TIDMREC
RNS Number : 3604I
Record PLC
14 June 2011
Record plc
PRESS RELEASE
14 June 2011
FINAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2011
Record plc, the specialist currency manager, today announces its
audited results for the year ended 31 March 2011.
Financial highlights:
-- AuME(1) $31.4bn at 31 March 2011 (down 8%)
-- AuME GBP19.6bn at 31 March 2011 (down 13%)
-- Management fee income of GBP28.1m (down 15%)
-- Pre-tax profit GBP12.5m (down 25%)
-- Continued strong balance sheet with no debt and a cash
balance of GBP24.7m (up 13%)
-- Operating profit margin to 31 March 2011 of 44% compared to
49% for the year ended 31 March 2010
-- Basic EPS of 4.03p per share (2010: 5.39p)
-- Proposed final dividend for the year to 31 March 2011 is
2.59p per share giving a total dividend in respect of the period of
4.59p per share (2010: 4.59p)
Operating highlights:
-- Dynamic Hedging AuME remained broadly unchanged and
represented 38% of AuME at 31 March 2011 (2010: 35%) but grew to
represent 62% of management fee income (2010: 43%)
-- Client numbers fell by 47 to 46 by year end 31 March 2011
-- Alpha Composite(2) return of -3.39 % for year ended 31 March
2011 (year to 31 March 2010 -0.73%)
-- Launch of FTSE FRB10 Index, Emerging Market Currency and Euro
Stress Funds
-- Plans to launch Currency Momentum and Currency Value
strategies in the current year
(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.
(2) Currency Alpha Composite - an investment return track record
generated by the aggregation of all standard segregated track
records for Record's established Currency for Return product. The
Currency Alpha Composite is asset weighted, based on AuME for each
account.
Commenting on the results Neil Record, Chairman of Record plc,
said:
"The last financial year was clearly challenging for Record as
clients continued to withdraw funds from the existing Currency for
Return products. Contrasting this has been the stability of both
clients and AuME for the hedging business (Dynamic and Passive)
that now represents 88% of our AuME. The split of business between
Dynamic Hedging and Currency for Return has changed substantially
over the last couple of years.
Management fee income fell to GBP28.1m as a result of the client
losses in the Currency for Return product. Operating margins
remained strong at 44% and the balance sheet had GBP24.7m cash and
no debt at the year end.
We have seeded two new funds in the year, a product to track the
FTSE Currency FRB10 index and an emerging market product.
Additionally, in June we launched a Euro stress fund. All these
products are being actively marketed to consultants and
clients.
Looking to the current year, we hope to achieve success with
Passive and Dynamic Hedging. Over the longer term we believe that
the suite of currency return products we are developing will be
attractive to clients as they look to invest in currency as it
becomes established as an asset class."
Analyst briefing
There will be a presentation for analysts at 9.30am on Tuesday
14 June 2011 at the offices of JPMorgan Cazenove Limited at 20
Moorgate London EC2R 6DA. A copy of the presentation will be made
available on the Group's website at www.recordcm.com.
For further information, please contact:
Record plc: +44 1753 852222
Neil Record, Chairman
James Wood-Collins, Chief Executive Officer
Paul Sheriff, Chief Financial Officer / Chief Operating
Officer
MHP Communications +44 20 3128
8100
Nick Denton, John Olsen, Vicky Watkins
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH
2011 2010
GBP'000 GBP'000
-------------------------------------------- ---------
Revenue 28,196 33,424
Cost of sales (102) -
-------------------------------------------- ---------
Gross profit 28,094 33,424
Administrative expenses (15,740) (16,972)
Loss on financial instruments held
as part of disposal group (1) (60)
-------------------------------------------- ---------
Operating profit 12,353 16,392
Finance income 184 220
Profit before tax 12,537 16,612
Taxation (3,603) (4,707)
-------------------------------------------- ---------
Profit after tax 8,934 11,905
Other comprehensive income - -
Total comprehensive income for the
year 8,934 11,905
Total comprehensive income for the
year attributable to:
Non-controlling interests 27 -
Owners of the parent 8,907 11,905
-------------------------------------------- ---------
Earnings per share for profit attributable
to the equity holders of the Company
during the year (expressed in pence
per share)
Basic earnings per share 4.03p 5.39p
Diluted earnings per share 4.03p 5.38p
-------------------------------------------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH
2011 2010 2009
GBP'000 GBP'000 GBP'000
---------------------------------- -------- ---------
Non-current assets
Property, plant and equipment 227 205 368
Intangible assets 1,085 535 -
Deferred tax assets 70 143 146
---------------------------------- -------- ---------
1,382 883 514
Current assets
Trade and other receivables 6,904 8,325 7,742
Derivative financial assets - 98 -
Cash and cash equivalents 24,728 21,861 29,798
---------------------------------- -------- ---------
31,632 30,284 37,540
Current assets held for sale
(disposal group) 3,022 940 -
---------------------------------- -------- ---------
Total assets 36,036 32,107 38,054
---------------------------------- -------- ---------
Current liabilities
Trade and other payables (4,089) (3,874) (7,076)
Corporation tax liabilities (1,837) (2,384) (3,774)
Derivative financial liabilities (12) (149) (13)
---------------------------------- -------- ---------
(5,938) (6,407) (10,863)
---------------------------------- -------- ---------
Total net assets 30,098 25,700 27,191
---------------------------------- -------- ---------
Equity
Issued share capital 55 55 55
Share premium account 1,809 1,809 1,809
Capital redemption reserve 20 20 20
Retained earnings 27,262 23,816 25,307
---------------------------------- -------- ---------
Equity attributable to owners
of the parent 29,146 25,700 27,191
Non-controlling interests 952 - -
---------------------------------- -------- ---------
Total equity 30,098 25,700 27,191
---------------------------------- -------- ---------
Chairman's Statement
AuME were 8% lower than the previous year due to the continued
decline in the Currency for Return product being mainly offset by a
higher level of Passive Hedging business. Dynamic Hedging remained
broadly unchanged year on year.
The last twelve months have continued to be challenging and
somewhat disappointing. Challenging because we have continued to
see disrupted currency markets, through the continuation of
quantitative easing providing headwinds to the core source of
return in our principal Currency for Return strategy. Disappointing
because we have not yet been able to build on the success we had in
the previous financial year in gaining additional clients in either
the US or UK to our Dynamic Hedging product. On a more positive
note, we are confident about adding new Dynamic Hedging clients in
the current financial year, and the launch of three new products is
encouraging as we continue to diversify the business.
Our priority remains to enhance the range of currency management
products which we offer to clients, and progress was made in the
year with the launch of two fund-based products with a further
product launched in June 2011. All of these products have been
externally marketed to clients and it is envisaged that these
products will gain traction in the coming years and further improve
the diversification of our income.
The first of these products builds on our firm belief that the
currency forward rate bias is an asset class in its own right, and
that there is a currency 'beta' return available to all. This view
is increasingly gaining ground, and is endorsed by at least one of
the major international investment consulting firms. Our
partnership with FTSE Group has resulted in a second index being
launched during the year, the FTSE Currency FRB10 index. We have
launched an index-tracking fund and seeded this fund with an
investment of GBP1m from the Group.
The second product is the Group's first fund to invest in
emerging market currencies. We see emerging market currencies as an
important and growing opportunity for the Group, and we intend to
launch a series of currency products to exploit this. The fund has
been launched and again seeded with a GBP1m investment from the
Group.
The third product, the Euro Stress Fund, seeks to generate a
positive investment performance during times of stress in the Euro.
This represents a significant departure for Record, as this is the
first tactical and the first non-systematic product the business
has launched. We have decided to make a foray into a new investment
style to respond to the commercial potential in capitalising on the
wide range of views in the market on the long-term viability of the
Euro in its current form. This fund was also seeded with a GBP1m
investment from the Group in June 2011.
Financial performance
The financial performance of the Group saw management fees
decrease to GBP28.1m for the year to 31 March 2011, a decline of
15% compared to the year ended 31 March 2010. Given prior valuation
levels (or 'high water marks') achieved, no performance fees were
earned in the period.
The operating margin, at 44%, was also less than that achieved
in the year to 31 March 2010 (49%). This reflects the fixed cost
nature of the cost base excluding the Group Profit Share (GPS)
which sets aggregate profit share at an average 30% of pre-GPS
operating profit.
Overall profit before tax was GBP12.5m and earnings per share
were 4.03p per share. The proposed final dividend is 2.59p per
share which, together with the interim dividend, means the total
dividend for the year remains unchanged at 4.59p per share. The
Board will review the dividend policy ahead of the interim
financial results in November 2011 to determine the appropriate
dividend policy based on the prevailing business environment at the
time.
The Board's current intention, subject to business conditions,
is to rebase the interim dividend from 2.0p per share to 0.75p per
share. In rebasing the dividend, the Board will be mindful of
achieving a level which it expects to be covered by earnings going
forward.
The balance sheet was stronger at the year end due to the early
payment of dividends in the prior year, with shareholder funds
increasing by 13% to GBP29.1m. Cash balances were GBP24.7m, an
increase of 13% on the previous year, reflecting both the earlier
dividend payments and the earlier payments of Group Profit Share in
the prior year. The Group has a regulatory capital surplus and has
cash reserves equivalent to approximately two years' operating
costs and no debt.
Aligned incentives
Record operates a profit share scheme whereby 30% of operating
profits over the medium term are distributed between all employees
of the Record Group. Every member of staff is entitled to a profit
share, and the distribution within the staff is determined by each
member's profit share 'units' and their salary. These are
determined in a formal annual review process.
For the current financial year, the scheme is being slightly
modified such that all senior managers, irrespective of their
shareholding in the Company, will be required to receive at least
one third of their profit-share in the form of share-based
payments. Additionally, in order to incentivise the sales effort,
provision is also being made for commission arrangements which will
be funded from within the profit share scheme.
For a small group of talented individuals below the senior
management, a long term option based scheme has been established in
addition to the Group Profit Share Scheme. It is our intention that
all share-based schemes will not involve the dilution of existing
shareholders.
Board changes and personnel
On 1 October 2010 the previously combined roles of Chairman and
Chief Executive were separated. I remain as Chairman and James
Wood-Collins has become Chief Executive. While James takes up this
role at a very challenging time for the business, I am confident
that he will enthusiastically pursue our aim of becoming a widely
recognised solution for the variety of the currency issues that
affect investors. James's appointment represents a continuation of
the transition that started shortly after the IPO to put in place a
new generation of management.
Group strategy and outlook
The broadening of the product range from three products at the
IPO to six products today demonstrates our commitment to
diversifying the product range and becoming less dependent on any
one product. Whilst product diversification should ultimately
result in a balance of income across products, the short term is
likely to see a continuation of the trend towards hedging business
as the new products gain acceptance with clients. We are continuing
to strengthen our sales and distribution capabilities to make the
most of our enhanced product range.
On the Dynamic Hedging side, we are seeing interest from a range
of investors who have found the cash flows that arose from their
passive hedges too disruptive, and where our Dynamic Hedging is
seen as a cash flow controlled alternative. This has been
particularly enhanced by the sentiment of some investors that
currencies will continue to be very volatile over the coming years.
We have seen a number of requests for proposals in the UK and have
been selected for a GBP0.5bn UK based Dynamic Hedging mandate. This
mandate has not yet started but contract discussions are underway.
We believe that we should be able to add further assets in 2011. We
also believe our Dynamic Hedging approach is well-suited to US
institutional investors who are increasing the scale of their
international equity investing.
In the field of Currency for Return, we see the launch of three
new funds as offering clients a range of alternative currency
strategies in both developed and emerging markets. The combination
of our existing active product in the forward rate bias, together
with a passive product in the forward rate bias, an emerging
markets product and a Euro stress product gives investors an
attractive suite of Currency for Return products. We are working on
developing two further strategies for currency value and currency
momentum that should be launched in the current financial year.
Whilst the short term prospects are likely to continue to be
challenging for the business, the implementation of a diversified
range of currency products should benefit the business in the
longer term.
Neil Record
Chairman
Chief Executive Officer's Statement
As highlighted in the Chairman's Statement, we have continued to
diversify the product range and launched two new products during
the financial year and a further product in June 2011.
The business now has a suite of six products that are available
to clients, together with currency momentum and currency value
products that should be available during the current financial
year. The focus has now shifted to the delivery of new sales for
all these products. The Client Team in the UK is being supplemented
with additional resources and a process is on-going to identify
sales resources in the US. The delivery of new sales is the key
priority for the management team over the coming twelve months.
The Group's principal products had mixed fortunes during the
year with Currency for Return overall continuing to see client
outflows, Dynamic Hedging remaining broadly unchanged and Passive
Hedging increasing as detailed below:
Currency for Return is predominantly the nine year established
active forward rate bias product, which experienced very strong
demand from institutional investors in 2006 and 2007, and hence
rapid growth in AuME over that period. AuME subsequently declined
between 2008 and 2011 with the loss of a significant number of
typically smaller clients who were invested in the pooled funds. At
31 March 2011, AuME for active forward rate bias strategies,
excluding other return-seeking strategies such as emerging market
currencies stood at $2.3bn (2010: $7.2bn).
These other return-seeking currency strategies, including
emerging market strategies, accounted for $1.1bn of AuME at 31
March 2011 (2010: $0.5bn), almost entirely in segregated mandates.
The passive forward rate bias strategy that is currently
seed-funded only, is also included within Currency for Return, as
other new return-seeking strategies including the Euro Stress Fund
will be when launched.
Dynamic Hedging is our longest-standing product, with continuous
client track records since 1985. AuME remained largely unaltered in
the year at $11.9bn at 31 March 2011 (2010: $12.0bn). We continue
to see interest in this product and anticipate further client
additions in the coming twelve months.
Passive Hedging, at $15.7bn AuME, accounts for 50% of AuME at 31
March 2011, but only 10% of fee income in the year. We are seeing a
renewed interest in Passive Hedging, and increased willingness by
clients to pay fees which we consider commensurate with the
operational requirements and risk involved, and an appropriate
return for Record.
Investment performance
Currency markets have returned to conditions closer to normality
over the financial year, with one important exception - the
continued persistence of ultra-loose monetary policy across the
major economies in our developed market currency universe. Whilst
these circumstances have prevailed for longer than we originally
anticipated, we continue to believe that they cannot prevail
indefinitely, and indeed we have already seen interest rate
increases from the European Central Bank since the end of the
financial year.
Other currency market characteristics that we exploit, in
particular trending and the appreciation of emerging market
currencies, have manifested themselves broadly as expected,
although we have seen some shortening of the time horizons over
which trending is evident, leading to more attention on
opportunities for intervention in Dynamic Hedging mandates.
The year ended 31 March 2011 has therefore seen continuing 'in
line' performance of the Dynamic Hedging product, negative
performance for the active forward rate bias product, and positive
performance for the emerging market product.
For US-based Dynamic Hedging clients, April and May 2010 were
broadly characterised by a strengthening US Dollar, continuing a
trend that had been established since December 2009. The high
proportion of exposures hedged in these programs ('hedge ratios')
allowed clients to outperform unhedged benchmarks substantially.
The US Dollar trend then reversed from June 2010, and broadly
weakened through to the end of the financial year. Whilst some of
the value built up in hedging programs was lost in this rapid
reversal, the Dynamic Hedging process rapidly reduced the hedge
ratios to allow our clients to benefit from strengthening foreign
currencies in their underlying portfolios.
For UK-based Dynamic Hedging clients, trending in Sterling was
less evident over the financial year. This led to periods of
positive performance against unhedged benchmarks (as Sterling
strengthened against foreign currencies) and periods of negative
performance (as Sterling weakened); overall performance was
modestly negative for the year, due to the inherent costs of the
investment process. Since this process is intended to allow clients
to benefit from strengthening foreign currencies and be protected
against weakening foreign currencies over multi-year currency
cycles, no single year's performance can be taken as indicative of
long-term performance.
For the active forward rate bias product, expressed as a
percentage of underlying assets with no gearing ('gearing one'
basis i.e. mandate sizes are scaled to an expected 4% tracking
error), the excess return of our segregated composite was -3.39%
for the year ended 31 March 2011, compared to the FTSE Currency
FRB10 index excess return in GBP of +1.77%.
The FTSE Currency FRB10 index has outperformed our active
product over this period because of the index's greater exposure to
less liquid currencies (principally the Australian Dollar and the
New Zealand Dollar) and the absence of risk management costs.
Notwithstanding the outperformance over this period, we continue to
have confidence in the investment process and long-term performance
of our active product. Meanwhile the index's performance over this
period should support marketing of the FTSE FRB10 Index Fund.
Performance of our emerging market currency program since its
live launch (as a segregated account) in November 2009 has been in
line with the simulated performance since 1998. The excess return
of our live program (both segregated and funded) was 2.08% for the
year ended 31 March 2011. This return can be attributed to a number
of the emerging market currencies of which we are long in the
program, with diversification across developed market currency
short positions also contributing to the performance.
We continue to anticipate that as the world economy returns to a
more normal monetary environment, the long-standing forward rate
bias track record demonstrated in the FTSE indices should
re-establish itself. More broadly, our development of a range of
return-seeking strategies should allow us better to ride out the
periodic bouts of underperformance that are to be expected in any
single return-seeking approach.
Product development
Our investment philosophy is well established over the last
thirty years. We believe that long-term strategic outcomes for
investment clients in the currency market are only reliably
achievable by exploiting long-term and persistent characteristics
of that market. We have maintained this philosophy in the face of
the unusual and disrupted market conditions that have prevailed
over much of the last three years, and we intend to continue to do
so.
The active forward rate bias product principally exploits the
forward rate bias (more commonly known as 'carry') as the key
driver of investment returns, and allies this to trends (or
'momentum') as a downside risk-control mechanism in order to limit
our clients' exposure to periods of forward rate bias
underperformance. This product also exploits short-term 'mean
reversion', although to a lesser degree.
Our confidence in the risk premium, or 'beta' nature of the
forward rate bias underpins our partnership with FTSE Group to
develop forward rate bias indices, as well as our development of
the FTSE FRB10 Index Fund. A comparison of our active and passive
forward rate bias track records demonstrates the effectiveness of
our active investment process, in particular the trend-exploiting
downside risk-control mechanism.
The emerging market currency strategies exploit a distinct
characteristic of these markets - namely that as their economies
converge in GDP per capita terms with developed markets, and do so
through international trade and globalisation, their currencies are
expected to appreciate against developed market currencies. This
effect, sometimes known as the 'Balassa-Samuelson' effect, can be
observed over the last thirty-five years.
The Euro Stress Fund is a new departure for Record, in that it
represents both a tactical and a non-systematic approach. We
believe that the uncertainties that lie ahead for the Euro mean
further stresses for the currency union that may create
opportunities for investors to profit from Euro destabilisation.
These opportunities will necessarily be path-dependent, and hence
their exploitation is less systematic than Record's
longer-established strategic products.
In launching the Euro Stress Fund, we have established a fully
regulated Jersey management company. This is Record's second
jurisdiction for funds and provides both diversification and
potential opportunities from Jersey-based investors for which
Dublin-based funds are not appropriate.
Rounding out our suite of return-seeking currency products will
be the currency value and currency momentum products that we expect
to launch in the current financial year. Both exploit
characteristics that we have long-recognised - 'currency value' is
the recognition of long-term mean reversion amongst developed
market currency pairs, and so underpins many of the arguments for
hedging, and momentum is at the core of our downside risk-control
mechanisms. We have not sought to exploit either of these as
stand-alone return sources in recent years, and are now starting to
do so in response to client demand. Our development of these new
products also creates opportunities for multi-strategy currency
products, accessing multiple return sources in the currency
market.
Turning to our hedging products, our Dynamic Hedging product
primarily exploits trends to allow our clients to benefit from
strengthening foreign currencies, and then to implement hedging
against weakening foreign currencies.
Finally, our Passive Hedging product does not exploit any of the
currency market characteristics identified above (although the
arguments for hedging developed market currency exposures rely on
long-term mean reversion). Our implementation of Passive Hedging
does rely on a number of important attributes of Record, not least
our expertise in designing hedging programs so as to be as
straightforward for the client to administer as possible, and our
fiduciary duty and moral obligation to achieve 'best execution' for
our clients in all of their transactions.
This duty, and our expertise in fulfilling it, is creating an
opportunity to offer execution-only mandates, where we transact for
clients (solely as agent and not as principal) in respect of
'ordinary course' FX transactions. Demand for unconflicted FX
execution has risen, in large part due to well-publicised concerns
in the US over custodian banks' FX execution. Offering
execution-only mandates, whilst modest in revenue terms, is also
remunerated on a basis which we consider commensurate with the
operational requirements and risk involved. Execution-only and
Passive Hedging mandates also offer opportunities to migrate at
least some of these new clients to higher value-added services in
the future.
New business initiatives
The expansion of our product range has created a more
diversified base from which to grow the business, reducing our
dependence on any one investment strategy. With this
diversification largely complete, our attention has shifted to
ensuring that we have the right sales and distribution resources in
place to take advantage of our expanded product range.
Our core UK pension fund market continues to be largely driven
by investment consultants. With that in mind, we have added one
member to the Client Team to focus exclusively on UK investment
consultant relations, working closely with other members of the
team and senior members of Record's management group.
In the US, we see a combination of factors increasing demand for
our products, in particular execution-only and hedging. These
factors include the growing use of global equity benchmarks and the
consequent increase in international equity investing, and the
concerns over custodian FX execution highlighted above. This,
allied with increasing reliance on investment consultants by US
pension plans (in particular public sector plans), has caused us to
look at adding dedicated US-based sales and consultant relations
resources, and we are hopeful of finalising this in the first half
of the current financial year.
Since the end of the financial year, we have also added a senior
member of the Client Team with long-standing experience in the
currency market, whose remit will focus on opportunities in Europe
excluding the UK pension fund market. When combined with the rest
of the team's focus on the UK, Swiss and North American markets, we
believe our sales and distribution resources will prove effective
in making the most of our enlarged product range. The combined
effect of these changes will add approximately GBP0.5m to the cost
base.
In order to position Record so that it can benefit from
developments in the currency market, we have continued to recruit
talented individuals, enhance our processes and invest in systems
infrastructure. In particular, the Group is currently in the
process of implementing a new back-office system that we anticipate
will be completed in the current financial year.
James Wood-Collins
Chief Executive Officer
Business Review
The twelve months to 31 March 2011 saw a stable level of AuME
for the Dynamic Hedging business that accounted for 62% of fee
income. Currency for Return products continued to see a decline in
AuME and investment performance was negative for the year as a
whole. Passive Hedging saw an increase in the year.
Introduction
The Business Review is a review of the business by management.
Its purpose is to provide shareholders with a summary, setting out
the business objectives of the Group, the Board's strategy to
achieve those objectives, the risks faced, the regulatory and
operating environment and the key performance indicators (KPIs)
used to measure performance.
This review has been prepared in accordance with the
requirements of Section 417 of the Companies Act 2006 and it forms
part of the Directors' Report. The Company's auditor is required to
report on whether the information given in the Directors' Report
and Business Review is consistent with the financial
statements.
Overview
The twelve months to 31 March 2011 saw a stable level of AuME
for the Dynamic Hedging business that accounted for 62% of fee
income. Currency for Return products continued to see a decline in
AuME and investment performance was negative for the year as a
whole. Passive Hedging saw an increase in the year. The Group saw
an overall decrease in AuME, client numbers, fee income and
operating profit. The balance sheet of the Group remains strong
with substantial cash and capital resources available to the
Group.
KPIs
The Board and Executive Committee use a number of key
performance indicators (KPIs) to monitor the performance of the
Group. A three year history of these KPIs is shown below.
Table 1 - KPIs
KPIs 2011 2010 2009
AuME at 31 March - US Dollars $31.4bn $34.0bn $31.5bn
AuME at 31 March - Sterling GBP19.6bn GBP22.4bn GBP22.0bn
Average AuME - US Dollars $31.3bn $34.8bn $45.6bn
Currency Alpha Composite(1) (3.39%) (0.73%) (3.49%)
Client numbers at 31 March 46 93 121
Average management fee rates 14.0 15.2 17.1
Operating profit margin 44% 49% 55%
Basic EPS 4.03 pence 5.39 pence 8.73 pence
----------- ----------- -----------
Summary of highlights
-- AuME decreased by $2.6bn (8%) during the year. AuME, when
measured in Sterling, decreased by GBP2.8bn (13%).
-- Average AuME decreased by $3.5bn (11%) during the year. The
largest component was the significant fall in Currency for Return
AuME.
-- The excess return of our segregated Alpha Composite,
expressed as a percentage of underlying assets on an ungeared
basis, was -3.39%.
-- Client numbers: this represents the number of separate legal
entities that have invested in a Record fund or appointed Record
directly as an investment manager. Each entity may have more than
one mandate. The number of clients at 31 March 2011 was 46, a fall
of 47 over the year.
-- The average management fee rates achieved were maintained
year on year for all products. However, the change in product mix
due to the decline in Currency for Return has caused a decrease in
blended average management fee rate from 15.2bps to 14.0bps.
-- A combination of reduced management fees, marginally higher
fixed costs and a reduced profit share cost resulted in an
operating profit margin of 44% for the year to 31 March 2011.
-- The decrease in operating profit margin is reflected in the
fall in the Group's earnings per share to 4.03p per share.
(1)Currency Alpha Composite - an investment return track record
generated by the aggregation of all standard segregated track
records for Record's Currency for Return product. The Currency
Alpha Composite is asset weighted, based on AuME for each
account.
Product review
Investment performance
Our hedging products are systematic in nature. The effectiveness
of each of the client programmes 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
program in line with the client's risk tolerance.
The performance of our Dynamic Hedging product depends on how
the foreign currencies change in value relative to the base
currency of a client. During the last year, our US-based clients
benefited not only from the strong performance of overseas equities
but also from the consistent depreciation of the US dollar relative
to other developed market currencies. Under this scenario overseas
investments increase in value, and our Dynamic Hedging programme is
designed to allow for the strength of the underlying foreign
currency performance to translate into strong performance expressed
in US dollars. As the foreign currencies were outperforming the US
dollar, the Dynamic Hedging program was decreasing the extent of
the foreign currency hedging but positioned to protect the
accumulated currency gains in case of US dollar reversal towards
strength. During the year the Dynamic Hedging product performed as
expected and allowed clients to participate in the majority of
these currency gains.
It was a different picture for our UK-based clients where the
overseas equity markets performed well, but this outperformance was
partially offset by moderate weakness of the foreign currencies
against Pound Sterling. Under this scenario our Dynamic Hedging
product reacted by increasing the level of currency protection,
although in the absence of clear trends the overall performance was
slightly negative.
For the Currency for Return product, the core investment
process, the Trend/Forward Rate Bias (FRB) strategy, aims to buy
selected higher interest rate currencies and sell selected lower
interest rate currencies and to manage these positions with a view
to controlling downside risk. Historically this investment approach
has shown positive returns due to the existence of the Forward Rate
Bias and trending movements in selected currency pairs, although in
the period since the beginning of the credit crunch the returns
from the Forward Rate Bias have been negative. Last year saw the
beginning of a reversal in the policy of low interest rates and
various other methods of ultra-loose monetary policy in the
developed world. Several developed world countries began the cycle
of monetary tightening but the overall state of heightened risk
aversion was dominated by the instability in the Euro-zone and
uncertainties around the economic recovery in the US. The
heightened risk aversion resulted in further depreciation in
traditionally high interest rate currencies which in turn created
opportunities for longer term recovery in performance. The table
below shows the extent of weakness in US dollar (USD), Pound
Sterling (GBP) and the Euro (EUR) against traditionally low
interest rate currencies like the Japanese Yen (JPY) in the period
from June 2007 to December 2010:
Depreciation of high interest rate currency
Currency Pair since June 2007:
USD vs. JPY 34%
GBP vs. JPY 49%
EUR vs. JPY 35%
--------------------------------------------
The recovery path in the performance of the Forward Rate Bias
remains unknown, but historically following previous periods of
Forward Rate Bias underperformance, a substantial portion of the
recovery came from appreciation of high interest rate currencies in
anticipation of tightening in the monetary policy.
Table 2 - Annual returns of Record Umbrella Currency Funds; year
to 31 March 2011
Volatility
Annual Return since inception
Fund Name Gearing % % p.a.(1)
Cash Plus 7 (24.75%) 19.63%
US Cash Plus 7 (24.11%) 19.93%
US Equity Plus 6 (15.20%) 24.95%
Sterling 20 5 (15.44%) 11.22%
UK Equity Plus(2) 6 (1.79%) n/a
FTSE FRB 10 Index(3) 1.8 3.87% n/a
Emerging Market Currency 1 2.69% n/a
-------- -------------- -----------------
Volatility
Annual Return since inception
Index /composite returns % % p.a.
--------------------------- -------- -------------- -----------------
Alpha composite (3.39%) 2.81%
FTSE Currency FRB5 GBP
Excess return (4.93%) 5.69%
FTSE Currency FRB10 GBP
Excess return 1.77% 4.72%
Global Equities (S&P 500) 46.57% 14.81%
--------------------------- -------- -------------- -----------------
(1)No volatility data is provided for products with less than 12
months historic data
(2)UK Equity Plus Fund return data is since inception in October
2010.
(3)FTSE FRB10 Index Fund return data is since inception in
December 2010.
Emerging Market Currency Fund return data is since inception in
December 2010.
Inception date is 31 December 1987
For comparison only
Since December 1987
Gearing
The Currency for Return product group allows clients to pick the
level of exposure they desire in the FX currency programmes. The
pooled funds offer clients a range of gearing and target volatility
levels with either Sterling or US Dollars as the base currency. The
segregated mandates allow clients to individually pick the level of
gearing.
It should be emphasised that in this case 'gearing' refers to
the multiple of the maximum size of the aggregate forward contracts
in the currency programme, to the pooled fund's net assets or the
segregated mandate size. This is limited by the willingness of
counterparty banks to take exposure to the pooled fund or
segregated client. Gearing in this context does not involve
borrowing.
The level of gearing has a direct consequence on the level of
volatility to which the investment will be exposed. A 5 times
geared fund in the long-established Currency for Return FRB product
should anticipate volatility of 20%, compared to a 7 times geared
fund volatility of 30%. By comparison, an equity portfolio
typically has a volatility of around 14%.
The level of gearing obviously impacts on the returns that
clients have experienced and this has been particularly relevant in
an environment of predominantly negative returns. Pooled clients in
the higher geared funds have seen losses that have increased their
propensity to redeem their investment.
AuME development
The Group has seen an overall decrease in AuME of $2.6bn through
the year, reaching $31.4bn at the year end.
Table 3 - AuME development ($bn)
Opening Closing
AuME at AuME at
1 April Net client 31 March
2010 flows Performance Equity FX effect 2011
34.0 -3.6 -0.6 -0.4 +2.0 31.4
AuME movements result both from factors within Record's control
and external factors. External factors include the Sterling/US
Dollar exchange rate and the underlying asset value (usually
equities) on which hedging mandates are based. External factors
accounted for a rise of $1.6bn in AuME during the year.
The Group has seen net outflows of $3.6bn from clients. Inflows
from both new and existing clients totalled $2.4bn, and were offset
by outflows of $6.0bn. Other movements included:
(i) a fall of $0.4bn related to movements in global stock and
other markets as many mandate sizes are linked to such markets;
(ii) a rise of $2.0bn due to changes in exchange rates over the
period, which affects the conversion of non-US Dollar mandate sizes
into US Dollar AuME. This does not have an equivalent impact on the
Sterling value of fee income; and
(iii) a decrease of $0.6bn due to investment performance in the
Group's pooled funds, which is compounded on a geared basis into
the AuME in those funds.
Of these movements, (i) and (ii) are outside the control of the
Group.
When expressed in Sterling, AuME in the year decreased by 13% to
GBP19.6bn (2010: GBP22.4bn). This decrease is more representative
of the impact of AuME on underlying management fee income with 31%
of year end AuME being denominated in Sterling, 32% in US Dollars,
33% in Swiss Francs and 4% in Euros.
Record's Currency for Return products are offered on either a
segregated mandate basis or through pooled funds, where clients
subscribe for units in funds for which Record is the distributor
and investment manager. Segregated Currency for Return AuME fell to
$2.2bn (2010: $3.6bn) due principally to the net outflows which
totalled $1.5bn. Included in the segregated Currency for Return
mandates are a small number of mandates for emerging market
currencies totalling $1.1bn (2010: $0.5bn). Record's pooled funds
experienced significant outflows with AuME falling to $1.2bn (2010:
$4.1bn).
Dynamic Hedging mandates remained largely unchanged at $11.9bn
(2010: $12.0bn). There were no material changes to the constitution
of the Dynamic Hedging business in the year.
Passive Hedging AuME increased by $2.3bn, a 17% increase in the
year. This increase was the combination of three factors: net
inflows of $0.8bn, the movement in the Sterling/US Dollar exchange
rate (an increase of $1.6bn) and a fall of $0.1bn in value of the
underlying assets, typically international equities, that the
hedging programme is established to hedge against. A number of
passive mandates are linked to overall programmes under which an
additional Currency for Return or Dynamic Hedging mandate
incorporates an element of Passive Hedging.
Product mix
The Group's product mix has continued to change over the period
due to the AuME movements described above. Hedging AuME has grown
to 88% of AuME (2010: 75%), as a result of the growth of the
Passive Hedging product, which accounts for 50% of AuME (2010:
39%). Together Currency for Return and Dynamic Hedging represent
49% of AuME (2010: 58%) being higher margin products compared to
Passive Hedging. Dynamic Hedging mandates made up 38% of AuME
(2010: 35%). Currency for Return pooled funds made up 4% of AuME
(2010: 12%) and Currency for Return segregated funds 7% of AuME
(2010: 11%).
At 31 March 2011 Record had 46 clients. The Group has gained a
small number of new clients in the year but overall experienced a
net loss of 47 clients.
Table 4 - AUME composition by product (US $bn)
31-Mar-11 31-Mar-10
Currency for Return -
segregated 2.2 7% 3.6 11%
Currency for Return -
pooled 1.2 4% 4.1 12%
----- ----- ----- -----
Sub - Total Currency
for Return 3.4 11% 7.7 23%
Dynamic Hedging 11.9 38% 12.0 35%
Passive Hedging 15.7 50% 13.4 39%
Cash 0.4 1% 0.9 3%
----- ----- ----- -----
Total 31.4 100% 34.0 100%
----- ----- ----- -----
Table 5 - AUME composition by product (GB GBPbn)
31-Mar-11 31-Mar-10
Currency for Return -
segregated 1.4 7% 2.4 11%
Currency for Return -
pooled 0.8 4% 2.7 12%
----- ----- ----- -----
Sub - Total Currency
for Return 2.2 11% 5.1 23%
Dynamic Hedging 7.4 38% 7.9 35%
Passive Hedging 9.8 50% 8.8 39%
Cash 0.2 1% 0.6 3%
----- ----- ----- -----
Total 19.6 100% 22.4 100%
----- ----- ----- -----
Table 6 - AuME composition by product and base currency
Currency for Return Currency for Return Dynamic Hedging Passive Hedging
Segregated Pooled
Base 31-Mar-11 31-Mar-10 31-Mar-11 31-Mar-10 31-Mar-11 31-Mar-10 31-Mar-11 31-Mar-10
Currency
--------- --------- --------- --------- --------- --------- --------- ---------
Sterling GBP 0.3bn GBP 1.3bn GBP 0.8bn GBP 2.4bn GBP 1.2bn GBP 1.1bn GBP 3.6bn GBP 3.0bn
US USD 1.0bn USD 0.8bn - - USD 8.9bn USD 9.4bn - -
Dollar
Swiss CHF 0.5bn CHF 0.7bn - - CHF 1.0bn CHF 0.9bn CHF 7.9bn CHF 8.2bn
Franc
Euro - - - EUR 0.3bn - - EUR 1.0bn EUR 0.8bn
Canadian CAD 0.2bn CAD 0.2bn - - - - - -
Dollar
Total USD 2.2bn USD 3.6bn USD 1.2bn USD 4.1bn USD USD USD USD
AuME US 11.9bn 12.0bn 15.7bn 13.4bn
Dollars
--------- --------- --------- --------- --------- --------- --------- ---------
Table 7 - AuME by Client type
AuME $ billions / % 31-Mar-11 31-Mar-10
Government & Public funds 18.7 59% 20.2 59%
Corporate Pension funds 8.4 27% 9.5 28%
Foundations & Investment
funds 4.3 14% 4.3 13%
----- ----- ----- -----
Total 31.4 100% 34.0 100%
----- ----- ----- -----
Table 8 - AuME by Client location
AuME $ billions / % 31-Mar-11 31-Mar-10
UK 9.7 31% 12.5 37%
Europe (excluding UK) 13.0 41% 12.0 35%
North America 8.7 28% 9.5 28%
Total 31.4 100% 34.0 100%
----- -----
Strategy
The strategic goals of the Group remain unchanged even in the
current period of strain in financial markets:
-- To offer a range of currency solutions to a range of
institutional clients;
-- To exploit opportunities for hedging (Dynamic and Passive)
products in the current market environment;
-- To develop both existing and new products within currency
management, including emerging market currencies, momentum and
value strategies;
-- To promote currency Forward Rate Bias as a
manager-independent asset class - currency 'beta';
-- To maintain and grow Currency for Return, including emerging
market currencies;
-- To respond quickly and flexibly to clients' currency
management needs; and
-- To continue investment in people and infrastructure.
Market development
Currency Solutions
Currency solutions potentially encompass a wide range of
activities. This ranges from clients seeking to be educated about
currency exposure and solutions through to bespoke and tailored
solutions for clients. In particular, we are currently seeing a
number of cases where it is alleged that custodians have been
taking excess spreads on currency transactions for clients and we
have seen an increasing number of requests for general currency
advice. This ranges from clients asking Record to undertake a
currency audit of transactions through to clients exploring whether
Record could offer execution services instead of a client's
custodian. It is believed that this business line could grow in the
coming twelve months and equally that clients who commence with an
execution mandate, may in time look for hedging and for
return-seeking solutions.
Hedging opportunities
The continued volatility in exchange rates over the last three
years has caused investors to re-examine their strategy for
managing exchange rate exposure, particularly in the US where
exposure to international assets continues to increase. Hedging now
represents 88% of AuME and 72% of management fee income.
Passive Hedging
We began re-marketing our Passive Hedging product in 2010 and
this has now resulted in growing AuME for this product. Clients
have been attracted to Record because we offer independent trading
relationships and we are able to manage counterparty exposure on
behalf of clients.
Whilst Passive Hedging has many benefits over not hedging, there
are particular cash flow implications during periods in which a
client's base currency is weak. For example, UK investors with
international equities have seen the value of their international
equities appreciate as Sterling has weakened. Those investors who
chose a passive hedging strategy have seen an offsetting cost
associated with this hedging strategy that has often had very
significant cash flow implications.
Dynamic Hedging
Record's Dynamic Hedging programme is an attractive alternative
to Passive Hedging that seeks to benefit when a client's base
currency is strong and limit the costs when the base currency is
weak. However, the product requires a level of confidence in Record
together with a high level of understanding from the investment
consultants, investment managers and trustees of a scheme. This,
combined with a lack of obvious competition or similar product
offerings, has often proved challenging for Record. The product
itself, has continued to perform in line with expectations during
this period, for both UK and US clients.
Currency for Return opportunities
Record's established active FRB strategy has seen a period of
negative performance from July 2007 to March 2011. The product has
seen significant outflows over the last three years and it is
likely that there will be further outflows in the short-term. In
particular, the pooled funds, through which the majority of clients
invested, have seen the majority of investors redeem their
investments over this period.
Record remains committed to the long-term performance of this
product and believes that performance will return. Interest rate
differentials are likely to revert to levels reflecting differences
in supply, demand and risk of currencies, and higher interest rate
currencies are likely to appreciate in anticipation of this,
benefitting the investment process.
In the medium term, providing positive performance returns,
Record believes that the environment will be favourable for clients
to consider currency as an alternative asset class in its own
right.
Currency Beta
One of Record's medium to long-term aims is to develop currency
as an asset class in its own right. The 'asset class project',
which started in 2009, has seen the launch of a second currency
index, the FTSE Currency FRB10 Index, in December 2010. Record
launched a pooled fund, the Record Currency FTSE FRB10 Index Fund,
to track this FTSE index and invested GBP1m in December 2010. It is
envisaged that there will be client demand for this product in the
current financial year.
Emerging Market
Record recognises that emerging market currencies offer
investors an opportunity to either seek to make a return from
emerging market currencies or seek to separate the underlying
on-shore asset performance (typically equities or bonds) from the
currency effect. Record currently has a small number of segregated
accounts, totalling $1.1bn of AuME for which an emerging market
currency option portfolio and an emerging market currency strategy
are implemented. Additionally, a pooled fund product was launched
in December 2010 and seeded with a GBP1m investment from
Record.
Euro Stress
In June 2011, Record launched a Jersey-based fund that is
positioned to generate a return when the Euro experiences periods
of strain on the currency union. Record seeded the fund with a
GBP1m investment and the fund is currently being marketed to
potential clients. This fund is more discretionary in style and is
managed on a day to day basis by the Portfolio Management Group,
consisting of the Chief Investment Officer, Head of Portfolio
Management, Head of Portfolio Implementation and the Head of
Trading.
Product development
It is widely recognised that there are four popular systematic
trading styles in FX, namely: "carry"; "value"; "momentum" and
"short volatility". Record intends to launch two new strategies in
the coming twelve months to exploit Currency Momentum and Currency
Value. These seek to exploit long-term mean reversion and
short-term trending in currency markets respectively and have
generated beta-like returns over the last 30 years. These planned
product launches will complement our existing offering in the carry
(forward rate bias) and emerging market strategies. These indices
will then allow investors to tailor their allocation to four
different return streams, in varying weights if necessary.
Currency Momentum
Momentum in currency is defined as the tendency of the spot rate
to appreciate after a prior appreciation, and to depreciate after a
prior depreciation. This market inefficiency has persisted across
different currencies and it is present in other asset classes, such
as equities. Currency is commonly thought of as trending and a
momentum strategy would seek to make a return from this
phenomenon.
Currency Value
Research suggests that purchasing power parity (PPP) valuation
models have been relatively good predictors of the long term
direction of spot movements. For example, if a currency deviates
too much from its equilibrium value (as indicated by PPP), then
this deviation will be corrected. The more significant the
deviation, the more pressure on the exchange rate to revert to fair
value and, consequently, the more rapid the reversion. Currency
value strategies exploit this insight, buying currencies that are
undervalued relative to PPP and selling currencies that appear
overvalued.
People management
Record's success depends on its ability to attract, retain and
motivate highly talented staff.
Recruitment
The recruitment process is carefully structured to ensure that
the right people are recruited into the Group. This continues with
a comprehensive induction programme for all new joiners to allow
them to adapt to the specialist environment within Record.
The Group has continued to recruit selectively throughout the
year in order to maintain a flexible, scalable platform for future
growth. The number of employees in the Group at 31 March 2011 was
70 (2010: 70).
Staff retention and motivation
An effective performance review and objective setting process,
personal development planning including the development of career
paths, together with our open and involving office culture, are all
key priorities in the development and retention of our staff. In
addition, the Group Profit Share Scheme promotes the acquisition of
equity in the Company by staff, improving both motivation and
retention.
Board and management succession
As indicated in the Report and Accounts for the period ended 31
March 2010, the joint role of Chairman and Chief Executive was
split on 1 October 2010. From this date, Neil Record, who had
previously performed the joint role, assumed the role of Executive
Chairman and relinquished the role of Chief Executive.
James Wood-Collins was appointed Chief Executive and joined the
Board on 1 October 2010. James joined Record following the IPO in
2008 and was Head of the Client Team prior to being appointed Chief
Executive. Prior to joining Record, James worked at J.P. Morgan
Cazenove.
At the same time, Leslie Hill re-assumed responsibility for
leadership of the Client Team and Paul Sheriff assumed the position
of Chief Operating Officer in addition to his role as Chief
Financial Officer, formalising a position he had fulfilled since
August 2009.
Infrastructure development
Record is regularly reviewing its internal systems and processes
in order to realise gains in capability, profitability, efficiency
and effectiveness, and to reduce its risk profile. After a formal
evaluation process, the Group has been working to implement a new
middle and back office platform.
This system is currently undergoing user acceptance testing and
it is envisaged that the system will be live in the current
financial year. The system should provide Record with increased
flexibility, both now and in the future, in terms of:
-- adding new instruments;
-- deploying new products and portfolios; and
-- delivering an improved level of client service.
The implementation of this system should enhance the control
environment through the:
-- robustness of a proven third party system;
-- reduction of 'off system' processes; and
-- standardisation of operational processes.
Risk management
The Board recognises that risk is inherent in all of its
business dealings, and in the markets and instruments in which the
Group operates. It therefore places a high priority on ensuring
that there is a strong risk management culture within the Group.
Effective risk management and strong internal controls are central
to the Group's business model and during the year the Group has
made further progress in developing this framework.
The Audit and Risk Committee was established to provide
oversight and independent challenge in relation to internal control
and risk management systems and procedures. The Compliance Director
is responsible for ensuring compliance with appropriate legal and
other regulatory standards, and for internal risk review of
operational processes. Additionally, Deloitte LLP performed a
number of pieces of assurance work in respect of Record's internal
controls during the year.
The Board has established a Risk Management Committee which is
chaired by the Chief Financial Officer/Chief Operating Officer and
has the Head of Operations, the Head of Trading, the Head of
Reporting Services, the Head of Portfolio Management, the Head of
Portfolio Implementation and the Head of Compliance as members. The
Committee reviews existing and new risks, and the incidence and
nature of any operational errors with the objective of ensuring
that adequate systems and controls are in place to minimise and
preferably eliminate such errors and their impact on both the Group
and its clients. Further details are provided in the Corporate
Governance section of the Annual Report.
The Group appointed Grant Thornton UK LLP as the reporting
accountant for its Audit and Assurance (AAF 01/06 and SAS 70)
reports. There are two types of assurance engagements associated
with the AAF framework, specifically 'reasonable' assurance
engagements and 'limited' assurance engagements. The Group
undertakes the higher standard of 'reasonable' assurance
engagements.
The principal risks faced by the Group fall into a number of
distinct categories and the means used to mitigate them are both
diverse and relevant to the nature of the risk concerned. The
principal risks and the means used to mitigate them are set out
below:
Risk type/owner Description of risk Mitigation
Strategic and business These include: These include:
risks The risk that the
medium and long term
profitability of the
Group could be adversely
impacted by the failure
to identify and
implement the correct
strategy. Delegated to:
Record plc Board; and
Executive Committee
------------------------- ------------------------
Any impairment to The Board's lengthy
Record's standing in the investment management
currency management experience.
markets with investors
and investment
consultants may result
in the loss of AuME
and/or fee income.
------------------------- ------------------------
Record's risk appetite
does not extend to
taking either
regulatory or
reputational risks
within the decision
making process.
Sufficient allocation
of resources is
provided to enhance
prevention of any
systemic failures of
day to day product
implementation that
could affect the firm's
reputation.
------------------------- ------------------------
Loss of key personnel; The Group's investment
could impact on the process is steered by
management of the Group an Investment Committee
and/or lead to a loss of of five, and for all
AuME. products except the
Euro Stress Fund is
managed on a day to day
basis by a systematic
process which is not
reliant on any
individual employee.
------------------------- ------------------------
All clients have two
points of contact to
ensure continuity in
the client relationship
if any one person
left.
------------------------- ------------------------
The Group considers
that its remuneration
policy and in
particular the
operation of the Group
Profit Share Scheme
promotes key personnel
retention and effective
risk management.
------------------------- ------------------------
Concentration risk on Diversification of
single product type; investment capabilities
Record's products are across risk reducing
all currency management and risk taking
based hence it would be products to reduce
adversely affected by a single event/product
move away from Dynamic exposure.
Hedging and/or currency
as an asset class by its
core client base.
------------------------- ------------------------
Account concentration; Record's commitment to
Record has a relatively client services
small number of high excellence, the
value clients. Its transparency of the
largest client generated investment process and
33% of management fee the regular reporting
income in the year ended and face to face
31 March 2011. The contact with clients is
largest five clients integral to retention.
generated 59% of
management fee income
and the largest ten
clients generated 76% of
management fee income in
the year ended 31 March
2011.
------------------------- ------------------------
Reliance on investment The Group devotes
consultants; if a considerable senior
consultant no longer management time and
believes that Currency effort to its
for Return or Dynamic relationships with the
Hedging is suitable for investment consultancy
clients and/or a firms to ensure that
consultant no longer developments within the
believes that Record is Group and its
a recommended investment investment research and
manager, then this could processes are
result in a loss of understood by these
AuME. firms.
------------------------- ------------------------
Changes in the Diversification of
regulatory environment investment capabilities
or tax regime making across risk reducing
investment in currency and risk taking
less attractive to products to reduce
investors. single event/product
exposure.
------------------------- ------------------------
Investment risks The These include: These include:
risk that long term
investment
outperformance is not
delivered, damaging
prospects for winning
and retaining clients,
and putting average
management fee margins
under pressure.
Delegated to: Investment
Committee
------------------------- ------------------------
The Group is paid by its Experienced Investment
Currency for Return Committee meets
clients to generate frequently ensuring
positive investment consistent core
performance over the investment processes
medium and long term by are applied.
taking investment risk
on their behalf. Any
sustained period of poor
investment performance
reduces the value of
AuME in the Group's
pooled funds and
segregated mandates that
could lead to mandate
terminations by clients,
to loss of confidence in
the Group's investment
model by clients,
potential clients and
the investment
consultants who advise
them.
------------------------- ------------------------
Dedicated currency
management research and
investment focus.
------------------------- ------------------------
Remuneration policy
links senior
management's
remuneration to long
term performance of the
Group.
------------------------- ------------------------
The Group's Dynamic Experienced Investment
Hedging products seek to Committee meets
vary the hedge ratio of frequently ensuring
a client's portfolio consistent core
such that a client investment processes
benefits from the are applied.
hedging programme in
periods of base currency
appreciation and limits
the costs in periods of
base currency weakness.
Prolonged periods of
base currency weakness
or strength may lead
clients to re-assess the
benefits of the
product.
------------------------- ------------------------
Dedicated currency
management research and
investment focus.
------------------------- ------------------------
Operational risks Risks These include: These include:
in this category are
broad in nature and
inherent in all
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. Delegated
to: Risk Management
Committee
------------------------- ------------------------
The Group is exposed to The Group has developed
the risk of failure of comprehensive disaster
its proprietary IT recovery and business
system (ROMP, or Record contingency plans.
Overlay Management These cover scenarios
Programme) and/or other from server failure to
IT systems. destruction of the
Group's offices.
Alternative office
facilities and
equipment are available
at a disaster recovery
provider should the
premises be
compromised. Disaster
recovery procedures are
tested on a regular
basis at the site of
the disaster recovery
provider.
------------------------- ------------------------
Engagement letters or
service level
agreements are in place
with all significant
service providers.
------------------------- ------------------------
Execution and process Record prepares an
management; dealing, annual AAF 01/06 report
portfolio, settlement and SAS 70 report. The
and reporting errors. contents of these
reports, which have
been independently
reviewed and tested by
Grant Thornton UK LLP,
provide assurances of
the Group's procedures
and controls to
mitigate operating
risk.
------------------------- ------------------------
Record has an
outsourced Internal
Audit function that
reports independently
to the Audit and Risk
Committee.
------------------------- ------------------------
The Group's investment
processes for all
products except the
Euro Stress fund are at
the day to day level
systematic and
non-discretionary in
nature. ROMP prompts
trades that are
executed by a dedicated
trading team without
discretion. ROMP
therefore controls the
trading to ensure that
portfolios are within
the structure dictated
by the investment
process. A dedicated
portfolio management
team oversee the
investment process and
provide post-trade
compliance assurances.
------------------------
Each department has
established procedures
manuals that are
available to all
members of staff. The
adherence to these
procedures is checked
through the compliance
monitoring programme,
AAF and SAS 70 reviews
and the internal audit
programme.
------------------------- ------------------------
Non-compliance, Each department has
including monitoring of established procedures
investment breaches. manuals that are
available to all
members of staff. The
adherence to these
procedures is checked
through the compliance
monitoring programme,
AAF and SAS 70 reviews
and the internal audit
programme.
------------------------- ------------------------
Record's investment The Group trades on
process involves high behalf of clients in
daily trading turnover currency and other
of client positions in products with a large
both size and volume, panel of banking
therefore it can be said counterparties.
to be reliant on market Currency is a
liquidity. particularly liquid
market that has
continued to provide
sufficient daily
liquidity.
------------------------- ------------------------
Record exposes clients There is an established
to derivative Risk Management
transactions with large Committee that meets on
banks as the a monthly basis. The
counterparty. As an over Risk Management
the counter (OTC) Committee oversees the
product, these contracts credit policy regarding
inherently contain a counterparty exposure.
degree of counterparty
risk with the
counterparty bank.
------------------------- ------------------------
Treasury risks The risks These include: These include:
that management does not
appropriately mitigate
balance sheet risks or
exposures potentially
resulting in an adverse
impact on the financial
performance or position
of the Group. Delegated
to: Chief Financial
Officer
------------------------- ------------------------
More than 50% of Group The Group hedges its
revenues are denominated non-Sterling income on
in a currency other than a monthly basis from
Sterling, the Group's the date that income is
functional and reporting accrued until the
currency, yet the anticipated date of
Group's cost base is receipt by using
almost 100% Sterling forward fixed rate
based. currency sales
contracts.
------------------------- ------------------------
The Group invests a Monthly reporting of
limited amount of its all balance sheet
resources in its own exposures to the
funds (seed capital), Executive Committee and
exposing it to price Board.
risk, credit risk, and
foreign exchange risk.
------------------------- ------------------------
Liquidity management - The Group has adopted a
the Group is exposed to credit risk policy to
credit risk and interest manage its credit
rate risk in respect of risks, under which it
its cash balances. keeps its cash on
deposit with at least
two A1/A+ or better
rated banks at any one
time.
------------------------- ------------------------
Monthly reporting of
all balance sheet
exposures to the
Executive Committee and
Board.
------------------------- ------------------------
Financial review
Total revenue decreased by 16% to GBP28.2m, principally due to
the reduction in management fees. This is greater than the
reduction in average AuME during the year of 10% due to the
business mix including a higher percentage of Passive Hedging that
attracts lower fees. Total expenditure decreased by 8% to GBP15.7m
principally through a reduction in the Group Profit Share cost.
Profit before tax decreased by 25% to GBP12.5m.
Profit and loss (GBPm) 2011 2010
Management fees 28.1 33.2
Performance fees - 0.2
Other revenue 0.1 -
------- -------
Total revenue 28.2 33.4
------- -------
Cost of sales (0.1) -
------- -------
Gross profit 28.1 33.4
------- -------
Personnel (excluding Group Profit
Share Scheme) (6.1) (6.1)
Non-personnel cost (4.3) (3.8)
Loss on financial instruments held
as part of disposal group - (0.1)
------- -------
Total expenditure (excl. Group Profit
Share Scheme) (10.4) (10.0)
------- -------
Group Profit Share Scheme (5.3) (7.0)
------- -------
Operating profit 12.4 16.4
% 44% 49%
------- -------
Net interest received 0.1 0.2
------- -------
Profit before tax 12.5 16.6
------- -------
Tax (3.6) (4.7)
------- -------
Profit after tax 8.9 11.9
------- -------
Fees
In the year ended 31 March 2011, the fall in the number of
clients, the associated decline in average AuME and the absence of
performance fees led to total fee income decreasing to
GBP28.1m.
Table 9 - Average management fee rates by product - (bps)
Product 2011 2010
Currency for Return - pooled 28.3 24.4
Currency for Return - segregated 23.4 26.6
----- -----
Currency for Return - combined
average 26.1 25.4
Dynamic Hedging 23.9 23.7
Passive Hedging 2.9 2.6
----- -----
Weighted average 14.0 15.2
----- -----
Record charges fees to its clients based upon the AuME of the
product provided. Record typically offers all Currency for Return
clients the choice of paying an asset-based management fee only or
the alternative of management fee plus performance fee. Higher
performance fee rates usually accompany lower management fee rates
and vice versa. The fee combinations are structured so that Record
is indifferent between them in the medium term. Performance fees
are subject to a 'high water mark' clause that states that
cumulative performance, typically since inception of the mandate,
must be above the previous high point on which performance fees
were charged before performance fees are charged again. Record
charges similar fees for both segregated and pooled Currency for
Return mandates.
Both Passive and Dynamic Hedging typically have fixed fee
arrangements. Both management fees and performance fees are
normally invoiced on a quarterly basis, although Record invoices
management fees for some of its larger clients on a monthly
basis.
As announced on 17 March 2011, we have renegotiated the fees on
our largest Dynamic Hedging mandate to a tiered management fee,
resulting in a net fee reduction from this client of GBP2.9 million
on an annualised basis. This will reduce the average fee rate on
Dynamic Hedging from 1 April 2011.
Table 10 - Total fee analysis (GBPm)
2011 2010
Management 28.1 33.2
Performance - 0.2
Other 0.1 -
----- -----
Total 28.2 33.4
----- -----
Management fees
Management fee income during the year was GBP28.1m (2010:
GBP33.2m). The table below shows growth in both Hedging products,
with management fee income attributable to Dynamic Hedging of
GBP17.5m, up 22% in the period and Passive Hedging up 23% to
GBP2.7m. The management fee income attributable to the Currency for
Return product is down 52% to GBP7.9m.
Table 11 - Management fees by product (GBPm)
2011 2010
Currency for Return - segregated 4.8 8.0
Currency for Return - pooled 3.1 8.6
----- -----
Sub-Total Currency for Return 7.9 16.6
Dynamic Hedging 17.5 14.4
Passive Hedging 2.7 2.2
----- -----
Total 28.1 33.2
----- -----
Performance fees
There were no performance fees earned in the year compared with
GBP0.2m in the previous year. Performance fee structures apply
primarily to Currency for Return mandates. Clients may choose
between management fee only structures or lower management fees
with a performance fee. The balance is towards fee structures with
a performance fee element for pooled funds.
Other income
Other income includes gains made on the Emerging Market product
trial, losses on hedging revenues denominated in currencies other
than Sterling, and foreign exchange gains, in addition to revenues
from activities other than currency management.
Group Profit Share Scheme
The Group operates a Group Profit Share Scheme such that a long
term average of 30% of operating profit before Group Profit Share
(GPS) is made available to be awarded to employees. The
Remuneration Committee has recommended that for the year ended 31
March 2011, the Group Profit Share Scheme is 30% of pre-GPS
operating profit. For the year ended 31 March 2011, this represents
GBP5.3m, a reduction of GBP1.7m from the previous financial year.
This represents a year on year decrease of 24% compared with a 16%
year on year decrease in total fee income.
Directors and senior management, who do not already own at least
2% of the issued shares in Record plc, are required to take a
proportion of this remuneration in the form of shares subject to
lock-up arrangements.
Under the scheme rules, the intention is to purchase these
shares in the market following the announcement of interim and full
year financial results.
Operating margin
The operating profit for the year ended 31 March 2011 of
GBP12.4m was GBP4.0m lower than the operating profit for the
previous financial year (2010: GBP16.4m). The Group achieved an
operating profit margin of 44% for the year ended 31 March 2011
(49% in 2010).
During the year ended 31 March 2011, total operating expenditure
of the Group decreased by GBP1.3m to GBP15.7m. This results
principally from a GBP1.7m reduction in the Group Profit Share
Scheme, offset by a GBP0.5m increase in non-personnel costs. Group
Profit Share (GPS) decreased in line with the reduction in
Operating profit (pre-GPS). Non-personnel costs increased due to a
combination of consultants, travel and professional service costs.
There was no movement in personnel costs (excluding Group Profit
Share Scheme) year on year.
Cash flow
The Group's ability to generate cash has remained strong, with a
year end cash position of GBP24.7m. The year on year increase is
principally due to the accelerated payment of both Group Profit
Share and dividend payments in the prior year. Cash generated from
operations before tax was GBP12.3m, with GBP4.1m paid in taxation
and GBP5.7m in dividends. At 31 March 2011 the closing cash and
cash equivalents was GBP24.7m compared with GBP21.9m at 31 March
2010.
Dividends
Shareholders received an interim dividend of 2.00p per share
paid on 21 December 2010. The Board recommends paying a final
dividend of 2.59p per share, equivalent to GBP5.7m. This would take
the overall dividend to 4.59p per share, being an unchanged
dividend on the prior year. This represents a 114% payment of
profits after tax for the year ended 31 March 2011.
Subject to shareholder approval, the dividend will be paid on 3
August 2011 to shareholders on the register on 24 June 2011, the
ex-dividend date being 22 June 2011. The dividend cover in the year
was 0.9 (2010: 1.2).
Capital management
The Board's policy is to retain capital (being equivalent to
shareholders' funds) within the business sufficient to meet
continuing obligations, sustain future growth and to provide a
buffer against adverse market conditions. To this end the Group has
developed a financial model to assist it in forecasting future
capital requirements over a four year time horizon under various
scenarios. Shareholders' funds were GBP29.1m at 31 March 2011
(2010: GBP25.7m). The Group has no debt.
Regulatory environment and regulatory capital
Record Currency Management Limited (RCML) is authorised and
regulated in the UK by the Financial Services Authority. RCML is
registered as an Investment Adviser with the Securities and
Exchange Commission in the United States. RCML is an Exempt
International Adviser with the Ontario Securities Commission in the
State of Ontario, Canada. RCML is approved by the Irish Financial
Services Regulator to act as promoter and investment manager to
Irish authorised collective investment schemes.
The Group has one UK regulated entity, RCML, on behalf of which
half-yearly capital adequacy returns are filed. RCML held surplus
capital resources relative to its requirements at all times during
the period under review. The Group is also subject to consolidated
regulatory capital requirements, whereby the Board is required to
assess the degree of risk across the business, and hold sufficient
capital within the Group against it.
In April 2011, the Group established a Jersey-based management
company, Record Currency Management (Jersey) Limited that was
authorised in April 2011 to manage Expert Funds by the Jersey
Financial Services Commission.
The Group has an active risk-based approach to monitoring and
managing risks used for reviewing and amending its Internal Capital
Adequacy Assessment Process (ICAAP).
The Board is satisfied that the Group is adequately capitalised
to continue its operations effectively given the considerable
balance sheet resources maintained by the Group. At 31 March 2011,
Record had Tier 1 capital of GBP28.1m. Further information
regarding the Group's capital adequacy status can be found in the
Group's Pillar 3 disclosure, which is available on our website at
www.recordcm.com.
Outlook - The new financial year
The short-term plan is to focus on growth from execution only,
Passive Hedging and Dynamic Hedging. There could be further
attrition in the Currency for Return product following the
sustained period of negative performance. Encouragingly, Record has
recently been selected for a GBP0.5bn UK Dynamic Hedging mandate
and contract discussions are underway.
Sales activity is focussed on pursuing those prospects that
present an immediate opportunity for one of Record's products. The
aim is to strengthen the sales team in the current financial year
by the addition of a US-based sales executive.
The three new products, the FTSE FRB10 Index Fund, the Emerging
Market Currency Fund and the Euro Stress Fund are all being
actively marketed to clients and investment consultants. Whilst it
is anticipated that new clients will be attracted to these products
in the current financial year, evidence to date suggests that this
will result in a gradual increase in AuME and hence a corresponding
period of relatively modest management fee income from these new
funds.
The project to implement the new middle and back office system
is progressing towards implementation in the current financial
year.
The fiscal environment will probably lead to increased interest
rates in a number of developed countries in the next twelve months.
A gradual return to more normal monetary conditions should be
favourable to our investment strategy and the forward rate bias. If
this occurs, we anticipate the resumption of positive returns from
the active forward rate bias investment strategy. A sustained
period of positive investment performance is likely to be a
precursor for investors to consider an investment in this
product.
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.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH
2011 2010
Note GBP'000 GBP'000
----- --------- ---------
Revenue 3 28,196 33,424
Cost of sales (102) -
----- --------- ---------
Gross profit 28,094 33,424
Administrative expenses (15,740) (16,972)
Loss on financial instruments held
as part of disposal group 18 (1) (60)
----- --------- ---------
Operating profit 4 12,353 16,392
Finance income 6 184 220
Profit before tax 12,537 16,612
Taxation 7 (3,603) (4,707)
----- --------- ---------
Profit after tax 8,934 11,905
Other comprehensive income - -
Total comprehensive income for the
year 8,934 11,905
Total comprehensive income for the
year attributable to:
Non-controlling interests 27 -
Owners of the parent 8,907 11,905
----- --------- ---------
Earnings per share for profit attributable
to the equity holders of the Company
during the year (expressed in pence
per share)
Basic earnings per share 8 4.03p 5.39p
Diluted earnings per share 8 4.03p 5.38p
----- --------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH
Note 2011 2010 2009
GBP'000 GBP'000 GBP'000
----- -------- -------- ---------
Non-current assets
Property, plant and equipment 11 227 205 368
Intangible assets 12 1,085 535 -
Deferred tax assets 14 70 143 146
----- -------- -------- ---------
1,382 883 514
Current assets
Trade and other receivables 15 6,904 8,325 7,742
Derivative financial assets 16 - 98 -
Cash and cash equivalents 17 24,728 21,861 29,798
----- -------- -------- ---------
31,632 30,284 37,540
Current assets held for sale
(disposal group) 18 3,022 940 -
----- -------- -------- ---------
Total assets 36,036 32,107 38,054
----- -------- -------- ---------
Current liabilities
Trade and other payables 19 (4,089) (3,874) (7,076)
Corporation tax liabilities 19 (1,837) (2,384) (3,774)
Derivative financial liabilities 19 (12) (149) (13)
----- -------- -------- ---------
(5,938) (6,407) (10,863)
----- -------- -------- ---------
Total net assets 30,098 25,700 27,191
----- -------- -------- ---------
Equity
Issued share capital 20 55 55 55
Share premium account 1,809 1,809 1,809
Capital redemption reserve 22 20 20 20
Retained earnings 27,262 23,816 25,307
----- -------- -------- ---------
Equity attributable to owners
of the parent 29,146 25,700 27,191
Non-controlling interest 23 952 - -
----- -------- -------- ---------
Total equity 30,098 25,700 27,191
----- -------- -------- ---------
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH
Note 2011 2010 2009
GBP'000 GBP'000 GBP'000
----- -------- -------- --------
Non-current assets
Investments 13 30 30 30
----- -------- -------- --------
30 30 30
Current assets
Trade and other receivables 15 - - 3
Derivative financial assets 16 - 98 -
Cash and cash equivalents 17 50 1,077 2,018
----- -------- -------- --------
50 1,175 2,021
Current assets held for sale
(disposal group) 18 2,070 940 -
----- -------- -------- --------
Total assets 2,150 2,145 2,051
----- -------- -------- --------
Current liabilities
Trade and other payables 19 (10) (47) (28)
Corporation tax liabilities 19 - (15) (18)
----- -------- -------- --------
(10) (62) (46)
----- -------- -------- --------
Total net assets 2,140 2,083 2,005
----- -------- -------- --------
Equity
Issued share capital 20 55 55 55
Share premium account 1,809 1,809 1,809
Capital redemption reserve 22 20 20 20
Retained earnings 256 199 121
----- -------- -------- --------
Total equity 2,140 2,083 2,005
----- -------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MARCH 2011
Called
up Share Capital Total
share premium redemption Retained Non-controlling shareholders'
capital account reserve earnings interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ----------- --------- ---------------- --------------
As at 1 April
2010 55 1,809 20 23,816 - 25,700
Dividends paid - - - (5,723) - (5,723)
Employee share
options - - - 262 - 262
-------- -------- ----------- --------- ---------------- --------------
Transactions
with owners - - - (5,461) - (5,461)
Issue of units
in funds to
non-controlling
interests - - - - 925 925
Profit for the
year - - - 8,907 27 8,934
As at 31 March
2011 55 1,809 20 27,262 952 30,098
-------- -------- ----------- --------- ----------------
YEAR ENDED 31 MARCH 2010
Called
up Share Capital Total
share premium redemption Retained Non-controlling shareholders'
capital account reserve earnings interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- -------- ----------- --------- ---------------- --------------
As at 1 April
2009 55 1,809 20 25,307 - 27,191
Dividends
paid - - - (13,596) - (13,596)
Own shares
held by EBT - - - (51) - (51)
Employee
share
options - - - 251 - 251
-------------- -------- -------- ----------- --------- ---------------- --------------
Transactions
with owners - - - (13,396) - (13,396)
Profit for
the year - - - 11,905 - 11,905
As at 31
March 2010 55 1,809 20 23,816 - 25,700
-------- -------- ----------- --------- ----------------
COMPANY STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MARCH 2011
Called Share Capital Total
up share premium redemption Retained shareholders'
capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ----------- ---------- --------------
As at 1 April
2010 55 1,809 20 199 2,083
Dividends
paid - - - (5,723) (5,723)
---------- --------- ----------- ---------- --------------
Transactions
with owners - - - (5,723) (5,723)
Loss for the
year - - - (22) (22)
Dividends
received
from
subsidiaries - - - 5,802 5,802
As at 31
March 2011 55 1,809 20 256 2,140
---------- --------- ----------- ----------
YEAR ENDED 31 MARCH 2010
Called Share Capital Total
up share premium redemption Retained shareholders'
capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ----------- ---------- --------------
As at 1 April
2009 55 1,809 20 121 2,005
Dividends
paid - - - (13,596) (13,596)
---------- --------- ----------- ---------- --------------
Transactions
with owners - - - (13,596) (13,596)
Profit for
the year - - - 59 59
Dividends
received
from
subsidiaries - - - 13,615 13,615
As at 31
March 2010 55 1,809 20 199 2,083
---------- --------- ----------- ----------
CONSOLIDATED STATEMENT OF CASH FLOW
YEAR ENDED 31 MARCH
2011 2010
GBP'000 GBP'000
-------- ---------
Profit after tax 8,934 11,905
Adjustments for:
Corporation tax 3,603 4,707
Finance income (184) (220)
Depreciation of property, plant and equipment 191 250
Share-based payments expense 262 251
-------- ---------
12,806 16,893
Changes in working capital
Decrease / (Increase) in receivables 1,418 (591)
Increase / (Decrease) in payables 214 (3,202)
Increase in other financial assets (1,985) (1,051)
(Decrease) / Increase in other financial
liabilities (136) 149
-------- ---------
CASH INFLOW FROM OPERATING ACTIVITIES 12,317 12,198
Corporation taxes paid (4,076) (6,094)
-------- ---------
NET CASH INFLOW FROM OPERATING ACTIVITIES 8,241 6,104
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (85) (87)
Purchase of intangible assets (679) (535)
Interest received 188 229
-------- ---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (576) (393)
CASH FLOW FROM FINANCING ACTIVITIES
Cash inflow from issue of units in funds 925 -
Purchase of treasury shares - (52)
Dividends paid to equity shareholders (5,723) (13,596)
-------- ---------
CASH OUTFLOW FROM FINANCING ACTIVITIES (4,798) (13,648)
NET INCREASE / (DECREASE) IN CASH AND
CASH EQUIVALENTS IN THE YEAR 2,867 (7,937)
Cash and cash equivalents at the beginning
of the year 21,861 29,798
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR 24,728 21,861
-------- ---------
Closing cash and cash equivalents consists
of:
Cash at bank and in hand 24,728 21,861
------- -------
24,728 21,861
------- -------
COMPANY STATEMENT OF CASH FLOW
YEAR ENDED 31 MARCH
2011 2010
GBP'000 GBP'000
-------- ---------
(Loss) / Profit after tax (22) 59
Adjustments for:
Corporation tax - 16
Finance income (4) (15)
-------- ---------
(26) 60
Changes in working capital
Increase in other financial assets (1,032) (1,038)
(Decrease) / Increase in payables (37) 18
-------- ---------
CASH OUTFLOW FROM OPERATING ACTIVITIES (1,095) (960)
Corporation taxes paid (15) (18)
-------- ---------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (1,110) (978)
CASH FLOW FROM INVESTING ACTIVITIES
Dividends received 5,802 13,615
Interest received 4 18
-------- ---------
NET CASH INFLOW FROM INVESTING ACTIVITIES 5,806 13,633
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid to equity shareholders (5,723) (13,596)
-------- ---------
CASH OUTFLOW FROM FINANCING ACTIVITIES (5,723) (13,596)
-------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS
IN THE YEAR (1,027) (941)
Cash and cash equivalents at the beginning
of the year 1,077 2,018
-------- ---------
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR 50 1,077
-------- ---------
Closing cash and cash equivalents consists
of:
Cash at bank and in hand 50 1,077
-------- -------
50 1,077
-------- -------
Notes to the accounts for the year ended 31 March 2011
1. Accounting policies
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the periods
presented unless otherwise stated.
(a) Accounting convention
Basis of preparation
The Group and Company have prepared their financial statements
under International Financial Reporting Standards (IFRSs) as
adopted by the European Union. IFRSs comprise standards and
interpretations approved by the International Accounting Standards
Board (IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) as adopted in the European Union
as at 31 March 2011. The financial statements have been prepared on
a historical cost basis, modified to include fair valuation of
derivative financial instruments.
The preparation of financial statements in accordance with the
recognition and measurement principles with IFRSs requires
management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. The bases for management
judgements, estimates and assumptions are discussed further in note
2.
Adoption of International Financial Reporting Standards
('Standards')
In the current year, there were no new or revised Standards and
Interpretations that have been adopted and have affected the
amounts reported in these financial statements.
The following standards have been applied by the Group from 1
April 2010. Their adoption has not had any significant impact on
the amounts reported in these financial statements but may impact
the accounting for future transactions and arrangements:
-- IAS 27 (Amendment) Consolidated and separate financial
statements
-- IFRS 2 (Amendment) Share based payments
-- IASB Improvements to IFRS
The following amendments were made as part of 'Improvements to
IFRS (2009)':
-- Amendments to IAS 38 'Intangible Assets'
-- Amendments to IFRS 8 'Operating Segments'
-- Amendments to IAS 7 'Statement of Cash Flows'
-- Amendments to IAS 36 'Impairment of Assets'
New Standards and Interpretations
During the course of the year, the IASB and the International
Financial Reporting Interpretations Committee issued a number of
new accounting standards, amendments to existing standards and
interpretations. The following new standard is not applicable to
these financial statements but is expected to have an impact when
it becomes effective. The Group plans to apply this standard in the
reporting period in which it becomes effective. IFRS 9 Financial
Instruments proposes revised measurement and classification
criteria for financial assets. This standard has a mandatory
effective date in 2013. The Group is still assessing the impact on
the Group's future financial statements.
(b) Basis of consolidation
The consolidated financial information contained within the
financial statements incorporates financial statements of the
Company and entities controlled by the Company (its subsidiaries)
drawn up to 31 March 2011. Control is achieved where the Company
has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. Where the
Group controls an entity, but does not own all the share capital of
that entity, the interest of the other shareholders'
non-controlling interests is stated within equity at the
non-controlling interests' proportion of the carrying values of the
recognised assets and liabilities.
An Employee Benefit Trust has been established for the purposes
of satisfying certain share-based awards. The Group has 'de facto'
control over this special purpose entity. This trust is fully
consolidated within the accounts.
The Group has investments in a number of funds where it is in a
position to be able to control those funds. These funds are held by
Record plc and represent seed capital investments by the Group. The
funds are consolidated unless they meet the definition of a current
asset held for sale, in which case they are classified and
accounted for accordingly.
The accounts of subsidiary undertakings, which are prepared
using uniform accounting policies, are coterminous with those of
the Company apart from those of the seeded funds which have
accounting reference dates of 30 September.
The Company is taking advantage of the exemption under the
Companies Act 2006 s408(1) not to present its individual statement
of comprehensive income and related notes that form part of the
financial statements. The Group total comprehensive income for the
year includes a comprehensive loss of GBP22,535 attributable to the
Company (2010: total comprehensive income of GBP58,027).
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
(c) Segment reporting
The Group provides its Directors with revenue information
disaggregated by product, whilst operating costs, assets and
liabilities are presented on an aggregated basis because this
reflects the unified basis in which the products are marketed,
delivered and supported, and on that basis, the Directors consider
that the Group has only one segment. The Group reports its revenues
by product and by two fee structures being 'management fees' and
'performance fees'. Revenue analysis is presented in note 3.
(d) Foreign currencies
The financial statements are presented in Sterling (GBP), which
is also the functional currency of the parent company. Foreign
currency transactions are translated into the functional currency
of the parent company using the exchange rates prevailing at the
dates of the transactions (spot exchange rate). Foreign exchange
gains and losses resulting from the settlement of such transactions
and from the remeasurement of monetary items at year end exchange
rates are recognised in the profit or loss.
In order to hedge its exposure to certain foreign exchange
risks, the Group enters into forward contracts (see note 24
Financial risk management). The Group does not apply hedge
accounting.
(e) Revenue recognition
Revenue is recognised in the statement of comprehensive income
when the amount of revenue can be measured reliably; it is probable
that economic benefits will flow to the entity; the stage of
completion can be measured reliably; and the costs incurred and
costs to complete the transaction can be measured reliably
also.
Management fees are accrued on a daily basis based upon the
Assets under Management Equivalent (AuME). The Group is entitled to
earn performance fees from a number of clients where the
performance of the clients' assets exceeds defined benchmarks by an
agreed level of outperformance over a set time period. Performance
fees are recognised when the fee amount can be estimated reliably
and it is probable that the fee will be received. Fees are
recognised at the end of a performance period.
(f) Retirement benefits
The Group operates defined contribution pension plans for the
benefit of certain employees. The Group makes contributions to
independently administered plans, such contributions being
recognised as an expense when they fall due. The Group has no legal
or constructive obligation to make any further payments to the
plans other than the contributions due.
(g) Share-based payments
The Group issues share awards to employees. Share options and
deferred share awards issued under the Group Bonus Scheme and the
Flotation Bonus Scheme are classified as share-based payments with
cash alternatives under IFRS 2. The fair value of the debt
component of the amounts payable to the employee is calculated as
the cash amount offered to the employee at grant date and the fair
value of the equity component of the amounts payable to the
employee is calculated as the market value of the share options or
award at grant date less the cash forfeited in order to receive the
share options or award. The debt component is charged to the
statement of comprehensive income over the period in which the
option or award is earned, the equity component is charged to the
statement of comprehensive income over the vesting period of the
option or award.
All other awards have been classified as equity-settled under
IFRS 2. The fair value of the amounts payable to employees under
these awards is recognised as an expense over the vesting period of
the award, with a corresponding increase in equity.
The fair value of options granted is measured at grant date
using the Black-Scholes formula, taking into account the terms and
conditions upon which the instruments were granted. The fair value
amounts for the options issued since listing on the London Stock
Exchange were determined using quoted share prices. Further details
on the share-based compensation plans are included in note 21.
(h) Leases
Leases in which substantially all the risks and rewards are
retained by the lessor are classified as operating leases. Payments
made under these operating leases are recognised in profit or loss
on a straight line basis over the term of the lease. Benefits
received as an incentive to sign a lease, whatever form they may
take, are credited to profit or loss on a straight line basis over
the lease term.
(i) Dividend distribution
Interim and special dividends are recognised when paid and final
dividends when approved by shareholders.
(j) Property, plant and equipment
All property, plant and equipment assets are stated at cost less
accumulated depreciation. Depreciation of property, plant and
equipment is provided to write off the cost, less residual value,
on a straight line basis over the estimated useful life.
-- Computer equipment - 2-5 years
-- Fixtures and fittings - 4 years
-- Leasehold improvements - period from acquisition to next rent
review
Residual values, remaining useful economic lives and
depreciation methods are reviewed annually and adjusted if
appropriate. Gains or losses on disposal are included in profit or
loss.
(k) Intangible assets
Intangible assets are shown at historical cost less accumulated
amortisation and impairment losses. Amortisation is charged to
profit or loss on a straight-line basis over the estimated useful
lives of the intangible assets unless such lives are indefinite.
Amortisation is included within operating expenses in the statement
of comprehensive income. Intangible assets are amortised from the
date they are available for use. Useful lives are as follows:
-- Software - 5 years
Amortisation periods and methods are reviewed annually and
adjusted if appropriate.
(l) Trade and other receivables
Trade and other receivables are stated at their original invoice
value, as the interest that would be recognised from discounting
future cash receipts over the short credit period is not considered
to be material. Trade receivables are reduced by appropriate
allowances for estimated irrecoverable amounts.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, on demand and
collateral deposits held with banks, and other short-term highly
liquid investments that are readily convertible to a known amount
of cash and are subject to an insignificant risk of changes in
value.
(n) Deferred taxation
Deferred tax is the future tax consequences of temporary
differences between the carrying amounts and tax bases of assets
and liabilities shown on the statement of financial position. The
amount of deferred tax provided is based on the expected manner of
recovery or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantially enacted at
the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. The carrying amount of the
deferred tax assets are reviewed at each statement of financial
position date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the asset to be recovered.
(o) Assets classified as held for sale (disposal groups)
When the Group intends to sell a disposal group, and if sale
within twelve months is highly probable, the disposal group is
classified as 'held for sale' and presented separately in the
statement of financial position.
A disposal group classified as 'held for sale' is measured at
the lower of its carrying amount immediately prior to their
classification as 'held for sale' and its fair value less costs to
sell. Gains and losses are recognised through profit or loss.
The Group's held for sale assets are limited to seed capital in
the FTSE FRB10 Index Fund and the Emerging Market Currency Fund. As
at 31 March 2010 the Group's held for sale assets were limited to
seed capital in the Carry 250 Fund.
(p) Trade and other payables
Trade and other payables are stated at their original invoice
value, as the interest that would be recognised from discounting
future cash payments over the short payment period is not
considered to be material.
(q) Financial instruments
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
financial instrument. Financial assets are derecognised when the
contractual rights to the cash flows from the financial assets
expire, or when the financial asset and all substantial risks and
rewards are transferred. A financial liability is derecognised when
it is extinguished, discharged, cancelled or expires.
Financial assets and financial liabilities are measured
initially at fair value plus transaction costs, except for
financial assets and financial liabilities carried at fair value
through profit or loss, which are measured initially at fair value.
Financial assets and liabilities are measured subsequently as
described below.
Financial Assets
For the purpose of subsequent measurement, financial assets are
classified into the following categories upon initial
recognition:
-- Loans and receivables;
-- Financial assets at fair value through profit or loss;
and
-- Held for sale financial assets.
The category determines subsequent measurement and whether any
resulting income and expense is recognised in profit or loss or in
other comprehensive income.
All financial assets except those at fair value through profit
or loss are subject to review for impairment at least at each
reporting date. Financial assets are impaired when there is any
objective evidence that a financial asset or a group of financial
assets is impaired. Different criteria to determine impairment are
applied for each category of financial assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. After initial recognition these are measured at amortised
cost using the effective interest method, less provision for
impairment. Discounting is omitted where the effect of discounting
is immaterial. The Group's cash and cash equivalents and trade and
other receivables fall into this category of financial
instruments.
Individual receivables are considered for impairment when they
are past due or when other objective evidence is received that a
specific counterparty will default. Impairment of trade receivables
is presented within 'other expenses'.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
financial assets that meet certain conditions and are designated at
fair value through profit or loss upon initial recognition. All
derivative financial instruments fall into this category. Assets in
this category are measured at fair value with gains or losses
recognised in profit or loss. The fair values of derivative
financial instruments are determined by reference to active market
transactions.
Financial liabilities
Financial liabilities are measured at amortised cost using the
effective interest method, except for financial liabilities held
for trading or designated at fair value through profit or loss,
that are carried at fair value with gains or losses recognised
through profit or loss.
Derivative financial liabilities
The Group uses foreign exchange forward contracts to manage its
foreign currency exposures.
Derivatives are initially recognised at cost on the date on
which the contract is entered into unless fair value at acquisition
is different to cost, in which case fair value is recognised.
Subsequently they are measured at fair value with gains and losses
recognised in profit or loss. Transaction costs are immediately
recognised in profit or loss.
(r) Impairment of assets
The Group typically assesses annually whether there is any
indication that any of its assets have been impaired. If such an
indication exists, the asset's recoverable amount is estimated and
compared to its carrying value.
An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. Impairment
losses are recognised in profit or loss.
In the case of the Group's current assets held for sale
(disposal group) which are seed investments in funds the Group
assesses whether the assets have been impaired on a monthly basis.
Any impairment loss is processed as described in Note 18.
(s) Taxation
Current tax is the tax currently payable based on taxable profit
for the year. Current income tax assets and / or liabilities
comprise those obligations to, or claims from, fiscal authorities
relating to the current or prior reporting periods, that are unpaid
at the reporting date. Current tax is payable on taxable profit,
which differs from profit or loss in the financial statements.
Calculation of current tax is based on tax rates and tax laws that
have been enacted or substantively enacted by the end of the
reporting period.
(t) Own shares
The Record plc Employee Benefit Trust (EBT) was formed under a
Trust Deed dated 19 December 2007 to hold shares acquired under the
Record plc share-based compensation plans. A total of 304,964
(2010: 586,068; 2009: 696,972) ordinary shares were held in the EBT
at the reporting date. The holding of the EBT comprises own shares
that have not vested unconditionally to employees of the Group. Own
shares are recorded at cost and are deducted from retained
earnings. The EBT is consolidated in the Group financial
statements.
Neither the purchase nor sale of own shares leads to a gain or
loss being recognised in the Group statement of comprehensive
income. Further information regarding the Record plc share-based
compensation plans and relevant transactions made during the year
are included in note 21.
(u) Group and Company reserves
The share premium account records the difference between the
nominal value of shares issued and the value of the consideration
received. The use of the share premium account is governed by the
Companies Act 2006.
Where shares have been redeemed or purchased wholly out of the
Company's profits, the Companies Act 2006 requires a transfer to
the capital redemption reserve equal to the amount by which the
Company's issued share capital is diminished. Furthermore the
provisions of the Act relating to a reduction of the Company's
share capital apply as if the capital redemption reserve were paid
up share capital of the Company.
(v) Non-controlling interests
Record plc has made investments in a number of funds where it is
in a position to be able to control those funds by virtue of the
size of its holding. Non-controlling interests occur when Record
plc is not the only investor in the fund. The non-controlling
interest is measured at the fair value of the third party
investment in the fund.
(w) Provisions and contingent liabilities
Provisions are recognised when present obligations as a result
of a past event will probably lead to an outflow of economic
resources from the Group and amounts can be estimated reliably.
Timing or amount of the outflow may still be uncertain. A present
obligation arises from the presence of a legal or constructive
commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and
uncertainties associated with the present obligation. Provisions
are discounted to their present values, where the time value of
money is material. Any reimbursement that the Group can be
virtually certain to collect from a third party with respect to the
obligation is recognised as a separate asset. However, this asset
may not exceed the amount of the related provision.
All provisions are reviewed at each reporting date and adjusted
to reflect the current best estimate. In those cases where the
possible outflow of economic resources as a result of present
obligations is considered improbable or remote, no liability is
recognised.
2. Critical accounting estimates and judgements
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in
the period of the revision and future periods if the revision
affects both current and future periods. Note 18 describes the
assumptions made in classifying its seed investment in two new
funds as assets held for sale. Note 21 covers the assumptions made
in calculating the fair value of share options offered by the Group
to its employees. The Directors have judged that the Group does not
bear substantially all the risks and rewards of ownership of its
leasehold premises and therefore accounts for the leases as
operating leases as described in note 27.
3. Revenue
(a) Segmental analysis
The Directors, who together are the entity's Chief Operating
Decision Maker, consider that its services comprise one operating
segment (being the provision of currency management services) and
that it operates in a market that is not bound by geographical
constraints. The Directors receive revenue analysis disaggregated
by product, whilst operating costs are presented on an aggregated
basis because this reflects the unified basis in which the products
are marketed, delivered and supported.
(b) Product revenues
The Group has split its currency management revenues by product
and fee type. The Currency for Return product is delivered through
both segregated mandates and a pooled fund structure. Revenues from
the two new products (Emerging Market Currency Fund and FTSE FRB10
Index Fund) are not material and have been included in the Currency
for Return pooled funds revenues. Other Group activities include
consultancy.
Fees FY11 FY10
GBP'000 GBP'000
-------- --------
Dynamic Hedging
Management fees 17,539 14,432
Performance fees - -
Passive hedging
Management fees 2,718 2,211
Currency for Return segregated
funds
Management fees 4,771 8,038
Performance fees - -
Currency for Return pooled funds
Management fees 3,111 8,563
Performance fees - 224
-------- --------
Total management fee and performance
fee income 28,139 33,468
Other Group activities 57 (44)
-------- --------
Total 28,196 33,424
-------- --------
(c) Geographical analysis
The geographical analysis of revenue is based on the destination
i.e. the location of the client to whom the services are provided.
All turnover originated in the UK. All assets of the Group are
located in the UK.
Other group activities form less than 1% of the total Group
income. This is not considered significant and they are not
analysed by geographical region.
Income by Geographical Region
Fees FY11 FY10
GBP'000 GBP'000
-------- --------
UK 8,440 14,885
US 13,604 10,921
Switzerland 5,343 4,568
UAE - 720
Other 752 2,374
-------- --------
Total management fee and performance
fee income 28,139 33,468
Other Group activities 57 (44)
-------- --------
Total 28,196 33,424
-------- --------
(d) Major clients
During the year ended 31 March 2011 GBP9.4m (33%) of the Group's
revenue was accounted for by a single client. No other clients
accounted for more than 10% of the Group's revenue during the
year.
4. Operating profit
Operating profit for the year is stated after
charging/(crediting):
FY11 FY10
GBP'000 GBP'000
-------- --------
Staff costs 11,437 13,172
Depreciation of property, plant and equipment 191 250
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts 34 33
The audit of the Company's subsidiaries,
pursuant to legislation 35 34
Other services pursuant to legislation 40 71
Other services relating to taxation 12 15
Operating lease rentals: Land and buildings 202 195
Exchange gains on hedging activities (263) (140)
Other exchange losses 245 288
-------- --------
5. Staff costs
The average number of employees, including Directors, employed
by the Group during the year was:
FY11 FY10
Client Team 11 10
Research 6 6
Portfolio Management 11 9
Trading 5 5
Operations 6 7
Reporting Services 7 6
Systems 6 6
Finance, Human Resources and Legal 7 7
Administration 2 3
Compliance 2 2
Corporate 9 8
----- -----
Annual Average 72 69
----- -----
The Company, as opposed to the Group, had eight employees during
the year (2010: seven).
The aggregate payroll costs of the above employees, including
Directors, were as follows:
FY11 FY10
GBP'000 GBP'000
-------- --------
Wages and salaries 7,947 8,875
Social security costs 1,226 1,410
Pension costs 470 483
Equity-settled share-based payments 1,794 2,404
-------- --------
Aggregate payroll costs 11,437 13,172
-------- --------
6. Finance income
FY11 FY10
GBP'000 GBP'000
-------- --------
Interest on short-term deposits 184 220
-------- --------
7. Taxation - Group
The total charge for the year can be reconciled to the
accounting profit as follows:
FY11 FY10
GBP'000 GBP'000
-------- --------
Profit before taxation 12,537 16,612
-------- --------
Taxation at the standard rate of tax in
the UK of 28% 3,510 4,651
Tax effects of:
Other disallowable expenses and non-taxable
income 18 13
Capital allowances for the period lower
than depreciation 9 30
Lower tax rates on UK subsidiary undertakings (8) (9)
Adjustments recognised in current year
in relation to the current tax of prior
years 2 (1)
Other temporary differences 72 23
-------- --------
Total tax expense 3,603 4,707
-------- --------
At the period end the Group had deferred tax assets of GBP69,615
(2010: GBP143,991). At the balance sheet date there were earned and
unearned share options not exercised and deferred share awards with
an intrinsic value for tax purposes of GBP70,904 (2010:
GBP350,175). The Group will be entitled to a corporation tax
deduction in respect of the difference between the exercise price
and the strike price upon the vesting of these shares.
The standard rate of corporation tax in the UK is 28% (2010:
28%). A full corporation tax computation is prepared at the year
end. The actual charge as a percentage of the profit before tax may
differ from the underlying tax rate. Differences typically arise as
a result of capital allowances differing from depreciation charged,
and certain types of expenditure not being deductible for tax
purposes, other differences may also arise.
The tax charge for the year ended 31 March 2011 was GBP3,603,466
(2010: GBP4,706,573) which was 28.8% of profit before tax (2010:
28.3%).
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial year attributable to equity holders of the parent
by the weighted average number of ordinary shares in issue during
the year.
Diluted earnings per share is calculated as for the basic
earnings per share with a further adjustment to the weighted
average number of ordinary shares to reflect the effects of all
potential dilution.
There is no difference between the profit for the financial year
attributable to equity holders of the parent used in the basic and
diluted earnings per share calculations.
FY11 FY10
------------
Weighted average number of shares
used in calculation of basic earnings
per share 220,965,275 220,668,098
Effect of dilutive potential ordinary
shares - share options 306,347 416,830
------------------------------------------ ------------ ------------
Weighted average number of shares
used in calculation of diluted earnings
per share 221,271,622 221,084,928
------------------------------------------ ------------ ------------
pence pence
------------------------------------------ ------------ ------------
Basic earnings per share 4.03 5.39
Diluted earnings per share 4.03 5.38
------------------------------------------ ------------ ------------
The potential dilutive shares relate to the share options and
deferred share awards granted in respect of three of the Group's
incentive schemes i.e. the Group Bonus Scheme, the Flotation Bonus
Scheme and the Share Scheme. There were share options and deferred
share awards in place at the beginning of the period over 586,068
shares. During the year options were exercised, or share awards
vested, over 281,104 shares. The Group did not grant any deferred
share awards with a potentially dilutive effect during the
year.
9. Dividends
The dividends paid by the Group during the year ended 31 March
2011 totalled GBP5,722,996 (2.59p per share), of which GBP4,420,307
(2.00p per share) was the interim dividend paid in respect of the
year ended 31 March 2011 and GBP1,302,689 (0.59p per share) was the
final dividend paid in respect of the year ended 31 March 2010. The
dividends paid during the year ended 31 March 2010 totalled
GBP13,595,519 (6.16p per share), of which GBP8,828,748 (4.00p per
share) was the sum of the two interim dividends paid in respect of
the year ended 31 March 2010 and GBP4,766,771 (2.16p per share) was
the final dividend paid in respect of the year ended 31 March
2009.
10. Retirement benefit obligations
The Group operates a defined contribution pension scheme. The
assets of the scheme are held separately from those of the Group in
an independently administered fund. The pension cost charge
represents contributions payable by the Group to the fund and
amounted to GBP470,667 (2010: GBP482,908).
11. Property, plant and equipment - Group
The Group's property, plant and equipment comprise leasehold
improvements, computer equipment, and fixtures and fittings. The
carrying amount can be analysed as follows:
Leasehold Computer Fixtures
improvements equipment and fittings Total
2011 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ----------- -------------- --------
Cost
At 1 April 2010 529 682 278 1,489
Additions 5 79 1 85
Disposals - (3) - (3)
Transfers - 129 - 129
-------------- ----------- -------------- --------
At 31 March 2011 534 887 279 1,700
-------------- ----------- -------------- --------
Depreciation
At 1 April 2010 430 623 231 1,284
Charge for the
year 104 55 32 191
Disposals - (2) - (2)
-------------- ----------- -------------- --------
At 31 March 2011 534 676 263 1,473
-------------- ----------- -------------- --------
Net book amounts
At 31 March 2011 - 211 16 227
-------------- ----------- -------------- --------
At 1 April 2010 99 59 47 205
-------------- ----------- -------------- --------
Leasehold Computer Fixtures
improvements equipment and fittings Total
2010 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ----------- -------------- --------
Cost
At 1 April 2009 506 640 269 1,415
Additions 23 55 9 87
Disposals - (13) - (13)
-------------- ----------- -------------- --------
At 31 March 2010 529 682 278 1,489
-------------- ----------- -------------- --------
Depreciation
At 1 April 2009 315 560 172 1,047
Charge for the
year 115 76 59 250
Disposals - (13) - (13)
-------------- ----------- -------------- --------
At 31 March 2010 430 623 231 1,284
-------------- ----------- -------------- --------
Net book amounts
At 31 March 2010 99 59 47 205
-------------- ----------- -------------- --------
At 1 April 2009 191 80 97 368
-------------- ----------- -------------- --------
Leasehold Computer Fixtures
improvements equipment and fittings Total
2009 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ----------- -------------- --------
Cost
At 1 April 2008 483 628 253 1,364
Additions 23 81 16 120
Disposals - (69) - (69)
-------------- ----------- -------------- --------
At 31 March 2009 506 640 269 1,415
-------------- ----------- -------------- --------
Depreciation
At 1 April 2008 212 426 115 753
Charge for the
year 103 203 57 363
Disposals - (69) - (69)
-------------- ----------- -------------- --------
At 31 March 2009 315 560 172 1,047
-------------- ----------- -------------- --------
Net book amounts
At 31 March 2009 191 80 97 368
-------------- ----------- -------------- --------
At 1 April 2008 271 202 138 611
-------------- ----------- -------------- --------
The Company has no property, plant and equipment as at 31 March
2011 (2010: nil; 2009: nil).
12. Intangible assets
The Group's intangible assets comprise acquired software only.
The carrying amounts can be analysed as follows:
Software Total
2010 GBP'000 GBP'000
Cost
At 1 April 2009 - -
Additions 535 535
Disposals - -
At 31 March 2010 535 535
Amortisation
At 1 April 2009 - -
Charge for the year - -
Disposals - -
At 31 March 2010 - -
Net book amounts
At 31 March 2010 535 535
At 1 April 2009 - -
--------- --------
Software Total
2011 GBP'000 GBP'000
--------- --------
Cost
At 1 April 2010 535 535
Additions 679 679
Disposals - -
Transfers (129) (129)
--------- --------
At 31 March 2011 1,085 1,085
--------- --------
Amortisation
At 1 April 2010 - -
Charge for the year - -
Disposals - -
--------- --------
At 31 March 2011 - -
--------- --------
Net book amounts
At 31 March 2011 1,085 1,085
--------- --------
At 1 April 2010 535 535
--------- --------
As at 31 March 2011 the Group is in the testing stage of
implementation of a new back office software project. Amortisation
of the capitalised development costs will commence from the date
that the project is completed (expected in the current financial
year). The estimated useful economic life of the completed software
is five years. During the prior year, the Group entered into an
agreement to develop a back office operating system and to operate
and support this system for five years. Minimum contractual
commitments resulting from this agreement are GBP1,523,750 payable
from 2010 through to 2014. All amortisation charges are included
within administrative expenses.
The Group had no intangible assets in the year ending 31 March
2009.
13. Investments
Company 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Investment in subsidiaries (at
cost)
Record Currency Management Limited 10 10 10
Record Group Services Limited 10 10 10
Record Portfolio Management
Limited 10 10 10
Record Fund Management Limited - - -
N P Record Trustees Limited - - -
---------- ---------- ----------
30 30 30
---------- ---------- ----------
Particulars of subsidiary undertakings
Name Nature of Business
Record Currency Management Currency management services
Limited
-----------------------------------
Record Group Services Limited Management services to other Group
undertakings
-----------------------------------
Record Portfolio Management Dormant
Limited
-----------------------------------
Record Fund Management Limited Dormant
-----------------------------------
N P Record Trustees Limited Trust company
-----------------------------------
The Group's interest in the equity capital of subsidiary
undertakings is 100% of the ordinary share capital in all cases.
All subsidiary undertakings are incorporated in England and Wales
and have a reporting date of 31 March.
14. Deferred taxation - Group
31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Profit and loss account movement
arising during the year (73) (3) 100
---------- ---------- ----------
Asset brought forward 143 146 46
---------- ---------- ----------
Asset carried forward 70 143 146
---------- ---------- ----------
The provision for deferred taxation consists of the tax effect
of temporary differences in respect of:
31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Deferred tax allowance on unvested
share options 18 101 103
Excess of taxation allowances
over depreciation on fixed assets 52 42 43
---------- ---------- ----------
70 143 146
---------- ---------- ----------
At the year end the Group had deferred net tax assets of
GBP69,615 (2010: GBP143,992; 2009: GBP146,598) including provision
for share options not exercised with an intrinsic value for tax
purposes of GBP70,904 (2010: GBP350,175; 2009: GBP460,002). On
exercise the Group will be entitled to a corporation tax deduction
in respect of the difference between the exercise price and the
strike price. There is no other unprovided deferred taxation.
15. Trade and other receivables
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Trade
receivables 6,264 7,697 7,026 - - -
Other
receivables 4 33 36 - - 3
Prepayments 636 595 680 - - -
---------- ---------- ---------- ---------- ---------- ----------
6,904 8,325 7,742 - - 3
---------- ---------- ---------- ---------- ---------- ----------
All amounts are short term. The Directors consider that the
carrying amount of trade and other receivables approximates to
their fair value. All of the Group's trade and other receivables
have been reviewed for indicators of impairment; no such indicators
were noted. The carrying amount of receivables whose terms have
been renegotiated, that would otherwise be past due or impaired is
GBPnil (2010: GBPnil; 2009: GBPnil).
16. Derivative financial assets
The Group trialled a new product in emerging markets from
November 2009 until January 2011, managing a portfolio of forward
exchange contracts in order to achieve a return. These contracts
were classified as financial assets held for trading. At 31 March
2011 there were no outstanding contracts (at 31 March 2010 there
were outstanding contracts with a principal value of GBP3,195,836;
2009: GBPnil). The fair value of the contracts was calculated using
the market forward contract rates prevailing at the period end
date. The maximum exposure to credit risk was represented by the
fair value of the positions and this was mitigated by using cash
deposited of GBP1m as collateral. Further detail including
sensitivity analysis on the fair value of outstanding contracts is
contained in note 24.
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ---------- ---------- ---------- ---------- ----------
Forward
foreign
exchange
contracts
held for
trading - 98 - - 98 -
----------- ---------- ---------- ---------- ---------- ----------
The net gain on forward exchange contracts at fair value is
included in other income. The net gain on financial assets is as
follows:
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Net gain
on
forward
exchange
contracts
at fair
value
through
profit or
loss 2 119 - 2 119 -
---------- ---------- ---------- ---------- ---------- ----------
17. Cash and cash equivalents
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Cash at
bank and
in hand -
Sterling 24,691 21,804 29,729 50 1,077 2,018
Cash at
bank and
in hand -
other
currencies 37 57 69 - - -
24,728 21,861 29,798 50 1,077 2,018
The Group holds short-term deposits that are made for varying
periods, depending on the cash requirements of the Group. From
November 2009 until January 2011, the Group also deposited cash as
collateral against the forward exchange contracts used in the
trialling of its new product. As at 31 March 2011 there was no
deposit held as collateral in this respect (2010: GBP1,022,578,
2009: GBPnil). These deposits earn interest at market short-term
deposit rates. The Group has unrestricted access to these deposits
which meet the definition of a cash equivalent.
18. Current assets held for sale (disposal group)
From time to time, the Group injects capital into funds operated
by the Group to launch or trial new products (seed capital). The
Group invested GBP1,004,000 in the Record Currency FTSE FRB10 Index
Fund and a further GBP1,000,000 in the Record Currency Emerging
Market Currency Fund. In both cases, the only other investor in the
fund is Neil Record, a Director of Record plc. In accordance with
SIC-12 and IAS 27, such funds are considered to be under control of
the Group and as such the fund becomes a subsidiary of the
Group.
The Group consolidates the assets of its subsidiaries on a line
by line basis, but as the Group is actively seeking to reduce its
holding in the fore-mentioned funds within twelve months through
the sale of further units in these funds to external investors and
the subsequent redemption of Record's own investment, the
investments in the funds are classified as being a disposal group
held for sale as it is considered highly probable that the funds
will not remain under the control of the Group one year after the
original investment was made.
If the Group still retains control of the funds after this time,
the funds will cease to be classified as held for sale and will be
consolidated in full. The Group was previously invested in the
Record Currency Fund Carry 250, and this was also accounted for as
a disposal group held for sale on the same basis.
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Seed
capital
classified
as being a
disposal
group held
for sale 3,022 940 - 2,070 940 -
---------- ---------- ---------- ---------- ---------- ----------
The Euro Stress Fund was not seeded until after year end and is
therefore not included in the amounts provided in the table
above.
The underlying assets of the funds are cash deposits, and
forward exchange contracts with tenors of three months or shorter
which are accounted for as derivatives measured at fair value
through profit or loss under IAS 39.
The net loss on financial instruments held as part of a disposal
group is as follows:
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Net loss on
financial
instruments
held as
part of
disposal
group 1 60 - 28 60 -
---------- ---------- ---------- ---------- ---------- ----------
The net loss on financial instruments held as part of disposal
group suffered by the Group includes a gain of GBP26,717
attributable to non-controlling interests.
19. Current liabilities
Amounts falling due within one year
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Trade
payables 580 457 130 - - -
Amounts owed
to Group
undertaking - - - 10 47 28
Other
payables 279 562 760 - - -
Other tax
and social
security 364 1,957 442 - - -
Accruals and
deferred
income 2,866 898 5,744 - - -
4,089 3,874 7,076 10 47 28
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
Current tax liabilities
Group Company
31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Corporation
tax 1,837 2,384 3,774 - 15 18
---------- ---------- ---------- ---------- ---------- ----------
Derivative financial liabilities
The Group uses forward exchange contracts to reduce the risk
associated with sales denominated in foreign currencies. At 31
March 2011 there were outstanding contracts with a principal value
of GBP4,361,326 (2010: GBP4,710,619) for the sale of foreign
currencies in the normal course of business. The fair value of the
contracts is calculated using the market forward contract rates
prevailing at 31 March 2011. Further detail including sensitivity
analysis on the fair value of outstanding contracts is contained in
note 24.
Group
31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Forward foreign exchange contracts 12 149 13
---------- ---------- ----------
The net gain or loss on forward foreign exchange contracts held
to hedge cash flow is as follows:
Group
31-Mar-11 31-Mar-10 31-Mar-09
GBP'000 GBP'000 GBP'000
---------- ---------- ----------
Net gain or (loss) on fair value
through profit or loss 263 140 (782)
---------- ---------- ----------
20. Called up share capital
The share capital of Record plc consists only of fully paid
ordinary shares with a par value of 0.025p. All shares are equally
eligible to receive dividends and the repayment of capital and
represent one vote at the shareholders' meeting.
2011 2010 2009
GBP'000 Number GBP'000 Number GBP'000 Number
-------- ------------ -------- ------------ ------------
Authorised
Ordinary
shares of
0.025p
each 100 400,000,000 100 400,000,000 100 400,000,000
-------- ------------ -------- ------------ -------- ------------
Called up,
allotted
and fully
paid
Ordinary
shares of
0.025p
each 55 221,380,800 55 221,380,800 55 221,380,800
-------- ------------ -------- ------------ -------- ------------
Changes to the issued share capital
GBP'000 Number
As at 1 April 2007 55 549,550
Exercise of share options
'A' ordinary shares issued - 3,902
Conversion of 'A' ordinary shares to
ordinary shares
Ordinary shares of 10p each 15 150,485
'A' ordinary shares of 10p each (15) (150,485)
Ordinary shares of 10p each 55 553,452
-------- ------------
400 to 1 Split of ordinary shares
Ordinary shares of 0.025p each 55 221,380,800
Adjustment for own shares held by EBT - (168,287)
As at 31 March 2008 55 221,212,513
Adjustment for own shares held by EBT - (528,685)
As at 31 March 2009 55 220,683,828
Adjustment for own shares held by EBT - 110,904
As at 31 March 2010 55 220,794,732
Adjustment for own shares held by EBT - 281,104
As at 31 March 2011 55 221,075,836
-------- ------------
The two classes of share authorised as at 1 April 2007 ranked
pari passu in all respects save that the 'A' ordinary shares were
subject to a mandatory transfer upon the termination of the
shareholder's employment. On 23 August 2007, a resolution was
passed with the effect that all issued and unissued 'A' ordinary
shares were converted to ordinary shares. On 15 November 2007, a
resolution was passed with the effect that on admission to the main
market for listed securities of the London Stock Exchange, all
issued and unissued ordinary shares of 10p were each split into 400
ordinary shares of 0.025p.
The Group has established an Employee Benefit Trust (EBT) to
hold shares to be used to meet future liabilities relating to the
Group's share-based compensation plans. Under IFRS the EBT is
considered to be under de facto control of the Group, and has
therefore been consolidated into the Group. As at 31 March 2011,
the EBT held 304,964 ordinary shares of 0.025p in Record plc (2010:
586,068).
21. Share-based payments
During the year ended 31 March 2011 the Group has managed the
following share-based compensation plans:
The Record plc Group Bonus Scheme
The Record plc Group Bonus Scheme (GBS) was adopted by the
company on 1 November 2007. On 30 July 2009 it was amended and
became the Record plc Group Profit Share Scheme. Under the terms of
the scheme rules, certain employees of the company could elect to
receive a proportion of their bonus in the form of a deferred share
award. The number of shares is calculated based on the residual
bonus divided by the market value of the shares at grant date. The
shares are available to the employee after the vesting period for
nil consideration upon exercise. The Group simultaneously granted
additional rights to acquire shares ('bonus' shares; equal to 20%
of the shares elected for) to those same employees. Elected shares
vest in two equal tranches on each of the first and second
anniversary of the date of grant and bonus shares will vest in full
only after two years. The vesting of the shares is subject to
continued employment or having left as a good leaver. The final
vesting of shares under this scheme will occur in June 2011 and no
further awards will be made.
The Record plc Group Profit Share Scheme
The Record plc Group Bonus Scheme (GBS) was amended with the
approval of a general meeting of the Company's members on 30 July
2009 and became the Record plc Group Profit Share Scheme. Under the
terms of the scheme rules, employees and Directors of the company
may elect to receive a proportion of their profit share in the form
of a share award, with the exception of certain employees and
Directors deemed significant shareholders who must receive their
profit share in cash. The scheme is being modified such that all
senior managers irrespective of their shareholding in the Company
will be required to receive at least one third of their profit
share in the form of shares. Directors and senior employees receive
one third of their profit share in cash, one third in shares
('Earned Shares') and may elect to receive the final third as cash
only or to allocate some or all of the amount for the purchase of
Additional Shares. Other employees receive two thirds of their
profit share in cash and may elect to receive the final third as
cash only or to allocate some or all of the amount for the purchase
of Additional Shares.
If an individual elects to receive Additional Shares, the Group
simultaneously awards a Matching Share value amount using a
multiple decided by the Remuneration Committee. The multiple for
Directors and senior employees was 1.0 for the first half year,
increasing to 1.2 for the second half year. The multiple was 0.2
for the whole year for other employees. The number of shares is
determined by the post-tax cash attributed to Earned Shares plus
Additional Shares plus Matching Shares divided by the aggregate
market value achieved on the purchase of all such shares in the
market. All shares the subject of share awards are transferred
immediately to a nominee. None of these shares are subject to any
vesting or forfeiture provisions and the individual is entitled to
full rights in respect of the shares purchased. No such shares can
be sold, transferred or otherwise disposed of without the consent
of the Remuneration Committee except as follows:
-- Earned shares - one third on each anniversary of the Profit
Share Payment date; and
-- Additional or Matching shares - the third anniversary of the
Profit Share Payment date for Directors and senior employees and
the second anniversary of the Profit Share Payment date for all
other employees.
The Record plc Share Scheme
The Record plc Share Scheme was adopted by the company on 1
August 2008. During the year ended 31 March 2009 two new senior
employees were granted deferred share awards upon appointment. The
number of shares for each employee was calculated based on
GBP200,000 divided by the market price of one Record plc ordinary
share on the day of appointment (or on the first business day after
a close period, if the appointment occurred within a close period).
The shares are available to the employee after the vesting period
for nil consideration upon exercise. The shares vest equally on the
second, third and fourth anniversary of appointment. The vesting of
the shares is subject to continued employment (or at the
Remuneration Committee's discretion, having become a good leaver).
The rights to acquire the shares are issued under nil cost option
agreements. It is intended to amend the Share Scheme to enable it
to provide tax-approved awards to employees of Record plc or its
subsidiaries
Share-based payment transactions with cash alternatives
Deferred share awards granted under the Record plc Group Bonus
Scheme, the Record plc Group Profit Share Scheme and options
granted under the Record plc Flotation Bonus Scheme are accounted
for under IFRS 2 as share-based payment transactions with cash
alternatives.
Equity-settled share-based payments
Deferred share awards granted under the Record plc Share Scheme
are accounted for under IFRS 2 as equity-settled share-based
payment transactions.
At 31 March 2011, the total number of ordinary shares of 0.025p
outstanding under Record plc share compensation schemes was 304,964
(2010: 586,068; 2009: 696,972). These deferred share awards and
options are over issued shares held in an Employment Benefit Trust.
Details of outstanding share options and deferred shares awarded to
employees are set out below:
Exercise
/ vesting Exercise
Date of At At date: / vesting Exercise
grant 01/04/10 Granted Exercised 31/03/11 From date: To price
Record
plc
Share
Scheme
04/08/08 170,245 - (56,749) 113,496 04/08/2010 04/08/2012 GBP0.00
01/09/08 215,053 - (71,685) 143,368 01/09/2010 01/09/2012 GBP0.00
--------- -------- ---------- --------- ----------- ----------- ---------
Total
options 385,298 - (128,434) 256,864
--------- -------- ---------- --------- ----------- ----------- ---------
Weighted GBPnil GBPnil GBPnil GBPnil
average
exercise
price of
options
--------- -------- ---------- --------- ----------- ----------- ---------
The weighted average exercise price of all outstanding options
at the beginning of the year was GBPnil.
During the year shares vested on 4 August 2010 and 1 September
2010; the first anniversary of the respective scheme above. The
share price at each vesting date was GBP0.46 and GBP0.42 per share
respectively.
Vesting
Date of At At date: Vesting
grant 01/04/10 Granted Vested 31/03/11 From date: To
Record
plc
Group
Bonus
Scheme
20/06/08 57,838 - (57,838) - 20/06/2009 20/06/2010
28/11/08 60,472 - (60,472) - 28/11/2009 28/11/2010
30/06/09 82,460 - (34,360) 48,100 30/06/2010 30/06/2011
--------- -------- ---------- --------- ----------- -----------
Total
deferred
share
awards 200,770 - (152,670) 48,100
--------- -------- ---------- --------- ----------- -----------
During the year shares vested on 20 June 2010 and 28 November
2010; the final vesting for the first two grant dates listed above.
The share price at each vesting date was GBP0.53 and GBP0.41 per
share respectively. Shares also vested on 30 June 2010; the first
anniversary for the final grant date listed above. The share price
at vesting date was GBP0.52 per share.
The Directors interests in the combined share schemes are as
follows:
Ordinary shares held as at
31 March 2011 31 March 2010
Record plc Group Profit Share
Scheme
James Wood-Collins 369,403 190,273
Paul Sheriff * 445,109 231,033
-------------- --------------
Record plc Share Scheme
James Wood-Collins 113,496 170,245
-------------- --------------
* As permitted by the scheme rules, these shares are held in the
name of the Director's spouse
There were no performance measures attached to vesting
conditions in any of the schemes.
Fair values of share-based compensation plans
The fair value amounts for the options issued since Admission
were determined using quoted share prices, which was a fair
representation of fair value at the grant date.
22. Capital redemption reserve
The Group has bought in a total of 202,072 ordinary shares of
10p for cancellation. The buy-ins occurred in five tranches, all
occurring prior to the share split.
March 2001 66,553 ordinary shares of 10p
April 2004 36,357 ordinary shares of 10p
February 2005 50,000 ordinary shares of 10p
October 2005 24,581 ordinary shares of 10p
December 2005 24,581 ordinary shares of 10p
The cost of the buy-ins was taken directly to retained earnings.
The nominal value of the shares was taken to a capital redemption
reserve.
23. Non-controlling interest
Neil Record has purchased units in both the Record Currency FTSE
FRB10 Index Fund and Record Currency Emerging Market Currency Fund.
As at 31 March 2011 the mark to market value of his holding in
Record Currency FTSE FRB10 Index Fund was GBP510,250 (2010: GBPnil)
and the mark to market value of his holding in Record Currency
Emerging Market Currency Fund was GBP442,004 (2010: GBPnil). Record
plc has the majority holding in both funds which are accounted for
as current assets held for sale. Neil Record who is the Chairman of
Record plc represents the only non-controlling interest (see note
18).
24. Financial risk management
The Group's current activities result in the following financial
risks and management responses to those risks in order to minimise
any resulting adverse effects on the Group's financial
performance.
Objectives, policies and processes for managing risk and the
methods used to measure the risk
Financial assets principally comprise trade receivables, cash
and cash equivalents and investments in seed products. Financial
liabilities comprise trade and other payables and derivative
financial liabilities. The main risks arising from financial
instruments are credit risk, liquidity risk, foreign currency risk
and interest rate risk each of which is discussed in further detail
below. The Group monitors and mitigates financial risk on a
consolidated basis and therefore separate disclosures for the
Company have not been included.
The Group has implemented a framework to manage the risks of its
business and to ensure that the Directors have in place risk
management practices appropriate to a listed company. The
management of risk is directed by the Board and reviewed by the
Audit and Risk Committee.
Credit risk
Record plc's Risk Management Committee has established a credit
risk policy to ensure that it only trades with counterparties that
meet requirements consistent with the Group's agreed risk appetite.
The Chief Financial Officer is responsible for reviewing the
Group's credit exposure and ensuring that any credit concerns are
raised to the Risk Management Committee and that action is taken to
mitigate these risks.
The Group invests some of its surplus funds in high quality
liquid market instruments. Such investments have a maturity no
greater than three months. To reduce the risk of counterparty
default the Group deposits the rest of its surplus funds in
approved high quality banks; the financial institutions involved
have high credit ratings assigned by international credit agencies.
The Group operates a policy of restricting its exposure to any
single bank to a maximum of GBP10m.
The Group's maximum exposure to credit risk is as follows:
2011 2010 2009
Financial assets at 31 March GBP'000 GBP'000 GBP'000
-------- -------- --------
Trade receivables 6,264 7,697 7,026
Other receivables 4 33 36
Held for sale financial assets (disposal
group) 3,022 940 -
Other financial assets at fair value
through profit or loss - 98 -
Cash and cash equivalents 24,728 21,861 29,798
-------- -------- --------
34,018 30,629 36,860
-------- -------- --------
The debtors' age analysis is also evaluated on a regular basis
for potential doubtful debts. It is management's opinion that no
provision for doubtful debts is required. The table below is an
analysis of financial assets by due date:
Neither
impaired More than
Carrying nor past 0-3 months 3 months
amount due past due past due
At 31 March 2011 GBP'000 GBP'000 GBP'000 GBP'000
--------- ---------- ----------- ----------
Trade receivables 6,264 6,270 - (6)
--------- ---------- ----------- ----------
Neither
impaired More than
Carrying nor past 0-3 months 3 months
amount due past due past due
At 31 March 2010 GBP'000 GBP'000 GBP'000 GBP'000
--------- ---------- ----------- ----------
Trade receivables 7,697 7,697 - -
--------- ---------- ----------- ----------
Neither
impaired More than
Carrying nor past 0-3 months 3 months
amount due past due past due
At 31 March 2009 GBP'000 GBP'000 GBP'000 GBP'000
--------- ---------- ----------- ----------
Trade receivables 7,026 6,700 326 -
--------- ---------- ----------- ----------
The Group allows an average debtor payment period of 30 days
after invoice date. It is the Group's policy to assess debtors for
recoverability on an individual basis and to make a provision where
it is considered necessary. In assessing recoverability the Group
takes into account any indicators of impairment up until the
reporting date. The application of this policy generally results in
debts between 0-3 months overdue not being provided for unless
individual circumstances indicate that a debt is impaired.
Trade receivables are made up of 39 debtors' balances (2010: 44;
2009: 57). The largest individual debtor corresponds to 37% of the
total balance (2010: 33%; 2009: 21%). The average age of these
debtors, based on the generally accepted calculation of debtor
days, is 81 days (2010: 84; 2009: 54) although this ignores the
quarterly billing cycle used by the Group for the vast majority of
its fees. Historically these debtors have always paid balances when
due. No debtors' balances have been renegotiated during the year or
in the prior year.
Liquidity risk
The Group is exposed to liquidity risk, namely that it may be
unable to meet its payment obligations as they fall due. The Group
maintains sufficient cash and marketable securities to meet these
obligations. Management review cash flow forecasts on a regular
basis to determine whether the Group has sufficient cash reserves
to meet the future working capital requirements and to take
advantage of business opportunities. The average creditor payment
period is 16 days (2010: 16 days; 2009: 14 days).
Contractual maturity analysis for financial liabilities:
Due or due Due between Due between
in less than 1 to 3 months 3 months to
1 month 1 year
At 31 March 2011 GBP'000 GBP'000 GBP'000
-------------- --------------- -------------
Trade and other payables 1,223 - -
-------------- --------------- -------------
Due or due Due between Due between
in less than 1 to 3 months 3 months to
1 month 1 year
At 31 March 2010 GBP'000 GBP'000 GBP'000
-------------- --------------- -------------
Trade and other payables 2,976 - -
-------------- --------------- -------------
Due or due Due between Due between
in less than 1 to 3 months 3 months to
1 month 1 year
At 31 March 2009 GBP'000 GBP'000 GBP'000
-------------- --------------- -------------
Trade and other payables 1,332 - -
-------------- --------------- -------------
Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate
risk arises from interest bearing financial assets and liabilities
used by the Group. Interest bearing assets comprise trade
receivables and cash and cash equivalents which are considered to
be short term liquid assets. It is the Group's policy to settle
trade payables within the credit terms allowed and the Group does
not therefore incur interest on overdue balances.
Not directly
exposed
Floating to interest
Fixed rate rate rate Total
At 31 March 2011 GBP'000 GBP'000 GBP'000 GBP'000
----------- --------- ------------- --------
Financial assets
Trade and other receivables - - 6,268 6,268
Financial assets at
fair value - - 3,022 3,022
Cash and cash equivalents 23,956 772 - 24,728
----------- --------- ------------- --------
Total financial assets 23,956 772 9,290 34,018
----------- --------- ------------- --------
Financial liabilities
Financial liabilities
at fair value through
profit or loss - - (12) (12)
Trade and other payables - - (1,223) (1,223)
----------- --------- ------------- --------
Total financial liabilities - - (1,235) (1,235)
----------- --------- ------------- --------
Not directly
exposed
Floating to interest
Fixed rate rate rate Total
At 31 March 2010 GBP'000 GBP'000 GBP'000 GBP'000
----------- --------- ------------- --------
Financial assets
Trade and other receivables - - 7,730 7,730
Financial assets at
fair value - - 1,038 1,038
Cash and cash equivalents 19,299 2,562 - 21,861
----------- --------- ------------- --------
Total financial assets 19,299 2,562 8,768 30,629
----------- --------- ------------- --------
Financial liabilities
Financial liabilities
at fair value through
profit or loss - - (149) (149)
Trade and other payables - - (2,976) (2,976)
----------- --------- ------------- --------
Total financial liabilities - - (3,125) (3,125)
----------- --------- ------------- --------
Not directly
exposed
Floating to interest
Fixed rate rate rate Total
At 31 March 2009 GBP'000 GBP'000 GBP'000 GBP'000
----------- --------- ------------- --------
Financial assets
Trade and other receivables - - 7,062 7,062
Cash and cash equivalents 26,828 2,970 - 29,798
----------- --------- ------------- --------
Total financial assets 26,828 2,970 7,062 36,860
----------- --------- ------------- --------
Financial liabilities
Financial liabilities
at fair value through
profit or loss - - (13) (13)
Trade and other payables - - (1,332) (1,332)
----------- --------- ------------- --------
Total financial liabilities - - (1,345) (1,345)
----------- --------- ------------- --------
Interest rate exposure and sensitivity analysis
If interest rates If interest rates
were 0.5% higher were 0.5% lower
Average Profit Profit
Carrying interest for the for the
Amount rate year Equity year Equity
At 31 March
2011 GBP'000 % GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------- ---------- --------
Cash and
cash
equivalents 24,728 0.77 9,015 30,208 8,798 29,991
--------- --------- --------- -------- ---------- --------
If interest rates If interest rates
were 0.5% higher were 0.5% lower
Average Profit Profit
Carrying interest for the for the
Amount rate year Equity year Equity
At 31 March
2010 GBP'000 % GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------- ---------- --------
Cash and
cash
equivalents 21,861 0.88 12,035 25,782 11,868 25,614
--------- --------- --------- -------- ---------- --------
If interest rates If interest rates
were 0.5% higher were 0.5% lower
Average Profit Profit
Carrying interest for the for the
Amount rate year Equity year Equity
At 31 March
2009 GBP'000 % GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------- ---------- --------
Cash and
cash
equivalents 29,798 3.97 19,368 27,284 19,181 27,097
--------- --------- --------- -------- ---------- --------
The average rate is calculated as the weighted average effective
interest rate. The tables above show the level of profit and equity
after tax if interest rates had been 0.5% higher or lower with all
other variables held constant. A sensitivity of 0.5% has been
selected as this is considered reasonable given the current level
of both short-term and long-term interest rates.
Foreign currency risk
Foreign currency risk refers to the risk that the value of a
financial commitment or recognised asset or liability will
fluctuate due to changes in foreign currency rates. The Group makes
use of forward exchange contracts to manage the risk relating to
future transactions in accordance with the Group's risk management
policy. The fair value of the forward contracts at 31 March 2011
was a liability of GBP12,434 (2010: GBP148,855; 2009: GBP12,758).
Gains on the forward exchange contracts were GBP262,849 in the year
(2010: gain of GBP140,466; 2009: loss of GBP782,627). The future
transactions related to the forward exchange contracts are expected
to occur within the next three months. Changes in the fair values
of forward exchange contracts are recognised directly in profit or
loss.
The Company is exposed to foreign currency risks on sales and
cash holdings that are denominated in a currency other than
Sterling. The principal currencies giving rise to this risk are
primarily the US Dollar, the Swiss Franc, the Euro and the Canadian
Dollar.
In the year ended 31 March 2011, the Group invoiced the
following amounts in currencies other than Sterling:
Value in
Local currency reporting
value currency
'000 GBP'000
--------------- -----------
US Dollar (USD) 23,643 15,167
Swiss Franc (CHF) 5,909 3,837
Euro (EUR) 625 396
Canadian Dollar (CAD) 464 389
--------------- -----------
Total 19,789
--------------- -----------
The value of revenues for the year ended 31 March 2011 that were
denominated in currencies other than Sterling was GBP19.8 million
(70% of total revenues). For the year ended 31 March 2010: GBP18.7m
(56% of total revenues).
Record plc's policy is to reduce the risk associated with the
Company's sales denominated in foreign currencies by using forward
fixed rate currency sales contracts, taking into account any
forecast foreign currency cash flows.
Foreign currency risk - sensitivity analysis
Profit for the
year Equity
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
10% weakening in the GBP/$
exchange rate 10,406 12,684 31,615 26,432
10% strengthening in the
GBP/$ exchange rate 7,372 11,353 28,581 25,101
-------- -------- -------- --------
10% weakening in the GBP/CHF
exchange rate 9,273 12,181 30,482 25,929
10% strengthening in the
GBP/CHF exchange rate 8,505 11,765 29,714 25,513
-------- -------- -------- --------
10% weakening in the GBP/CAD$
exchange rate 8,929 11,985 30,138 25,733
10% strengthening in the
GBP/CAD$ exchange rate 8,849 11,925 30,058 25,673
-------- -------- -------- --------
10% weakening in the GBP/EUR
exchange rate 8,928 12,005 30,137 25,753
10% strengthening in the
GBP/EUR exchange rate 8,850 11,909 30,059 25,657
-------- -------- -------- --------
Sterling/US Dollar exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed both on a historical basis and market
expectations for future movement. When applied to the average
Sterling/USD exchange rate of $1.559/GBP this would result in a
weakened exchange rate of $1.417/GBP and a strengthened exchange
rate of $1.732/GBP. This range is considered reasonable given the
historic changes that have been observed.
Sterling/Swiss Franc exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed both on a historical basis and market
expectations for future movement. When applied to the average
Sterling/CHF exchange rate of CHF1.540/GBP this would result in a
weakened exchange rate of CHF1.400/GBP and a strengthened exchange
rate of CHF1.711/GBP. This range is considered reasonable given the
historic changes that have been observed.
Sterling/Canadian Dollar exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed both on a historical basis and market
expectations for future movement. When applied to the average
Sterling/CAD exchange rate of CAD$1.578/GBP this would result in a
weakened exchange rate of CAD$1.434/GBP and a strengthened exchange
rate of CAD$1.754/GBP. This range is considered reasonable given
the historic changes that have been observed.
Sterling/Euro exchange rate
The impact of a change of 10% has been selected as this is
considered reasonable given the current level of exchange rates and
the volatility observed both on a historical basis and market
expectations for future movement. When applied to the average
Sterling/Euro exchange rate of EUR1.193/GBP this would result in a
weakened exchange rate of EUR1.084/GBP and a strengthened exchange
rate of EUR1.325/GBP. This range is considered reasonable given the
historic changes that have been observed.
FTSE FRB10 Index Fund
The Group has seeded a new product, which is a fund that tracks
the FTSE Currency FRB10 Index by holding a portfolio of developed
market currency deliverable forward exchange contracts. The value
of the Group's investment as at 31 March 2011 was GBP1,485,369. The
investment is recognised as an asset held for sale and as such, all
gains and losses are recognised through profit or loss. The Group
has provided the following data in respect of sensitivity to this
index. As the fund started in December 2010, no comparative data is
provided.
Profit for
the year Total equity
ended 31 as at 31
March 2011 March 2011
GBP'000 GBP'000
------------ -------------
10% depreciation in the FTSE Currency
FRB10 Index 8,640 29,831
------------ -------------
10% appreciation in the FTSE Currency
FRB10 Index 9,174 30,365
------------ -------------
The impact of a change to the index of 10% has been selected as
this is considered reasonable given the current level of exchange
rates and the volatility observed both on a historical basis and
market expectations for future movement.
Emerging markets currencies
The Group has seeded a new fund, the Record Currency - Emerging
Market Currency Fund, which manages a portfolio of emerging market
currency deliverable forward exchange contracts and emerging market
currency non-deliverable forward exchange contracts in order to
achieve a return. The value of the Group's investment as at 31
March 2011 was GBP1,537,178. The investment is recognised as an
asset held for sale and as such, all gains and losses are
recognised through profit or loss. The Group has provided the
following data in respect of sensitivity to this portfolio. As the
fund started in December 2010, no comparative data is provided.
Profit for
the year Total equity
ended 31 as at 31
March 2011 March 2011
GBP'000 GBP'000
------------ -------------
20% depreciation in the Emerging
Market portfolio 8,582 29,793
------------ -------------
20% appreciation in the Emerging
Market portfolio 9,196 30,407
------------ -------------
The impact of a change to the portfolio value of 20% has been
selected as this is considered reasonable given the current level
of exchange rates and the volatility observed both on a historical
basis and expectations for future movement in emerging markets.
25. Additional financial instruments disclosures
Financial instruments measured at fair value
IFRS 7 (Improving Disclosures about Financial Instruments),
requires the Group to present certain information about financial
instruments measured at fair value in the statement of financial
position.
The following table presents financial assets and liabilities
measured at fair value in the consolidated statement of financial
position in accordance with the fair value hierarchy. This
hierarchy groups financial assets and liabilities into three levels
based on the significance of inputs used in measuring the fair
value of the financial assets and liabilities. The fair value
hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of significant
input to the fair value measurement. The financial assets and
liabilities measured at fair value in the statement of financial
position are grouped into the fair value hierarchy as follows:
Level Level Level
2011 1 2 3
Note GBP'000 GBP'000 GBP'000 GBP'000
------ -------- -------- -------- --------
Financial instruments at fair
value through profit or loss
Forward foreign exchange
contracts used for hedging a (12) - (12) -
Assets held for sale
(disposal group) b 3,022 - 3,022 -
------ -------- -------- -------- --------
3,010 - 3,010 -
------------------------------------- -------- -------- -------- --------
Level Level Level
2010 1 2 3
Note GBP'000 GBP'000 GBP'000 GBP'000
------ -------- -------- -------- --------
Financial instruments at fair
value through profit or loss
Forward foreign exchange
contracts used for product
trial a 98 - 98 -
Forward foreign exchange
contracts used for hedging a (149) - (149) -
Assets held for sale
(disposal group) b 940 - 940 -
------ -------- -------- -------- --------
889 - 889 -
------------------------------------- -------- -------- -------- --------
There have been no transfers between levels in the reporting
period (2010: none).
Basis for classification of financial instruments within the
fair value hierarchy
(a) Forward foreign exchange contracts
Forward foreign exchange contracts are classified as level 2.
Although these instruments are traded on an active market, the fair
value of forward foreign exchange contracts is established using
interpolation of observable market data rather than from a quoted
price. All forward foreign exchange contracts are strictly short
term in duration.
(b) Held for sale investments
Record plc has invested in two new funds, the Record Currency -
FTSE FRB10 Index Fund which is priced daily and the Record Currency
- Emerging Market Currency Fund which is priced fortnightly.
However, the funds are not actively traded and, according to the
Directors' interpretation of the standard, the investments in the
funds are most appropriately categorised as level 2.
Classes and fair value of financial instruments
Financial assets
2011 2010 2009
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
--------- -------- --------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- --------- -------- --------- --------
Assets held
for sale 3,022 3,022 940 940 - -
--------- -------- --------- -------- --------- --------
Derivative
financial
instruments
at fair value
through
profit or
loss - - 98 98 - -
--------- -------- --------- -------- --------- --------
Cash and cash
equivalents 24,728 24,728 21,861 21,861 29,798 29,798
--------- -------- --------- -------- --------- --------
Financial liabilities
2011 2010 2009
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
--------- -------- --------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------- --------- -------- --------- --------
Derivative
financial
instruments
at fair value
through
profit or
loss 12 12 149 149 13 13
--------- -------- --------- -------- --------- --------
It is the Directors' opinion that the carrying value of trade
receivables and trade payables approximates to their fair
value.
Categories of financial instrument
Assets
at fair
Financial value
liabilities through
measured at profit Derivatives Held
Loans and amortised or used for for
Note receivables cost loss hedging sale
At 31 March
2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- ------------ ------------ -------- ------------ --------
Disposal
group 18 - - - - 3,022
Trade and
other
receivables
(excludes
prepayments) 15 6,268 - - - -
Cash and cash
equivalents 17 24,728 - - - -
Other
financial
instruments
at fair
value
through
profit or
loss 19 - - - (12) -
Current trade
and other
payables 19 - (3,060) - - -
----- ------------ ------------ -------- ------------ --------
30,996 (3,060) - (12) 3,022
----- ------------ ------------ -------- ------------ --------
Assets
at fair
Financial value
liabilities through
measured at profit Derivatives Held
Loans and amortised or used for for
Note receivables cost loss hedging sale
At 31 March
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- ------------ ------------ -------- ------------ --------
Disposal
group 18 - - - - 940
Trade and
other
receivables
(excludes
prepayments) 15 7,730 - - - -
Cash and cash
equivalents 17 21,861 - - - -
Other
financial
instruments
at fair
value
through
profit or 16,
loss 19 - - 98 (149) -
Current trade
and other
payables 19 - (5,360) - - -
----- ------------ ------------ -------- ------------ --------
29,591 (5,360) 98 (149) 940
----- ------------ ------------ -------- ------------ --------
Assets
at fair
Financial value
liabilities through
measured at profit Derivatives Held
Loans and amortised or used for for
Note receivables cost loss hedging sale
At 31 March
2009 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----- ------------ ------------ -------- ------------ --------
Trade and
other
receivables
(excludes
prepayments) 15 7,062 - - - -
Cash and cash
equivalents 17 29,798 - - - -
Other
financial
instruments
at fair
value
through
profit or
loss 19 - - - (13) -
Current trade
and other
payables 19 - (5,106) - - -
----- ------------ ------------ -------- ------------ --------
36,860 (5,106) - (13) -
----- ------------ ------------ -------- ------------ --------
26. Contingent liabilities
The Company, together with its subsidiary undertakings, had
given a cross guarantee in respect of certain indebtedness of the
Group. The amount of such indebtedness at 31 March 2011 was GBPnil
(2010: GBPnil). The cross guarantee was released on 30 March
2010.
27. Operating lease commitments
On 25 January 2006, the Group signed a lease on new premises at
Morgan House, Madeira Walk, Windsor, Berkshire. This lease expires
on 19 June 2016. The annual commitment under this lease is
GBP229,710 (2010: GBP229,710). The Group has retained its lease on
the premises at 32 Peascod Street, Windsor, Berkshire which has a
commitment of GBP86,000 per annum (2010: GBP86,000). Those premises
have been sublet at the same rate from May 2006 and the lease
expires in December 2011.
At 31 March 2011 the Group had commitments under non-cancellable
operating leases relating to land and buildings as set out
below:
2011 2010 2009
GBP'000 GBP'000 GBP'000
-------- -------- --------
Not later than one year 237 277 316
Later than one year and
not later than five years 919 926 342
Later than five years 57 287 -
-------- -------- --------
1,213 1,490 658
-------- -------- --------
The total of future minimum sublease payments expected to be
received under non-cancellable subleases at the reporting
dates:
2011 2010 2009
GBP'000 GBP'000 GBP'000
-------- -------- --------
Not later than one year 65 86 86
Later than one year and
not later than five years - 65 151
-------- -------- --------
65 151 237
-------- -------- --------
28. Related parties transactions
Company
Details of transactions between the Company and other Group
undertakings, which are related parties of the Company, are shown
below:
Transactions with subsidiaries
The Company's subsidiary undertakings are listed in note 13,
which includes a description of the nature of their business.
31-Mar-11 31-Mar-10
GBP'000 GBP'000
---------- ----------
Amounts due from subsidiaries - -
Amounts due to subsidiaries 10 47
Net dividends received from
subsidiaries 5,723 13,615
---------- ----------
Transactions with Record Currency Fund - Carry 250
Record plc, together with Neil Record (who is a Director of
Record plc and is therefore a related party) held all the issued
units in the Record Currency Fund - Carry 250. Consequently Record
plc exerted a controlling interest over the Record Currency Fund -
Carry 250 and it was therefore considered to be a related party to
Record plc and its subsidiaries as at 31 March 2010. Record plc's
initial investment was GBP1,000,000, the fair value of this
investment as at 31 March 2011 was nil (2010: GBP940,337). Details
of transactions between the Company and Record Currency Fund -
Carry 250 are shown below:
2011 2010
GBP'000 GBP'000
-------- --------
Investment in Record Currency Fund -
Carry 250 at cost - 1000
-------- --------
Amounts owed to and by related parties are unsecured,
interest-free and have no fixed terms of repayment. The balances
will be settled in cash. No guarantees have been given or received.
No provisions for doubtful debts have been raised against amounts
outstanding, and no expense has been recognised during the period
in respect of bad or doubtful debts due from related parties.
Transactions with Record Currency - FTSE FRB10 Index Fund
Record plc, together with Neil Record who is a related party,
hold all the issued units in the Record Currency - FTSE FRB10 Index
Fund. As Record plc therefore exerts a significant influence over
the Record Currency - FTSE FRB10 Index Fund, it is considered to be
a related party to Record plc and its subsidiaries. Details of
transactions between the Company and Record Currency - FTSE FRB10
Index Fund are shown below:
2011 2010
GBP'000 GBP'000
-------- --------
Investment in Record Currency - FTSE 1,004 -
FRB10 Index Fund
-------- --------
Transactions with Record Currency - Emerging Market Currency
Fund
Record plc, together with Neil Record who is a related party,
hold all the issued units in the Record Currency - Emerging Market
Currency Fund. As Record plc therefore exerts a significant
influence over the Record Currency - Emerging Market Currency Fund,
it is considered to be a related party to Record plc and its
subsidiaries. Details of transactions between the Company and
Record Currency - Emerging Market Currency Fund are shown
below:
2011 2010
GBP'000 GBP'000
-------- --------
Investment in Record Currency - Emerging 1,000 -
Market Currency Fund
-------- --------
Group
Transactions or balances between Group entities have been
eliminated on consolidation and in accordance with IAS 24, are not
disclosed in this note.
The compensation given to key management personnel is as
follows:
2011 2010
GBP'000 GBP'000
-------- --------
Short-term employee benefits 4,953 5,866
Post-employment benefits 296 325
Share-based payments 1,654 2,171
Dividends 2,907 7,669
-------- --------
9,810 16,031
-------- --------
Directors' remuneration
2011 2010
GBP'000 GBP'000
-------- --------
Aggregate emoluments of the
Directors
Emoluments (excluding pension
contribution) 3,463 3,754
Pension contribution 126 150
-------- --------
During the year, four Directors of the Company (2010: five)
participated in the Group's Personal Pension Plan, a defined
contribution scheme.
29. Ultimate controlling party
As at 31 March 2011 the Company had no ultimate controlling
party, nor at 31 March 2010.
30. Capital management
The Company's objectives when managing capital are (i) to
safeguard the Company's ability to continue as a going concern, and
(ii) to provide an adequate return to its shareholders.
The Company sets the amount of capital in proportion to risk.
The Company manages the capital structure and makes adjustments to
it in light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Company may adjust the amount of
dividends paid to shareholders, return capital to shareholders, or
issue new shares. The Company had no debt in the current or prior
financial year and consequently does not calculate a
debt-to-adjusted capital ratio.
31. Post reporting date events
No adjusting or significant non-adjusting events have occurred
between the reporting date and the date of authorisation. However,
in March 2011, Record renegotiated the fees on our largest Dynamic
Hedging mandate resulting in a reduced fee scale being applied from
1 April 2011 (further details are provided in the Business
Review).
32. Statutory Accounts
This statement was approved by the Board on 13 June 2011. The
financial information set out above does not constitute the
company's statutory accounts. The statutory accounts for the
financial year ended 31 March 2010 have been delivered to the
Registrar of Companies and received an audit report which was
unqualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying
the report, and did not contain statements under section 498(2) or
498(3) of the Companies Act 2006.
The statutory accounts for the financial year ended 31 March
2011 received an audit report which was unqualified, did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying the report, and did
not contain statements under section 498(2) or 498(3) of the
Companies Act 2006, and will be delivered to the Registrar of
Companies.
Notes to Editors
This announcement includes information with respect to Record's
financial condition, its results of operations and business,
strategy, plans and objectives. All statements in this document,
other than statements of historical fact, including words such as
"anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates", "may", "will", "continue", "project" and similar
expressions, are forward-looking statements.
These forward-looking statements are not guarantees of the
Company's future performance and are subject to risks,
uncertainties and assumptions that could cause the actual future
results, performance or achievements of the Company to differ
materially from those expressed in or implied by such
forward-looking statements.
The forward-looking statements contained in this document are
based on numerous assumptions regarding Record's present and future
business and strategy and speak only as at the date of this
announcement.
The Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statements contained in this announcement whether as a result of
new information, future events or otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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