CLS Annual Report - 31 December 2012

Annual Report & consolidated accounts31 December 2012

CLS Group Holdings AG

CLS Mission StatementTo enhance financial stability by providing risk mitigation services to the global FX market.

17Currencies

Our currencies

Overseen by CLS Oversight CommitteeFormal co-operative oversight arrangement established by 22 central banks*

» Australian Dollar» Canadian Dollar» Danish Krone» Euro» Hong Kong Dollar

» Reserve Bank of Australia» Bank of Canada» Danmarks Nationalbank» European Central Bank» National Bank of Belgium» Bank of France

» Israeli Shekel» Japanese Yen» Korean Won» Mexican Peso» New Zealand Dollar

» Bank of Italy» Deutsche Bundesbank» Netherlands Bank» Hong Kong Monetary Authority» Bank of Israel» Bank of Japan

» Norwegian Krone» Singapore Dollar» South African Rand» Swedish Krona» Swiss Franc

» Bank of Korea» Banco de Mexico» Reserve Bank of New Zealand» Norges Bank» Monetary Authority of Singapore

» UK Pound» US Dollar

» South Africa Reserve Bank» Sveriges Riksbank» Swiss National Bank» Bank of England» US Federal Reserve (chair)

94%*

of the total value of currencies traded globally

* BIS Triennial Central Bank Survey – FX and derivatives market activity in April 2010 (September 2010).

* The 22 central banks of the CLS Oversight Committee comprise the 17 currencies settled in CLS and 5 of the central banks in the Eurosystem

CLS Group Holdings AG Report & Accounts 2012 1

CLS Group Holdings AGAnnual Report

Contents

2012 Results Summary 2

Highlights 3

Chairman’s Statement 9

Chief Executive Officer’s Report 13

Directors’ Report 17

Directors’ Responsibilities Statement 21

Report of the Statutory Auditor 23

Consolidated Income Statement 24

Consolidated Statement of Comprehensive Income 25

Consolidated Balance Sheet 26

Consolidated Statement of Changes in Equity 27

Consolidated Cash Flow Statement 28

Notes to the Consolidated Financial Statements 29

Directors 62

Executive Management Committee 65

Regulatory Developments 66

Corporate Governance Statement 67

Professional Advisers 72

CLS Group Holdings AG Report & Accounts 20122

2012 Results Summary

The CLS Group – at a glance 2012 2011

Revenue for the year GB£m 159.3 106.2

Profit/(loss) from operations GB£m 16.9 (4.6)

Total profit for the year GB£m 14.0 0.6

Total assets at year end GB£m 174.7 129.4

Net Shareholders’ funds at year end GB£m 98.8 81.0

Daily average capped billable value US$ trillion 2.51 2.55

Daily average billable volume Number of sides 689,000 805,000

Average price per instruction GB£ 0.78 0.43

Average monthly number of employees in year No. 328 246

Number of Shareholders at year end No. 74 73

Number of Members at year end No. 62 61

CLS Aggregation highest daily volume No. 570,807 461,636

Note – This report references two different categories of volume and value information

Billable Volume and Value – based on input instructions, this data relates to Member billing and is subject to a cap

Settled Volume and Value – based on the volume and value settled by CLS, including CLS Settlement and CLS Aggregation


Highlights

Regulatory

» CLS Bank International was designated a systemically important financial market utility (FMU) by the US Department of Treasury’s Financial Stability Oversight Council

» CLS’ role was recognised as being a contributing factor to the US Department of the Treasury’s determination that FX swaps and FX forwards would be exempt from the central clearing and trading requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Customers

» Swedbank became a new Settlement Member, bringing the total to 62

» Natixis became a new CLS shareholder

» 13,877 third parties used the settlement service in 2012 – a year-on-year increase of 20%

Services

» Total value of settled instructions in excess of USD 1,200 trillion in 2012 (combining FX Settlement and Aggregation) – a year-on-year decrease of 1.8%

» Total volume of settled instructions in excess of 262 million in 2012 (combining FX Settlement and Aggregation volumes) – a year-on-year reduction of 0.2%

» Record daily settlement volume of more than 2.6 million instructions on 22 January 2013

» CLS Aggregation volumes increased by 59% year-on-year

Organisation

» David Puth joined as Chief Executive Officer

» In September 2012, CLS celebrated its 10-year anniversary


CLS Group at a Glance

CLS plays a fundamental role in the global FX market operating the largest multicurrency cash settlement system to mitigate risk for the FX transactions of its Members and their customers.

CLS Group Holdings AG Shareholders

CLS Group Holdings AG

Board of DirectorsChairman’s Committee

Nominating and Governance CommitteeAudit and Finance Committee

Technology and Operations CommitteeRisk Management Committee

Board Strategy CommitteeRule Book Committee

CLS UK Intermediate Holdings LtdBoard of Directors

Representative OfficeTokyo

CLS Bank InternationalBoard of Directors

CLS Services LtdBoard of Directors

CLS Aggregation Services LLC51% CLS Bank International;

49% Traiana LLCBoard of Directors

CLS Group Structure


Total Value Settled by Currency in USD for 2012 (%)

Average Volumes and Values

Daily average settlement value (US$ billion)

Daily average CLS Settlement volume

Average daily gross trade sides aggregated by Trade Date

Volu

me

Valu

e

ZAR 0.68%CAD 2.50%

AUD 5.20% DKK 0.80%

EUR 19.60%

GBP 6.97%

HKD 0.89%ILS 0.15%

JPY 8.04%

KRW 0.59%MXN 0.83%

NOK 1.08%NZD 1.03%SEK 1.37%

SGD 0.87%

USD 45.32%

CHF 4.07%

0

1,000

2,000

3,000

4,000

5,000

0

200,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

400,000

600,000

800,000

1,000,000

1,200,000


1970s

1990s

2000s

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 1974Bankhaus Herstatt fails

March 1996CPSS publishes a report: Settlement Risk In Foreign Exchange Transactions (the Allsopp Report) – a strategy for addressing FX settlement risk

September 2003Four more currencies added – Danish Krone, Norwegian Krone, Singapore Dollar and Swedish Krona

February 2004First FX transaction settled for a fund counterparty – investment management community begins using CLS

December 2004Four more currencies added – Hong Kong Dollar, Korean Won, New Zealand Dollar, South African Rand

December 2007Settlement extended for certain over-the-counter (OTC) credit derivatives through a partnership between the DTCC and CLS

September 2002

CLS launched – 39 Members and seven currencies

(Australian Dollar, Canadian Dollar, Euro, Japanese Yen,

Swiss Franc, UK Pound, US Dollar)

The Evolution of CLS


1970s

1990s

2000s

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

May 2008CPSS publishes a report on settlement risk, which renews the focus on settlement risk reduction, commends the CLS PvP architecture and provides steps to further mitigate settlement risk

May 2008Israeli Shekel and Mexican Peso added bringing the total number of currencies settled by CLS up to 17

January 2010CLS Aggregation launched to address the capacity challenges faced by banks resulting from the growth in FX trading from hedge funds, algorithmic traders, retail and institutional clients

February 2013ACI launches its New Model Code which recommends “Institutions active in FX trading should be CLS participants where possible”

May 2010Period of market volatility, CLS settles an average of over one million payment instructions per day with an average daily value of USD 4.2 trillion

September 2012CLS celebrates its 10-year Anniversary

September 2008

As conditions deteriorated in the global capital markets following the collapse of Lehman Brothers,

CLS delivered the settlement service and the FX market

continued to function without disruption

January 2013

CLS settles a total of

instructions in one day – a record volume for the service

(includes FX Settlement and CLS Aggregation)

2,621,054

March 2008

CLS settles USD

10.3 trillion

in one day – a record value for the

service

July 2012

CLS designated a systemically important FMU

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Chairman’s Statement

Dear Shareholder,

2012 has been a landmark year for CLS, marking a decade of operation. The 10-year anniversary represented a major milestone, not just for CLS, but for the wider FX market.

Now in its 11th year of operation, both CLS and the FX market continue to evolve, in response to intensified regulatory and supervisory developments. CLS’ role in the mitigation of FX settlement risk continues to be of fundamental importance to the efficiency of the market, delivering a robust, resilient and efficient service for Settlement Members and their customers.

CLS’ role in the mitigation of FX settlement risk continues to be of fundamental importance to the efficiency of the market, delivering a robust, resilient and efficient service for Settlement Members and their customers.”

Gerard Hartsink


Financial Performance

CLS’ financial performance is detailed in the Directors’ Report but, to summarise, the Group achieved a profit of £14.0 million after interest and tax, compared to £0.6 million in 2011.Total revenue of £159.3 million represents a 50% increase compared to 2011.

Appointment of New Chief Executive Officer

In April 2012, I was appointed Interim Executive Chairman. Over the subsequent four months it was my responsibility to ensure that CLS progressed with executing its strategy and service.

In August 2012, I transferred the day-to-day running of CLS to David Puth, who joined as CEO, increasing the impetus and focus that drives the transformation of our organisation. David has brought broad industry and regulatory expertise, having worked at J.P. Morgan for almost two decades in a variety of senior global leadership roles, and more recently as head of Global Markets at State Street. For 12 years, he was a member of the Federal Reserve Foreign Exchange Committee, a group that he also chaired for three of those years (1999-2002). FX has been a constant throughout David’s career, and at CLS he has already demonstrated his expertise in this market, as well as strong leadership skills and the vision to align the organisation to the present and future needs of the FX market.

The Changing Regulatory Landscape

As the infrastructures that underpin financial markets face greater scrutiny than ever, a significant regulatory development was announced in July 2012, when CLS was designated a systemically important FMU by the Financial Stability Oversight Council, under the Dodd-Frank Act. In addition to this, in April 2012, CPSS and IOSCO published its Principles for Financial Market Infrastructures (the “Principles”), which CLS will need to adhere to.

In November 2012, the US Department of the Treasury determined that FX swaps and FX forwards would not be regulated as swaps under the Commodity Exchange Act, and therefore would be exempt from the central clearing and trading requirements of the Dodd-Frank Act. Such an exemption has not yet been granted in the European Union for the EMIR Regulation.

Corporate Governance

CLS’ own corporate governance was rigorously reviewed and strengthened over the course of the year.

The Board now comprises 20 Directors. Shareholder financial institutions are represented by 15 Directors, there are 4 independent Directors and the CEO. During 2012 eight Directors retired and six new Directors joined the Board. I would like to thank the departing Directors for their valuable contribution to CLS and welcome the new Directors to the Board.

Highlights

2012 14,000,000

2012 159,300,000

2011 600,000

2011 106,200,000

Group Profit

£14.0million

Total Revenue

£159.3million

Chairman’s Statement


Strategy

In July 2012, the Board approved a revised strategy and mission statement to shape the future direction of the business. The strategy enables CLS to meet regulatory and market expectations, and to support future growth. This is detailed further in the Directors’ Report.

10-Year Anniversary

Since its launch, CLS has become the global standard for FX settlement. Over 1.2 trillion payment instructions have been settled since CLS operations went live, with a value of more than USD 8,200 trillion.

To celebrate CLS’ 10-year anniversary, receptions were held in London, Tokyo and New York. I was delighted to see many friends, colleagues and contacts from the FX and payments industry, including current and previous Directors of the Board, central bankers, representatives from Settlement Members and industry bodies, and past and present members of staff – all of whom have helped to build CLS into the robust and resilient financial infrastructure it is today.

In Conclusion

I would like to take this opportunity to thank shareholders, the central banks of the Oversight Committee, Settlement Members, third parties, partners and vendors for their support during 2012. I would also like to thank the Board of Directors, and CLS Executive Management and staff for their diligence and commitment, both during my time as Interim Executive Chairman and thereafter.

During 2012, CLS has continued to establish a resilient corporate governance structure to ensure compliance with regulation and the changing needs of the FX market. With a strong CEO, supported by an experienced executive team, I firmly believe that CLS is well positioned for the future.

Gerard Hartsink

Chairman CLS Group Holdings AG 21 March 2013

Since its launch, CLS has become the global standard for FX settlement. Over 1.2 trillion payment instructions have been settled since CLS operations went live, with a value of more than USD 8,200 trillion.

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Chief Executive Officer’s Report

Dear Stakeholder,

2012 was a year of great accomplishment and important transition for CLS.

Gerard Hartsink, our Chairman of the Board, became Interim Executive Chairman in April, ensuring the Group continued to deliver on its strategy and enabling a successful transition for me to become the CEO of CLS in late August. I want to thank Gerard for his leadership throughout the year and particularly during his time as Interim Executive Chairman.

I have, over the course of my first six months with the company, had the opportunity to meet with many of our Members and have extensively reviewed each of our business units. I have been immediately impressed with the strength of the services that we provide and with the deep commitment we have to serving our Members.

The accomplishments for CLS during the year were many. The most notable event was our designation by the U.S. Department of the Treasury’s Financial Stability Oversight Council as a systemically important FMU. This designation is the result of a multi-year effort on the part of the CLS team and further highlights the critical role that CLS plays in global financial markets.

Our Mission, “to enhance financial stability by providing risk mitigation services to the global FX market” has never been as essential to our Members as it is today. The importance of CLS was highlighted further in November, with the announcement of the U.S. Treasury Department’s exemption of FX swaps and forwards from the clearing requirements required for many financial products under the Dodd-Frank legislation. The role that CLS plays in the mitigation of FX settlement risk was certainly a contributing factor to that decision.

CLS delivered on time and on budget a series of technology upgrades that will result in a more cost-effective delivery of our core services.”

David Puth


2012 4.70 trillion

22 January 2013 2.62 million

2011 4.78 trillion

19 September 2012 2.23 million

21 September 2011 2.18 million

Average Daily Value Settled

$4.70trillion

CLS Daily Settled Instructions All-Time High

2.62million

Highlights Chief Executive Officer’s Report

In 2012 we made significant progress on working to enable Same Day Settlement between the U.S. Dollar and the Canadian Dollar. This groundbreaking initiative will be completed on time and on budget for launch in the fall of 2013.

During the year we began the process of strengthening our presence in Asia, beyond the team that has operated successfully from Japan for the past 10 years. We will be adding personnel on the ground in Asia during the second half of 2013, to further serve our local Members by providing risk management solutions for the rapidly expanding currency markets in the region.

We continued our active dialog with central banks and market participants as part of our strategic plan to expand the number of currencies that settle through CLS. Key resources were added as we built a dedicated Currency Program team. We advanced discussions in a number of countries including Chile, Thailand, Brazil, Russia and China, as we identified ways to assist these countries in the mitigation of FX settlement risk.

The core CLS Settlement volumes were largely unchanged in 2012 versus the prior year, during a year of relatively subdued activity in the FX markets. We did see significant growth in the volumes of our CLS Aggregation Service during this same period. The full year average daily value for 2012, combining CLS Settlement and Aggregation, was USD 4.7 trillion. More recently, during the first two months of 2013 we have seen values increase to an average of USD 5.2 trillion per day.

The investments in risk management and technology made by CLS over the past three years, ahead of the important regulatory changes, have enabled our organization to provide Members with a notably higher level of service. In technology, the increased investment has enabled CLS to materially expand our peak capacity. We have updated our core technologies to meet the elevated standards required of a systemically important FMU. The need to build capacity was demonstrated on 22 January 2013 when CLS settled more than 2.6 million instructions (combining FX Settlement and CLS Aggregation), 18% more than the previous high, recorded on 19 September 2012. In addition to enabling an increase in capacity, CLS delivered on time and on budget a series of technology upgrades that will result in a more cost-effective delivery of our core services than has been the case over our first 10 years of operation.


As I look ahead to 2013, I am very optimistic about the prospects for growth at CLS through the enhancement of the services we provide to Members. The growing importance of Central Counterparties (CCPs) in the clearing of certain FX transactions as mandated by the Dodd-Frank legislation will require CLS to play a more active role with those entities. We are, as well, in the process of exploring alternative settlement sessions that could enable Same Day Payment versus Payment settlement in other jurisdictions. The CLS management team has been further strengthened through the addition of a new Chief Financial Officer, a new Head of Global Regulatory Affairs and a new Chief Legal Officer. We are making improvements to our processes that ensure we provide the most cost-effective solutions for risk mitigation in the FX market.

In conclusion, 2012 was a year of significant developments for CLS. A decade from our launch date, our mission has never been more critical. Our infrastructure is well-positioned for continued growth in volume and in the delivery of new services. We will, in 2013, complete our first alternative settlement session between the U.S. Dollar and the Canadian Dollar. We are expanding our presence in Asia and look forward to growth in our currency program. We deeply appreciate the support that we have received from our Members and look forward to providing an increasingly strong service in the year ahead.

David Puth

Chief Executive Officer CLS Group Holdings AG 21 March 2013

Our Mission, “to enhance financial stability by providing risk mitigation services to the global FX market” has never been as essential to our Members as it is today.


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Directors’ Report

The Directors of CLS Group Holdings AG present their report to the shareholders, together with the audited consolidated accounts for the year ended 31 December 2012.

The Group has its registered office in Zurich, Switzerland, subsidiaries in London, England (CLS UK Intermediate Holdings Ltd and CLS Services Ltd), New York City, US (CLS Bank International), Delaware, US (CLS Aggregation Services LLC) and a representative office of CLS UK Intermediate Holdings Ltd in Tokyo, Japan.

Principal Activities and Business Review

CLS plays a fundamental role in the foreign exchange (FX) market – it operates the largest multicurrency cash settlement system to mitigate settlement risk for the FX transactions of its Members and their customers.

Owned by the world’s leading financial institutions, CLS settles payment instructions relating to underlying FX transactions in 17 major currencies and certain other transactions that result in one-way payments in a subset of those currencies.

Financial Results and Dividends

The Group achieved a profit after interest and tax of £14.0 million, compared to £0.6 million in 2011.

No dividend is recommended for the year (2011: £nil). Net assets of £98.8 million showed an increase of 22% compared to 2011.

Revenue

Total revenue of £159.3 million represents a 50% increase over 2011. FX revenues of £139.4 million in 2012 increased by £48.5 million over 2011. CLS Aggregation revenues were £9.3 million compared to £5.8 million in 2011. Other revenues increased by 12% year-on-year (actual £10.6 million revenue versus £9.4 million in 2011). Other revenues include In/Out swaps, account maintenance fees, account opening fees and liquidity charges.

Operating Costs

The cost base increased substantially in 2012 to £142.4m (from £110.8 million in 2011), primarily due to the heightened regulatory expectations, increased risk management and the ability to deliver strategic initiatives. This expansion transitions CLS into a strong and proactive FMU focused on the mitigation of FX settlement risk globally and operating a resilient, safe and efficient settlement service.

Capital Expenditure

The Group invested significantly in the year on strengthening its systems, building resiliency and increasing capacity and performance. Total capital additions for the year amounted to £49.2 million (£45.9 million on Intangible additions and £3.3 million on Plant, Property and Equipment).

2012 139,400,000

2012 9,300,000

2011 90,900,000

2011 5,800,000

FX Revenue

£139.4million

CLS Aggregation Revenue

£9.3million

Highlights

2012 10,600,000

2011 9,400,000

Other Revenues

£10.6million


Financial Position

The Group’s balance sheet increased with net assets up from £81.0 million in 2011 to £98.8 million in 2012 (an increase of 22%).

Deposits and cash and cash equivalents were £56.2 million by the end of the year (an increase of £8.3 million). The increase comprised cash inflows from operating activities of £27.2 million, issue of share capital of £3.7 million, net loan funding of £26.8 million, partially offset by £49.2 million capital expenditure.

Going Concern

The Board of Directors has formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Company and the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

The Directors estimate, based on their assessment of progress to date on service uptake and having reviewed cash flow forecasts for the 2013 budget year and the long-term business plan 2012-2016, that sufficient funds will be available in the business for at least the next 18 months.

This will be reviewed regularly by the Board of Directors during 2013. In addition the Board acknowledges that Principle 15 of the CPSS-IOSCO Principles will require a review of the liquidity and equity for the Group. This may include a combination of raising additional equity, modifications to the pricing and reappraisal of investment plans.

Strategy

Since CLS went live in 2002 it has provided a value proposition focusing on reducing settlement risk, expanding FX trading and access to counterparties, creating new business opportunities, improving credit management and reducing operational risk. While the FX market and the regulatory environment around CLS have changed significantly since 2002, these continue to be important drivers of the service.

After the 2008 financial crisis, CLS’ strategy focused on strengthening the platform and ensuring a robust and resilient service. In 2012 the Board reviewed the CLS value proposition for shareholders and Settlement Members, and its role for post trade risk mitigation in the FX market. As a result the Board concluded to extend the remit of CLS, as it recognised the potential to provide risk mitigation services, in addition to addressing settlement risk. The Board approved for that reason the revised Mission Statement, “to enhance financial stability by providing risk mitigation services to the global FX market.”

The Board approved the following strategic priorities: the delivery of a Same-Day Settlement service; a new currency programme; the development of an Asia strategy; and to explore alternative models of membership, including developing a strategic dialogue with Central Counterparties to identify potential use of CLS Settlement for FX products.

2012 98,800,000

2012 56,200,000

2011 81,000,000

2011 47,900,000

Group Net Assets

£98.8million

Deposits and Cash and Cash Equivalents

£56.2million

Highlights Directors’ Report


Risk Management

The Group’s activities are exposed to a variety of risks. The central banks expect, in principle 4 of the CPSS principles, that an FMI should effectively measure, monitor and manage its credit exposures to participants and those arising from its payment and settlement processes.

In 2012 the Board supported an upgrade of the Risk Management function, including the creation of a stronger Risk Management Committee.

The Board approved in 2012 a Risk Appetite Statement and new Risk Policies such as an Enterprise-wide Risk Policy, a Systemic Risk Policy and an Operational Risk Management Policy.

An appropriate set of risk metrics were reviewed by the Risk Management Committee and the Board receives a quarterly risk report from the Chief Risk Officer with the agreed metrics.

Internal Controls

The Audit and Finance Committee reviewed and approved the annual internal audit plan and reviewed and monitored CLS Group management’s responsiveness to findings and recommendations of the internal audit function.

The Chief Internal Auditor has direct access to the Chairman and to the Audit and Finance Committee. The Audit and Finance Committee also ensures that the internal audit function of the Group has adequate resources and appropriate access to information for effective functioning and in accordance with relevant professional standards.

The Audit and Finance Committee also approves the terms of engagement of the external auditor of the Group and reviews the findings of the external auditor and the effectiveness of the audit.

Executive Management

The Chairman’s Committee of the Board reviewed and approved the job descriptions, the remuneration, retention plans and succession plans of the Executive Management.

The Board approved the following strategic priorities: the delivery of a Same-Day Settlement service; a new currency programme; the development of an Asia strategy; and to explore alternative models of membership.

Owned by the world’s leading financial institutions, CLS settles payment instructions relating to underlying FX transactions in 17 major currencies and certain other transactions that result in one-way payments in a subset of those currencies.


Regulatory Affairs

The Board acknowledges that the regulatory developments in multiple jurisdictions are important for refining CLS’ strategy. The Board receives, on a quarterly basis, an update of the regulatory developments that impact CLS and/or its settlement members. A description of the relevant regulatory developments follows the notes to the financial statements.

Governance

The CPSS principle 2 for Financial Market Infrastructures published in 2012 supposes that an FMI should have governance arrangements that are clear and transparent. In 2012 the CLS Board reviewed its governance structures, the composition of the Board and the Board Committees, and its policies to empower the Executive Management to execute the management of the Group. An overview of corporate governance follows the notes to the financial statements.

Directors and Their Interests

The Directors who served during the year are listed on pages 62 to 64. There were no Directors with an interest in the share capital of CLS Group Holdings AG or any of the subsidiaries at any time during the year. All Directors signed the Code of Conduct. During the year, the Group has maintained Directors’ and Officers’ insurance relating to specified liabilities that may arise in relation to Group companies. This remains in force at the date of this report.

Auditor

Each of the persons who is a Director at the date of approval of this Annual Report confirms that:

» so far as the Director is aware, there is no relevant audit information of which the company’s auditors are unaware; and

» the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

Deloitte AG, Zurich have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming annual general meeting to be held on 23 April 2013.

By order of the Board.

Gerard Hartsink

Chairman CLS Group Holdings AG 21 March 2013

Directors’ Report


Directors’ Responsibilities Statement

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

The Directors have elected to prepare the financial statements in accordance with the requirements of Swiss law, International Financial Reporting Standards (IFRS) and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in circumstances.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s “Framework for the preparation and presentation of financial statements”. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS.

However, Directors are also required to:

» Properly select and apply accounting policies;

» Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

» Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and

» Make an assessment of the company’s ability to continue as a going concern.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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Report of the Statutory AuditorTo the general meeting of CLS Group Holdings AG, Zurich for the year ended 31 December 2012

Report on the consolidated financial statements

As statutory auditor, we have audited the accompanying consolidated financial statements of CLS Group Holdings AG, which comprise the consolidated balance sheet, consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and notes for the year ended 31 December 2012.

Board of Directors’ responsibility

The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risk of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system.

An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.

Report on other legal requirements

We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standards 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

Deloitte AG/SA

Rolf Schönauer Licensed Audit Expert Auditor in charge

Florian Lachenmeier Licensed Audit Expert

21 March 2013


Consolidated Income StatementFor the year ended 31 December 2012

notes

2012 £000

2011 £000

Revenue 4 159,343 106,163

Operating expenses (142,404) (110,796)

Profit/(loss) from operations 5 16,939 (4,633)

Investment income 7 245 245

Finance costs 22 (310) (646)

Profit/(loss) before tax 16,874 (5,034)

Tax (charge)/credit for the period 9 (2,870) 5,637

Profit for the period 14,004 603

Attributable to:

Equity holders of parent 14,028 287

Non-controlling interests 20 (24) 316


All of the above relates to continuing operations.


Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2012

2012 £000

2011 £000


Total comprehensive income 14,004 603

Attributable to:

Equity holders of parent 14,028 287

Non-controlling interests (24) 316

Total comprehensive income 14,004 603

There is no recognised income or expense for the years ended 31 December 2012

and 31 December 2011 other than those stated above.


Consolidated Balance SheetFor the year ended 31 December 2012

notes

2012 £000

2011 £000

Non-current assetsIntangible assets 10 85,961 51,024

Property, plant and equipment 11 7,855 6,440

Available for sale investments 13 114 101

Deferred tax asset 14 8,926 11,329

102,856 68,894

Current assetsTrade and other receivables 15 15,620 12,413

Tax assets 19 58 164

Deposits 16 3,076 19,250

Cash and cash equivalents 17 53,118 28,638

71,872 60,465

Total assets 174,728 129,359

Current liabilitiesTrade and other payables 18 (45,452) (38,644)

Tax liabilities 19 (131) (210)

(45,583) (38,854)

Non-current liabilitiesLoan 22 (26,667) (2,035)

Member credits 23 (3,726) (7,452)

(30,393) (9,487)

Total liabilities (75,976) (48,341)

Net assets 98,752 81,018

EquityShare capital 24 126,541 124,274

Share premium account 19,926 18,463

Combined merger and consolidated reserves 25 116,631 116,631

Retained earnings 26 (163,595) (177,623)

Equity attributable to equity holders of the parent 99,503 81,745Non-controlling interest 20 (751) (727)

Total equity 98,752 81,018

The financial statements were approved by the Board of Directors on 21 March 2013 and signed on its behalf by:

David Puth

Chief Executive Officer

Alexander Filshie

Chief Financial Officer


Consolidated Statement of Changes in EquityFor the year ended 31 December 2012

Share Capital

£000

Share Premium

£000

Combined Merger and

Consolidated Reserves

£000

Retained Earnings

£000

Equity

Attributable to Parent

£000

Non-

controlling Interest

£000

Total Equity

£000

Balance at 1 January 2011 124,274 18,463 116,631 (177,910) 81,458 (1,043) 80,415

Issue of Shares – – – – – – –

Profit for the year – – – 287 287 316 603

Balance at 31 December 2011 124,274 18,463 116,631 (177,623) 81,745 (727) 81,018

Issue of Shares 2,267 1,463 – – 3,730 – 3,730

Profit for the year – – – 14,028 14,028 (24) 14,004

Balance at 31 December 2012 126,541 19,926 116,631 (163,595) 99,503 (751) 98,752

Equity comprises share capital, share premium, retained earnings and a combined merger and consolidated reserve.


Consolidated Cash Flow StatementFor the year ended 31 December 2012

notes

2012 £000

2011 £000

Net cash inflow from operating activities 27 27,163 13,506

Investing activities:

Interest received 263 224

Decrease/(Increase) in deposits 16,174 (250)

Purchases of intangible assets 10 (45,925) (16,652)

Purchases of property, plant and equipment 11 (3,316) (5,477)

Purchase of investments 13 (13) –

Net cash outflow from investing activities (32,817) (22,155)

Financing activities:

Issue of share capital 24 3,730 –

Receipt/(Payment) of long-term loan 22 26,754 (7,576)

Payment of Member credits – (2,858)

Net cash inflow/(outflow) from financing activities 30,484 (10,434)

Net increase/(decrease) in cash and cash equivalents 24,830 (19,083)

Cash and cash equivalents at beginning of year 28,638 48,222

Effect of foreign exchange rate changes (350) (501)

Cash and cash equivalents at end of year 53,118 28,638


Notes to the Consolidated Financial StatementsFor the year ended 31 December 2012

1. General Information

CLS Group Holdings is a company limited by shares (Aktiengesellschaft) pursuant to articles 620 et seq. of the Swiss Code of Obligations and incorporated and registered in the Commercial Register of the Canton of Zurich, Switzerland. The address of the registered office is given on page 72. Its principal activities are detailed in the Directors’ Report on pages 17 to 20.

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 2.

In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in these financial statements. These financial statements illustrate the adoption of new standards and amendments which are applicable to reporting periods with a year end of 31 December 2012. They also illustrate the early adoption of IAS 19 (as revised in June 2011) and amendments to IAS 1 (June 2011).

Amendments to IAS 1 Presentation of financial statements (amended June 2011)

IAS 19 Employee Benefits (revised June 2012)

Amendments to IFRS 7 Financial Instruments: Disclosures

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 9 Financial Instruments

IFRS 10 Consolidated Financial Statements

IFRS 12 and IAS 27 Investment Entities (amended)

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement

IAS 27 (revised) Separate Financial Statements

IAS 28 (revised) Investments in Associates and Joint Ventures

IAS 32 (amended) Offsetting Financial Assets and Financial Liabilities

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine


The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods, except as follows:

IFRS 7 (amended) will increase the disclosure requirements where netting arrangements are in place for financial assets and financial liabilities;

IFRS 9 will impact both the measurement and disclosures of Financial Instruments;

IFRS 12 will impact the disclosure of interests the Group has in other entities; and

IFRS 13 will impact the measurement of fair value for certain assets and liabilities as well as the associated disclosures.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the company.

Risk report

CLS Group employs a risk self-assessment process that covers all business functions. The self-assessment process is a continuous process. The Business Risk Committee (BRC), formed in September 2010, is the mechanism for management to review operational incidents, events or trends that need to be addressed and potentially mitigated. It provides oversight and acts as an escalation point for issues coming out of other committees within CLS, which address individual operational risks at the time they occur. The BRC escalates material operational risk issues to CLS Executive Management and the Risk Management Committee as applicable.

The risk self-assessment process is also the primary source of the risks included in the monthly Composite Risk Report (“CRR”). Additional risks are added as necessary, irrespective of where they were originally identified (e.g. Audit Reports, regulatory findings etc.). The monthly CRR is circulated to the Executive Management Committee.

Please refer to note 33 for more information on the Group’s Financial Risk Management.

2. Significant Accounting Policies

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have also been prepared in accordance with IFRS adopted for use in the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical cost basis, except for, when used, the inclusion of derivative financial instruments at fair value. The principal accounting policies adopted are set out below.

Notes to the Consolidated Financial Statements


Basis of preparation

The accounts have been prepared on the going concern basis, in accordance with the requirements of Swiss law, IFRS and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining the internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in circumstances.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries) made up to 31 December each year. Control is achieved where the company has the power to govern the financial and operating policies of an investee entity to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Pension costs

Pension costs are recognised in the Income Statement in the period in which they are incurred. The Group operates a defined contribution scheme.

Member credits

During an initial phase of live operations known as “ramp-up” (which ended on 8 September 2003), Members were invoiced in advance for instruction processing charges based on pre-agreed transaction volumes. Any difference between amounts paid in advance by Members during the Ramp-up period, and the amounts which would otherwise have been payable based on actual volumes, have been credited to Members in the form of Member credits. Fifty per cent of these credits had been repaid by the end of 2012. Twenty-five per cent of the remaining balance has been recognised as a current liability in the balance sheet as they are expected to be repaid within one year and twenty-five per cent recognised as a long-term liability as they are not expected to be repaid within one year.



Leasing

Leases are classified as finance leases whenever the terms of the lease transfer, substantially, all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Foreign currencies

Transactions in currencies other than pounds sterling are recorded at the average rates of exchange prevailing in the month of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated into pounds sterling at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Foreign exchange gains and losses resulting from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Income Statement for the period.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised.


The carrying value of deferred income tax assets is reviewed at each balance sheet 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 deferred income tax assets to be utilised.

Deferred income tax assets are measured at the tax rates that are expected to apply to the year when the asset is realised, based on the tax rates and laws that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Internally-generated intangible assets

The Group’s CLS System is an internally-generated intangible asset and is recognised as the following conditions are met:

» An asset is created that can be identified;

» It is probable that the asset created will generate future economic benefits; and

» The development cost of the asset can be measured reliably.

The internally-generated intangible asset is amortised on a straight-line basis over its estimated economic life as follows:

CLS System – over one to five years

Assets in the course of construction mainly comprise partly completed CLS System application development costs and are not amortised until they are in a location and condition necessary for them to be capable of operating in the manner intended by management.

Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation and any provision for impairment losses. Depreciation is provided on all property, plant and equipment at a rate calculated to write off the cost, less the estimated residual values of each asset on a straight-line basis over their expected useful lives as follows:

Property, plant and equipment – depreciated over four to ten years

Impairment of tangible and intangible assets excluding goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.


Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Financial instruments

Financial assetsFinancial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets are classified into the following specified categories: financial assets “available for sale investments” and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.



Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

Available for sale investments

Investments are classified as available for sale and are initially measured at fair value. Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at cost. Changes in fair value of available for sale investments are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit for the period.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For all other financial assets, objective evidence of impairment could include:

» significant financial difficulty of the issuer or counterparty; or

» breach of contract, such as a default or delinquency in interest or principal payments; or

» it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.


For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference



between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

Financial liabilities and equity

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.

Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.

Other financial liabilities

Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Derivative financial instruments

The Group can use foreign exchange forward contracts to hedge its exposure to foreign exchange rate risk. Changes in the fair value of derivative financial instruments are recognised in the Consolidated Income Statement as they arise. No hedge accounting is applied to these instruments.

Related parties

No single shareholder has overall control as resolutions are generally taken by majority and operate under a one shareholder one vote system. At 31 December 2012, the largest individual shareholder had 3.58% (2011: 3.62%) of total share capital.

Joint Ventures

Joint Ventures (CLS Aggregation LLC) is consolidated into the Group using the proportional consolidation method.



3. Critical Accounting Judgements and Key Sources of Estimation Uncertainty

The preparation of the Group’s consolidated financial statements requires management to make estimates and judgements that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of income and expenses during the reporting period. Management evaluates its estimates and judgements on an ongoing basis. Management bases its estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The following estimates and judgements are considered important to the portrayal of the Group’s financial condition:

During the year, management has conducted a discounted cash flow analysis of the future revenue stream which could be generated by the internally-generated intangible asset in use in order to establish its future cash-generating ability. This review has led management to conclude that the internally-generated intangible asset is not impaired at the balance sheet date as no event has occurred which has reduced its future cash-generating ability to lower than its carrying value.

» During the year, management has conducted a review of the estimated useful life of the internally-generated intangible asset, currently determined at five years. For the major part of this asset (CLS1), continued expenditure on application development maintains and enhances its future economic benefits and therefore management is of the opinion that the current estimated useful life can be maintained at five years. For one part of the asset (CLS2), however, management is of the opinion that the current useful life is one year.

» At the balance sheet date, management has reviewed the carrying value of the deferred tax asset using as its support the Group’s projected five year plan. The forecasted income profile contained in the plan supports the value of the asset and therefore management is of the opinion that the value is appropriate.


4. Revenue

2012 £000

2011 £000

Instruction Processing Charges 139,428 90,973

Annual Account Maintenance Fees 4,232 4,166

Liquidity Usage Fees 2,536 2,589

Aggregation Fees 9,327 5,771

In/Out Swap Programme Participant Fees 1,272 649

Credit Derivatives 1,173 809

NDF Instruction Fees 1,013 838

Account Opening Fees 110 110

Sundry Income 252 258

Total Revenue 159,343 106,163

A revenue breakdown by business and geographical segments is not shown, as the equity of the Group is not publicly traded; the Group operates in a single global market and only has one class of business.



5. Profit from Operations

The profit from operations has been arrived at after charging:

2012 £000

2011 £000

Staff costs (see note 6) 54,291 38,359

Service charges 31,085 22,499

Amortisation of intangible assets 10,988 10,357

Depreciation of property, plant and equipment 1,901 1,028

Traiana service charges 4,537 2,143

Net foreign exchange losses 351 501

Auditors’ remuneration for audit services (see below) 207 177

The analysis of auditors’ remuneration is as follows:

2012 £000

2011 £000

Fees payable to the company’s auditors for the audit of the company’s annual accounts 5 5

Fees payable to the company’s auditors and their associates for other services to the Group:

Audit of the company’s subsidiaries pursuant to legislation 202 172

Total audit fees 207 177

Tax services 124 132

Other services 4,167 7,033

Capitalised fees 2,769 –

Total non-audit fees 7,060 7,165

Total fees 7,267 7,342

Other services for 2012 were mainly in relation to the review and strengthening of the Group’s governance and risk management structures. Capitalised fees were mainly in relation to development work carried out on CLS 2.0.


6. Staff Costs

The average monthly number of permanent persons employed by the Group (including Executive Directors), divided by function, was:

2012 2011

Service delivery and technology 224 168

Risk and control 72 50

Corporate 32 28

Total 328 246

Their aggregate remuneration comprised:

2012 £000

2011 £000

Salaries 44,407 30,396

Temporary staff 4,846 4,629

Social security costs 2,402 1,733

Pension costs 2,636 1,601

Total 54,291 38,359

Further analysis of Directors’ remuneration is included in note 30.

7. Investment Income

2012 £000

2011 £000

Interest income on bank deposits 245 245

Investment income 245 245

8. Finance Costs

2012 £000

2011 £000

Total interest on loan (see note 22) 967 646

Less capitalised interest on new loan* (657) –

Net finance costs charged to income statement 310 646

The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is the actual interest rate i.e 1.5% over 3 month GBP LIBOR.


9. Tax

2012 £000

2011 £000

Current tax:

UK corporation tax

– Current period (105) (59)

– Adjustments in respect of previous periods – 7

(105) (52)

Non-UK corporation tax

– Current period (356) (358)

– Adjustments in respect of previous periods (6) (222)

(362) (580)

Current tax charge for the period (467) (632)

Deferred tax:

Relating to origination and reversal of temporary differences (2,403) 6,269

Total tax (charge)/credit for the period (2,870) 5,637

Non-UK tax relates to Japan and the US.



The charge for the year can be reconciled to the profit per the income statement as follows:

2012 £000

2011 £000

Profit/(loss) before tax 16,874 (5,034)

Statutory tax rate 24.5% 26.5%

At UK statutory income tax rate (4,134) 1,334

Current tax affecting items:

Permanent disallowable expenses and non-taxable income 3,694 (5,167)

Adjustments in respect of current income tax of previous periods (6) (216)

(Charge)/benefit arising from a previously unrecognised tax loss, tax credit or temporary difference of a prior period reducing current tax expense

– 453

Effect of different tax rates (marginal relief) 2 2

Effect of different tax rates of subsidiaries operating in other jurisdictions (1,614) 439

Deferred tax affecting items:

Deferred tax expense relating to changes in the tax rates (802) (68)

Benefit arising from the recognition of a previously unrecognised deferred tax asset – 8,858

Adjustments in respect of recognised deferred tax of previous periods (11) 2

Foreign exchange rate movement 19 –

Consolidation adjustment (18)

Total tax (charge) / income for the period (2,870) 5,637

From 1 April 2012 the main rate of UK corporation tax was reduced from 26% to 24%. A further reduction in the corporation tax rate to 23%, effective from 1 April 2013, was also substantively enacted on 3 July 2012. This reduced rate has been reflected in the calculation of deferred tax at 31 December 2012.


10. Intangible Assets

2012 £000

2011 £000

Work in Progress – Cost

Opening balance 1 January 12,573 7,058

Additions 45,925 16,652

Transfers (17,385) (11,137)

Closing balance 31 December 41,113 12,573

CLS System – Cost


Additions – –

Transfers 17,385 11,137


Closing balance Total Cost 198,794 152,869

CLS System – Accumulated Amortisation


Charge for the year 10,988 10,357


Net book value

Work in Progress 41,113 12,573

CLS System 44,848 38,451

Intangibles Total 85,961 51,024

During 2012, the economic life of the majority of the CLS System (following significant investment in the System during the year) was held at between one and five years.

Work in progress at the end of December 2012 mainly comprises partly completed CLS System application development costs.



11. Property, Plant and Equipment

Computer equipment, fixtures and fittings

2012 £000

2011 £000

Cost


Additions 3,316 5,477


Accumulated Depreciation


Charge for the year 1,901 1,028


Net book value:

Property, Plant and Equipment Total 7,855 6,440

2012 £000

2011 £000

Fire insurance value of tangible fixed assets (plant, property and equipment) 12,518 7,172

12. Subsidiaries

Details of investments in which the Group or the company holds 20% or more of the nominal value of any class of share capital are as follows:

Name of Company Holding Proportion of voting rights and shares held

Nature of business

CLS UK Intermediate Holdings Ltd (incorporated in the UK)

Ordinary shares 100% Provision of CLS Group corporate services

CLS Services Ltd (incorporated in the UK)

Ordinary shares 100% Provision of operational support and technical management of the CLS System

CLS Bank International (incorporated in the US)

Common stock 100% Foreign exchange settlement, risk and liquidity management. Regulatory and central bank relations

CLS Aggregation Services LLC (incorporated in the US)

Common stock 51% Aggregation of foreign exchange trades prior to settlement

CLS Bank International and CLS Services Ltd are wholly-owned subsidiaries of CLS UK Intermediate Holdings Ltd.

CLS Aggregation Services LLC is a joint venture between CLS Bank International and Traiana Inc., (a subsidiary of ICAP), a company incorporated in the US.


13. Available for Sale Investments

Investment in SWIFT

In April 2003, CLS Bank International purchased 55 shares in SWIFT at a cost of EUR 1,950 each. In April 2007 a further 44 shares were purchased for EUR 2,440 each. In April 2009, SWIFT bought back 43 shares for EUR 2,656 each. In April 2012 a further 10 shares were purchased for EUR 3,300 each. These shares are included in the balance sheet of the Group as an investment at a cost of £113,682.

At 31 December 2012 £000


Available-for-sale investments carried at fair value

Shares (note 33) 114 101

Total 114 101

This investment is an equity investment that does not have a quoted market price in an active market and whose fair value cannot be reliably measured. As a result, this investment is held at cost. The Group does not intend to dispose of this investment.

Every three years SWIFT reallocates its share capital to its members based on their proportion of usage of its service. If this results in a buy-back of shares from CLS Bank International, then these would be transferred at a price that is triennially determined by the Board of SWIFT. The last available price determined in April 2012 was EUR 3,300 per share. Based on the latest Swift financials, there is no risk of impairment to this investment.

The Group held no trading investments, no held-to-maturity investments or loans receivable carried at amortised cost in either the current or prior year.

Further information about these investments is available in note 33.

14. Deferred Tax Asset

Asset recognised on trading losses

£000

Asset recognised on tax

depreciation £000

Asset recognised

on accruals £000

Other £000

Total £000

Balance at 1 January 2011 4,929 2 129 – 5,060

Credit/(charge) to income in the year 2,357 3,942 (30) – 6,269

Balance at 31 December 2011 7,286 3,944 99 – 11,329

Reclassification* 3,808 (8,698) 4,053 837 –

(Charge)/credit to income in the year (4,905) 2,579 (80) 3 (2,403)

Balance at 31 December 2012 6,189 (2,175) 4,072 840 8,926

* The reclassification in the period ensures that the various deferred tax assets and liabilities are correctly disclosed within their respective categories of temporary difference as at 31 December 2012.



From 1 April 2012 the main rate of UK corporation tax was reduced from 26% to 24%. A further reduction in the corporation tax rate to 23%, effective from 1 April 2013, was also substantively enacted on 3 July 2012. This reduced rate has been reflected in the calculation of deferred tax at 31 December 2012.

Further reductions in the main tax rate have also been announced such that the rate effective from 1 April 2014 will be 21%. The further reductions to the tax rates have not been substantively enacted at the balance sheet date and are therefore not reflected in these financial statements.

15. Trade and Other Receivables



Pre-payments and accrued income 12,732 9,308

Other receivables 2,174 1,763

VAT recoverable 565 904

Trade receivables 149 438

Total 15,620 12,413

The Directors consider that the carrying amount of trade receivables approximates to their fair value because they are short term in nature. The average period for receipt was nil days (2011: two days).

16. Deposits

Deposits comprise short-term bank deposits held by the Group with an original maturity of between three and 12 months. The carrying amount of these assets approximates to their fair value because they are short term in nature.

17. Cash and Cash Equivalents

Cash and cash equivalents (which are presented as a single class of asset on the face of the balance sheet) comprise cash and short-term bank deposits held by the Group with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value because they are short term in nature.



18. Trade and Other Payables



Loans (see note 22) (10,034) (7,912)

Accruals and deferred income (25,268) (24,900)

Trade payables (2,214) (1,639)

Taxation and social security costs (779) (1,350)

Other payables (3,185) (2,597)

Member credits (see note 23) (3,972) (246)

Total (45,452) (38,644)

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases was 10 days (2011: 9 days).

The Directors consider that the carrying amount of trade payables approximates to their fair value because they are short term in nature.

19. Tax Liabilities/Assets



UK Corporation tax (42) (52)

Japanese Corporation tax (89) (50)

US Federal tax – (108)

Total tax liabilities (131) (210)

US Federal tax – –

US City tax 58 164

Total tax assets 58 164

Net tax (liabilities)/assets (73) (46)

The Directors consider that the carrying amount of tax liabilities approximates to their fair value because they are short term in nature.

20. Profit/(Loss) Attributable to Non-Controlling Interest

CLS Bank International owns 51% of CLS Aggregation Services LLC (CLSAS) with the remaining 49% owned by Traiana Inc. In 2012 CLSAS recorded a total loss of $106k, $52k (representing 49%) of this loss is attributable to Traiana. Under the terms of the joint venture contract, each partner can recharge the company an annual fixed fee.


21. Derivative Financial Instruments

The Group can utilise currency derivatives to mitigate exposure to significant foreign currency cash flows.

At the balance sheet date, the Group had no commitment to any financial instruments.

22. Loan



Opening Balance at 1 January (9,947) (17,523)

Borrowing (40,000) –

Finance costs (310) (646)

Finance costs (capitalised)* (657) –

Capital Repaid 13,246 7,576

Interest repaid 967 646

Closing Balance at 31 December (36,701) (9,947)

These costs include a commitment fee of £265k.

Borrowings are repayable as follows:

Loan



On demand or within one year (10,034) (7,912)

In the second year (8,000) (2,035)

In the third to fifth year inclusive (18,667) –

(36,701) (9,947)

Less: amount due for settlement within 12 months (shown under Trade and Other Payables) 10,034 7,912

Amount due for settlement after 12 months (26,667) (2,035)

The Group entered into an agreement with Zurcher Kantonalbank in Switzerland to borrow £30,000,000 commencing on 31 March 2009 until 31 March 2013 at an interest rate of 4.35%. The loan is repayable in quarterly instalments.

In 2012 the Group entered into a new agreement with Zurcher Kantonalbank in Switzerland to borrow up to £50,000,000 at an interest rate of 1.5% over 3 month GBP LIBOR. This loan will be drawn down in parts - £20,000,000 in April 2012 and £20,000,000 in September 2012 and a further £10,000,000 in 2013. The loan is repayable in quarterly instalments and will be fully repaid by April 2017.


23. Member Credits



Less: amount due for settlement within 12 months (shown under Trade and Other Payables) (3,972) (246)

Member credits (payable > 1 year) (3,726) (7,452)

Total (7,698) (7,698)

These credits represent pre-payments of instruction volume processing fees that Members provided during the Group’s first live year operations. The carrying value approximates to their fair value, as the Group intends to repay the credits in the future.

24. Share Capital

2012 Total Nominal value CHF

2011 Total Nominal value CHF

Authorised

233,898 ordinary shares of 1,740 CHF each 406,982,520 406,982,520

Allotted and fully paid

Year

Class

Total Nominal value CHF

Total Nominal value CHF

2012 Ordinary 165,392 ordinary shares of 1,740 CHF each 287,782,080 126,541,547

2011 Ordinary 163,420 ordinary shares of 1,740 CHF each 284,350,800 124,273,982

In September, the Group issued 1,972 shares to a new shareholder Natixis for a cash consideration of CHF 5,647k (£3,730k). All ordinary shares are recorded at the rates of exchange ruling at the date the shares were paid up.

CLS Group Holdings AG has one class of ordinary share which carries no right to fixed income.

In September 2006, CLS Group Holdings AG issued 10,259 Genussscheine certificates. Under IAS 39, these are recognised as equity instruments and measured at fair value, which has been calculated to be immaterial. The holders of Genussscheine certificates are entitled to a pro rata share of a potential dividend and the right to receive a certain return on their investment in the event of liquidation. In May 2010, the Group issued an additional 770 Genussscheine certificates.



25. Merger and Consolidated Reserves

» CLS Group Holdings AG (CLS AG) was established in April 2002, as a new Swiss incorporated holding company of CLS Group. At the reorganisation date, all existing institutional shareholders of CLS UK Intermediate Holdings Ltd (CLS UK), the pre-reorganisation UK incorporated holding entity of the CLS Group, were offered new shares in CLS AG in exchange for their existing shares in CLS UK.

» The consolidated net assets of CLS UK at April 2002 (the reorganisation date) were £105.6 million, represented by combined share capital and premium of £216.6 million and retained losses of £111.0 million.

» The nominal value of the share capital offered by CLS AG in exchange for CLS UK was CHF 236 million (£99.9 million).

» Post reorganisation, the consolidated net assets and retained losses of CLS AG remained the same, i.e. £105.6 million and £111.0 million creating a difference of £116.6 million. This difference is recorded as a merger and consolidated reserve for the company.

The table below details this information.

April 2002

Pre-Merger Post-Merger

£m CLS UK Intermediate Holdings Ltd CLS Group Holdings AG

Share Capital 205.6 99.9

Share Premium 11.0 –

Merger and Consolidated Reserve – 116.7

Retained Losses (111.0) (111.0)

Total equity 105.6 105.6

Merger Reserve £000

Consolidated Reserve £000

Total £000

Balance at 1 January and 31 December 2012 5,686 110,945 116,631

CLS Group has opted to utilise an exemption available under IFRS1 (First-Time Adoption of IFRS) in respect of not applying IFRS3 Business Combinations to the Group reconstruction which took place in 2002. Under this exemption, the Group can continue to show the reconstruction as a uniting of interests (i.e. as a merger) and need not retrospectively apply IFRS3.



26. Retained Earnings (Accumulated Losses)

£000

Balance at 1 January 2012 (177,623)

Profit for the year 14,028

Balance at 31 December 2012 (163,595)

27. Notes to the Cash Flow Statement

Year ended 31 December 2012

£000


£000

Profit/(loss) from operations 16,939 (4,633)

Adjustments for:

Amortisation of intangible assets 10,988 10,357

Depreciation of property, plant and equipment 1,901 1,028

Loss on cash and cash equivalents as a result of foreign exchange rate changes 351 501

Operating cash flows before movements in working capital 30,179 7,253

Increase in receivables (3,226) (1,514)

Increase in payables 960 9,376

Cash generated from operations 27,913 15,115

Income taxes paid (440) (963)

Interest paid (310) (646)

Net cash inflow from operating activities 27,163 13,506

Cash and cash equivalents, which are presented as a single class of asset on the face of the balance sheet, comprise cash, short-term bank deposits and short-dated US Government Treasury Bills held by the Group with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value because they are short term in nature.


28. Operating Lease Arrangements

The Group as a lessee

2012 £000

2011 £000

Minimum lease payments under operating leases recognised in the Consolidated Income Statement for the year

3,035 3,045

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:



– within one year 2,659 2,757

– between two and five years 7,560 8,246

– after five years 5,862 7,835

16,081 18,838

Operating lease payments represent rentals payable by the Group, for certain of its office properties and equipment. Leases are negotiated for an average term of eight to ten years and rentals are fixed for an average of seven years.

29. Contingent Liabilities

(a) Deferred ConsiderationOn 11 December 1997, CLS UK Intermediate Holdings Ltd. (formerly CLS Services Ltd., a subsidiary of CLS Group Holdings AG) acquired Exchange Clearing House Limited (“ECHO”), incorporated in Great Britain, and Multinet International Bank (“MIB”), incorporated in the US, from their respective shareholders (“vendors”) under the terms of a sale and purchase agreement.

The sale and purchase agreement provides for deferred consideration payable to vendors. The company’s liability to pay deferred consideration spans a ten-year period which commenced on 1 January 2003.

Payment is dependent on a pre-determined adjusted cumulative net operating profit level and is calculated as a percentage of an adjusted net operating cash flow formula.

In September 2006, 19 of 23 vendors accepted an offer of Swiss Genussscheine in exchange for an assignment and transfer of their existing deferred consideration rights.

In May 2010, one additional vendor accepted the offer of Swiss Genussscheine under the same terms.

For the three vendors retaining their deferred consideration rights, on CLS’ understanding of the sale and purchase agreement no liability to pay deferred consideration arises in the period ended 31 December 2012 (year ended 31 December 2011: nil), nor is it expected to arise in the future, due to the adjusted cumulative net operating profit being less than the pre-determined level.


These remaining three vendors have challenged CLS’ understanding of the sale and purchase agreement and the accounts relating to it. The three vendors are asserting a contrary interpretation of the agreement, which if adopted (in accordance with their calculations) would result in payments of deferred consideration. CLS has rejected those three vendors’ claims and arguments. CLS has taken outside legal advice and believes that its understanding of the sale and purchase agreement is correct and that the interpretation of the agreement proposed by the three vendors is inconsistent with the language of the agreement and the understanding of the parties.

Due to the degree of uncertainty regarding relevant levels of operating profits and cash flows, the Directors consider that a reliable estimate of any potential liability under this agreement cannot be made and hence no provision has been made.

(b) Alice LitigationOn 24 May 2007, CLS Bank International initiated an action against Alice Corporation Pty Ltd. (“Alice”) in the United States District Court for the District of Columbia seeking a declaratory judgment of non-infringement, patent invalidity, and patent unenforceability against patents held by Alice. Alice is an Australian corporation whose only known business is holding patents. Alice had previously asserted in correspondence, and then alleged in counterclaims in the District of Columbia lawsuit, that CLS’ continuous linked settlement service and settlement system infringe certain US patents held by Alice. The complaint filed by CLS alleged that CLS does not infringe the Alice patents, alleged that the Alice patents are invalid and unenforceable, and sought a judicial declaration to that effect. Alice’s counterclaims seek unspecified damages for alleged infringement.

On 9 March 2011, the U.S. District Court for the District of Columbia granted CLS summary judgment dismissing the case, and found that all of Alice’s asserted patent claims were invalid and cover non-patentable subject matter. The district court’s decision was appealed to the U.S. Court of Appeals for the Federal Circuit, and the appeal was argued on 13 January 2012. On 9 July 2012, the Federal Circuit reversed the district court and held that it was not manifestly evident that Alice’s claims were invalid and covered non-patentable subject matter. On 22 August 2012, CLS requested en banc review of the Federal Circuit’s 9 July 2012 decision. On 9 October 2012, the Federal Circuit granted CLS’ petition for en banc review and vacated the 9 July 2012 decision. Alice and CLS filed briefs before the en banc court, and oral argument proceeded on 8 February 2013. To date CLS has no decision from the en banc court.

The financial impact on the CLS Group cannot currently be assessed and hence no provision has been made.



30. Related Party Transactions

Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Apart from these, there are no other related party transactions.

The remuneration of the Directors of the Swiss holding company (CLS Group Holdings AG) is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. It includes the total emoluments for services payable by any Group company for the period that they were Directors of CLS Group Holdings AG.


£000


£000

Short-term employee benefits 4,581 2,046

Post-employment benefits – 36

Total 4,581 2,082

31. Financial Commitments

Financial commitments are defined as those items which are considered material and outside normal purchase commitments that are contracted for, but not provided for, at the balance sheet date.

Financial commitments are as follows:



Contracted for but not provided for:

– Services Agreement 329,533 325,023

– Acquisition of intangibles 39,000 48,000

– other 18,937 27,051

Total 387,470 400,074

32. Controlling Party

In the opinion of the Directors there is no one controlling party of the Group. The company accounts of CLS Group Holdings AG (a company incorporated in Switzerland) are available at its registered office c/o Interhold AG, Bellerivestrasse 29, P.O. Box 432, CH-8024 Zurich, Switzerland.


33. Financial Risk Report

Financial risk management

The Group’s principal financial instruments, other than derivatives, comprise cash and short-term deposits, trade debtors and trade creditors, which represent the Group’s maximum exposure to credit risk in relation to financial assets.

The Group’s activities expose it to financial risks, namely market risk (including currency risk and interest rate risk) and credit risk. The Group can use foreign exchange forward contracts to hedge these exposures.

Financial risk management is carried out by Group Finance who seeks to reduce financial risk and ensure sufficient liquidity is available to meet its operational needs as well as investing in cash assets safely and profitably. Group Finance works closely with the business to ensure its understanding of the underlying business requirements. The Group’s Treasury and Investment policy is approved by the Audit and Finance Committee of the Board and reviewed by it on an annual basis.

Details of significant accounting policies and methods adopted, including the criteria for recognition of financial instruments, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the consolidated financial statements.

1. Market risk I. Foreign currency risk The Group is exposed to foreign exchange risk from its overseas operations,

primarily in the US and to a lesser extent in Switzerland and Japan. To reduce exposure to currency fluctuations, the Group has a policy which allows the purchasing of forward exchange contracts or holding foreign currency short-term deposits when taking into account an analysis of the future currency forecasts. At the year-end, the Group was not holding any forward contracts.

II. Interest rate risk The Group’s exposure to market risk for changes in interest rates relates primarily

to cash and short-term deposits and external borrowings. The Group is exposed to interest rate risk as it deposits funds at both fixed and floating rates. The Group’s main strategy for managing risk in this area revolves around the projection of future cash flows by using short-, medium- and long-term planning. Subject to normal operational requirements, the Group aims to maximise its yield by entering into short-term investment positions with banks. This exposes the Group to cash flow interest rate risk as cash and short-term deposits are affected by market rates. The Group has two loans from Zurcher Kantonalbank: one at a fixed rate of 4.35% which is due to end in March 2013, and the other at a rate of 1.5% plus 3 month GBP LIBOR, which will be fully repaid by April 2017. Both loans expose the Group to cash flow interest rate risk.

2. Credit riskThe Group has no significant concentration of credit risk. Cash and short-term deposits are invested with counterparties who are banks with high credit ratings assigned by international credit rating agencies. The Group’s exposure to credit risk arises from the default of the counterparty with a maximum exposure equal to the carrying value of these instruments. The Group has a policy that limits the amount of



credit exposure to any financial institution.

The Group does not extend credit to its Members, so has no significant exposure.

I. Fair value of financial assets and financial liabilities Set out below is a comparison by category of book values and fair values of the

Group’s financial assets and financial liabilities:

31 December 2012 2011

notes

Book value £000

Fair value £000

Book value £000

Fair value £000

Financial assets

1. Investments (a) 114 114 101 101

2. Loans and receivables:

Trade and other receivables (a),(c) 15,620 15,620 12,413 12,413

3. Cash, cash equivalents and deposits (a) 56,194 56,194 47,888 47,888

Total financial assets 71,928 71,928 60,402 60,402

Non-financial assets 102,742 102,742 68,957 68,957

Total assets 174,670 174,670 129,359 129,359

Financial liabilities

4. Financial liabilities at amortised cost:

Loan (b) (36,701) (34,855) (9,947) (9,040)

Trade and other payables (a) (31,446) (31,446) (30,486) (30,486)

Member credits (a) (7,698) (7,698) (7,698) (7,698)

5. Fair value though profit and loss: – – – –

Total financial liabilities (75,845) (73,999) (48,131) (47,224)

Non-financial liabilities (131) (131) (210) (210)


The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

» Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

» Level 2 fair value measurements are those derived from 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 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Group only held Level 3 investments in both the current and the prior year. It held no financial assets at FVTPL or financial liabilities at FVTPL in either the current or prior year.



Financial assets

Unquoted equities 114 101

Total 114 101

Notes(a) The fair value of trade receivables, deposits, cash and trade payables approximates

to their carrying value due to their short-term nature.

(b) The fair value of any loans is determined using effective interest rates with reference to current market interest rates.

(c) At the balance sheet date £438k (2011: £104k) of trade and other receivables was past due and not impaired.



II. Interest rate risk profile Set out below is an analysis of the interest risk profile of the Group’s financial

assets (excluding trade debtors and other receivables) by currency:

Cash at bank £000

Deposits less

than 3 months £000

Deposits over 3 months but less than 12 months

£000

Total £000

As at 31 December 2012

Sterling 7,570 18,250 – 25,820

US dollar 3,198 20,917 3,076 27,191

Swiss franc 2,926 – – 2,926

Other currencies 257 – – 257

Total cash, cash equivalents and deposits 13,951 39,167 3,076 56,194

Fixed rate assets – 39,167 3,076 42,243

Floating rate assets 10,753 – – 10,753

Balances for which no interest is paid 3,198 – – 3,198


As at 31 December 2011

Sterling 2,918 12,250 19,250 34,418

US dollar 1,168 7,722 – 8,890

Swiss franc 4,580 – – 4,580

Other currencies – – – –


Cash at bank £000

Deposits less

than 3 months £000

Deposits over 3 months but less than 12 months

£000

Total £000

Fixed rate assets – 19,972 19,250 39,222

Floating rate assets 8,666 – – 8,666

Balances for which no interest is paid – – – –


The effective interest rate on the average daily closing balances is 0.46% (2011: 0.40%).


III. Interest rate sensitivity on cash balances At the date of reporting, if interest rates had been either:

» 15 basis points higher or lower and all other variables had been constant then the effective interest rates would have been 0.61% or 0.31% (2011: 0.55% or 0.25%). Profit for the year ending 31 December 2012 (assuming the same closing balance values for 1 year) would increase or decrease by £77k (2011: increase or decrease by £91k).

» 20 basis points higher or lower and all other variables had been constant then the effective interest rates would have been 0.66% or 0.26% (2011: 0.60% or 0.20%). Profit for the year ending 31 December 2012 (assuming the same closing balance values for 1 year) would increase or decrease by £104k (2011: increase or decrease by £121k).

IV. Foreign currency sensitivity The Group’s main sensitivity to changes in exchange rates is on its bank balances

and deposits held in foreign currency in order to finance its overseas operations, particularly USD and CHF. In 2012, GBP weakened 4.6% against the USD and 2.4% against the CHF. This led to an unrealised loss on exchange of £0.35m on GBP/USD and £0.1m unrealised loss on GBP/CHF respectively. The following table details the gains that would have been made following a 10% change in pound sterling against the CHF and an 8% change against USD (2011: a 20% change in GBP against the CHF and a 6% change against USD were used).


£000


£000

Profit and loss

US dollar 916 580

Swiss franc 258 102

Japanese yen – –

Total 1,174 682



34. Capital Management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns. The capital structure of the Group consists of debt, which consists of the borrowings as described in notes 22 and 23, cash and cash equivalents and equity attributable to the equity holders of the parent, comprising issued capital, reserves and retained earnings as described in notes 24 to 26.

CLS Bank International (a wholly-owned subsidiary of CLS Group Holdings AG) is regulated by the Federal Reserve Bank of New York and is subject to its equity capital requirements.

The internal Executive Management Committee reviews the capital of the Group on a monthly basis as part of its stated objectives. It is additionally reviewed by the Board at least annually. These objectives ensure that the funding profile of the Group is managed effectively as a going concern and in compliance with supervisory targets. These targets were achieved in both the current and prior years.


Director Gerard Hartsink Originally Appointed June 2003 Affiliation Independent Role/Location Chairman of the Board, Netherlands (Independent Chairman since 2011 AGM, former Head of GTS ABN AMRO)

Director Vincent Bonamy Originally Appointed April 2012* Affiliation Societe Generale Role/Location Managing Director, Head of FIC & Global FX Development, France

Director Sir John Gieve Originally Appointed December 2011 Affiliation Independent Role/Location Former Deputy Governor-Financial Stability, Bank of England, UK

Director Mirco Brisighelli Originally Appointed May 2011 Affiliation Unicredit S.p.A. Role/Location Head of Settlement and Liquidity Risk Management, Italy

Director Thomas Gillie Originally Appointed April 2012* Affiliation BoA Merrill Lynch Role/Location Head of G-10 FX Trading, Americas, US

Director John Davidson Originally Appointed April 2012* Affiliation Citigroup Role/Location Head of Enterprise Risk Management, US

Director Kenneth Harvey Originally Appointed December 2011 Affiliation Independent Role/Location Former Group MD and Chief Technology and Services Officer, HSBC, US

Director Phil Armstrong Originally Appointed April 2007 Affiliation Goldman Sachs Role/Location Co-Chief Operating Officer – Global Operations, US

Director Frederic Boillereau Originally Appointed April 2010 Affiliation HSBC Role/Location Global Head, Foreign Exchange & Commodities, Global Markets, UK

* elected at 2012 Annual General Meeting of CLS Group Holdings AG on 24 April 2012

DirectorsAt 31 December 2012


Director Yumesaku Ishigaki Originally Appointed May 2011 Affiliation BTMU Role/Location General Manager, Transaction Services Division Chartered Member, Securities Analysts Association of Japan, Japan

Director Hays Littlejohn Originally Appointed April 2008 Affiliation UBS Role/Location Head of Global Wholesale Cash Solutions, Switzerland

Director David Puth Originally Appointed November 2012# Affiliation CLS Group/CLS Bank Role/Location Chief Executive Officer, CLS Group/CLS Bank – New York/London

Director Bruce Nolop Originally Appointed November 2012# Affiliation Independent Role/Location Former CFO of E*Trade – US

Director Paul Riordan Originally Appointed April 2009 Affiliation Commonwealth Bank of Australia Role/Location Chief Risk Officer, Premium Business Services, Australia

Director Bryan Osmar Originally Appointed December 2011 Affiliation Royal Bank of Canada Role/Location SVP Market and Trading Credit Risk, Group Risk Management, Canada

Director Rick Sears Originally Appointed May 2011 Affiliation Barclays Role/Location Managing Director, Chief Operating Officer – FX, UK

Director Niels Kjaer Originally Appointed April 2010 Affiliation Nordea Role/Location Head of Group Market Risk Management, Denmark

Director Khiang Tong Lim Originally Appointed May 2011 Affiliation OCBC Role/Location Head of Group Operations, Executive Vice President, Singapore

# elected at Extraordinary General Meeting of CLS Group Holdings AG on 7 November 2012


Directors

Retired Directors

Retirement for terms ended April 2012:

Lars Hakanson Societe General

Romeo Lacher Credit Suisse

Gordon Sangster Bank of America

Bharat Sarpeshkar Citibank

Resignations:

Andrew Cox (April 2012) JPMorgan Chase

Alan Bozian (April 2012) Executive Director (CLS Group CEO)

Tomoyuki Isshiki (June 2012) Sumitomo Mitsui Banking Corporation

Christine Mead (September 2012) Independent

Roger Hawes (November 2012) Royal Bank of Scotland

Director Jason Vitale Originally Appointed May 2011 Affiliation Deutsche Bank Role/Location Global Head of FX Prime Brokerage and OTC Clearing within Global Markets Finance & Foreign Exchange, UK

Director David Weisbrod Originally Appointed April 2012* Affiliation JPMorgan Chase Role/Location Vice Chair, Risk Management, US

* elected at 2012 Annual General Meeting of CLS Group Holdings AG on 24 April 2012


Executive Management CommitteeAt 31 March 2013

Chief Executive Officer David Puth

Chief Compliance Officer Michele Fleming

Head of Global Market Development Rachael Hoey

Head of Global Regulatory Affairs Dino Kos

Head of Global Operations John Hagon

Chief Internal Auditor Martin Ingell

Chief Legal Officer Alan Marquard

Chief Human Resources Officer Kathryn Herrington

Chief Corporate Development Officer Richard Kerschner

Chief Risk Officer Naresh Nagia

Chief Technology Officer Sankar Aiyar

Chief Financial Officer Alexander Filshie


CLS continues to adapt to regulatory changes across multiple jurisdictions and has commented on a number of regulatory consultations. To increase transparency, CLS responses on regulatory consultations are published on the CLS website.

CLS observes the CPSS Core Principles for Systemically Important Payment Systems published in 2001. In April 2012, CPSS and IOSCO issued Principles for Financial Market Infrastructures, replacing the Principles issued in 2001 and raising international standards to ensure that the infrastructure supporting global financial markets is more robust, and thus well placed to withstand financial shocks. Work is progressing to ensure CLS will meet these heightened standards by the end of 2013.

In August 2012 the importance of mitigating FX settlement risk was recognised by the Basel Committee on Banking Supervision (BCBS), which published a consultation paper with seven guidelines on Supervisory Guidance for Managing Risks Associated with the Settlement of Foreign Exchange Transactions. Guideline 7 recommended that central banks ensure banks hold sufficient capital in the case that they do not settle their FX transactions through the use of a Financial Market Infrastructure that provides a payment versus payment arrangement.

Also in August 2012, CLS responded to the European Securities and Markets Authority (ESMA) consultation papers identifying settlement risk as the predominant risk in FX markets, clarifying that CLS mitigates settlement risk and pointing out that the industry already has credit support annexes in place to manage counterparty risk.

In September 2012, CLS commented on the Basel Committee for Banking Supervision (BCBS) and Board of the International Organisation of Securities Commissions (IOSCO) consultative document on “Margin Requirements for Non-Centrally Cleared Derivatives”. CLS’ letter advocated an exemption from margin requirements for FX swaps and forwards. Some global harmonisation is expected in the final rules and the EMIR related binding rulemaking will only be issued after the release of the global regulatory group’s final recommendations on margin requirements of non–cleared trades, and detailed binding rules can only be expected through 2013.

In October 2012, CLS commented on the BCBS consultative document entitled “Supervisory Guidance for Managing Risks Associated with the Settlement of Foreign Exchange Transactions.” CLS broadly supported the paper, which advocated the use of PVP settlement for foreign exchange transactions. CLS advocated for more detailed guidance from regulators to identify those cases where banks should engage in PVP settlement. The final paper was published in February 2013.

As previously stated, in November 2012, the US Department of the Treasury exempted FX swaps and forwards from the definition of a “swap” for the purposes of the Commodity Exchange Act, thereby exempting FX swaps and forwards from the central clearing requirement of Dodd-Frank.

In December 2012, CLS responded to the European Commission Directorate General Internal Market and Services consultation on a possible recovery and resolution framework for financial institutions other than banks. CLS broadly supported the paper, agreeing with the Commission’s statement that “payment systems are a major channel by which shocks can be transmitted across domestic and international financial systems and markets and consequently, it is critical to the proper functioning of the financial sector and for financial stability that payment systems are robust and secure.” A new legislative proposal is scheduled for the second half of 2013.

Regulatory Developments


Overview

In 2012 CLS was designated a systemically important FMU by the Financial Stability Oversight Council in conjunction with reforms introduced in connection with provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Concurrently, the CLS Group Board completed an extensive review and enhancement of its governance to align with CPSS-IOSCO governance requirements. The actions taken by the CLS Group and its Board have resulted in a clear and straightforward governance structure and include the addition of independent directors, clarification of Board committee responsibilities and significant revisions to the governance documentation of CLS Group. These changes in structure, documentation, and practice have strengthened the CLS Group governance infrastructure and created a firm foundation for the future.

On an ongoing basis, CLS Group Holdings and its subsidiaries adhere to the Swiss Code of Best Practice for Corporate Governance, the UK Combined Code, and laws, rules, and regulations applicable to systemically important financial market utilities, Edge Act corporations, and to bank holding companies subject to regulation and supervision by the Board of Governors of the Federal Reserve System (“Federal Reserve”).

Key Subsidiaries

CLS Group Holdings AG, a Swiss corporation (“CLS Group Holdings”), is the parent holding company for the CLS Group and is owned by 74 shareholders, each of which (with limited exceptions) is a Settlement Member or an affiliate of a Settlement Member of CLS Bank International, a US Edge Act corporation (“CLS Bank”). While CLS Bank is the operating corporation for the settlement of payment instructions relating to FX transactions, CLS Group’s aggregation services are provided by CLS Aggregation Services LLC, a Delaware limited liability company which is a majority-owned subsidiary of CLS Bank1. These entities, along with additional service companies, are collectively referred to as the CLS Group (“CLS Group”).

Supervision and Oversight

As an Edge Act corporation formed under Section 25A of the Federal Reserve Act, CLS Bank is regulated and supervised by the Federal Reserve. In addition, the central banks whose currencies are settled in CLS Bank have established a cooperative oversight arrangement, the CLS Oversight Committee, as a mechanism to fulfil their responsibilities to promote safety, efficiency and stability in financial markets and payment systems in which CLS Bank participates. The Federal Reserve organises and administers the CLS Oversight Committee, which is the primary forum for the participating central banks to carry out their cooperative oversight of the CLS system. In 2012, the Chairman of the Board of the CLS Group Board, its Chief Executive Officer and certain members of its Executive Management met three times with the CLS Oversight Committee regarding various matters pertaining to CLS Group service, risk, strategy and governance.

In addition, CLS Bank must comply with regulations related to designations imposed by various jurisdictions with which it interacts, including the European Union. The CLS system is specified by HM Treasury as a recognised inter-bank payment system under the Banking Act 2009 and is therefore subject to direct supervision by English regulatory authorities.

Corporate Governance Statement

1 Traiana Inc. (“Traiana”) owns 49% of CLS Aggregation Services and is in turn majority owned by ICAP, an unaffiliated Interdealer Broker


Shareholders

CLS Group Holdings shareholders each hold an interest in the CLS Group and, at their Annual General Meeting, elect Directors, approve the company’s financials and independent auditor and undertake any other business reserved for the shareholders.

Shareholders are invited to communicate with the Chairman of the Board or Company Secretary by using the following email:

[email protected]

Board of DirectorsThe CLS Group Board is responsible for the ultimate direction and supervision of CLS Group Holdings and oversight of CLS Group as a whole, as well as governance and compliance arrangements, finances and audit function and strategy. Each Director of the CLS Group Board concurrently serves on the Board of CLS Bank, to ensure that matters involving both the Swiss holding company and CLS Bank are fully coordinated. In addition, to assist the CLS Group Board in its oversight responsibilities, Board Committees have been delegated certain responsibilities; however, matters of a material nature are escalated to the full Board.

The responsibility to undertake the business and operational activities of the CLS Group is delegated to the Executive Management of CLS Group, headed by the Chief Executive Officer of CLS Group Holdings.

The Board held twelve regularly scheduled meetings in 2012 as well as a number of ad hoc meetings. Four of the twelve regularly scheduled meetings were convened in person, with eight meetings held telephonically. In addition, the Board receives regular communications from the Chairman regarding industry or regulatory developments and from the Chief Executive Officer regarding business matters for CLS Group.

Board Composition

The CLS Group Holdings Board currently comprises 20 Directors (see listing of Directors on pages 62 to 64.

The Nominating and Governance Committee, in selecting candidates to stand for election as Directors, follows certain guidelines set forth in the Organisational Regulations.



Board Remuneration

Only the Chairman and the Independent Directors are remunerated for their Board services; however, the expenses incurred by all Non-Executive Directors in fulfilling their Board responsibilities, notably travel to the in person Board meetings, is reimbursed.

The shareholders have approved the following remuneration:

1. The Chairman of the Board, who is required to attend meetings with regulatory and oversight agencies, industry associations and shareholders and who is required to devote 50% of his time to CLS Group, receives an annual stipend in the amount of US$500,000 (or its equivalent in a different currency), and

2. Each Independent Director, who is required to spend approximately 20% of his or her time on CLS Group matters, receives an annual stipend of US$180,000 (or its equivalent in a different currency). In addition, as an exceptional matter, certain stipends were grossed up to account for relevant foreign taxes.

Director Compliance and Code of Conduct

Board members are required to annually attest to their compliance with the CLS Group Directors Code of Conduct, which sets forth standards of ethical conduct and the avoidance of conflicts of interest. In addition the Board annually receives educational sessions on regulatory, risk and strategic issues. The Board also undertakes an annual self-assessment, attends regular Director Education Sessions on regulatory, strategic and risk-related topics, and each newly elected Director attends a two-day Induction Programme.

CLS Group Board Committees

As of December 2012, the CLS Group Board had seven committees to support the Board in carrying out its responsibilities. As the CLS Group Board bears ultimate responsibility for all CLS Group subsidiaries, the Board’s committees review and advise on material matters pertaining to CLS Group, CLS Bank and other CLS subsidiaries. Among other duties, the CLS Group Board committees review and recommend CLS Group policies related to their areas of responsibility.

Audit and Finance Committee

The Audit and Finance Committee (“AFC”) is charged with (1) overseeing CLS controls, both its internal audit function and the relationship with the external auditor, and (2) overseeing finance functions, including financial strategies, capital planning, pricing policies, and budget as well as accounting policies and methods and compliance with legal and accounting standards. The AFC also oversees the CLS Group’s whistle-blowing policy.

Board Strategy Committee

While the responsibility for the company’s strategic vision and its implementation lies with the CLS Group Board, the Board Strategy Committee (“BSC”) reviews, refines and advises Executive Management regarding the company’s strategic vision and associated business and resource plans and provides advice, counsel and recommendations to the CLS Group Board.


Chairman’s Committee

The Chairman’s Committee provides counsel and approves certain matters pertaining to the Chairman and the CEO on Board matters, including agendas and Board policies, human resources and remuneration, legal, compliance and regulatory affairs.

Nominating and Governance Committee

The Nominating and Governance Committee advises the CLS Group Board regarding the governance of CLS Group, including oversight of vetting and nomination of director candidates and ensuring the efficacy of CLS Group corporate governance practices, including Committee composition, governance documents, Board self-evaluation, Director Induction and Education.

Risk Management Committee

The Risk Management Committee (“RMC”) is responsible for reviewing and assessing areas of risk such as credit risks, market risks, liquidity risks, legal risks, compliance risks, payment risks and operational risks. The RMC also assists the CLS Group Board in (1) setting the risk appetite of the CLS Group and (2) the proper oversight of the risk management function of CLS Bank.

Rule Book Committee2

The Rule Book Committee oversees and reviews the development of, and amendments to, the CLS Bank International Rules governing CLS Bank Members, including ensuring sufficient interface with Settlement Members and FX market participants, monitoring compliance with regulatory notification requirements, and providing counsel and recommendations to the CLS Bank Board with regard to proposed amendments.

Technology and Operations Committee

The Technology and Operations (“TOPs”) Committee oversees the CLS Settlement Service and technological and operational aspects of strategic or significant enhancements or modifications to the CLS core system and support systems. The TOPs Committee also supports and guides the management of strategic technology relationships, including CLS core platforms, contingency policies and procedures.


2 The Rule Book Committee was formed by the Board in September 2012 to assist the Board with its oversight of anticipated changes to the CLS Bank International Rule Book and Membership Handbook as CLS Bank responded to significant changes in industry regulation and business practices.


CLS Group Board and Committee Meeting Composition as at 31 December 2012

CLS GROUP HOLDINGS BOARD MEMBERS

CLS GROUP BOARD*

AUDIT & FINANCE

CTTEE

BOARD

STRATEGY CTTEE

CHAIRMAN’S CTTEE

NOMINATING &

GOVERNANCE CTTEE

RISK MGMT CTTEE

RULE BOOK CTTEE

TECHNOLOGY &

OPERATIONS CTTEE

Total number of meetings 15 7 6 31 10 11 2 9

Gerard Hartsink (Chairman) Chair • Chair • • •

Phil Armstrong (Deputy Chair) • Chair • • •

Frederic Boillereau • • •

Vincent Bonamy • • •

Mirco Brisighelli • • •

John Davidson • • •

Sir John Gieve • • •

Thomas Gillie • •

Kenneth Harvey • • Chair

Yumesaku Ishigaki • •

Niels Kjaer • •

Khiang Tong Lim • • •

Hays Littlejohn • • • Chair •

Bruce Nolop • Chair •

Bryan Osmar • • Chair • •

David Puth (CEO) • • •

Paul Riordan • • •

Rick Sears • • Chair

Jason Vitale • • • •

David Weisbrod • •

* The CLS Group Board held twelve regularly scheduled meetings in 2012; in addition, three special meetings were convened to address specific topics.


Professional Advisers

Company Secretary

Philippe Weber – Niederer Kraft & Frey

Registered Office

c/o Interhold AG

Bellerivestrasse 29

P.O. Box 432

CH-8024 Zurich, Switzerland.

Solicitors

Niederer Kraft & Frey

Bahnhofstrasse

CH-8001 Zurich, Switzerland.

Auditors

Deloitte AG

General Guisan-Quai 38

Postfach 2232

CH-8022 Zurich

Switzerland.

Bankers

Zurcher Kantonalbank

Bahnhofstrasse 9

8010 Zurich, Switzerland.

USFinancial Square 32 Old Slip, 23rd Floor New York NY 10005 US

tel: +1 212 943 2290 fax: +1 212 363 6998

UKExchange Tower One Harbour Exchange Square London E14 9GE UK

tel: +44 (0)20 7971 5700 fax: +44 (0)20 7971 5729

JapanMitsui ni-Goukan, 2-1-1 Nihonbashi Muromachi Chuo-ku Tokyo 103-0022 Japan

tel: +81 (0)3 3517 2791 fax: +81 (0)3 3517 2796

® CLS and the CLS Logo are registered trademarks of CLS UK Intermediate Holdings Ltd © 2013 CLS Intermediate Holdings Ltd.

www.cls-group.com

CLS Annual Report - 31 December 2012

Documents

Transcript of CLS Annual Report - 31 December 2012