Interim announcement: six months ended 30 September 2021

RECORD plc

23 November 2021

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021

Profit growth and diversification of products and revenues supports interim dividend increase

Record plc ("Record" or "the Company"), the specialist currency and derivatives manager, today announces its unaudited results for the six months ended 30 September 2021 ("H1-22").

Financial headlines:

• Revenue growth of 38% to £16.3m (H1-21: £11.8m)
• Interim dividend increased by 56% to 1.80 pence per share (H1-21: 1.15 pence per share)
• Growth in AUME1 of 5% in USD terms to $84.1bn (31 March 2021: $80.1bn) and 7% in GBP terms to £62.4bn (31 March 2021: £58.1bn)
• Client numbers remained at 89 (31 March 2021: 89)
• Management fee growth of 44% to £16.1m (H1-21: £11.2m)
• Increased operating margin of 32% (H1-21: 22%)
• Profit before tax doubled to £5.2m (H1-21: £2.6m)
• Basic EPS of 2.08 pence (H1-21: 1.10 pence)
• Strong financial position with shareholders' equity of £25.2m (H1-21: £25.7m)

Key developments:

• New product launch of Record EM Sustainable Finance Fund in June with USD 750 million AUME at launch in collaboration with UBS Global Wealth Management provides first milestone in developing ESG and sustainable investment capabilities
• Further diversification into higher revenue and more scalable products increases operating margin
• Anticipated launch of Municipal Loan Fund before the end of this financial year
• Reduced concentration on lower-margin Passive Hedging product
• Focus on modernisation of business continues with investment in technology to enhance business processes and to develop our product/service offering

Commenting on the results, Leslie Hill, Chief Executive Officer of Record plc, said:

"Since I assumed the role of CEO last year, our business has encountered the significant challenge of implementing a change in strategic direction during the unprecedented conditions of a global pandemic. Over the last 18 months, our business has faced this challenge head on and we have now started to see the tangible benefits in the form of a more diversified business aligned with stronger financial performance.

"The benefits of our change in approach to partnering with other third-party specialists can be seen across all areas of our business. In this respect we've taken our first steps into the rapidly growing area of sustainable finance with the successful launch of Record's EM Sustainable Finance fund alongside UBS Global Wealth Management, whilst expanding our knowledge and expertise in financial instruments outside of pure currency. We are also seeing the benefits in the form of enhanced efficiencies and scalability from the adoption and integration of new technology.

"Work continues on the modernisation of our business and in the development of new products, and we anticipate the launch of a Municipal Loan fund focused on the German institutional market before the end of the financial year, which we hope will provide opportunities for further growth in Europe.

"Such transformational change is never easy. However, we have an excellent team and strong relationships both with clients and our partners, which I believe will continue to deliver growth and achieve our goal of building a more modern, profitable and diversified business."

Analyst presentation

There will be a presentation for analysts at 10.00am on Tuesday 23 November 2021 held via a Zoom call. Please contact the team at Buchanan via [e-mail] for further details. A copy of the presentation will be made available on the Group's website at www.recordcm.com.

For further information, please contact:

1 As a currency and derivatives 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. A full definition of AUME is provided at the end of this document.

Record plc	+44	(0)	1753 852222
Neil Record - Chairman
Leslie Hill - Chief Executive Officer
Steve Cullen - Chief Financial Officer
Buchanan	+44	(0)	20 7466 5000
Giles Stewart
Victoria Hayns
Henry Wilson
George Beale

About us

Our purpose: to deliver innovative, thought leading and practical solutions to the needs of currency market users and investors, while maintaining independence and integrity.

We are an independent, specialist currency and derivatives manager with over 38 years of experience which has allowed us to develop a deep and fundamental understanding of the risk and reward opportunities within those markets. Record plc has a premium listing on the Main Market of the London Stock Exchange.

Chief Executive Officer's statement

We continue with our inexorable move to a more technologically agile and diversified business. We are expanding our offering to clients and yet remaining a go-to provider for currency and derivative products and solutions. We will always have currency as our core competence, in all its forms, but as you will see reading below we are branching out, as promised. This is a critical part of our future success.

Progress against strategy

Our EM Sustainable Finance Fund, launched with our client UBS in June of this year, continues to develop its Frontier Currency and Sustainable Bond portfolios and interest in the area is growing. Our total current Frontier and EM currency portfolio stands at $3.3 billion and we are starting to engage with other clients who need help with innovative solutions in this area, in the realms of both debt and currency.

Our European business, particularly in Germany, continues to grow and our first material German Dynamic Hedging mandate started this summer. We set up our German subsidiary, Record Asset Management GmbH with offices in Frankfurt, in the final calendar quarter of 2020 and applied for a BaFin licence earlier this year. Our Head of Sales Dr Jan Witte is spearheading these efforts, supported by a growing European team based out of Zurich, Amsterdam and Frankfurt.

Most promisingly, we anticipate launching a Luxembourg‑based Municipal Loan Fund with Universal‑Investment as Fund Manager by the end of the financial year; this fund will combine European Municipal Loans managed by our Fixed Income and Derivatives teams with European trade receivables provided by our collaboration partners Siegfried and VTeam. This new development will expand our range of products and further increase the scalability and diversification of our revenue sources.

Modernisation

This work continues at a strong but measured pace, with initiatives to build a robust and secure data storage warehouse and enhanced FX execution capabilities engaging our growing in‑house team and working in conjunction with subject matter experts. This is all part of bringing the latest technology and design approaches into the heart of our business, definitely a journey not a "destination" but one that I am confident will continue to yield new revenue sources through new offerings, as well as cost savings by continuing to deliver efficiencies. The house is not finished and we are working away covered in dust with all the windows open, but we have a good architect and a great building team whom we try and give all the TLC they need to make the place a home that all our clients, old and new, want to visit, and never leave.

Succession

We have made some new appointments and promotions in the last year, and plan to give more opportunity to our young talent. The addition of our London office will help to continue to attract and retain talent, while retaining some of our most experienced directors as consultants during the transition to ensure stability and resilience. This is one of the best parts of my job, getting the right people in the right jobs and then supporting and mentoring them, although to be fair they teach me just as much.

We also continue to award equity options through our JSOP and share option schemes and these are proving popular with staff. In our recent appointments, Matt Hotson and Krystyna Nowak, we have two new Non-executive Directors who are bringing a very interesting strategic dynamic to the Board, and this will be very helpful to me going forward.

Financial results and dividends

The benefits of our change in strategy are now starting to be reflected in our financial performance. Our push for diversification into higher-margin and more scalable products and revenue streams has increased revenue by 38% and almost doubled our pre-tax profits, with our operating profit margin increasing to 32% from 22% versus the same period last year. Further financial information can be found in the Financial review.

Notwithstanding the challenges arising from both covid-19 and our change in strategy over the last 18 months, neither our capital management policy nor our dividend policy has changed. The Board continues to remain confident in the ability of the business to deliver on its planned strategy and to achieve further growth, and has decided to pay an increased interim dividend of 1.80 pence per share (HY21: 1.15p) on 30 December 2021 to shareholders on the register at 3 December 2021.

Outlook

I am very aware of the need for revitalisation, evolution and change while we keep what is so good about us; our special expertise, our integrity and our experienced staff. The marriage of old and new is a delicate and subtle art but one that, as we get it right, and I believe we are, will yield exciting growth and development avenues for us in the future. We are very much at the start of what we can accomplish.

Leslie Hill

Chief Executive Officer

22 November 2021

Interim management review

Market review

The six months to 30 September 2021 were characterised by a more auspicious covid-19 outlook as efforts to keep economies open were generally more successful than the six months prior. The period began on less positive footing as the highly transmissible Delta variant became widespread, however high inoculation rates combined with management strategies - rather than "covid-zero" policies - generally saw economic activity and mobility continue to recover and global transmission rates moderated towards the end of the period.

In spite of the progress made towards exiting the pandemic, global economic reflation slowed in pace on account of both the winding down of government support measures and supply chain issues. Investor attention instead turned towards the prospect of a more protracted period of elevated inflation rates. Reopening demand was unmatched by supply across a range of production factors including labour, energy commodities and finished goods due to supply chain disruptions. These factors combined to create a "perfect storm" of commodity price increases, with energy prices rising significantly through the period, and in particular natural gas more than doubled in price.

Central banks had the challenge of calibrating policy in response to the uncertain outlook. Initially thought to be "transitory" in nature, sticky inflation rates and rising commodity prices began to drive market-based measures of short‑term inflation expectations higher. The Federal Reserve ("Fed") carefully communicated policy intentions over the period, indicating with increasing confidence that tapering of asset purchases would be appropriate towards the end of the year. The Fed remained reluctant to raise rates this year, with the Fed dot-plot suggesting 2022 was more appropriate. At the same time, EM central banks - especially those of commodity exporters - began decisive rate hiking cycles to arrest inflation pressures.

Global risk sentiment was broadly supported up to September, likely helped along by still exceptionally easy financial conditions. Market appetite shrank towards the end of the period over concerns around China's Evergrande's solvency, the European energy crisis, and fears over the US debt ceiling. Furthermore, a series of Chinese regulatory crackdowns pressured equity markets. Currency moves during the period were driven by the interplay of shifts in risk sentiment, relative covid-19 outlooks, inflation surprises, and the perceived reaction function of central banks. The US dollar declined during the first two months of the period before appreciating in the remaining months and ended the period around 1% up on a trade-weighted basis.

Operating review

As the impact of the pandemic on our business now starts to recede, during the last six months we have begun to see the signs of growth and renewed interest from clients in innovation, especially in the area of sustainable investment. We are working closely in collaboration with our preferred partners to develop innovative solutions, whilst continuing to invest in our people and infrastructure, more information for which is given below.

Our clients

Record's strong institutional client base responded robustly to the pandemic, maintaining their strategic hedging programmes in almost all cases. As lockdowns have lifted in most jurisdictions, the business of investing has returned to normal with appetite amongst clients to pick up new projects previously put to one side during the height of the pandemic. Two key themes continue to dominate investors' focus: adding yield and increasing sustainability. Record's efforts have therefore been focused on helping our clients achieve these

goals in a number of ways. One highlight of the half year was the launch of the Record EM Sustainable Finance Fund. This fund not only solves a number of challenges for our leading global wealth manager partner, including the ability to offer innovation in sustainable investments via exposure to EM local currencies, but has received widespread interest both from existing and new clients.

Other asset managers are also feeling the return of allocators to the market and we are seeing redoubled interest from alternative managers in bespoke hedging solutions as clients search globally for yield, as well as alternative investments in sustainable finance. Finally, we are seeing the appetite for yield in a number of bespoke projects which combine Record's expertise with that of best‑in‑class third parties in order to help our clients maximise their returns in the challenging investment environment. As always, the strength of our relationships and the trust our clients place in us is at the heart of all that we do from cutting edge innovation to efficient and reliable implementation.

Our people

Having successfully navigated through the most critical stages of the pandemic, we have proved that it's possible to have employees working remotely without any diminution in client service levels, security or productivity. Consequently, and looking ahead to the future, we are now able to offer a much broader degree of flexibility to employees with respect to where and how they work. Not only does this enhance the work-life balance of our employees and hence their general wellbeing and mental health, it is another "tool in the box" for attracting and retaining our talented employees. Notwithstanding the above, the importance of continuing to provide high-quality office space to reinforce the benefits of collaborative working, training and social interaction is not underestimated. In this respect, we recently opened a new office in London and plan to downsize our Windsor headquarters upon cessation of the lease in September 2022, which gives further choice to our employees as to how best utilise their time working, for example with clients, working alone or working in collaboration with each other. We believe that offering such a balance and choice both in work patterns and location will serve to increase overall productivity and employee retention, in addition to helping to attract new talent to the business.

Our technology and operations

As the UK government's lockdown measures have eased, Record has successfully continued working from home, with business continuity fully maintained throughout the period. We are now supporting flexible working across the business, including remote working, office-based, or hybrid working patterns enabled for all staff. Remote access systems and security controls have continued to be enhanced in line with this, as well as further investment in IT hardware as required. This new normal has therefore become the foundation for us from which to further automate existing manual tasks, explore new technologies and processes, and invest in modern software development projects.

Our governance and oversight

A comprehensive review of our governance structure is currently underway. This will ensure that we have the most appropriate structure to support the strategy, and to continue to provide the relevant level of control and oversight across all of the Group companies aligned with the expected future growth of the Group. In the meantime, our governance, risk and management reporting framework continues to function as expected. Meetings on the whole take place in the office, with some hybrid meetings allowing participants to dial in remotely.

Our business model and profitability

Our existing hedging products and client base continue to provide a robust core of revenue upon which to build, and we continue to work hard in maintaining our strong relationships and the highest levels of client service in this regard. However, in order to deliver the growth and longevity demanded by our change in strategy, it is also necessary to provide innovative and scalable products, using technology to ensure efficiency of delivery, to increase margins and to maximise profitability.

Following our transitional year in FY‑21, as expected we are now starting to see the financial impact from our focus on product diversification into innovative and higher-margin products flow through to our revenue and ultimate profitability. In comparison to the same period last year (six months ended 30 September 2020: H1-21), our revenue has increased by 38% and we've doubled our operating profit, whilst our operating margin has increased from 22% to 32% over the same period. Further financial information is given in the Financial review section.

Brexit

As part of our Brexit strategy, the Group has already established a German subsidiary and its application to BaFin for regulatory approval is on track. Whilst Brexit has not impacted our ability to service our existing EU27 client base, it has somewhat constrained our ability to market a small number of our products to potential EU27 clients, which we anticipate being fully mitigated once formal authorisation from BaFin is confirmed.

Product investment performance

Hedging

Our hedging products are predominantly systematic in nature. The effectiveness of each client mandate is assessed regularly

and adjustments are made when necessary in order to respond to changing market conditions or to bring the risk profile of the hedging mandate in line with the client's risk tolerance.

Passive Hedging

Record has developed and runs an enhanced Passive Hedging service, which aims to reduce the cost of hedging by introducing additional flexibility into the implementation of currency hedges without changing the hedge ratio. While the investment process is partly systematic, the episodic nature of many opportunities exploited by the strategy means it requires a higher level of discretionary oversight than has historically been associated with Passive Hedging.

Since the aggressive central bank interventions seen in 2020 in response to the covid-19 pandemic, we have continued to observe large and consistent levels of government stimulus into global markets. This has introduced large amounts of cash liquidity into markets, and has caused FX forward pricing to remain very stable. In light of this lack of volatility, discretionary decisions have favoured running programmes closer to their benchmarks for extended periods during the year, as the opportunities to add value have been limited. FX transaction costs have been at historically low levels, with bank dealers preferring to compete for market share through competitive pricing.

	Half‑year	Return since
	return	inception
Value added by enhanced Passive Hedging programme relative to a fixed-tenor benchmark	(0.01%)	0.08% p.a.

Dynamic Hedging

During the period, US-based Dynamic Hedging clients experienced a strengthening of the US dollar against developed market currencies. The Dynamic Hedging programmes responded as expected and hedge ratios were adjusted systematically in response to currency movements; however, hedging returns in the programmes were marginally negative, due to elevated costs associated with varying hedge ratios.

	Half‑year	Return since
	return	inception
Value added by Dynamic Hedging programme	(0.08%)	0.43% p.a.

Currency for Return

Record's Currency for Return suite of products includes both discretionary and systematic investment styles. The Record EM Sustainable Finance Fund uses a more discretionary approach, whilst the Currency Multi-Strategy product is a more systematic offering combining five individual strategies.

Record EM Sustainable Finance Fund

The new Record EM Sustainable Finance Fund, launched on 28 June 2021, is a result of the strategic partnership between Record and UBS Wealth Management. The Fund aims to stabilise currencies in developing economies, improve the flow of development finance and enhance financing projects in illiquid markets. The strategy targets positive sustainability outcomes across a multidimensional investment process, whereby it trades liquid and illiquid EM currencies designed to help stabilise exchange rates and to absorb currency risk, and invests in an underlay of sustainable development bonds issued by multilateral development banks with strong development operations in emerging economies. Furthermore, an active engagement strategy with counterparty banks encourages improvements in areas of ESG.

Although returning -0.32% for the half year to 30 September 2021, the Record EM Sustainable Finance Fund performed well when compared to major market EM sovereign bond indices. The overweight exposures in the currencies of some economies

in Eastern Europe, and Central and Eastern Asia, contributed positively to the outperformance in the period. Exposure to currencies in Latin America performed poorly in the period following growing local political and fiscal uncertainties, inflationary pressures, concerns over a slowdown in global growth, in particular in China, and volatile commodity prices. The return of shorting a diversified basket of developed market currencies to fund the long exposures in emerging market currencies also added positively to the outperformance. The USD-denominated bonds in the portfolio closed slightly weaker on the back of increasing yields in the US market as the Fed indicated that tapering could start as early as November 2021 amid rising price pressures and strong growth momentum.

	Half‑year	Return since
	return	inception
Record EMSF Fund USD Share Class	(0.32%)	(0.32%)
GBI EM Global Diversified1	(3.56%)	(3.56%)

1. Source: J.P. Morgan.

Multi-Strategy

Record's Currency Multi-Strategy product combines a number of diversified return streams, which include:

• Forward Rate Bias ("FRB", also known as Carry) and Emerging Market ("EM") strategies which are founded on market risk premia and as such perform more strongly in "risk on" environments; and
• Momentum, Value and Range‑Trading strategies which are more behavioural in nature, and as a result are less risk sensitive.

Currency Multi-Strategy returned positively during the period which was largely driven by outperformance in the EM and Value modules. Widening EM-DM rate differentials and a supportive cyclical backdrop created tailwinds for EM currencies in the period. Value returned positively on the back of short exposures in Australia where lagging vaccination efforts weighed on economic activity and the rate outlook. The Momentum strand detracted from returns due to reversal of multi-month trends in the period.

Half‑year Return since Volatility since