has long prided itself on client retention and
exceptional levels of client service and this forms the base for
the creation of any new product or service.
Where possible, we aim to forge long-term partnerships with
clients, acting as their trusted advisers. Working in this way with
clients, where both sides understand the other’s capabilities and
desires, allows us to design solutions that directly address the
real investment challenges faced by them.
Strategic approach
Record’s strategic sales objective is to drive accelerated revenue
growth diversified by product, geography and client type. It aims
to achieve this objective with a sharp focus on the following four
items: a broad range of flagship products; strategic partnerships
with our clients and the highest levels of client service; strong
relationships with third parties including investment consultants;
and a targeted approach to the sales process leveraging
technology. As discussed elsewhere in this report, the
technological investment that the business is making is critical
for the distribution effort. On the one hand, this is expected to
underpin the sales and relationship management process.
On the other hand, it will enable us to deliver innovation within
our existing service suite as well as integrating new strategies
to continue to meet and exceed our clients’ needs.
Flagship products
Record has been a specialist currency manager for almost 40
years and continues to put tailored currency solutions, both risk
management and return-seeking, at the core of our offering.
This has led to two key mandate successes with US clients this
year where our pedigree in systematic investment processes
and experience managing large accounts has contributed
significantly to those wins.
However, we recognise that demand for such services is not
consistent from all investor types or at all times. Over the course
of FY-21, we have made significant progress in developing our
offering, listening carefully to the needs and desires of our
existing and prospective clients. These developments aim
to align the best of what Record can offer both in terms of
underlying product design and tailored implementation and
client service, with the challenges that we find our clients facing.
One such development is the Record EM Sustainable
Finance Fund in partnership with a large Swiss Wealth Manager,
more information on which is given in the case study on
page 15. The challenge identified was to find ethical debt
investments in Emerging Markets, which can potentially have
a positive impact in those countries and in their development.
Record has long-standing experience in Emerging Markets
as well as strong counterparty relationships and pioneering
expertise in ESG within the currency arena which have
enabled the design of a strategy to address the challenge
faced by that client.
Strategic report
11
Working with third parties
Investment consultants have long formed
a key part of Record’s client engagement
and sales strategy and have contributed
significantly to our success. That remains
as true as ever and we see a focus on
investment consultants playing a pivotal
role in our future growth. As the range of
services that we offer expands with both
flagship products and tailored solutions,
so does the scope for our engagement
with investment consultants and we aim
to draw on these partnerships and the
“best-in-class” idea generation from both
sides to expand our client reach.
Additionally, we intend to work closely with
a few carefully selected partners in order to
broaden our reach in certain target markets
and geographies and to accelerate product
development. We recognise that alongside
desirable products, trust is the key
ingredient in driving growth and putting
the right idea in front of the right person is
critical. Partnering with firms that are able
to leverage the right expertise helps us
to expand our reach and allows us to
present our solutions to the right investors
in the right way.
In the UK, there has been a renewed
focus on working with fellow asset
managers where we can add significant
value through both investment and
operational currency expertise as they
seek to broaden their investments and
client base geographically. We have also
seen significant interest from insurance
prospects looking for supply chain finance
and yield that sits comfortably under
solvency legislation.
European demand continues to be
characterised by two key themes: passive
currency risk management and the ever
present search for yield. The latter has seen
us lay some very exciting groundwork for
a suite of bespoke yielding products,
in collaboration with trusted partners.
Early market sounding has given indications
that these will prove popular with a new
European client base, struggling for
attractive investments in a world of
negative yields.
Finally, we have seen an uptick in demand
from Asia, historically a smaller market for
Record, including an appetite for active risk
management, as well as yield enhancements,
from rapidly internationalising institutional
investors in Asia.
A targeted approach
Like every other investment manager,
the pandemic has seen Record’s Client
Team grounded and glued to video calls.
While this has proven a challenge at times,
the embrace of technology across our
clients, prospects and partners has opened
up opportunities. With geographic borders
and physical distance less of a hindrance
than ever before, the team will be using
technology to expand its capabilities in
reaching a wider audience than was
previously possible. However, a wider
audience does bring the risk of a
diluted message and focus on real tangible
synergies between our capabilities and the
needs of our prospective clients is more
critical than ever.
Tailored geographic needs
Record has long appreciated the different
demand for services and products in
the various regions in which we operate,
focusing accordingly. Indeed these different
perspectives have been key to Record’s
success since a challenge on one side of
a currency pair can be an opportunity for
the other side.
These geographic differences continue to
be reflected in the demand we are seeing
for flagship products. The US continues
to demonstrate interest in Dynamic
Hedging, both for risk management and
return-seeking purposes, with the former
fuelled in significant part by the continued
uncertainty in the path of the US dollar.
Canadian interest also centres on Dynamic
Hedging strategies but driven more by
a desire to reduce and optimise the
currency risk embedded in increasingly
international exposures.
Strategic reportGovernanceFinancial statementsAdditional information 12
Record plc Annual Report 2021
Products
The Group’s suite of core products is split
into two main categories: Currency Risk
Management and Return-Seeking products.
Currency Risk Management
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 continually 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.
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, investment
judgement and specialised infrastructure
to identify the opportunities and then to
take advantage of them with a structured
and risk-managed approach.
Passive Hedging
Passive Hedging mandates have the
cost-effective reduction of currency risk
as their sole objective. This is achieved
through symmetrical and unbiased
elimination of currency exposure
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
Dynamic Hedging
Record’s Dynamic Hedging product is an
attractive alternative to Passive Hedging
and has reduction of currency volatility as
well as generating value as dual objectives.
The Dynamic Hedging product seeks to
allow our clients to benefit from foreign
currency strength while protecting them
from foreign currency weakness relative
to their own base currency.
Value is generated entirely through
the asymmetric reduction of pre-existing
currency risk and Dynamic Hedging’s
ability to outperform Passive Hedging is
dependent on trending in currency markets.
Signal Hedging
Record has a licensing agreement
with WisdomTree, the New
York-headquartered exchange-traded fund
and exchange-traded product sponsor and
asset manager, under which it provides
signals that are used to dynamically hedge
currency exposures within WisdomTree’s
rules-based index family, and which
includes the hedging of emerging
market currencies.
Since Record is not managing the
exchange-traded funds included under
such licences, 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”.
Audit and fiduciary execution
Record offers transparent and
cost-effective fiduciary execution for
clients wishing to undertake foreign
exchange transactions (spot and forward)
which are unrelated to their currency
hedging or investment mandates. All trades
are executed by Record (as agent) in the
client’s name, and in accordance with best
execution practices. Clients benefit from
both the wholesale pricing Record is able
to achieve for their trades, as well as from
the knowledge that their transactions are
undertaken on a best execution basis.
For clients whose FX transactions are
undertaken by a third party (e.g. FX
custodian), Record offers currency
audits using comprehensive price data
(both internal and externally sourced).
Our reports are able to shed light on the
quality of execution and highlight to our
clients where there may be scope
for improvement.
Emerging Market Momentum Hedging
Whilst Emerging Market (“EM”) currency
exposure is generally expected to
deliver positive returns through time,
EM currencies are more volatile than their
developed market counterparts and
are sensitive to many of the same
macroeconomic factors which drive local
equity and bond markets. This can add
further pressure to portfolio performance
during challenging market environments.
Record’s EM Momentum Hedging is
intended to help investors principally
concerned with drawdown protection by
improving the downside risks of holding
EM currency exposures. Through an early
warning indicator, EM currency exposure is
temporarily phased-out from the portfolio,
helping to protect investors during rapid
market sell-off phases.
Strategic report
13
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.
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.
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 Range Trading strategy exploits the
tendency for certain currency pairs to trade
within narrow ranges.
The philosophy comes from the
observation that spot rate volatility
is excessive when measured daily,
but dissipates over a one-to-three
month period. This stems from the fact
that demand and supply of FX over certain
time frames is random and disjointed,
resulting in the spot rate reacting to
maintain equilibrium in short-term supply
and demand. Much of the flow in the
FX markets is a by-product of economic
activity (importing or exporting of goods
or services, cross-border M&A transactions)
or a consequence of quasi-systematic
processes (such as passive rolling of
FX hedges). In view of the above,
many participants in the FX markets will
continue to transact despite adverse price
movements, informing our view that this is
a reliable risk premium.
Return-Seeking
Record’s Return-Seeking strategies have
the generation of investment return as their
principal objective.
Currency Multi-Strategy
The Currency Multi-Strategy range
includes five principal strategies, being
Carry, Emerging Market, Momentum,
Value and Range Trading, and it is possible
to offer these in either a segregated or
pooled fund structure.
These strategies can be combined
in different weightings that appeal to
particular market segments under Record’s
Multi-Strategy approach, which can be
applied as an “overlay” to help clients
achieve a variety of investment objectives,
and offers clients access to the main
sustainable 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. Further detail on each of the
five principal strands is given below:
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.
Strategic reportGovernanceFinancial statementsAdditional information 14
Record plc Annual Report 2021
Products continued
We also offer bespoke solutions
tailored to individual client requirements.
Return-Seeking continued
ESG in currency
Research has shown that the institutional
framework of a country plays an important
role in its economic growth, with better
institutions leading to higher growth and
also lower volatility, paving the way for
a more sustainable path for the country.
Our approach to ESG first reviews a wide
currency universe from an institutional,
social, and political perspective with the
objective of determining which currencies
to accept in our strategy. We then identify
pro-ESG factors towards which we can tilt
exposures, increasing the sustainability of
the overall portfolio whilst maintaining its
return-seeking characteristics. Factors
are reviewed both quantitatively and
qualitatively and are applied to tilt the
portfolio and to inform our discretionary
risk management. They are drawn from a
number of the United Nations Development
Programme’s (“UNDP’s”) Sustainable
Development Goals (“SDGs”) which
we believe serve as advanced indicators
for higher productivity growth; so by
systematically incorporating ESG in
alignment with the UNDP’s SDGs,
we expect to produce positive
risk-adjusted returns.
Record EM Sustainable Finance Fund
The fund was developed with the aim
of investing currency with impact by
combining strategic investment in
currencies, an underlay of impact bonds
and focused counterparty engagement.
A description of the academically
supported theory behind the strategy,
as well as more detail on how these three
factors are combined to provide sustainable
investment in less developed economies,
is provided on page 30 in the Sustainability
section of this report.
Multi-product
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
Record also provides ancillary services
including cash and liquidity management,
collateral management and
derivatives overlays.
Information on product investment
performance is given in the Operating
review section (pages 36 to 38).
Strategic report
15
Case study:
New product development:
Record EM Sustainable Finance Fund
Currency
for Return
The challenge
The solution
The outcome
Our new product, the Record
EM Sustainable Finance Fund, an
Irish-based UCITS ICAV developed in
collaboration with a large Swiss Wealth
Manager, is expected to launch shortly.
For more information on the strategy,
see page 30.
To design a strategy that leverages
currency investment to support
development in accordance with the
UN Sustainable Development Goals.
This is a unique proposition in an asset
class largely unexplored within the
realms of sustainable finance.
Emerging economies typically rely on
loans denominated in a foreign currency
to meet their development objectives.
Currency volatility, however, can act as
a barrier to the development of domestic
capital markets and the creation of
economic wealth. The costs of insuring
the currency risk can be high and
subject to large fluctuations, leaving
local communities unprotected and
vulnerable. This exchange rate
uncertainty creates significant problems
in deciding if and when to take a loan
and in assessing the feasibility of paying
it back in the long term. The challenge
included how best to explore the
balance between return-seeking
currency investment and sustainable
outcomes to deliver a strategy that
combines long-term sustainable
development with currency return.
Find out more about
Currency for Return on pages 13 and 37
Currency is an essential instrument
that can contribute to sustainable
development in less developed
economies and create a lasting
positive impact for local businesses
and communities. The innovative
solution blends investments in impact
bonds as an underlay strategy with a
diversified emerging market currency
overlay that captures currency
undervaluation and capital incentive
factors to maximise impact. The strategy
pursues sustainability by taking positions
in a currency which is underinvested
across at least one of the following four
dimensions: time, maturity, liquidity
and volatility. We deploy capital in aid
of delivering currency stabilisation in
emerging economies, contributing to the
development of the domestic financial
market structure thereby promoting
sustainable, inclusive growth.
The strategy is complemented
by an accompanying counterparty
engagement strategy that makes
execution consistent with the intentions
of the fund, by encouraging positive
environmental, social and governance
developments among counterparties
in our bank panel.
Strategic reportGovernanceFinancial statementsAdditional information 16
Record plc Annual Report 2021
Markets
Our market environment and industry trends
Our market
The currency market represents the biggest
and most liquid financial market available,
with exceptionally low transaction costs
and daily FX volumes averaging $6.6 trillion
(source: BIS Triennial Central Bank Survey
of Foreign Exchange and OTC Derivatives
Markets 2019). 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 we believe 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.
Global and macro trends
Inflation and ultra-low or negative
interest rates
The global pandemic cemented an era
of accommodative policy, epitomised by
ultra-low rates, multi-trillion dollar fiscal
packages, and major central bank asset
purchase programmes. Despite widespread
disruption to global activity and trade,
policy activism and the suppression of
the time value of money helped to contain
financial market volatility. It is the concern
of many that these well-intentioned actions
have inflated most traditional asset returns
and valuations, with the implication
that a repeat of such performance is not
organically possible without new policy
impulse. The best performing assets could
now be the riskiest, and as the pandemic
fades, investors must contend with
economic realities. Of utmost concern
is the prospect of rising inflation rates
as economies reopen, posing the threat
of disruption through forced central
bank tightening.
What this means for our business
Record’s Currency for Return strategies
are designed to target persistent market
patterns and risk premia. As economic,
political, and societal norms change, so
must our approach. As such, we constantly
challenge the assumptions underlying our
investment process. In particular,
the centrally managed nature of financial
markets and homogeneity of central bank
policy contributed to uniformity among
currencies and lower currency volatility.
We continued to adjust our investment
processes accordingly, for example by
improving the way we capture currency
value cycles, and extract growth premia
from Emerging Markets. More broadly,
the risks to traditional premia are seen
as validating the need for legitimate and
diversifying sources of return
through currency.
Extraordinary Federal Reserve policy
saw the US dollar take a round trip
from currency strength to weakness,
emphasising the benefits of active hedging
strategies; we have since seen enhanced
interest in Dynamic Hedging and in October
on-boarded a new institutional Dynamic
Hedging client. The prolonged anticipated
effects of the pandemic in Emerging
Markets are leading some investors to
reassess the benefits of holding certain
EM currencies. This has generated new
interest in the bespoke management of
EM currency exposures, for which we
have the tools, processes and know-how.
From a strategic hedging perspective, we
are working with clients to help understand
the risks and scenarios emanating from
uncertainty around inflation and
central bank normalisation.
Additionally, the bottoming out of yields
across the globe has most investors
searching high and low for yield, which
creates a double opportunity for Record.
Firstly in our well-established business
working with alternative asset managers,
particularly in private credit, since they are
seeing ever-increasing demand as the
yielding opportunities from the public
markets have evaporated. This is driving
both more interest in their strategies from
foreign investors and a push to source
assets in other jurisdictions, both of which
introduce currency management into the
equation. Secondly and in counterpoint to
the first, there is significantly more demand
for yielding, liquid strategies. Record has
collaborated with a trade finance specialist,
to be able to offer our clients access
to solutions centred on diversified,
short-dated exposure to investment grade
corporates. Initial engagement with clients
and prospects alike has been very strong
and we will work hard to develop this
opportunity further into FY-22.
Strategic report
17
Industry trends
Increase in demand for
sustainable investment products
The last twelve months has seen an
acceleration in the widespread
incorporation of sustainability-linked
factors in investment products as
investors become ever more focused on
resilience. With broad understanding that
“non-financial” data (climate, social,
governance, etc.) can more completely
fortify portfolios to weather global shocks,
asset managers have had to review the
remits of fiduciary duty to take account
of these fast-evolving investor preferences
and broader understanding of material risk.
Pandemic contagion flagged risks that
occur concomitant with an increasingly
interconnected world, reliant upon global
supply chains and geared by closely
intertwined national economies. Long-term
climate risks and the global consequences
of seemingly idiosyncratic sovereign-level
physical risks are therefore now better
comprehended in their magnitude, and the
importance of international co-operation
more seriously acknowledged. Investors
have translated macroeconomic risks into
portfolio risks, using frameworks such as
that of the Sustainability Accounting
Standards Board (“SASB”) to understand
what this means for the resilience of their
investments, and it is on asset managers
to respond with credible and prudent
sustainable solutions.
What this means for our business
Sustainability has been placed at the heart
of our business, both at an operations level
and ever-increasingly at the investment
level. In partnership with our clients,
we have designed and crafted original
sustainable solutions, as illustrated by
the recent development of the Record
EM Sustainable Finance Fund; displaying
thought leadership in an asset class
often forgone in sustainable investment
strategies. We look to continue
collaborating with our clients and other
research bodies to reach bespoke
sustainable solutions in the currency
space, and continue in leading the way
in our sector.
In keeping with our beliefs in responsible
investment, and meeting demand for
sustainable reporting within standardised
and trusted reporting frameworks, this year
we have reported according to the
recommendations of the Task Force for
Climate-related Financial Disclosures
(“TCFD”), completed our UN PRI annual
report, as well as released a Sustainability
Report detailing extensively how we
incorporate sustainability in every corner
of our business. Whilst the standardised
formats of the external reports are not
always a fit for FX investment strategies,
we continue to aim for transparency and
disclosure wherever possible.
Advances in technology
Over recent years technological advances
have changed the way in which
businesses in our sector need to operate.
This includes how data is collected and
analysed for investment purposes,
having the ability to trade using
electronic platforms and algorithms,
enabling improved client reporting
processes, and introducing efficiencies
in more manual processes and procedures.
The speed of change is dramatic and will
continue to change the way business is
done in our sector going forward.
What this means for our business
Technology has a critical role to play in our
business, both to create efficiency to deliver
reliable low-cost solutions for clients, and to
drive innovation in creating new products
and markets. Technologies such as artificial
intelligence and machine learning, as well
as improvements in data science and the
ability to utilise opportunities offered
through third party systems, can all
contribute to the aim of improving our
investment management products and
services. As a result, the need to continue
to observe and invest in technology
and innovation is paramount to protect
our capability to respond effectively to
disruption and change in our markets,
as well as to support our investment
management processes and systems,
improve client service and enhance our
operating efficiency and effectiveness.
Strategic reportGovernanceFinancial statementsAdditional information 18
Record plc Annual Report 2021
Markets continued
Market review
Review of the year ended
31 March 2021
The financial year began just a week
after the S&P500 bottomed out,
following the shuttering of economies
globally and a pause on all
non-essential activity in order to
stop the spread of the covid-19
virus. The first quarter of the year was
characterised by a relative stabilisation
in financial market conditions as the
unprecedented sudden stop in activity
ushered in large-scale stimulus
programmes from major central banks
and governments alike. By our
estimates, the G4 central banks alone
grew their balance sheets by over
$6 trillion during the financial year,
while debt to GDP in those same
countries is estimated to have risen
by 18% over the course of 2020.
In spite of the damage evident in the
real economy, these economy-saving
measures were enough to prevent a
broader credit crunch and what
many feared could have amounted
to a depression. To the contrary,
risk markets generally rose for the rest
of the year, with the S&P500 reaching
new highs as soon as August.
The rapid recovery of risk sentiment
would not have been possible without
the development of life-saving vaccines.
With reopening prospects tied to the
attainment of herd immunity, market
fluctuations followed closely the various
hurdles – including the discovery of
new and more contagious virus strains
– and advancements of the vaccine
development and deployment
process. By mid-financial year, market
participants could be more confident of
economic reopening in the year ahead.
Faced with the ongoing uncertainty
of the pandemic and a notable
inflation undershoot relative to its target,
in August the Federal Reserve unveiled
its Average Inflation Targeting
framework. This new flexible approach,
all else equal, would see the Federal
Reserve committing to looser policy
in order to make up for years of inflation
undershooting the bank’s target.
As markets looked through transitory
inflation weakness to higher expected
levels in the future, falling ex ante US
real yields weighed heavily on the
US dollar, especially versus cyclically
sensitive currencies like the Australian
dollar. This also supported a reflation in
Emerging Market assets through to the
end of the calendar year.
Aside from navigating the impact of
the pandemic, investors also had to
contend with the US elections between
November and January. In contrast to
expectations of a mixed result,
Democratic Presidential candidate
Joe Biden took the Presidency,
while his party maintained control
over the House, and gained narrow
control over the Senate via the state
of Georgia. Crucially, this laid the
groundwork for major fiscal
stimulus and, by the turn of the year,
expectations of robust vaccine rollouts
and a fiscally fuelled normalisation of
the output gap began to pressure US
fixed income. In turn, this allowed the
US dollar to recover some of its losses.
Meanwhile, the UK and EU managed
to bridge the Brexit hurdle in the nick
of time after months of intense
negotiations over competition rules
and other stickier agenda items, with
an EU/UK Trade and Cooperation
Agreement coming into law on the last
day of the calendar year. With the risk
of “No deal” and a subsequent hard
fallout of the EU in the rear-view mirror,
the pound has traded on stronger
footing, taking impetus from political
stabilisation, successful vaccine rollouts
and a more hawkish Bank of England
into 2021 – though divorce acrimony
between the UK and EU still remains in
periphery and long-term structural
post-Brexit effects have yet
to materialise.
Developed market risk assets remained
resilient through the end of the financial
year, however Emerging Markets ran
into some headwinds. Lacking the
economic degrees of freedom to hike
interest rates decisively in response
to higher US yields, the lagged rollout
of vaccines, new covid-19 waves,
and instances of idiosyncratic risks
generated volatility in some currencies.
For Russia, sanction risks resurfaced
under a more hawkish Biden
administration, while hard-earned
credibility at the Turkish central bank
unwound over a weekend following
the surprise dismissal of its
market-friendly governor.
Strategic report
19
Towards the end of the financial
year, and notwithstanding unforeseen
developments in virus variants, the end
of the pandemic started to come into
sight as countries (particularly in the
developed world) upped the ante with
mass inoculations. With that, so did
questions around the longer-term
implications of the economic measures
put in place to combat the downturn.
Principally, investors were left
questioning how governments
might handle the large debts accrued.
With austere policy being difficult to sell
politically, official default best avoided,
and without sustained high growth
rates, this raised the prospect of
a prolonged period of financially
repressive policies.
Relatedly, central banks began to
carefully consider their exit strategies
and investors were left wondering how
or if normalisation might be achieved
without financial market disruption.
The covid-19 pandemic proved to be
one of the largest economic shocks in
modern economic history, yet with the
well-intentioned actions of central
banks and governments, currency
volatility was contained over the
period. Therefore, the prospect of
policy tightening forced by a sudden
resurgence in inflation as economies
reopen remains a key risk in the minds
of investors going into the 2022
financial year.
Please refer to the Risk management
section on page 44 to see how the
Group has managed the impact of
the covid-19 pandemic.
US dollar trade-weighted spot exchange rate
Index, December 2019 = 100
110
105
100
95
90
Dec
2019
Jan
2020
Feb
2020
Mar
2020
Apr
2020
May
2020
Jun
2020
Jul
2020
Aug
2020
Sep
2020
Oct
2020
Nov
2020
Dec
2020
Jan
2021
Feb
2021
Mar
2021
Apr
2021
May
2021
Sources: Record, ICE, Macrobond.
Strategic reportGovernanceFinancial statementsAdditional information 20
Record plc Annual Report 2021
Strategic priorities and goals
Delivering innovative, thought-leading
and practical solutions while maintaining
independence and integrity.
We are a specialist currency
and derivatives manager
Strategy and goals
Our strategy of diversification, modernisation and planning for
succession is underpinned by the cornerstones of our business
philosophy, which are to give clients the best possible experience,
to continually invest in our technology and innovation, and to
develop our people to be the best that they can be.
Performance measurement
The Group uses key performance indicators (“KPIs”) to measure
and monitor the performance of the Group. The financial and
non-financial KPIs are presented on pages 24 to 27.
1
Quality client
experience
page 21
We aim to build strong, long-term “trusted adviser”
relationships with our clients.
This is achieved through providing the highest levels
of service to our clients through proactive relationships,
informing clients on currency markets and opportunities,
seeking to understand their currency and related
investment issues, and tailoring our products to
meet their individual requirements.
Measured by:
Revenue, AUME, client
numbers and client
longevity
Risks:
Strategy, people and
employment, regulatory
change, operational
and investment
2
Technology
and innovation
page 22
3
Talent
development
page 23
We aim to differentiate Record from our competitors
by reinforcing our thought leadership through innovation
and by investing in technology.
This is achieved through devising and implementing
innovative solutions to meet unique client requirements
in new products and services and by enhancing existing
products and strategies. Advances in technology help
us to ensure a scalable, robust and efficient method
of delivery for our products and services.
We aim to develop and retain a diverse pool of
talent which is key both to delivery of a “best in class”
business model, and to the long-term stability of
the business.
This is achieved through strong recruitment, career
development and support systems to identify and
retain talent aligned with both our culture and plans
for generational change.
Measured by:
Operating profit margin,
EPS, DPS, AUME and
client numbers
Risks:
Strategy, concentration,
margin compression, people
and employment, regulatory
change, operational
and investment
Measured by:
EPS, AUME, average
number of employees,
staff retention and
employees
with equity interest
Risks:
Strategy, people and
employment and investment
Strategic report
21
Quality client experience
1
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 and
related investment issues and tailoring our products to meet their individual requirements.
Initiatives
• Focus on generational change
to plan for future stability for
business and client relationships
• Develop new products aligned
with investor demand for
ESG-related and sustainable
finance strategies
• Focus on opportunities
for existing clients to benefit
from product enhancements
and complementary services
alongside current product range
Progress
• New Sustainability Office and
Committee will reinforce our
commitment to develop
responsible investment strategies
• Retention of the existing client
base and revenue against the
pressures that the covid-19
pandemic exerted
• Development of two new flagship
product offerings in collaboration
with external partners for
distribution in current financial
year (FY-22)
Priorities
• Significantly diversify product
offerings, in particular new flagship
products
• Leverage strong existing
client relationships to develop
new strategies
•
Invest in technology to enhance
the service offering to clients and
the overall client experience
• Continue to diversify product
offering with selected third
party relationships
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,
Germany 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.
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.
Find out more about our products and distribution on pages 10
to 15.
Strategic reportGovernanceFinancial statementsAdditional information 22
Record plc Annual Report 2021
Strategic priorities and goals continued
Technology and innovation
2
We continue to occupy a unique position in the market by building on and reinforcing our
experience and thought leadership through our use of technology and delivering innovative
solutions to our clients. As the environment and the needs of our clients evolve, we also continue
to adapt our product offering in addition to how these products are accessed to better suit the
operational requirements of clients.
Priorities
• Focus on opportunities for client
collaboration and client-led
product development
• Review opportunities for
introducing third party systems
to improve trading functionality,
operational efficiency and
investment capability
• Continued investment in research
to enhance existing products
and services
• Further develop Trade Finance
opportunity with both new and
existing clients
Initiatives
• Diversification of products
and services through strategic
partnerships, research,
and innovation
• Continue to expand our
dedication to ESG and
sustainability through firm culture,
engagement and product creation
• Deliver complementary investment
solutions for our strategies to
support our global client base
•
Identify opportunities for
incorporating new technology
focused on enhancing clients’
experience, improving efficiency
of processes and to improve
operational resilience
• Expand our experience,
knowledge and track record
in trading and evaluating
Frontier currencies
• To support flexible and remote
working for all staff to improve
talent acquisition and retention
Progress
• Designed and built the Record
EM Sustainable Finance Fund
in partnership with a Swiss
Wealth Manager
• Established a Senior
Sustainability Office and
Sustainability Committee
• Engaged directly with liquidity
providers and counterparties
to our clients using our bespoke
ESG rankings and evaluation
methodology
• Partnered in development of
a new Trade Finance strategy
• Adopted a new data capture and
transformation platform, Xceptor,
to bring efficiencies and improve
our client offering
• Developed and established
a track record trading Frontier
currencies as part of an EM
client mandate
• Disaster recovery and business
continuity capability enhanced
to ensure the firm can support
flexible working and working
from home
Collaborative infrastructure
The Group’s operational infrastructure is built around how
we service our clients and ensures a collaborative approach
to promote innovation across all sections of the business,
as well as alongside our strategic partners. 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, which enables us to cross-pollinate advancements
across mandates.
We maintain a purpose-built and fully integrated end-to-end
operational process to allow for scalable and customisable
implementation of our products. The success of our working
approach is evidenced by the launch of new products in
collaboration with partners, new strategies in conjunction with
clients, and delivering solutions designed specifically around
our clients and their needs.
Strategic report
23
Talent development
3
We aim to develop and retain a diverse pool of talent which is key both to delivery
of a “best in class” business model, and to the long-term stability of the business.
Initiatives
• To ensure the wellbeing of all
of our staff working from home
during the covid-19
lockdown periods
• To consider the shape of
future work patterns to align
the interests of our employees
with those of our business
• Alignment of pension
contributions across all
staff grades by April 2022
• Trialling the accelerator course ran
by Advancing Women Executives
(“AWE”), which aims to provide
relevant training to progress the
careers of mid-level women and
under-represented professionals
Progress
•
Internal promotions made to
restructure the sales team and
for CIO succession
• All staff were provided with the
necessary equipment and support
to facilitate full remote working
throughout the pandemic
•
Investment in technology to
enhance employees’ working
practices and efficiencies
• Continuation of workforce
development and training
on areas such as a
Micro-Aggressions workshop
to highlight unconscious bias
and tackling discrimination
• Pension contributions now fully
aligned across all staff grades,
effective April 2021
Priorities
• To liaise with staff to carefully
plan for the transition back to
our offices
• To review and consider the shape
of future work patterns to align the
interests of our employees
with those of our business
• Continue to plan for generational
change and to recognise and
reward talent through
internal promotion
• To continue to invest in
the development, retention,
wellbeing and diversity of our
talented employees
Recruitment
Staff retention, motivation and development
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 the future. The process continues
with a comprehensive induction programme for all new joiners
to allow them to adapt to the specialist environment
within Record.
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’s Share Scheme, Profit Share Scheme, Joint Share
Ownership Plan and the 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 2021, the proportion of employee
shareholders stood at 68% (2020: 69%).
Strategic reportGovernanceFinancial statementsAdditional information 24
Record plc Annual Report 2021
Key performance indicators
Measuring our performance
against our strategy.
Financial KPIs
Revenue
(£m)
Revenue is earned mainly from the
provision of currency management
services in the form of management
fees and performance fees.
Operating profit margin
(%)
Basic earnings per share
(“EPS”) (pence per share)
Operating profit margin is an alternative
performance measure, calculated by
dividing operating profit by revenue.
The Group aims to create shareholder
value over the long term, illustrated by
a consistent growth in EPS.
2021
2020
2019
2018
2017
25.4
2021
24
25.6
2020
25.0
23.8
23.0
2019
2018
2017
2021
2020
2019
2018
30
32
31
34
2017
2.75
3.26
3.27
3.03
2.91
Why this is important
Revenue is a key indicator of client
experience, growth and a key driver of
profitability. Growth in AUME resulted in an
8% increase in management fees, although
challenging market conditions meant this
was offset by a corresponding decrease in
performance fees of £1.7 million.
Link to strategy
1 Quality client experience
2 Technology and innovation
Why this is important
EPS measures the overall effectiveness
of the business model and drives both our
dividend policy and the value generated for
shareholders. Similarly to operating profit,
EPS has been impacted in the short term
by the increase in costs arising from the
implementation of the new strategy.
Link to strategy
1 Quality client experience
2 Technology and innovation
3 Talent development
Why this is important
Operating profit margin is an indicator
of the efficiency of the business in turning
revenue into profit. Whilst revenues were
broadly maintained for the year, costs
increased as a result of restructuring
and investing in technology, which have
impacted the profitability of the business
in the short term. Further information can
be found in the Financial review section on
page 39.
The Group aims to increase the operating
profit margin over time through investment
in resources and technology to maintain its
premium products and services, whilst
increasing operating efficiency and
developing more diversified revenue
streams in higher-margin products.
Link to strategy
1 Quality client experience
2 Technology and innovation
3 Talent development
Strategic report
25
The Board and Executive Committee use both financial and
non-financial key performance indicators (“KPIs”) to monitor
and measure the performance of the Group against its strategic
priorities. Some KPIs link to specific strategic areas as noted
below, whilst others represent higher level key metrics in terms
of the Group’s business and financial performance.
Dividends per share (“DPS”) (pence per share)
The Group’s policy is that total distributions in any year will be covered by earnings.
The Group aims to pay a progressive ordinary dividend and return surplus capital to
shareholders where it is in excess of business requirements, usually in the form of
special dividends.
Ordinary
Special
2021
2020
2019
2018
2017
2.30
2021
0.45
2.30
2.30
2.30
2.00
2020
0.41
2019
2018
2017
0.69
0.50
0.91
Why this is important
Repeatable dividend payments illustrate the cash generative nature of Record’s business,
and its strength in converting profits into cash and providing a suitable return to
shareholders. The ordinary dividend per share is unchanged on last year. The special
dividend per share has increased by 0.04 pence, resulting in a 1.5% increase in total
dividends to 2.75 pence per share (2020: 2.71 pence per share).
Link to strategy
1 Quality client experience
2 Technology and innovation
3 Talent development
Strategic reportGovernanceFinancial statementsAdditional information 26
Record plc Annual Report 2021
Key performance indicators continued
Measuring our performance
against our strategy.
Non-financial KPIs
AUME
($ billion)
Clients
Client numbers represent the number of
separate legal entities that have appointed
Record directly as an investment manager
or invested in a Record fund at the year
end, and acts as a broad indicator of
business growth.
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. AUME is an
alternative performance measure and
further detail on how it is defined is
provided on page 136.
Client longevity
(%)
Client longevity measures how long Record
has been providing currency management
services to each client with a mandate
active as at 31 March 2021.
2021
2020
2019
2018
2017
80.1
2021
89
> 10 years
24%
58.6
57.3
62.2
58.2
2020
2019
2018
2017
72
6-10 years
12%
65
60
59
3-6 years
1-3 years
0-1 year
18%
25%
21%
Why this is important
AUME is a key driver of future revenue
and an indicator of business growth.
AUME increased by 37% for the year,
including net inflows of $9.7 billion
diversified across product lines.
Link to strategy
1 Quality client experience
2 Technology and innovation
3 Talent development
Why this is important
The sustained growth in client numbers is
indicative of successful client engagement,
quality client experience and the building
of strong “trusted adviser” relationships.
Why this is important
Client longevity is both an indicator
of recent client growth, and also of the
Group’s success in sustaining quality client
relationships through investment cycles.
Link to strategy
1 Quality client experience
Link to strategy
1 Quality client experience
Strategic report
27
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.
2021
2020
2019
2018
2017
83
82
2021
2020
85
2019
81
73
2018
2017
90
2021
81
84
2020
2019
93
2018
83
2017
68
69
70
72
68
Why this is important
Average employee numbers is an indicator
of growth and also of how effectively the
Group is using technology to make
processes more efficient.
Link to strategy
2 Technology and innovation
3 Talent development
Why this is important
The Group’s third cornerstone is
talent development, which includes
the development and retention of our
talented employees. Whilst every business
expects a degree of employee turnover,
the monitoring of employee retention acts
as a general indicator for factors affecting
our employees’ wellbeing, development,
and issues such as longer-term succession.
Why this is important
The alignment of employee interests with
those of our shareholders is an important
factor in ensuring the longer-term success
of our business and is an important tool
in managing generational change.
Link to strategy
3 Talent development
Link to strategy
3 Talent development
Strategic reportGovernanceFinancial statementsAdditional information 28
Record plc Annual Report 2021
Sustainability
Sustainability encompasses many aspects of
business operations, including both strategy
and investment as well as business practice,
community engagement and our workforce.
Responsible investment
People and diversity
Environment
Find out more on pages 29 to 30
Find out more on pages 31 and 32
Find out more on page 33
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, are detailed on pages 34 and 35.
We believe that all stakeholders are
beneficiaries of environmentally friendly
business practice and socially responsible
investment. Record is therefore committed
to being a company with a culture which
places sustainability, corporate
responsibility and community
engagement firmly at the centre
of priorities.
Section 172 Companies Act 2006
We set out on pages 34 and 35 our key
stakeholder groups, their material issues
and how we engage with them. Each
stakeholder group requires a tailored
engagement approach to foster effective
and mutually beneficial relationships.
By understanding our stakeholders,
we can factor into Boardroom discussions
the potential impact of our decisions on
each stakeholder group and consider their
needs and concerns, in accordance with
s172 of the Companies Act 2006.
This in turn ensures we deliver solutions
our clients want and need, continue to
work effectively with our colleagues
and suppliers, comply with regulatory
requirements, make a positive contribution
to local communities and achieve long-term
sustainable returns for our investors.
During the year, the Board made
decisions to deliver against our strategy,
whilst considering the different interests
of our stakeholder groups and the impact
of key decisions upon them. The following
provides an overview of some of the key
decisions taken and how integral our
stakeholders are in the Board’s
decision-making process:
(a) The establishment of a German
subsidiary, Record Asset Management
GmbH, in November 2020. Further
details are on page 66.
Acting in a fair and responsible manner
is a core element of our business practice,
more information on which can be found in
our separate Sustainability Report.
(b) Record established a Joint Share
Ownership Plan (“JSOP”) for the next
generation of management. Further
details are on page 74.
(c) The Record Sustainability Office was
established during the year. Further
details are on page 29.
Strategic report
29
Responsible investment
Governance
Sustainability organisational chart
Record plc Board
In 2020, Record cemented its sustainability
governance structure, creating the role of
Sustainability Officer to dedicate resources
into managing and co-ordinating the
various efforts across the firm to embed
sustainability. The Sustainability Office
was thence created, incorporating the
pre-existing Sustainability Committee
(formerly named ESG Committee) and
combining with a Senior Sustainability
Office which brings together department
heads on a monthly basis, and is chaired
by the CEO, to set sustainability firmly on
the agenda of all departments and
co-ordinate activity across the business.
The Sustainability Officer acts as conduit
between the two committees, representing
and voicing the views of the Sustainability
Committee at the senior level.
The Sustainability Committee has
formalised the key officer roles to delegate
responsibility in key areas of sustainability,
namely Corporate Social Responsibility
(“CSR”), Responsible Investment (“RI”) and
Climate Change. In this we hope to expand
the scope of our efforts by utilising more
time and resources, and engaging more of
our workforce to have responsibility on
these key components.
Oversees
Reports to
Senior Sustainability Office (“SSO”)
Chief Executive Officer
Head of Economic Research
Chief Investment Officer
Head of Trading
Head of Human Resources
Sustainability Officer
Head of European Sales
Advises
Reports to
Sustainability Committee
Chair
Sustainability Officer
CSR
Office Sustainability officers
Diversity officers
Sustainable finance
ESG officers
Impact officers
Engagement officers
Climate officers
Strategic reportGovernanceFinancial statementsAdditional information 30
Record plc Annual Report 2021
Sustainability continued
Responsible investment continued
Philosophy
Record Emerging Market
Sustainable Finance Fund
Record has identified responsible
investment as an essential prerequisite to
successful, resilient and prudent investment
management. Consideration of
environmental, social, and governance
(“ESG”) factors within investment strategy
was a natural extension of its corporate
philosophy, and continues to infuse its
strategy development and perception of
risk factors going forward. 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. This manifested in the creation
of one of the first ESG Emerging Market
Currency for Return strategies in 2018,
and has continued to evolve since into
a focus on sustainable investment
with impact.
Collaboration
Record is actively exploring ways to
collaborate with external parties, including
clients who might wish to apply the
methodology to reflect their own specific
preferences and views on various elements
of sustainable finance. Record’s research
is ongoing, responding to improvements
in available data, as well as developing
and improving on its own strategies and
building and innovating new approaches
to maintain its place at the forefront of
research in such a fast-developing space.
During 2020, Record continued to
pioneer research in this space, developing
an Emerging Market Sustainable Finance
product that combines strategic investment
in currencies, impact bond collateral and
counterparty engagement to nurture and
enhance development in the currency
universe countries.
Currency
The Record EM Sustainable Finance
strategy aims to stabilise currencies,
which in turn can facilitate development
and harness the growth potential in
developing countries, in accordance with
the academically supported theory that
EM currency stability is a key prerequisite
for equitable and sustainable economic
and social development.
Correctly deployed, currency is an
essential tool in contributing to sustainable
development in less developed economies
and in creating a lasting positive impact.
This is achieved via two channels: the
Stabilisation Factor and the Capital
Incentive Factor. The fund seeks also to
widen the universe of currencies,
extending to more illiquid currencies in
order to broaden the scope of impact.
Collateral
In 2019 Record began using its own
capital to invest in Impact Bonds,
organised through international and
regional multilateral organisations which
align with the UN Sustainable Development
Goals (“SDGs”). Record believed this would
not only aid development and achieve
impact, but also presented an opportunity
to gain experience in dealing, holding and
reporting on Impact Bonds which
underscored the collateral component
of the EM Sustainable Finance Fund.
The collateral strategy uses cash
and invests in US dollar-denominated
sustainable development bonds which are
primarily issued by highly rated multilateral
development banks (“MDBs”). The strategy
can also invest in other impact debt
instruments such as green, social and
sustainability bonds issued by sovereigns
and agencies. The collateral strategy
is designed for investors who desire
to make a positive economic, social
and environmental impact by channelling
financial resources to sustainable projects
in low and middle-income economies.
Counterparty engagement
Our Counterparty Engagement Strategy
creates a watertight strategy which aligns
our execution with the aims of the overall
strategy. Further, our banks can be
considered as part of the financial
supply chain. ESG risks associated
with counterparties are thereby a
supply chain risk.
We thereby evaluate our counterparty bank
panel using primary, AI and third party ESG
data to create an aggregated proprietary
ESG score, which is then used to direct
flows towards more sustainable banks.
Crucially, this is paired with regular
engagement calls and quarterly reports
to encourage progress on key areas
such as diversity, fossil fuel financing and
misconduct, internalising the externalities
of our banks on wider stakeholders.
Strategic report
31
People and diversity
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 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. After a successful year
working remotely, the Group is looking
forward to welcoming everyone back into
the office with the introduction of a hybrid
working pattern to allow everyone to fully
utilise the positives of both working from
home and in the office.
The office environment and culture promote
staff development and training. All staff are
invited to participate in 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.
In addition, the Group continues to provide
a number of other benefits to employees
including pension, private medical cover,
life insurance, permanent health insurance,
maternity and shared parental benefits,
lunchtime fitness classes and subsidised
gym membership. A new ultra-low emission
(“ULEV”) car benefit scheme was
implemented to continue our commitment
to sustainability through employee benefits.
All employees participate in 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.
All employees are also offered the
Employee Assistance Programme,
which provides 24/7 confidential telephone
support from qualified counsellors as well
as online computerised cognitive
behavioural therapy, to support anyone
struggling with their mental health.
We organised a Company-wide talk
with Insuring Women’s Futures (“IWF”),
which highlighted the differences in men’s
and women’s financial journeys, and how
our financial lives have changed since
covid-19. In February 2021 we also held
a Micro-Aggressions workshop to highlight
issues such as unconscious bias and
tackling discrimination.
The Group has an established internship
programme for students and during the
year welcomed interns from Oxford
University, the University of Warwick
and the University of Bath.
Staff retention (%)
FY-21
FY-20
FY-19
90%
81%
84%
Human rights
Record complies fully with appropriate
human rights legislation in the countries
in which it operates.
Strategic reportGovernanceFinancial statementsAdditional information 32
Record plc Annual Report 2021
Sustainability continued
People and diversity continued
Diversity and inclusion
The Group’s aims include ensuring that all
staff are provided with equal opportunities
and that the workplace is free of
discrimination. It also 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.
Two affinity networks were introduced in
2020 in order to celebrate, support and
recognise the diversity of our staff, and also
set a diverse agenda amid recruitment and
development efforts. The Ethnic Diversity
Network (“EDN”) and Gender Equality
Network (“GEN”) seek to engage all staff
in discussions and celebrations of diversity,
hosting training sessions, socials, and topic
discussions over the year. The networks
also seek to engage with industry and
community-wide initiatives, conducting
key support for charities and initiatives
such as Destiny Transformers and Insuring
Women’s Futures.
The gender diversity within the Group is shown below:
Gender balance
As at 31 March 2021
Board Directors
Senior management
Other staff
All employees
Female
Male
number
% number
%
3
5
25
33
50%
21%
49%
41%
3
19
26
48
50%
79%
51%
59%
See our separate Sustainability Report for our Gender Pay Gap and further diversity
data and more information on our diversity initiatives.
Community
Record recognises its obligations and
responsibility to contribute to the wider
community outside of the firm. Over the
course of the year, the Group made
charitable donations totalling £19,247.
Our charitable giving is focused on
employee choice, with the Group matching
employee donations and sponsorship. The
Group continues to encourage employees
to participate in fundraising activities for
charitable causes and this year employees
participated in a variety of events, including
charity lunches and fundraising
competitions. Examples of supported
charities and causes included The Ashford
and St Peter’s Hospital Charitable Fund,
Berkshire Women’s Aid, the Great Ormond
Street Stocking Appeal, Alexander Devine
Children’s Hospice Service, and Destiny
Transformers. A scheme allowing UK
employees to give to charity through
the payroll is also offered.
Charitable donations (£’000)
FY-21
19.2
FY-20
15.2
FY-19
16.8
We also provide financial assistance
to students studying at Balliol College,
Oxford through a 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.
Strategic report
33
Environment
Energy consumption (kWh 000)1,3
FY-21
82
90
FY-20
163
592
Scope 2
Scope 3
Location-based methodology (Tonnes of CO2e)1,3
FY-21
19
80
FY-20
42
198
Scope 2
Scope 3
Market-based methodology (Tonnes of CO2e)1,3
FY-21
28
80
FY-20
68
198
Scope 2
Scope 3
Energy and GHG emissions annual % change2,3
Reporting category
Scope 1
Scope 2
Scope 3
Total
Scope 1, 2 & 3 CO2e
Intensity ratio:
tonnes CO2e/FTE
Energy
consumption
UK & offshore
Location-based
methodology
UK & offshore
Market-based
methodology
UK & offshore
—
-50%
-85%
-77%
—
-54%
-60%
-59%
—
-54%
-60%
-58%
-61%
-61%
1. Scope 1 emissions were zero for the reported years.
2. Scope 1 covers combustion of gas & combustion of fuel for transport purposes. Scope 2 covers
purchased electricity. Scope 3 covers business travel in rental cars and employee-owned vehicles;
premises waste, water, and T&D losses; business travel; outbound deliveries; commuting;
and homeworking. The total CO2e intensity ratio is calculated as the total CO2e tonnes divided
by total firm FTE.
3. Please note that rounding errors may exist.
4. Group emissions data relates to the calendar year preceding the given financial year end.
Streamlined Energy and
Carbon reporting (“SECR”) and
Greenhouse gas emissions
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.
Methodology
The method used to calculate GHG
emissions is the GHG Protocol Corporate
Accounting and Reporting Standard
(revised edition), together with the latest
emission factors from recognised public
sources including, but not limited to, BEIS,
the US Energy Information Administration,
the US Environmental Protection Agency
and the Intergovernmental panel on
Climate Change.
Energy efficiency actions taken
2021 saw a significant fall in carbon
emissions4 across the board, down 77%
in energy consumption and 59% and
58% in location-based and market-based
emissions, respectively. This was
anticipated given the move to
work-from-home practices for most
employees over the last year, significantly
reducing business emissions as a result
of reduced office use and lower
commuting times. Our focus will be on
keeping emissions lower on the return
back to the office over the next fiscal year,
with particular focus on office sustainability;
taking this opportunity to reassess our
everyday business routines and promote
a green transition to net zero as set out in
the separate Sustainability Report.
TCFD
We are public supporters of the Task Force
on Climate-related Financial Disclosures
(“TCFD”), and this year will disclose for
the first time in the Sustainability Report
according to the recommendations on
disclosure of climate risk exposure.
Strategic reportGovernanceFinancial statementsAdditional information
34
Record plc Annual Report 2021
Sustainability continued
Section 172 Companies Act 2006 – Our stakeholders
Clients
Shareholders
People
Clients are the central focus of our business.
The Group aims to understand clients’
evolving needs, to respond to them
accordingly and deliver long-term
investment performance.
How we engage
Our 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.
The Client Team builds strong and trusted
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.
Clients receive frequent and regular reports
on market and investment performance.
Their material issues
Our clients’ material interests relate to the
performance of Record’s products after fees,
a robust risk framework, transparency,
value for money, maintaining the high levels
of service they receive and the provisions of
bespoke and innovative products which
fulfil their needs.
2021 highlights and
future changes
There has been heightened engagement
with clients during the covid-19 crisis and
increased monitoring of market conditions
and performance.
We are currently evaluating options for
improving our client reporting with the aim of
providing more real-time data and analytics.
The Record Sustainability Office was set up
during the year to maintain sustainability and
ESG factors as a focus across all aspects of
our business, including investment strategy,
corporate responsibility and risk
management for the benefit of
clients and all of our stakeholders.
We rely on the support and engagement
of our shareholders to deliver our strategic
objectives and grow the business.
How we engage
The Group Chief Executive Officer and
Chief Financial Officer presented the full-year
and half-year results to major investors.
The primary means of communicating with
shareholders are 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 www.recordcm.com. The website
also contains information on the business
of the Group, corporate governance, all
regulatory announcements, key dates in
the financial calendar and other important
shareholder information.
Their material issues
Our shareholders want Record to ensure it
is a long-term sustainable business which
delivers attractive returns through share
price growth and regular dividends.
2021 highlights and
future changes
The appointment of Panmure Gordon as
Record’s corporate broker has improved
engagement with existing shareholders and
enhanced the Group’s ability to reach out to
potential investors.
The Chair of the Nomination Committee has
contacted certain institutional shareholders
to discuss the UK Corporate Governance
Code requirements related to the tenure
of the Chairman.
The 2020 AGM was held as a closed meeting
due to covid-19 but the Board was keen to
maintain engagement and so shareholders
were invited to ask questions via e-mail, with
the Board undertaking to either respond via
return of e-mail or publication on the investor
relations website.
Our people are central to the ongoing
success of the business and we aim to
attract, retain, develop and motivate the right
people for current and future business needs.
How we engage
We engage with our employees
through a variety of channels including a
Company intranet, management briefings,
e-mail updates and Company-wide
presentations by the Group Chief
Executive Officer .
We seek to encourage employees in
developing and advancing their careers,
offering assistance in such forms as study
support and the possibility of secondments
to overseas offices.
The Group’s remuneration framework includes
schemes aimed at aligning employees’
interests with those of shareholders by offering
them the opportunity to share in our success
through share ownership.
Their material issues
Our people’s material interests relate to the
working and cultural environment provided by
Record. They want to be fairly rewarded for
their contribution and have opportunities for
learning, growth and further development
as well as sharing in business success.
2021 highlights and
future changes
Tim Edwards is the designated
Non-executive Director responsible
for workforce engagement and reports
to the Board on employee viewpoints.
A number of workforce engagement sessions
have taken place over the period with small
groups meeting with Tim to discuss topics
including business strategy, communication,
working arrangements, remuneration and
career opportunities.
Affinity networks have been introduced
to embrace diversity and encourage the
inclusion of all staff.
During the covid-19 pandemic there has
been increased engagement with staff to
ensure their wellbeing during the extended
periods of home working.
The covid-19 crisis highlighted the benefits
of flexible working arrangements for both staff
and the business. We are now reviewing the
possibility of more flexible working patterns
and practices upon return to the office in
order to achieve an appropriate work-life
balance for the longer-term benefit of both
our employees and the business.
Strategic report
35
Society
External suppliers
Regulators
We recognise the responsibility we have
to the local community, wider society and
the environment.
How we engage
We are proud to support the communities in
which Record operates and we have a long
history of contributing through monetary
donations, gift giving and employee time.
Further details can be found on pages 31
and 32.
We are keen to promote responsible investing
and have incorporated environmental, social
and governance (“ESG”) factors into some of
our currency management products. Record
has been a signatory to the Principles for
Responsible Investment since June 2018.
The Record Sustainability Office was set up
during the year to maintain sustainability and
ESG factors as a focus across all aspects of
our business, including investment strategy,
corporate responsibility and risk management
for the benefit of clients and all of our
stakeholders.
We have established a Sustainability
Committee which meets on a quarterly
basis and we have a documented policy
establishing our approach to sustainability
matters, details of which can be found from
page 28.
Their material issues
Record aims to manage the business in a
manner which minimises its impact on the
environment and helps to benefit society.
2021 highlights and
future changes
Employees helped to raise £19,247 for local
and national charities during the year.
Record has now been certified carbon
neutral for over twelve years.
Further details of our fundraising and
charitable support projects can be found
on page 32 and also online in our
Sustainability Report 2021.
We rely on the use of external suppliers and
service providers to supplement the Group’s
own infrastructure, benefiting from the
expertise these suppliers provide.
How we engage
We maintain a close working relationship with
all our suppliers and service providers, with
regular review of contracts and arrangements
in place performed as part of the budgeting
process.
All material supplier contracts are subject
to due diligence checks and contracts are
thoroughly reviewed by Record’s in-house
legal team before signing. Signed service
level agreements are in place for all
critical suppliers.
Record has a supplier payment policy which
ensures that all invoices are approved and
duly paid within agreed terms.
Their material issues
Our suppliers wish to develop mutually
beneficial working relationships over the
long term.
2021 highlights and
future changes
During the covid-19 crisis we have continued
to pay all suppliers and service providers on
a timely basis.
Our drive to implement new technology has
resulted in new relationships with software
suppliers and IT contractors, allowing access
to expert knowledge and skills and resulting
in flexible, effective and efficient working
partnerships. There will be further
engagement with third party suppliers
as technology developments continue.
As a global business, we seek to have
transparent and open relationships with our
regulators around the world. Regulators
provide oversight to ensure the business
is operated within regulatory parameters,
thereby giving valuable assurance to clients
and other stakeholders.
How we engage
We have an experienced Head of Compliance
to manage the compliance function and
oversee regulatory matters.
We engage directly and through membership
of various industry bodies 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
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.
We receive advice and updates on regulatory
matters from both our internal and external
auditors and also our lawyers.
Their material issues
Regulators want to ensure that our business
is run responsibly with the best interests of
our clients at the centre of everything we do.
They seek to protect the integrity of the
financial systems they supervise and promote
fair competition for the benefit of clients.
2021 highlights and
future changes
As part of its Brexit strategy, the Group has
established a German subsidiary.
We have complied with the latest version
of the UK Corporate Governance Code as
deemed appropriate given the size and nature
of the business. See pages 54 and 55 for
further details.
Strategic reportGovernanceFinancial statementsAdditional information 36
Record plc Annual Report 2021
Operating review
AUME increased by 37% in US dollar
terms, finishing the year at $80.1 billion,
its highest ever level.
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
Record’s enhanced Passive Hedging service aims to reduce the cost of hedging by introducing 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. High levels of central bank intervention have meant there have been particularly high levels of liquidity in the FX derivatives
market since April 2020. This has, for the most part, had a dampening effect on volatility and reduced the opportunity set available for
clients. In December 2020, however, we saw significant volatility arise in the FX forwards market for a period of a couple of weeks.
We positioned client portfolios appropriately to extract value from this volatility. Positive performance for the year can be attributed to
actively managing clients’ duration profiles in such a way that they benefited from these market opportunities as and when they arose.
The table below shows the total value added relative to a fixed-tenor benchmark for an enhanced Passive Hedging programme for a
representative account. The base currency used is Swiss francs.
Return for
year to
31 March 2021
Return
since
inception1
Value added by enhanced Passive Hedging programme relative to a fixed-tenor benchmark
0.05%
0.08% p.a.
Dynamic Hedging
The performance of our Dynamic Hedging product depends on how the foreign currencies change in value relative to the base currency
of our client. During the year, US investors saw gains from currency on international assets when valuing positions in US dollars, as the
US dollar depreciated against the majority of G10 currencies. Record’s Dynamic Hedging product adjusted hedge ratios in line with US
dollar fluctuations, reducing hedging losses when the US dollar was weaker and helping to protect against currency losses when the US
dollar was episodically stronger – as a result, on the net basis, this allowed our clients to participate in currency gains on the underlying
foreign currency exposure.
The performance of the Dynamic Hedging programmes hedging US dollar exposures into other currencies was opposing and reflective
of the mandates’ specific objectives, benchmarks and inception dates in the reported period.
Value added by Dynamic Hedging programme
Return for
year to
31 March 2021
Return
since
inception2
(0.49%) 0.45% p.a.
1. Since inception in October 2014.
2. Since inception in April 2009.
Strategic report
37
Currency for Return
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, which include:
• Forward Rate Bias (“FRB”, also known as Carry) and Emerging Market strategies which are founded on market risk premia
and as such perform more strongly in “risk on” environments; and
• Momentum, Value and Range Trading strategies which are more behavioural in nature, and as a result are less risk-sensitive.
Record’s Multi-Strategy mandates delivered positive overall performance over the year which was driven by the outperformance in
FRB and EM strategies given their positive correlation to sentiment. Positive vaccine news supported the global growth outlook and
the mitigation of negative tail risk scenarios around a prolonged recession, which enticed inflows into EM and risk-on DM currencies.
Return for
Returns
Record Multi-Strategy composite1
12 months to Return since Volatility since
inception
% p.a.
31 March 2021
%
inception
% p.a.
2.86%
0.86%
3.19%
Scaling
The Currency for Return product group allows clients to select the level of exposure they desire in their currency programmes
by selecting the required level of scaling and/or the volatility target.
It should be emphasised that in this case “scaling” refers to the multiple of the aggregate notional value of forward contracts in
the currency programme to the mandate size. This is limited by the willingness of counterparty banks to take exposure to the client.
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 mandate size.
AUME development
AUME expressed in US dollar terms finished the year at $80.1 billion, an increase of 37% (2020: $58.6 billion). When expressed in
sterling, AUME increased by 23% to £58.1 billion (2020: £47.3 billion).
AUME development bridge – year to 31 March 2021 ($bn)
90
80
70
60
50
40
58.6
AUME at
1 April
2020
8.4
3.4
9.7
80.1
Net flows
Markets
FX effects
and scaling
adjustments
AUME
at 31 March
2021
AUME movements
Passive Hedging AUME increased by 22% to $61.5 billion at the end of the year (2020: $50.3 billion), including net inflows of $1.5 billion
and $0.6 billion from new and existing clients respectively. Further positive impacts arose from market movements ($6.4 billion) and
movements in exchange rates ($2.7 billion).
Dynamic Hedging AUME increased by 271%, ending the year at $9.3 billion (2020: $2.5 billion). The majority of the $6.8 billion increase
is attributable to net inflows ($6.6 billion), of which $5.5 billion was from new clients with the remaining $1.1 billion from existing clients.
Exchange rate movements added a further $0.2 billion.
Currency for Return AUME increased to $3.9 billion at the end of the year (2020: $2.6 billion) as a result of positive movements in
exchange rates ($0.3 billion), scaling ($0.2 billion) and market movements ($0.8 billion).
Multi-product AUME increased to $5.2 billion (2020: $3.0 billion) as the result of $1.0 billion of net inflows, market movements of
$0.9 billion and exchange rate movements of $0.3 billion.
1. 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.
Strategic reportGovernanceFinancial statementsAdditional information
38
Record plc Annual Report 2021
Operating review continued
AUME development continued
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 movements increased AUME by $8.4 billion
in the year ended 31 March 2021 (2020: decrease of $3.2 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.
AUME composition by underlying asset class as at 31 March 2021
Passive Hedging
Dynamic Hedging
Multi-product
Equity
%
30%
97%
0%
Fixed
income
%
37%
0%
0%
Other
%
33%
3%
100%
Forex
Approximately 80% 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 increased
AUME by $3.1 billion over the year. This movement does not have an equivalent impact on the sterling value of fee income.
At 31 March 2021, the split of AUME by base currency was 12% in sterling, 47% in Swiss francs, 20% in US dollars, 15% in euros
and 6% in other currencies.
AUME composition by base currency
Base currency
Sterling
US dollar
Swiss franc
Euro
Australian dollar
Canadian dollar
Swedish krona
Product mix
AUME composition by product
Passive Hedging
Dynamic Hedging
Currency for Return
Multi-product
Cash
Total
31 March 2021
31 March 2020
GBP 6.7bn
USD 16.2bn
CHF 35.2bn
EUR 9.9bn
AUD 2.1bn
CAD 4.8bn
SEK 0.4bn
GBP 6.3bn
USD 6.2bn
CHF 31.0bn
EUR 8.1bn
AUD 1.6bn
CAD 3.5bn
SEK 3.9bn
31 March 2021
31 March 2020
US $bn
61.5
9.3
3.9
5.2
0.2
%
US $bn
77%
12%
5%
6%
0%
50.3
2.5
2.6
3.0
0.2
%
86%
4%
4%
5%
1%
80.1
100%
58.6
100%
The mix of hedging AUME changed during the year with net inflows into higher-margin Dynamic Hedging reducing the concentration from
lower-margin Passive Hedging AUME.
Strategic report
39
Financial review
The year has been one
of transition, with focus
on the implementation of
the new strategy arising
from the Group’s change
of leadership.
Steve Cullen
Chief Financial Officer
Overview
As expected, the financial impact of such
change has been felt in the form of reduced
profitability in the short term as the
business seeks to embed structural and
resource changes necessary in
the implementation of the new strategy.
Notwithstanding a challenging year due
to the impact of covid-19, strong progress
was made in the second half in terms of
growth in AUME in existing products as well
as in the development of new products, the
full benefits from which we expect to see in
the current year (FY-22). The Group remains
independent and profitable, supported by
its strong and liquid balance sheet.
Revenues remained broadly flat on last
year at £25.4 million (2020: £25.6 million)
supported by an 8% increase in
management fees offsetting the drop in
performance fees of £1.7 million for the
year. Operating profit for the year fell
to £6.1 million (2020: £7.6 million) and the
operating profit margin decreased to 24%
(2020: 30%) with profit before tax falling to
£6.2 million (2020: £7.7 million). The fall in
operating profit resulted from an increase
in operating expenses (excluding variable
remuneration) of 11% to £15.7 million,
and variable remuneration fell to
£3.2 million (2020: £3.5 million).
Profit and loss (£m)
Revenue
Cost of sales
Gross profit
2021
2020
25.4
25.6
(0.4)
(0.3)
25.0
25.3
Personnel (excluding GPS)
(10.3)
Non-personnel cost
(5.4)
Other income or expense
0.0
(8.6)
(5.7)
0.1
Total expenditure
(excluding GPS)
GPS
Operating profit
(15.7)
(14.2)
(3.2)
(3.5)
6.1
7.6
Operating profit margin
24%
30%
Net interest received
Profit before tax
Tax
Profit after tax
0.1
6.2
0.1
7.7
(0.8)
(1.3)
5.4
6.4
Revenue
£25.4m
2020: £25.6m
-0.6%
Management fees
£24.9m
2020: £23.1m
+7.8%
Strategic reportGovernanceFinancial statementsAdditional information
Expenditure
Cost of sales
Cost of sales comprises referral fees and
costs in relation to the Record Umbrella
Fund.
Operating expenditure
The Group operating expenditure
(excluding variable remuneration) increased
by 11% to £15.7 million for the year (2020:
£14.2 million).
Growth in personnel costs of 20% to
£10.3 million (2020: £8.6 million) reflects
salary increases from internal promotions
arising from restructuring plus the full-year
effect of recruiting at more senior levels
towards the end of the last financial year.
The Group remains conscious of the
need for good cost control balanced
with ensuring the business is appropriately
resourced to achieve its strategic goals
of growth and succession.
Non-personnel costs decreased by
5% during the year to £5.4 million
(2020: £5.7 million). Whilst the Group
has continued to invest in technology
and systems, cost savings have been
made in client-facing activities such as
travel and conferences due to the impact
of covid-19.
Other income was £41k for the year
(2020: £82k) and represents net gains
made on derivative financial instruments
employed by the Group’s seed funds,
hedging activities and other FX
adjustments or revaluations.
40
Record plc Annual Report 2021
Financial review continued
Management fees
Passive Hedging management fees
decreased by 5% to £11.4 million for the
year (2020: £12.0 million). Whilst average
AUME increased over the year, the
consequent increase in fees was more than
offset by the impact from the decision by
some clients with enhanced Passive
Hedging mandates to change from a higher
management fee basis to a lower
management plus performance fee basis
during the year.
Dynamic Hedging management
fees increased by 41% to £5.6 million
(2020: £4.0 million) as a result of the
increase in AUME arising from net inflows
of $6.6 billion from new and existing clients.
Management fees from Currency for Return
mandates remained consistent with last
year at £2.0 million.
Multi-product management fees increased
by 14% to £5.9 million (2020: £5.1 million)
linked to the net inflows of $1.0 billion
in the second half and the impact of
positive market movements in the year
of $0.9 billion.
Performance fees
Performance fees are derived from a
combination of hedging and return-seeking
products. Aggregate performance fees of
£0.1 million were earned during the year
(2020: £1.8 million).
In contrast to February and March 2020
when most assets were re-priced down as
a result of the pandemic, the year saw
reduced volatility linked to unprecedented
amounts of central bank interventions.
Consequently, some assets rebounded
faster while both our Currency for Return
and enhanced Passive Hedging products
are taking longer to make up lost ground
versus previous high water marks, resulting
in reduced performance fees for the year.
Other currency services income
Other currency services income totalled
£0.4 million (2020: £0.7 million) and
consists of fees from ancillary currency
management services including collateral
management, signal hedging and tactical
execution services. Fees charged for these
ancillary services are not linked to AUME.
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.
Growth in AUME drives growth in
management fees. Whilst positive market
movements of $8.4 billion were broadly
evenly split across both halves of the year,
the impact from the net inflows of $9.7 billion
was felt in the second half of the year.
Consequently, revenues of £11.8 million
for the first half increased by 14% to
£13.5 million in the second half (ignoring
performance fees) with the financial impact
from the $80.1 billion headline AUME
expected to be seen more fully in FY-22.
Management fees earned during the
year increased by 8% to £24.9 million
(2020: £23.1 million), with the increase in
management fees of £1.7 million offsetting
the decrease in performance fees
(of £1.7 million) for the year.
Revenue analysis (£m)
Year
ended
31 Mar
2021
Year
ended
31 Mar
2020
Management fees
Passive Hedging
11.4
12.0
Dynamic Hedging
Currency for Return
Multi-product
5.6
2.0
5.9
4.0
2.0
5.1
Total management fees
24.9
23.1
Performance fees
0.1
1.8
Other currency
services income
Total revenue
0.4
0.7
25.4
25.6
Strategic report
41
Group Profit Share (“GPS”) Scheme
The Group operates a discretionary GPS
Scheme i.e. variable remuneration, which
is linked to both the financial performance
of the Group and the achievement against
individual performance objectives for staff.
Historically a long-term average of 30%
of underlying operating profit before GPS
(“GPS pool”) has been made available
to be awarded to staff. However, for the
prior year ended 31 March 2020 the
Remuneration Committee introduced
changes to the operation of the scheme
with the aim of rewarding individual
employee performance that drives revenue
growth, improvements to efficiency and
reduced costs. Consequently, the
expectation is that the average GPS %
will now diverge from the long-term average
due to the Remuneration Committee using
the flexibility and discretion it already holds
in varying the GPS pool between 25% to
35% of underlying operating profit
before GPS.
For the year ended 31 March 2021,
the GPS pool is 34% of pre-GPS
underlying operating profit, which
represents £3.2 million, a decrease
of 9% over the previous financial year
(2020: £3.5 million).
Further information on variable
remuneration can be found in the
Remuneration report starting on page 70.
Operating profit and margin
Group operating profit decreased by 20%
to £6.1 million (2020: £7.6 million) and the
Group operating margin decreased to 24%
(2020: 30%). Whilst revenue has remained
constant with last year, as expected the
implementation of the new strategy has
resulted in a short-term negative impact
on the operating margin.
Cash flow
The Group consolidated statement of cash
flows is shown on page 103 of the
financial statements.
The Group’s year-end cash and cash
equivalents stood at £6.8 million (2020:
£14.3 million) and the total assets managed
as cash were £19.8 million (2020:
£22.3 million). The cash generated from
operating activities before tax is shown on
page 101 to the financial statements and
was £7.7 million (2020: £7.9 million).
During the year, taxation of £1.4 million
was paid (2020: £1.4 million) and
£5.3 million was paid in dividends
(2020: £5.9 million).
At the year end, the Group held
money market instruments with maturities
between three and twelve months, worth
£12.9 million (2020: £8.0 million). These
instruments are managed as cash by the
Group but are not classified as cash under
IFRS rules (see note 18 of the financial
statements for more details).
Dividends
An interim ordinary dividend of 1.15 pence
per share (2020 interim: 1.15 pence) was
paid to shareholders on 31 December
2020, equivalent to £2.2 million.
As disclosed in the Chairman’s statement
on page 4, 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 0.45 pence equivalent
to £0.8 million, making the total dividend in
respect of the year ending 31 March 2021
of £5.3 million equivalent to 100% of total
earnings.
The total ordinary and special dividends
paid per share in respect of the prior year
ended 31 March 2020 were 2.30 pence
and 0.41 pence respectively, equivalent
to total dividends of £5.3 million and
representing 83% of total earnings per
share of 3.26 pence.
Financial stability and
capital management
The Group’s balance sheet is strong and
liquid with total net assets of £26.8 million
at the end of the year, including current
assets managed as cash totalling
£19.8 million. The business remains cash
generative, with net cash inflows from
operating activities after tax of £6.3 million
for the year (see consolidated statement
of cash flows on page 101 of the financial
statements).
The Board’s conservative 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
26.8
28.0
2021
2020
Deductions:
intangible assets
Regulatory capital
resources
(0.4)
(0.4)
26.4
27.6
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.
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.
Strategic reportGovernanceFinancial statementsAdditional information
42
Record plc Annual Report 2021
Risk management
Record’s culture is one of integrity and
accountability, and is 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, our people 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.
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 in determining 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 not meeting
its minimum regulatory capital requirement.
The Group has a capital and dividend
policy, which is designed 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 detailed on pages 45 to 48.
The business is also exposed to both
conduct risk and reputational risk.
Conduct 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 impact of conduct risk is
evident and managed primarily within the
strategic, operational and investment risk
categories, 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 45 to 48.
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. The impact
from 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 below.
The remaining principal risk categories are
listed below and further detail is given on
pages 45 to 48:
Strategic risk
Business 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.
Strategic report
43
Risk management framework – overview
Record Board
Executive Committee
Audit and Risk Committee
Investment Committee
Risk Management Committee
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 Investment
Committee’s members are listed on
page 61. Investment Committee approval
is required prior to implementation of any
new or amended investment process
or product.
As prescribed in terms of reference
approved by the Audit and Risk Committee,
the Risk Management Committee
continually reviews existing, new and
emerging 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.
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 aim to ensure
adherence to quality standards and
regulatory requirements. Functions such as
Front Office Risk Management,
Compliance, 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 BDO LLP (“BDO”), the Group’s external
auditor. The Group has commissioned RSM
Risk Assurance Services LLP (“RSM”),
an independent third party, 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, RSM 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.
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.
External independent assurance activity
Statutory external audit (BDO)
ISAE 3402 and AT-C 320 service auditor’s
report on internal controls (RSM)
Embedded culture of integrity and accountability
1st line of defence:
2nd line of defence:
3rd line of defence:
Business operations and support
Control and oversight functions
Internal audit
(independent assurance – Deloitte)
Strategic reportGovernanceFinancial statementsAdditional information 44
Record plc Annual Report 2021
Risk management continued
Covid-19
Whilst the impact of covid-19 continues
to disrupt the world economy, many
businesses, including those in financial
services, have successfully adapted to
working under the change in environment,
including full remote working.
Market liquidity has now returned and
the temporary market dislocations seen
during the pandemic have now receded.
However, at time of writing, the pandemic
continues to cause severe disruption
across certain parts of the globe, including
the identification of new strains of the virus,
which has limited the progress in the global
recovery. Therefore, whilst no longer an
emerging risk, a degree of uncertainty
persists and the risk continues to be
assessed under business risk.
Information on how the Group has been
impacted by the pandemic, including on its
business and operations, is given in more
detail below.
Review of the impact of covid-19
Our people
Covid-19 is a public health crisis and first
and foremost our focus has been on the
health and wellbeing of our people and their
families. During the crisis, Record has not
furloughed any staff nor made any covid-19
related redundancies, and we have not
relied on any external support in the form
of government assistance schemes.
At time of writing, planning has begun for
the easing of restrictions and how these
may impact the return to “normal” working
conditions in terms of social distancing,
travel, increased office hygiene
requirements and other measures.
As a result of the pandemic, all of our
employees are fully able to work remotely,
giving us an opportunity to offer a more
flexible working pattern thereby improving
the work-life balance for our employees
going forward.
Our clients
Record’s clients are institutional and of
high quality with strong, long-standing and
trusted relationships built over many years.
Record has not lost any clients as a result
of the covid-19 pandemic and, using
technology-led solutions and digital
channels, has maintained strong lines
of communication and service levels
throughout the crisis, responding to client
requests in volatile markets and restricted
liquidity, and underpinning the quality of our
service offering. The quality of our clients
is reflected in the business having not
suffered from any unpaid fees for over
20 years through various market crises and
cycles, and we have not seen any change
in our recovery rates as a result of
the pandemic.
Our technology and operations
Full business continuity has been
maintained throughout all stages of the
crisis. Remote access systems have been
strengthened and over the course of the
lockdown additional IT equipment and
resource has been sourced to facilitate
both the necessary communication
channels with clients, and the required
working environment from home.
Our governance and oversight
Virtual meetings have replaced physical
meetings in the office and broadly follow
the same pattern as prior to the crisis,
although the frequency for some meetings
was increased in the early stages of the
pandemic, for example more regular Audit
and Risk Committee meetings and weekly
Executive Committee catch-ups to discuss
employee wellbeing, market behaviour and
other management issues.
Our risk and management reporting
framework has continued to function as
planned, as have monitoring and oversight
tasks operated by the compliance team.
Our business model
With the exception of those changes
mentioned above, the impact of covid-19
on our business model has been fairly
limited and well contained. Our costs have
not materially increased as a result of the
virus and our balance sheet remains well
capitalised and robust, maintaining our
independence throughout. In terms of
revenue, whilst we have not seen and do
not anticipate any direct material outflows as
a result of covid-19, the link between some
of our clients’ mandates with other markets,
such as equity and fixed income, means our
AUME is also affected to a lesser extent by
movements in such markets. Consequently,
whilst we saw a relatively small impact (-7%)
on our AUME at the start of the pandemic
in the final quarter of FY-20, this proved
relatively short lived. Markets have since
rebounded and our AUME increased by
14% (+$8.4 billion) in FY-21 as a result of
such market movements.
As expected, our short-term profitability
has been impacted by the investment
made in implementing our new strategy
and not as a result of the impact of
covid-19 on the business, which remains
profitable and cash generative, with no
changes to our capital or dividend policy.
Strategic report
45
Emerging risks
Emerging risks are primarily external in nature and tend to overlay the Group’s existing principal risk categories. Emerging risks can
include natural disasters, pandemics, disruption in financial markets and business infrastructure, political risk and changes or trends
in the competitive landscape. The Group Board, management and Risk Management Committee constantly monitor emerging risks by
including these in the ongoing review of risks performed through the risk management framework, assessing the potential likelihood
and impact on the principal risks faced by the business.
Emerging risk – trend in sustainable investment
The last year has seen a rapid acceleration of the move towards sustainable investment. Investor sentiment is now more focused than
ever on the effects of climate change and on how the financial sector can force the change for good through the promotion of responsible
investment. This trend will only continue and must be acknowledged by embracing the challenge and recognising the opportunities
available to make a difference.
Record has identified responsible investment as an essential prerequisite to successful, resilient and prudent investment management.
This year has seen the formalisation of Record’s sustainability framework, incorporating sustainability into our investment philosophy and
governance structure. Our commitment to delivering responsible investment products for our clients has been illustrated by the
development of the Record EM Sustainable Finance Fund in collaboration with a large Wealth Manager in Switzerland, more information
on which is provided in our case study on page 15.
The risk associated with this trend has moved from an emerging risk to a strategic risk, since the impact of not recognising the risk or
opportunities arising could lead to a failure to deliver the growth strategy, thereby affecting the longevity of the Group.
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.
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.
Link to
strategy
1
2
3
Risk
Failure to deliver strategy
– risk of failure to achieve
strategic objectives through
internal or external factors.
Potential impact – reduced short
to medium-term profitability, and
growth prospects and viability
limited longer term.
Rating
Change
Mitigating activities and update
Low
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.
New leadership has made progress in executing change
in strategy, as illustrated through 37% growth in AUME,
new product development, implementing new technology,
and new talent in senior positions.
Key to strategy link
1 Quality client experience
2 Technology and innovation
3 Talent development
Strategic reportGovernanceFinancial statementsAdditional information 46
Record plc Annual Report 2021
Risk management continued
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
Link to
strategy
Rating
Change
Mitigating activities and update
Medium
Low
Medium
Low
1
2
1
2
1
2
3
1
2
Concentration risk – the risk of
concentration either by product,
client type or geographical
location leading to over-reliance
on any one category of revenue.
Potential impact – Record’s
products are predominantly
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.
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.
People and employment risk
– the inability to attract or retain
key employees or to plan for
succession 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.
Regulatory change – the risk of
failure by the Group to comply
with the introduction of new
regulation or changes to existing
regulation.
Potential impact – ability to do
business may be affected,
resulting in loss of revenue
or regulatory censure.
Continued diversification of investment capabilities
across risk-reducing and return-seeking products,
plus the capability to offer bespoke products to
meet client requirements.
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 or market uncertainty and disruption.
Restructure of Client Team to focus on diversification of
products and geographies.
Significant and diversified AUME inflows achieved in FY-21.
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.
Notwithstanding the FY-21 reduction in operating margin,
reduced reliance on revenue from lower-margin products
(Passive Hedging) with the win of a significant Dynamic
Hedging client during the year in addition to the anticipated
launch of the Record EM Sustainable Finance Fund have
reduced this risk in the current financial year (FY-22).
Promotion of collegiate and professional culture, good
career opportunities, study support and overseas
secondments.
Remuneration policy and share-based remuneration
schemes align key personnel and promote retention.
The Group continues to focus on succession planning
to mitigate the risk from over-reliance on key personnel,
as illustrated by the change in CIO and restructure of
the Client Team during the year.
Growth agenda under the new strategy has increased
the ability to attract talent on a global basis.
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 implementation of new Prudential regulations (IFPR)
adds to the increase in regulatory change risk for FY-22.
Strategic report
47
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
Link to
strategy
Rating
Change
Mitigating activities and update
High
Medium
1
2
1
2
Technology and information
security risk – cyber security
presents an ongoing significant
risk to financial services
companies, including 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.
Operational control
environment – the risk of
errors in execution and process
management, legal, 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 could potentially
lead to 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.
Record continues to monitor, review and invest in its cyber
and data security systems, incorporating input from the
internal auditor and third party advisers.
Cyber-related metrics are monitored, reported and
reviewed in monthly management information and
Board information packs.
Throughout our industry, covid-19 has increased the
risks associated with technology and information security
systems. This includes the opportunity for criminals to
exploit new vulnerabilities that may arise, for example
through remote working. Whilst Record recognises this
threat and invests and responds accordingly, the Group
acknowledges the increase in the inherent risk associated
with cyber attacks.
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 Business Risk teams oversee 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.
Annual ISAE 3402 and AT-C 320 service auditor’s report
on internal controls independently reviewed and tested
by RSM.
The Group has maintained the high standards around
its operational control environment notwithstanding the
impacts of covid-19, including the facilitation of full remote
working for the majority of the year.
Key to strategy link
1 Quality client experience
2 Technology and innovation
3 Talent development
Strategic reportGovernanceFinancial statementsAdditional information 48
Record plc Annual Report 2021
Risk management continued
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
Link to
strategy
Rating
Change
Mitigating activities and update
1
2
3
1
2
Product underperformance
– the risk that long-term
investment performance is not
delivered.
Potential impact – damages
prospects for winning and
retaining clients, minimises
revenues through reduced
management and performance
fees and may cause
reputational damage.
Market liquidity risk – the risk
of reduced or constrained market
liquidity, which would affect
Record’s investment process as
it 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.
High
Experienced Investment Committee meets regularly,
ensuring consistent core investment processes are applied.
Low
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.
Product underperformance risk will be further diversified
with the future launch of the Record EM Sustainable
Finance Fund.
The Group has a large panel of banking counterparties it
uses to trade on behalf of clients in currency and related
instruments.
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 and more recently the impact
of the covid-19 pandemic.
Market conditions have recovered from the lack of
liquidity and temporary market dislocations evident
during the pandemic.
Key to strategy link
1 Quality client experience
2 Technology and innovation
3 Talent development
Strategic report
49
Changes in our industry such as the
increase in demand for sustainable
investment products and advances in
technology provide both challenge but also
opportunity to the Group, and economic
uncertainly linked to the long-term impact
of covid-19 will persist for the foreseeable
future. Through its change in strategy and
increased focus on growth, combined with
the continued enhancement of its products
and services and in maintaining its
approach to innovation and the use of
technology, the Directors believe the
Company to be capable of meeting such
challenges, as evidenced by the growth
and diversification of AUME seen over the
year. However, the Directors consider a
three-year horizon over which to assess
the viability of the Group to be appropriate
under such circumstances, since it
provides a sharper focus and any further
planning horizon provides a greater level
of uncertainty to financial projections.
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.
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.
As discussed in more detail on page 44,
the impact of covid-19 on our business has
been limited to managing the change in
our physical working environment and
practices, and in ensuring the wellbeing of
our employees and their families. We have
maintained both continuity in operational
and client servicing matters as well as our
independence without the need for
additional funding or the use of
government-related schemes.
However, a degree of uncertainty remains,
for example linked to the ability of the
vaccines to contain potential new strains
of the virus and the corresponding
potential impact upon the global recovery.
Consequently, the market downturn
scenario has been the subject of further
focus. The updated scenario assumed an
immediate 40% reduction in AUME due to
market movements with minimal recovery
over the viability assessment period, and
with management actions limited only to
the cessation of dividend payments.
Notwithstanding such a severe and
immediate decrease in AUME and hence
revenues, the Group remained viable,
retaining a strong capital position
significantly in excess of its regulatory
requirement supported by significant
liquid resources.
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 2024.
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 at Board and Executive level, and
by operational sub-committees within the
Group. Further detail on the Group’s
strategy and principal risks is given in the
Strategic report on pages 20 to 23 and
44 to 48 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;
• operational risk event – causing AUME
outflows and potentially reputational
damage; and
• the loss of key personnel – resulting in
the loss of AUME or the inability to win
new clients.
Strategic reportGovernanceFinancial statementsAdditional information 50
Record plc Annual Report 2021
Governance
In this section
Chairman’s introduction
Board of Directors
Corporate governance report
Corporate governance overview
Board structure
Board activity
Board effectiveness
Corporate governance framework
Internal control and risk management
Nomination Committee report
Audit and Risk Committee report
Remuneration report
Chair of the Remuneration Committee’s statement
Remuneration Policy
Annual report on remuneration
Directors’ report
Directors’ responsibilities statement
51
52
54
54
56
58
59
60
61
62
64
70
70
72
77
86
89
Governance
51
Chairman’s introduction
Effective corporate governance is
key to the long-term success of
any business. In this section of the
Annual Report we set out our
extensive corporate governance
arrangements and describe the
operation of the Board and its
Committees during the year.
The financial year has been dominated by
the covid-19 pandemic and the business
has adapted well and operated successfully
with minimal interruption to its operations.
This is thanks in part to the strong and
robust corporate governance framework
which the Group has in place, together with
the fact that the Board and its Committees
have worked closely with the Group’s highly
experienced management team to support
Record’s operational teams in continuing to
deliver a high-quality range of products and
services to our clients.
I am confident that the Group’s governance
arrangements are both appropriate and
effective and that going forward the Group
will continue to embrace regulatory,
governance and best practice changes in
its drive to best serve all its stakeholders.
Neil Record
Chairman
16 June 2021
Neil Record
Chairman
Company purpose
To deliver innovative, thought leading and
practical solutions to the needs of currency
market users and investors, while
maintaining independence and integrity.
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.
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.
Further information on the corporate
governance framework is provided on
pages 60 and 61.
Compliance with the 2018 UK
Corporate Governance Code
Throughout 2020, the Company has
applied the main principles and provisions
of the Code as deemed appropriate to
Record. Pages 54 and 55 provide an
overview of how the Code has been
applied and Record’s departures from
the Code are fully explained.
Section 172 disclosure
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. Details of how the
Board engaged with Record’s various
stakeholders are shown on pages 34
and 35.
Strategic reportGovernanceFinancial statementsAdditional information 52
Record plc Annual Report 2021
Board of Directors
The Board of Record plc is a highly skilled and committed group of
individuals who are focused on understanding Record’s strengths and
the challenges the Group faces.
Neil Record
Chairman
Leslie Hill
Chief Executive Officer
Steve Cullen
Chief Financial Officer
Jane Tufnell
Senior Independent Director
Appointed:
Leslie joined Record in 1992. She
was appointed Head of Sales and
Marketing in 1999, and Chief
Executive Officer in February 2020.
Previous appointments:
Leslie’s extensive prior experience
includes working at Lloyds Bank
and Merrill Lynch where she was
Director and Head of Corporate
Foreign Exchange Sales worldwide.
Current external appointments:
Leslie is a director of Trade
Record Ltd.
Skills and experience:
Having worked at Record for
almost 30 years Leslie has a deep
understanding of Record’s products
and the needs of clients. As
Head of the Client Team she
was instrumental in driving the
client-focused culture of the
business and helped to maintain
existing and develop new client
relationships. Leslie is therefore
very well placed to provide a client
perspective during Board
discussions.
This extensive experience means
Leslie as CEO is ideally suited to
leading Record in the current
client-led changing environment and
to ensuring that it thrives within it.
Appointed:
Steve was appointed to the Board
and made Chief Financial Officer in
March 2013.
Previous appointments:
Steve qualified as a Chartered
Accountant in 1994 and gained
15 years of audit experience within
public practice before joining
Record.
Current external appointments:
Steve has no other appointments
outside of the Record Group.
Skills and experience:
Steve joined Record in October
2003 and led Record’s Finance
team for over nine years reporting
directly to the Chief Financial Officer.
He 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.
With his ICAEW FCA qualification
and over 30 years’ experience,
including over 17 years within
financial services, Steve brings
considerable accounting, financial
and risk management expertise to
the Board.
Appointed:
Jane was appointed as a
Non-executive Director in
September 2015 and became
the Senior Independent Director
in October 2018.
Previous appointments:
Jane co-founded the investment
management firm Ruffer in 1994,
and served on its management
board until her retirement in
June 2014.
Current external appointments:
Jane is the chair of Odyssean
Investment Trust plc and ICG
Enterprise Trust plc and is an
independent non-executive
director of Schroder UK Public
Private Trust plc.
Skills and experience:
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.
Committee memberships:
A
RN *
Appointed:
Neil founded Record in 1983 and
has been its principal shareholder
and Chairman since then. Neil also
served as Record’s CEO until
October 2010.
Previous appointments:
Prior to founding Record Neil
was an economist at the Bank
of England and worked in the
commodity and currency trading
department at Mars Inc’s UK
subsidiary.
Current external appointments:
Neil is Chairman of the Board of
The Institute of Economic Affairs and
a director of IEA Forum Limited,
Chairman of The Global Warming
Policy Forum and a director of Aims
of Industry Limited, Oxford Festival of
the Arts and Circular Wave Limited.
Skills and experience:
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.
Neil 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.
Committee memberships:
N
Governance
53
Rosemary Hilary
Non-executive Director
Tim Edwards
Non-executive Director
Appointed:
Tim was appointed as a
Non-executive Director of Record
in March 2018.
Previous appointments:
Previously, Tim was a member of
the governing Board of InnovateUK,
the UK’s innovation agency, a
director of the UK Cell and Gene
Therapy Catapult and chair of the
UK BioIndustry Association.
Current external appointments:
Tim is a biotech entrepreneur, who
is currently chair of Schroder UK
Public Private Trust, Karus
Therapeutics Limited and Storm
Therapeutics Limited, and a director
of AstronauTX Limited.
Skills and experience:
Tim is a Chartered Accountant
(FCA) 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.
Committee memberships:
A N R *
Appointed:
Rosemary was appointed as a
Non-executive Director in
June 2016.
Previous appointments:
Rosemary 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. Rosemary was
formerly a member of the
Investment Committee and Chair
of the Risk and Audit Committee of
the Pension Protection Fund (2016
to 2019) and Trustee and member
of the Audit, Risk and Finance
Committee of Shelter, the
homelessness charity.
Current external appointments:
Rosemary is a non-executive
director of Willis Limited,
St. James’s Place plc, Vitality Life
and Vitality Health. She is also a
member of the MBA Advisory
Board at Cass Business School.
Skills and experience:
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. Rosemary
provides support and challenge to
Record’s management, and in doing
so helps the Board maintain its
strong governance framework.
Committee memberships:
RNA *
Gender diversity
As at year end and as at
the date of report
Female
50%
Male
50%
Board tenure
As at year end
> 6 yrs
50%
3-6 yrs
50%
A
N
R
Audit and Risk
Committee
Nomination
Committee
Remuneration
Committee
Chair
Strategic reportGovernanceFinancial statementsAdditional information
54
Record plc Annual Report 2021
Corporate governance report
Corporate governance overview
Compliance with the UK Corporate
Governance Code (the “Code”)
The Board is supportive of the principles of
the Code and has been since its Admission
to the Official List of the UK Listing
Authority in December 2007, with the
Board complying as it deems appropriate
given the nature and size of the business.
The latest version of the Code was
published in July 2018 and is applicable
to accounting periods beginning on or
after 1 January 2019.
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.
The Code consists of the 18 principles set
out in this table; each is cross-referenced to
the relevant section of this Annual Report.
Board Leadership &
Company Purpose
Division of Responsibilities
A. A successful company is led by an
effective and entrepreneurial board, whose
role is to promote the long-term sustainable
success of the company, generating value for
shareholders and contributing to
wider society.
Board of Directors, pages 52 and 53
Board structure, page 56
Our stakeholders, pages 34 and 35
B. The board should establish the company’s
purpose, values and strategy, and satisfy itself
that these and its culture are aligned. All
directors must act with integrity, lead by
example and promote the desired culture.
Strategic priorities and goals, pages 20
to 23
C. The board should ensure that the
necessary resources are in place for the
company to meet its objectives and measure
performance against them. The board should
also establish a framework of prudent and
effective controls, which enable risk to be
assessed and managed.
Key performance indicators, pages 24 to 27
Risk management, pages 42 to 48
Governance framework, pages 60 and 61
Audit and Risk Committee report, pages 64
to 69
D. In order for the company to meet its
responsibilities to shareholders and
stakeholders, the board should ensure
effective engagement with, and encourage
participation from, these parties.
Our stakeholders, pages 34 and 35
E. The board should ensure that workforce
policies and practices are consistent with the
company’s values and support its long-term
sustainable success. The workforce should
be able to raise any matters of concern.
Our stakeholders, pages 34 and 35
Sustainability report, pages 28 to 35
F. The chair leads the board and is
responsible for its overall effectiveness in
directing the company. They should
demonstrate objective judgement throughout
their tenure and promote a culture of
openness and debate. In addition, the chair
facilitates constructive board relations and the
effective contribution of all non-executive
directors, and ensures that directors receive
accurate, timely and clear information.
Board structure, page 56
Board activity, pages 58 and 59
G. The board should include an appropriate
combination of executive and non-executive
(and, in particular, independent non-executive)
directors, such that no one individual or small
group of individuals dominates the board’s
decision-making. There should be a clear
division of responsibilities between the
leadership of the board and the executive
leadership of the company’s business.
Board structure, page 56
Nomination Committee report, pages 62
and 63
H. Non-executive directors should
have sufficient time to meet their board
responsibilities. They should provide
constructive challenge, strategic guidance,
offer specialist advice and hold management
to account.
Board structure, page 56
Nomination Committee report, pages 62
and 63
I. The board, supported by the company
secretary, should ensure that it has the
policies, processes, information, time and
resources it needs in order to function
effectively and efficiently.
Board structure, page 56
Board activity, pages 58 and 59
Governance framework, pages 60 and 61
Governance
55
Audit, Risk & Internal Control
Remuneration
Composition, Succession
& Evaluation
J. Appointments to the board should be
subject to a formal, rigorous and transparent
procedure, and an effective succession plan
should be maintained for board and senior
management. Both appointments and
succession plans should be based on merit
and objective criteria and, within this context,
should promote diversity of gender, social and
ethnic backgrounds, cognitive and personal
strengths.
Nomination Committee report,
pages 62 and 63
K. Consideration should be given to the
length of service of the board as a whole and
membership regularly refreshed.
Nomination Committee report, pages 62
and 63
M. The board should establish formal and
transparent policies and procedures to ensure
the independence and effectiveness of
internal and external audit functions and
satisfy itself on the integrity of financial and
narrative statements.
Directors’ report, pages 86 to 88
Audit and Risk Committee report,
pages 64 to 69
Financial review, pages 39 to 41
Risk management, pages 42 to 48
N. The board should present a fair, balanced
and understandable assessment of the
company’s position and prospects.
Audit and Risk Committee report,
pages 64 to 69
Strategic report, pages 1 to 49
L. Annual evaluation of the board should
consider its composition, diversity and how
effectively members work together to achieve
objectives. Individual evaluation should
demonstrate whether each director continues
to contribute effectively.
O. The board should establish procedures to
manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks that the company
is willing to take in order to achieve its
long-term strategic objectives.
Board effectiveness, page 59
Nomination Committee report, pages 62
and 63
Audit and Risk Committee report,
pages 64 to 69
Risk management, pages 42 to 48
P. Remuneration policies and practices
should be designed to support strategy and
promote long-term sustainable success.
Executive remuneration should be aligned to
company purpose and values, and be clearly
linked to the successful delivery of the
company’s long-term strategy.
Remuneration report, pages 70 to 85
Q. A formal and transparent procedure for
developing policy on executive remuneration
and determining director and senior
management remuneration should be
established. No director should be involved in
deciding their own remuneration outcome.
Remuneration report, pages 70 to 85
R. Directors should exercise independent
judgement and discretion when authorising
remuneration outcomes, taking account of
company and individual performance, and
wider circumstances.
Remuneration report, pages 70 to 85
The Board has reviewed the
appropriateness of the provisions to
determine whether they should be applied
or if departure is justified. All provisions of
the Code have been applied as necessary
as part of Record’s corporate governance
framework except for the following:
• Provision 9 of the Code recommends
that the chair should be independent
on appointment. Neil Record is deemed
to be a controlling shareholder and so
was not independent on appointment.
However, the Board is of the opinion
that the potential issue of
non-independence is outweighed by
the attributes of leadership and
guidance that Neil brings to the role.
• Provision 19 of the Code recommends
that the chair should not remain in post
beyond nine years from the date of first
appointment to the board. Neil Record
founded the Record Group in 1983
and led the business until its IPO in
December 2007. At the time of the IPO
it was agreed Neil was best placed to
continue to chair the business, a role he
has undertaken ever since.
Neil is well-known and well respected
within the field of currency management
and his long established involvement
with the business, his ideas and
character have built the business to
what it is today. The Board is of the
opinion that Neil continues to add
considerable value and that retaining
him as Chairman is therefore justified for
the foreseeable future. Details of the
Nomination Committee’s review of the
tenure of the Chairman conducted in
2021 together with its conclusion are
provided on page 63.
• Provision 21 of the Code recommends
that the chair should consider having
a regular externally facilitated board
evaluation. In FTSE 350 companies
this should happen at least every three
years. As a non-FTSE 350 company
the triennial requirement for an external
assessment does not apply to Record
plc and to date has not been considered
necessary. Details of the evaluation
process conducted in 2021 which
incorporated a workshop facilitated
externally are provided on page 63.
• Provision 38 of the Code recommends
that the pension contribution rates for
executive directors, or payments in lieu,
should be aligned with those available to
the workforce. Historically, the pension
contribution rates for Executive Directors
have been higher than the rest of the
workforce; this discrepancy has now
been addressed effective 1 April 2021.
Details of how pension contribution
rates are being aligned across the
business are provided in the
Remuneration report on page 73.
Strategic reportGovernanceFinancial statementsAdditional information 56
Record plc Annual Report 2021
Corporate governance report continued
Board structure
Board composition
The Record plc Board consists of six
members and is headed by Neil Record
(Chairman), with the Executive Directors,
Leslie Hill (Chief Executive Officer) and
Steve Cullen (Chief Financial Officer). 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
52 and 53.
In February 2021 Bob Noyen stepped
down from the Record plc Board but
remained as Chief Investment Officer and a
director of Record Currency Management
Limited. Mr Noyen subsequently resigned
from the role of Chief Investment Officer
and a director of Record Currency
Management Limited effective
31 March 2021, and is now retained by
Record on a twelve-month consultancy
contract. Further information on this Board
change is detailed in the Nomination
Committee report on page 62. There have
been no new external appointments to the
Board during the year.
Code provision
The Code recommends that at least half
the board, excluding the chair, should be
non-executive directors whom the board
considers to be independent and the
Board’s structure complies with this
provision. The Board considers that the
current composition is appropriate given
the size and structure of the business.
The division of responsibilities between the
Chairman and the Chief Executive Officer is
clearly established, set out in writing and
agreed by the Board.
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.
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 Group 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. Her statement on FY-21 and the
outlook for the Group can be found on pages 6 and 7.
Chief Financial Officer
The Chief Financial Officer is responsible for the finance function, the financial
management and control of the business, and for developing and delivering
appropriate internal and external financial reporting. His financial review for
FY-21 can be found on pages 39 to 41.
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 63) 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.
Governance
57
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 52 and 53. 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 84.
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 the boardroom in its broadest
sense 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 important 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 six and thus women
make up 50% 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 described on pages
31 and 32.
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.
The Company’s Articles of Association
were revised in 2020 to align with the UK
Corporate Governance Code July 2018,
current legislation and market practice and
were subsequently approved by
shareholders at the 2020 AGM. Under the
Articles all Directors are subject to annual
election by shareholders and all of the
Directors will stand for re-election at
the 2021 AGM, with the exception of
Jane Tufnell who will be standing down
for personal reasons.
The Board 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 2021
Notice of AGM.
Strategic reportGovernanceFinancial statementsAdditional information 58
Record plc Annual Report 2021
Corporate governance report continued
Board activity
Board focus and decision-making
The regular scheduled Board meetings
have a set, strategically focused agenda
and Board members are invited in advance
of each meeting to add any additional
issues they wish to be addressed.
Updates from the chairs of the Nomination
Committee, Remuneration Committee and
Audit and Risk Committee are provided at
each meeting.
Ongoing matters discussed included Brexit
planning, the implementation of SMCR,
global regulatory developments and the
covid-19 pandemic.
During the year, the Board focused on
the key matters detailed below:
Material circulated in advance of the
meetings has included:
• Minutes of the previous Board meetings
• Executive Team meeting minutes
• CEO report
• KPI data pack
•
•
•
Investment performance report
Investment Committee report
IT strategy and systems report
• Research activities report
• Compliance and risk report
• COO report
• Head of HR report
• Management information pack
March 2021
• Group strategy and values (Strategy)
• Budget FY-22 (Strategy, Finance)
February 2021
• Board structure and CIO change
(Strategy, Governance)
• Company Secretary change (Governance)
• Trade Finance investment
(Strategy, Finance)
November 2020
• Going concern review (Finance)
• Interim review (Finance)
• Interim dividend proposal (Finance)
• Board Diversity Policy (Governance)
• Conflicts of interest framework and
Conflicts of interest management and
disclosure policy (Governance, Risk)
June 2020
• Going concern and long-term viability
review (Finance, Risk management)
• Annual Report and Accounts 2020 and
dividend proposal (Finance)
• Amended Articles of Association for Record
plc (Governance)
• Revised Board and Committee terms of
reference (Governance)
• Group IT infrastructure strategy and budget
Key matters
considered by the
Board in the year to
31 March 2021
July 2020
(outside the normal meeting cycle)
• Pillar 3 Disclosure (Risk management)
August 2020
• Trade Record Ltd divestment
(Strategy, Finance, Risk)
• Establishment of the Executive
Committee (Governance)
• Establishment of a JSOP scheme
(Workforce)
September 2020
• Review of the Directors’ conflicts of
interest register (Conduct)
• Appointment of Panmure Gordon as
corporate broker (Corporate)
• Code of Ethics Parts I and II (Conduct)
Governance
59
Meeting frequency and attendance
The Board met six times between
1 April 2020 and 31 March 2021 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 regular offsite strategy meetings and
additional meetings as required to address
specific issues. As a result of the covid-19
crisis no offsite strategy meetings were held
during the year under review.
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 2021.
Directors are expected to attend all
meetings of the Board. Details of Board
meeting attendance are included in the
table below:
Meetings in the year: 6
Neil Record
Jane Tufnell
Rosemary Hilary
Tim Edwards
Steve Cullen
Leslie Hill
6/6
6/6
6/6
6/6
6/6
6/6
Bob Noyen attended five meetings before
he stepped down from the Board in
February 2021.
The Non-executive Directors met without
the Executive Directors on several
occasions throughout the year, prior to
scheduled meetings.
Board effectiveness
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 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.
On an ongoing basis 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.
Board performance evaluation
The Board is required by the Code to
undertake an annual evaluation of its
performance. The Code states that
“There should be a formal and rigorous
annual evaluation of the performance of
the board, its committees, the chair and
individual directors”.
The Code recommends that evaluation of
the board of FTSE 350 companies should
be externally facilitated at least every
three years.
A Board effectiveness workshop was
conducted in March 2021 and further
details are provided in the Nomination
Committee report.
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 2021 was positive and all
roles were considered to be
undertaken effectively.
Strategic reportGovernanceFinancial statementsAdditional information 60
Record plc Annual Report 2021
Corporate governance report continued
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 62 and 63;
• Audit and Risk Committee – report set
out on pages 64 to 69; and
• Remuneration Committee – report set
out on pages 70 to 85.
The Committees operate on written terms
of reference, which are reviewed annually
and which are available on the Group’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.
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 below gives an overview of
the Group’s core governance framework.
Board
Board Committees
Nomination
Remuneration
Audit and Risk
Operational Committees
Executive
Investment
Risk Management
Operational Committees
The Board has also established three
Committees responsible for operational
oversight and decision-making as follows:
Executive Committee
Role: The Executive Committee with its
sub-committees is the decision-making
body for all day-to-day operations as
delegated by the Board and Record plc’s
subsidiaries.
Members: During the year the Committee
comprised the Chief Executive Officer as
Chair, the Chief Financial Officer, the Chief
Investment Officer, the Chief Operating
Officer, the Head of Portfolio Management,
the Head of Human Resources, the Head
of Global Sales (April to December 2020)
and the Head of Strategic Initiatives (from
August 2020). Members of the senior
management team are invited to attend
as deemed appropriate.
Meetings: The Committee meets formally
once a month and holds regular 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
eight out of twelve meetings in the year
under review).
Reporting: Minutes of all meetings are
circulated to the Board for review and
comment.
Sub-committees: During the year two
new sub-committees were created,
reporting in to the Executive Committee,
each responsible for on-the-ground
decision-making, these being the Human
Resources Committee consisting of the
CEO, Head of HR and the HR Director,
and the Technology Committee consisting
of the COO, CTO/Head of Infrastructure,
CTO and Head of Strategic Initiatives.
The aim being to facilitate more timely
and more effective decision-making.
Governance
61
Investment Committee
Role: The Board has delegated the
responsibility for authorising changes
to existing investment processes and for
approving new investment strategies to
the Investment Committee.
Members: The Committee consists of
the Chief Investment Officer, the Chief
Executive Officer, the Group Chairman,
the Head of Portfolio Management and
the Head of Investment Strategy.
Meetings: The Committee meets as
necessary, responding both to internal
developments and external events.
Reporting: Reports on the activities of the
Committee are presented at each formal
Board meeting for review and comment.
Risk Management Committee
Role: The Audit and Risk Committee has
delegated to the Risk Management
Committee the task of overseeing and
mitigating operational risks arising across
the activities of Record Currency
Management Limited, the regulated entity
within the Group.
Members: The Chief Operating
Officer (Committee Chair), the Head of
Compliance and Risk, the Chief Financial
Officer, the Head of Client Onboarding, the
Head of Operations, the Head of Portfolio
Implementation, the Head of Trading, the
Head of Front Office Risk Management and
the Head of Reporting are all members of
the Committee.
Meetings: The Committee meets at least
once a month and as necessary in
response to individual or specific events
requiring review.
Reporting: 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 42 to 48 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 2021 and is satisfied that the
internal control environment is appropriate
(see “Internal controls and risk
management” on pages 67 and 68).
Approved by the Board and signed on
its behalf by:
Kevin Ayles
Company Secretary
16 June 2021
Strategic reportGovernanceFinancial statementsAdditional information 62
Record plc Annual Report 2021
Nomination Committee report
This year the Nomination Committee
has continued to focus on overseeing
Board and senior management
composition and I am confident
we have a highly effective team to
deliver value to our stakeholders.
Role of the Committee
The role of the Nomination Committee is
to ensure that the Board has the optimal
talents and experience to enable the
Company to grow, compete in its
markets and manage risks effectively.
The Committee serves both Record plc
and the Group’s FCA regulated entity,
Record Currency Management Limited.
Committee meeting attendance
Jane Tufnell
Rosemary Hilary
Tim Edwards
Neil Record
7/7
7/7
7/7
7/7
Jane Tufnell
Chair of the Nomination Committee
Dear Shareholder
I am pleased to present the Nomination
Committee report for the year ending
31 March 2021. This will be my last report
as Chair of the Nomination Committee as
I will be stepping down from the Board
at this year’s AGM on 27 July.
Key responsibilities
The key responsibilities of the Committee
are to:
• review the structure, size and
composition of the Board and
Committees including the diversity
and balance of skills and experience;
• consider succession planning for
Directors and other senior management;
•
identify and nominate for the approval of
the Board candidates to fill Board
vacancies; and
• review annually the time commitment
required of Non-executive Directors.
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.
Committee meetings
The Committee met on seven occasions
during the year ended 31 March 2021
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 above.
The Chair of the Nomination Committee
reported regularly to the Board on the
Committee’s activities, identifying matters
where any action was deemed to be
required and making recommendations
as considered appropriate.
Key areas of focus
Board composition
The Committee has continued to be aware
of the need for the business to be more
responsive to the needs and demands of
clients in an ever evolving environment and
to have a Board structure in place which
ensures the Group can adapt and change.
The Committee met in January to review
the composition of the Record plc Board
and, in conjunction with ongoing
discussions with the Chief Investment
Officer, Bob Noyen, determined it was
in the best interest of the Group that
he should focus on addressing clients’
demands and their currency exposures
at an operational rather than strategic level.
As a result of these discussions Bob Noyen
elected to stand down from the Board of
Record plc and this was approved by the
Board on 4 February 2021.
Governance
63
Subsequently, Bob Noyen requested that
he be retained on a consulting arrangement
with the Group and the Board agreed this
was acceptable. The Nomination
Committee considered a proposal put
forward by Leslie Hill as Chief Executive
Officer to appoint Dmitri Tikhonov to the
role of Chief Investment Officer and director
of Record Currency Management Limited
to replace Bob. The Committee considered
Dmitri’s extensive investment experience
built up over more than 18 years at Record
and the work he had undertaken in his role
of Chief Investment Risk Officer and agreed
that he had the skills necessary to perform
the Chief Investment Officer role effectively.
A recommendation was put to the Board
of Record Currency Management Limited
accordingly at their meeting held on
18 March 2021 and they expressed their
full support and approval for Dmitri being
appointed as Chief Investment Officer and
director of Record Currency Management
Limited to be effective 1 April 2021, subject
to FCA approval.
Extension of the appointment term
for Tim Edwards
In March 2021 the Committee reviewed
the extension of the appointment term for
Tim Edwards as a Non-executive Director
following its expiry after the initial three-year
term, Tim having been appointed on
22 March 2016. Tim was not present for
this review. It was agreed that it was in the
interests of both Record plc and Record
Currency Management Limited that Tim
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.
Board diversity
The Group’s Board Diversity Policy was last
reviewed by the Committee in November
2020. 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 is appropriate
and meets the gender target set in the
Group’s Board Diversity Policy.
Tenure and effectiveness
of the Chairman
The UK Corporate Governance Code
recommends that the Chair should not
remain in post beyond nine years from the
date of their appointment to the Board.
The Committee is aware that Neil Record
has been in post since Record’s IPO in
2007. The Committee has reviewed this
tenure and has noted the benefits of
continuity of the Board Chair during a
period of continued transition for the
business. Discussion of the issue by the
Committee Chair with major shareholders
has confirmed they remain confident with
Neil’s ongoing tenure.
The Committee has concluded that
Neil’s extensive experience in the currency
industry as well as his leadership and
challenge to the Board during this time of
business transition supports the decision
to retain him as Chair for the foreseeable
future. The Committee Chair conducted
a review of the Board Chair with all Board
members in May 2021. The review
concluded that Neil had made a very
positive contribution in the period and he
continues to provide valuable support to
both the business and Leslie Hill as Chief
Executive Officer.
The tenure of the Chair will continue to
be reviewed by the Committee on an
annual basis.
Performance of the Directors
and the Board
In September 2020 the Committee
considered the outcome of the SMCR
competency and performance reviews
conducted in respect of all the Board
members and senior managers. The
Committee acknowledged it was content
with the competency assessments and
performance evaluations made and that
it had no concerns regarding the
performance of any of the individuals
reviewed.
A Board effectiveness workshop was
conducted in March 2021, facilitated by
an external company, Boardroom Review.
They carried out interviews with Board
members and reviewed information prior to
a collective Board workshop discussing the
strengths, challenges and contribution of
the Board to the success and sustainability
of the Company. Areas for focus were
identified and the Board is aligning these
actions with the implementation of
the strategy.
In June 2021, the Committee reviewed
the performance of the Board Committees.
It concluded that the timetable of meetings,
the issues addressed and the time
committed by Non-executive Directors
was appropriate.
Looking forward
The Committee plans to focus on the
specification of the future role profile for the
Chief Executive Officer with consideration
of the business transition taking place and
what the Record Group of tomorrow will
look like to facilitate succession planning for
both the Chief Executive Officer and Chair
roles.
Approved by the Committee and signed
on its behalf by:
Jane Tufnell
Chair of the Nomination Committee
16 June 2021
Strategic reportGovernanceFinancial statementsAdditional information 64
Record plc Annual Report 2021
Audit and Risk Committee
report
I am pleased to confirm the
Committee has continued to be
central to the oversight of the Group’s
financial reporting, risk management,
control and assurance processes and
internal and external audit.
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 Committee also monitors oversight
of the US regulated entity Record
Currency Management (US) Inc.
Committee meeting attendance
Rosemary Hilary
Jane Tufnell
Tim Edwards
Dear Shareholder
I am pleased to present the Audit and
Risk Committee report for the year ending
31 March 2021.
Committee duties
Under its terms of reference the Committee
is tasked with the following:
Internal controls, risk management and
operational conflicts of interest:
• monitoring and reviewing the Group’s
internal financial controls and the internal
control and risk management systems;
• providing advice, oversight and
challenge necessary to embed and
maintain a supportive risk culture
throughout the Group; and
8/8
8/8
8/8
• reviewing the conflicts of interest
framework and making
recommendations to the Board and
management as appropriate.
Compliance, whistleblowing, fraud and
anti-money laundering:
• considering and approving the remit of
the Compliance & Risk function and
challenging whether it has adequate
resources and appropriate access to
information to enable it to perform its
function effectively and in accordance
with the relevant professional standards;
• overseeing whistleblowing arrangements
by which staff may raise concerns about
possible improprieties in financial
reporting or other matters; and
• reviewing the Group’s systems and
controls for the prevention of bribery
and reviewing the adequacy and
effectiveness of the Group’s anti-money
laundering systems and controls.
External audit:
• making recommendations relating to
the appointment, re-appointment and
removal of the external auditor and
overseeing any tender of external
audit services;
• 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,
taking into consideration relevant
UK professional and regulatory
requirements; and
• overseeing the provision of any non-audit
services by the external auditor.
Governance
65
Internal audit:
• reviewing and approving the role,
mandate and annual internal audit plan
of the internal audit function, ensuring
that the function has the necessary
resources and access to information to
enable it to fulfil its mandate;
• monitoring and reviewing the
effectiveness of the Group’s internal
audit function; and
• reviewing and monitoring management’s
responsiveness to the internal auditor’s
findings and recommendations.
Financial reporting:
• monitoring the integrity of the Group’s
financial statements, including the
review of this Annual Report and any
other formal announcements relating
to the Group’s performance;
• reviewing any significant financial
reporting judgements;
• reviewing the assumptions and any
qualifications made in support of the
going concern statement and the
longer-term viability statement; and
• reviewing the application and
consistency of accounting policies and
accounting standards.
The full terms of reference of the
Committee were last updated and
approved by the Board in June 2020;
they 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.
The Chair of the Committee provides
regular reports to the Board detailing how
the Committee has discharged its
responsibilities as set out in its terms
of reference.
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.
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 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 52 and 53.
The composition of the Committee
complies with the Code provision for
smaller companies requiring at least two
independent Non-executive Directors
throughout the year.
Committee meetings
The Committee met eight times during the
year ending 31 March 2021, being four
quarterly meetings, two meetings ahead of
results announcements and two additional
meetings held as a result of the covid-19
crisis. The 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 from PwC for the period
to 4 August 2020, and BDO thereafter,
each attended three meetings as the
incumbent external auditor and the Deloitte
internal auditor partner attended all eight
meetings. Minutes of the meetings were
documented by the Company Secretary
and retained on file.
Committee member meeting attendance
for the year ending 31 March 2021 is
detailed on page 64.
The Committee also separately met the
Group’s external auditor on two occasions
and the internal auditor on five occasions,
providing an opportunity for them,
privately and in confidence, to raise
matters of concern.
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.
Committee Chair meetings
During the year the Chair of the Committee
has had separate discussions with the
key people involved in the Company’s
governance, including the Board Chairman,
the Chief Executive Officer, the Chief
Financial Officer, the Head of Compliance
and Risk and also the external audit partner
and the internal audit partner to obtain
updates and insights into business activities.
Committee evaluation
An internal review of Committee
effectiveness was overseen by the
Company Secretary in May 2021.
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.
Strategic reportGovernanceFinancial statementsAdditional information 66
Record plc Annual Report 2021
Audit and Risk Committee
report continued
Committee activities
The Committee has discharged its
responsibilities under its terms of reference
for the period under review by the following
actions:
• reviewing the form, content and integrity
of financial information prior to release,
including the Annual and Interim
Reports;
• reviewing the content of each of the
Interim Management Statements for
subsequent Board approval;
• reviewing the adequacy and
effectiveness of the Group’s internal
controls and risk management systems;
• considering the Pillar 3 disclosures prior
to their recommendation for acceptance
by the Board;
• receiving and reviewing internal audit
updates and reports;
• evaluating the performance and
independence 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 for the interim review and the
final audit;
• assessing the external auditor’s
concluding report for the interim review
and the year-end financial statements;
• evaluating the performance of the
external auditor over the period;
• reviewing regular reports by the Head of
Compliance and Risk detailing internal
compliance and risk management
activities and issues;
• reviewing a “Risk Matrix” to ensure that
key risks and risk movements are
identified and addressed;
• examining departmental KPI and KRI
data to ensure operational risks are
identified and appropriately addressed
by management;
• reviewing Risk Management Committee
meeting minutes and summary activity
reports by the Chief Operating Officer as
Chair of the Risk Management
Committee; and
• reviewing and approving the Group’s
whistleblowing policy.
Key areas of focus
Review of the regulatory landscape
Briefings on regulatory developments were
provided to the Committee at each meeting
by Deloitte as internal auditor and by the
Head of Compliance and Risk. Topics
included the Senior Managers and
Certification Regime, Brexit, FCA policy and
discussion statements, FRC guidance and
regulatory changes in other jurisdictions
relevant to Record.
Brexit
The Committee closely monitored
management’s Brexit preparations to
ensure Record was suitably organised for
all possible outcomes. Ahead of the end of
the Brexit transition period the Committee
was content that Record was suitably
prepared and that Record could continue
to serve all of its existing EU27 clients
under existing investment management
agreements from 1 January 2021. As part
of its Brexit strategy Record established a
German subsidiary, Record Asset
Management GmbH, in November 2020.
Technology and cyber security
Given the extensive programme of
technological developments being
undertaken across the Group, the
Committee has been keen to ensure that
appropriate controls and processes are in
place for all IT projects and all new systems
implemented. The Committee has received
regular updates from the Chief Technology
Officer and the Head of Strategic Initiatives
who also attended meetings to respond to
the Committee’s questions. The Committee
has received reassurance that there is
appropriate management involvement
and oversight of the IT projects being
undertaken. The Committee has been
satisfied that business risks are being
considered and monitored and that
controls are in place as necessary.
The Committee will continue to challenge
the Head of Strategic Initiatives to ensure
successful delivery of Record’s
technology strategy.
The Committee has remained conscious
that cyber security presents an ongoing
significant risk to financial services
companies and has continued to monitor,
review and challenge Record’s cyber and
data security processes; management’s
approach to developments and initiatives;
and management’s response to issues
identified internally, by the internal auditor
and by third party advisers. Management
are working to secure Cyber Essentials
certification and the Committee is
supportive of this initiative. The need to
remain vigilant is recognised and cyber
security will continue to be a key focus for
the Committee going forward.
An internal vulnerabilities assessment was
conducted by an external third party in
December 2020 and management then
implemented a plan to address the gaps
identified. These gaps were not material
and the Committee was content with the
action proposed and taken by
management.
Third party assurance services
RSM Risk Assurance Services LLP (“RSM”)
was appointed in January 2020 to conduct
the Reporting Accountant and Independent
Service Auditor (ISAE 3402/AT-C 320)
reports on internal controls on an annual
basis. Their update report for 2021 was
presented to and reviewed by the
Committee in June 2021.
Record Currency Management
(US) Inc. activities
The Committee has been keen to ensure
that oversight of the US subsidiary and the
controls in place appropriately reflect its
activities and, accordingly, they have
sought and received ongoing assurances
from both management and the Head of
Compliance and Risk.
During the year steps have been taken
by management to enhance the
documentation of US activities and
compliance monitoring of the subsidiary
and the Committee has been supportive
of the developments made.
The Committee will continue to monitor the
activity of the US entity to assess whether
the control environment, management
oversight and compliance oversight remain
aligned with the risks of its business.
Governance
67
Conflicts of interest
During the year the Committee and the
Board undertook a comprehensive review
of the Conflict Management Framework
together with the Conflicts of Interest Policy,
the Gifts and Entertainment Policy and
the Conflicts of Interest Register and
relationships log. Both the Audit and Risk
Committee and the Board confirmed
they were comfortable with the conflicts
of interest structures and controls then
in place.
Covid-19 response
The Committee requested and received
regular business updates and monitored
management’s ongoing response to the
covid-19 crisis to ensure that appropriate
processes and controls have remained in
place during the period whilst all
employees have been working from home.
The Committee has welcomed the
responsiveness of management to the
situation and is supportive of the initiatives
implemented to ensure the business has
continued to operate under a strong control
environment with no material impact on its
trading activities or its financial
reporting processes.
Financial reporting
The Committee has thoroughly 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 assessments of the
internal controls environment, the
financial impact of the covid-19 pandemic,
future cash flows, going concern and
ongoing viability.
The Committee was satisfied that all
judgements made by management which
affect financial reporting, including the
consolidation of seed funds, have been
made in accordance with the Group’s
accounting policies and made a
recommendation to the Board that it was
appropriate for the Group to adopt the
going concern basis of accounting in
preparing the half-year and annual financial
statements for the year ending
31 March 2021.
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 review report on the half-
year results.
The Committee is satisfied that the financial
reporting control framework 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 reviewed 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 providing oversight and
independent challenge to the internal
controls and risk management systems
of the Group.
A “Risk Matrix”, which identifies key risk
areas that may impact the Group and
monitors them against the Board’s risk
appetite, 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 associated business impact are
identified promptly so that appropriate
action can be taken. The use of the
“Risk Matrix” to assist risk monitoring
is welcomed by the Committee.
The Committee has reviewed 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.
In July 2020 the Committee undertook
a detailed review of the Group’s Pillar 3
disclosures which had been prepared in
accordance with the Capital Requirements
Directive. The Committee members agreed
they were satisfied with the disclosures
made in the document and recommended
the Pillar 3 Disclosures for the
Board’s approval.
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 pages 42 to 45.
Strategic reportGovernanceFinancial statementsAdditional information 68
Record plc Annual Report 2021
Audit and Risk Committee
report continued
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 April 2021. Deloitte reports directly to the
Committee and the relationship is subject
to periodic review.
Having been appointed by Record in
July 2014 the Deloitte internal audit partner
was approaching the seven-year maximum
permitted tenure under the Internal Audit
Code of Practice published by the
Chartered Institute of Internal Auditors and
so in March 2021 the Committee reviewed
the CVs of potential new Deloitte partners,
following which interviews were held and a
new partner selected.
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 deep-dive thematic and risk-based
audits and also high level in-flight reviews
of specific projects 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 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.
The Committee has reviewed the findings
and recommendations made by the internal
auditor and has aimed to ensure that any
issues arising are suitably addressed by
management in an effective and
timely manner.
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 has monitored
whether sufficient and appropriate
resources are dedicated to the internal
audit function and this has been reported
to and noted by the Board.
External audit
Following an external audit tender process
conducted in early 2020, detailed in the
previous Annual Report, the Committee
and Board’s recommendation to replace
PwC LLP by appointing BDO LLP (“BDO”)
was approved by shareholders at the 2020
AGM held on 4 August 2020. On the
engagement of BDO, Neil Fung-On was
appointed lead audit partner and he has
led the 2021 external audit process. BDO’s
fees and the terms of the audit engagement
letter for FY-21 were approved by the
Committee in October 2020.
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.
The Committee discussed the findings with
the auditor and was satisfied with the
conclusion reached by the auditor that
there was no evidence of material
misstatements. The Committee has
confirmed that no material items remained
unadjusted in the financial statements.
An assessment of the quality and
effectiveness of BDO’s FY-21 audit was
considered by way of a review completed
by the Committee with the assistance of
senior members of the Finance Team and
with reference to the FRC’s practice aid on
assessing audit quality, published in
December 2019. The Committee evaluated
the judgements; mindset and culture; skills,
character and knowledge; and quality
control demonstrated by BDO throughout
the audit process and concluded that BDO
had provided a quality 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
During the year the Committee operated
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 was not
compromised. The policy adheres to the
Financial Reporting Council’s revised
Ethical Standard issued in December 2019.
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 and monitors fees accordingly.
Governance
69
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 BDO in the year
under review:
•
independent auditor report to the FCA
on compliance with client asset rules;
and
• the interim review work performed on
the half-year accounts.
Details of the total fees paid to BDO 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 8% (2020: 20%) 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
BDO’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.
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:
• technology and cyber security;
• the continued response to the covid-19
crisis and transition back to office
working;
•
internal capital adequacy and risk
assessment and ongoing risk
monitoring;
• risk and controls as the Group’s strategy
is implemented, including new product
offerings;
• oversight and monitoring of the Group’s
regulated businesses based overseas;
and
• the regulatory landscape in the UK and
other jurisdictions relevant to Record.
Approved by the Committee and signed on
its behalf by:
Rosemary Hilary
Chair of the Audit and Risk Committee
16 June 2021
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Record plc Annual Report 2021
Remuneration report
Our remuneration policy is designed
to act in the interests of all of our
key stakeholders: our clients,
shareholders, employees
and regulators.
Role of the Committee
The role of the Remuneration
Committee is to review and approve
the remuneration strategies of the
Group, encompassing the Chair,
the Executive Directors, and the staff
as a whole. The Committee also reviews
and advises on the remuneration policy
and ensures that it promotes good
conduct consistent with sound and
effective risk management, and is
properly disclosed to stakeholders.
Committee meeting attendance
Tim Edwards
Rosemary Hilary
Jane Tufnell
7/7
7/7
7/7
Tim Edwards
Chair of the Remuneration Committee
Chair of the Remuneration
Committee’s statement
Introduction
I am pleased to present our Remuneration
report for 2021. We believe that our
Remuneration Policy, as approved by
shareholders at our 2020 AGM, remains
appropriate and we are proposing no
further changes this year.
Our report is split into three sections:
• the Remuneration Policy tables;
• the annual report on remuneration
for 2020-21; and
• the role and activity of the
Remuneration Committee.
We have not reproduced our full
Remuneration Policy in this report but
have provided a summary in the tables
produced on pages 72 to 76. A copy of
our full Directors’ Remuneration Policy,
as approved by shareholders in July 2020,
is available in the Remuneration sections
of the 2020 Annual Report and Accounts,
which is available on our website
www.recordcm.com.
This year, in line with the agreed
Remuneration Policy, we have introduced a
new element of remuneration, a Joint Share
Ownership Plan (“JSOP”) for staff below
Executive Director level as part of our
succession and talent management
strategy. The JSOP is designed for key staff
to accelerate their acquisition of shares to
further align their interests with those of
shareholders. The scheme requires a
financial commitment from the individual to
participate, further aligning the individuals’
contribution and retention with business
performance. Further details are provided
in the Remuneration Policy tables.
Furthermore, we used the flexibility in our
Share Scheme such that management
awarded the full allocation of share options
to staff below Director level.
In our Remuneration Policy we committed
to the alignment of pension contributions
across the Group. From June 2020,
contributions to Directors were decreased
from 15.5% to 13.5% and since April 2021
we have had alignment across the Group
at a single rate of 11% to be paid to all
staff, including Directors. Directors are able
to contribute to a pension scheme or may
receive payment in lieu if they have opted
out of the pension scheme.
Governance
71
Remuneration principles
Our approach to remuneration is driven
by long-term thinking to promote the
sustainable growth of the Group.
Identifying, developing and appropriately
compensating our high performers, at all
levels of the business, is critical to
long-term business success and is aligned
to both clients’ and shareholders’ interests.
Our key remuneration principles are:
• A consistent remuneration structure
for all employees, not just Directors,
which is transparent and
straightforward.
• Our remuneration structures should
reward and incentivise profitable
business growth.
• Remuneration should comprise two
components: (i) a fixed salary; and (ii) a
variable component based on individual
performance.
• Directors’ remuneration should include
a deferred element which is satisfied by
paying it in the form of equity.
Leadership and strategy
The Board’s priorities to position the firm for
growth and establish a plan for succession
in the most senior executive posts have
progressed significantly this year. We are
now well placed to continue to deliver
modernisation, diversification and growth
for next year. To reflect Leslie Hill’s
leadership and critical value in delivering
the change in strategy, her salary was
increased to £650,000 from 1 April 2021.
Leslie’s variable remuneration will continue
to be based on her performance against
agreed objectives.
As part of succession plans, Bob Noyen
relinquished his role as Chief Investment
Officer on 31 March 2021. Payments
made to Bob on leaving were in line with
our Remuneration Policy. Bob has
agreed to assist with the transition and
maintenance of client relationships by
providing continued support over the
next financial year.
Group performance for 2020-21
The year to 31 March 2021 has seen
revenues stay in line with last year, but an
increase in operating expenditure meant
that operating profit decreased by 20%.
Our AUME reached its highest ever value
at $80.1 billion and our share price
increased from 28 pence to 70 pence
during the year. Our Group Profit Share
Scheme pool was 34% of pre-GPS
underlying operating profit, which
represented £3.2 million, directly linking the
Company’s financial performance to the
size of the variable remuneration pool.
The value delivered under the Group
Profit Share Scheme decreased by 10%
compared to the previous period.
Directors were awarded profit share units
by the Remuneration Committee based
on their individual level of performance
measured against their objectives.
Some discretion was exercised by the
Committee in the allocation of these profit
share units. Details can be found within
the annual report on remuneration.
The Committee also received 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 option awards were made to Directors
during the year and details of previous
awards can be found on page 80 and all
awards were made in accordance with
the Scheme rules. No options vested for
Directors during the year as the
performance conditions had not been
met. Details can be found on page 80.
Alignment with shareholders
As at 31 March 2021, 38% of the
Company’s shares were held by the
Chairman and Directors, and each of
the current Executive Directors has a
shareholding significantly greater than
1.5 times their salary. In addition,
68% of the Company’s employees
are shareholders.
Engaging with employees
The Committee takes an active involvement
in remuneration for the whole Company.
Record staff participate in both the Group
Profit Share Scheme and the Share Option
Scheme and the Committee reviews all
GPS and option awards. A significant
proportion of our colleagues are
shareholders, so are able to express their
views in the same way as other
shareholders.
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.
In my role as Employee Engagement
Director, leading our workforce engagement
initiatives, we have been able to seek the
views of the wider workforce on a range of
topics including strategy, remuneration and
working arrangements under the covid-19
pandemic, through meetings and
conversations with staff.
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. The Remuneration
Committee takes into account shareholder
views received in relation to resolutions to
be considered at the AGM each year, and
values shareholder feedback when forming
remuneration policy.
Tim Edwards
Chair of the Remuneration Committee
16 June 2021
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Record plc Annual Report 2021
Remuneration report continued
Remuneration Policy
Remuneration Policy summary tables
This section of the Remuneration report starts with a table illustrating the remuneration structures that we have in place for Executive
Directors and then 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 for Directors and the tables
summarise the policy approved by shareholders at the 2020 AGM.
Summary remuneration structure
The table below illustrates the remuneration structures that we have in place for Directors.
Options
Struck at market price with performance conditions
1/3 vests
but held until
year 5
1/3 vests
but held until
year 5
1/3 vests
1/3 shares
released from
lock up
1/3 shares
released from
lock up
1/3 shares
released from
lock up
Group Profit
Shares
Share Scheme
Cash
Pension and
benefits
Cash
Salary
Cash
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Note: Directors are required to take one-third of their Group Profit Share payment in shares, which are locked up and released over three years. Directors can elect
to take a further third of their Group Profit Share payment in shares, and these have no lock up.
Remuneration Policy: comparison table for Executive Directors and staff
The table below provides a summary of the policy for each component part of remuneration for Executive Directors. The approach for
all staff is also included to provide context for the remuneration for the entire workforce.
Element, purpose
and link to strategy
Current operation
for employees
Policy for Executive Directors
Base salary
Fixed remuneration that reflects the role,
responsibilities, experience and
knowledge of the individual.
Paid monthly and reviewed annually
by management.
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.
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.
Governance
73
Element, purpose
and link to strategy
Commission
The Commission scheme is to reward
and incentivise contributions to new
business from the next generation.
Any payments are authorised by the
HR Committee and approved by the
Remuneration Committee after input
from the Head of Compliance and Risk.
The scheme operates within a risk
management framework to ensure
products are appropriate for clients
and any payment is made from profits.
Benefits
To provide a benefits package
that provides for the wellbeing of
our colleagues.
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 2021),
which is matched at a rate of 50%.
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.
Policy for Executive Directors
Executive Directors are not eligible to participate in
the Commission scheme.
Current operation
for employees
All staff can participate.
Staff will only receive a payment if they
are meeting their individual performance
objectives.
Code staff receive any payment in
shares, locked up for a period of one
year, whereas other staff will receive any
payment in cash.
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.
Executive Directors received benefits on the same basis as all
other employees, at the prevailing rates and nothing else.
All staff members are eligible to
participate in the SIP.
Executive Directors may participate in the SIP on the same
basis as other employees.
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 receive an employer pension
contribution of 11% of salary.
Executive Directors received an employer pension contribution
of 13.5% of salary from 1 June 2020 which can be paid into
the Group Personal Pension Scheme or delivered as a cash
allowance, aligned with that of the senior managers.
The Company aligned employer pension contributions for
all staff, including Executive Directors, in April 2021 to 11%.
All staff participate in the Group Profit
Share Scheme.
Executive Directors are eligible to participate in the Group
Profit Share Scheme.
Profit Share payments relate to the
responsibilities of the role and the
individual level of performance against
objectives for the relevant period.
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.
The Remuneration Committee approves all payments to
Executive Directors, which are based on individual
performance against objectives for the relevant period.
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.
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.
Malus and clawback provisions apply to all awards. Further
details are set out below.
The Committee has discretion in the treatment of leavers as
set out below.
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Record plc Annual Report 2021
Remuneration report continued
Remuneration Policy continued
Remuneration Policy: comparison table for Executive Directors and staff continued
Element, purpose
and link to strategy
Current operation
for employees
Policy for Executive Directors
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.
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 on a stepped basis after three, four and five
years. Awards that vest on the third and fourth year are
required to be held until the fifth year.
Malus and clawback provisions apply to all awards.
Further details are set out below.
The Committee has discretion in the treatment of leavers
as set out below.
Executive Directors are not eligible to participate in the
JSOP scheme.
Joint Share Ownership Plan
(“JSOP”)
The JSOP has been introduced to
accelerate the acquisition of shares for
the next generation of management,
as part of succession plans.
A financial commitment is required to
participate, further aligning the
participant’s contribution and retention
with longer-term business performance
and shareholder value.
Purchased shares are jointly held by the
EBT and the employee under the JSOP
agreement. The hurdle is struck at
market price and the employee owns
any value above the hurdle.
Vesting is over a four-year period, one
quarter each year, and any gain in share
price is realised in shares with a two-year
holding period.
There are clawback provisions and an
employee is required to pay to participate
in the scheme.
All staff members are eligible to
participate in the JSOP.
Any JSOP grants are awarded by
management on a discretionary basis.
Remuneration policy for the Chairman and the Non-executive Directors
The table below sets out the remuneration policy for the Chairman and the Non-executive Directors. In summary, they only receive fixed
pay and benefits.
Element, purpose
and link to strategy
Current operation for Chairman
and Non-executive Directors
Further information
Fees/salary
Fixed remuneration that reflects the role,
skills and experience.
Benefits
To enable the Chairman and
Non-executive Directors to carry out
their roles.
The Chairman’s salary is determined by
the Remuneration Committee.
The Non-executive Directors’ fees are
approved by the Board.
Increases are normally expected to be in
line with the typical level of increase
awarded across the Group.
The Chairman receives benefits on the
same basis as other Executive Directors,
including pension, private medical
insurance, dental insurance, permanent
health insurance, life assurance, personal
accident insurance and annual holiday.
Commission, SIP, Group Profit
Share Scheme, Share Scheme
and JSOP
The Chairman and the Non-executive
Directors do not participate in any of
these schemes.
Salaries and fees are reviewed annually. Any review will take
into account market rates, business performance and
individual contribution.
The Non-executive Directors receive expenses but do not
receive any additional benefits.
Governance
75
Service contracts and loss
of office payment policy
We provide all Executive Directors with
service agreements. None of the service
agreements are 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 and are required
to provide at least six months’ notice of
their intention to resign. 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 to their final
remuneration. 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 and discretion
as set out in those plans at the time the
Director leaves.
Engaging with employees and
shareholders, decision-making
processes and general employee
pay and conditions
The Group’s approach to engaging with
employees and shareholders are detailed in
the Chair of the Remuneration Committee’s
statement. The Group’s remuneration
decision-making processes are also
summarised in that statement and detailed
further above in the Remuneration Policy
tables, as well as the general approach to
employee pay and conditions.
Malus and clawback
Clawback provisions enable variable
remuneration to be reclaimed under
exceptional circumstances, as follows:
• GPS – malus and clawback provisions
are in place in the event of adverse
restatement of accounts or material
misconduct, at the discretion of the
Remuneration Committee.
• Share options – 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.
• Commission – clawback provisions are
in place in the event of adverse
restatement of accounts or breach of
contract for all commission payments.
• JSOP – clawback provisions are in place
for conduct resulting in significant
financial losses to the Company, material
wrongdoing, conduct that brings the
Company into material disrepute, breach
of contract or breach of regulatory rules.
Source and funding of shares
Share awards under the Group Profit Share
Scheme are covered wherever possible
through market purchases by the
Company’s Employee Benefit Trust (“EBT”)
rather than through the issue of new
shares, and this has been the case since
the inception of the Scheme in 2007.
It remains our intention to continue to
operate in this manner in order to minimise
potential dilution of shareholders’ interests.
Similarly, options under the Share Scheme
are not normally satisfied by the issue of
new shares, in order to minimise potential
dilution. The Company provides funds to
the EBT to allow it to purchase shares in
the market with which to satisfy the
exercise of options. The number of shares
purchased by the Group to hedge the
award of options is based on an
appropriate hedge ratio at each grant
date, as calculated by management and
approved by the Remuneration Committee.
Implementation of
Remuneration Policy
The Group has implemented the
Remuneration Policy, as approved by
shareholders last year. The Group will
continue to apply the Remuneration Policy
in FY-22, with no changes being made.
The Remuneration Committee will approve
any variable remuneration payments for the
CEO and CFO based on their performance
against their objectives and in accordance
with the Group Profit Share Scheme rules.
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, subject to the applicable policy
at the time.
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.
Executive shareholding policy
Any new Executive Director will be
encouraged to build a shareholding of at
least 1.5 times base salary, for example
through the use of GPS and share option
schemes, within a reasonable time of being
appointed.
At the end of his/her appointment, an
Executive Director would need to retain a
shareholding previously built up through the
use of remuneration schemes, but
excluding any shares bought for cash, of a
total of 1.5 times base salary, with half this
total being held for a period of one year and
half of this total being held for a period of
two years.
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Record plc Annual Report 2021
Remuneration report continued
Remuneration Policy
continued
Regulation
We continue to review our Remuneration
Policy in line with regulatory changes and
good practice and to ensure compliance with
the principles of the Remuneration Code of
the UK financial services regulator, as
applicable to the Group. In particular we will
be reviewing the impact of the Investment
Firm Prudential Regulation and any
implications for our Remuneration Policy.
Leslie Hill
Remuneration Policy – 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 well as any
gains on share options.
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.
Minimum
100%
£723,825
3-year
low
3-year
high
3-year
average
48%
52%
£690,137
41%
59%
£1,270,178
45%
55%
£901,070
£
0
200k
400k
600k
800k
1,000k
1,200k
1,400k
Bob Noyen (left the Board on 4 February 2021)
3-year
low
3-year
high
3-year
average
69%
31%
£404,857
48%
52%
£689,458
53%
47%
£589,812
£
0
200k
400k
600k
800k
1,000k
1,200k
1,400k
Steve Cullen
Minimum
100%
£152,640
3-year
low
3-year
high
3-year
average
70%
30%
£214,527
62%
38%
£245,090
65%
35%
£233,020
Key:
Fixed
Variable
£
0
200k
400k
600k
800k
1,000k
1,200k
1,400k
The above charts exclude the value
of options granted to Directors.
Governance
77
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 2021 AGM. The information on pages 77 to 84 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 2021 is detailed below together with their remuneration for the
previous year.
Leslie Hill
(appointed CEO on
13 February 2020)
James Wood-Collins
(resigned as CEO
on 13 February 2020)
Bob Noyen
(left the Board on
4 February 2021)
Steve Cullen
Executive
Directors
2021
£
2020
£
Salaries and fees
450,000
306,529
Benefits¹
Pensions2
2,325
2,150
62,250
47,512
Total fixed pay
514,575
356,191
2021
£
—
—
—
—
2020
£
2021
£
2020
£
2021
£
2020
£
249,096
242,830
285,913
129,997
129,997
809
1,243
1,393
1,128
38,610
33,592
44,316
17,983
1,908
20,150
288,515
277,665
331,622
149,108
152,055
Short-term incentive
(GPS cash)4
Short-term incentive
(GPS shares)3
427,420
257,801
—
194,669
84,795
228,999
43,612
58,260
328,183
128,902
Total variable pay5
755,603
386,703
Total
1,270,178
742,894
—
—
—
97,336
42,397
114,501
292,005
127,192
343,500
21,807
65,419
29,129
87,389
580,520
404,857
675,122
214,527
239,444
Neil Record
Jane Tufnell
Rosemary Hilary
Tim Edwards
Non-executive
Directors
2021
£
2020
£
2021
£
2020
£
2021
£
2020
£
2021
£
2020
£
Salaries and fees
79,310
79,310
63,500
63,500
49,862
49,862
43,497
43,497
Benefits1
Pensions2
Total
2,561
10,971
92,842
2,490
12,293
94,093
—
—
—
—
—
—
182
—
161
—
—
—
63,500
63,500
49,862
50,044
43,658
43,497
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. This includes payments made in lieu of pension contributions. Pension contributions were decreased from 15.5% to 13.5% on 1 June 2020.
3. Short-term incentive payments are subject to individual performance conditions summarised in the objectives table below. The shares vest immediately but
are subject to lock-up restrictions and are calculated based on the overall profitability of the Group.
4. The Remuneration Committee exercised discretion and James Wood-Collins was determined to be a good leaver for the GPS and his GPS relates to the
period to 13 August 2020.
5. The table excludes any value derived from share options. No Directors had a gain in the year. The only Director who had a gain in the prior year was
James Wood-Collins (£2,100).
Payments for loss of office and payments made to former Directors
Bob Noyen left the Board of Directors on 4 February 2021 and left employment on 31 March 2021. Payments from 5 February to
31 March were £80,423. These payments comprise £43,083 salary, £221 medical benefits, £20,773 short-term incentives (GPS cash),
£10,386 short-term incentives (GPS shares) and £5,960 cash in lieu of pension. He was made a payment in lieu of notice of £142,956
being six months’ salary and no other payments were made for loss of office. Bob was treated as a good leaver under the Group Profit
Share Scheme and Share Scheme rules and Remuneration Policy. To assist with the transition and maintenance of client relationships,
Bob agreed to provide consultancy support to the Company over a twelve-month period, commencing on 1 April 2021.
James Wood-Collins left the Board of Directors on 13 February 2020 and left the Group on 13 August 2020 after working his six-month
notice period. Payments from 1 April to 13 August were £287,804. These payments comprise £121,507 salary, £343 medical benefits,
£68,954 short-term incentives (GPS cash) and £97,000 (statutory legal cap) for loss of office. No other payments were made to
former Directors.
Strategic reportGovernanceFinancial statementsAdditional information
78
Record plc Annual Report 2021
Remuneration report continued
Annual report on remuneration continued
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 2021, the Group made contributions of 15.5% of each Director’s salary for April and May 2020, which was then
reduced to 13.5% on 1 June 2020, that 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 2020 and 31 March 2021 are detailed in the tables on
page 77.
Allocation of the Profit Share pool to Executive Directors
The Remuneration Committee is able to exercise discretion over the level of base Group Profit Share units that are awarded to Executive
Directors based on the role and level of responsibility. The final allocation is adjusted based on an assessment of the individual Director’s
performance compared to their objectives. On two occasions during the year, the Committee approved awards to the Directors after
considering the role and performance of each individual Director for the relevant six-month period. The overall performance for the year
for each Executive Director is summarised below. The Committee also receives reports from the Head of Compliance and Risk, regarding
any legal or compliance issues relevant to the award.
Leslie Hill
Objectives
Outcomes
Strategic
Sales
Support our sales environment to enhance the sales of both our traditional
products and new strategies. Deliver an EM Sustainable Finance Fund
and build strategic partnerships.
Investments
Diversify our investment product offering, restructure the department to
focus on risk management and active strategies separately.
Technology
Modernise our IT platform.
Provide long-term flexibility and cost savings.
Highest ever AUME at $80.1 billion. Client numbers grew by 24%.
EM Sustainable Finance Fund to launch.
Product diversification being achieved through our own strategies and
two new flagship product offerings in collaboration with external partners.
Investment team was reorganised, with a change of our CIO and
investment management teams.
Good progress in technology, with the introduction of a new data
capture transformation platform to bring efficiencies and improve our
client offering together with new development tools and improvements
to the technology infrastructure.
Succession and organisational structure
Develop an organisational structure that is fit to deliver profitable growth
and to support succession.
We have seen encouraging work in progress, with the creation of a new
sales leadership team and a new investment leadership team.
Operational
People
Recruit, develop and retain high-performing colleagues as part of
Record plc leadership and participation.
Press and investors
Build positive relationships with investors, brokers, city contacts
and press.
This was achieved through the development and retention of
high performers in the team.
This was achieved and the Company enjoyed share price growth from
28 pence to 70 pence during the year.
Award:
200%. Objectives were exceeded and the Committee made an award of 200% to recognise over-performance.
Governance
79
Bob Noyen
Objectives
Outcomes
Strategic
Investment strategies
Manage investment products and services for the risk management
investment team. Transition return product responsibilities and evolve
investment management structure.
Client relationships
Initiate investment research to retain clients by introducing new services
and/or improvements to existing services. Support client retention.
Operational
People
Support to the CEO and the client and client services teams. Train and
mentor colleagues as part of succession planning.
Investment performance has been variable with a reduction in
performance fees in the year. New investment leadership team has
been established.
For the clients that Bob was solely or jointly responsible for there was
a strong retention rate and strong client servicing.
This was partially met during the period. Bob provided advice and
support to the next generation of investment managers.
Compliance
Lead by example in ensuring compliance with policies and procedures,
to ensure Record meets its obligations to clients and to regulators.
This has been met.
Award:
Objectives were partially met for the period and the Committee made an award of 65% of base units, recognising some underperformance.
Steve Cullen
Objectives
Strategic
Identify and implement opportunities for Finance team to become more
commercial.
Operational
Cost discipline and accounting
Ensure maintenance of cost discipline across the business through
adherence to approved budget, and expenditure authorisation policy
and procedures.
Risk management
Ensure suitable systems and controls in place within Finance to
minimise potential errors/breaches.
Reporting
Ensure timely delivery of key reporting metrics, including the
Annual Report, internal audit relationship, investor relations.
Department
Ensure appropriate team structure and skills and review areas for
improving efficiency.
External relationships
Continue to develop relationships with external auditors, internal
auditors, company brokers and investor relations.
Outcomes
Good progress made with the implementation of a new accounting
package and a new tax advisory firm appointed.
Cost discipline was maintained throughout the financial year.
No material errors or breaches in routine reporting, confirmed by
external audit.
Refreshed approach to the Annual Report and improvements
made to the style of the report.
New team working well together, improved internal reporting and
use of technology to automate some manual processes.
Good relationships established with internal and external auditors.
Increased involvement with brokers and investor relations.
Award:
100%. Objectives were met for the period and progress being made to use new systems and automation.
Strategic reportGovernanceFinancial statementsAdditional information 80
Record plc Annual Report 2021
Remuneration report continued
Annual report on remuneration continued
Directors’ share options and share awards (audited information)
During the financial year ended 31 March 2021 no option awards were made to 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 on a stepped basis over three, four and five years subject to continued service and
performance conditions, as well as any options that have lapsed or been exercised.
Total
options at
1 April
2020
Options
granted
in period
Date of grant
Leslie Hill
01/12/15
150,000
27/01/16
33,334
30/11/16
366,667
26/01/18
280,000
21/08/19
575,000
Bob Noyen1
01/12/15
150,000
27/01/16
33,334
30/11/16
366,667
26/01/18
280,000
21/08/19
575,000
Steve Cullen
01/12/15
150,000
27/01/16
33,333
30/11/16
366,667
26/01/18
125,000
21/08/19
260,000
1. Resigned 4 February 2021.
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Options
lapsed
in period
(150,000)
(33,334)
(183,333)
(93,333)
—
(150,000)
(33,334)
(183,333)
(93,333)
—
(150,000)
(33,333)
(183,333)
(41,666)
—
Options
exercised
in period
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
options at
31 March
2021
—
—
Exercise
price
Earliest
exercise
Latest
exercise
28.875p
01/12/20
30/11/21
24.50p
27/01/20
26/01/22
183,334
34.0718p
30/11/19
29/11/22
186,667
575,000
—
—
43.50p
26/01/21
25/01/24
31.10p
21/08/22
20/08/25
28.875p
01/12/20
30/11/21
24.50p
27/01/20
26/01/22
183,334
34.0718p
30/11/19
29/11/22
186,667
575,000
—
—
43.50p
26/01/21
25/01/24
31.10p
21/08/22
20/08/25
28.875p
01/12/20
30/11/21
24.50p
27/01/20
26/01/22
183,334
34.0718p
30/11/19
29/11/22
83,334
43.50p
26/01/21
25/01/24
260,000
31.10p
21/08/22
20/08/25
The outstanding share options above vest subject to performance conditions which are detailed below.
There were no gains on share options by Directors in the year ended 31 March 2021.
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%, =
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