In 2020 we announced our first change in tariffs for five years with an increase in the revenue required to offset the increased cost of governance and control related to CLSSettlement. We also believe the value of both the settlement risk mitigation and funding efficiency should be closely correlated to the value of a CLSSettlement instruction. As a result, we also announced changes to our CLSSettlement pricing methodology, to better emphasize the settled value element of the tariff which now better reflects the risk mitigation and liquidity benefits we provide. We always endeavor to keep any fee changes to a minimum and remain committed to ensuring long-term price sustainability. As in prior years we fully expensed any investment relating to further enhancing CLSNet, reflecting our experience that our products can take several years to fully achieve steady state economic maturity. This investment improves CLSNet’s flexibility and scalability and develops the enhanced connectivity for both buy-side and sell-side participants. During the last quarter of 2020 we also began charging customers for the first time following the initial free trial period and I am encouraged by the number of institutions that have recently signed up to this service, including Alpha Bank and First Abu Dhabi Bank as our first Russian and UAE banks, respectively.

Our data business continues to perform well and in line with forecasts despite the Covid-19 pandemic, which has had a profound impact on the overall data and information services market. We will continue to develop the data business into 2021 to meet demand as the FX industry adopts to this new market environment.

2020 underlying expenses increased by a modest 6% year-on-year, with increased staff costs reflecting our ongoing enhancements to our governance and control framework.

And as in previous years, our investment program reflected the requirements of our critical market infrastructure status, coupled with strategic investments including, most notably, Convergence.

Where appropriate we will seek strategic savings to offset these investments. Given competing priorities, we will also continue to adopt a strict prioritization and evaluation of our book of work, whilst balancing the importance of ongoing investment.

Analysis of our cash and deposit balances reflects a year of significant, but conscious investment. This was not only in the Convergence program, but in strengthening our new talent, capabilities, and enhancing related process and tools. Despite the impacts of Covid-19, we remained within our financial expectations, including the resiliency of our balance sheet where the market valuation of our own deposits and financial investments remained largely unaffected by the market volatility seen at the start of the pandemic. This reflected our conservative approach to balance sheet investment.

During 2020, we continued to monitor our current and future forecast capital position closely, at both an aggregate and an individual legal entity level. On completion of our long-term investment program, we are targeting a return to positive cash generation as we seek to realize both financial and non-financial benefits from our new platform and infrastructure. In the intervening period, as we progress through the investment cycle, we will continue to hold capital above the minimum requirements in our regulated entity and maintain a level of capital in excess of these minimum requirements for prudence purposes, held in the form of a buffer, across the Group.

While the scale of investment has had an impact on our financial results, we will always actively balance the need for service excellence and resilience with our capital position. The heart of our business continues to be CLSSettlement and ongoing investment here is paramount. This year will see the completion of our Convergence program which will be one of our most critical priorities, coupled with initiatives which further strengthen our governance and control framework. In parallel, we will selectively enhance our three business lines of settlement, data and processing, to fully support our clients.

In closing, in 2020 we progressed well on a number of fronts and successfully navigated the challenges presented by Covid-19. In 2021, I hope to share the successful progress we have made against our strategic goals. For now, I thank all of our many stakeholders and especially my fellow colleagues for their commitment and continued contribution to the success of CLS.

Trevor Suarez

Chief Financial Officer