Record : Interim Report For The Six Months Ended 30 September 2023

recordfg.com

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2023

Record plc ("Record" or "the Company"), the specialist currency and asset manager, today announces its unaudited results for the six months ended 30 September 2023 ("H1-24").

Financial headlines:

• Management fees increased by 3% to £19.6m (H1-23: £19.0m)
• Performance fees of £1.5m down 46% versus H1-23(H1-23: £2.8m)
• Revenue decreased by 3% to £21.5m (H1-23: £22.1m)
• Profit before tax decreased by 16% to £6.3m (H1-23: £7.5m)
• Interim dividend increased by 5% to 2.15 pence per share (H1-23: 2.05 pence per share)
• Decrease in operating profit margin to 29% (H1-23: 34%)
• Basic EPS decreased by 24% to 2.48 pence (H1-23: 3.27 pence)
• AUME in USD terms of $84.5bn (H1-23: $80.8bn, FY-23: $87.7bn)
• Strong financial position with shareholders' equity of £28.5m (H1-23: £28.0m)

Key developments:

• Currency Management - strong performance evidenced by continued growth in underlying management fees, and performance fees earned of £1.5 million
• Asset Management - further progress made in diversification, highlighted by the launch of two funds in the period, with a further fund launch anticipated in the second half of FY-24
• Record Digital - suite of Luxembourg funds under development and continued exploration of new ideas in the digital asset space
• Leslie Hill, CEO, announces retirement with effect from end of financial year (FY-24)
• Board announces appointment of Dr Jan Witte as CEO Elect with effect from 1 January 2024

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

"We continue to make steady progress along the three strands of our business strategy, with important milestones reached in our diversification and succession plans, including the announcement of my retirement with effect from 31 March 2024 and the appointment of Jan Witte as my successor.

"Our client proposition remains strong as does our pipeline of tangible opportunities across our broad product suite. Our growth in financial terms is not linear and delays in new product launches alongside stubbornly high inflation have led to a decrease in our operating margin for the period. However, looking ahead, we anticipate further fund launches and growth across our range of products which we expect to increase our profitability over the medium term.

"The Group remains well positioned financially, with increased cash generation and a strong balance sheet to support its future growth plans. The Board remains confident in the delivery of market expectations for the current financial year. I believe the business remains capable of delivering on the targets set out in February, albeit achieving them may take longer than originally anticipated."

Analyst presentation

There will be a presentation for analysts at 9.30am today held via a Zoom call. Please contact the team at Buchanan via record@buchanan.uk.com for further details. A copy of the presentation will be made available on the Group's website at www.recordfg.com.

Interim Report

For the six months ended 30 September 2023

Chief Executive Officer's statement

"We continue to make steady progress along the three strands of our business strategy with some important milestones reached during the period."

The Group continues to make steady steps forward in the triple objective of diversification, modernisation and succession planning. Whilst we are marginally below the targets we had set ourselves for the half year, this is due largely to timing differences associated with fund launches taking longer than expected. Nonetheless, none of the delays are due to changes in client appetite or commitment, rather they have been caused by the speed with which we have been able to set up and launch our structures.

Diversification

We continued to successfully diversify the business across our currency management, asset management and digital products and service offerings over the period.

Record Currency Management Limited ("RCML")

At RCML we maintain good performance across our currency strategies, evidenced by £1.5 million of performance fees earned in the year to date and the continued high performance of our EMSF Fund. For the latter, we are dedicating more resource in the coming months in anticipation of adding assets given the excellent track record and the upcoming three year anniversary of the Fund. We are continuing to see new pension fund and asset management hedging clients coming on board - this part of our business represents the stable bedrock from which our other forthcoming projects can launch.

Record Asset Management GmbH ("RAM")

At RAM, we are excited by the upcoming launch of our first Infrastructure Fund on which we serve as General Partner ("GP") for a group of long established European clients. This Fund will begin to generate long-term revenue as each individual infrastructure project is funded, and is a very welcome evolution for us as a business. The quality of these earnings will complement the fees we already earn. We have also launched two other funds in the last six months, a Protected Equity Fund which launched with USD 215 million and the GP Stakes Fund with USD 5 million, both of which attract higher fees than we can achieve in the world of currency management and both of which are expected to grow materially over time.

Record Digital Asset Ventures Ltd ("RDAV")

At RDAV, we are launching our Luxembourg-based digital asset fund structure in partnership with Dair Capital. The structure aims to deliver an institutionally recognised operation, so clients can take investment risk in this new asset class without unnecessary operational risk. We plan to launch three funds, designed and managed by Darren Dineen the CEO of Dair Capital who brings his experience and track record to develop this business for institutional investors in partnership with us. We are working very closely with the fund ecosystem and aim to make his Five Seasons fund the first regulated crypto-currency fund in Luxembourg, attracting not only the Ultra High Net Worth clients Darren has worked with in the past, but also some new institutional monies, which Record hopes to help bring in.

Succession planning

As I pass the CEO baton on to Jan Witte, our 'home grown' new CEO Elect, I am proud of the impressive team of professionals we have recruited over the past four years and we continue to add to this team. We will announce some new hires in the near future to boost the "bench" and help us deliver the new products and services we have been planning for over a year now.

Modernisation

We continue to pass milestones such as building new reporting capabilities and moving more activities to cloud-based solutions, and as we do we find new opportunities to improve our technology on an ongoing basis. It is definitely a journey as opposed to a destination, but one where we challenge ourselves to be selective and results focussed, and to get value for our spend. This has been and is at the core of keeping up with other offerings and most of all listening to our clients and their requests.

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Interim Report

For the six months ended 30 September 2023

Financial performance and dividends

We continue along our growth path albeit progress has, and will continue to be, non-linear in financial terms. As stated above, the pipeline remains strong across all business units, although profitability has been somewhat tempered by timing issues with delays in new product launches, plus continued high inflationary pressure on costs. It is pleasing to note the more regular contribution to revenue seen from performance fees although, as always, this remains potentially episodic and always subject to market conditions.

In terms of revenue, it is pleasing to note the continued growth in underlying management fees of 3% in the period to £19.6 million (H1-23: £19.0 million). Performance fees of £1.5 million (H1-23: £2.8 million) continue to be a welcome addition to total revenue, albeit more episodic and volatile in nature. Going forward, we anticipate continued revenue growth from both our traditional currency hedging business alongside that from the new product launches in both RAM and RDAV.

In light of this, and in line with the company's progressive dividend policy, the Board has decided to pay an increased interim dividend for HY-24 of 2.15 pence per share (HY-23: 2.05 pence per share) on 22 December 2023, to shareholders on the register at 1 December 2023.

Finally, after almost four years at the helm, having delivered a robust succession plan and a diversified suite of products and services, now feels the right time for me to plan to step down and pass the reins to Jan and my fellow board members, who I know will do an excellent job in taking the business forward.

Leslie Hill

Chief Executive Officer

16 November 2023

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Interim Report

For the six months ended 30 September 2023

Interim management review

"Just over three years into its change in strategic direction, the Group continues both to grow its traditional currency management business, and to deliver progress in its drive for diversification with the launch of two new asset management products in the period."

Operating review

Our aim is to grow our business through modernisation, investing in new technology and in diversifying our products and services. New technology enables us to provide more efficient, safe and scalable products across our whole product suite, whilst diversification enables us to offer differentiated and relevant products to suit individual client demand.

The pipeline of tangible opportunities that we see for growing our business remains strong across all product lines, albeit that the development and delivery of new asset management products has taken longer than initially anticipated. In collaboration with our clients and specialist partners' we launched two new Luxembourg-based funds in the period and anticipate the launch of further funds before the end of the financial year.

The expansion of our business has led to increased costs, exacerbated by higher than anticipated inflation over a longer period. Whilst this has weighed on our operating profitability in the short term, we remain confident that increased efficiency through modernisation, alongside the launch of higher margin products and a continued focus on controlling our cost base will increase our operating margin over the medium term.

Products

The beginning of the reporting period saw elevated market and currency volatility as the US SVB banking crisis highlighted credit stresses in the financial system on the back of the Fed's tightening campaign, though swift policy response remedied market turmoil. Meanwhile a majority of Developed Markets ("DM") central banks entered into the latter phases of the monetary policy tightening cycle, with market re-calibrations of peak rates sensitive to incoming information on core inflationary pressures and persistence of general labour market resilience, with the aforementioned principal drivers of currency moves. The risk environment remained relatively mixed throughout the period given further economic fragilities in the Chinese economy and more recently US government shutdown risks and energy prices. Pronounced trends have led to extended valuations, notably USD strength and JPY weakness.

Against this volatile market backdrop, we have seen continued investor appetite for both risk management programmes as well as those seeking to harness market movements to generate a return. This appetite has been broad based across Record's currency strategies, which has coincided with a renewed internal focus on core products and their fit for specific markets.

Demand for passive hedging was observed across the traditional base comprising European institutional investors, particularly in Switzerland, as well as in the asset manager space. Record's Hedging for Asset Managers product is being extended in scope, incorporating significant enhancements to both reporting and liquidity management, and attracting interest from large private markets investment groups which is anticipated to drive asset growth over the coming year.

Mixed investor sentiment about the future path of the US dollar continues to drive interest in Dynamic Hedging as investors recognise the opportunity to add value to portfolios while reducing risk. Existing investors in the strategy have benefited from gains in the programme despite somewhat range bound conditions for much of the six-month period.

Record's flagship return-seeking products, Currency Multi-Strategy and Emerging Markets Sustainable Finance ("EMSF"), both delivered positive returns over the period. Currency Multi-Strategy continues to attract investor interest in the search for uncorrelated, unfunded returns to their portfolios, either as newcomers to currency as an asset class or as seasoned allocators to the space. Recent EMSF performance has consolidated its lead over asset class benchmarks and, with a credible track record now established, investors are starting to take note of the pioneering approach and the industry-leading returns.

People

Our succession strategy continues to evolve with the announcement of Dr Jan Witte's appointment to the board with effect from 1 January 2024, and his subsequent appointment as CEO following Leslie Hill's upcoming retirement on 31 March 2024. Jan was appointed as CEO of the Group's UK-regulated subsidiary, Record Currency Management Limited ("RCML"), earlier this year, alongside his existing position as CEO of Record Asset Management GmbH ("RAM") in Germany. We continue to invest in our people. This means hiring exceptional people throughout our business and providing opportunities for our talented colleagues to increase their levels of responsibility, while providing support in the form of internal and external coaching, learning and personal development, such as by studying for professional qualifications. This has led to a number of promotions and internal transfers and also in us welcoming some talented new colleagues. We also continue to strengthen our partner relationships to continue to diversify our product offering, our client base and our activities.

Whilst focus on good cost control remains paramount, a cost of living allowance of £2,000 was agreed for the year to all staff below Board level, to be paid in quarterly instalments during the year, to help our employees with the continued high level of inflation. Following a salary review process conducted more recently in October, a 3% award was made across the company in addition to share option awards to key staff to align them with our longer-term business strategy.

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For the six months ended 30 September 2023

Operating review continued

Lastly, as part of our employee engagement strategy, we have been using short pulse surveys on a range of topics including management, communication, health and wellbeing, pay and benefits and office location.

Technology

We continue to support flexible working across the business, including remote working, office-based and hybrid working patterns enabled for all staff. Remote access systems and security controls have continued to be enhanced as we deliver greater flexibility and functionality to our staff whilst maintaining the greatest levels of security and protection.

The continuous improvement and development of our technology stack is critical to improving how we support clients and deliver our products and services effectively.

In line with our strategy for modernisation, and as part of our ongoing and continuous development, Record's Board has maintained an elevated IT-related budget relative to our historic expenditure. This spending has been assigned across three core areas: software development to improve functionality and capability; infrastructure to improve security and resilience; and data management to provide greater insights and value around our investment services.

Product investment performance

Currency Management

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 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.

After a period of continuous effort from global central banks to combat price increases by progressing in their interest rate hiking cycles, the last six months have seen a peak in global inflationary pressures. While the market anticipated the start of an interest rate cutting cycle across major currencies, central bankers' emphasis has remained on keeping the interest rates "higher for longer". The longer end of the yield curve is consequently experiencing a great degree of volatility. This has caused a further tightening in the financial conditions and in the FX basis over the course of the last six months expanding the opportunity set from which the team can potentially add value. Therefore, performance for the first half of the year has been strong as the portfolio managers have positioned the portfolio to take advantage of the current volatile environment. Generally, the portfolios have been managed with excess durations to their benchmarks.

The table below shows the total value added relative to a fixed-tenor benchmark for an Enhanced Passive Hedging program for a representative account (base currency is Swiss francs).

Dynamic Hedging

US-based Dynamic Hedging clients experienced appreciation of the US dollar against developed market currencies over the period. The majority of dollar strength occurred throughout August and September on the back of hawkish commentary from Fed chair Powell, notably during the Jackson Symposium, and further supported by the September FOMC meeting seeing an upwards adjustment in median dot plot projections for 2024. Dollar strength was also partially attributable to risk off sentiment, amidst China growth concerns, and rising US treasury yields.

The Dynamic Hedging programmes responded as expected, with hedge ratios rising systematically in response to dollar strength. Consequently, hedging returns for US-based clients were positive, helping to protect against foreign currency weakness. Conversely, non-US clients experienced losses from hedging; however, these losses were limited as hedge ratios fell in response to broad dollar strength, allowing clients to gain from their embedded currency positions.

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.

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Interim Report

For the six months ended 30 September 2023

Operating review continued

Currency for Return continued

Record EM Sustainable Finance Fund

The 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 improve the flow of development finance, enable local currency lending, enhance financing projects in illiquid markets and support macroeconomic stability by currency stabilisation. The strategy targets positive sustainability outcomes across a multidimensional investment process, whereby it trades liquid and illiquid EM currencies to absorb currency risk. It further invests in an underlay of sustainable development bonds issued by Multilateral Development Banks ("MDBs") and other Development Finance Institutions ("DFIs") with a strong presence in low and middle-income economies, alongside an active stakeholder engagement that promotes better policies and practices among investees and trading counterparties.

The Fund returned 1.27% for the half year to 30 September 2023, outperforming major EM sovereign debt and currency indices.

The positive return was driven by the outperformance in the currency positions. This more than offset the negative returns in the bond underlay driven by higher yields in the US which were unsupportive of the dollar bond portfolio. Some outperformance on duration versus reference indices was generated on the back of yields climbing more at the back-end of the US treasury curve and shorter duration exposure of the fund.

Long EM currency positions returned positively due to continued rate tightening cycles via EM central banks and positive real rates in view of achieved disinflationary momentum. Positions in high-yielding Latin American and European currencies saw the lion's share of gains. Chilean peso was a notable underperformer in the period due to underwhelming Chinese data given its strong macro and trade links. The funding of Developed Market currency short positions also contributed positively in the period due to the weakness of Japanese yen versus the US dollar.

Currency 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;
• Value and Momentum strategies which are more behavioural in nature, and as a result are less risk sensitive
• Developed Market Classification ("DMC"), a quantitative strategy using machine learning techniques to predict short term currency moves, using high frequency data on carry, momentum, volatility and US dollar cycle factors

Currency Multi-Strategy returned positively during the period, driven by the outperformance in the EM, Carry and Momentum strands. EM gains were driven by long positions in high-yielding Latin American currencies in light of continued hawkish central bank communications, attractive real rate accruals and a reduction in political risk premia. Key short positions returned positively given their sensitivity to the more challenging global risk environment amidst China growth fragilities and higher US treasury yields, both traditionally negative for EM FX. The Carry strand outperformed on the back of continued central bank rate divergence, with short JPY and long USD exposures the key contributors to outperformance. The low carry (interest rate) JPY depreciated given the relative accommodative Bank of Japan ("BoJ") stance whilst attractive yields kept the USD supported during the period. Momentum returned positively, driven largely by long GBP and CHF positions. The former appreciated on the back of the upwards adjustment in market rate expectations as the Bank of England has faced further challenges in addressing persistent inflationary pressures. CHF also saw strength given the continued Swiss National Bank campaign to limit inflationary pressures vis-à-vis engineering FX strength.

Value returned negatively on the back of long JPY and short USD exposures. Despite moves by the BoJ to increase flexibility around Yield Curve Control ("YCC") in July which has allowed for yields to rise in a constrained manner, the continued relative easy bias of the BoJ and limited communication on the end of their negative interest rate policy in tandem with elevated US treasury yields have all weighed on the JPY. The US dollar was supported by market recalibration of rates around the Fed's "higher for longer" messaging, bolstered by a resilient labour market and economic data supporting a soft landing scenario.

Developed Market Classification ("DMC") performance was flat, with mixed performance across the portfolio. The CHF, SEK and EUR pairs provided positive returns, capturing short to medium term trends during the period. The CAD and NOK pairs had slight positive performance. Negative returns in other pairs came from a mostly net short USD position, which picked up on some short- term USD weakening but underperformed in August and September. Overall, the model's Trend factor was most important in deciding positions during this period, with the Volatility and Carry factors also contributing.

1. Source: JP Morgan.
2. Record Multi-Strategy Composite return data is since inception in July 2012, showing excess returns data gross of fees in USD base and scaled to a 4% target volatility.

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Interim Report

For the six months ended 30 September 2023

Operating review continued

Scaling

The Currency for Return product group allows clients to select the level of exposure they desire in their currency programmes in addition to the level of scaling and/or the volatility target.

It should be emphasised that in this case "scaling" refers to the multiple of the aggregate notional value of forward contracts in the currency programme which is limited by the willingness of counterparty banks to take exposure to the client. The AUME of those mandates where scaling or a volatility target is selected is represented in Record's AUME at the scaled value of the mandate, as opposed to the mandate size.

Asset Management

Over the past 18 months, Record's EU-based subsidiaries, Record Asset Management GmbH ("RAM") and RAM Strategies GmbH ("RAM Strategies"), have spearheaded the establishment of a Luxembourg collective investment fund platform. This initiative is now bearing fruit with the first two funds launched in the period. The first fund to go live (Record Diversified GP Stakes) specialises in taking minority equity stakes in alternative asset managers. The second fund (Record Protected Equities) combines an international equity portfolio with downside tail-risk protection. A third fund, which focuses on infrastructure assets, is currently in development with an anticipated launch in the fourth quarter of the current financial year.

In creating these funds, Record has partnered with other specialists of high calibre with expertise in the specific asset classes. These new offerings ensure that our clients have access to exciting, non-currency related investment strategies, as part of our strategy to grow our business through diversification, with the added benefit of fostering deeper client relationships.

RAM Strategies, with its background of distributing third-party investment strategies, has taken the lead in marketing these new funds throughout Europe. At period end, assets under management on the Luxembourg fund platform were approximately USD 205 million.

The launch of these funds also marks the signing of RAM's inaugural client. RAM obtained its BaFin license in 2022 and its appointment marks a major milestone in its history, having now been engaged to provide investment management services and share class hedging services to the Funds.

Record Digital

Record Digital was set up as a separate group entity within the Record Financial Group to track, learn and identify opportunities for future diversification and growth in this sector to help ensure the sustainability of the business going forward. We set aside capital (initially £2 million), and our investments were selected in view of two main objectives, cash-to-cash potential, and business leverage. We have committed 73% of this capital to a mix of small direct investments, and investment funds focused on disruptive technologies, early stage, and digital asset companies. These investments have helped us establish a network of talent, subject- matter experts, and partners to work with, evaluate ideas and explore new business opportunities together. We have been actively incubating these ideas, making connections between this world and our core competencies, testing out new products, exploring new strategies and approaches to delivering financial services. As we take these ideas forward, and move on from incubation towards syndicating these ideas, we look to build diversifying streams of revenue from new products and services, at commercial fees, building on and aligned with our core competencies.

We are currently building out a suite of Luxembourg funds which are embedding the differentiating services, unique functionalities, and capabilities of market leaders in the digital asset space. For example, Block Scholes Limited ("Block Scholes") will be a service provider to these funds providing data, analytics, and research to the portfolio managers and risk management functions. Record first invested in Block Scholes in February 2022, and has since become a client and a partner to the business as well as our CTO, Rebecca Venis, serving as a Non-Executive Director. As of October 2023, Record led and successfully closed the most recent Block Scholes funding round, securing $3.1 million alongside our co-investors, including InvestCorp, Saison Capital, CoinSwitch and Dair Capital. We are excited by the opportunities looking forward, as we syndicate more of these incubated ideas, to build on our core competencies and establish innovative and sustained diversifying revenue lines for the business.

AUME development

AUME decreased over the period by 3.6% to $84.5 billion in US dollar terms, and decreased in sterling terms by 2.6% to £69.2 billion. Total net outflows for the period were $1.0 billion, compared to HY-23 net inflows of $8.6 billion, and FY-23 net inflows of $9.1 billion.

The AUME movement over the six-month period is analysed as follows:

AUME movement analysis in the six months to 30 September 2023

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Interim Report

For the six months ended 30 September 2023

Operating review continued

Product mix

The product mix has remained broadly consistent with that reported at the year end.

AUME composition by product

Equity and other market performance

Record's AUME is affected by movements in equity and other markets because Passive and Dynamic Hedging mandates, and some of the Multi-product mandates, are linked to equity holdings or other asset types such as bonds or real estate.

Additional details on the composition of assets underlying the Hedging and Multi-product mandates are provided below to help illustrate more clearly the impact of equity and fixed income market movements on these mandate sizes.

Class of assets underlying mandates by product as at 30 September 2023

Forex

Approximately 75% of the Group's AUME is non-US dollar denominated. Therefore, foreign exchange movements may have an impact on AUME when expressing non-US dollar AUME in US dollars, although this movement does not have an equivalent impact on the sterling value of fee income. Exchange rate movements decreased AUME by $0.3 billion in the period and changes to mandate underlying asset values decreased AUME by $1.9 billion.

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Interim Report

For the six months ended 30 September 2023

Financial review

Overview

We continue to make progress on the growth and diversification of our business.

In this respect, it is pleasing to report continued growth in underlying management fees plus progress made on the delivery of new asset management products, as evidenced by the launch of two new funds in the period. Investment in our technology and resources accompanied by sustained inflationary pressure across our cost base continues to weigh on our operating margin.

Looking forward, we anticipate a further fund launch for the second half accompanied by a strong pipeline of opportunities across both currency and asset management products in addition to tangible progress in our digital asset project. Consequently, we remain confident in delivering solid and continuous progress in line with our strategic objectives of growth and diversification.

Revenue

Headline revenue of £21.5 million, including performance fees, represents a small decrease of 3% from H1-23 (£22.1 million) and a 5% decrease compared to the second half of last year (H2-23: £22.6 million). Excluding performance fees, which at £5.8 million were exceptional for FY-23, underlying management fees increased by 3% versus H1-23 and by 2% against H2-23.

Revenue analysis (£m)

*Other income includes distribution fees and fees from ancillary investment management services.

Following an exceptional year for Performance fees throughout FY-23(FY-23: £5.8 million), we continue to see opportunities for earning performance fees in some of our Passive Hedging mandates including tenor management, albeit at more normalised levels based on current market conditions. Performance fees of £1.5 million were earned in the period versus exceptional performance fees linked to more volatile market movements of £2.8 million and £3.0 million in the first and second half of FY-23 respectively.

Passive Hedging management fees of £5.8 million were £0.5 million lower than the equivalent period last year (H1-23: £6.3 million)

and £0.8 million lower compared to the second half of last year (H2-23: £6.6 million), linked mainly to the net outflows of $1.3 billion seen over the period. As a percentage of opening AUME, net outflows of $1.3 billion equate to a reduction of approximately 2%.

Dynamic Hedging management fees increased by 21% to £7.0 million compared to the same period last year (H1-23: £5.8 million) and by £0.8 million versus H2-23 (£6.2 million), predominantly driven by the full impact of net inflows since H1-23 of $2.8 billion.

Currency for Return management fees of £3.1 million decreased by 14% (£0.5 million) compared to H1-23(H1-23: £3.6 million) and by £0.1 million versus H2-23 (£3.2 million), predominantly due to the full impact of net outflows of $0.5 billion since H1-23.

Management fees of £3.7 million from the Multi-product category are £0.4 million higher than both the first and second half of last year (H1-23 and H2-23: £3.3 million), linked predominantly to the impact from the net inflow of $0.8 billion in the final quarter of FY-23.

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Interim Report

For the six months ended 30 September 2023

Financial review continued

Revenue continued

Other income consists of ancillary currency management services, including collateral management, signal hedging and tactical execution services totalling £0.2 million (FY-23: £0.5 million), plus fees earned on the distribution of third-party investment products of £0.2 million (FY-23: £0.1 million).

Expenditure

Expenditure analysis (£m)

Total administrative expenditure (excluding Group Bonus) of £12.4 million for the period represents an increase of 15% (H1-23: £10.8

million) compared with the equivalent prior year period, and an increase of 8% versus the second half of last year (H2-23: £11.5 million).

Personnel costs of £7.1 million (excluding Group Bonus) increased by 13% versus the same period in the prior year (H1-23: £6.3

million) and by 9% compared to the second half of last year (H2-23: £6.5 million). We continue to invest in the business in line with our plans for diversification and succession and in sourcing the right skill sets at the right level. Personnel changes lead to occasional one-off reorganisation costs, which we would expect to decrease as the changes required to resource levels and skill sets begin to level off. In line with our succession strategy, we remain committed both to recognising our future talent through internal promotions, and to retention by utilising our various share schemes, both of which add to our overall personnel costs. We are supporting our employees during this prolonged period of high inflation by committing to cost-of-living payments of £2,000 per employee during FY-24 (paid over four quarters), and have also awarded a general salary increase of 3%, effective from 1 October 2023, to ensure we remain both competitive and an attractive potential employer in the current environment. Whilst we expect pressure on personnel costs to continue in the short-term, we are confident that the result will not repeat the material increases seen in the level of our personnel costs in prior periods.

As expected, inflation has also led to an increase in non-personnel costs in addition to costs linked to our overseas expansion and growth, including office and travel costs, IT-related support and data costs, and professional fees including higher UK audit fees and additional audit fees for the new regulated subsidiary in Germany. Total non-personnel costs of £5.3 million for the period represent an increase of 18% over the same period last year (H1-23: £4.5 million) and of 6% versus the second half of FY-23 (H2-

1. £5.0 million). Group Bonus Scheme

The Remuneration Committee operates the Group Bonus scheme to reward and incentivise employees for the delivery of business growth, having previously established the range within which the scheme operates at 25% to 35% of pre-Bonus operating profit.

During the period, pre-Bonus operating profit of £8.7 million reduced by 23% compared to H1-23 (£11.3 million) and by 19% versus

H2-23 (£10.8 million), and the cost of the Bonus Scheme has decreased by 32% to £2.6 million for the period (H1 and H2-23: £3.8 million). The decrease reflects both the reduction in operating profit and the decrease in the percentage used to calculate the bonus pool. Whilst the Remuneration Committee acknowledged the continued effort and progress being made in the growth and strategic direction of the business, in line with its remuneration principles it has reduced the bonus pool percentage to 30% of pre- Bonus operating profit (H1-23: 33% and FY-23: 34.8%).

Cash flow

The Group generated £7.3 million of cash from operating activities before tax during the period (H1-23: £6.8 million). Taxation paid during the period increased to £1.3 million compared to £1.0 million for the same period last year.

The Group paid dividends totalling £6.0 million in the period (H1-23: £5.2 million), more information for which is given in note 5 to the financial statements.

Dividends and capital

The Board remains confident that the strategy of modernisation, diversification and succession continues to be the right direction for the Group. Consequently, in line with the Board's capital and dividend policies targeted at sustained and progressive dividend growth, the Group will pay an increased interim dividend of 2.15 pence per share in respect of the six-month period (H1-23:

2.05 pence). This will equate to a distribution of £4.3 million (H1-23: £3.9 million), following which the business will retain cash and money market instruments on the balance sheet, which are significantly in excess of financial resource requirements required for regulatory purposes.

The Group has no debt and is cash-generative with capital and dividend policies aimed at ensuring continued balance sheet strength to support future growth. Shareholders' funds were £28.5 million at 30 September 2023 (H1-23: £28.0 million).

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