Wolters Kluwer

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2021 ANNUAL REPORT Deep impact when it matters most Every second of every day, our customers face decisive moments that impact the lives ofmillions of people andshape society for the future. → Read more about Product Impact on page 40 Wolters Kluwer 2021 Annual Report When you have to be right As a global provider of professional information, software solutions, and services, our work helps to protect people’s health and prosperity and contributes to a safe and just society, by providing deep insights and knowledge to professionals. → Read more about our business model and strategy onpage 6 €4.8bn total revenues 92% of revenues from digital products and services 25.3% adjusted operating proﬁt margin €3.38 diluted adjusted earnings per share 80% of revenues is recurring 13.7% return on invested capital 2021 FINANCIAL HIGHLIGHTS TABLE OF CONTENTS Strategic Report 2 Wolters Kluwer at a Glance 4 Q&A with Nancy McKinstry 6 Business Model and Strategy 8 2022 Full-Year Outlook 10 Stakeholders and Value Creation 12 Organizational Structure and Executive Team 14 Health 18 Tax & Accounting 22 Governance, Risk & Compliance 26 Legal & Regulatory 30 Group Financial Review 36 Sustainability Governance 54 Corporate Governance 58 Risk Management 69 Statements by the Executive Board 70 Executive Board and Supervisory Board 72 Report of the Supervisory Board 76 Remuneration Report Financial Statements and Other 98 Financial Statements 100 Consolidated Financial Statements 107 Notes to the Consolidated Financial Statements 194 Company Financial Statements 197 Notes to the Company Financial Statements 204 Independent Auditor’s Report 215 Articles of Association Provisions Governing Proﬁt Appropriation 216 Report of the Wolters Kluwer Preference Shares Foundation 217 Wolters Kluwer Shares and Bonds 223 Five-Year Key Figures 225 Glossary 226 Contact Information ← → Wolters Kluwer 2021 Annual Report 1 We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. AREAS OF EXPERTISE We deliver professional information, software, and services for the healthcare; tax and accounting; governance, risk and compliance; and legal and regulatory sectors. 10% of revenues invested in innovation and product development 72 belonging score, measure of employee diversity, equity, and inclusion 99% of active employees completed 2021 ethics, data privacy, and security training 46% of employees are female SUSTAINABILITY HIGHLIGHTS 2021 HEALTH Trusted clinical technology and evidence- based solutions that drive effective decision-making and outcomes across the continuum of healthcare. → Read more about Health on page 16 TAX & ACCOUNTING Expert solutions that help tax, accounting and audit professionals drive productivity, navigate change, and deliver better outcomes, helping them to grow, manage, and protect their businesses and their clients' businesses. → Read more about Tax & Accounting onpage18 GOVERNANCE, RISK & COMPLIANCE Expert services and solutions for legal entity compliance, legal operations management, banking product compliance, regulatory reporting, and risk management. → Read more about Governance, Risk & Compliance on page 22 LEGAL & REGULATORY Evidence-based information, actionable insights, and integrated workﬂow solutions enabling professionals to adhere to ever-changing regulatory obligations, manage risk, increase efﬁciency, and produce better outcomes. → Read more about Legal & Regulatory onpage 26 55% of revenues from expert solutions 5.7% organic growth in revenues FINANCIAL HIGHLIGHTS 2021 €1.0bn adjusted free cash ﬂow 52% total shareholder return (dividends not reinvested) 2 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Wolters Kluwer at a Glance Revenues by media format 2018 Services Print Digital: Expert Solutions Digital: Information Products 2019 2020 2021 100% 80% 60% 40% 20% 0% Adjusted operating proﬁt margin 2018 2019 2020 2021 26% 25% 23% 24% 22% Organic revenue growth 2018 2019 2020 2021 5.7% 1.7% 6% 5% 4% 3% 2% 1% 0% 4.3% 4.3% Diluted adjusted EPS 2018 2019 2020 2021 3.50 3.00 2.50 0.50 2.00 1.50 1.00 0.00 Return on invested capital 2018 2019 2020 2021 16% 12% 8% 4% 0% 19,800 employees serving customers in over 180 countries Revenues by type Recurring 80% Non-recurring 20% 7 ﬂagship ofﬁces signiﬁcant subsidiaries ← → Wolters Kluwer 2021 Annual Report 3 Every day our customers face decisive moments that impact the lives of millions of people and shape society for the future. In these crucial moments we put sound knowledge, deep expertise, and usable insight into their hands. 4 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Q How would you summarize 2021 for Wolters Kluwer? It was the ﬁnal year of our 2019-2021 strategic plan, and despite the many challenges created by the pandemic over the past two years, we made signiﬁcant progress last year on the priorities we had set out for that plan. Expert solutions, which are sophisticated workﬂow and software solutions that support professionals’ decision-making and enhance outcomes and productivity, grew 6% organically. Our digital information products and most of our expert services also performed well. The ﬁnancial results beneﬁtted from a sharp rebound in non-recurring revenues, but the real highlight for me was the improved organic momentum in recurring revenues. Recurring revenues account for 80% of our total revenues and represent the strategic heart of our company. We also met or exceeded most of the environmental, social, and governance (ESG) goals we set for 2021. Signiﬁcant attention was again paid to the well- being of our employees and I’m thankful for their never-ending dedication to the business and our customers. Employee engagement was kept above the high- performing norm – a major achievement given the impact the pandemic is having on all of our daily lives. Q Did you achieve the goals that you set out in your 2019-2021 plan? The strong recovery in 2021 helped us reach most of our three-year ﬁnancial goals as we pursued our strategic priorities. Expert solutions grew from 49% of total revenues in 2018 to 55% in 2021. This was largely due to their above- average organic growth rate, but also the result of a few portfolio changes we made: selected software acquisitions and non-core divestments. The second main goal of the past few years was to enrich our information-centric products with advanced technologies. This was the most difﬁcult part of our strategy, and it’s a little early to claim complete success, but I am encouraged by customers' responses to some of our recently launched innovations. One example is Ovid Synthesis, our new cloud-based solution that streamlines the workﬂow of medical researchers, enabling them to manage Q&A with Nancy McKinstry GROWTH IN EXPERT SOLUTIONS GROWTH IN CLOUD SOFTWARE HIGH EMPLOYEE ENGAGEMENT 6% organic growth 17% organic growth 74% 1%-point above the high-performing norm Employee engagement was kept above the high- performing norm – a major achievement given the impact the pandemic is having on all of our daily lives. Nancy McKinstry → Read more about employee engagement and talent management onpage 42 ← → Wolters Kluwer 2021 Annual Report 5 projects in one place and ensure that clinical practice improvements are based on the latest medical evidence. Our third priority was to drive operational agility. The pandemic proved that we have come a very long way. I attribute that to the investments we made in infrastructure and systems over many years, which made the transition to work from home almost seamless for us. As part of the recent plan, we completed several major internal projects that help drive agility, such as the implementation of a new global HR platform and the consolidation of our many websites into a single global site. Q Your new three-year strategy for 2022-2024 appears to carry forward many aspects of the previous plan. What is new? The new strategy, Elevate Our Value, is a reﬁnement of the recent plan. Growing our expert solutions remains our top priority. We believe that the transition to cloud and digitization of workﬂows, accelerated during the pandemic, will continue, and this plan aims to capitalize on those trends. The second goal will be to expand our reach into adjacencies along our customers' workﬂows and to reposition certain products for new market segments. The third priority for the coming years relates to our own operations: we want to do more to strengthen central functions, such as our go-to-market capabilities and technology, to support our business units in driving growth. Q In your new strategy, you include advancing Environmental, Social, and Governance: could you elaborate on your intentions here? We are proud of our sustainability accomplishments, but we know there is scope for improvement. The ESG factors that are critical to the long- term sustainability of our business, such as product innovation, customer relationships, cybersecurity, data privacy, and talent management, have long received management's attention and consistent investment, and that will continue. In the next three years, we want to move forward in a few key areas. On the social front, we are widely recognized for achieving gender diversity, especially at senior levels of management. We intend to build on that success by cultivating diversity more broadly. To be able to measure and manage this and set targets, we established a baseline quantitative score for belonging in 2021. Belonging measures the extent to which employees believe they can bring their authentic selves to work and be accepted for who they are. Our belonging score is in line with the average for global companies, but we want to improve it. A target for this measure has now been incorporated into 2022 remuneration for the Executive Board and all executives globally, and we have developed speciﬁc action plans to drive progress. On the environmental front, while we are not a carbon-intensive business, we want to play our part. We have been reporting direct emissions for many years, but want to improve the robustness of our data and processes and extend this effort to quantify emissions along the value chain. We are making a commitment to start aligning our reporting with the recommendations of the Task Force for Climate-related Financial Disclosures and to develop science-based targets. Q What should we expect from Wolters Kluwer in coming years? I am looking forward to 2022 and beyond. Our new plan should deliver good organic growth and improvement in margins and returns, while at the same time advancing sustainability. It is exciting to see the progress being made in professional markets thanks to the application of advanced technologies. With our engaged, talented, and diverse team of domain experts and technologists, we are well-positioned to support our customers as they automate their workﬂows to improve decisions and outcomes. Nancy McKinstry CEO and Chair of the Executive Board Wolters Kluwer Business Model andStrategy We support professionals across four main customer segments: health; tax & accounting; governance, risk & compliance; and legal & regulatory. Every day, our customers face the challenge of increasing proliferation and complexity of information and the pressure to deliver better outcomes at a lower cost. Many of our customers are looking for mobility, ﬂexibility, intuitive interfaces, and integrated open architecture technology to support their decision-making. We aim to solve their problems and add value to their workﬂow with our range of digital solutions and services, which we continuously evolve to meet their changing needs. Our expert solutions combine deep domain knowledge with technology to deliver both content and workﬂow automation to drive improved outcomes and productivity for our customers. Expert solutions, which include nearly all of our software products and certain advanced information solutions, accounted for 55% of total revenues in 2021. Based on revenues, our largest expert solutions by division are: • Health: clinical decision support tool UpToDate; clinical drug databases Medi-Span and Lexicomp; and Lippincott nursing solutions for practice and learning. • Tax & Accounting: corporate performance solution CCH Tagetik; corporate internal audit platform TeamMate; professional tax and accounting software, including CCH ProSystem fx and CCH Axcess in North America and similar software for professionals across Europe. • Governance, Risk & Compliance: ﬁnance, risk, and regulatory reporting suite OneSumX; banking compliance solutions ComplianceOne, Expere, eOriginal, and Gainskeeper; and enterprise legal management software Passport and TyMetrix. 1 Throughout this document, EHS/ORM refers to environmental, health&safetyandoperationalriskmanagement. Strategy The foundation laid over the past many years has driven improved organic growth and operating margins and helped us navigate the challenge of the global pandemic. While we were brieﬂy diverted from our ﬁnancial trajectory in 2020 due to the pandemic, the recovery seen in 2021 allowed us to meet nearly all of the ﬁnancial goals set for the most recent strategic plan (2019-2021). We grew expert solutions from 49% of total revenues in 2018 to 55% of total revenues in 2021, primarily through organic growth. The acquisitions of CGE, XCM, Vanguard, and eOriginal, and the divestment of several non-core assets also helped increase our focus on expert solutions. We made progress on enriching several of our information products and are now starting to launch the early results of that effort. We also made progress on our third goal, which was to drive operational agility, by completing several major internal projects, such as the introduction of a modernized global HR system in 2019, the consolidation of 280 customer-facing websites into a single global site in 2021, and the implementation of CCH Tagetik as our new corporate performance management tool in 2021. Strategic priorities 2022-2024 In the past two years, we have seen key market trends accelerate: increased digitization of professional and corporate workﬂows; accelerated transition to cloud- based solutions; and growing importance of ecosystems. In response, we have reﬁned our strategy for the next three years. The three strategic priorities for 2022-2024 are: Accelerate Expert Solutions: we intend to focus our investments on cloud-based expert solutions while continuing to transform selected digital information products into expert solutions. We will invest to enrich the customer experience of our products by leveraging advanced data analytics. Our mission is to empower our professional customers with the information, software solutions, and services they need to make critical decisions, achieve successful outcomes, and save time. • Legal & Regulatory: Environmental, Health & Safety/Operation Risk Management (EHS/ORM) 1 suite Enablon; and our range of workﬂow solutions for European legal professionals, including Kleos and Legisway. Business model Our business model is primarily based on subscriptions, software maintenance, and other recurring revenues (80% of total revenues in 2021), augmented by implementation services and license fees as well as volume-based transactional or other non-recurring revenues. Renewal rates for our recurring digital information, software, and services revenues are high and are one of the key indicators by which we measure our success. Product innovation is a key driver of growth. For the past eighteen years, we have been re-investing 8% to 10% of our revenues each year (including capital expenditures) in developing new and enhanced products and their supporting technology platforms. More than half of our operating costs relate to our employees, who create, develop and maintain, sell, implement, and support our solutions. Our technology architecture is increasingly based on globally scalable platforms that use standardized components. An increasing proportion of our solutions is built cloud- ﬁrst. Many of our solutions incorporate advanced technologies, such as artiﬁcial intelligence, natural language processing, robotic process automation, and predictive analytics. Our development teams use customer-centric, contextual design and develop solutions based on the scaled agile framework. Our solutions are sold by our own sales teams or through selected distribution partners. 6 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Expand Our Reach: we will seek to extend into high-growth adjacencies along our customer workﬂows and adapt our existing products for new customer segments. We plan to further develop partnerships and ecosystems for our key software platforms. Evolve Core Capabilities: we intend to enhance our central functions to drive excellence and scale economies in sales and marketing (go-to-market) and in technology. We plan to advance our environmental, social, and governance (ESG) performance and capabilities and to continue investing in diverse and engaged talent to support innovation and growth. We expect this strategy to support good organic growth and improved margins and returns over the coming three years. While the strategy remains centered on organic growth, we may make selected acquisitions and non- core disposals to enhance our value and market positions. Acquisitions must ﬁt our strategy, strengthen or extend our existing business, be accretive to diluted adjusted EPS in their ﬁrst full year, and, when integrated, deliver a return on invested capital above our weighted average cost of capital (8%) within three to ﬁve years. We expect that group-wide product development spend will remain at approximately 10% of total revenues in the next three years. Our strategy aims to achieve high levels of customer satisfaction and an engaged, talented, and diverse workforce, to maintain strong corporate governance and secure systems, and to drive efﬁcient operations that meet environmentally-sound practices. Elevate Our Value 55% of 2021 revenues from expert solutions STRATEGY 20222024 We have reﬁned our strategy for the next three years. This strategy should support good organic growth and enhanced operating margins and return on invested capital over the coming three years. The priorities for 2022-2024 are: • Drive investment in cloud-based expert solutions • Transform digital information products into expert solutions • Enrich customer experience leveraging data analytics • Extend into high-growth adjacencies • Reposition solutions for new segments • Drive revenues through partnerships and ecosystem development • Enhance central functions, including marketing and technology • Advance ESG performance and capabilities • Engage diverse talent to drive innovation and growth Accelerate Expert Solutions Expand Our Reach Evolve Core Capabilities ← → Wolters Kluwer 2021 Annual Report 7 2022 Full-Year Outlook If current exchange rates persist, the U.S. dollar rate will have a positive effect on 2022 results reported in euros. In 2021, Wolters Kluwer generated more than 60% of its revenues and adjusted operating proﬁt in North America. As a rule of thumb, based on our 2021 currency proﬁle, each 1 U.S. cent move in the average €/$ exchange rate for the year causes an opposite change of approximately 2 euro cents in diluted adjusted EPS 1 . We include restructuring costs in adjusted operating proﬁt. We currently expect that restructuring costs will increase to our normal range of €10-€15 million (2021: €6 million). We expect adjusted net ﬁnancing costs of approximately €65 million in constant currencies, including lease interest charges 2 . We expect the benchmark tax rate on adjusted pre-tax proﬁts to increase to approximately 23.0%-24.0% (2021: 21.5%). Capital expenditure is expected to be within our normal range of 5.0%-6.0% of total revenues (2021: 5.0%). We expect the full-year cash conversion ratio to be in the range of 100%-105% (2021: 112%) 3 . Any guidance we provide assumes no additional signiﬁcant change to the scope of operations. We may make further acquisitions or disposals which can be dilutive to margins and earnings in the near term. 2022 Outlook by division Health We expect organic growth to slow from 2021 levels, mainly due to the absence of a contract win of the size of the ASCO titles. We expect the adjusted operating proﬁt margin to improve modestly. Tax & Accounting We expect organic growth to improve slightly from 2021 levels and the adjusted operating proﬁt margin to improve. Governance, Risk & Compliance We expect organic growth to slow from 2021 levels, due to slower growth in transactional revenues. We expect the adjusted operating proﬁt margin to improve. Legal & Regulatory We expect organic growth to be in line with 2021. The adjusted operating proﬁt margin is expected to decline due to the absence of the one-off pension plan amendment gain recorded in 2021. performance indicators 2022 Guidance 2021 Adjusted operating profit margin (%) 25.5-26.0 25.3 Adjusted free cash flow (€ million) 1,025-1,075 1,010 ROIC (%) Around 14.0 13.7 Diluted adjusted EPS (€) Mid-single-digit growth 3.38 Guidance for adjusted operating proﬁt margin and ROIC is in reported currencies and assumes an average EUR/USD rate in 2022 of €/$ 1.13. Guidance for adjusted free cash ﬂow and diluted adjusted EPS is in constant currencies (€/$ 1.18). Guidance reﬂects share repurchases for up to €600 million in 2022. Our speciﬁc guidance for FY2022 adjusted operating proﬁt margin, adjusted free cash ﬂow, return on invested capital (ROIC), and diluted adjusted EPS is provided below. We expect good organic growth, albeit slower than in 2021 due to challenging comparables starting in the second quarter. We expect the adjusted operating proﬁt margin to ease in the ﬁrst half but to rise for the full year 2022. We expect growth in diluted adjusted EPS to be dampened by a return to our historical tax rate. 1 This rule of thumb excludes the impact of exchange rate movements on intercompany balances, which is accounted for in adjusted net ﬁnancing costs inreported currencies and determined based on period-end spot rates and balances. 2 Guidance for adjusted net ﬁnancing costs in constant currencies excludes the impact of exchange rate movements on currency hedging andintercompanybalances. 3 Cash repayments of lease liabilities are expected to be in line with depreciation of right-of-use assets (2021: €71 million). 8 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements CASE STUDY: CCH AXCESS CUSTOMERSHARES THE BENEFITS OFMOVING TO THE CLOUD We often raise the value and importance of the cloud through platforms like CCH Axcess, but the impact of the cloud really comes to life when seen through the eyes of a customer. Lepper & Company, LLC, a tax, accounting, and payroll ﬁrm, has been a valued user of CCH Axcess for many years, and owners Martin and Julie Lepper got the scare of their lives when they suffered a ﬁre in their ofﬁce in Pinckney, Michigan, on a Friday evening in July 2021. After making sure all of their staff were safe, Martin and Julie shifted to thinking about their clients and business continuity. “As we walked through the wreckage, we both felt immediate relief that we had strong business continuity plans. Those plans were based on all of the mission-critical data and applications living on the cloud. Particularly for small and mid-sized ﬁrms, it’s not a question of can we afford to move, but can we afford not to move to the cloud?”. Despitethe total loss of one of their ofﬁces reduced to rubble, the services they provide to their clients, some of whom were also impacted by the building ﬁre, did not skip a beat. “That is the real-world value and power of the cloud and a cloud platform likeCCH Axcess. The next Monday we could open from our other ofﬁce and were fullyoperational.” Wolters Kluwer really helped us, and our customers, whenitmattered most. Martin and Julie Lepper, Lepper & Company, LLC ← → Wolters Kluwer 2021 Annual Report 9 Wolters Kluwer maintains regular contact with a range of stakeholders, including customers, employees, suppliers and partners, investors, ﬁnancial and ESG analysts, ratings agencies, government bodies, the media, civil society organizations (CSOs), and educational and research institutions. Weare a strategic partner or member in industry associations and advocacy organizations, such as the Healthcare Information Management Systems Society, International Society of Pharmacoeconomics and Outcomes Research, Accounting Blockchain Coalition, Institute of Internal Auditors, Mortgage Bankers Association, American Financial Services Association, European Company Lawyers Association, International Legal Technology Association, American Bankers Association, and European Risk ManagementCouncil. CUSTOMERS Year-round dialogue through sales, marketing, and customer service teams; customer collaboration on product development Net promoter scores; customer satisfaction scores; customer and product renewal rates; market share studies; product development spending Impact when it matters most: our professional information, software andservices provide insights and workﬂow automation to customers to support their critical decision-making EMPLOYEES Regular engagement at all levels, including one-on- one, group and townhall meetings; check-ins and performance meetings; surveys; SpeakUp line; Global Innovation Awards, Code Games, and other employee awards and events; works council engagement Employee turnover rates; employee engagement and belonging scores; training sessions attended Providing attractive employment and career opportunities; developing skills, talent andexperience; promoting diversity, equity, inclusion, and belonging SUPPLIERS & PARTNERS INVESTORS Regular quality screening, audits and due diligence; collaboration Year-round dialogue through a global program of investor relations events and meetings; regular engagement with analysts; Annual General Meeting of Shareholders Procurement process and due diligence questionnaires; certiﬁcation programs; and commitment to standards in Supplier Code of Conduct Financial KPIs, incl. organic growth, adjusted operating proﬁt margin, adjusted free cash ﬂow, and ROIC; ESG KPIs, incl. employee engagement, cybersecurity maturity, ESG ratings Creating mutually beneﬁcial economic value for our suppliers and partners Generating Total Shareholder Return (TSR) for shareholders through share price appreciation and dividends; risk- adjusted ﬁnancial returns for creditors SOCIETY Various programs in support of our communities around theworld Tracking of charitable contributions Our employees donate their time and talents to community projects; our work helps protect people’s health and prosperity, and contributes to a safe and just society; we provide attractive jobs, pay taxes, and set high standards Stakeholders and ValueCreation Key stakeholders How we engage How we measure How we create value 10 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Value Creation Model Focus on customer success Make it better Aim high and deliver Win as a team Elevate Our Value • Talented, Engaged, and Diverse Employees • Sustained Investment in Innovation • Strong Brands • Strong Customer Retention • Good Governance • Disciplined Capital Allocation • Agile and Secure Operations • Respect for Society and Environment We aim to create long-term value for all of our major stakeholders and for society, by using resources thoughtfully and efﬁciently, respecting our company values, and focusing those resources on actions that support our purpose and our strategy. THE WAY WE DO BUSINESS OUR RESOURCES OUR IMPACT Accelerate Expert Solutions Expand Our Reach Evolve Core Capabilities HUMAN TALENT • Efforts and skills of 19,800 employees FINANCIAL CAPITAL • €2.4bn equity • €3.1bn gross debt TECHNOLOGY & INTELLECTUAL PROPERTY • Global brand • Software and contentIP SUPPLIERS & PARTNERS • Actively selected and managed suppliers NATURAL RESOURCES • Energy and water consumption along our value chain CUSTOMERS • €4.8bn revenues in professional information, software solutions, and services • Enabling efﬁcient, effective, and accurate decision-making • 80% recurring revenues EMPLOYEES • €2.0bn in personnel salaries, wages, and other beneﬁts • Developing skills, talent, and careers • Promoting diversity, equity, inclusion, and belonging SUPPLIERS & PARTNERS • €1.5bn spent on third- party content and services • High standards INVESTORS • Total shareholder return 52% in 2021 • €57m net interest paid to ﬁnancial credit institutions SOCIETY • €277m income tax paid • Community efforts • Our products help protect people’s health and prosperity, and contribute to a safe and just society UN Sustainable Development Goals ← → Wolters Kluwer 2021 Annual Report 11 EXECUTIVE BOARD & CORPORATE OFFICE GLOBAL BUSINESS SERVICES GLOBAL GROWTH MARKETS HEALTH • Clinical Solutions • Learning, Research & Practice GOVERNANCE, RISK & COMPLIANCE • Legal Services • Financial Services TAX & ACCOUNTING • Corporate Performance Solutions • Professional Tax & Accounting LEGAL & REGULATORY • EHS/ORM & Legal Software • Legal Information Solutions DIGITAL EXPERIENCE GROUP • Innovation and product development • Development centers of excellence • Technology assets management • China, India, and Brazil • Global expert solutions • Local market knowledge • Technology infrastructure • Operational excellence programs • Procurement and shared services 12 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Organizational Structure and Executive Team HEALTH Stacey Caywood CEO We provide trusted clinical technology and evidence-based solutions that engage clinicians, patients, researchers, students, and the next generation of healthcare providers. With a focus on clinical effectiveness, research and learning, clinical surveillance and compliance, as well as data solutions, our proven solutions drive effective decision-making and consistent outcomes across the continuum of care. Customers span a broad scope of hospitals and healthcare organizations, individual students and clinicians, nursing and medical schools and libraries, payers, life sciences, and retail pharmacies. Portfolio includes AudioDigest, Emmi, Health Language, Lexicomp, Lippincott, Medi-Span, Ovid, POC Advisor, Sentri7, Simpliﬁ 797, SoleSource, UpToDate, and UpToDate Advanced. TAX & ACCOUNTING Karen Abramson CEO We enable professionals in tax and accounting ﬁrms, governing authorities, and businesses of all sizes to grow, manage, and protect their business and their clients’ businesses. Expert solutions – in compliance, collaboration, internal and external audit management, corporate performance management, and ﬁrm management – integrate deep domain knowledge with workﬂows to ensure compliance, improved productivity, effective management, and strengthened client relationships. Customers include accounting ﬁrms, corporate ﬁnance, tax and auditing departments, government agencies, libraries, and universities. Portfolio includes A3 Software, ADDISON, ATX, CCH, CCH AnswerConnect, CCH Axcess, CCH Axcess iQ, CCH Axcess Validate, CCH Axcess Workﬂow, CCH iFirm, CCH Integrator, CCH ProSystem fx, CCH OneClick, CCH PinPoint, CCH Tagetik, Genya, PFX Engagement, TeamMate, and Twinﬁeld. GOVERNANCE, RISK &COMPLIANCE Richard Flynn CEO We provide legal and banking professionals with solutions to ensure compliance with ever- changing global regulatory and legal obligations, manage risk, increase efﬁciency, and produce better business outcomes. The portfolio offers technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance. Customers include corporations, small businesses, law ﬁrms, corporate legal departments, insurers, compliance professionals, risk managers, and ﬁnancial institutions – including banks, non- bank lenders, credit unions, and leasing and securities ﬁrms. Portfolio includes CASH Suite, CLM Matrix, ComplianceOne, CT Corporation, eOriginal, Expere, GainsKeeper, LegalVIEW BillAnalyzer, Lien Solutions, OneSumX, Passport, TSoftPlus, TyMetrix 360°, and Vanceo. LEGAL & REGULATORY Martin O’Malley CEO We enable legal and compliance professionals and environmental, health & safety and operational risk managers to improve productivity and performance, mitigate risk, and solve complex problems with conﬁdence. With expert information, enriched with advanced technologies, we help professionals thrive in the complex and changing areas of legal and regulatory compliance. Customers include law ﬁrms, corporate legal departments, corporations, environmental, health, and safety (EHS) professionals, operational risk managers, universities, and government agencies. Portfolio includes CaseWorx, CGE, Enablon, InView, Iter, Jogtár, Jura, Kleos, Legal Intelligence, Legal Monitoring, Legisway, LEX, Navigator, NotaioNext, ONE, Progman, RBSource, Schulinck, Simpledo, VitalLaw, and Wolters Kluwer Online. GLOBAL GROWTH MARKETS Cathy Wolfe EVP Global Growth Markets (GGM) is responsible for developing the company’s strategic presence in fast-growing geographies, particularly China, India, and Brazil. GGM’s mission is to apply local market knowledge to service professionals with global expert solutions. DIGITAL EXPERIENCE GROUP Dennis Cahill CTO The Digital eXperience Group (DXG) creates state-of-the-art digital and software solutions in close collaboration with our business units around the world. The DXG mission is to accelerate innovation and leverage our technology investments. The group drives innovation through three centers of excellence, which focus on User/Customer Experience, Artiﬁcial Intelligence, and Advanced Platform Services. GLOBAL BUSINESS SERVICES Andres Sadler CEO Global Business Services (GBS) is responsible for driving and enhancing the quality, performance, and transformation of our internal technology infrastructure, including IT operations, workplace technologies, cybersecurity, IT architecture, engineering services, network, and enterprise systems. GBS supports the company’s digital transformation across technology, accounting, strategic sourcing, procurement, operational excellence, collaboration services, analytics, and events. CORPORATE OFFICE The Corporate Ofﬁce sets the global strategic direction for the company and ensures good corporate governance. Its mission is to support and provide an enabling business and operating environment, to help realize our strategy to deliver impact to our customers, employees, investors, and society at large. Full list of management www.wolterskluwer.com/en/ about-us/management ← → Wolters Kluwer 2021 Annual Report 13 IMPACTDRIVEN INNOVATIVE HEALTHCARE SOLUTIONS Trusted clinical technology and evidence-based solutions that drive effective decision-making and improved outcomes across healthcare. 14 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Health We harness artiﬁcial intelligence and leading digital technologies so clinicians can make better decisions, patients can stay connected to care teams, and lives can be saved. See our Health overview www.wolterskluwer.com/en/health ← → 15Wolters Kluwer 2021 Annual Report REVIEW OF 2021 PERFORMANCE • Clinical Solutions revenues grew 8% organically, led by UpToDate. • Learning, Research & Practice revenues were lifted by a new journal contract. • Margin increase reﬂects operational gearing, cost savings, and lower restructuring charges. Wolters Kluwer Health revenues increased 7% in constant currencies and 7% organically (2020: 3%). Adjusted operating proﬁt increased 9% in constant currencies, mainly reﬂecting operational gearing and lower restructuring charges. The decrease in operating proﬁt reﬂects impairments of acquired identiﬁable intangible assets, mainly related to continuing education unit Learner’s Digest. Clinical Solutions (53% of divisional revenues) achieved 8% organic revenue growth (2020: 6%), with strong performances in all main geographic regions. In clinical decision support, UpToDate delivered high single-digit organic growth driven by subscription renewals. Our clinical drug databases, Medi-Span and Lexicomp, drove high single-digit organic growth, beneﬁtting from international customer wins and higher usage. With U.S. hospitals and healthcare professionals under pressure from the pandemic for most of the year, our smaller clinical solutions products posted weaker results. Health Learning, Research & Practice (47% of divisional revenues) recorded 6% organic growth (2020: 0%), in large part due to the ASCO journal publishing contract added at the start of the year. The unit also beneﬁtted from a rebound in print book revenues, as distributors and book retailers restocked in preparation of the re-opening of medical and nursing schools. Print book revenues grew 4% organically (compared to 39% decline in 2020). Our medical research platform, Ovid, recorded good organic growth driven by subscription renewals. In January 2022, the medical research unit launched Ovid Synthesis Clinical Evidence Manager, a workﬂow solution that enables efﬁcient implementation of new evidence into practice. Our digital expert solutions for nursing practice and education, such as Lippincott CoursePoint+ and vSim, delivered another year of double-digit organic growth. In continuing medical education, Learner’s Digest revenues were weak. Our customers Solutions for hospitals, clinics, and other healthcare providers, individual clinicians and students, nursing and medical schools and libraries, retail pharmacies, payers, and life sciences organizations. Top products Clinical Solutions: UpToDate, Lexicomp, Medi-Span, Emmi, Sentri7, Simpliﬁ, Health Language Learning, Research & Practice: Ovid, Lippincott Williams & Wilkins books and journals, Lippincott digital nursing solutions, Audio Digest Complete list of Solutions www.wolterskluwer.com/en/health/ our-solutions Our teams have equipped clinicians around the world with trusted evidence-based content to deliver the best care for patients everywhere. Stacey Caywood, CEO Health DIVISIONAL AWARDS 2021 • Frost & Sullivan 2021 North American Company of the Year Award for Clinical Decision- Support (six products). • Lippincott nursing journals win Crystal Clarion Award 2021. 16 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Health Health – Year ended December 31 € million, unless otherwisestated 2021 2020   CC  OG Revenues 1,234 1,193 +3% +7% +7% Adjusted operating profit 360 343 +5% +9% +9% Adjusted operating profitmargin 29.2% 28.7% Operating profit 302 307 -2% Net capital expenditure 33 32 Ultimo FTEs 2,913 2,824 : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. 2021 Revenues by geographic market North America 75% Asia Paciﬁc & ROW 15% Europe 10% 2021 Revenues by type Recurring 90% Other non-recurring 6% Print books 4% 2021 Revenues by media format Software 3% Print 12% Other digital 85% MARKET TRENDS Rise of virtual care and telemedicine Demand for solutions to alleviate pressure on hospitals and staff Consumerization of healthcare Demand for nursing and medicaleducation ← → Wolters Kluwer 2021 Annual Report 17 OPTIMIZE TAX, ACCOUNTING & AUDIT PROCESSES Expert solutions that integrate domain knowledge with workﬂows to ensure compliance, improve productivity, and strengthen client relationships. Strategic Report | Governance | Financial Statements 18 Wolters Kluwer 2021 Annual Report Tax & Accounting We enable professionals in tax and accounting ﬁrms, governing authorities, and businesses of all sizes to grow, manage, and protect their business and their clients’ businesses. See our Tax & Accounting overview www.wolterskluwer.com/en/tax-and- accounting ← → 19Wolters Kluwer 2021 Annual Report The pandemic has accelerated many of the trends we were seeing in our markets, particularly our customers' transition to the cloud. Karen Abramson, CEO Tax & Accounting DIVISIONAL AWARDS 2021 • CCH Tagetik Predictive Intelligence wins 2021 Business Intelligence Group Innovation Award. • TeamMate+ Agile Audit solution wins Gold Globee for Audit Innovation. 20 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements REVIEW OF 2021 PERFORMANCE • Corporate Performance Solutions grew 10% organically, led by CCH Tagetik. • Professional Tax & Accounting grew 5% organically, supported by North America and Europe. • Margin decline reﬂects increased spending and investment to support growth. Wolters Kluwer Tax & Accounting revenues grew 7% in constant currencies, with the effect of acquisitions (XCM Solutions in September 2020 and Vanguard Software in May 2021) partly offset by the deconsolidation of certain Brazilian assets in June 2021. Organic growth recovered to 6% (2020: 2%). Adjusted operating proﬁt rose 2% in constant currencies, as operational gearing and lower restructuring were offset by increased investment in cloud software solutions across the division. Operating proﬁt mainly reﬂects a foreign exchange loss related to the divestment of our Brazilian assets. Corporate Performance Solutions (16% of divisional revenues) delivered 10% organic growth (2020: 8%). Both CCH Tagetik and TeamMate were buoyed by continued strong demand for the cloud versions of their software suites. Financial performance management platform, CCH Tagetik, grew 14% organically, driven by upgrades by existing customers, new customer wins, and a recovery in software implementation services. Vanguard Software, which extends CCH Tagetik into sales and operations planning, has now been fully integrated with CCH Tagetik. Global internal audit solution, TeamMate, posted mid-single digit organic growth driven by strong performances in Europe and Asia Paciﬁc. North America Professional Tax & Accounting (49% of divisional revenues) achieved 5% organic growth (2020: 0%), driven primarily by renewals and upgrades for our cloud-based solutions, including the CCH Axcess suite and CCH Engagement. Fees from ancillary services, such as e-ﬁling and bank products, stabilized. Our U.S. publishing business was broadly stable with trends in print books and training revenues improving compared to 2020. Europe Professional Tax & Accounting (30% of divisional revenues) sustained 5% organic growth (2020: 5%), with good performance across all seven European countries. The European business continued to invest in cloud and hybrid- cloud collaboration tools. Asia Paciﬁc and Rest of World Professional Tax & Accounting (5% of divisional revenues) saw positive organic growth led by China. In June 2021, we merged certain Brazilian assets with those of a competitor in exchange for a minority interest in the combined entity. Our customers Solutions for accounting ﬁrms, corporate ﬁnance, tax and auditing departments, government agencies, libraries, and universities. Top products Corporate Performance Solutions: CCH Tagetik, TeamMate Professional Firm Solutions: North America: CCH Axcess, CCH ProSystem fx, CCH Axcess Engagement, CCH Axcess Workﬂow, CCH AnswerConnect, CCH Axcess Validate Europe and ROW: A3 Software, ADDISON, CCH iFirm, CCH Integrator, CCH OneClick, CCH PinPoint, Genya, Twinﬁeld Complete list of Solutions www.wolterskluwer.com/en/tax-and- accounting/our-solutions Tax & Accounting Tax & Accounting – Year ended December 31 € million, unless otherwisestated 2021 2020   CC  OG Revenues 1,510 1,431 +6% +7% +6% Adjusted operating proﬁt 430 431 0% +2% 0% Adjusted operating profitmargin 28.4% 30.1% Operating profit 352 387 -9% Net capital expenditure 72 77 Ultimo FTEs 7,416 7,149 : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. 2021 Revenues by geographic market North America 53% Asia Paciﬁc & ROW 8% Europe 39% 2021 Revenues by type Recurring 87% Other non-recurring 12% Print books 1% 2021 Revenues by media format Software 78% Services 2% Other digital 17% Print 3% MARKET TRENDS Accelerated adoption of cloud solutions Digitization and automation of workﬂows Emergence of connected eco-systems Growing regulatory complexity ← → Wolters Kluwer 2021 Annual Report 21 Governance, Risk & Compliance TECHNOLOGYENABLED SERVICES AND SOLUTIONS Expert services and solutions for legal entity compliance, legal operations management, banking product compliance, andregulatory reporting. 22 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements We provide legal and banking professionals with solutions to ensure compliance with ever- changing regulatory and legal obligations, manage risk, increase efﬁciency, and produce better business outcomes. See our GRC overviews www.wolterskluwer.com/en/compliance www.wolterskluwer.com/en/ﬁnance ← → 23Wolters Kluwer 2021 Annual Report REVIEW OF 2021 PERFORMANCE • Legal Services recorded 12% organic growth, buoyed by a 21% rise in transactional revenues. • Financial Services revenues grew 3% organically, excluding revenues associated with the PPP. • Margin increase reﬂects lower restructuring and other provisions. Wolters Kluwer Governance, Risk & Compliance (GRC) revenues increased 10% in constant currencies, including the effect of the acquisitions of eOriginal on December 16, 2020, and LicenseLogix on October 29, 2021, partly offset by a small disposal. Organic growth was 6% (2020: 2%). The adjusted operating proﬁt margin increased, reﬂecting substantially lower restructuring charges, and lower provisions. These beneﬁts were partly offset by increased investment in product and platform development across the division. Operating proﬁt rose 8% reﬂecting the rise in adjusted operating proﬁt, offset by higher amortization and impairment of acquired intangibles. Legal Services (56% of divisional revenues) recorded 12% organic growth (2020: 2% decline), led by CT Corporation, which saw good momentum in recurring service subscriptions combined with double-digit organic growth in transactional revenues (2020: 10% decline). This performance captures the rebound in U.S. company formations, M&A activity, and other transactional volumes in 2021. In October, CT Corporation acquired LicenseLogix, a leading provider of U.S. business licensing services. Enterprise Legal Management (ELM) Solutions achieved 5% organic growth (2020: 0%) supported by an increase in law ﬁrm transactional revenues and recurring software revenues. Financial Services (44% of divisional revenues) revenues declined 1% organically (2020: 7%) but rose 3% excluding revenues associated with the PPP. Compliance Solutions, excluding the PPP solution, was broadly stable year on year. eOriginal, which was acquired in December 2020, delivered better- than-expected double-digit revenue growth (not included in organic growth) and is being aligned with our digital loan compliance solutions, Expere and ComplianceOne. Lien Solutions, a mostly transactional business, experienced a strong rebound in revenues driven by increased UCC search and ﬁling volumes and continued success with its motor vehicle title perfection services. Finance, Risk & Reporting recorded muted organic growth due to lower professional services. Our customers Solutions and services for legal, compliance, and risk professionals in corporations, small businesses, law ﬁrms, insurers, banks, non-bank lenders, credit unions, leasing companies, and securities ﬁrms. Top products Legal Services: CT Corporation, Passport, TyMetrix 360, LegalVIEW BillAnalyzer Financial Services: OneSumX, ComplianceOne, Expere, eOriginal, GainsKeeper, Lien Solutions Complete list of Solutions www.wolterskluwer.com/en/compliance/ our-solutions www.wolterskluwer.com/en/ﬁnance/our- solutions I am incredibly proud of how our team has supported our legal and ﬁnancial clients and helped them navigate the uncertainties of the last two years. Richard Flynn, CEO Governance, Risk&Compliance DIVISIONAL AWARDS 2021 • CT Corporation UCC Hub wins Legal Technology Innovation of the Year award from The New World Report. • Chartis RiskTech100: category winner for Regulatory Reporting – Banking, Liquidity Risk, and Regulatory Intelligence. 24 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Governance, Risk & Compliance Governance, Risk & Compliance – Year ended December 31 € million, unless otherwisestated 2021 2020   CC  OG Revenues 1,139 1,074 +6% +10% +6% Adjusted operating profit 351 313 +12% +17% +13% Adjusted operating profit margin 30.8% 29.1% Operating profit 301 279 +8% Net capital expenditure 82 76 Ultimo FTEs 4,736 4,485 : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. 2021 Revenues by geographic market North America 88% Asia Paciﬁc & ROW 2% Europe 10% 2021 Revenues by type Recurring 59% FS transactional 10% LS transactional 23% Other non-recurring 8% 2021 Revenues by media format Software 54% Services 36% Other digital 9% Print 1% ← → Wolters Kluwer 2021 Annual Report 25 MARKET TRENDS Increasing regulatory complexity forcorporations and banks Varying rates of cloud adoption across customer segments Growing appetite for technology-led solutions Rising expectations for technology capabilities Legal & Regulatory LEGAL EXPERT INSIGHTS Evidence-based information, actionable insights, and integrated workﬂow solutions that help customers make the right decisions and streamline compliance. 26 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements We enable legal and compliance professionals, and environmental, health & safety, and operational risk managers to improve productivity and performance, mitigate risk, and solve complex problems with conﬁdence. See our Legal & Regulatory overview www.wolterskluwer.com/en/legal ← → 27Wolters Kluwer 2021 Annual Report Among legal professionals, technology is going to have the most impact in the next three years. Martin O'Malley, CEO Legal &Regulatory REVIEW OF 2021 PERFORMANCE • EHS/ORM & Legal Software (18% of divisional revenues) grew 8% organically. • Information Solutions grew 2% organically driven by strong growth in digital formats. • Margin increase reﬂects operational gearing and a one-time pension beneﬁt. Legal & Regulatory revenues declined 1% in constant currencies, reﬂecting the effect of a series of disposals completed in 2020 and 2021. On an organic basis, revenues grew 3% (2020: 2% decline), supported by high single-digit growth in digital product revenues. Adjusted operating proﬁt increased 26% in constant currencies and included an €11 million one-time beneﬁt related to amendments to the employee pension fund in the Netherlands. The margin increase also reﬂects operational gearing and substantially lower restructuring costs, partly offset by increased investment in product development. Operating proﬁt increased 93%, due to a €26 million net gain on the sale of the U.S. legal education business. EHS/ORM and Legal Software (18% of divisional revenues), which includes our global solutions for environmental, health & safety and operational risk management (EHS/ORM) and our European Legal Software unit, saw organic growth accelerate to 8% (2020: 5%). In EHS/ORM, Enablon’s recurring cloud-based revenues generated double-digit organic growth, while on-premise software license and implementation fees declined. Our legal software solutions, Kleos and Legisway, drove strong organic growth in both cloud subscriptions and non-recurring revenues. Investment in product development was stepped up in 2021. Legal & Regulatory Information Solutions (82% of divisional revenues) recorded 3% revenue decline in constant currencies due to divestitures. On an organic basis, revenues grew 2% (2020: 3% decline). Digital information solutions grew 7% organically, but this was partly offset by a decline in print subscriptions. Revenues from print books declined in Europe, but grew in the U.S. as our legal education business (divested in December 2021) beneﬁtted from a market recovery. In December 2021, we announced the receipt of a binding offer from Karnov Group for our Spanish and French legal information assets. This transaction is conditional on anti-trust approval in Spain and expected to close before the end of 2022. Our customers Solutions for legal, compliance, EHS, and operational risk professionals in law ﬁrms, corporations, universities, and government agencies. Top products Environmental, Health & Safety/ Operational Risk Management: Enablon Legal Software: Kleos, Legisway Legal & Regulatory Information Solutions: VitalLaw, RBSource, LEX, ONE, Navigator, Schulinck, Jura, Legal Intelligence, Jogtar Complete list of Solutions www.wolterskluwer.com/en-gb/legal/ our-solutions DIVISIONAL AWARDS 2021 • Enablon Vision wins Business Intelligence Group award for Sustainability Product of the Year. • VitalLaw U.S. COVID-19 Solution wins 2021 SIAA Business Technology CODiE Award. 28 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Legal & Regulatory Legal & Regulatory – Year ended December 31 € million, unless otherwisestated 2021 2020   CC  OG Revenues 888 905 -2% -1% +3% Adjusted operating profit 121 97 +25% +26% +41% Adjusted operating profit margin 13.6% 10.7% Operating profit 114 59 +93% Net capital expenditure 52 45 Ultimo FTEs 4,262 4,195 : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. 2021 Revenues by geographic market North America 24% Asia Paciﬁc & ROW 2% Europe 74% 2021 Revenues by type Recurring 81% Other non-recurring 11% Print books 8% 2021 Revenues by media format Software 21% Services 2% Other digital 56% Print 21% ← → Wolters Kluwer 2021 Annual Report 29 MARKET TRENDS Increasing legal and regulatory intensity Law ﬁrms and corporate legal teams increasingly adopt technology Traditional law ﬁrms facing newcompetitors EHS/ORM tools evolving into integrated risk platforms This group ﬁnancial review provides a summary of our 2021 results in IFRS alongside a discussion of benchmark ﬁgures offering insight into organic performance in constant currencies. All divisions recorded stronger organic growth as market conditions started to recover from the pandemic. Kevin Entricken, CFO and member of the Executive Board 30 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements HIGHLIGHTS • Revenues up 6% in constant currencies and up 6% organically. • Recurring revenues up 6% organically (80% of total revenues); non-recurring up 6% organically. • Digital & services revenues up 7% organically (92% of total revenues); print down 4% organically. • Expert solutions revenues up 6% organically (55% of total revenues). • Operating proﬁt up 4%. • Adjusted operating proﬁt up 11% in constant currencies. • Adjusted operating proﬁt margin up 90 basis points to 25.3%. • Margin beneﬁtted from operational gearing, lower restructuring costs, net positive one-time items, and from savings on travel and other expenses curtailed during the pandemic. • Impairment charges on acquired identiﬁable intangible assets of €33 million (2020: none). • Proﬁt for the year up 1%, reﬂecting the higher operating proﬁt and a lower effective tax rate, partly offset by an increase in net ﬁnancing costs. • Diluted adjusted EPS €3.38, up 17% in constant currencies. • Adjusted free cash ﬂow €1,010 million, up 15% in constant currencies. • Balance sheet remains strong: net-debt- to-EBITDA 1.4x. • Return on invested capital improved to 13.7%. Group Financial Review ← → Wolters Kluwer 2021 Annual Report 31 REVENUES Group revenues were €4,771 million, up 4% overall and up 6% in constant currencies. For the group, the effect of acquisitions was largely offset by the effect of divestments. Organic growth was 6%, marking a clear recovery on the prior year (2020: 2%). Excluding revenues associated with the U.S. Paycheck Protection Program (PPP), organic growth was also 6% (2020: 1%). All geographic regions experienced a recovery in organic growth. Revenues from North America, which accounted for 62% of group revenues, grew 7% organically (2020: 2%). Revenues from Europe, 31% of total revenues, increased 4% organically (2020: 2%). Revenues from Asia Paciﬁc and Rest of World, 7% of total revenues, grew 3% on an organic basis (2020: 4% decline). Total recurring revenues, which include subscriptions and other renewing revenue streams, accounted for 80% of total revenues in 2021 (2020: 80%) and grew 6% organically, a clear improvement on the prior year (2020: 4%). Of this, digital and service subscriptions grew 7% organically (2020: 6%), while print subscriptions declined 10% organically (2020: 9% decline). Other recurring revenues were stable on an organic basis (2020: 1% decline). Non-recurring revenues increased 6% organically, recovering from the steep declines seen in 2020 due to the effects of the pandemic (2020: 8% decline). Legal Services transactional revenues increased 21% organically after declining 6% organically in 2020. Financial Services transactional revenues declined 11% organically (2020: 25% increase), reﬂecting lower revenues associated with the PPP. Print book revenues ended the year up 1% organically (2020: 26% decline), following a sharp decline in the fourth quarter, as expected. Other non-recurring revenues, which include software licenses and implementation services, recovered to 4% organic growth (2020: 8% decline). € million % Revenues 2020 4,603 Organic change 259 6 Acquisitions 64 1 Divestments (45) (1) Currency impact (110) (2) Revenues 2021 4,771 4 OPERATING PROFIT Operating proﬁt increased 4% to €1,012 million (2020: €972 million), reﬂecting the increase in adjusted operating proﬁt partly offset by a net €33 million impairment of acquired identiﬁable intangible assets. Adjusted operating proﬁt was €1,205 million (2020: €1,124 million), an increase of 11% in constant currencies and 10% organically. The adjusted operating proﬁt margin increased 90 basis points to 25.3% (2020: 24.4%), beneﬁtting from operational gearing, lower restructuring costs, net positive one-time items (mainly an €11 million positive one-time item related to an amendment to the Netherlands pension fund), and cost savings related to low levels of travel and in-person events activity curtailed as a result of the pandemic. Restructuring costs, included in adjusted operating proﬁt, were €6 million, signiﬁcantly lower than in the prior year (2020: €49 million). Investments in product development were maintained at high levels, while investment in sales and marketing and technology infrastructure was increased. Key ﬁgures € million, unless otherwise stated 2021 2020   CC  OG Revenues 4,771 4,603 +4% Operating profit 1,012 972 +4% Profit for the year 728 721 +1% Diluted EPS (€) 2.78 2.70 +3% Net cash from operating activities 1,292 1,197 +8% Business performance – benchmark figures Revenues 4,771 4,603 +4% +6% +6% Adjusted operating profit 1,205 1,124 +7% +11% +10% Adjusted operating profit margin 25.3% 24.4% Adjusted net profit 885 835 +6% +15% Diluted adjusted EPS (€) 3.38 3.13 +8% +17% Adjusted free cash flow 1,010 907 +11% +15% Return on invested capital (ROIC) 13.7% 12.3% Net debt 2,131 2,383 -11% : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. Benchmark ﬁgures are performance measures used by management. See Note 4 fora reconciliation from IFRS to benchmark ﬁgures. 32 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Group Financial Review continued DIVISIONAL PERFORMANCE All divisions recorded a recovery in organic growth as market conditions staged a recovery from the pandemic. Adjusted operating proﬁt margins increased in all divisions except Tax & Accounting where operational gearing was outweighed by increased investment in sales and marketing and technology infrastructure. Revenues by type € million, unless otherwise stated 2021 2020   CC  OG Digital and service subscription 3,397 3,218 +6% +8% +7% Print subscription 157 182 -14% -13% -10% Other recurring 256 280 -9% -5% 0% Total recurring revenues 3,810 3,680 +4% +6% +6% Print books 146 150 -2% -2% +1% LS transactional 266 228 +17% +21% +21% FS transactional 109 129 -16% -11% -11% Other recurring 440 416 +6% +7% +4% Total non-recurring revenues 961 923 +4% +6% +6% Total revenues 4,771 4,603 +4% +6% +6% : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. Other non-recurring revenues include software licenses, software implementation fees, professional services, and other non-subscription offerings. LS = Legal Services; FS = Financial Services. Divisional summary € million, unless otherwise stated 2021 2020   CC  OG Revenues Health 1,234 1,193 +3% +7% +7% Tax & Accounting 1,510 1,431 +6% +7% +6% Governance, Risk & Compliance 1,139 1,074 +6% +10% +6% Legal & Regulatory 888 905 -2% -1% +3% Total revenues 4,771 4,603 +4% +6% +6% Adjusted operating profit Health 360 343 +5% +9% +9% Tax & Accounting 430 431 0% +2% 0% Governance, Risk & Compliance 351 313 +12% +17% +13% Legal & Regulatory 121 97 +25% +26% +41% Corporate (57) (60) -5% -5% -5% Total adjusted operating profit 1,205 1,124 +7% +11% +10% Adjusted operating profit margin Health 29.2% 28.7% Tax & Accounting 28.4% 30.1% Governance, Risk & Compliance 30.8% 29.1% Legal & Regulatory 13.6% 10.7% Total adjusted operating profit margin 25.3% 24.4% : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. ← → Wolters Kluwer 2021 Annual Report 33 CORPORATE EXPENSES Net corporate expenses declined by 5% in constant currencies and organically, reﬂecting lower spending on various corporate projects and lower travel expenses. Corporate € million, unless otherwise stated 2021 2020   CC  OG Adjusted operating profit (57) (60) -5% -5% -5% Operating profit (57) (60) -5% Net capital expenditure 0 1 Ultimo FTEs 127 132 : % Change;  CC: % Change in constant currencies (€/$ 1.14);  OG: % Organic growth. FINANCIAL POSITION Balance sheet Non-current assets, mainly consisting of goodwill and acquired identiﬁable intangible assets, increased by €123 million to €6,290 million in 2021, mainly due to continued investments in software assets, acquisitions through business combinations, and the positive effect of foreign exchange differences, being higher than the amortization and impairments recognized during the year and the divestments of operations. Total equity increased by €330 million to €2,417 million, mainly due to the signiﬁcant comprehensive income achieved for the year, partly offset by the effect of share buybacks and dividend payments. During the year, we repurchased 5.0 million shares for a total consideration of €410 million, including 0.7 million shares to offset incentive share issuance (2020: 0.9 million). At December 31, 2021, share buybacks have not yet been executed for an amount of €50 million under the existing mandate. In September 2021, we completed a reduction in ordinary share capital by canceling 5.0 million of the shares held in treasury (2020: 5.5 million shares canceled). As of December 31, 2021, we held 4.3 million shares in treasury. In 2021, the total weighted average number of shares was 260.4 million (2020: 265.0 million). Net debt, leverage, and liquidity position Net debt at December 31, 2021, was €2,131 million, compared to €2,383 million at December 31, 2020. Included in net debt was €331 million of lease liabilities. The net-debt-to-EBITDA ratio was 1.4x (2020: 1.7x). On March 30, 2021, we issued a new €500 million, 7-year senior unsecured Eurobond with a coupon of 0.25%. The new bond provides ﬁnancing at an attractive rate and has extended the company’s debt maturity proﬁle. The proceeds will be used for general corporate purposes. Balance sheet € million, unless otherwise stated 2021 2020 Variance Non-current assets 6,290 6,167 123 Working capital (318) (968) 650 Total equity 2,417 2,087 330 Net debt 2,131 2,383 (252) Net-debt-to-EBITDA ratio 1.4 1.7 (0.3) 34 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements In July 2021, we agreed to a one-year extension of our €600 million multi-currency revolving credit facility. This facility will therefore now mature in 2024 and still includes a further one- year extension option. The relevant terms and conditions remain unchanged. Simultaneously, we executed a sustainability-linked option that was available under this facility, in order to reinforce our ESG ambitions by embedding them into our ﬁnancing. Four ESG key performance indicators, along with an ESG-linked pricing mechanism, were agreed, making the facility a sustainability- linked credit facility. This facility is currently undrawn. We remain comfortably below the debt covenant on this credit facility. Our liquidity position remains strong with, as of December 31, 2021, net cash available of €992 million. Working capital Operating working capital amounted to €(1,121) million, compared to €(934) million in 2020, a decrease of €187 million. This decrease includes the autonomous movements in working capital. Non- operating working capital and assets/liabilities classiﬁed as held for sale increased to €(198) million, compared to €(757) million in 2020, mainly due to the repayment of the Euro Commercial Paper program of €100 million and the decrease in bank overdrafts for cash management purposes. OTHER DEVELOPMENTS Financing results Financing results amounted to a net cost of €84 million (2020: €41 million), including a €5 million net loss on revaluation of ﬁnancial assets through proﬁt and loss (2020: €0 million). The increase in net costs is mainly due to a €15 million net foreign exchange loss on the translation of intercompany balances compared to a €24 million net foreign exchange gain in 2020. The translation of intercompany balances was impacted by the movement in the €/$ exchange rate from 1.23 on December 31, 2020, to 1.13 at December 31, 2021. Adjusted net ﬁnancing costs increased to €78 million (2020: €46 million). Equity-accounted investees Our share of proﬁts of associates, net of tax, was €1 million (2020: €6 million); the prior period included a one-time higher result related to Logical Images which was divested in May 2020. Taxation Proﬁt before tax decreased 1% to €929 million (2020: €937 million). The effective tax rate decreased to 21.6% (2020: 23.1%), reﬂecting a one-time release of tax contingencies following the closure of tax audits. Adjusted proﬁt before tax was €1,128 million (2020: €1,084 million), up 12% in constant currencies. The benchmark tax rate on adjusted proﬁt before tax was 21.5% (2020: 23.0%). Earnings per Share Total proﬁt for the year increased 1% to €728 million (2020: €721 million) and diluted earnings per share increased 3% to €2.78 (2020: €2.70). Diluted adjusted EPS was €3.38 (2020: €3.13), up 17% in constant currencies, reﬂecting the increase in adjusted net proﬁt, a lower tax rate, and a 2% reduction in the diluted weighted average number of shares outstanding to 261.8 million (2020: 266.6 million). Return on Invested Capital (ROIC) In 2021, the ROIC was 13.7% (2020: 12.3%), mainly due to a higher adjusted operating proﬁt and a lower benchmark tax rate. Group Financial Review continued Working capital € million 2021 2020 Variance Inventories 65 68 (3) Contract assets – current 138 111 27 Trade receivables 1,008 986 22 Operating other receivables – current 366 269 97 Deferred income – current (1,709) (1,518) (191) Other contract liabilities (80) (66) (14) Trade and other operating payables (909) (784) (125) Operating working capital (1,121) (934) (187) Cash and cash equivalents 1,001 723 278 Non-operating working capital and assets/liabilities classified as held for sale (198) (757) 559 Total (318) (968) 650 ← → Wolters Kluwer 2021 Annual Report 35 The net cash inﬂow before the effect of exchange differences was €554 million (2020: net cash inﬂow of €7 million), due to the net cash from operating activities far outweighing the net cash used in ﬁnancing activities and investing activities. Adjusted operating cash ﬂow was €1,348 million (2020: €1,145 million), up 20% in constant currencies. The cash conversion ratio increased to 112% (2020: 102%), due to substantially higher working capital inﬂows compared to the prior year. Working capital inﬂows were €150 million (2020: €39 million inﬂow) driven by organic revenue growth and improved collections on receivables. Net capital expenditure increased to €239 million (2020: €231 million), remaining at 5.0% of revenues (2020: 5.0%). Cash payments related to leases, including €9 million of lease interest paid, declined to €77 million (2020: €85 million), due to reduced real estate footprint. Net interest paid, excluding lease interest paid, increased to €57 million (2020: €54 million). Corporate income tax paid increased to €277 million (2020: €221 million), due to the timing of tax payments and higher taxable income. Restructuring led to a net cash outﬂow of €33 million, largely reﬂecting cash appropriation of provisions amounting to €34 million (compared to a net increase of €17 million in the prior year). As a result, adjusted free cash ﬂow was €1,010 million (2020: €907 million), up 11% overall and up 15% in constant currencies. Dividends paid to shareholders amounted to €373 million (2020: €334 million), while share repurchases totaled €410 million (2020: €350 million). Acquisitions and divestments Total acquisition spending, net of cash acquired and including €5 million in transaction costs, was €113 million (2020: €406 million), mainly relating to the acquisitions of Vanguard Software in Tax & Accounting (€93 million) and LicenseLogix in Governance Risk & Compliance (€10 million). On a pro-forma basis, these acquisitions generated revenues of €19 million in 2021, of which €9 million was consolidated in 2021. Earnouts or deferred payments on acquisitions were €0 million in 2021 (2020: €6 million). Divestment proceeds, net of cash disposed and transaction costs, were €68 million (2020: €48 million) and related primarily to the divestment of the U.S. legal education assets. Leverage and ﬁnancial policy Wolters Kluwer uses its cash ﬂow to invest in the business organically and through acquisitions, to maintain optimal leverage, and provide returns to shareholders. We regularly assess our ﬁnancial position and evaluate the appropriate level of debt in view of our expectations for cash ﬂow, investment plans, interest rates, and capital market conditions. While we may temporarily deviate from our leverage target at times, we continue to believe that, in the longer run, a net- debt-to-EBITDA ratio of around 2.5x remains appropriate for our business given the high proportion of recurring revenues and resilient cash ﬂow. Cash ﬂow € million, unless otherwise stated 2021 2020 Variance Net cash from operating activities 1,292 1,197 95 Net cash used in investing activities (287) (563) 276 Net cash used in financing activities (451) (627) 176 Adjusted operating cash flow 1,348 1,145 203 Net capital expenditure (239) (231) (8) Adjusted free cash flow 1,010 907 103 Diluted adjusted free cash flow per share (€) 3.87 3.40 0.47 Cash conversion ratio (%) 112 102 36 Wolters Kluwer 2021 Annual Report Our purpose is to deliver deep impact when it matters most. Our products and services support the knowledge, decision- making, and effectiveness of our professional customers, protect people’s health and prosperity, andcontribute to a safe and just society. Sustainability Wolters Kluwer 2021 Annual Report36 Strategic Report | Governance | Financial Statements ← → Wolters Kluwer 2021 Annual Report 37 SECTION OVERVIEW → Our approach to sustainability page 37 → Materiality page 38 → Customer focus and relationships page 40 → Product impact and innovation page 40 → Employee engagement and talent management page 42 → Diversity, equity, inclusion, and belonging page 44 → Cybersecurity and data privacy page 46 → Ethics, compliance, and governance page 47 → Environmental responsibility page 48 → Social responsibility page 49 → Non-ﬁnancial information statement page 51 → EU Taxonomy regulation disclosure page52 OUR APPROACH TO SUSTAINABILITY We have an ongoing commitment to cultivating a creative work environment with highly engaged employees, harnessing the diversity of our communities, contributing to society, and playing our part in protecting the environment. Sustainability underpins how we do business and how we respect and create value for our stakeholders. It has been ingrained in our processes, policies, business values, and company culture for many years. Today, ESG goals are a key element of our corporate strategy, with ESG targets incorporated into executive remuneration and embedded into our credit facility. We focus on the areas most material to our stakeholders and our business as we manage ESG risks and opportunities. Our sustainable approach to creating long-term value will enable us to deliver positive outcomes for our stakeholders, minimize negative impacts, contribute to society and respect the environment. In this chapter, we describe our approach and performance with regard to key Environmental, Social, and Governance (ESG) issues. We aim to be clear and transparent in our reporting. We are guided by international guidelines, such as the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, the United Nations Guiding Principles on Business and Human Rights (UNGPs), and the principles of the United Nations Global Compact (UNGC). This annual report includes selected data on material ESG topics. The full overview of our ESG data disclosures can be found in our 2021 ESG Data Overview. Our ESG data reporting has been prepared in accordance with the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) frameworks. The 2021 ESG Data Overview and GRI, SASB, and UN Global Compact disclosures are available at www.wolterskluwer.com/en/investors/ ﬁnancials/annual-reports SUSTAINABILITY RATINGS 38 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Sustainability continued We undertake periodic materiality assessments to identify economic, environmental, social, and governance issues that are linked to the interests of our stakeholders and are relevant to the success of our business. We assess the level of importance of these issues to our stakeholders and to Wolters Kluwer. This analysis helps us prioritize the issues that matter most and ensure we remain focused on those that have the most impact on our business and our stakeholder groups. Issue identiﬁcation In 2020, we performed a comprehensive materiality assessment. The process, led by a third party, started with research to identify 25 key topics, which were grouped into four different categories: environmental, social, governance, and product. The research included a review of market trends, peers and competitors, reporting frameworks, and previous materiality analyses. Stakeholder engagement, issue prioritization, and results We took views on the materiality of these 25 topics from a broad group of internal and external stakeholders, including customers, employees, senior executives, investors, business partners, and suppliers, through interviews and surveys. Finally, the topics were ranked, based on the stakeholder feedback, and the results validated against the company’s corporate risk assessment. The topics that were identiﬁed as most material are shown in the upper right corner of the matrix diagram. This report focuses on the six topics most material to our business: customer focus and relationships; product impact and innovation; employee engagement and talent management; diversity, equity, inclusion, and belonging; cybersecurity and data privacy; and ethics, compliance, and governance. MATERIALITY Sustainability strategy Our sustainability strategy ENGAGE encourages our employees to focus on six sustainability pillars, including four of the most material topics as identiﬁed by stakeholders. Each of the pillars in this strategy includes a range of initiatives and action plans. During 2021, progress was made across all pillars, described in more detail in the sections below. ← → Wolters Kluwer 2021 Annual Report 39 Materiality refresh In 2021, we performed a consistency check on the 2020 materiality assessment and concluded that the 2020 assessment remained valid for 2021. The only change made was to add belonging to diversity, equity, and inclusion. See the section Diversity, Equity, Inclusion, and Belonging for more information. The materiality matrix highlights the importance of social and governance factors for our business. As a provider of digital information, software, and services, our business is mainly driven by the innovation and commitment of our talented, engaged, and diverse workforce. Since the environmental impact of our industry is relatively low, environmental factors are generally not seen as very material to the future of our business. Nonetheless, we believe we have a responsibility to society at large to contribute to reducing carbon emissions. The section Environmental Responsibility sets out our plans to improve the quality and completeness of our emissions data and our ambition to follow the recommendations of the Task Force on Climate-related Financial Disclosures. MATERIALITY CONTINUED Level of materiality: High Medium Low Environmental topics  Circular economy  Climate resilience  Carbon footprint  Waste and water management Social topics  Employee engagement and talent management  Employee compensation  Employee health, safety, and well-being  Diversity, equity, inclusion, and belonging  Labor practices  Training and professional development  Community involvement  Employee volunteering  Responsible supply chain management Governance topics  Board diversity  Cybersecurity and data privacy  Ethics, compliance, and governance  Executive compensation  Public policy  Responsible Artiﬁcial Intelligence (AI)  Tax responsibility Product topics  Products design and lifecycle management  Customer focus and relationships  Editorial quality and integrity  IP and copyright protection  Product impact and innovation Importance to stakeholders Impact on business outcome 2 418 1 Low Materiality matrix Medium High 17 12 20 3 11 9 19 14 13 23 24 21 7 6 10 22 15 25 5 8 16 40 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Why is this topic important? Our stakeholders recognize that product impact and innovation are critical to organic growth and to our transformation into an expert solutions company. Over the years, we delivered on our strategy to consistently invest 8%-10% of our annual revenues in product development, a large portion of which supports innovation. Our central product development team, the Digital eXperience Group, plays a key role, working closely with business units and with customers to drive innovation using a customer-centric process and leveraging their centers of excellence in advanced technologies. Our approach We celebrate innovation through our annual Global Innovation Awards (GIA), which rewards teams who develop innovative solutions that improve customer experiences or transform our own internal processes. Each year, hundreds of employees take up the challenge, demonstrating their sense of purpose and creativity, and fostering collaboration across the business. We measure innovation by tracking our product development spend by business unit and by regularly monitoring progress against product roadmaps. We track GIA submissions and winners. GIA ideas that were launched in the market include CCH IQ, LegalVIEW BillAnalyzer, Jurimetria, UCC Manage, Ilien Motor Vehicle, and OneSumX Proviso. We also monitor our performance in various industry awards and rankings that focus on innovation, such as the Best in KLAS Awards and the Stevie Awards. Why is this topic important? The issue of customer focus and relationships is viewed by internal and external stakeholders as the single most material factor for the long-term sustainability of our business. Employees view it as important to our purpose of delivering impact when it matters most and fundamental to our core value of focusing on our customers’ success. Shareholders consider it critical to the long-term growth and competitiveness of the company. Our approach We build and develop customer relationships through a variety of touchpoints, especially through our sales, marketing, customer support, professional services, and product development teams. In addition to regular customer contact, our teams host user conferences and participate in industry events. We conduct regular customer surveys and market research. Several of our businesses maintain customer advisory panels. In designing, building, and enhancing our solutions, we work closely with customers before, during, and after the product development phase to ensure we meet user needs. We measure customer focus and relationships across Wolters Kluwer primarily by tracking customer retention, product renewal rates, and net promoter scores (NPS). For our established expert solutions and other leading subscription-based digital information products and services, we strive to maintain or achieve product renewal rates of 90% or more and a top-three NPS score. In 2021, renewal rates for our largest subscription-based digital information products and services were maintained at high levels (above 90%) and NPS scores for more than half of our top products were maintained or improved. CUSTOMER FOCUS AND RELATIONSHIPS Sustainability continued PRODUCT IMPACT AND INNOVATION ← → Wolters Kluwer 2021 Annual Report 41 In 2021, product development spend was at the upper end of our stated goal of 8%-10% of total revenues. While the number of GIA submissions were lower than in 2020, the quality of the ideas submitted was high. Six concepts were selected as winners and provided with start-up funding. We believe that when teams are able to gather and brainstorm in person, creativity and ideation will recover. Product impact and innovation 2021 2020 2019 Product development spending, % of revenues 10% 9% 10% Number of submissions to Global Innovation Awards 154 219 260 Number of Global Innovation Awards winners 6 6 4 Our products and services help to protect people’s health and prosperity and contribute to a safe and just society by providing deep insights and knowledge to professionals. Our Product Impact Portfolio analysis, included in the 2021 ESG Data Overview, highlights the positive impacts that three top expert solutions from each division have on customers and society. Each product analyzed is scored on whether it has a positive impact on economic, social, and environmental indicators. Selected highlights of this analysis are provided below. We are committed to the United Nations Sustainable Development Goals (SDGs), which address the economic, social, and environmental challenges the world faces. We support and contribute to the SDGs through the innovative products and services we deliver, through our engaged employees, through our sustainable returns, and by making an impact on society. As shown in our Value Creation Model, we have identiﬁed four SDGs to which we believe we can contribute most, as an investor, innovator, employer, and provider of products and services. PRODUCT IMPACT AND INNOVATION CONTINUED Product Customer benefit Societal benefit UpToDate • Improves medical outcomes • Enhances efﬁcient use of resources • Contributes to global health and well-being • Improves clinical decision-making of health professionals • Promotes equality by making expert knowledge available free of charge to the charity Mercy Ships and to clinicians who serve vulnerable populations CCH Tagetik • Improves efﬁciency of corporate ﬁnance workﬂow • Enables compliance with regulations • Contributes to innovation by embedding predictive analytics and machine learning • Supports regulatory compliance and transparency OneSumX • Mitigates risks in banking • Enables compliance with regulations • Promotes transparency of regulatory reporting • Secures institutional assets and reputation • Enhances the security of banking systems Enablon • Helps mitigate environmental, health, and safety risks • Improves efﬁciency of corporate sustainability data collection and reporting • Contributes to global health and safety • Supports regulatory compliance and transparency 42 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Why is this topic important? Our employees are instrumental to the success of our company. Attracting, developing, and retaining talented employees is a material issue for our business and a strategic priority. Employee engagement is a key driver of employee performance and ultimately of business results. To underscore the importance of this topic, a target for employee engagement was included in the Executive Board remuneration in 2021. For more information, see Remuneration Report. Our approach We measure our performance in the area of human talent by monitoring employee engagement, turnover rates, and other data. See table below for selected data. We conduct annual surveys to measure employee engagement, the key objective of which is to identify areas of strength and opportunity so that we can make Wolters Kluwer an even better place to work. In 2021, we conducted an additional survey to obtain more speciﬁc feedback on the diversity, equity, and inclusion aspects of our workplace culture. See the section Diversity, Equity, Inclusion, and Belonging for a more in-depth discussion. The results of our 2021 employee engagement survey indicate that engagement remains above the high-performing norm, an independently-deﬁned standard based on leading companies that qualify for Fortune’s World’s Most Admired Companies and Great Place to Work rankings. Although there was a decrease over 2021, this is in line with market trend and should be seen in the context of the ongoing impact of the global pandemic. Through the survey, our employees told us that they are treated with dignity and respect and that we effectively collaborate with each other, even though we have had to learn to work differently during the global pandemic. The survey also indicated that while progress has been made, there remains room for further improvement in the areas of career development, belonging, and agility, which we plan to address in the coming years. With the economic recovery, there was a rise in talent movement globally in 2021; we also saw an increase in voluntary turnover. We took action to address this and ended the year with a turnover rate that is lower than the average from the 2021 Gartner Technology Industry Benchmark. Employee engagement and talent management 2021 2020 2019 Employee engagement score 1 74% 84% 77% Engagement relative to high-performing norm Above Above Above Voluntary turnover 11.9% 7.1% 8.8% Non-voluntary turnover 3.1% 4.1% 3.8% Total turnover 15.0% 11.2% 12.6% Employees that accessed optional learning 71% 55% – 1 Employee engagement score is based on surveys and high-performing norm based on standard from independent market-leading survey partners. Results are from a shorter pulse survey administered to 20% of employees in 2019 and all employees in 2020, and a full survey administered to all employees in 2021. EMPLOYEE ENGAGEMENT AND TALENTMANAGEMENT Sustainability continued ← → Wolters Kluwer 2021 Annual Report 43 Talent management We have a comprehensive global talent management program, which includes recruitment, new employee on-boarding, skills training, career development, annual performance reviews, and succession planning. We will be expanding our current focus on developing manager capabilities to provide more targeted support. In 2021, we performed an assessment of manager needs, which led to the identiﬁcation of additional curricula that will be launched in 2022. These courses will support managers in employee coaching and development, cultivating an inclusive work environment, and preparation for a safe return to our ofﬁces. Our annual Leadership Summit, held virtually in June 2021, reﬂected our commitment to help our leaders engage with each other, exchange ideas, and build the skills and capabilities to achieve our strategic goals as a company. We have an annual performance review cycle in place, which includes setting performance and development goals, regular check-ins, and employee self-evaluations. Each year, our managers and employees set goals that ensure their work contributes to our strategy and creates value over the long term. In 2021, we launched a new learning management system that is integrated into our global Human Resources platform and offers employees easy access to required training and a robust library of optional learning opportunities, which support employee growth and development. We continued our all-employee development campaign #Grow, which is designed to help make growth and development part of our daily work-life. Over the year, we saw our employees increasingly engage in discretionary learning, spending an average of six hours per engaged learner. Employee health, safety, and well-being The health, safety, and well-being of our employees is of utmost importance at Wolters Kluwer, especially as the global pandemic has continued. In early 2021, we launched an enhanced global well-being program to include an expanded set of resources, programs, and content focused on building resilience. The program aims to support employees to achieve their personal best in emotional, physical, social, and ﬁnancial well-being. We collaborate with best-in-class vendor partners to provide content and resources to motivate positive behavior changes and engagement in whole-self care. Details of this program are provided below. We also provide our global employees with ﬂexible work arrangements to help balance the various professional and personal commitments in their lives. EMPLOYEE ENGAGEMENT AND TALENTMANAGEMENT CONTINUED CASE STUDY: WOLTERS KLUWER GLOBAL WELLBEING PROGRAM FOREMPLOYEES Keyresources provided to employees include: • A global employee assistance program that provides conﬁdential individual counseling 24/7, help with work/life balance, and support for managers during critical incidents; • Courses and webinars on resilience, mindfulness, and well-being during challenging times; • Virtual on-demand well-being programming, including physical ﬁtness classes, meditation, andmindfulness; • Resources to support personal resilience with strategies for coping with work-related stress and burnout; • A COVID-19 information series, including an interactive education program and live Q&A sessions with experts in the ﬁeld; and • Ergonomics program to support the work-from-home environment. 44 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements DIVERSITY, EQUITY, INCLUSION, ANDBELONGING Why is this topic important? We believe that diversity in our workforce drives better decisions, innovation, and overall performance. While diversity has always been important at Wolters Kluwer, we are increasing our focus on diversity, equity, inclusion, and belonging (DEIB). We aim to provide a welcoming environment and equitable opportunities for all employees regardless of background, nationality, race, ethnicity, gender, gender identity, age, sexual orientation, marital status, disability, or religion. This principle is ingrained in our company values and articulated in our Code of Business Ethics. Our approach We have a policy that the Supervisory Board, Executive Board, and the division CEOs should be at least 30% female and at least 30% male. For many years, our gender diversity achievements have been ahead of these targets. See Corporate Governance for more information. In 2021, a DEIB goal was included in the Executive Board remuneration. For more information, see Remuneration Report. Also, we established a new executive role to lead our efforts around DEIB. In August 2021, we completed our ﬁrst diversity, equity, and inclusion survey, resulting in a baseline quantitative measure of belonging. Belonging measures the extent to which employees believe they can bring their authentic selves to work and be accepted for who they are. We established a baseline belonging score of 72 which is in line with the 2021 average for global companies. As we advance our DEIB efforts in 2022, we aspire to improve upon our baseline score over time. The analysis highlighted several areas of strength and opportunity that are reﬂected in our integrated action plan for 2022 to drive stronger belonging and employee engagement. A target to improve the belonging score will be included in the 2022 remuneration for the Executive Board and senior executives. To drive progress, we have stepped up our talent sourcing efforts to increase candidate ﬂow from under-represented groups, provided enhanced interview training for hiring managers focused on unconscious bias, and increased our participation in a variety of diversity recruiting events. We piloted an internship program for female university students in our Pune, India, technology center. The majority of the interns from this pilot program ultimately joined Wolters Kluwer as full-time employees. We also enhanced our health and well-being beneﬁts to be more attractive to diverse employees and candidates. In addition, our women's networks and diversity councils within the divisions continued to evolve. In an effort to be transparent, we are disclosing the ethnicity representation of our employees in the United States, where it is legally permissible to collect this data. Sustainability continued ← → Wolters Kluwer 2021 Annual Report 45 DIVERSITY, EQUITY, INCLUSION, ANDBELONGING CONTINUED Diversity, equity, inclusion, and belonging 2021 2020 2019 Belonging score 1 72 – – Gender ratio, % female Total workforce 46% 47% 47% Executive Board 50% 50% 50% Division CEOs 50% 50% 75% Managers 2 38% 38% 39% Non-managers 3 47% 48% 49% Race/ethnicity ratio, % of U.S. workforce 4 Asian 12.3% – – Black or African American 6.8% – – Hispanic or Latino 5.9% – – White 70.0% – – Other race or ethnicity 5 1.6% – – Unknown or not provided 3.4% – – 1 Belonging score is based on a survey by an independent market-leading survey partner. 2 Managers are deﬁned as employees having three or more direct reports. 3 Non-managers are deﬁned as employees having less than three direct reports (0-1-2). 4 Races/ethnicities reported mirror those used for required federal reporting in the United States. 5 Other races/ethnicities include persons who identify as being of two or more races, Native American orAlaska Native, Native Hawaiian or Other Paciﬁc Islander. CASE STUDY: WOMEN IN TECHNOLOGY  GRACE HOPPER CELEBRATION Wolters Kluwer’s Digital eXperience Group (DXG) participated in the inaugural virtual gatherings of female technologists in Europe, Middle East & Africa in May 2021: the Grace Hopper Celebration EMEA produced by the AnitaB organization. The Grace Hopper Celebration is the world’s leading event for female technologists, enabling them to learn, network, and celebrate their achievements and to engage with organizations that view technology innovation as a strategic imperative. AnitaB is a non-proﬁt social enterprise that aims to bring the research and career interests of women in computing to the forefront and to highlight the contributions of women intech. For DXG, this was an important talent recruitment event in which several of our female software engineers and other technologists took part, generating exposure for Wolters Kluwer as a global employer and digital leader, while raising awareness of our commitment to diversity. Wolters Kluwer employees engaged in positive conversations with conference attendees and drove interest to the careers section of our website. 46 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Why is this topic important? As a digital company, cybersecurity and data privacy are important to the success of our business. Customers rely on us to deliver our platforms and services safely and reliably, while safeguarding their data. We are committed to protecting our employees’ and customers’ personal and professional information. We deliver on this promise by keeping information secure and respecting the rights of individuals to protect their personal information. Our approach Cybersecurity Our global information security program is built on people, processes, and technology collectively protecting the organization, our products, and customers. The program has a three-tiered management structure, and is overseen by the Security Council, comprising senior leadership from all our divisions and functional areas. The VP, Global Information Security is responsible for oversight, management, and monitoring of the program. We perform regular information security risk assessments to assess and evaluate the effectiveness of the security program. The program is assessed annually by an independent third party. In 2020, we adopted the National Institute of Standards and Technology, Cybersecurity Framework (NIST-CSF) to expand the maturity-based model of our cybersecurity program into a risk-based model. To monitor, manage, and respond to potential security threats, we have a cross-functional global information security incident response team that promptly analyzes potential security incidents, to assess the impact, determine if any immediate risk exists, and take immediate actions to mitigate any damage. We maintain a written global information security program of policies, procedures, and controls aligned to NIST-CSF, ISO 27001, and other equivalent standards. These govern the processing, storage, transmission, and security of data. In 2021, we further advanced our availability, resilience, and cybersecurity position by rolling out new capabilities. We continued the ongoing security awareness through phishing email tests and completed a NIST-CSF maturity assessment. Cybersecurity training was completed by 99% of our active employees. A target for cybersecurity maturity was included in the Executive Board remuneration in 2021. Our indexed cybersecurity maturity score increased from 100.0 in 2020 to 105.6 in 2021. For more information, see Remuneration Report. We maintain sufﬁcient controls to meet certiﬁcation and attestation requirements for the objectives stated in ISO 27001 and in SOC 1 and SOC 2 Type 2 for the security program. For select systems, applications and services, we receive third-party audits of our compliance with SOC 2 Type 2 annually. Data privacy We foster a culture that respects the data privacy rights of individuals by promoting data privacy as a core company value. We strive to embed privacy across disciplines. We have a comprehensive privacy program and a privacy governance organization responsible for implementing policies and procedures that are designed to ensure compliance with privacy laws and regulations. We have set the EU General Data Protection Regulation (GDPR) as our global baseline reference and embed privacy rights in our policies, design, processes, and training. We train our employees in the safeguarding and processing of personal information and implement policies relating to the rights of individuals and privacy by design. We inform our customers about our privacy practices in various ways, including by means of a Privacy & Cookie notice on our global website and as part of our marketing practices. We explain what personal information we collect, use, and disclose, and inform customers of their rights and the choices they can make about the sharing of their information. Sustainability continued CYBERSECURITY AND DATA PRIVACY 99% of our active employees completed cybersecurity and data privacy training ← → Wolters Kluwer 2021 Annual Report 47 Our customers demand a strong and sound data privacy strategy and the secure storage, handling, and processing of their data – always. A strong data privacy program is therefore essential to protecting our company’s reputation and to our ability to offer expert solutions. Our data privacy strategy consists of three focus areas: • Accelerate the development, implementation, and orchestration of the global privacy baseline across divisions and key countries to reﬂect regulatory developments; • Enhance the level of maturity of the privacy processes; and • Leverage and strengthen privacy awareness across the company. In 2021, 99% of our employees completed global data privacy awareness training as part of our Annual Compliance Training program. We hosted webinars on privacy by design and provided specialized training on artiﬁcial intelligence and data privacy considerations. Why is this topic important? We are committed to protecting our people, environment, assets, and reputation. Good governance is key to upholding our history of high ethical standards and improving our company’s decision-making processes, and forms the foundation of our sustainability strategy. Our ethics and compliance policies and procedures form the basis of our governance framework. Our approach Our Code of Business Ethics forms the basis of our commitment to use high standards of professional conduct and ethics in achieving our goals. Our Code of Business Ethics is published on our internal communications website in various languages for all our employees. In 2021, we launched a new communication plan on our Code of Business Ethics, including newsletters, case studies, and webinars. We also rolled out a new global Anti-Bribery and Anti-Corruption Policy that serves as an extension of our Code of Business Ethics. We implemented enhanced anti-bribery due diligence screening of our partners and suppliers. Annual Compliance Training Our Annual Compliance Training consists of online courses on our Code of Business Ethics, IT and cybersecurity, and data privacy. The training was provided to all active employees globally in 2021 and requires employees to certify in writing that they have read and understood our Code of Business Ethics. New hires receive the training as part of their on-boarding. In 2021, a target for the Annual Compliance Training was included in the Executive Board remuneration. See Remuneration Report for more information. Conﬁdential channels for raising concerns We aim to create a culture where everyone feels conﬁdent to speak up. We encourage our employees to report any concerns, including suspected violations of the Code of Business Ethics or other company policies, to their manager, Human Resources, Legal, or senior management. In addition, SpeakUp – our global reporting system operating through an external provider – offers our employees a conﬁdential channel available 24/7 for reporting concerns to the Ethics & Compliance Committee in their own language, with the option to report anonymously where permitted by law. The Ethics & Compliance Committee reviewed all concerns received in 2021 and took appropriate action. None of these concerns had a material impact on the company. CYBERSECURITY AND DATA PRIVACY CONTINUED ETHICS, COMPLIANCE, AND GOVERNANCE 48 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Ethics and compliance 2021 2020 2019 % of employees who completed Annual Compliance Training 99% 99% 99% Number of SpeakUp concerns 21 19 29 ETHICS, COMPLIANCE, AND GOVERNANCE CONTINUED Sustainability continued We are committed to minimizing our impact on the environment and to addressing the challenges of climate change as they relate to our own operations and our value chain. As a people-centric business, our overall risk related to environmental matters is relatively low, due to the nature of our business activities and the products and services we offer. Nonetheless, we have for many years been committed to managing our use of energy and natural resources in a responsible manner. In recent times, we have seen climate change and environmental impact take on increased importance for our employees, investors, customers, and other stakeholders. This has led us to expand or accelerate programs and policies designed to reduce the environmental impact of our operations. Our efforts to minimize our environmental impact support the COP21 Paris Agreement of December 2016 and the last COP26 Glasgow Climate Pact of November 2021 on limiting global warming. It is our ambition to align our practices and reporting with the guidelines recommended by the Task Force on Climate-related Financial Disclosures (TCFD) and to set science- based targets based on robust emissions data. During 2021, we enhanced our environmental data collection and reporting processes by adding additional checks and balances to ensure more reliable data. We explored setting targets for our scope 1 and 2 emissions and scope 3 business travel emissions, which we have been measuring and reporting on for many years. To achieve our ambition to set science- based targets, we recently kicked off a project with external experts to help us assess our complete greenhouse gas (GHG) footprint (including scope 1, 2, and all categories of scope 3 emissions), evaluate our internally developed targets, support target setting on additional scope 3 categories, and develop an abatement plan across all scopes. This project will also include a gap assessment and roadmap to align with the TCFD recommendations. Once we have determined our GHG footprint and established a baseline based on robust and complete data, we intend to develop and publish science-based targets and a roadmap of how to achieve them. Throughout 2021, we continued to make progress on existing programs to reduce our emissions, as described below. Real estate rationalization Our global Real Estate & Facilities team aims to create sustainable and appealing workspaces for Wolters Kluwer employees, balancing the demand for space, attractive design, and employee engagement with environmental impact and spend per square meter. The team’s real estate rationalization program was stepped up at the start of 2020 in order to help reduce our ofﬁce-linked consumption of energy and water and our waste generation. Since 2020, sustainability certiﬁcates and green ofﬁce standards are part of our selection criteria for new ofﬁces. Our ofﬁces in Madrid and Barcelona (Spain), Chennai (India), and Paris (France) are ISO 14001 certiﬁed. During 2021, the total real estate footprint in square meters was reduced by 7% on an organic basis, mainly by closing smaller ofﬁces. ENVIRONMENTAL RESPONSIBILITY ← → Wolters Kluwer 2021 Annual Report 49 ENVIRONMENTAL RESPONSIBILITY CONTINUED Environmental programs 2021 2020 2019 Real estate rationalization, % reduction in m 2 7% 7% – Number of data centers closed 21 11 – Number of on-premise servers decommissioned 2,838 – – Migration of servers to the energy-efﬁcient cloud hosting providers Over the past decade, we have been migrating customer applications and internal systems from on-premise servers to the cloud. Transitioning to the cloud brings not only customer beneﬁts in terms of improved cybersecurity protection and increased mobility, availability, and standardization, it also helps reduce our carbon footprint. As our major cloud providers operate on higher energy efﬁciency, and in themselves are pursuing net zero emissions goals, we reduce our emissions by moving our applications to the cloud and by consolidating and decommissioning our on-premise data centers. In the selection of new cloud providers, carbon emission is one of the selection criteria. As part of this program we closed 21 data centers and decommissioned 2,838 servers in 2021. A target for the migration or elimination of on-premise servers to the cloud was included in the Executive Board remuneration in 2021. → See our Remuneration Report onpage 76 Business travel Our business travel policy considers the needs of customers and other stakeholders while encouraging employees to question the ﬁnancial and environmental cost of their travel compared to conducting virtual meetings. In 2020 and 2021, the global pandemic severely restricted business mobility, such that our travel activity has been signiﬁcantly below historical levels. During the global pandemic, employees made much greater use of virtual meetings and events to support our global operations. While we expect travel activity to gradually return (as and when circumstances allow), we now expect that we can hold travel-related emissions per full-time equivalent below 2019 levels by encouraging greater use of virtual meetings and events. We aim to protect people’s health and prosperity and contribute to a safe and just society. Our overall risk with respect to social and human rights-related matters is considered relatively low, due to the markets we operate in, the types of products and services we deliver, our highly qualiﬁed employees, and the customers and suppliers we deal with. Protecting human rights We support human rights as outlined in the Universal Declaration of Human Rights, the core standards of the International Labor Organization, the United Nations Global Compact, and the United Nations Guiding Principles on Business and Human Rights. We strive to ensure that our own activities do not infringe on human rights. We expect our business partners to support the same human rights standards by committing to our Supplier Code of Conduct or an equivalent standard. Our approach to human rights is emphasized in our Code of Business Ethics and our Human Rights Policy, and includes topics, such as equal opportunity and non- discrimination, health and safety, and fair pay. Feedback from our employees is very important: we actively engage with works councils and participate in collective bargaining where applicable. We monitor our employee compensation to ensure that we provide a living wage to our employees. SOCIAL RESPONSIBILITY 50 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Sustainability continued We periodically compare our wages to the Global Living Wage Coalition (GLWC) benchmark, in countries where such a benchmark is available. The comparison against the GLWC’s 2020 benchmarks indicates that our employees are paid above the living wage standard in countries covered by the Coalition. Responsible supply chain We expect our suppliers to meet the same social and environmental standards as we are committed to. Through our comprehensive third-party risk management program, we engage with our suppliers to ensure we have a responsible supply chain throughout our operations. Suppliers who are managed through our central supplier database are required to complete a due diligence questionnaire providing information on their policies for data security and data privacy, human rights and labor conditions, environmental footprint, and more. As part of this, we also request our suppliers to sign our Supplier Code of Conduct or to have their own equivalent standard, committing them to following applicable laws and regulations in areas such as human rights, labor conditions, anti-bribery, and the environment. Based on the supplier risk classiﬁcation, this due diligence is repeated every one to three years. In 2021, the number of suppliers that are centrally managed was increased and more suppliers were invited to the due diligence questionnaire. Responsible supply chain 2021 2020 2019 Number of suppliers that have signed our Supplier Code of Conduct or have an equivalent standard 900 490 261 % of centrally managed suppliers that completed the due diligence questionnaire 91% 98% 90% Community involvement and volunteering We provide knowledge, experience, resources, and funding to support local communities. Our people, products, and services are available in areas of need to make a sustainable, long-term positive impact. We support community efforts that are aligned with our strategy and the UN Sustainable Development Goals we focus on, have a high degree of local impact and create personal engagement amongst our employees. In 2021, our businesses engaged in over 100 community projects. One of these products provided over 35,000 clinicians in resource limited areas with free access to UpToDate, training, and support. Community contributions in thousands of euros 2021 2020 2019 Community contributions in cash 1,508 1,136 759 Community contributions in kind 3,586 2,906 813 Management cost related to community contributions 43 35 35 Total 5,137 4,077 1,607 Our Volunteer Day Off program offers all employees up to one day off each year to spend supporting eligible non-proﬁt organizations. In 2021, 292 days were spent by employees volunteering under the program. Our Green is Green program is a voluntary network of employees who champion environmentally-sound practices. With the majority of ofﬁces closed for most of 2021 due to the global pandemic, the Green is Green network focused on raising awareness by organizing and participating in virtual events, including an all-employee webinar on the prevention of global warming. Also, several teams around the world participated in tree planting activities and joined World Cleanup Day by removing litter and waste from environmental habitats. SOCIAL RESPONSIBILITY CONTINUED 292 days were spent by employees volunteering ← → Wolters Kluwer 2021 Annual Report 51 We disclose non-ﬁnancial information as required under the Non-Financial Information Decree (Besluit bekendmaking niet-ﬁnanciële informatie) and section 2:391(1) of the Dutch Civil Code. As such, we have issued a non-ﬁnancial information statement. The table below provides an overview of the relevant sections per topic. Responsible supplychain Sub-topic Relevant sections of annual report Business model Description of the company’s businessmodel Business Model and Strategy Stakeholders and Value Creation Environmental matters Description of policies Outcome of policies How risks are managed Non-financial key performance indicators: • % revenues from digital and services; • Number of suppliers that signedourSupplier CodeofConduct orhavetheir ownequivalent; • Real estate rationalization percentage reduction; and • Number of servers decommissioned. Environmental Responsibility Social Responsibility/Responsible supply chain Risk Management/Operational resilience Materiality Social and employee matters Description of policies Outcome of policies How risks are managed Non-financial key performance indicators: • Percentage of female diversity; • Percentage of ethnic diversity (U.S.); • Employee engagement score; • Employee belonging score; • Employee turnover rate; and • Community contributions. Employee Engagement and TalentManagement Diversity, Equity, Inclusion, and Belonging Social Responsibility Risk Management/People and organization Materiality Human rights matters Description of policies Outcome of policies How risks are managed Non-financial key performance indicators: • Number of suppliers that signedourSupplier CodeofConduct orhavetheir ownequivalent; and • Living wage benchmark. Social Responsibility Materiality Risk Management/Regulatory andcompliance Anti-corruption and bribery matters Description of policies Outcome of policies How risks are managed Non-financial key performance indicators: • Percentage of employees that completed the AnnualCompliance Training; • Number of SpeakUp concerns; and • Number of suppliers that signed ourSupplier CodeofConduct orhavetheir own equivalent. Ethics, Compliance, and Governance Social Responsibility/Responsible supply chain Materiality Risk Management/Corruption andbribery NONFINANCIAL INFORMATION STATEMENT 52 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Sustainability continued We disclose information on how and to what extent our activities are associated with economic activities that qualify as environmentally sustainable in accordance with Regulation of the European Union 2020/852 (Taxonomy Regulation). The Taxonomy Regulation lays out a classiﬁcation system to deﬁne environmentally sustainable economic activities based on technical screening criteria. During 2021, we reviewed our economic activities against the technical screening criteria for economic activities with signiﬁcant contribution to climate change mitigation and adaptation (as described in Annex I and Annex II of the Delegated Act supplementing the Taxonomy Regulation), to determine whether we have any Taxonomy-eligible activities. After careful review of the technical screening criteria, we have concluded that none of the economic activities carried out by Wolters Kluwer can be considered as eligible activity under the Taxonomy Regulation. EU TAXONOMY REGULATION DISCLOSURE Governance SECTION OVERVIEW → Corporate Governance page 54 → Risk Management page 58 → Statements by the Executive Board page 69 → Executive Board and Supervisory Board page 70 → Report of the Supervisory Board page 72 → Remuneration Report page 76 ← → Wolters Kluwer 2021 Annual Report 53 This chapter provides an outline of the broad corporate governance structure of the company. Wolters Kluwer N.V., a publicly listed company organized under Dutch law, is the parent company of the Wolters Kluwer group. The corporate governance structure of the company is based on the company’s Articles of Association, the Dutch Civil Code, the Dutch Corporate Governance Code (the ‘Corporate Governance Code’), and all applicable laws and regulations. 54 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Corporate Governance INTRODUCTION The company has a two-tier board structure consisting of an Executive Board and a Supervisory Board. The Executive Board and the Supervisory Board are responsible for the corporate governance structure. This Corporate Governance chapter includes the corporate governance statement as speciﬁed in section 2a of the Decree with respect to the contents of the annual management report (Besluit inhoud bestuursverslag). Wolters Kluwer complies with all Principles and Best Practice Provisions of the Corporate Governance Code, unless stipulated otherwise in this chapter. Potential future material corporate developments might after thoughtful considerations, justify deviations from speciﬁc topics and recommendations as included in the Corporate Governance Code, which will always be clearly explained. The Dutch Corporate Governance Code is available at www.mccg.nl Executive Board The Executive Board consists of the CEO and CFO and is entrusted with the management and day-to-day operations of the company. The Executive Board is responsible for achieving the company’s aims, the strategy and associated risk proﬁle, the development of results, and sustainability. The responsibilities are set out in the By-Laws of the Executive Board, which have been approved by the Supervisory Board. In fulﬁlling its management responsibilities, the Executive Board takes into account the interests of the company and its afﬁliated business, as well as the relevant interests of the company’s stakeholders. The members of the Executive Board are appointed by the General Meeting of Shareholders. The full procedure for appointment and dismissal of members of the Executive Board is explained in the company’s Articles of Association. Information on the members of the Executive Board is provided in the section Executive Board and Supervisory Board. → See our Executive Board and Supervisory Board onpage 70 Remuneration The remuneration of the Executive Board is determined by the Supervisory Board based on the remuneration policy adopted by the General Meeting of Shareholders. In line with Dutch law, which implements the amended European Shareholder Rights Directive, the Supervisory Board proposed an amended remuneration policy to the 2021 Annual General Meeting of Shareholders. The amended policy was adopted by a majority of 97% of the share capital represented. The Supervisory Board is responsible for the execution of the remuneration policy, based on the advice of the Selection and Remuneration Committee. Detailed information about the remuneration policy and its application in 2021 can be found in the Remuneration Report. Under the Long-Term Incentive Plan (LTIP), Executive Board members can earn ordinary shares after a vesting period of three years, subject to clear and objective three-year performance criteria established in advance. In the amended remuneration policy, the Executive Board members are required, in line with Best Practice Provision 3.1.2 (vi) of the Corporate Governance Code, to hold the earned shares (net of taxes) after vesting for two more years (starting with the 2021- 2023 performance period). However, if an Executive Board member is eligible for a company-sponsored deferral program and chooses to participate by deferring LTIP proceeds upon vesting, then such Executive Board member will be required to hold the remaining vested shares or a minimum of 50% of vested shares (net of taxes), whichever is higher, for a two-year period. For the performance periods up to and including the 2020-2022 cycle, Executive Board members are not required to retain the shares for a period of two years post vesting. Term of appointment Since the introduction of the ﬁrst Corporate Governance Code in 2004, Executive Board members are appointed for a period of four years, after which reappointment is possible, in line with Best Practice Provision 2.2.1 of the Corporate Governance Code. The existing contract with Ms. McKinstry, who was appointed before the introduction of the ﬁrst Corporate Governance Code and has an employment contract for an indeﬁnite period, will remain honored. ← → Wolters Kluwer 2021 Annual Report 55 Severance arrangements With respect to future Executive Board appointments, the company will, as a policy, comply with Best Practice Provision 3.2.3 of the Corporate Governance Code regarding the maximum severance remuneration in the event of dismissal. In line with this Best Practice Provision, the contract with Mr. Entricken contains a severance payment of one year’s base salary. However, the company will honor the existing contract with Ms. McKinstry who was appointed before the introduction of the ﬁrst Dutch Corporate Governance Code. Change of control The employment contracts of the Executive Board members and a small group of senior executives contain stipulations with respect to a change of control of the company. According to these stipulations, in the case of a change of control, the relevant persons will receive 100% of the number of conditional rights on shares awarded to them with respect to pending Long-Term Incentive Plans of which the performance periods have not yet ended. In addition, they are entitled to a cash severance payment if their employment agreements would end following a change of control. Supervisory Board The Supervisory Board supervises the policies of the Executive Board and the general affairs of the company and its enterprise, taking into account the relevant interests of the company’s stakeholders, and advises the Executive Board. The supervision includes the effectiveness of the company’s internal risk management and control systems and the integrity and quality of the ﬁnancial reporting. The Supervisory Board also has due regard for sustainability matters. In addition, certain resolutions of the Executive Board must be approved by the Supervisory Board. These resolutions are listed in the By-Laws of the Supervisory Board and include: • Transactions in which there are conﬂicts of interest with Executive Board members that are of material signiﬁcance for the company or the Executive Board member; • Acquisitions or divestments of which the value is at least equal to 1% of the consolidated revenues of the company; • The issuance of new shares or granting of rights to subscribe for shares; and • The issuance of bonds or other external ﬁnancing of which the value exceeds 2.5% of annual consolidated revenues. The responsibilities of the Supervisory Board are set out in the By-Laws of the Supervisory Board. Appointment and composition The members of the Supervisory Board are appointed by the General Meeting of Shareholders. The full procedure of appointment and dismissal of Supervisory Board members is explained in the company’s Articles of Association. The current composition of the Supervisory Board can be found in the sections Executive Board and Supervisory Board, and Report of the Supervisory Board. The composition of the Supervisory Board will always be such that the members are able to act critically and independently of one another, the Executive Board, and any particular interests. As a policy, the Supervisory Board in principle aims for all of its members to be independent of the company, which is currently the case. The independence of Supervisory Board members is monitored on an ongoing basis, based on the criteria of independence as set out in Best Practice Provisions 2.1.7 and 2.1.8 of the Corporate Governance Code and Clause 1.5 of the Supervisory Board By-Laws. The number of supervisory board memberships of all Supervisory Board members is limited to such extent that the proper performance of their duties is assured. The number of board memberships of all Supervisory Board members is currently in compliance with the maximum number of board seats allowed under Dutch law. Further information on the Supervisory Board members can be found in the section Executive Board and Supervisory Board. → See Executive Board and Supervisory Board onpage 70 Provision of information We consider it important that the Supervisory Board members are well- informed about the business and operations of the company. The Chair of the Supervisory Board, the CEO and Chair of the Executive Board, and the Company Secretary monitor, on an ongoing basis, that the Supervisory Board receives adequate information. In addition, the CEO sends written updates to the Supervisory Board about important events. The Chair of the Supervisory Board and the CEO hold several meetings and calls per year outside of formal meetings, to discuss the course of events at the company. The Supervisory Board also has direct contact with layers of management below Executive Board level. Operating managers, including divisional CEOs, are regularly invited to present to the Supervisory Board on the operations in general and business development. In addition, the company facilitates visits to business units and individual meetings with staff and line managers. Various members of staff also attend Audit Committee meetings. 56 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Insider Dealing Policy The members of the Executive Board and the Supervisory Board are bound to the Wolters Kluwer Insider Dealing Policy and are not allowed to trade in Wolters Kluwer securities when they have inside information or during closed periods. These periods begin either on the ﬁrst business day of the quarter, or 30 calendar days prior to the publication of Wolters Kluwer’s annual results, half-year results, ﬁrst-quarter trading update, and nine-month trading update, whichever is earlier. The day after the announcement of these results or updates, the Board members can trade again, with prior approval of the securities compliance ofﬁcer, which will be granted if they do not have inside information at that point in time. Culture Our purpose is to help professionals deliver deep impact when it matters most. The Executive Board has adopted company values that serve as guidelines for our employees and are at the heart of the company’s future success. Our values propel us to put the customer at the center of everything we do, honor our commitment to continuous improvement and innovation, aim high and deliver the right results, and most importantly: win as a team. Our values are a key part of our company culture and are also integrated into our Code of Business Ethics, that sets forth the ethical standards that are the basis for our decisions and actions, and for achieving our goals. Our Code of Business Ethics provides more speciﬁc guidance on how we live our values. The Executive Board and the Supervisory Board are committed to ensure high standards of ethics and integrity and promote openness through our SpeakUp program. More information on our Code of Business Ethics and SpeakUp program can be found in the chapter Sustainability. → Read more about our Code of Business Ethics onpage 47 Risk management The Executive Board is responsible for identifying and managing the risks associated with the company’s strategy and activities and is supervised by the Supervisory Board. The Audit Committee undertakes preparatory work for the Supervisory Board in this area. Wolters Kluwer has implemented internal risk management and control systems which are embedded in the operations of the businesses to identify signiﬁcant risks to which the company is exposed, and to enable the effective management of those risks. The aim of the systems is to provide a reasonable level of assurance on the reliability of ﬁnancial reporting. For a detailed description of the risks and the internal risk management and control systems, reference is made to Risk Management. → See Risk Management onpage 58 Environmental, Social, and Governance matters The Executive Board and the Supervisory Board are committed to Wolters Kluwer’s sustainability strategy. Throughout the annual report, the separate 2021 Environmental, Social, and Governance Data Overview, and a dedicated section on our website, we report on goals and progress of our sustainability activities and accomplishments. The Environmental, Social, and Governance Data Overview is available at www.wolterskluwer.com/en/investors/ ﬁnancials/annual-reports Shareholders and the General Meeting of Shareholders At least once a year, Wolters Kluwer holds a General Meeting of Shareholders. The agenda of the Annual General Meeting of Shareholders shall in each case contain the report of the Executive Board, the report of the Supervisory Board, the remuneration report, the adoption of the ﬁnancial statements, and the proposal to distribute dividends or other distributions. Resolutions to release the members of the Executive Board and the Supervisory Board from liability for their respective duties is voted on separately. Corporate Governance continued Committees of the Supervisory Board The Supervisory Board has two standing committees: the Audit Committee and the Selection and Remuneration Committee. The responsibilities of these committees can be found in their respective Terms of Reference. A summary of the main activities of these committees, as well as the composition, can be found in the Report of the Supervisory Board. Remuneration The remuneration of the Supervisory Board members is determined by the General Meeting of Shareholders. The remuneration does not depend on the results of the company. The Supervisory Board members do not receive shares or stock options by way of remuneration, nor are they granted loans. The remuneration policy was adopted by the General Meeting of Shareholders in 2020. For more information on remuneration, see Remuneration Report. → See Remuneration Report onpage 76 Diversity The company’s diversity policy for the Supervisory Board, Executive Board, and division CEOs is included as Annex to the Supervisory Board By-Laws. Elements of diversity include nationality, gender, age, and expertise. The target is to have a representation of at least 30% male and at least 30% female, both in the Supervisory Board and the Executive Board, and at the division CEO level. Currently, 43% of the Supervisory Board members are female, 50% of the Executive Board members are female, and 50% of the operating division CEOs are female. The Supervisory Board composition also comprises expertise within the broad information industry as well as speciﬁc market segments in which the company operates. Four nationalities are represented on the Supervisory Board. The composition of the Executive Board and the Supervisory Board is in line with our diversity policy, Dutch law, and the competency, skills, and experience requirements. → See our Executive Board and Supervisory Board onpage 70 50% of the Executive Board members are female ← → Wolters Kluwer 2021 Annual Report 57 In 2021, shareholders with voting rights for approximately 79% of the issued capital of the company were represented at the Annual General Meeting of Shareholders. Shareholders who alone or jointly represent at least half a percent (0.5%) of the issued capital of Wolters Kluwer shall have the right to request the Executive Board or Supervisory Board to put items on the agenda of a General Meeting of Shareholders, provided that such requests are made in writing at least 60 days before a General Meeting of Shareholders. Amendment Articles of Association A resolution to amend the Articles of Association may only be passed by the General Meeting of Shareholders at the proposal of the Executive Board, subject to the approval of the Supervisory Board. The most recent amendment of the Articles of Association took place in 2016. Issuance of shares The Articles of Association of the company determine that shares may be issued at the proposal of the Executive Board and by virtue of a resolution of the General Meeting of Shareholders, subject to designation of the Executive Board by the General Meeting of Shareholders. At the Annual General Meeting of Shareholders of April 22, 2021, the Executive Board was granted the authority for a period of 18 months to issue new shares, with exclusion of pre-emptive rights, subject to approval of the Supervisory Board. The authorization is limited to a maximum of 10% of the issued capital on the date of the meeting. Acquisition of shares in the company Acquisition of shares in the company (share buybacks) may only be effected after authorization by the General Meeting of Shareholders, and while respecting the restrictions imposed by the Articles of Association of the company. At the Annual General Meeting of Shareholders of April 22, 2021, the authorization to acquire shares in the company was granted to the Executive Board for a period of 18 months. The authorization is limited to a maximum of 10% of the issued capital on the date of the meeting. On December 31, 2021, Wolters Kluwer N.V. held 4,323,699 shares in the company (1.65% interest). Preference shares Wolters Kluwer N.V. and the Wolters Kluwer Preference Shares Foundation (the Foundation) have concluded an agreement based on which preference shares can be taken by the Foundation. This option on preference shares is at present a measure that could be considered as a potential protection at Wolters Kluwer against exercising inﬂuence by a third party on the policy of the company without the consent of the Executive Board and the Supervisory Board, including events that could threaten the strategy, continuity, independence, identity, or coherence between the activities of the company. The Foundation is entitled to exercise the option on preference shares in such a way that the number of preference shares taken will be no more than 100% of the number of issued and outstanding ordinary shares at the time of exercise. Among others by the exercise of the option on the preference shares by the Foundation, the Executive Board and the Supervisory Board will have the possibility to determine their position with respect to, for example, a party making a bid on the shares of Wolters Kluwer and its plans, or with respect to a third party that otherwise wishes to exercise decisive inﬂuence, and enables the Boards to examine and implement alternatives. All members of the Board of the Foundation are independent from the company. → See the Report of the Wolters Kluwer Preference Shares Foundation onpage 215 Information pursuant to Decree Clause 10 Take-over Directive The information speciﬁed in both clause 10 of the Take-over Directive and the Decree, which came into force on December 31, 2006 (Decree Clause 10 Take-over Directive), can be found in this chapter and in Wolters Kluwer Shares and Bonds. → See Wolters Kluwer Shares and Bonds onpage 216 Legal structure The ultimate parent company of the Wolters Kluwer group is Wolters Kluwer N.V. In 2002, Wolters Kluwer N.V. abolished the voluntary application of the structure regime (structuurregime). As a consequence, the structure regime became applicable to Wolters Kluwer Holding Nederland B.V., which is the parent company of the Dutch operating subsidiaries. Wolters Kluwer International Holding B.V. is the direct or indirect parent company of the operating subsidiaries outside of the Netherlands. For additional information and documents related to the Corporate Governance structure of Wolters Kluwer, including the Articles of Association, By-Laws of the Executive Board, By-Laws of the Supervisory Board, Terms of Reference of the Audit Committee, Terms of Reference of the Selection and Remuneration Committee, and the Remuneration Policy for the Supervisory Board, please visit the Corporate Governance section on our website. The Articles of Association, By-Laws of the Executive Board, By-Laws of the Supervisory Board, Terms of Reference of the Audit Committee, Terms of Reference of the Selection and Remuneration Committee, and the Remuneration Policy for the Supervisory Board are available at www.wolterskluwer.com/en/investors/ governance/policies-and-articles This section provides an overview of Wolters Kluwer’s approach to risk management, the main risks facing the company and the organization, as well as processes and actions to identify, assess, and mitigate these risks. 58 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Risk Management Responsibility for risk management The Executive Board is responsible for overseeing risk management and internal controls within Wolters Kluwer. The CEO is responsible for Strategic and Operational risks, and the CFO is responsible for Legal & Compliance and Financial & Financial Reporting risks. See page 60 for an overview of these risks. The company has implemented internal risk management and control processes, which are generally integrated into the operations of the businesses. The aim is to timely identify signiﬁcant risks to which the company is exposed, to enable the effective management of those risks, and to provide a reasonable level of assurance on the reliability of the ﬁnancial reporting of the Wolters Kluwer group. The Executive Board reviews an annual assessment of pertinent risks and mitigating actions and diligently evaluates those outcomes against the deﬁned risk appetite. Based on this assessment, the Executive Board reviews the design and effectiveness of the internal risk management and control systems, taking into consideration the company’s risk appetite and the observations and reports of internal assurance functions and the Corporate Risk Committee. The internal risk management and control systems cannot provide absolute assurance regarding the achievement of the company’s objectives or the reliability of the ﬁnancial reporting, or entirely prevent material errors, losses, fraud, and violation of applicable laws and regulations. Managing risks is integrated into the conduct of business of our divisions and operating entities, supported by several staff functions. The Executive Board is informed by division management about risks as part of the regular planning and reporting cycles on divisional and operational entity levels. The Corporate Risk Committee, consisting of representatives of various functional departments, meets periodically and monitors material risks and remediating actions with a focus on company- wide, non-business speciﬁc risks. This committee also oversees the mitigation of certain risks that emerge and require a centralized approach. Risk management and control systems The company has an Internal Control Framework for ﬁnancial reporting (ICF), based on the COSO (Committee of Sponsoring Organizations of the Treadway Commission) 2013 framework, which is designed to provide reasonable assurance that the results of the business are accurately reﬂected in its internal and external ﬁnancial reporting. The ICF is deployed by the operating business units and central functions: the Corporate Ofﬁce, Global Business Services, and the Digital eXperience Group, and reviewed and tested by internal control ofﬁcers. An annual risk assessment program for ﬁnancial and IT general control risks determines the scope and controls to be tested. As part of that scope, key controls are tested annually. The results of testing are reported to the Executive Board, the Audit Committee, and internal auditors on a quarterly basis. Where needed, remedial action plans are designed and implemented to address signiﬁcant risks as derived from internal control testing, and internal and external audits. Internal audit and risk management functions Internal auditing is an independent and objective assurance and consulting activity that is guided by a philosophy of adding value to further improve, where deemed ﬁt for purpose, the maturity of operations of Wolters Kluwer. It assists in accomplishing its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of the organization’s governance, risk management, and internal controls. The global Internal Audit department works according to an audit plan which is discussed with the external auditors, the Executive Board, and the Audit Committee. The plan is approved by the Executive Board and the Supervisory Board. The audit plan is based on risk assessments and focuses on strategy execution, ﬁnancial reporting risks, and operational risks, including IT-related risks. The global Risk Management department facilitates risk prevention, protection, response, and recovery programs via procurement of insurance; incident and related claims management, and business continuity management; loss control programs, and other initiatives to mitigate speciﬁc risks. The Internal Audit, Internal Control, Group Accounting & Reporting, Law and Compliance, Treasury, Tax, and Risk Management departments provide quarterly reports to the Audit Committee and the Executive Board. ← → Wolters Kluwer 2021 Annual Report 59 Risk categories and risk appetite The following pages outline the 22 main risks the company has assessed up to the date of this annual report. It is not the intention to provide an exhaustive description of all possible risks. There may be risks that are not yet known or the company has not yet fully assessed. It is also possible that existing risks have been assessed as not signiﬁcant, which could in the future develop into a material exposure for the company and have a signiﬁcant adverse impact on its business. The company’s risk management and internal control systems have been designed to identify, mitigate, and respond to risks in a timely manner. However, absolute assurance cannot be attained. The risk appetite of the main risks is qualiﬁed as balanced, conservative, or minimal. To achieve its strategic goals, Wolters Kluwer is prepared to take duly balanced risks in certain strategic areas, such as acquisitions, expansion in high- growth countries, and the launch of new innovative products. With respect to other risk categories, the approach of the company towards risks could be qualiﬁed as conservative, and as minimal for regulatory and compliance and ﬁnancial reporting risks. The company carefully weighs risks against potential rewards. Actions to prevent and mitigate risks and uncertainties are summarized for each of the individual risks on the following pages. Wolters Kluwer’s risk proﬁle has been impacted by the global pandemic that has ramiﬁcations across many risk areas. Although this does not lead to major changes in risk ratings, there are shifts in focus within existing risks, mainly by increasing impact and/or probability. STRATEGIC • Economy and markets • Products • Competition • Trends impacting business models • Mergers and acquisitions • Divestments OPERATIONAL • IT and cybersecurity • Supply chain, technological developments, and projects • People and organization • Fraud • Operational resilience • Brand and reputation LEGAL & COMPLIANCE • Regulatory and compliance • Corruption and bribery • Contractual compliance • Intellectual property protection • Third-party claims • Legislative developments FINANCIAL & FINANCIAL REPORTING • Treasury • Post-employment beneﬁts • Taxes • Misstatements, accounting estimates and judgments, and reliability of systems STRATEGIC RISKS Risk description and impact Mitigation Economy and markets Global and regional economic conditions may have a negative effect on several products. The impact of these conditions on the overall portfolio will depend on the severity of the economic issue, the countries or regions affected, and potential government responses. Our more cyclical products, which include training activities, advertising, books (Health/Legal & Regulatory), and lending- related and corporate formation-related transactions (Governance, Risk & Compliance), may be especially sensitive to economic conditions. In 2021, the company continued the progress to shift the company’s portfolio towards digital and high-growth businesses. Recurring revenues represent 80% of the company’s consolidated revenues, reinforcing the company’s resilience. Furthermore, revenues come from a variety of product types, customer segments, and geographic areas, bringing beneﬁts of diversiﬁcation. We also monitor our revenue exposure by geography – the U.S. is our largest market and Europe our second largest. Businesses that are sensitive to cyclical, transactional, or economic trends use cost optimization levers to defend margin as revenues shrink. We continue to focus on retention, cross-sell, upsell, defensive pricing, and pivoting new sales efforts to stronger industries and customer sub-segments. We continue to reshape the business through innovation, product development, and strategic acquisitions and divestments. The company monitors relevant political and macroeconomic issues (e.g., global pandemic, Brexit, energy markets) in terms of risks and opportunities. Products The rate of decline in our legacy print revenues (8% of total revenues), which includes books and print-based subscriptions, may accelerate. Our print revenues are mainly in Health and Legal & Regulatory, with a small amount in Tax & Accounting. The company mitigates the decline of print-related revenues by migrating customers from print to digital products, retention, and upselling opportunities. In addition, the company continues to assess its portfolio, leading to the divestment of non- core businesses being offset by acquisitions in growth markets and segments and organically-driven revenue growth. Competition Wolters Kluwer faces competitive challenges from existing and new competitors, including free availability of some sources of information. The company’s offerings are varied and very specialized, across multiple customer segments – which is a natural defense against the larger existing or new potential competitors. Strategically, we continue to invest 8%-10% of revenues annually in product development to expand offerings in expert solutions and services in order to drive our competitive positioning and support innovation and growth, as well as the ongoing transformation of our information products. 60 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Risk Management continued STRATEGIC RISKS CONTINUED Risk description and impact Mitigation Trends impacting business models Technological, cultural, or demographic trends might affect current business models. These developments could include disruptive technologies, such as the impact of artiﬁcial intelligence on the activities of professionals. In addition, new generations of professional customers might expect a different approach and different tools and solutions to support them in their work. The company actively monitors trends in the markets in which the company operates and that might affect its business in the future. We focus on evolving customer needs by closely monitoring net promoter scores, actively engaging via customer advisory boards, hosting and participating in leading industry conferences, and analyzing competitive offerings. Further, we have expanded the use of advanced technologies and invested in cloud readiness/migration throughout the company via our technology centers of excellence, Global Innovation Awards program, and division-speciﬁc initiatives. Deep understanding of our customers, enabled by strong advanced technological capabilities, continues to allow the company to transform its portfolio of information, expert solutions, and services and ensures alignment with longer-term trends. Finally, maintaining a diverse and technically skilled workforce with a good understanding of current and future customer needs also contributes to safeguarding future value creation by the company. Mergers and acquisitions Risks with respect to acquisitions primarily relate to the integration of the acquired companies, changing economic circumstances, customer retention, controls surrounding their information security and supply chain, competitive dynamics, retaining key personnel, and realization of projected sales and synergies. The company has strict strategic and ﬁnancial criteria for acquiring new businesses. The company’s investment decisions are very selective: the focus is on businesses with proven track records (relatively lower risk) that are relatively predictable. We conduct broad-based due diligence of acquisitions, using internal expertise and external due diligence professionals. We also maintain relationships with preferred due diligence suppliers who have deep expertise in our targeted sectors, and incorporate lessons learned from prior transactions. We are incorporating more focus on privacy and IT security diligence, as well as more standardized IT/software diligence external support. The company uses contractual indemnities and warranties from the seller, and deal structures to retain management and assure alignment between the purchase price and the performance of the acquired company. Generally, acquisitions are expected to be accretive to adjusted earnings per share in year one and cover the company’s weighted average cost of capital within three to ﬁve years. Post-merger integration plans are developed with assistance from the company’s internal corporate integration team. The Executive Board approves an acquisition integration plan prior to completing an acquisition, which is actively managed and monitored after completion. In addition, capital allocation to mergers and acquisitions is balanced across divisions and geographies. Divestments Execution of the company’s strategy is also supported by the divestment of non-core businesses. The ability to successfully divest operations can depend on economic and market circumstances, competitive dynamics, contractual obligations, shared costs within the group, the ability of the business to operate stand-alone, retention of key personnel, the buyer’s ability to realize synergies, and other factors. To mitigate risks related to material divestments, the company prepares carve-out ﬁnancials, usually carries out a vendor due diligence, and engages external experts for such due diligence and execution of the transaction. ← → Wolters Kluwer 2021 Annual Report 61 OPERATIONAL RISKS Risk description and impact Mitigation IT and cybersecurity Wolters Kluwer is exposed to IT-related risks and cyber threats that could affect the IT infrastructure and system availability, applications availability, and the conﬁdentiality and integrity of information. The company takes active steps to mitigate IT and cybersecurity risks by increasing the investment in a globally managed cybersecurity program to effectively manage execution of project plans and provide management accountability at various levels. The company adopted the National Institute of Standards and Technology, Cyber Security Framework (NIST-CSF) to expand the maturity-based model of our cybersecurity program into a risk-based model. Further, we matured our controls for industry requirements by continuously assessing them against industry compliance programs, i.e., SOC 2 and ISO requirements. Also, we further strengthened IT disaster recovery and updated our incident management capabilities to account for cyberattacks. The Annual Compliance Training program for all employees was again provided in 2021, consisting of policy education and online security modules. We have now updated and aligned all local policies/standards with global policies. We implemented a mobile device management solution to protect our mobile devices and are actively implementing multi-factor authentication to all users accessing our main internal IT systems. We completed SOC 2 assessments on our cloud- managed services and conducted risk evaluations for all our critical vendors through questionnaires, and online and on-site assessments. Further, we improved network resilience with the implementation of the network peering point, and customer service availability with the implementation of an additional cloud-based solution. IT General Controls form an integral part of Wolters Kluwer’s Internal Control Framework and are aligned with the Global Information Security Policy. Controls over data and security programs are periodically tested to ensure conﬁdential and sensitive data are adequately protected. The company will continue to strengthen its security and incident response plans throughout 2022. IT and cybersecurity are standing Corporate Risk Committee agenda items. Supply chain, technological developments, and projects Our businesses could be adversely affected by the dependency on our supply chain, including but not limited to parties delivering cloud services, outsourced and offshored data center services, software as a service, software development, and maintenance activities, including back-ofﬁce transactions processing. Implementing new technology-related initiatives for delivering our products and services, as well as achieving cost efﬁciencies through technology/ IT sourcing initiatives, is inherently complex and is subjected to many execution risks during the development and implementation phases. To mitigate supply chain risks, the company applies third-party risk management criteria when choosing external partners and ensures detailed operating and service agreements with these providers. The procurement center of excellence and our third-party risk management function support our sourcing and procurement operations. This includes a sourcing and procurement-wide enterprise solution and streamlined processes to further centralize our supplier onboarding and third-party risk management activities. We monitor progress and performance of key vendors during the term of agreement by oversight boards and program management teams. Centrally managed suppliers are subject to due diligence screening and requested to sign the Wolters Kluwer Supplier Code of Conduct or provide an equivalent standard. Over the past years, we have set a roadmap for consolidation and simpliﬁcation of IT infrastructure and for implementing more service capabilities to support customers. 62 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Risk Management continued OPERATIONAL RISKS CONTINUED Risk description and impact Mitigation Supply chain, technological developments, and projects continued In 2021, with the support of a top tier consulting ﬁrm, we developed a best-in-class supply chain risk management design. The design addresses a consistent and compliant intake process; centralization of third-party data, including service and geographic information; the assessment of risk prior to contracting, including a formalized issue management process; tailored contracting to manage customer expectations; monitoring of service delivery against agreements; and comprehensive population and third-party level reporting to business leadership, with the ability to respond quickly to speciﬁc inquiries. In 2022, we start to implement the new design, which is a multi-year project. In response to market developments caused by the global pandemic (e.g., U.S. vaccine mandates), geopolitical risks, and cybersecurity threats (e.g., Log4j) our priority is to ensure business continuity and legal compliance. We are using different types of supplier base segmentations based on the supplier risk proﬁle and the likelihood of the risk to occur. To quickly inform business leadership of the most accurate information, we created speciﬁc dashboards that are refreshed daily to share major insights and exposures. The Corporate Quality Assurance team aims to improve the success of large change initiatives by providing assurance that key projects can move to the next stage of development or implementation, and by transferring lessons learned from one project to another. This team also supports standardization of change methodologies and frameworks. People and organization The success of the company is highly dependent on its ability to attract, develop, and retain talent with the skills and experience to deliver on current and future requirements. The company continues to prioritize the attraction, development, and retention of the talent we need to support our success. With our new market-leading cloud solutions in place, we are creating an increasingly enhanced experience for candidates and employees as we drive efﬁciency and expand our analytics to support a data-driven approach to recruiting, better understand our workforce and the opportunities we have to increase engagement, target our talent development efforts, and better align reward strategies to market. We continue to expand our rewards infrastructure to maintain competitiveness, particularly in critical talent segments, and are coupling that with expanded talent management programs to build out the next generation of career progression tools, succession planning, and company-sponsored learning programs. We are expanding our Diversity, Equity, Inclusion, and Belonging (DEIB) focus to ensure we have a highly engaged workforce and have named an executive leader to drive our ongoing DEIB efforts. We are continuing our practice of surveying the workforce to ensure management maintains a current view of employee engagement and insights for how to continuously improve it, including how to best support employees during the pandemic, which was and continues to be a priority to ensure all our colleagues stay safe, productive, and connected. ← → Wolters Kluwer 2021 Annual Report 63 OPERATIONAL RISKS CONTINUED Risk description and impact Mitigation Fraud In the conduct of its business, the company may be exposed to internal or external fraudulent or related criminal actions, including cyberfraud/malicious acts where a bad actor attempts to take something of value (tangible or intangible assets) from the company. With the ongoing global pandemic as well as the uptick in ransomware attacks globally, we expect that this risk for both internal and external/cyberfraud risks may be ampliﬁed and continue to assess the measures in place. Governance: The Corporate Risk Committee frequently reviews potential exposure to fraudulent activities in order to take appropriate and timely action. On an ongoing basis, the company evaluates and improves anti-fraud related process controls and procedures to mitigate this risk and build employee awareness across the organization. We conduct regular reviews of adherence to the Code of Business Ethics, the Wolters Kluwer Internal Control Framework, and other relevant frameworks and policies. These include strict policies on segregation of duties, risk-based internal audits, (fraud) risk assessment activities throughout the business, staff training, and information sharing. Identify/protect/detect: We focus on anti-fraud risk awareness at many levels and through many channels. In addition to the activities undertaken by technology and information security functions, anti-fraud awareness activities include, among other things, annual compliance training, company-issued fraud alerts, and anti-fraud/anti- cybercrime workshops and training sessions within at-risk businesses and functions. We use case studies and best practices to further raise global fraud awareness and reduce social engineering risks. We also consider fraud risk and related measures in our Supplier Code of Conduct and weave anti-fraud protections into vendor management, payment card, and banking practices. Respond/recover: Employees (and our vendors) are encouraged to “pause for cause” and report suspected activities, including fraud, via appropriate channels. For example, employees may report via SpeakUp or via cybercrime/fraud incident reporting systems, supported by incident responders who guide matters from intake through conclusion. Operational resilience Resilience focuses on how to prepare for, protect against, respond to, recover, and learn from risk threats and covers incident management, business continuity, operational recovery, and IT disaster recovery. The company could be exposed to damages to its tangible assets (e.g., facilities, IT systems, hardware) and intangible assets (data, brand, reputation, and software) which could cause business interruption and ﬁnancial or other loss. During 2021, this risk exposure generally increased due to the global pandemic and rises in cybercrime, climate change, natural catastrophe, and civil unrest events throughout the world. Generally, to mitigate operational resilience risks, the company has implemented a centralized worldwide risk control and business continuity management program. Regular loss control surveys of key operating companies and supplier locations are conducted by company risk managers and our insurers. They work with our operating companies to cost-effectively implement recommendations for continued improvement. The company maintains a multi-disciplinary Global Incident Management Program to strengthen the ability to manage crises and incidents, irrespective of the type. Incident management is a standing agenda topic of the Corporate Risk Committee and incidents are reported quarterly to the Audit Committee. Likewise, the company continues to enhance disaster recovery capabilities. More speciﬁcally, impacts related to 2021 risks were mitigated via the company’s operational resilience programs mentioned above, the continuing evolution of our disaster recovery capabilities, the consolidation/reduction of global real estate footprint, and our ability to continue business, i.e., virtually conduct our largely digital business in a safe, interconnected, and productive way. In 2021, we integrated climate change into our enterprise risk assessment process. Based on our initial assessment, our business has a limited exposure based on the nature of our activities and our focus on digital products and services. Our geographically diversiﬁed personnel and support centers have capabilities to cover and adapt between regions. We continue to further evaluate and monitor developments in this space. 64 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Risk Management continued OPERATIONAL RISKS CONTINUED Risk description and impact Mitigation Brand and reputation With the increasing prominence of the Wolters Kluwer brand, the company potentially becomes more vulnerable to brand or reputation risks. To mitigate brand and reputation risks, the company has established the cross- functional Global Brand Organization that oversees the brand strategy and implementation work by the Global Branding & Communications (GBC) team. The GBC team closely works with other corporate functions and the businesses to grow the equity and awareness of the brand while monitoring any potential reputational risks. The GBC team implemented a tool to monitor conversations globally around the brand and on thought leadership in the media and on social media. The perception of risk and trust has been heightened by the global pandemic causing customers and society to rethink and reset. Wolters Kluwer has played a vital role to help manage uncertainty during these unprecedented times through new solutions, webinars, online classrooms, and topical pages. Insights are shared with internal stakeholders including the Global Brand Organization. LEGAL & COMPLIANCE RISKS Risk description and impact Mitigation Regulatory and compliance The company can be exposed to non- compliance with laws, regulations, internal policies, or breach of covenant in ﬁnancing and other agreements, and loss or suspension of business licenses. Non-compliance could result in ﬁnes, restrictions on business, third-party claims, and reputational damage. Compliance with laws and internal policies is an integral part of Wolters Kluwer’s Internal Control Framework, which includes semi-annual Letters of Representation, annual internal control testing, annual compliance risk assessments, and regular internal audits on compliance topics. Pertinent training programs are provided to all employees to create awareness about compliance subjects and mitigate compliance related risks. Our global SpeakUp program, which includes a reporting system, encourages employees to report any suspected non-compliance for investigation and remediation. We continue to implement a cross-functional enterprise-wide compliance program for privacy laws. Global data privacy training was provided to all employees. We continually evaluate whether legislative changes, regulatory developments, new products, or business acquisitions require additional compliance efforts. Corruption and bribery Wolters Kluwer businesses operate worldwide, which brings a high variety of business cultures and practices. In addition, our customers include governmental and semi-governmental organizations. These are factors which could potentially contribute to the risk of being exposed to corruption and bribery. In 2021, we rolled out a new global Anti-Bribery and Anti-Corruption Policy. This policy serves as an extension of our general policy in the Code of Business Ethics, which prohibits employees, either directly or indirectly, from offering, promising, demanding, or accepting bribes to obtain or retain business. Our new policy includes an enhanced process of due diligence, and our employees were trained on the new policy. We conduct due diligence screening of centrally managed suppliers that includes anti- bribery safeguards and the requirement to agree to the terms of our Supplier Code of Conduct or adhere to an equivalent standard. Finally, our global SpeakUp program encourages employees to report any suspected act of corruption or bribery. ← → Wolters Kluwer 2021 Annual Report 65 LEGAL & COMPLIANCE RISKS CONTINUED Risk description and impact Mitigation Contractual compliance The company could be exposed to claims by its contractual counterparties based on alleged non-compliance with contractual terms, such as, but not limited to, the number of users agreed upon, price commitments, and/or service delivery. The company mitigates contractual compliance risks by negotiating contracts with attention to risk transfer clauses, representations, warranties, and covenants. For part of our vendor contracts, we use contract management systems to monitor material contractual rights and obligations, and software tools to track the use of software for which licenses are required. We launched a contract lifecycle management initiative to, among other things, facilitate compliance with third-party agreements. Contract playbooks assist the company’s internal legal department in standardizing negotiation positions with respect to customer contracts. Further, our limitation of liability policy standardizes negotiation of liability provisions in Software as a Service (SaaS) and software agreements with customers, and establishes an exceptions process to ensure proper balancing of risks and beneﬁts. Intellectual property protection Intellectual property rights could be challenged, limited, invalidated, circumvented, or infringed. Technological developments make it increasingly difﬁcult to protect intellectual property rights. Changes in legislation could have an impact on the ability to protect intellectual property rights. Wolters Kluwer actively protects its intellectual property rights to safeguard its portfolio of information, software solutions, and services. The company relies on trademark, copyright, patent, and other intellectual property laws to establish and protect its proprietary rights to these products and services. We monitor legislative developments with respect to intellectual property rights. Our central trademarks database provides expert protection and supports the monitoring of our intellectual property. In 2021, a module on intellectual property protection was included in our annual all-employee compliance training. Third-party claims The company may be exposed to litigation, administrative actions, and other claims by third parties, including claims relating to products, services (including software and SaaS offerings), informational content provided or published by the company, and employee and vendor relations. Such claims may be based on legal theories, such as alleged negligence, product liability, breach of contract, or infringement of third-party intellectual property rights. The company mitigates these risks by striving to produce high-quality products, services, and content, and by generally including disclaimers and limitations of liability in its contracts. Our employees are made aware of requirements to ensure compliance with intellectual property laws and regulations. Further, the company’s limitation of liability policy standardizes negotiation of liability provisions in software customer agreements. The company's insurance program covers certain types of exposures. The company manages a range of insurable risks by arranging insurance coverage for ﬁrst-party and third-party liability exposures. Legislative developments As a global information, software solutions, and services provider, changes in laws, legislation, or (temporary) trade restrictions could impact the company’s business in certain jurisdictions. The company monitors legislative developments and regulatory changes, including trade restrictions, to assess the potential impact on its businesses. In certain cases, the company partners with local companies to facilitate compliance with applicable laws. We monitor and comply with global executive and health agency orders, regulations, and laws in connection with the global pandemic. In 2021, we implemented enhanced screening technology for prospects and customers to timely address changes to sanctions and export controls. Further, we actively monitor developments in privacy laws and regulations on a global basis. 66 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Risk Management continued FINANCIAL & FINANCIAL REPORTING RISKS Risk description and impact Mitigation Treasury Fluctuations in exchange and interest rates affect Wolters Kluwer’s results. It is the company’s goal to mitigate the effects of currency and interest rate ﬂuctuations on net proﬁt, equity, and cash ﬂow. Whenever possible, the company tries to do this by creating natural hedges, by matching the currency proﬁle of income and expenses and of assets and liabilities. When natural hedges are not present, Wolters Kluwer strives to realize the same effect with the aid of derivative ﬁnancial instruments. For this purpose, hedging ranges have been identiﬁed and policies and governance are in place, including authorization procedures and limits. The company purchases or holds derivative ﬁnancial instruments only with the aim of mitigating risks and most of these instruments qualify for hedge accounting as deﬁned in IFRS 9 Financial Instruments. The company does not purchase or hold derivative ﬁnancial instruments for speculative purposes. More disclosure and detailed information on ﬁnancial risks and policies is provided in Note 30 – Financial Risk Management. The Treasury Policy on market risks (currency and interest), liquidity risks, and credit risks is reviewed by the Audit Committee, with quarterly reporting by the Treasury Committee to the Audit Committee on the status of these ﬁnancial risks. In 2021, we secured new funding by issuing a new €500 million seven-year Eurobond and extended the duration of our €600 million multi-currency revolving credit facility for one year, which diminished liquidity risk. Post-employment beneﬁts The company maintains a few post- employment beneﬁt programs globally. Generally, these programs are deﬁned contribution plans, while in some countries we have deﬁned beneﬁt plans, the largest of which is an active plan in the Netherlands, and next in size are the frozen or closed plans in the United States, the United Kingdom, Canada, Belgium, and Australia. In addition, in the U.S., we maintain a frozen U.S. Retiree Life Insurance Plan. For most of the active plans, the company as well as employees make investments for the future beneﬁt of participants. For the frozen or closed plans, the company continues to ensure they are properly funded to provide the committed level of beneﬁts to participants. From a risk point of view, funding requirements are inﬂuenced by interest rates and the investment returns on the assets invested in each respective plan, which are inﬂuenced by ﬁnancial markets and economic conditions. The company performs an ongoing evaluation of all plans to ensure we are market competitive with designs that minimize risk and volatility, while we continuously monitor opportunities to make the frozen/closed plans more efﬁcient. In 2021, we executed an annuity buy-in for the Canada pension plan, transferring the liability to an insurer while protecting the beneﬁts for participants, eliminating the risk and obligation for the company. We also annuitized our U.S. Retiree Life Insurance Plan, transferring the liability to an insurer while protecting the beneﬁts for participants, eliminating the risk and obligation for the company for this plan as well. In the Netherlands, while there was a delay in the implementation of the Pension Accord, we have continued to plan for those eventual changes, working with the Pension Fund Board and external experts. As we have historically done, we continue to partner closely with independent expert advisors on market competitive plan design, plan performance monitoring, and deﬁning investment and hedging strategies for all of our plans to maximize returns while managing downside risk. The accounting for deﬁned beneﬁt plans is based on annual actuarial calculations in line with IAS 19 Employee Beneﬁts, disclosed in Note 31 – Employee Beneﬁts. ← → Wolters Kluwer 2021 Annual Report 67 68 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Sensitivity analysis Fluctuations in currency exchange, discount, interest, and tax rates affect Wolters Kluwer’s results. The following table illustrates the sensitivity to a change in these rates for adjusted operating proﬁt and diluted adjusted EPS: Potential impact Adjusted operating profit € millions Diluted adjusted EPS € cents 1% decline of the U.S. dollar against the euro (10) (2) 1% decrease in discount rate in determining the gross service costs for the post-employment benefit plans (9) (3) 1% increase in interest rate assuming same mix of variable and fixed gross debt n/a 0 1% increase in the benchmark tax rate on adjusted net profit n/a (5) Risk Management continued FINANCIAL & FINANCIAL REPORTING RISKS CONTINUED Risk description and impact Mitigation Taxes Changes in operational taxes and corporate income tax rates, laws, and regulations could adversely affect the company’s ﬁnancial results, tax assets, and liabilities. Next to income taxes, most taxes are either transactional or employee-related and are levied from the legal entities in the relevant jurisdictions. Wolters Kluwer maintains a liability for uncertain tax positions in line with IFRS accounting standards. The adequacy of this liability is evaluated on a regular basis in consultation with external advisors. Reference is made to Note 23 – Tax Assets and Liabilities for additional information about income tax and related risks. As a leader in tax and accounting products, the company takes its responsibility as a corporate citizen seriously. We provide training to our tax staff where appropriate. The company reviews its Tax Principles annually and updated these in 2020. Misstatements, accounting estimatesand judgments, andreliability of systems The processes and systems supporting ﬁnancial reporting may be susceptible to unintentional misstatements or manipulation. The preparation of ﬁnancial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from those estimates. The company mitigates these risks by maintaining an Internal Control Framework for ﬁnancial reporting. The Internal Audit and Internal Control departments have a system in place for the monitoring of progress in resolving any audit ﬁndings and performing follow-up visits and back-testing to determine whether those ﬁndings are timely and adequately resolved. In addition, senior executives in the divisional and operating companies and senior corporate staff members sign Letters of Representation semi- annually, certifying compliance with laws and policies. Independent internal audit reviews are carried out to ensure compliance with policies and procedures and to ensure that existing controls provide adequate protection against actual risks. Further, ﬁnancial results are inquired and reviewed by the Business, Analysis & Control, Consolidation, Group Accounting & Reporting, Treasury, and Corporate Tax departments and the Executive Board, and in monthly development meetings as part of regular business reviews. The Group Accounting & Reporting department periodically provides updates and webinars outlining changes in policies, accounting standards, and ﬁnancial focus areas. Reconciliation of statutory accounts is done by the Group Accounting & Reporting and Corporate Tax departments, which includes a comparison between group reported ﬁgures, statutory ﬁgures, and tax ﬁlings. ← → Wolters Kluwer 2021 Annual Report 69 Statements by the ExecutiveBoard The Executive Board is responsible for the preparation of the ﬁnancial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code. The ﬁnancial statements consist of the consolidated ﬁnancial statements and the company ﬁnancial statements. The responsibility of the Executive Board includes selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. The Executive Board is also responsible for the preparation of the Report of the Executive Board (bestuursverslag) which for this statement includes the Strategic Report, Corporate Governance, and Risk Management, included in the 2021 Annual Report. The Report of the Executive Board and the Financial Statements are prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code. The Executive Board endeavors to present a fair review of the situation of the business at balance sheet date and of the course of affairs in the year under review. Such an overview contains a selection of some of the main developments in the ﬁnancial year and can never be exhaustive. The company has identiﬁed the main risks it faces, including ﬁnancial reporting risks. These risks can be found in Risk Management. In line with the Dutch Corporate Governance Code and the Dutch Act on Financial Supervision (Wet op het ﬁnancieel toezicht), the company has not provided an exhaustive list of all possible risks. Furthermore, developments that are currently unknown to the Executive Board, or considered to be unlikely, may change the future risk proﬁle of the company. The company must have internal risk management and control systems that are suitable for the company. The design of the company’s internal risk management and control systems (including the Internal Control Framework for ﬁnancial reporting) has been described in Risk Management. The objective of these systems is to manage, rather than eliminate, the risk of failure to achieve business objectives and the risk of material errors to the ﬁnancial reporting. Accordingly, these systems can only provide reasonable, but not absolute, assurance against material losses or material errors. As required by provision 1.4.3 of the Dutch Corporate Governance Code and Section 5:25c(2)(c) of the Dutch Act on Financial Supervision (Wet op het ﬁnancieel toezicht) and on the basis of the foregoing and the explanations contained in Risk Management, the Executive Board conﬁrms that to its knowledge: • No material failings in the effectiveness of the company’s internal risk management and control systems have been identiﬁed; • The company’s internal risk management and control systems provide reasonable assurance that the ﬁnancial reporting over 2021 does not contain any errors of material importance; • There is under the current circumstances a reasonable expectation that the company will be able to continue in operation and meet its liabilities for at least 12 months as from the date hereof, therefore it is appropriate to adopt the going concern basis in preparing the ﬁnancial reporting; • There are no material risks or uncertainties that could reasonably be expected to have a material adverse effect on the continuity of the company’s enterprise in the coming 12 months as from the date hereof; • The 2021 Financial Statements give a true and fair view of the assets, liabilities, ﬁnancial position, and proﬁt or loss of the company and the undertakings included in the consolidation taken as a whole; and • The Report of the Executive Board includes a fair review of the situation at the balance sheet date, the course of affairs during the ﬁnancial year of the company, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks that the company faces. Alphen aan den Rijn, February 22, 2022 Executive Board Nancy McKinstry CEO and Chair of the Executive Board Kevin Entricken CFO and member of the Executive Board Further information can be found on www.wolterskluwer.com/en/investors/governance/overview 70 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Nancy McKinstry American, 1959, Chief Executive Ofﬁcer and Chair of the Executive Board since September 2003, and member of the Executive Board since June 2001. As CEO and Chair of the Executive Board, Ms. McKinstry is responsible for division performance, Global Strategy, Business Development, Technology, Global Business Services, Communications, Human Resources, Corporate Governance, and Sustainability. Kevin Entricken American, 1965, Chief Financial Ofﬁcer and member of the Executive Board since May 2013. As CFO and member of the Executive Board, Mr. Entricken is responsible for Group Accounting & Reporting, Business Analysis & Control, Internal Audit, Internal Controls, Investor Relations, Mergers & Acquisitions, Taxation, Treasury, Risk Management, Real Estate, and Legal Affairs. Frans Cremers Dutch, 1952, Chair of the Supervisory Board and Co-Chair of the Selection and Remuneration Committee dealing with selection and appointment matters. Appointed in 2017, and current term until 2022. Position Former CFO and member of the Executive Board of VNU N.V. Supervisory directorships, other positions • Member of the Board of Directors of Stichting Preferente Aandelen Heijmans, and Stichting Preferente Aandelen B KPN • Investigator appointed by the Enterprise Section of the Amsterdam Court of Appeal in relation to the policy and course of events in the matter of SNS Reaal N.V. and SNS Bank N.V. Executive Board Supervisory Board ← → Wolters Kluwer 2021 Annual Report 71 Ann Ziegler American, 1958, Vice-Chair of the Supervisory Board and member of the Selection and Remuneration Committee. Appointed in 2017, and current term until 2025. Position Former Senior Vice President, Chief Financial Ofﬁcer, and Executive Committee member of CDW Corporation Supervisory directorships, other positions • Member of the Board (Non-Executive Director) of Hanesbrands Inc. • Member of the Board (Non-Executive Director) of US Foods Inc. • Member of the Board (Non-Executive Director) of Reynolds Consumer Products Inc. Jack de Kreij Dutch, 1959, Chair of the Audit Committee. Appointed in 2020, current term until 2024. Position Former CFO and Vice-Chairman of the Executive Board of Royal Vopak N.V. Supervisory directorships, other positions • Deputy Chairman of the Supervisory Board and Chairman of the Audit Committee of Royal Boskalis Westminster N.V. • Member of the Supervisory Board and Chairman of the Audit Committee of TomTom N.V. • Chairman VEUO (Vereniging van Effecten Uitgevende Ondernemingen) • Member of the Board (Non-Executive Director) and Chairman of the Audit Committee, member of Remuneration Committee and Chairman of Investment Committee of Oranje Fonds • Member of the Global Advisory Board of Metyis • Member of the Board of Stichting Preferente Aandelen Philips Bertrand Bodson Belgian, 1975. Appointed in 2019, current term until 2023. Position CEO and member of the Board of Keywords Studios plc, and former Chief Digital Ofﬁcer and member of the Executive Committee of Novartis Supervisory directorships, other positions • Member of the Board (Non-Executive Director) of Tesco PLC Sophie V. Vandebroek American, 1962, member of the Audit Committee. Appointed in 2020, current term until 2024. Position Founder Strategic Vision Ventures LLC and former Chief Technology Ofﬁcer of Xerox and Chief Operating Ofﬁcer of IBM Research Supervisory directorships, other positions • Member of the Board of Directors (Non-Executive Director) and member of the Finance and the Nomination & Governance Committees of IDEXX Laboratories, Inc. • Member of the Board of Directors (Non- Executive Director) and member of the Compensation and the ESG Committees of Inari Agriculture, Inc. • Member of the Board of Trustees of the Boston Museum of Science • Member of the Board of Trustees of the Massachusetts Technology Leadership Council • Member of the International Advisory Board, Flanders AI Research Program • Strategic Advisor, Safar Partners Jeanette Horan British, 1955, Co-Chair of the Selection and Remuneration Committee dealing with remuneration matters. Appointed in 2016, and current term until 2024. Position Former Chief Information Ofﬁcer at IBM Supervisory directorships, other positions • Member of the Board (Non-Executive Director) and member of the Audit and Technology Committees of Nokia • Member of Board of Advisors of Jane Doe No More, a non-proﬁt organization • Member of the Board of the Ridgeﬁeld Symphony Orchestra, a non-proﬁt organization Chris Vogelzang Dutch, 1962, member of the Audit Committee. Appointed in 2019, and current term until 2023. Position Former CEO of Danske Bank A/S Supervisory directorships, other positions • Member of the Supervisory Council of Rijksmuseum 72 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements INTRODUCTION BY THE CHAIR OF THE SUPERVISORY BOARD During 2021, the Supervisory Board was pleased to see that, despite the challenges resulting from the global pandemic, the ambitions of the 2019- 2021 strategy, Accelerate Our Value, were successfully achieved, providing a continuing strong foundation for the future of the company. We worked together with the Executive Board on the development of the new three-year strategy, Elevate Our Value. The increased focus on further expanding expert solutions is one of the cornerstones of this new strategy, which the Supervisory Board believes addresses attractive market opportunities and will accordingly contribute to the future success of the company. The strategy also focuses on topics, such as attracting and engaging diverse talent, maintaining a collaborative and ethical culture, and other important Environmental, Social, and Governance (ESG) topics. These are subjects which are close at heart for the Supervisory Board and in conjunction with the business strategy will contribute to the aspired long-term value creation for the company’s stakeholders. The new plan includes some ambitious new goals and we are looking forward with conﬁdence to the execution of this plan under the leadership of the Executive Board. Frans Cremers Chair of the Supervisory Board Report of the SupervisoryBoard This report provides an overview of the supervisory activities of the Supervisory Board and its committees during the year. The Supervisory Board is responsible for supervising the Executive Board in setting and achieving the company’s strategy, targets, and policies, as well as the general course of affairs of the company. The Supervisory Board also assists the Executive Board with advice. The new plan contains some ambitious new goals and we are looking forward with conﬁdence to the execution of this plan under the leadership of the Executive Board. Frans Cremers, Chair of the Supervisory Board ← → Wolters Kluwer 2021 Annual Report 73 Meetings The Supervisory Board held seven scheduled meetings in 2021. Six of these meetings took place virtually due to the global pandemic. Six meetings included a session for Supervisory Board members only, without the members of the Executive Board being present. All members attended all meetings. There was one scheduled conference call between the Executive Board, the Chair of the Supervisory Board, and the Chair of the Audit Committee. The Chair of the Supervisory Board had regular contact with the Chair of the Executive Board. Financial statements The Executive Board submitted the 2021 Financial Statements to the Supervisory Board. The Supervisory Board also took notice of the report and the statement by Deloitte Accountants B.V. (as referred to in Article 27, paragraph 3 of the company’s Articles of Association), which the Supervisory Board discussed with Deloitte. The members of the Supervisory Board signed the 2021 Financial Statements, pursuant to their statutory obligation under clause 2:101 (2) of the Dutch Civil Code. The Supervisory Board proposes to the shareholders that they adopt these Financial Statements at the Annual General Meeting of Shareholders of April 21, 2022. → See the Financial Statements onpage 98 Evaluations The Supervisory Board discussed its own functioning, as well as the functioning of the Executive Board and the performance of the individual members of both Boards. These discussions were partly held without the members of the Executive Board being present. The composition of the Supervisory Board, the Audit Committee, and the Selection and Remuneration Committee was also discussed in the absence of the Executive Board. The Supervisory Board members completed a self-assessment. Overall, the outcome of the evaluation was positive. The Supervisory Board remains focused on a good balance between presentations and discussions and gave several suggestions for topics on which it would like to receive additional information, such as ESG (in particular diversity, equity, inclusion, and belonging and climate change), and the Net Promoter Scores of key products, which topics were discussed in more detail in the course of the year. The composition of the Supervisory Board represents the relevant skill sets and the required areas of expertise. The Supervisory Board meetings take place in an open and transparent atmosphere with each of the members actively participating. The Committees function well. In addition to the formal evaluation process, as a standard practice, the Chair of the Supervisory Board gives feedback to the Chair of the Executive Board after every Supervisory Board meeting. Global pandemic The Executive Board has kept the Supervisory Board regularly informed in detail regarding the impact of the global pandemic on the company. The information related, among others, to the well-being and engagement of employees, working from home policies, back-to-ofﬁce plans, the impact on the business and its customers, as well as the ﬁnancial performance and outlook of the company. The Supervisory Board was pleased to see that the company was able to continue reacting to the situation in an agile entrepreneurial way, while giving high priority to the health and well-being of the employees, and to serving customers with solutions to help them to effectively deal with the pandemic. Strategy The Supervisory Board was kept well informed on the execution of the strategy for 2019-2021, Accelerate Our Value. This strategy aimed at accelerating the transformation of the company towards a global organization which grows expert solutions, advances deep domain expertise, and drives operational agility. The Supervisory Board was also closely involved in developing the new three-year strategy for 2022-2024, Elevate Our Value, and approved the strategy. The strategy was discussed in two meetings of the Supervisory Board. The Supervisory Board believes that the strategy, with a further reinforced focus on expert solutions, is a good next step in the evolution of the company. The Supervisory Board also supports the strong focus on ESG matters, including the emphasis on diverse talent as a key pillar of the strategy. The Supervisory Board believes the strategy will contribute to the long-term value creation for the company’s stakeholders. As in other years, the divisional CEOs also presented their Vision & Strategy Plans for 2022-2024 to the Supervisory Board. This enables the Supervisory Board to obtain a good view of the opportunities and challenges for each of the divisions and to support the Executive Board in making the right strategic choices and investment decisions for each business. The Supervisory Board considers it important to meet each of the divisional CEOs periodically and receive an update from them on performance, key market trends, strategy, and competitive developments. Also, with a view on talent management and having solid replacement plans, speaking directly to other senior management levels is deemed important for the Supervisory Board. The Supervisory Board was also informed about the innovation activities and investments within Wolters Kluwer. 2021 was the eleventh consecutive year in which Wolters Kluwer rewarded promising new internal business initiatives via the Global Innovation Awards. This event enables teams across the business to present their innovative ideas. The awards are ultimately awarded by a jury consisting of internal and external experts. Continuing focus on innovation and investment in new and enhanced products, including expert solutions, is an important means for driving long- term value creation as well as a strong culture of innovation at Wolters Kluwer. Two of the awarded teams presented their business plans to the Supervisory Board. In line with standard practice, management of the Global Business Services organization and the Digital eXperience Group gave presentations, updating the Supervisory Board on the company’s technology strategy and execution thereof, including cybersecurity and disaster recovery plans. The Supervisory Board also considers it important to be aware of the main developments with respect to competition and the markets in which the company operates. To that end, an overview of the most important developments with respect to traditional and new competitors is discussed during each Supervisory Board meeting. 74 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Report of the SupervisoryBoard continued Investor Relations The Supervisory Board was well informed about Investor Relations activities, which is a standing agenda item during the Supervisory Board meetings. Updates included share price developments, communication with shareholders, shareholders’ views on acquisitions, analyst research, and the composition of the shareholder base. The Supervisory Board also carefully reviewed and approved the annual report and press releases regarding the full-year and half- year results, and the ﬁrst-quarter and nine-month trading update. Audit Committee The Audit Committee met four times in 2021, during the preparation of the full-year 2020 and half-year 2021 results, and around the ﬁrst-quarter 2021 trading update and nine- month 2021 trading update. In addition, there was one scheduled conference call in December between the auditors, the Chair of the Audit Committee, and the CFO. The Audit Committee consisted of Mr. de Kreij (Chair), Ms. Vandebroek, and Mr. Vogelzang. Each of the members attended all meetings. The meetings of the Audit Committee were held in the presence of the Executive Board members, the external auditor, the head of internal audit, and other corporate staff members. During 2021, as routine agenda items, the Audit Committee had discussions with the external auditors, as well as with the head of internal audit, without the members of the Executive Board being present. In addition, the Chair of the Committee met with the CFO, the external auditor, the head of Group Accounting & Reporting, and the head of Internal Audit in preparation of the Committee meetings. After every meeting, the Chair of the Committee reports back to the full Supervisory Board. The main items discussed during the Audit Committee meetings included the ﬁnancial results of the company, status updates on internal audit and internal controls, the management letter of the external auditor, the progress on the implementation of the new corporate performance management system, accounting topics, pensions, tax planning, impairment testing, the Treasury Policy, the ﬁnancing of the company, risk management, cybersecurity, hedging, litigation reporting, incident management, the quarterly reports of the external auditor, and their full-year report on the audit. Talent management and organizational developments Each year, the outcome of the annual talent review is discussed by the Supervisory Board. Diversity at Board and senior management levels is an important element in that discussion. Furthermore, as a standing topic during each Supervisory Board meeting, the Supervisory Board is informed about organizational developments, including appointments at senior positions within the company. The Supervisory Board fully supports all initiatives in the company to enhance the diverse and inclusive culture within the company. The Supervisory Board discussed this topic in several meetings. The Supervisory Board was also updated on the results of Wolters Kluwer’s employee engagement survey, which measures important topics such as engagement, alignment, agility, career development, and other components driving engagement, and supporting a culture aimed at long-term value creation. Finance The Supervisory Board carefully observes the ﬁnancing of the company, including the balance sheet and available headroom. The Supervisory Board also closely monitors the development of, among others, the net-debt-to- EBITDA ratio, debt/equity ratio, and liquidity planning. The Supervisory Board approved the share buyback program in 2021 of up to €410 million (including €60 million for which the proceeds of the divestment of Legal Education were used). The Supervisory Board also approved the additional €50 million share buyback for the period starting January 3, 2022, up to and including February 21, 2022. In addition, the Supervisory Board approved the ﬁrst one-year extension of the €600 million multi-currency revolving credit facility with an initial maturity of three years, as well as the activation of the ESG targets in that facility. Other ﬁnancial subjects discussed included the budget, the ﬁnancial outlook, the achievement of ﬁnancial targets, the interim and ﬁnal dividends, the outcome of the annual impairment test, and annual and interim ﬁnancial results. Acquisitions and divestments The Executive Board kept the Supervisory Board informed about all pending acquisition and divestment activities. The Supervisory Board approved the acquisition of Vanguard Software by the Tax & Accounting division. The Supervisory Board also discussed in detail the performance and value creation of previous acquisitions, taking into consideration Wolters Kluwer’s ﬁnancial and strategic criteria for acquisitions. Corporate governance and risk management The Supervisory Board was kept informed about developments with respect to corporate governance and risk management. The Supervisory Board and Audit Committee discussed risk management, including the risk proﬁle of the company and risk appetite per risk category, as well as the assessment of internal risk management and control systems. The Audit Committee and Supervisory Board discussed the ongoing actions the company takes to further improve the internal risk management and control systems, including IT security and cybersecurity. For more information, see Risk Management. → Read more about Risk Management on page 58 Environmental, Social, and Governance matters The Supervisory Board was kept informed on the developments with respect to ESG performance and initiatives. The Supervisory Board is supportive of the company’s ESG approach. A separate presentation was given on the actions and plans the company takes with respect to diversity, equity, inclusion, and belonging. The enhanced focus on ESG is also reﬂected by the fact that non-ﬁnancial targets make up 10% of the Executive Board’s short-term incentive targets in 2021 and 2022. The Supervisory Board was informed of the completion rate of the Annual Compliance Training (99%). The Supervisory Board believes that these efforts will contribute to an inclusive culture of integrity, accountability, and transparency, aimed at long-term value creation for all stakeholders. ← → Wolters Kluwer 2021 Annual Report 75 complies with this ambition. In the course of 2022, the company will review its diversity policy and report about it in line with new Dutch legislation. All Supervisory Board members comply with the Dutch law regarding the maximum number of supervisory board memberships. Furthermore, all members of the Supervisory Board are independent from the company within the meaning of best practice provisions 2.1.7, 2.1.8, and 2.1.9 of the Dutch Corporate Governance Code. For more information on each Supervisory Board member in accordance with the Dutch Corporate Governance Code, see the sections Executive Board and Supervisory Board and Corporate Governance. → See Executive Board and Supervisory Board onpage 70 → See Corporate Governance onpage 54 The Supervisory Board would like to thank the Executive Board and all employees worldwide for their efforts in the past year. The ﬂexibility of the entire organization during another year of the global pandemic, in combination with the results of the company and ongoing focus on serving customers and long-term value creation, were highly appreciated by the Supervisory Board. Alphen aan den Rijn, February 22, 2022 Supervisory Board Frans Cremers, Chair Ann Ziegler, Vice-Chair Bertrand Bodson Jeanette Horan Jack de Kreij Sophie Vandebroek Chris Vogelzang The Supervisory Board and the Executive Board would like to thank Mr. Cremers for his ﬁve years as Chair of the Supervisory Board. He has chaired the Board during two years of the global pandemic and his support to management in these unprecedented circumstances was highly appreciated. We wish Mr. Cremers all the best in the years to come. The members of the Supervisory Board and the Executive Board. Supervisory Board composition In 2021, the ﬁrst term of Mr. Cremers and Ms. Ziegler expired. They were both reappointed by the AGM. Mr. Cremers was only available for a one-year reappointment and will retire after the 2022 AGM. The Supervisory Board is pleased to nominate Ms. Heleen Kersten as a new member of the Supervisory Board to the 2022 AGM. Her expertise in the area of corporate law, corporate governance, M&A matters, and her experience on several boards, ﬁt the proﬁle of the Supervisory Board and the diversity policy. The Supervisory Board has appointed Ms. Ziegler as new Chair of the Supervisory Board, following the retirement of Mr. Cremers. Mr. De Kreij has been appointed as new Vice-Chair. Ms. Kersten will replace Mr. Cremers as a member of the Selection and Remuneration Committee. The composition of the Supervisory Board is in line with the proﬁle and the company’s diversity policy, reﬂecting a diverse composition with respect to expertise, nationality, gender, and age, reﬂecting the international nature and geographic scope of the company. Four nationalities are represented on the Supervisory Board, with different talents and relevant areas of expertise. The Supervisory Board currently has a female representation of 43%, which is in line with Dutch law requiring a representation of at least 30% male and female. After the appointment of Ms. Kersten at the AGM of 2022, the female representation will be 57%. The composition comprises international board experience, speciﬁc areas of expertise (including ﬁnance, legal, and technology), as well as expertise within the broad information industry and speciﬁc market segments in which the company operates. The proﬁle, competences matrix, rotation schedule, and diversity policy are available on wolterskluwer.com/ en/investors/governance/supervisory- board-committees In line with the diversity policy, it is the aim to have a representation of at least 30% male and female in the Supervisory Board, Executive Board, and at divisional CEO level. The company currently The Audit Committee has reviewed the performance of the external auditor, the proposed audit scope and approach, the audit fees, and the independence of the external auditor, and has approved the other assurance services, tax advisory services, and other non-audit services provided by the external auditor. The Auditor Independence Policy is available on the website. The Auditor Independence Policy www.wolterskluwer.com/en/investors/ governance/policies-and-articles Selection and Remuneration Committee The Selection and Remuneration Committee met six times in 2021. The Committee consists of Ms. Horan (who chairs the remuneration-related discussions), Mr. Cremers (who chairs the selection and nomination-related discussions), and Ms. Ziegler. All members attended all meetings. After every meeting, the respective chairs of the Committee report back to the full Supervisory Board. The resolutions regarding appointments and remuneration were taken by the full Supervisory Board, based on recommendations from the Committee. At the Annual General Meeting of Shareholders (AGM) of April 22, 2021, the amended version of the remuneration policy of the Executive Board was adopted. For more information about the remuneration policy of the Executive Board and the execution thereof, see Remuneration Report. → See our Remuneration Report onpage 76 The Selection and Remuneration Committee also reviewed the remuneration of the Supervisory Board. It will be proposed during the 2022 AGM to increase the Supervisory Board remuneration. This proposal is in line with the remuneration policy for the Supervisory Board, which was adopted by the AGM in 2020. The Selection and Remuneration Committee also discussed the replacement of Mr. Cremers as Chair of the Supervisory Board after the AGM in April 2022 as well as the composition of the Supervisory Board, which resulted in the nomination and appointments set out below. 43% of the Supervisory Board members are female This Remuneration Report provides an overview of our remuneration policy which was adopted at the 2021 Annual General Meeting of Shareholders. The new remuneration policy for the Executive Board was adopted and the 2020 Remuneration Report was approved, with high levels of support. Jeanette Horan, Co-Chair of the Selection and Remuneration Committee, dealing with remuneration matters 76 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements LETTER FROM THE COCHAIR OFTHE SELECTION AND REMUNERATION COMMITTEE Dear Shareholders, On behalf of the Supervisory Board, I am pleased to present our 2021 Remuneration Report, in which we provide a summary of the remuneration policy for the Executive Board and explain how performance in 2021 translated into remuneration earned. New remuneration policy adopted At the 2021 Annual General Meeting, the new remuneration policy for the Executive Board was adopted and the 2020 Remuneration Report was approved, with high levels of support. Both received well over 95% of the votes in favor, with good participation in the meeting. The new remuneration policy established several important changes. In the short- term incentive plan (STIP), the weight of non-ﬁnancial or environmental, social, and governance (ESG) measures was increased (up to a maximum of 20%) and six strategically important non-ﬁnancial or ESG measures were introduced. In the long-term incentive plan (LTIP), return on invested capital (ROIC) was introduced as a new measure and diluted EPS was replaced by diluted adjusted EPS. These are two measures that have long been part of the company’s key ﬁnancial performance indicators and are aligned with how we provide market guidance. Remuneration Report 6% organic growth in 2021 ← → Wolters Kluwer 2021 Annual Report 77 The new policy also formalized minimum share ownership requirements and a two- year post-vesting holding period. The other signiﬁcant change was a 10% reduction in CEO remuneration by lowering the LTIP pay at target, starting in 2021. For the LTIP 2021-2023, the target pay was reduced from 285% to 265% of base salary, which will be reﬂected when this cycle pays out in 2024. For the LTIP 2022-2024, the target pay will be further reduced to 240% of base salary, which will be reﬂected in the payout in 2025 and LTIP cycles thereafter. The LTIPs vesting in 2021 and 2022 (payout in 2022 and 2023) still reﬂect the former remuneration policy. As in recent years, for the payout of the LTIP period just completed, the largest driver of remuneration is the appreciation of the share price. A detailed explanation of the new remuneration policy, how it was applied in 2021, and how it determined remuneration is provided in this report. 2021 performance and STIP outcome Despite the continued challenges and uncertainties posed by the global pandemic, the business started to see a recovery in the second quarter of 2021. This was most visible in the faster-than- expected recovery of non-recurring revenues which had been severely impacted in 2020. More importantly, as the year progressed, digital and services subscription revenues picked up pace. Throughout the year, management kept their attention on people-related matters: supporting the well-being of employees; adapting back-to-ofﬁce plans following the emergence of new COVID variants; and taking steps to address the heightened and global competition for talent. In 2021, the group delivered organic growth of 6%, an increased adjusted operating proﬁt margin of 25.3%, and adjusted free cash ﬂow of €1,010 million. The strong recovery in 2021 meant that all one-year ﬁnancial targets were exceeded. Performance against the six non-ﬁnancial objectives that were part of the STIP in 2021 was, in aggregate, ahead of target, with ﬁve of the six measures in line with, or ahead of, targets set. 2019-2021 performance and LTIPoutcome The recovery in 2021 allowed management to successfully deliver on the 2019-2021 strategic plan and to largely restore performance back towards the company's pre-pandemic ﬁnancial trajectory. The strategy of focusing on expert solutions and promoting organizational agility was key to driving this result. Over the three-year period, 2019-2021, the actual compound annual growth rate in diluted EPS was 15.0% in constant currencies, exceeding the target of 12.9% set three years ago. As a shareholder, you will be pleased that over the three-year LTIP period, the share price rose 100.5%. Total Shareholder Return was 101.4% (using a 60-day average price at the start and end of the period), placing Wolters Kluwer in fourth place among the TSR peer group. As an important component of management incentive, this share price performance drove the ﬁnal value of the LTIP awards to management. Changes for 2022 During 2021, the Supervisory Board reviewed the effectiveness of the non- ﬁnancial or ESG metrics and targets that were used for the 2021 STIP and concluded that a shorter list of ESG targets will drive greater focus. Not only have several of our shareholders expressed a preference for fewer ESG metrics, but over the course of the year, market practice continued to evolve in favor of fewer measures. The number of non-ﬁnancial measures will therefore be reduced from six to three in 2022. We are introducing an important new employee-related ESG measure in STIP: a quantitative score for belonging. Belonging is a key driver of employee engagement and is an indicator of our progress on nurturing workforce diversity. Further information on this important ESG topic can be found in the Sustainability chapter of this annual report. Two of last year's ESG measures are being retained: the indexed cybersecurity maturity score and the number of on-premise servers decommissioned as part of our cloud migration program. The company has now also extended these three ESG measures to the short-term incentive plans of all executives. Metrics used in the LTIP for 2022-2024 will stay the same: relative TSR; diluted adjusted EPS; and ROIC. The Supervisory Board has set targets with additional stretch applied to the baseline three-year strategic plan. These prospective three- year targets are disclosed on page 93. The Supervisory Board continues to monitor the TSR peer group in light of the planned merger of two existing TSR peers, IHS Markit and S&P Global. When this merger completes, IHS Markit will be replaced by another sector peer that meets our selection criteria. We trust this report provides a clear explanation of the drivers of 2021 remuneration and that shareholders appreciate the enhanced disclosure that we committed to last year. The 2022 AGM agenda is available at www.wolterskluwer.com/agm Jeanette Horan Co-Chair of the Selection and Remuneration Committee, dealing with remuneration matters 78 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements For 2021, STIP measures were revenues, adjusted net proﬁt, adjusted free cash ﬂow, and six non-ﬁnancial, operational, or ESG measures. The achievements on each of these measures are shown above and discussed in this report (Implementation of remuneration policy in 2021). Remuneration at a glance HOW DID WE PERFORM? Revenues, € million 4,771 Adjusted free cash ﬂow, € million 1,010 Adjusted net proﬁt, € million 885 55% of revenues from expert solutions 74% Employee engagement score, above the high-performing norm (HPN) Establish a diversity, equity, inclusion, and belonging strategy and plan 99% completion of annual compliance training 105.6 Indexed cybersecurity maturity score (2020=100) 2,838 Number of on-premise servers decommissioned (reducing carbon footprint) 2021 STIP ﬁnancial targets were all exceeded, while most non-ﬁnancial/ ESG targets were met or exceeded. Three-year total shareholder return performance and compound annual growth (CAGR) in diluted EPS were ahead of LTIP 2019-2021 targets. 2021 ﬁnancial measures 2021 non-ﬁnancial/ESG measures ← → Wolters Kluwer 2021 Annual Report 79 2021 CEO target and realized pay AEX and STOXX Europe 600 rebased to Wolters Kluwer share price. The share price increased 100.5% over the three-year performance period for LTIP 2019-2021. Target pay shown above reﬂects the number of LTIP shares conditionally awarded for LTIP 2019-2021 valued at the closing share price on December 31, 2018 (€51.66). Realized actual pay shown above reﬂects the number of LTIP shares earned valued at the closing share price on December 31, 2021 (€103.60). The ﬁnal actual payout will be valued at the volume weighted average price on February 24, 2022. IMPACT OF PERFORMANCE ON REMUNERATION 15% Diluted EPS: Three-year CAGR in constant currencies 2019-2021 performance Share price over LTIP period Three-year CAGR in diluted EPS Three-year CAGR in constant currencies was 15% over the period 2019-2021. The company uses a 60-day average of the share price at the beginning and the end of each three-year performance period to reduce the inﬂuence of potential stock market volatility. In October 2020, McClatchy was replaced by Verisk Analytics. In February 2021, Axel Springer was replaced by Intertek. Three-year 2019-2021 total shareholder return Wolters Kluwer achieved fourth position for TSR performance relative to its TSR peers. This ranking determines the number of TSR-related shares awarded at the end of the three-year LTIP period. Target Actual 60% 7,802 61% 22% 17% 29% 40% 16,270 12% 9% 6% 4% €0 20,000 in thousands of euros, unless otherwise stated 10,000 15,000 5,000 Increase in value due to share price performance LTIP EPS outperformance LTIP TSR outperformance LTIP STIP Base Salary 0 20 40 60 80 100 120 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21 Wolters Kluwer N.V. AEX rebased STOXX Europe 600 rebased Share price over LTIP period € €2.35 €2.46 €2.70 €2.78 2018 2019 2020 2021 60-day average price TSR Reach S&P Global Thomson Reuters Wolters Kluwer Daily Mail & GT News Corp RELX A Mondadori Sage Group Intertek J Wiley Lagardère Informa Pearson PRISA Verisk 0% +400% +500% +100% +200% +300% -100% OUR NEW REMUNERATION POLICY At the 2021 Annual General Meeting of Shareholders, the revised Executive Board Remuneration Policy was adopted. Upon adoption of the policy, the following substantive changes were made to the remuneration package of the Executive Board members: The remuneration policy is available at www.wolterskluwer.com/en/investors/governance/policies-and-articles Remuneration peer group Weighting of European companies in the pay peer group was adjusted from 50% to approximately 60%. STIP performance measures(ﬁnancial) A pre-deﬁned list of ﬁnancial measures replaced the previous unlimited ﬂexibility to select measures; STIP ﬁnancial measures will have a minimum weighting of 80%. These measures exclude the effect of currency, accounting changes, and changes in scope (acquisitions and divestitures) after the annual budget is ﬁnalized. The pre-deﬁned list comprises: • Revenues * • Organic growth • Adjusted operating proﬁt • Adjusted operating proﬁt margin • Adjusted net proﬁt * • Adjusted free cash ﬂow * • Cash conversion ratio * These ﬁnancial measures will be used for the STIP in 2022. STIP performance measures (non-ﬁnancial, including ESG) Non-ﬁnancial measures can include ESG, strategic, or operational metrics, such as employee engagement score, customer satisfaction scores, measures of good corporate governance, operational excellence, and/or environmental impact. The maximum weighting of non-ﬁnancial measures was established at 20%. In 2021, the weighting was set at 10%. For 2022, the following three strategically-important ESG metrics will be used: • Belonging score (a quantiﬁed measure of diversity, equity, and inclusion) • Indexed cybersecurity maturity score • Number of on-premise servers decommissioned (reducing carbon footprint) LTIP performance measures • Total shareholder return (TSR) was retained at a 50% weighting • Diluted adjusted EPS * replaced diluted EPS with a weighting of 30% • Return on invested capital (ROIC) was introduced with a weighting of 20% * Diluted adjusted EPS aligns more closely with market practice and is the metric we use when giving guidance on expected ﬁnancial performance. CEO remuneration In consultation with the CEO, the CEO’s total target remuneration was reduced by approximately 10% by lowering the CEO LTIP conditional share award for performance on target from 285% of base salary to 240% over two years. In addition, the CEO’s base salary was not increased in 2021. Share ownership and holdingrequirements Introduction of minimum share ownership requirements: 3x base salary for CEO, 2x base salary for CFO, and a two-year holding period post-vesting. 80 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued OUR REMUNERATION PHILOSOPHY Clear alignment between executive rewards and shareholder interests is central to our Executive Board remuneration policy. We have a robust pay for performance philosophy with strong links between rewards and results for both our short-term incentive plan (STIP) and long-term incentive plan (LTIP). Variable remuneration outcomes are aligned to stretch targets that measure performance against Wolters Kluwer’s strategic aims. The Supervisory Board has a clearly deﬁned process for setting stretch targets and a framework for decision-making around executive remuneration. In 2020, the Selection and Remuneration Committee engaged an external remuneration advisor to provide recommendations and information on market practices for remuneration structure and levels. The Committee had extensive discussions, supported by its external advisor, to review the composition and key drivers of remuneration. The Supervisory Board historically viewed performance targets as commercially sensitive and therefore did not disclose them in advance. However, given feedback from our shareholders, we decided that, upon the adoption of our new remuneration policy at our 2021 AGM, we would disclose LTIP performance targets in advance, starting with this 2021 annual report. In addition, similar to the 2020 report, we have disclosed targets, achievements, and resulting pay outcomes for both the STIP and LTIP retrospectively in this report. The Supervisory Board determines Executive Board remuneration on the basis of a set of principles that demonstrate clear alignment with shareholder and other stakeholder interests. We recognize it is our responsibility to ensure that executive remuneration is closely connected with ﬁnancial and strategic performance. OUR EXECUTIVE BOARD REMUNERATION FRAMEWORK Our Executive Board remuneration framework comprises the following elements: Element of remuneration Key feature Alignment to strategy and shareholder interests Base salary Reviewed annually with reference to pay peer group andincreases provided to all employees Set at a level to attract, motivate, and retain the best talent STIP Paid annually in cash; maximum opportunity: 175% ofbasesalary Incentivizes delivery of performance against our annual strategic, financial, and ESG goals LTIP Conditional rights on ordinary shares, subject to a three- year vesting schedule and three-year performance targets Incentivizes delivery of financial performance and creation of long-term sustainable value; demonstrates long-term alignment with shareholder interests Pension Defined contribution retirement savings plan that is available to all employees in the country of employment Provides appropriate retirement savings designed to be competitive in the relevant market Other benefits Eligibility for health insurance, life insurance, a car, and participation in any all-employee plans that may be offered in the country of employment Designed to be competitive in the relevant market Principles of Executive Board remuneration Pay for performance and strategic progress • Pay is linked to the achievement of key financial and non-financial targets related to our strategy • Over 75% of on-target pay is variable and linked to performance against stretch targets • Short-term incentives are linked to annual targets • Long-term incentives are linked to performance against three-year stretch targets aligned to our strategic plan Align with long-term stakeholder interests • Policy incentivizes management to create long-term value for shareholders and other stakeholders through achievementofstrategic aims and delivery against financial and non-financial objectives • Majority of incentive is long-term and paid in Wolters Kluwer shares which are subject to two-year post-vesting holding requirements Be competitive in a global market for talent • On-target pay is aligned with the median of a defined global pay peer group, comprised of competitors and other companies in our sectors that are of comparable size, complexity, business profile, and international scope • TSR peer group companies are additionally screened for financial health, stock price correlation and volatility, andhistoricalTSR performance ← → Wolters Kluwer 2021 Annual Report 81 82 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued Deliver deep impact when it matters most FOCUS ON CUSTOMER SUCCESS AIM HIGH AND DELIVER MAKE IT BETTER WIN AS A TEAM Financial and non-ﬁnancial metrics Executive Board remuneration policy (adopted at the 2021 AGM): Financial measures – short-term incentive plan (STIP) pre-defined list of measures: Revenues Organic growth Adjusted operating profit Adjusted operating profit margin Adjusted netprofit Adjusted free cash flow Cash conversion ratio Non-financial measures – short-term incentive plan (STIP): ESG, operational, or strategic measures, including revenues from expert solutions, employee engagement score, customer satisfaction scores, measures of good corporate governance, measures ofoperationalexcellence,and measures of environmental impact. Financial measures – long-term incentive plan (LTIP): Relative total shareholder return Diluted adjusted EPS (three-year CAGR) Return on invested capital For 2022, STIP ﬁnancial measures will be revenues, adjusted net proﬁt, and adjusted free cash ﬂow. STIP non-ﬁnancial measures will be: employee belonging score; indexed cybersecurity score; and the number of on-premise servers decommissioned. • Drive investment in cloud-based expert solutions • Transform digital information solutions into expert solutions • Enrich customer experience leveraging data analytics LINKING PAY TO OUR STRATEGIC GOALS The largest component of Executive Board remuneration is variable performance-based incentives. This strengthens the alignment between remuneration and company performance, and reﬂects the philosophy that Executive Board remuneration should be linked to a strategy for long-term value creation. Our strategy aims to deliver continued good organic growth, further incremental improvements to our adjusted operating proﬁt margin and return on invested capital, and seeks to drive long-term, sustainable value for all stakeholders. OUR STRATEGIC AIMS • Enhance central functions, including marketing and technology • Advance ESG performance and capabilities • Engage diverse talent to drive innovation and growth Evolve Core Capabilities Accelerate Expert Solutions • Extend into high-growth adjacencies • Reposition solutions for new segments • Drive revenue through partnerships and ecosystem development Expand Our Reach OUR PURPOSE OUR VALUES ALIGNING WITH OUR RISK PROFILE The Supervisory Board assesses whether variable remuneration might expose the company to risk, taking into consideration our overall risk proﬁle and risk appetite, as described in Risk Management. We believe that our remuneration policy provides management with good incentives to create long-term value, without increasing our overall risk proﬁle. BENCHMARKING AGAINST OUR PEERS Pay peer group We use a pay peer group to benchmark Executive Board pay. This includes direct competitors and other companies in our sectors of comparable size, complexity, business proﬁle, and international scope. It is made up of companies based in Europe and North America, to reﬂect where Executive Board members might be recruited to or from. In 2021, ﬁve additional European companies were included in the pay peer group, making it approximately 60% European. The most comparable businesses available in Europe are companies in the Application Software and IT Consulting & Services sectors. In benchmarking pay against the pay peer group, the value of share-based remuneration is standardized to ensure a like-for-like comparison. In 2021, the pay peer group consisted of the companies shown in the table below. The third column provides the ﬁve European peers that were added in 2021. TSR peer group The TSR peer group consists of 15 companies that are used as the comparator group to determine TSR performance, which is one of the measures used in the LTIP. The TSR group is screened not only for comparability of the business (see above), but also for share price correlation and volatility. In 2020, we updated the TSR peer group to reﬂect the group’s transformation into a digital information, software and services business. Consumer publishers were replaced by other, more appropriate software and services companies from the pay peer group. This was in line with feedback received from shareholders. The new TSR peer group was applied to the LTIP 2020-2022 and LTIP 2021-2023, and will again apply for the LTIP 2022-2024. In case of the delisting or merger of a TSR peer group company, the Supervisory Board will carefully consider an appropriate replacement that meets strict pre-determined criteria. These criteria include: industry; geographic focus; size; ﬁnancial health; share price correlation and volatility; and historical TSR performance. Pay and TSR peer groups North American comparators (2020 and ongoing) European comparators (2020 and ongoing) European comparators (added in 2021) Equifax TSR Bureau Veritas TSR Atos Intuit Experian TSR Cap Gemini MSCI TSR IHS Markit TSR Dassault Systèmes News Corporation Informa TSR Teleperformance Nielsen Holdings Intertek Group TSR Temenos NortonLifeLock Pearson TSR S&P Global TSR RELX TSR Thomson Reuters TSR SGS TSR Verisk Analytics TSR The Sage Group TSR John Wiley & Sons * TSR * John Wiley & Sons included in the TSR peer group but not in the pay peer group. TSR Companies that are included in the TSR peer group. ← → Wolters Kluwer 2021 Annual Report 83 The TSR peer group used for the LTIP 2018-2020 and LTIP 2019-2021 comprised the following companies: TSR peer group LTIP 2018-2020 and LTIP 2019-2021 North American comparators European comparators European comparators John Wiley & Sons Arnoldo Mondadori Promotora de Informaciones (PRISA) McClatchy * /Verisk Analytics Axel Springer Reach News Corporation Daily Mail & General Trust RELX S&P Global Informa The Sage Group Thomson Reuters Lagardère Pearson * McClatchy, after being acquired, was replaced by Verisk Analytics in October 2020. SETTING TARGETS FOR LONGTERM INCENTIVE PLAN MEASURES The Supervisory Board uses a rigorous process to set stretch targets for the Executive Board. Process for setting targets for long-term incentive plan measures The ﬁnancial plan that is part of our three-year Vision & Strategy Plan (VSP) is the starting point for target setting. This plan is augmented with assumptions around management actions to arrive at realistic stretch targets. The process for setting targets for the LTIP starts with our company strategy, which is generally formulated every three years, and our three-year ﬁnancial plan (Vision & Strategy Plan or VSP), which is updated annually. The VSP generates a three-year forecast, based on organic development of the existing business. This plan is reviewed and approved by the Supervisory Board. For LTIP remuneration targets, this forecast is augmented with anticipated, value-creating management initiatives not accounted for in the ﬁnancial plan in order to give realistic but stretch targets that the Supervisory Board feels will maximize the full potential of the organization. Assumptions for management initiatives are made based on historical patterns and forward-looking strategic plans. Typical management initiatives are acquisitions, divestitures, restructuring, and share buybacks (including shares repurchased under our Anti-Dilution Policy). All targets are based on constant currency rates and IFRS accounting standards. The Supervisory Board compares the stretch targets against external benchmarks, where available, to ensure they represent a challenging performance in our sector and against other peers. The stretch targets are also tested for sensitivity to various input factors. Step 1 Step 2 Step 3 Step 4 Review VSP three-year ﬁnancial plan = Finalize three-year LTIPtargets Augment forecasts for management actions not intheplan Test targets for stretch and payout sensitivity Determine three-year LTIPtargets The TSR peer group is a sub-set of the pay peer group, with the exception of John Wiley & Sons. John Wiley is not included in the pay peer group because its revenues and market capitalization are signiﬁcantly smaller than those of Wolters Kluwer, but as a competitor whose business is comparable to parts of Wolters Kluwer, its share price performance is viewed as an appropriate comparator for TSR purposes. 84 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued USE OF DISCRETION IN DETERMINING VARIABLEREMUNERATION Under Dutch law, the Supervisory Board has the discretionary authority to amend Executive Board payouts, as determined by actual performance against pre-set targets, if they are considered unreasonable or unfair in relation to stakeholders’ interests. The Supervisory Board annually assesses the impact of certain management actions, or external events or circumstances, on results during the performance period, and may use its discretion to adjust for these actions or events. Such actions, events, or circumstances include, but are not limited to, the impact of restructuring, acquisitions, divestments, and share buybacks beyond that anticipated in the target-setting process. External events considered could include economic recession, changes in tax rates, and other events unforeseen in the target-setting process. Variable remuneration can be clawed back after payout if the payout was based on incorrect information. IMPLEMENTATION OF REMUNERATION POLICY IN 2021 This section outlines the implementation of the remuneration policy for Executive Board members in 2021, in line with the remuneration policy and the remuneration framework discussed above. It also describes how the performance measures were applied in 2021. During 2021, remuneration was paid in accordance with the remuneration policy adopted in 2021. There were no deviations from the remuneration policy, nor from the governance process in the execution of the policy. The Supervisory Board carried out a scenario analysis when determining the structure and level of Executive Board remuneration for 2021, in accordance with the Dutch Corporate Governance Code. The Supervisory Board is of the view that management achieved strong results despite the ongoing challenges of the pandemic, which required the organization to pivot and adapt throughout the year to protect the health and safety of employees, while continuing to deliver for customers. 2021 STIP ﬁnancial targets were all exceeded, while most non-ﬁnancial or ESG targets were met or exceeded. The formulaic outcome resulted in cash annual STIP payments of €1,959,938 for the CEO and €893,176 for the CFO. Three-year performance on total shareholder return and CAGR in diluted EPS were both ahead of the LTIP 2019-2021 targets set three years ago. The performance and shares to be paid out for the LTIP 2019-2021 is discussed below under Long-term incentive plans. ← → Wolters Kluwer 2021 Annual Report 85 Remuneration of the Executive Board – IFRS based Fixed remuneration Variable remuneration in thousands of euros, unlessotherwise indicated Base salary Social security Pension contribution Other benefits * STIP LTIP 2 Sub-total Proportion fixed/ variable Tax related cost Total 2021 N. McKinstry 1 1,348 22 93 572 1,960 4,713 8,708 23%/77% 669 9,377 K.B. Entricken 694 22 64 203 893 1,632 3,508 28%/72% (104) 3,404 Total 2,042 44 157 775 2,853 6,345 12,216 25%/75% 565 12,781 2020 N. McKinstry 1,371 22 76 142 1,690 4,463 7,764 21%/79% (252) 7,512 K.B. Entricken 702 22 45 215 716 1,463 3,163 31%/69% 969 4,132 Total 2,073 44 121 357 2,406 5,926 10,927 24%/76% 717 11,644 1 In 2021, Ms. McKinstry’s base salary was $1,461,000 (€1,347,998). The 2021 STIP payout is calculated on a U.S. dollar denominated equivalent of total salary as: $1,461,000 x 158.7% ($2,318,607 equivalent to €1,959,938). 2 LTIP share-based payments are based on IFRS accounting policies and therefore do not reﬂect the actual payout or value of performance shares released upon vesting. * Executive Board members are eligible for beneﬁts such as health insurance, life insurance, a car, and to participate in whatever all-employee plans may beoffered at any given point. Other beneﬁts of Ms. McKinstry include the recognition of a one-time, non-cash accrual of €446,000 to reﬂect her vesting in the retiree medical plan to which she is entitled based on her tenure and service with the company. Base salary We believe the current CEO pay package is appropriate given the market benchmark data for our pay peer group. However, to be responsive to the concerns around quantum from some investors, the Supervisory Board resolved not to increase the CEO base salary for 2021. The Supervisory Board approved an increase in base salary for Mr. Entricken of 2.5% in 2021. This was in line with the budgeted 2021 salary increase for Wolters Kluwer executives globally. Short-term incentive plan 2021 The STIP provides Executive Board members with a cash incentive for the achievement of speciﬁc annual targets for a set of ﬁnancial and non-ﬁnancial performance measures determined at the start of the year. The STIP payout as a percentage of base salary for on-target performance is shown in the table below, with the minimum threshold for payout and the maximum payout in the case of overperformance. There is no payout if performance is less than 90% of the STIP target. Payout is capped at performance that is 110% or more than the STIP target. The STIP payout percentages have remained unchanged since 2007. Payout of STIP variable remuneration takes place only after veriﬁcation by the external auditor of the company’s ﬁnancial statements, including the ﬁnancial KPIs on which the ﬁnancial STIP targets are based. STIP percentage payout scenarios for 2021 Minimum payout (% of base salary) Minimum threshold: no payout if performance is below (% of target) Target payout (% of base salary) Maximum payout (% of base salary) Maximum payout if performance is above (% of target) CEO 0% < 90% 125% 175% ≥110% CFO 0% < 90% 95% 145% ≥110% The 2021 performance measures, determined by the Supervisory Board, are listed in the table below. They reﬂect the key performance indicators (KPIs) on which the company reports and that are important measures of the successful execution of our strategy. Performance against STIP targets for 2021, together with the resulting STIP payout for the CEO and the CFO for the ﬁnancial year, is indicated in the table below. 86 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued Payouts for performance against 2021 STIP targets in thousands of euros, unless otherwise indicated STIP outcomes Performance targets Actual performance N. McKinstry 1 K.B. Entricken 2 Performance measures Weighting (A) Minimum Target Maximum Performance As % of target Payout, % of base salary (B) Weighted (A)x(B) Payout, % of base salary (C) Weighted (A)x(C) 2021 Financial Revenues 34.0% 4,164 4,627 5,090 4,771 103% 140% 47.6% 110% 37.4% Adjusted net profit 28.0% 729 810 891 885 109% 170% 47.6% 140% 39.2% Adjusted free cash flow 28.0% 733 815 896 1,010 124% 175% 49.0% 145% 40.6% Non-financial/ESG Average of six measures 10.0% 104% 145% 14.5% 115% 11.5% Total payout as % ofbasesalary 158.7% 128.7% Total payout 1,960 893 1 The 2021 STIP payout is calculated on a U.S. dollar denominated equivalent of total base salary as: $1,461,000 x 158.7% ($2,318,607 equivalent to €1,959,938). 2 The 2021 STIP payout is calculated on a U.S. dollar denominated equivalent of total base salary as: $821,000 x 128.7% ($1,056,627 equivalent to €893,176). Performance against the individual six STIP non-ﬁnancial targets for 2021 is detailed in the table below: Performance against STIP non-ﬁnancial targets for 2021 Performance targets Actual performance Performance measures Weighting (A) Minimum Target Maximum Performance As % of target Non-financial measures % of revenues from expertsolutions 1.67% 90% of target 55.3% 108% of target 54.5% 99% Employee engagement score vs high-performingnorm (HPN) 1 1.67% 4-5 percentage points below HPN HPN ± 1 percentage point 10 percentage points above HPN HPN + 1 percentage point 100% A diversity, equity, andinclusiongoal 1.67% Discretionary Deliver assessment and plan Discretionary Assessment and plan were delivered 100% % completion of annual compliance training 1.67% <98% 98% ≥ 99.01% ≥ 99.01% 110% Indexed cybersecurity maturityscore (2020 = 100.0) 1.67% 100.0 103.1 106.3 105.6 105% Number of on-premise servers decommissioned (reducing carbon footprint) 1.67% 808 850 935 2,838 110% Average of six measures 10.0% 104% 1 High-performing norm (HPN) is an independently-deﬁned standard based on companies that qualify for Fortune’s World’s Most Admired Companies andGreatPlace to Work rankings. ← → Wolters Kluwer 2021 Annual Report 87 LONGTERM INCENTIVE PLANS The LTIP provides Executive Board members conditional rights on shares (performance shares). The plan aims to align the organization and its management with the strategic goals of the company and, in doing so, reward the creation of long-term value for shareholders. The total number of shares that Executive Board members receive depends on the achievement of pre-determined performance conditions at the end of a three-year performance period. The performance measures for the LTIP 2019-2021 were total shareholder return (TSR) relative to our group of TSR peer companies (TSR-related shares) and diluted EPS (EPS-related shares). Payout of the performance shares at the end of the three-year performance period will take place only after veriﬁcation by the external auditor of the achievement of the TSR and EPS targets. Total Shareholder Return TSR objectively measures the company’s ﬁnancial performance and assesses its long-term value creation as compared to other companies in our TSR peer group. It is calculated based on the share price change over the three-year period and assumes ordinary dividends are reinvested. By using a three-year performance period, there is a clear link between remuneration and long-term value creation. The company uses a 60-day average of the share price at the beginning and end of each three-year performance period to reduce the inﬂuence of potential stock market volatility. Wolters Kluwer’s TSR performance compared to the peer group determines the number of conditionally awarded TSR-related shares allocated at the end of the three-year performance period. These incentive zones are in line with best practice recommendations for the governance of long-term incentive plans. TSR performance ranking payout percentage table Position Payout as % of conditional shares awarded for on-target performance 1-2 150% 3-4 125% 5-6 100% 7-8 75% 9-16 0% Diluted adjusted earnings per share and return on invested capital Executive Board members can earn 0%-150% of the number of conditionally awarded EPS-related or ROIC-related shares, depending on Wolters Kluwer’s performance over the three-year performance period. The Supervisory Board determines the exact targets for the EPS-related and ROIC-related shares for each three-year performance period. The EPS targets are based on diluted adjusted EPS performance in constant currencies, to exclude beneﬁts or disadvantages based on currency effects over which the Executive Board has no control. In addition, diluted adjusted EPS performance is based on consistent IFRS accounting standards. The ROIC targets are also based on constant currencies. Using EPS and ROIC as performance measures for LTIP facilitates strong alignment with the successful execution of our strategy to generate long-term shareholder value. 88 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued Diluted adjusted EPS and ROIC performance incentive table Achievement Payout % Less than 50% of target None On target 100% Overachievement of target Up to 150% Performance against targets for TSR and EPS for the 2018-2020 and 2019-2021 performance periods LTIP measure Weighting Target Achievement Payout % Period 2019-2021 Vesting TSR 50% Position 5-6 Position 4 125% Diluted EPS * 50% CAGR of 12.6% 15.0% 150% Period 2018-2020 Vesting TSR 50% Position 5-6 Position 3 125% Diluted EPS * 50% CAGR of 10.4% 11.1% 135% * LTIP 2018-2020 and LTIP 2019-2021 were based on the former remuneration policy, which used TSR and diluted EPS. For calculation purposes, we are using the deﬁnition of diluted EPS that can be found in the Glossary. VESTED LONG-TERM INCENTIVE PLANS LTIP vesting for the performance period 2019–2021 The LTIP 2019-2021 vested on December 31, 2021. Vested LTIP 2019-2021 shares will be released on February 24, 2022. The volume- weighted average price for the shares released will be based on the average exchange price traded at Euronext Amsterdam on February 24, 2022, the ﬁrst day following the company’s publication of its annual results. Conditional share awards vested for the period 2019-2021 number of shares, unless otherwise stated Outstanding at December 31, 2021 Additional conditional number of TSR shares (25%) Additional conditional number of EPS shares (50%) Vested/payout February 24, 2022 Estimated cash value of payout (inthousands ofeuros) * N. McKinstry 92,306 13,347 19,459 125,112 12,962 K.B. Entricken 28,486 4,119 6,005 38,610 4,000 Total 120,792 17,466 25,464 163,722 16,962 Senior Management 353,908 44,259 88,551 486,718 50,424 Total 474,700 61,725 114,015 650,440 67,386 * Estimated cash value calculated as the number of shares vested multiplied by the closing share price on December 31, 2021 (€103.60). ← → Wolters Kluwer 2021 Annual Report 89 LTIP vesting for the performance period 2018-2020 The LTIP 2018-2020 vested on December 31, 2020. A total number of 705,214 shares were released on February 25, 2021. On that day, the volume-weighted average price of Wolters Kluwer N.V. was €64.9899. The following table indicates the number of shares vested and the cash equivalent. LTIP: shares vested for the performance period 2018-2020 number of shares, unless otherwise stated Outstanding at December 31, 2020 Additional conditional number of TSR- shares (25%) Additional conditional number of EPS- shares (35%) Vested/payout February 25, 2021 Cash value of vested shares * N. McKinstry 108,117 15,563 16,052 139,732 9,081 K.B. Entricken 34,189 4,922 5,076 44,187 2,872 Total 142,306 20,485 21,128 183,919 11,953 Senior management 400,962 50,148 70,185 521,295 33,879 Total 543,268 70,633 91,313 705,214 45,832 * Cash value in thousands of euros; calculated as the number of shares vested multiplied by the volume weighted average price on February 25, 2021. CONDITIONALLY AWARDED SHARES This section provides information on the conditional share awards under the outstanding (in-ﬂight) LTIPs for Executive Board members and other senior management. LTIP awards 2020-2022 and 2021-2023 The Executive Board members and other senior management have been conditionally awarded the following number of shares based on a 100% payout, subject to the conditions of the LTIP grants for 2020-2022 and 2021-2023: Conditional LTIP share awards for performance periods 2020-2022 and 2021-2023 number of shares at 100% payout Conditionally awarded TSR- based shares Conditionally awarded EPS- based shares Conditionally awarded TSR- based shares Conditionally awarded ROIC and EPS-based shares Total conditionally awarded shares LTIP 2020-2022 LTIP 2020-2022 LTIP 2021-2023 LTIP 2021-2023 December 31, 2021 N. McKinstry 48,255 32,486 38,618 28,352 147,711 K.B. Entricken 17,523 11,797 15,300 11,233 55,853 Total 65,778 44,283 53,918 39,585 203,564 Senior management * 144,775 144,774 168,451 168,450 626,450 Total 210,553 189,057 222,369 208,035 830,014 * Remuneration of senior management consists of a base salary, STIP, and LTIP, and is based on the achievement of speciﬁc objective targets linked to creating value forshareholders, such as revenue and proﬁt performance. The LTIP targets and payout schedule for senior management are similar to those for the Executive Board. 90 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued KEY ASSUMPTIONS FOR LTIP 20202022 AND LTIP 20212023 SHARES Fair values for LTIP shares are provided in the table below. In the benchmarking process, the fair value of share-based remuneration is standardized to ensure a like-for-like comparison to peer companies. LTIP 2021-2023 LTIP 2020-2022 Fair values Fair value of (Adjusted-) EPS shares at grant date (in €) 64.06 60.68 Fair value of ROIC shares at grant date (in €) 64.06 – Fair value of TSR shares at grant date (in €) 47.03 40.85 TSR shares – key assumptions Share price at grant date (in €) 69.06 65.02 Expected volatility 21.8% 16.5% The fair value of TSR shares is calculated at the grant date using the Monte Carlo model. For the TSR shares granted in the LTIP 2021- 2023, the fair value is estimated to be €47.03 as of January 1, 2021. The inputs to the valuation were the Wolters Kluwer share price of €69.06 on the grant date (January 1, 2021) and an expected volatility of 21.8% based on historical daily prices over the three years prior to January 1, 2021. Dividends are assumed to increase annually based on historic trend and management plans. The model assumes a contractual life of three years and uses the risk-free rate on Dutch three-year government bonds. PROPOSED REMUNERATION APPROACH FOR 2022 This section describes arrangements that will be put into place for 2022, in line with the remuneration policy as adopted at the April 2021 AGM. Base salary The Supervisory Board approved a regular increase in base salary for the CEO and CFO of 2.5%, in line with the overall budgeted 2022 salary increase for Wolters Kluwer employees globally. Short-term incentive plan 2022 The STIP percentage payout scenarios for 2022 will be the same as in 2021 (shown in the table on page 86). According to the remuneration policy, the Supervisory Board can annually select measures from a pre-deﬁned list of ﬁnancial measures, providing ﬂexibility for the Supervisory Board and transparency for stakeholders. A full list of ﬁnancial measures is provided in the summary table at the front of this Remuneration Report. The ﬁnancial measures carry a weight of at least 80% under the new remuneration policy adopted in 2021. The Supervisory Board has selected the following measures from the list for 2022: Financial performance measures for STIP 2022 Measure Weighting How performance is calculated Revenues 34% STIP financial targets are based on the annual budget which assumes development of the existing business. In calculating STIP performance results, the effect of changes in currency is excluded and is based on consistent IFRS accounting standards. Adjusted net profit 28% Adjusted free cash flow 28% Total weighting of STIP financial measures 90% Non-ﬁnancial performance measures for STIP 2022 The non-ﬁnancial measures relate to ESG, strategic, or operational priorities. The policy sets the maximum weight for these non- ﬁnancial measures at 20% of the STIP. In 2022, the weight will be set at 10% with each measure equal-weighted and separately assessed. The measures will apply equally to the CEO and CFO and have been cascaded down to all executives. In 2022, the following three strategically-relevant ESG measures will be applied. All three measures will be quantiﬁable and veriﬁable. ← → Wolters Kluwer 2021 Annual Report 91 Non-ﬁnancial performance measures for 2022 ESG objective Measure Weighting % Description of target and how it is measured Workforce diversity and employee engagement Belonging score 3.33% The annual target aims to achieve an improvement in our overall belonging score. Belonging measures the extent to which employees believe they can bring their authentic selves to work and be accepted for who they are. Thescore (on a scale of 0-100) is determined by an independent third party (2021:Microsoft GLINT). Secure systems and processes Indexed cybersecurity maturity score 3.33% The annual target is based on a company-wide program designed to maintain and advance cybersecurity. Our cybersecurity maturity score is assessed annually by a third party, based on the National Institute of Standards and Technology (NIST) framework. The score is indexed with a base line of 100.0 in 2020. The annual target aims to achieve annual improvement on the baseline. Reduction in carbon footprint Number of on-premise servers decomissioned 3.33% The annual target is based on programs managed by Global Business Services, Digital eXperience Group, and the four divisions. Decommissioning of on-premise servers by migrating to energy-efficient cloud platforms reduces our carbon footprint. Total weighting of STIP non-financial measures 10.0% 0% 20% 40% 60% 80% 100% Weighting of STIP 2022 performance measures Financial measures Non-ﬁnancial measures Disclosure of STIP targets The Supervisory Board does not disclose STIP targets in advance due to their commercial sensitivity. In response to shareholder requests for greater transparency, we have disclosed STIP targets retrospectively in this report. LONGTERM INCENTIVE PLAN 20222024 Conditional LTIP grants under the new remuneration policy The CEO’s target remuneration is positioned in line with the median of the pay peer group. However, having listened to shareholder concerns about the quantum of CEO remuneration, we proposed as part of the new remuneration policy in 2021, in consultation with the CEO, to reduce the maximum award of conditional shares from 285% to 240% over a two-year period. This change will take place in two steps (265% for 2021 and 240% for 2022) and will effectively reduce the CEO’s target remuneration by about 10%. The CFO’s target conditional award is 200%. Wolters Kluwer uses the fair value method for calculating the number of conditional performance shares to be awarded. 0% 20% 40% 60% 80% 100% Weighting of LTIP 2022-2024 performance measures TSR Diluted adjusted EPS ROIC 92 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued For the LTIP 2022-2024 cycle, in accordance with the policy adopted by shareholders at the 2021 AGM, the Supervisory Board will maintain TSR, measured against 15 peers, as an LTIP measure with a weighting of 50% of the value of the LTIP. In addition, the Supervisory Board will keep diluted adjusted EPS at 30% of the value and ROIC at 20%. These measures were selected based on investor feedback and the Supervisory Board's continued desire to incentivize management to drive long-term value creation. Prospective disclosure of LTIP targets We committed to disclose the LTIP targets prospectively (in addition to continuing retrospective disclosure of LTIP targets), upon adoption of the remuneration policy by the 2021 AGM. For plans designed under the new policy, targets are provided below. LTIP Measure Weighting Target in constant currencies Period 2022-2024 TSR 50% Position 5-6 Diluted adjusted EPS 30% CAGR of 9.3% ROIC 20% Final year ROIC of 16.6% Period 2021-2023 TSR 50% Position 5-6 Diluted adjusted EPS 30% CAGR of 8.5% ROIC 20% Final year ROIC of 13.9% Period 2020-2022 TSR 50% Position 5-6 Diluted basic EPS 50% Not disclosed Conditional LTIP grants 2022-2024 In accordance with the commitment of the Supervisory Board in 2021 upon adoption of the remuneration policy, the LTIP target level for the 2022-2024 performance period will be 240% for the CEO. The target level for the CFO is 200%. The number of shares conditionally awarded at the start of the performance period is computed by dividing the amount, as calculated above, by the fair value of a conditionally awarded share at the start of the performance period. As the fair value of TSR-related shares can be different from the fair value of EPS- and ROIC-related shares, the number of conditionally awarded TSR-related shares can deviate from the number of conditionally awarded EPS- and ROIC-related shares. Proposed 2022 remuneration retains high proportion of performance-driven pay Maximum +50% share price appreciation Maximum performance On-target performance Minimum performance 2,0000in thousands of euros 4,000 12,0008,0006,000 10,000 2022 performance-driven CEO remuneration scenarios Base Salary Pension Social security and other beneﬁts STIP LTIP LTIP: share price appreciation ← → Wolters Kluwer 2021 Annual Report 93 Proposed 2022 remuneration retains high proportion of performance-driven pay Maximum +50% share price appreciation Maximum performance On-target performance Minimum performance 1,0000in thousands of euros 2,000 5,0003,000 4,000 2022 performance-driven CFO remuneration scenarios Base Salary Pension Social security and other beneﬁts STIP LTIP LTIP: share price appreciation SHARE OWNERSHIP AND HOLDING REQUIREMENTS According to our remuneration policy, the CEO will be required to own Wolters Kluwer shares valued at three times base salary, with other Executive Board members required to hold shares valued at twice base salary. Our current Executive Board members are already in compliance with this ownership requirement, with their personal shareholdings in Wolters Kluwer N.V. shown below: Shares owned by Executive Board members number of shares, unless otherwise stated Actual ownership as multiple of base salary (as at December 31, 2021) * Actual ownership as multiple of base salary (as at December 31, 2020) * December 31, 2021 December 31, 2020 N. McKinstry 28.6x 23.3x 372,131 462,131 K.B. Entricken 6.0x 3.6x 40,036 36,636 * Number of Wolters Kluwer N.V. shares held at December 31 multiplied by the Wolters Kluwer N.V. share price on that date, divided by base salary. In addition to these ownership requirements, according to the remuneration policy, performance shares (net of any income taxes due on vesting) are subject to a two-year holding period requirement, as provided in the Dutch Corporate Governance Code. This two-year holding period applies to the LTIP 2021-2023 and later plans and extends the total required retention period to ﬁve years including the three-year performance and vesting period. If the Executive Board member is eligible for a company-sponsored deferral program and chooses to participate by deferring LTIP proceeds upon vesting, the maximum amount that can be deferred is 50% of the vested value. The remaining vested value in shares (net of taxes) is subject to the two-year holding period requirement. 94 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued CEO PAYRATIO The pay-ratio, obtained by dividing the total 2021 remuneration for the CEO by the average of the total 2021 remuneration of all employees worldwide, was 87 (2020: 79). For this purpose, the total CEO remuneration is based on the remuneration costs as stated in the table Remuneration of the Executive Board – IFRS based, minus tax-related costs. The average employee remuneration is obtained by dividing the 2021 total personnel expenses as stated in Note 13 – Personnel Expenses (after subtracting the CEO’s remuneration), by the reported average number of full-time employees (minus one). As such, both the total CEO remuneration (minus tax-related costs) and the average total remuneration of all employees (minus the CEO’s remuneration) are based on IFRS standards. The difference between the 2020 and 2021 pay ratios was due to the one-time non-cash accrual of retiree medical beneﬁts and higher variable pay. OTHER INFORMATION The company does not grant any personal loans, guarantees, or the like to Executive Board or Supervisory Board members. Supervisory Board remuneration A revised Supervisory Board remuneration policy was adopted at the 2020 AGM. The Supervisory Board had reviewed its own remuneration and established the new policy on the recommendation of the Selection and Remuneration Committee. This was in line with the November 2019 Dutch legislation which implemented the amended Shareholder Rights Directive. According to this policy, the remuneration for the Supervisory Board aims to attract and retain high caliber individuals with the relevant skills and experience to guide the development and execution of company strategy and facilitate long-term value creation. Supervisory Board remuneration is not tied to company performance and therefore includes ﬁxed remuneration only. In exceptional circumstances, ad-hoc committees may be established, for which the Chair and members may receive pro-rated remuneration at the level of the Audit Committee fee, capped at ﬁve times the annual fee of the Audit Committee. Resolutions are always taken by the full Supervisory Board. The Supervisory Board seeks advice from an independent external remuneration advisor. Supervisory Board remuneration in thousands of euros Member Selection and Remuneration Committee Member Audit Committee 2021 2020 2019 F.J.G.M. Cremers, Chair Co-Chair 128 128 114 A.E. Ziegler, Vice-Chair Yes 102 102 95 B.J.F. Bodson 1 82 72 22 J.P. de Kreij 3 Chair 94 92 – J.A. Horan Co-Chair 91 96 100 S. Vandebroek 3 Yes 93 61 – C.F.H.H. Vogelzang 2 Yes 88 88 58 Former Supervisory Board members B.F.J. Angelici 4 – – 20 R.D. Hooft Graafland 6 – 34 97 B.J. Noteboom 4 – – 25 F.M. Russo 5 – – 97 Total 678 673 628 1 Appointed at the AGM of 2019, with effect from September 1, 2019. 2 Appointed at the AGM of 2019. 3 Appointed at the AGM of 2020. 4 Retired after the AGM of 2019. 5 Retired at year-end 2019. 6 Retired after the AGM of 2020. ← → Wolters Kluwer 2021 Annual Report 95 Supervisory Board members’ fees The table below shows the fee schedule for Supervisory Board members. It also shows the proposed new remuneration as of 2022, which proposal will be submitted to the 2022 Annual General Meeting of Shareholders. This proposal is in line with the Supervisory Board remuneration policy which was adopted in 2020 by the AGM with 99.11% of votes in favor and reﬂects the responsibilities of Supervisory Board members, remuneration levels at other two-tier board Dutch listed (AEX) companies and selected European companies, and the international composition of the Supervisory Board. Supervisory Board members’ fees in euros Annual fee 2020 Annual fee 2021 Proposed new fee Chair 112,000 112,000 130,000 Vice-Chair 83,500 83,500 95,000 Members 70,000 70,000 75,000 Chair Audit Committee 22,500 22,500 25,000 Members Audit Committee 16,500 16,500 18,000 Chair Selection and Remuneration Committee 17,500 * 17,500 * 20,000 ** Members Selection and Remuneration Committee 11,500 11,500 14,000 Travel allowance for intercontinental travel 5,000 per meeting 5,000 per meeting 5,000 per meeting * Due to the co-chair arrangement, each co-chair receives €14,500. ** Due to the co-chair arrangement, each co-chair will receive €17,000. Shares owned by Supervisory Board members At December 31, 2021, Ms. Ziegler held 1,894 American Depositary Receipts (each Depositary Receipt represents one ordinary Wolters Kluwer share) (2020: none). None of the other Supervisory Board members held shares in Wolters Kluwer (2020: none). SHAREHOLDER VOTING AT ANNUAL GENERAL MEETING The following table sets out the voting results in respect of resolutions relating to remuneration at the AGM held on April 22, 2021. Shareholder voting outcomes at the 2021 AGM Resolution % of votes for % of votes against votes withheld 2020 Remuneration Report Advisory 95.98% 4.02% 731,864 2021 Proposed Executive Board Remuneration Policy Binding 97.14% 2.86% 24,293 96 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Remuneration Report continued FIVEYEAR OVERVIEW OF ANNUAL CHANGES IN REMUNERATION IFRS BASED The table below provides an overview of Executive Board remuneration, Supervisory Board remuneration, company performance, and average employee remuneration for the past ﬁve years. Five-year overview of annual changes in remuneration (IFRS based) in thousands of euros, unless otherwise stated 2021 2020 2019 2018 2017 Executive Board remuneration (excluding tax-related cost) N. McKinstry 8,708 7,764 7,932 7,792 7,661 Change (in %) 12.2 (2.1) 1.8 1.7 15.2 K.B. Entricken 3,508 3,163 3,181 3,298 3,103 Change (in %) 10.9 (0.6) (3.6) 6.3 15.1 Supervisory Board remuneration * F.J.G.M. Cremers, Chair 1 128 128 114 117 60 A.E. Ziegler, Vice-Chair 1 102 102 95 95 57 B.J.F. Bodson 4 82 72 22 – – J.A. Horan 3 91 96 100 91 88 J.P. de Kreij 2 94 92 – – – S. Vandebroek 2 93 61 – – – C.F.H.H. Vogelzang 4 88 88 58 – – R.D. Hooft Graafland 9 – 34 97 100 80 F.M. Russo 5 – – 97 97 87 B.J. Angelici 6 – – 20 85 72 B.J. Noteboom 6 – – 25 82 72 P.N. Wakkie 7 – – – – 25 L.P. Forman 7 – – – – 32 Company performance Organic growth (in %) 5.7 1.7 4.3 4.3 3.4 Adjusted operating profit margin (in %) 25.3 24.4 23.6 23.1 22.2 Year-end closing share price (€) 103.60 69.06 65.02 51.66 43.48 Share price change (in %) 50 6 26 19 26 Total shareholder return (in %) 52 8 28 21 29 Average remuneration on a full-time equivalent basis of employees Total personnel cost per FTE, excluding CEO 99.7 98.6 97.6 92.3 93.9 * Members of the Supervisory Board are independent from the company. Their remuneration is not tied to Wolters Kluwer’s performance and therefore includes ﬁxedremuneration only. 1 Appointed at the AGM of 2017. 2 Appointed at the AGM of 2020. 3 Appointed at the AGM of 2016. 4 Appointed at the AGM of 2019. Mr. Bodson's appointment was with effect from September 1, 2020. 5 Appointed at the AGM of 2016; retired per year end 2019. 6 Retired after the AGM of 2019. 7 Retired after the AGM of 2017. 9 Retired after the AGM of 2020. ← → Wolters Kluwer 2021 Annual Report 97 98 Wolters Kluwer 2021 Annual Report Strategic report | Governance | Financial Statements SECTION OVERVIEW → 2021 Financial Statements page 99 → Consolidated Financial Statements page 100 → Notes to the Consolidated Financial Statements page 107 → Company Financial Statements page 194 → Notes to the Company Financial statements page 197 → Other information on the Financial Statements page 204 Financial Statements 98 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements ← → Wolters Kluwer 2021 Annual Report 99 Notes to the Consolidated FinancialStatements 107 Note 1 – General and Basis of Preparation 109 Note 2 – Significant Accounting Policies 111 Note 3 – Accounting Estimates and Judgments 112 Note 4 – Benchmark Figures 118 Note 5 – Segment Reporting 120 Note 6 – Revenues 124 Note 7 – Earnings per Share 125 Note 8 – Acquisitions and Divestments 129 Note 9 – Assets/Liabilities Classified as Held for Sale 131 Note 10 – Sales Costs 132 Note 11 – General and Administrative Costs 132 Note 12 – Other Gains and (Losses) 133 Note 13 – Personnel Expenses 133 Note 14 – Amortization, Impairment, and Depreciation 134 Note 15 – Financing Results 135 Note 16 – Income Tax Expense 137 Note 17 – Non-controlling Interests 138 Note 18 – Goodwill and Intangible Assets other thanGoodwill 143 Note 19 – Property, Plant, and Equipment 144 Note 20 – Leasing 148 Note 21 – Investments in Equity-accountedInvestees 149 Note 22 – Financial Assets 149 Note 23 – Tax Assets and Liabilities 152 Note 24 – Inventories 153 Note 25 – Contract Assets and Liabilities 156 Note 26 – Other Receivables 157 Note 27 – Cash and Cash Equivalents 157 Note 28 – Trade and Other Payables 158 Note 29 – Long-term Debt 163 Note 30 – Financial Risk Management 172 Note 31 – Employee Benefits 182 Note 32 – Provisions 184 Note 33 – Capital and Reserves 186 Note 34 – Share-based Payments 189 Note 35 – Related Party Transactions 189 Note 36 – Audit Fees 190 Note 37 – Commitments, Contingent Assets, andContingent Liabilities 191 Note 38 – Remuneration of the Executive Board and the Supervisory Board 192 Note 39 – Overview of Significant Subsidiaries 193 Note 40 – Events after Balance Sheet Date 100 Consolidated Financial Statements 100 Consolidated Statement of Profit or Loss 101 Consolidated Statement of Comprehensive Income 102 Consolidated Statement of Cash Flows 104 Consolidated Statement of Financial Position 106 Consolidated Statement of Changes in Total Equity 2021 Financial Statements 100 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Consolidated Statement of Profit or Loss in millions of euros, unless otherwise stated, for the year ended December 31 2021 2020 Revenues Note 5/6 4,771 4,603 Cost of revenues Note 5 (1,374) (1,359) Gross profit Note 5 3,397 3,244 Sales costs Note 10 (806) (784) General and administrative costs Note 11 (1,550) (1,480) Total operating expenses Note 5 (2,356) (2,264) Other gains and (losses) Note 12 (29) (8) Operating profit Note 5 1,012 972 Financing income 4 10 Financing costs (82) (56) Other finance income/(costs) (6) 5 Total financing results Note 15 (84) (41) Share of profit of equity-accounted investees, net of tax Note 21 1 6 Profit before tax 929 937 Income tax expense Note 16 (201) (216) Profit for the year 728 721 Attributable to: – Owners of the company 728 721 – Non-controlling interests Note 17 0 0 Profit for the year 728 721 Earnings per share (EPS) (€) Basic EPS Note 7 2.79 2.72 Diluted EPS Note 7 2.78 2.70 Consolidated FinancialStatements ← → Wolters Kluwer 2021 Annual Report 101 Consolidated Statement of Comprehensive Income in millions of euros, for the year ended December 31 2021 2020 Comprehensive income Profit for the year 728 721 Other comprehensive income Items that are or may be reclassified subsequently to the consolidated statement ofprofitorloss: Exchange differences on translation of foreign operations 314 (348) Eschange differences on translation of equity-accounted investees Note 21 1 0 Recycling of foreign exchange differences on loss of control Note 8 40 0 Gains/(losses) on hedges of net investments in foreign operations (16) 11 Gains/(losses) on cash flow hedges 6 (24) Net change in fair value of cash ﬂow hedges reclassified to the consolidated statementofprofit or loss Note 15 4 6 Items that will not be reclassified to the consolidated statement of profit or loss: Remeasurement gains/(losses) on defined benefit plans Note 31 16 0 Other comprehensive income/(loss) for the year, before tax 365 (355) Income tax on items that may subsequently be reclassified to the consolidated statement ofprofit or loss 0 1 Income tax on items that will not be reclassified to the consolidated statement of profit orloss (4) 0 Income tax on other comprehensive income Note 23 (4) 1 Other comprehensive income/(loss) for the year 361 (354) Total comprehensive income for the year 1,089 367 Attributable to: – Owners of the company 1,088 367 – Non-controlling interests 1 0 Total 1,089 367 102 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Consolidated Statement ofCashFlows in millions of euros, for the year ended December 31 2021 2020 Cash flows from operating activities Profit for the year 728 721 Adjustments for: Income tax expense Note 16 201 216 Share of profit of equity-accounted investees, net of tax Note 21 (1) (6) Financing results Note 15 84 41 Amortization, impairment, and depreciation Note 14 473 442 Book (profit)/loss on disposal of operations and non-current assets 10 (7) Fair value changes of contingent considerations Note 12 0 (4) Additions to and releases from provisions Note 32 15 42 Appropriation of provisions Note 32 (36) (19) Changes in employee benefit provisions (9) (4) Share-based payments Note 34 24 24 Other adjustments (4) (2) Adjustments excluding autonomous movements in working capital 757 723 Inventories (3) 0 Contract assets Note 25 (16) (6) Trade and other receivables (78) 22 Deferred income Note 25 113 44 Other contract liabilities Note 25 14 29 Trade and other payables 120 (50) Autonomous movements in working capital 150 39 Total adjustments 907 762 Net cash flows from operations 1,635 1,483 Interest paid (including the interest portion of lease payments) (72) (75) Interest received 6 10 Paid income tax Note 23 (277) (221) Net cash from operating activities 1,292 1,197 ← → Wolters Kluwer 2021 Annual Report 103 in millions of euros, for the year ended December 31 2021 2020 Cash flows from investing activities Capital expenditure Note 18/19 (240) (238) Proceeds from disposal of other intangible assets and property, plant, and equipment 1 7 Acquisition spending, net of cash acquired Note 8 (108) (395) Receipts from divestments, net of cash disposed Note 8 76 50 Dividends received Note 21 0 1 Cash from settlement of net investment hedges (16) 12 Net cash used in investing activities (287) (563) Cash flows from financing activities Repayment of loans (100) (363) Proceeds from new loans 500 496 Repayment of principal portion of lease liabilities Note 20 (68) (74) Collateral paid Note 30 – (2) Repurchased shares Note 33 (410) (350) Dividends paid Note 33 (373) (334) Net cash used in financing activities (451) (627) Net cash ﬂow before effect of exchange differences 554 7 Exchange differences on cash and cash equivalents and bank overdrafts 76 (77) Net change in cash and cash equivalents and bank overdrafts 630 (70) Cash and cash equivalents less bank overdrafts at January 1 364 434 Cash and cash equivalents less bank overdrafts at December 31 Note 27 994 364 Add: Bank overdrafts at December 31 Note 27 9 359 Less: Cash included in assets classified as held for sale at December 31 Note 9 (2) – Cash and cash equivalents in the consolidated statement of financial position at December 31 Note 27 1,001 723 104 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Consolidated Statement ofFinancialPosition in millions of euros, at December 31 2021 2020 * Non-current assets Goodwill Note 18 4,180 3,969 Intangible assets other than goodwill Note 18 1,620 1,669 Property, plant, and equipment Note 19 75 84 Right-of-use assets Note 20 301 319 Investments in equity-accounted investees Note 21 10 8 Financial assets Note 22 5 5 Other receivables Note 26 18 20 Contract assets Note 25 19 21 Deferred tax assets Note 23 62 72 Total non-current assets 6,290 6,167 Current assets Inventories Note 24 65 68 Contract assets Note 25 138 111 Trade receivables Note 25 1,008 986 Other receivables Note 26 366 272 Current income tax assets Note 23 59 23 Cash and cash equivalents Note 27 1,001 723 Assets classified as held for sale Note 9 101 – Total current assets 2,738 2,183 Total assets 9,028 8,350 * Restated for certain reclassifications. See Note 1 – General and Basis of Preparation. ← → Wolters Kluwer 2021 Annual Report 105 in millions of euros, at December 31 2021 2020 * Equity Issued share capital Note 33 32 32 Share premium reserve 87 87 Legal reserves 215 (118) Treasury shares (247) (222) Retained earnings 2,330 2,308 Equity attributable to the owners of the company Note 47 2,417 2,087 Non-controlling interests Note 17 0 0 Total equity 2,417 2,087 Non-current liabilities Bonds 2,625 2,126 Private placements 153 157 Lease liabilities 260 276 Other long-term debt 13 17 Total long-term debt Note 29 3,051 2,576 Deferred tax liabilities Note 23 294 305 Employee benefits Note 31 90 115 Provisions Note 32 7 4 Non-current deferred income Note 25 113 112 Total non-current liabilities 3,555 3,112 Current liabilities Deferred income Note 25 1,709 1,518 Other contract liabilities Note 25 80 66 Trade and other payables Note 28 944 819 Current income tax liabilities Note 23 142 169 Short-term provisions Note 32 27 48 Borrowings and bank overdrafts Note 29 9 459 Short-term lease liabilities Note 29 71 72 Liabilities classified as held for sale Note 9 74 – Total current liabilities 3,056 3,151 Total liabilities 6,611 6,263 Total equity and liabilities 9,028 8,350 * Restated for certain reclassifications. See Note 1 – General and Basis of Preparation. 106 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Consolidated Statement of Changesin Total Equity Legal reserves Other reserves in millions of euros Issued share capital Share premium reserve Legal reserve participations Hedge reserve Translation reserve Treasury shares Retained earnings Shareholders’ equity Non- controlling interests Total equity Balance at January 1, 2020 * 33 87 139 (110) 213 (279) 2,297 2,380 0 2,380 Profit for the year 721 721 0 721 Other comprehensive income/(loss) for the year (6) (348) 0 (354) 0 (354) Total comprehensive income for the year (6) (348) 721 367 0 367 Transactions with owners of the company, recognized directly in equity: Share-based payments 24 24 24 Cancelation of shares (1) 346 (345) 0 0 Release LTIP shares 61 (61) 0 0 Final cash dividend 2019 (210) (210) 0 (210) Interim cash dividend 2020 (124) (124) (124) Repurchased shares (350) (350) (350) Other movements (6) 0 6 0 0 Balance at December 31, 2020 * 32 87 133 (116) (135) (222) 2,308 2,087 0 2,087 Balance at January 1, 2021 32 87 133 (116) (135) (222) 2,308 2,087 0 2,087 Profit for the year 728 728 0 728 Other comprehensive income/(loss) for the year (6) 354 12 360 1 361 Total comprehensive income for theyear (6) 354 740 1,088 1 1,089 Transactions with owners of the company, recognized directly in equity: Share-based payments 24 24 24 Cancelation of shares 0 336 (336) 0 0 Release LTIP shares 49 (49) 0 0 Final cash dividend 2020 (232) (232) (1) (233) Interim cash dividend 2021 (140) (140) (140) Repurchased shares (410) (410) (410) Other movements (15) 0 15 0 0 Balance at December 31, 2021 32 87 118 (122) 219 (247) 2,330 2,417 0 2,417 * Restated for certain reclassifications. See Note 1 – General and Basis of Preparation. ← → Wolters Kluwer 2021 Annual Report 107 Note 1 – General and Basis of Preparation GENERAL Reporting entity Wolters Kluwer N.V. (the company) with its subsidiaries (together referred to as ‘the group’, and individually as ‘group entities’) is a global leader in professional information, software solutions, and services for the health, tax and accounting, ﬁnance, risk and compliance, and legal and regulatory sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with technology and services. The group maintains operations across the U.S. & Canada, Europe, Asia Paciﬁc, and other regions (referred to as ‘Rest of World’). The company’s ordinary shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. The registered ofﬁce of Wolters Kluwer N.V. is located at Zuidpoolsingel 2, Alphen aan den Rijn, the Netherlands, with its statutory seat in Amsterdam and a registration with the Dutch Commercial Register under number 33.202.517. Statement of compliance The consolidated ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations, prevailing as of December 31, 2021, as endorsed for use in the European Union by the European Commission. These ﬁnancial statements were authorized for issuance by the Executive Board and the Supervisory Board on February 22, 2022. The adoption of the ﬁnancial statements and the adoption of the dividend are reserved for the shareholders in the Annual General Meeting of Shareholders on April 21, 2022. Consolidated financial statements The consolidated ﬁnancial statements of the company at and for the year ended December 31, 2021, comprise the group and the group’s interest in associates. The signiﬁcant accounting policies applied in the preparation of these consolidated ﬁnancial statements are set out in Note 2 – Significant Accounting Policies and the relevant respective notes to the consolidated ﬁnancial statements. A list of subsidiaries has been ﬁled with the Chamber of Commerce in The Hague, the Netherlands, and is available from the company upon request. An overview of the signiﬁcant subsidiaries is included in Note 39 – Overview of Significant Subsidiaries. BASIS OF PREPARATION Basis of measurement The consolidated ﬁnancial statements have been prepared under the historical cost basis except for the following material items in the consolidated statement of ﬁnancial position: • Financial assets and ﬁnancial liabilities (including derivative ﬁnancial instruments) measured at fair value; • Assets and liabilities held for sale; • Contingent considerations; • Share-based payments; and • Net deﬁned employee beneﬁt assets/liabilities. Functional and presentation currency The consolidated ﬁnancial statements are presented in euros, which is the company’s functional and presentation currency. Unless otherwise indicated, the ﬁnancial information is in euros and has been rounded to the nearest million. Use of estimates and judgments The preparation of ﬁnancial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expense. Refer to Note 3 – Accounting Estimates and Judgments. Notes to the Consolidated Financial Statements 108 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 1 – General and Basis of Preparation continued Going concern The Executive Board has assessed the going concern assumption, as part of the preparation of the consolidated ﬁnancial statements. The Executive Board believes that no events or conditions, including the COVID-19 pandemic, give rise to doubt about the ability of the group to continue in operation at least 12 months from the end of the reporting period. This conclusion is drawn based on knowledge of the group, the estimated economic outlook and related identiﬁed risks and uncertainties. Furthermore, the conclusion is based on a review of the three-year strategic plan and next year’s budget, including expected development in liquidity and capital, which includes the evaluation of current credit facilities available, contractual and expected maturities of ﬁnancial liabilities, and loan covenants. Consequently, it was concluded that it is reasonable to apply the going concern assumption for the preparation of the consolidated ﬁnancial statements. Effect of new accounting standards Except for the EU-endorsed amendments below, the group has consistently applied the accounting policies set out in Note 2 – Significant Accounting Policies and the relevant respective notes to the consolidated ﬁnancial statements, to all periods presented in these ﬁnancial statements. The group has applied the following amendments for the ﬁrst time for the annual reporting period commencing January 1, 2021: • Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 7, IFRS 9, IFRS 16, and IAS 39). In the prior year, the group adopted the Interest Rate Benchmark Reform Phase 1 amendments. These amendments modiﬁed speciﬁc hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments are amended as a result of the interest rate benchmark reform. In the current year, the group adopted the Interest Rate Benchmark Reform Phase 2 amendments. Adopting these amendments enables the group to reflect the effects of transitioning from interbank offered rates (IBOR) to alternative benchmark interest rates without giving rise to accounting impacts that would not provide useful information to users of ﬁnancial statements. The ﬁxed interest payments on the group’s private placements denominated in Japanese yen are hedged to euro, via cross-currency interest rate swaps. Both the Japanese Libor and Euribor are inputs in the fair value determination. The Phase 1 reliefs have allowed the group to continue its fair value determination during the period of uncertainty. In the group’s other hedging relationships, no IBOR is used as input in the fair value determinations, nor is there any reference to any IBOR in the hedge contracts. See Note 30 – Financial Risk Management for further disclosure on the Interest Rate Benchmark Reform. Agenda decisions by IFRS Interpretations Committee – Configuration or customization costs in a cloud computing agreement (IAS38Intangible Assets) The group assessed the impact of this Agenda decision and concluded that it did not have a signiﬁcant impact on the amounts recognized in the current or prior periods. Effect of forthcoming accounting standards The following forthcoming amendments and new standards are not yet effective for the year ended December 31, 2021, and have not been early adopted in preparing these ﬁnancial statements: • Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 9 and IFRS 16); • References to the Conceptual Framework (Amendments to IFRS 3); • Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28); • IFRS 17 Insurance Contracts; • Classiﬁcation of liabilities as current or non-current (Amendments to IAS 1); • Disclosure of accounting policies (Amendments to IAS 1 and IFRS Practice Statement 2); • Deﬁnition of accounting estimates (Amendments to IAS 8); • Deferred tax related to assets and liabilities arising from a single transaction (Amendments to IAS 12); • Property, Plant, and Equipment – Proceeds before intended use (Amendments to IAS 16); and • Onerous contracts – Cost of Fulﬁlling a Contract (Amendments to IAS 37). ← → Wolters Kluwer 2021 Annual Report 109 Note 1 – General and Basis of Preparation continued The group expects no signiﬁcant impact from these amendments and new standards. Comparatives The comparative disclosures were adjusted as follows: • In the 2020 consolidated statement of ﬁnancial position, both deferred tax assets and deferred tax liabilities decreased by €33 million, due to a change in presentation of certain tax allowances. • In the consolidated statement of changes in equity, an amount of €19 million is reclassiﬁed from the translation reserve to the hedge reserve, to adjust for an erroneous classiﬁcation, at January 1, 2020, and December 31, 2020. In addition, certain immaterial reclassiﬁcations have been made to the comparative consolidated statement of cash flows, the comparative consolidated statement of ﬁnancial position, and the related notes to conform to the current year presentation and to improve insights. These reclassiﬁcations have had no impact on the comparative shareholders’ equity and comparative proﬁt for the year. Note 2 – Signiﬁcant Accounting Policies Except for the changes explained in Note 1 – General and Basis of Presentation, the group has consistently applied the signiﬁcant accounting policies to all periods presented in these consolidated ﬁnancial statements. The main principles for the determination and presentation of results and the valuation and presentation of assets and liabilities are described in the relevant respective notes to the consolidated ﬁnancial statements. BASIS OF CONSOLIDATION Subsidiaries Subsidiaries are all entities controlled by the group. The group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and can affect those returns through its power over the entity. The principle of control is the basis for determining which entities are consolidated in the consolidated ﬁnancial statements. Loss of control Upon loss of control, the group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests, and the other components of equity related to the subsidiary. Any surplus or deﬁcit arising from the loss of control is recognized in proﬁt or loss. If the group retains any equity interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, the remaining interest is accounted for as an equity-accounted investee or as a ﬁnancial asset at fair value through proﬁt or loss or other comprehensive income, depending on the level of influence retained. Transactions eliminated on consolidation Intragroup balances, transactions, and any unrealized gains and losses arising from transactions between group companies are eliminated in preparing the consolidated ﬁnancial statements. Unrealized gains arising from transactions between the group and its equity-accounted investees are eliminated to the extent of the group’s interest in the equity-accounted investees. Foreign currency Functional and presentation currency Items included in the ﬁnancial statements of each of the group entities are measured using the currency of the primary economic environment in which the group entities operate (the functional currency). The consolidated ﬁnancial statements are presented in euros, which is the group’s presentation currency. 110 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 2 – Signiﬁcant Accounting Policies continued Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions during the year and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates, are recognized in proﬁt or loss. Foreign currency differences arising from the following items are recognized in other comprehensive income: • Qualifying cash flow hedges to the extent that the hedge is effective; and • Qualifying net investment hedges on foreign operations to the extent that the hedge is effective. Non-monetary assets and liabilities in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the transaction date. Non-monetary assets and liabilities denominated in foreign currencies, that are stated at fair value, are translated to the functional currency at the foreign exchange rates prevailing on the dates the fair value was determined. Foreign operations The assets and liabilities of group companies are translated to euros at foreign exchange rates prevailing at the end of the reporting period. Income and expenses of group companies are translated to euros at exchange rates on the dates of the transactions. All resulting exchange differences are recognized as a component of other comprehensive income in the translation reserve. When a foreign currency-denominated subsidiary or equity-accounted investee is disposed of, exchange differences that were recognized in other comprehensive income prior to the sale are reclassiﬁed to proﬁt or loss as part of the gain or loss on divestments. Net investment in foreign operations Net investment in foreign operations includes equity ﬁnancing and long-term intercompany loans for which settlement is neither planned nor likely to occur in the foreseeable future. Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges, are taken to the translation reserve of foreign operations in other comprehensive income. MAIN CURRENCY EXCHANGE RATES rates to the euro 2021 2020 U.S. dollar (average) 1.18 1.14 U.S. dollar (at December 31) 1.13 1.23 PRINCIPLES UNDERLYING THE STATEMENT OF CASHFLOWS General Bank overdrafts repayable on demand are included as cash and cash equivalents in the consolidated statement of cash flows to the extent that they form an integral part of the group’s cash management. However, in the consolidated statement of ﬁnancial position, the bank overdrafts are presented separately as the offsetting criteria are not met. Cash flows from operating activities Cash flows from operating activities are calculated by the indirect method, by adjusting the consolidated proﬁt for the year for items that are not cash flows and for autonomous movements in operating working capital (excluding the impact of acquisitions/ divestments, foreign exchanges differences, and reclassiﬁcations to assets/liabilities classiﬁed as held for sale). Cash flows from operating activities include receipts from customers, cash payments to employees and suppliers, paid ﬁnancing costs of operating activities (including interest paid and received, interest portion of lease payments, paid ﬁnancing fees, and cash flows resulting from derivatives not qualifying for hedge accounting), acquisition and divestment-related costs, spending on restructuring provisions, and income taxes paid. ← → Wolters Kluwer 2021 Annual Report 111 Note 2 – Signiﬁcant Accounting Policies continued 112 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 4 – Benchmark Figures Cash flows from investing activities Cash flows from investing activities are those arising from capital expenditure on and disposal of property, plant, and equipment and other intangible assets, acquisitions and sale of subsidiaries and equity-accounted investees, dividends received, and cash flows from the settlement of net investment hedge. Dividends received relate to dividends received from equity-accounted investees and ﬁnancial assets measured at fair value through proﬁt or loss or other comprehensive income. Cash receipts and payments from the settlement of derivative ﬁnancial instruments are classiﬁed in the same manner as the cash flows of the hedged items. The group primarily uses derivatives for hedging its net investments in U.S. dollar-denominated subsidiaries. As a result, cash receipts and payments from the settlement of derivatives are classiﬁed under cash flows from investing activities. Cash flows from financing activities The cash flows from ﬁnancing activities comprise the cash receipts and payments from issued and repurchased shares, long-term debt instruments, short-term ﬁnancing, repayment of the principal portion of lease liabilities, and dividends paid. Dividends paid relate to dividends paid to the owners of the company and the non-controlling interests. Note 3 – Accounting Estimates and Judgments General The preparation of the ﬁnancial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expense. The estimates and underlying assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not clear from other sources. Actual results may differ from those estimates and may result in material adjustments in the next ﬁnancial year(s). The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of IFRS that have a signiﬁcant effect on the ﬁnancial statements and estimates with a signiﬁcant risk of material adjustment in future years are further discussed in the corresponding notes to the consolidated statements of proﬁt or loss and ﬁnancial position: • Revenue recognition (see Note 6); • Accounting for income taxes (see Note 16); • Valuation, measurement, and impairment testing of goodwill and intangible assets other than goodwill (see Note 18); and • Employee beneﬁts (see Note 31). Impact of COVID-19 The ongoing COVID-19 pandemic did not have a signiﬁcant effect on the accounting estimates and judgments applied in the group’s consolidated ﬁnancial statements. ← → Wolters Kluwer 2021 Annual Report 113 Note 4 – Benchmark Figures continued Benchmark ﬁgures refer to ﬁgures adjusted for non-benchmark items and, where applicable, amortization and impairment of goodwill and acquired identiﬁable intangible assets. Adjusted ﬁgures are non-IFRS compliant ﬁnancial ﬁgures but are internally regarded as key performance indicators to measure the underlying performance of the business. These ﬁgures are presented as additional information and do not replace the information in the consolidated ﬁnancial statements. BENCHMARK FIGURES in millions of euros, unless otherwise stated 2021 2021 2020 Change in actual currencies (%) Change in constant currencies (%) * Revenues 4,771 4,603 4 6 Organic revenue growth (%) 6 2 Adjusted operating proﬁt 1,205 1,124 7 11 Adjusted operating proﬁt margin (%) 25.3 24.4 Adjusted net proﬁt 885 835 6 15 Adjusted net ﬁnancing costs Note 15 (78) (46) 70 (8) Adjusted free cash flow 1,010 907 11 15 Cash conversion ratio (%) 112 102 Return on invested capital (ROIC) (%) 13.7 12.3 Net debt Note 29 2,131 2,383 (11) Net-debt-to-EBITDA ratio 1.4 1.7 Diluted adjusted EPS (€) 3.38 3.13 8 Diluted adjusted EPS in constant currencies (€) * 3.56 3.03 17 Diluted adjusted free cash flow per share (€) 3.87 3.40 14 17 * Constant currencies at €/$ 1.14. REVENUE BRIDGE € million % Revenues 2020 4,603 Organic change 259 6 Acquisitions 64 1 Divestments (45) (1) Currency impact (110) (2) Revenues 2021 4,771 4 114 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 4 – Benchmark Figures continued RECONCILIATION BETWEEN OPERATING PROFIT AND ADJUSTED OPERATING PROFIT 2021 2020 Operating proﬁt 1,012 972 Amortization and impairment of acquired identifiable intangible assets Note 14 164 144 Non-benchmark items in operating proﬁt Note 12 29 8 Adjusted operating proﬁt 1,205 1,124 RECONCILIATION BETWEEN TOTAL FINANCING RESULTS AND ADJUSTED NET FINANCING COSTS 2021 2020 Total ﬁnancing results Note 15 (84) (41) Non-benchmark items in total ﬁnancing results Note 15 6 (5) Adjusted net ﬁnancing costs (78) (46) RECONCILIATION BETWEEN PROFIT FOR THE YEAR AND ADJUSTED NET PROFIT 2021 2020 Proﬁt for the year attributable to the owners of the company (A) 728 721 Amortization and impairment of acquired identifiable intangible assets 164 144 Tax benefits on amortization and impairment of acquired identifiable intangible assets (44) (37) Non-benchmark items, net of tax 37 7 Adjusted net proﬁt (B) 885 835 SUMMARY OF NON-BENCHMARK ITEMS 2021 2020 Included in operating profit: Other gains and (losses) Note 12 (29) (8) Included in total financing results: Other ﬁnance income/(costs) Note 15 (6) 5 Total non-benchmark items before tax (35) (3) Tax beneﬁt/(expense) on non-benchmark items (1) (4) Impact of changes in tax rates (1) 0 Non-benchmark items, net of tax (37) (7) ← → Wolters Kluwer 2021 Annual Report 115 Note 4 – Benchmark Figures continued RECONCILIATION BETWEEN NET CASH FROM OPERATING ACTIVITIES AND ADJUSTED FREE CASH FLOW 2021 2020 Net cash from operating activities 1,292 1,197 Net capital expenditure (239) (231) Repayment of principal portion of lease liabilities (68) (74) Acquisition-related costs Note 8 5 11 Paid divestment expenses Note 8 8 2 Dividends received Note 21 0 1 Net income tax charge/(beneﬁt) on divested assets and consolidation of platform technology 12 1 Adjusted free cash flow (C) 1,010 907 RETURN ON INVESTED CAPITAL (ROIC) in millions of euros, unless otherwise stated 2021 2020 Adjusted operating proﬁt 1,205 1,124 Allocated tax (259) (259) Net operating proﬁt after allocated tax (NOPAT) 946 865 Average invested capital 6,915 7,053 ROIC (NOPAT/Average invested capital) (%) 13.7 12.3 Allocated tax is the adjusted operating proﬁt multiplied by the benchmark tax rate. Invested capital is deﬁned as total assets minus current liabilities and non-current deferred income, excluding investments in equity- accounted investees, deferred tax assets, non-operating working capital, and cash and cash equivalents. This total summation is adjusted for accumulated amortization on acquired identiﬁable intangible assets, goodwill amortized pre- IFRS 2004, and goodwill written off to equity prior to 1996 (excluding acquired identiﬁable intangible assets/goodwill that have been impaired and/or fully amortized), less any related deferred tax liabilities. The average invested capital is based on ﬁve measurement points during the year. 116 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 4 – Benchmark Figures continued PER SHARE INFORMATION in euro, unless otherwise stated 2021 2020 Total number of ordinary shares outstanding at December 31 (in millions of shares) Note 33 258.2 262.4 Weighted average number of ordinary shares (D) (in millions of shares) Note 7 260.4 265.0 Diluted weighted average number of ordinary shares (E) (in millions of shares) Note 7 261.8 266.6 Adjusted EPS (B/D) 3.40 3.15 Diluted adjusted EPS (B/E) 3.38 3.13 Diluted adjusted EPS in constant currencies 3.56 3.03 Basic EPS (A/D) Note 7 2.79 2.72 Diluted EPS (A/E) Note 7 2.78 2.70 Adjusted free cash flow per share (C/D) 3.89 3.42 Diluted adjusted free cash flow per share (C/E) 3.87 3.40 BENCHMARK TAX RATE in millions of euros, unless otherwise stated 2021 2020 Income tax expense Note 16 201 216 Tax beneﬁt on amortization and impairment of acquired identifiable intangible assets 44 37 Tax beneﬁt/(expense) on non-benchmark items (1) (4) Impact of changes in tax rates (1) 0 Tax on adjusted proﬁt (F) 243 249 Adjusted net proﬁt (B) 885 835 Adjustment for non-controlling interests 0 0 Adjusted proﬁt before tax (G) 1,128 1,084 Benchmark tax rate (F/G) (%) 21.5 23.0 ← → Wolters Kluwer 2021 Annual Report 117 Note 4 – Benchmark Figures continued CASH CONVERSION RATIO in millions of euros, unless otherwise stated 2021 2020 Operating proﬁt 1,012 972 Amortization, impairment, and depreciation Note 14 473 442 EBITDA 1,485 1,414 Non-benchmark items in operating proﬁt Note 12 29 8 Adjusted EBITDA 1,514 1,422 Autonomous movements in working capital 150 39 Net capital expenditure (239) (231) Repayment of principal portion of lease liabilities Note 20 (68) (74) Interest portion of lease payments Note 20 (9) (11) Adjusted operating cash flow (H) 1,348 1,145 Adjusted operating proﬁt (I) 1,205 1,124 Cash conversion ratio (H/I) (%) 112 102 NON-BENCHMARK ITEMS IN OPERATING PROFIT Non-benchmark items relate to income and expenses arising from circumstances or transactions that, given their size and/or nature, are clearly distinct from the ordinary activities of the group and are excluded from the benchmark ﬁgures. Apart from amortization and impairment of acquired identiﬁable intangible assets and impairment of goodwill, non-benchmark items in operating proﬁt include the items below. Refer also to Note 12 – Other Gains and (Losses). Divestment-related results Divestment-related results are event-driven gains and losses incurred by the group from the sale of subsidiaries and/or businesses. These results also include divestment expenses and restructuring of stranded costs, and have been included in other gains and losses in the consolidated statement of proﬁt or loss. Acquisition-related costs Acquisition-related costs are non-recurring costs incurred by the group resulting from acquisition activities. The acquisition-related costs are directly attributable to acquisitions, such as legal fees, broker/bank costs, and commercial and ﬁnancial due diligence fees, and have been included in other gains and losses in the consolidated statement of proﬁt or loss. Loss on remeasurement of disposal groups Loss on remeasurement of disposal groups includes losses for any initial or subsequent write-down of the disposal groups to fair value less costs of disposal. Fair value changes of contingent considerations Results from changes in the fair value of contingent considerations are not considered to be part of the ordinary activities of the group and have been included in other gains and losses in the consolidated statement of proﬁt or loss. 118 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 5 – Segment Reporting Additions to acquisition integration provisions Additions to acquisition integration provisions are those non-recurring costs incurred by the group to integrate activities acquired through business combinations and have been included in other gains and losses in the consolidated statement of proﬁt or loss. Other non-benchmark items Non-benchmark items, which cannot be classiﬁed in the categories above, relate to income and expenses arising from circumstances or transactions that, given their size or nature, are clearly distinct from the ordinary activities of the group and are excluded from the benchmark ﬁgures. NON-BENCHMARK ITEMS IN FINANCING RESULTS Non-benchmark items in ﬁnancing results (total other ﬁnance income/(costs)) include the below items. Refer also to Note 15 – Financing Results. Divestment-related results on equity-accounted investees When equity accounting for equity-accounted investees ceases, the group calculates the book gain or loss as the difference between the sum of the fair value of proceeds less costs of disposal, the fair value of retained investment, and any amount reclassiﬁed from other comprehensive income less the carrying amount of the investment at the date on which signiﬁcant influence is lost. Book results and fair value changes of financial assets measured at fair value through profit or loss Fair value changes of ﬁnancial assets measured at fair value through proﬁt or loss and any gain or loss on the sale of ﬁnancial assets measured at fair value through proﬁt or loss. Financing component employee benefits Financing component employee beneﬁts relates to net interest results on the net deﬁned beneﬁt liability or asset of the group’s deﬁned beneﬁt pension plans and other long-term employee beneﬁt plans. NON-BENCHMARK TAX ITEMS IN INCOME TAX EXPENSE This item includes the tax effect on non-benchmark items as deﬁned above, and on the amortization and impairment of acquired identiﬁable intangible assets, as well as the income tax expense relating to any material changes in (income) tax laws and (income) tax rates in the jurisdictions where Wolters Kluwer operates. ← → Wolters Kluwer 2021 Annual Report 119 Note 5 – Segment Reporting continued Health Tax & Accounting Governance, Risk & Compliance Legal & Regulatory Corporate * Total reporting by segment 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Revenues from third parties 1,234 1,193 1,510 1,431 1,139 1,074 888 905 – – 4,771 4,603 Cost of revenues (379) (364) (418) (396) (307) (300) (270) (299) – – (1,374) (1,359) Gross proﬁt 855 829 1,092 1,035 832 774 618 606 0 0 3,397 3,244 Sales costs (193) (195) (280) (255) (162) (164) (171) (170) – – (806) (784) General and administrative costs (360) (326) (413) (388) (365) (330) (355) (376) (57) (60) (1,550) (1,480) Total operating expenses (553) (521) (693) (643) (527) (494) (526) (546) (57) (60) (2,356) (2,264) Other gains and (losses) 0 (1) (47) (5) (4) (1) 22 (1) – – (29) (8) Operating proﬁt 302 307 352 387 301 279 114 59 (57) (60) 1,012 972 Amortization of acquired identifiable intangibleassets 31 35 36 39 35 33 29 37 – – 131 144 Impairment/(reversal of impairment) of acquiredidentifiable intangible assets 27 – (5) – 11 – – – – – 33 0 Non-benchmark expense/(income) in operatingproﬁt 0 1 47 5 4 1 (22) 1 – – 29 8 Adjusted operating proﬁt 360 343 430 431 351 313 121 97 (57) (60) 1,205 1,124 Amortization of other intangible assets and depreciation of PPE and right-of-use assets (50) (54) (101) (93) (73) (69) (63) (61) (3) (2) (290) (279) Impairment of other intangible assets and right-of-use assets (5) (2) (7) (10) (5) (4) (2) (3) – – (19) (19) Goodwill and acquired identifiable intangible assetsat December 31 1,262 1,221 1,761 1,627 1,374 1,316 828 923 – – 5,225 5,087 Net capital expenditure 33 32 72 77 82 76 52 45 0 1 239 231 Assets classified as held for sale at December 31 – – – – – – 101 – – – 101 0 Liabilities classified as held for sale at December 31 – – – – – – 74 – – – 74 0 Number of FTEs at December 31 2,913 2,824 7,416 7,149 4,736 4,485 4,262 4,195 127 132 19,454 18,785 * The corporate function does not represent an operating segment. 120 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 6 – Revenues ACCOUNTING POLICIES An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses. The four global operating divisions are based on strategic customer segments: Health; Tax & Accounting; Governance, Risk & Compliance; and Legal & Regulatory. This segment information is based on the group’s management and internal reporting structure. All operating segments are regularly reviewed by the Executive Board, within Wolters Kluwer deﬁned as the group’s chief operating decision-maker, to make decisions about resources to be allocated to the segments and to assess their performance to the extent whereby discrete ﬁnancial information is available. The Executive Board reviews the ﬁnancial performance of the segments and the allocation of resources based on revenues and adjusted operating proﬁt. Revenues from internal transactions between the operating segments are conducted at arm’s length, with terms equivalent to comparable transactions with third parties. These internal revenues are limited and therefore excluded from the segment reporting table. Segment results reported to the Executive Board include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Costs and net capital expenditure incurred on behalf of the segments by Global Business Services and Digital eXperience Group and associated FTEs are allocated to the operating segments. Non-current interest-bearing liabilities and deferred tax liabilities are not considered to be segment liabilities as these are primarily managed by the corporate treasury and tax functions. Operating working capital is not managed at the operating segment level but at a country or regional level. GEOGRAPHICAL INFORMATION total non-current assets per region* 2021 % 2020 % The Netherlands 677 11 691 11 Europe (excluding the Netherlands) 1,342 22 1,444 24 U.S. and Canada 4,117 66 3,865 64 Asia Paciﬁc 75 1 77 1 Rest of World 17 0 18 0 Total 6,228 100 6,095 100 * Non-current assets per region exclude deferred tax assets and derivative ﬁnancial instruments. OTHER DISCLOSURES There are no customers with revenues that exceed 10% of the group’s total revenues. For the revenues per geographical region, refer to Note 6 – Revenues. ← → Wolters Kluwer 2021 Annual Report 121 Note 6 – Revenues continued 2021 2020 Revenues from contracts with third parties 4,771 4,603 ACCOUNTING POLICIES Revenues represent the amount of consideration the group expects to be entitled to – arising from contracts with customers in the ordinary course of business – in exchange for transferring promised goods and/or services to customers, excluding amounts collected on behalf of third parties. Revenue is recognized once the performance obligations are fulﬁlled (i.e., when the customer obtains control over those goods and/or services). Subscriptions Revenues related to subscriptions are recognized over the period in which the goods are transferred and/or content is made available online and when the goods and/or content involved are similar in value over time. Subscription income received or receivable in advance of the delivery of goods and/or content is presented as deferred income (a contract liability) in the consolidated statement of ﬁnancial position. Licenses License fees paid for the use of the group’s software products and/or services are recognized in accordance with the substance of the agreement. Revenues from licenses representing a right to access are recognized over time on a straight-line basis. In case a right-to-access license is invoiced to the customer as a one-time upfront fee, revenue is recognized between 12 and 60 months depending on the nature of the license. In case of a transfer of rights (i.e., right-to-use license), which permits the licensee to exploit those rights freely and the group as a licensor has no remaining obligations to perform after delivery, revenue is recognized at the time the control of the license is transferred to the customer, considering any signiﬁcant customer acceptance clauses. Non-refundable upfront fees charged to the customers are often not considered to be a distinct performance obligation as these considerations do not result in a transfer of goods and/or services. Instead, these fees are considered an advance payment for future goods and/or services and therefore these payments are recognized as revenue when those future goods and/or services are transferred. Goods Revenues from the sale of goods are recognized upon shipment or upon delivery when control is transferred to the customer, provided that the ultimate collectability and ﬁnal acceptance by the customer is reasonably assured. When goods are sold with a right to return the goods, the group recognizes the revenues of the transferred goods for the amount the group expects to be entitled to, a refund contract liability in the consolidated statement of ﬁnancial position, and an asset for its right to recover goods on settling the refund contract liability. Services Revenues from providing services are recognized in the period in which the related performance obligations are satisﬁed. For ﬁxed- price contracts, revenue is recognized based on the actual service provided up to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the beneﬁts simultaneously. In case of ﬁxed-price contracts, the customer pays the ﬁxed amount based on a payment schedule. If the value of the services rendered by the group exceeds the invoiced amounts, a contract asset (unbilled revenue) is recognized. If the invoiced amounts exceed the value of services rendered, a contract liability (deferred income) is recognized. If the contract includes an hourly fee, revenue is recognized in the amount to which the company has a right to invoice. Customers are invoiced on a periodic basis and consideration is payable when invoiced. Implementation services Revenues from the sale of implementation services are based on input or output methods, subject to the contractual arrangements, and are recognized when the related performance obligations are satisﬁed or upon full completion of the promise to the customer, depending upon which method faithfully depicts the group’s performance towards completion. 122 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 6 – Revenues continued Multi-element contracts There are arrangements that include various combinations of performance obligations, such as software licenses, services, training, hosting, and implementation. A performance obligation is only distinct if the customer can beneﬁt from the goods and/or services on its own or together with other resources that are readily available to the customer, and the promise to transfer goods and/or services is separately identiﬁable from other promises in the contract. Goods and/or services that are not distinct are bundled with other goods and/or services in the contract, until a bundle of goods and/or services is created that is distinct, resulting in a single performance obligation. Where performance obligations are satisﬁed over different periods of time, revenues are allocated to the respective performance obligations based on relative stand-alone selling prices at the inception of the arrangement, and revenues are recognized as each performance obligation is satisﬁed. Agent/principal arrangements If the group acts as an agent, whereby the group sells goods and/or services on behalf of a principal, the group recognizes the amount of the net consideration as revenues. If the group acts as a principal, the group recognizes the gross amount of consideration for the speciﬁc goods and/or services transferred once the performance obligations are satisﬁed. Variable consideration Discounts (including volume discounts), return of goods and/or services, usage-based prices, and pricing based on index are the most common forms of variable considerations within the group. A discount is often contractually agreed and allocated to all distinct performance obligations, unless there is a speciﬁc discount policy for that performance obligation. Volume-related discounts, return of goods, and usage-based prices are estimated at contract inception and periodically reassessed during the contract term. The group considers normal price increases based on local inflation rates or customary business practices as compensation for cost price increases and not as variable consideration. Any pricing that is beyond compensation for cost price increases is estimated at contract inception, periodically reassessed and recognized over the term of the contract. Contract modifications A contract modiﬁcation is a change in the scope and/or price of a contract that is approved by both the customer and the group. The group accounts for a contract modiﬁcation retrospectively: • If the modiﬁcation only affected the transaction price and the remaining goods and/or services are not distinct; or • If the modiﬁcation affected the scope, but no distinct goods and/or services are added. The group accounts for a contract modiﬁcation prospectively: • If the modiﬁcation only affected the transaction price and the remaining goods and/or services are distinct; or • If the modiﬁcation affected the scope, distinct goods and/or services are added, but the additional consideration did not reflect the stand-alone selling price. The group accounts for a contract modiﬁcation as a separate contract if the modiﬁcation affected the scope, distinct goods and/or services are added, and the additional consideration reflected the stand-alone selling price. Financing components As a practical expedient, the group does not adjust the consideration for the effects of a signiﬁcant ﬁnancing component if the group expects that the period between the transfer of the promised goods and/or services to the customer and payment by the customer is one year or less. The group has no signiﬁcant contracts with periods of one year or more between the transfer of goods and/or services and the payment of the consideration. Consequently, the group does not adjust any of the transaction prices for the time value of money. Warranty In most cases, any warranty given in connection with the sale of products and/or services does not qualify as a distinct service and therefore these general warranties are not considered to be a separate performance obligation. Consequently, no warranty provisions are recognized. ← → Wolters Kluwer 2021 Annual Report 123 Note 6 – Revenues continued Cost of revenues Cost of revenues comprises directly attributable costs of goods and/or services sold. For digital products and services, cost of revenues may include data maintenance, hosting, license fees, royalties, product support, personnel expenses, subcontracted work, training, and other costs incurred to support and maintain the products, applications, and/ or services. For print products, these costs may include cost for paper, printing and binding, royalties, personnel expenses, subcontracted work, shipping costs, and other incurred costs. CRITICAL ESTIMATES AND JUDGMENTS Revenue recognition requires estimates and judgments. IFRS 15 Revenue from Contracts with Customers requires management to make judgments on the characteristics of a performance obligation, (un)bundling of multi-element arrangements, and assessment whether the revenue should be recognized over time or at a point in time. In addition, management makes estimates of the stand- alone selling prices of performance obligations, variable considerations, and the product and contract life. Also, when another party is involved in providing goods and/or services to a customer, management makes a judgment whether the promise to the customer is a performance obligation by the group (i.e., acting as a principal), or by another party (i.e., acting as an agent). The group acts predominantly as the principal in its customer contracts. For the judgments applied to the incremental cost to obtain a contract, refer to Note 25 – Contract Assets and Liabilities. DISAGGREGATION OF REVENUES Health Tax & Accounting Governance, Risk & Compliance Legal & Regulatory Total reporting per segment 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Revenue recognition At a point in time recognition 223 212 214 210 411 382 209 237 1,057 1,041 Over time recognition 1,011 981 1,296 1,221 728 692 679 668 3,714 3,562 Revenues from third parties 1,234 1,193 1,510 1,431 1,139 1,074 888 905 4,771 4,603 Revenue per contract Contracts one year or less 821 797 1,292 1,228 851 817 684 730 3,648 3,572 Multi-year contracts 413 396 218 203 288 257 204 175 1,123 1,031 Revenues from third parties 1,234 1,193 1,510 1,431 1,139 1,074 888 905 4,771 4,603 REVENUES BY MEDIA FORMAT Health Tax & Accounting Governance, Risk & Compliance Legal & Regulatory Total reporting per segment 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Digital 1,089 1,055 1,434 1,348 723 680 684 653 3,930 3,736 Services 1 2 35 38 410 384 14 30 460 454 Print 144 136 41 45 6 10 190 222 381 413 Revenues from third parties 1,234 1,193 1,510 1,431 1,139 1,074 888 905 4,771 4,603 124 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 7 – Earnings per Share REVENUES BY TYPE 2021 2020 Digital and service subscription 3,397 3,218 Print subscription 157 182 Other recurring 256 280 Total recurring revenues 3,810 3,680 Print books 146 150 Legal Services transactional 266 228 Financial Services transactional 109 129 Other non-recurring * 440 416 Total non-recurring revenues 961 923 Total revenues 4,771 4,603 * Other non-recurring revenues include software licenses, software implementation fees, professional services, and other non-subscription offerings. RECURRING/NON-RECURRING REVENUES Health Tax & Accounting Governance, Risk & Compliance Legal & Regulatory Total reporting per segment 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Recurring revenues 1,112 1,086 1,313 1,257 669 619 716 718 3,810 3,680 Non-recurring revenues 122 107 197 174 470 455 172 187 961 923 Revenues from third parties 1,234 1,193 1,510 1,431 1,139 1,074 888 905 4,771 4,603 GEOGRAPHICAL INFORMATION revenues generated per region 2021 % 2020 % The Netherlands 196 4 193 4 Europe (excluding the Netherlands) 1,274 27 1,238 27 U.S. and Canada 2,946 62 2,818 61 Asia Paciﬁc 277 5 278 6 Rest of World 78 2 76 2 Total revenues 4,771 100 4,603 100 ← → Wolters Kluwer 2021 Annual Report 125 Note 8 – Acquisitions and Divestments The group presents basic and diluted earnings per share data for its ordinary shares. BASIC EARNINGS PER SHARE Basic earnings per share is calculated by dividing the proﬁt for the year of €728 million (2020: €721 million) attributable to the ordinary equity holders of the company, by the weighted average number of ordinary shares outstanding during the year of 260.4 million (2020: 265.0 million), after adjusting for own ordinary shares held (treasury shares). Profit for the year 2021 2020 Proﬁt for the year attributable to the owners of the company (A) 728 721 Weighted average number of ordinary shares for the year in millions of shares, unless otherwise stated 2021 2020 Outstanding ordinary shares at January 1 Note 33 267.5 273.0 Effect of cancelation of shares (1.5) (1.7) Effect of repurchased shares (5.6) (6.3) Weighted average number of ordinary shares (B) 260.4 265.0 Basic EPS (A/B) (€) 2.79 2.72 DILUTED EARNINGS PER SHARE Diluted earnings per share is determined by dividing the proﬁt for the year of €728 million (2020: €721 million) attributable to ordinary shareholders of the company, by the diluted weighted average number of ordinary shares outstanding of 261.8 million (2020: 266.6 million), after adjustments for treasury shares and for the effects of all dilutive potential ordinary shares which consist of LTIP shares granted. Diluted weighted average number of ordinary shares for the year in millions of shares, unless otherwise stated 2021 2020 Weighted average number of ordinary shares (B) 260.4 265.0 Effect of Long-Term Incentive Plan (LTIP) 1.4 1.6 Diluted weighted average number of ordinary shares (C) 261.8 266.6 Diluted EPS (A/C) (€) 2.78 2.70 126 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 8 – Acquisitions and Divestments continued ACQUISITIONS ACCOUNTING POLICIES Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the group. Changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. CRITICAL ESTIMATES AND JUDGMENTS The fair value of the assets, liabilities, and contingent liabilities of a business combination should be measured within 12 months from the acquisition date. For some acquisitions, provisional fair values have been included in the consolidated statement of ﬁnancial position. The ﬁnal valuation of the acquired identiﬁable intangible assets and liabilities assumed is still pending but will be completed within the 12-month timeframe. Actual valuation of these assets, liabilities, and contingent liabilities may differ from the provisional valuation. When a business combination agreement provides for an adjustment to the cost of the transaction, contingent on future events (such as earnouts), the group includes an initial fair value of that adjustment in the cost of the transaction at the acquisition date if the adjustment is probable and can be measured reliably. The initial and subsequent measurement will usually be based on estimates of future results of the business combination. Actual results may differ from those estimates and may result in material adjustments in the next ﬁnancial year(s). Subsequent changes to the fair value are recognized in proﬁt or loss, based on a periodic reassessment of the contingent consideration. General On May 14, 2021, Wolters Kluwer Tax & Accounting completed the acquisition of 100% of the shares of Vanguard Software, a global provider of cloud-based integrated business planning solutions for €93 million in cash. The transaction had no deferred and contingent considerations. The acquisition offers an opportunity to extend the CCH Tagetik ﬁnancial performance management platform into sales and operations planning, including supply chain planning and predictive analytics. Vanguard Software serves companies of all sizes across every major industry in more than 60 countries, helping them to improve forecasting, reduce overstocks, optimize inventory distribution, and reduce supply chain costs. Vanguard Software revenues derive from subscription-based cloud software (averaging approximately 55% of total revenues in recent years) and software-related professional implementation and consulting services. Vanguard Software recorded unaudited revenues of €9 million in 2021, with the majority being from North America. We expect the acquisition to achieve a return on invested capital above our after-tax weighted average cost of capital of 8% within three to ﬁve years. The near-term impact on the group’s adjusted net proﬁt is immaterial. Vanguard Software is headquartered in Cary, North Carolina, U.S., and had approximately 40 employees at acquisition date. The fair values of the identiﬁable assets and liabilities of Vanguard Sofware, as reported at December 31, 2021, are provisional. On October 29, 2021, Wolters Kluwer Governance, Risk & Compliance (GRC) acquired 100% of the shares of LicenseLogix LLC, a provider of U.S. business licensing services for €9 million in cash and a deferred consideration of €2 million. LicenseLogix is a premier provider of comprehensive business license services, including research, ﬁling and ongoing compliance management. LicenseLogix has been a strategic partner of GRC’s CT Corporation for over ﬁve years and today serves more than 800 corporate customers of all sizes and across all industries. LicenseLogix services are highly complementary to those of CT Corporation and will form an integral component of CT’s end-to-end legal entity compliance and managed services offerings. The acquisition is expected to deliver a return on invested capital (ROIC) above Wolters Kluwer’s after tax weighted average cost of capital (8%) within three to ﬁve years from completion. The transaction is expected to have an immaterial impact on the group's adjusted earnings in the ﬁrst full year. LicenseLogix is headquartered in White Plains, New York, U.S., generated annualized unaudited revenues of €4 million in 2021, and had approximately 75 employees at acquisition date. The fair values of the identiﬁable assets and liabilities of LicenseLogix, as reported at December 31, 2021, are provisional. In addition, other smaller acquisitions were completed, with a combined total consideration of €9 million (2020: €5 million), including deferred and contingent considerations, and combined annualized unaudited revenues of €6 million (2020: €2 million). ← → Wolters Kluwer 2021 Annual Report 127 Note 8 – Acquisitions and Divestments continued Acquisition spending In 2021, total acquisition spending, net of cash acquired, was €108 million (2020: €395 million), including deferred and contingent consideration payments of €0 million (2020: €6 million). In 2020, the group acquired CGE, XCM Solutions, eOriginal, and a few smaller businesses. In 2021, acquisition-related costs amounted to €5 million (2020: €11 million). The goodwill relating to the 2021 acquisitions represents future economic beneﬁts speciﬁc to the group arising from assets that do not qualify for separate recognition as intangible assets. This includes expected new customers who generate revenue streams in the future, revenues generated because of new capabilities of the acquired product platforms, as well as expected synergies that will arise following the acquisitions. Of the goodwill recognized in 2021, €68 million was deductible for income tax purposes (2020: €73 million). The following tables provide information in aggregate for all business combinations in 2021: Acquisitions 2021 2020 Carrying amount Fair value adjustments Recognized values Recognized values Consideration payable in cash 111 406 Deferred and contingent considerations at fair value: Non-current 1 0 Current 1 0 Total consideration 113 406 Intangible assets other than goodwill Note 18 0 47 47 183 Other non-current assets Note 20 2 – 2 6 Current assets 8 – 8 27 Current liabilities (9) – (9) (27) Non-current liabilities Note 29 (2) – (2) (4) Deferred tax assets/(liabilities) 2 (3) (1) (19) Fair value of net identiﬁable assets 1 44 45 166 Goodwill on acquisitions Note 18 68 240 Cash effect of acquisitions: Consideration payable in cash 111 406 Cash acquired (3) (17) Deferred and contingent considerations paid Note 30 0 6 Acquisition spending, net of cash acquired 108 395 Of the 2021 fair value adjustments of €44 million, €23 million related to Vanguard Software, €11 million related to LicenseLogix, and €10 million related to the other acquisitions. 128 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 8 – Acquisitions and Divestments continued Contribution of 2021 acquisitions in millions of euros, unless otherwise stated Revenues Adjusted operating profit Profit for the year FTEs at December 31, 2021 Totals excluding the impact of 2021 acquisitions 4,762 1,204 742 19,309 Contribution of 2021 acquisitions 9 1 (1) 145 Totals for the year 2021 4,771 1,205 741 19,454 Pro forma contribution of 2021 acquisitions for the period January 1, 2021, up to acquisitiondate (unaudited) 10 0 (3) Pro forma totals for the year 2021 4,781 1,205 738 The above information does not purport to represent what the actual results would have been, had the acquisitions been concluded on January 1, 2021, nor is the information necessarily indicative for future results of the acquired operations. In determining the contributions by the acquisitions, management has assumed that the fair value adjustments that arose on the date of the acquisition would have been the same if the acquisition had occurred on January 1, 2021. Deferred and contingent considerations The acquisitions completed in 2021 resulted in a maximum achievable undiscounted deferred and contingent consideration of €2 million. The fair value of this deferred and contingent consideration amounted to €2 million at acquisition date and at December 31, 2021. For further disclosure on deferred and contingent considerations, refer to Note 30 – Financial Risk Management. Provisional fair value accounting The fair values of the identiﬁable assets and liabilities will be revised if new information, obtained within one year from the acquisition date about facts and circumstances that existed at the acquisition date, causes adjustments to the above amounts, or for any additional provisions that existed at the acquisition date. Subsequent changes in purchase price accounting for 2020 acquisitions resulted in a reduction of goodwill of €2 million. Reference is made to Note 18 – Goodwill and Intangible Assets other than Goodwill. DIVESTMENTS ACCOUNTING POLICIES The amount of goodwill allocated to a divested business is based on its relative value compared to the value of the group of cash- generating units to which the goodwill belongs. General On June 1, 2021, Wolters Kluwer Tax & Accounting completed the combination of certain Prosoft assets in Brazil with those of Alterdata Tecnologia em Informática Ltda in exchange for an 11.8% non-controlling interest in the combined entity. On completion, the group incurred a €42 million divestment-related loss on the Prosoft transaction. The loss on divestment was mainly due to the recognition of an unrealized foreign exchange loss of €40 million (non-cash) related to the historical devaluation of the Brazilian real against the euro. Prior to this transaction, there was a €5 million reversal of an impairment of Prosoft’s acquired identiﬁable intangible assets. The business was deconsolidated from June 1, 2021. At this date, the business had 225 FTEs. In 2021 up to this date, Prosoft generated revenues of €3 million. The share in the combined entity is recognized as a ﬁnancial asset at fair value through proﬁt or loss. Refer to Note 22 – Financial assets. On December 1, 2021, Wolters Kluwer Legal & Regulatory completed the sale of its U.S. legal education business for €75 million in cash. The divestment will allow Wolters Kluwer Legal & Regulatory to further advance its focus in the U.S. on supporting legal professionals with the domain expertise and state-of-the-art solutions that they need. The U.S. legal education business, which mainly produces textbooks and innovative digital educational solutions for law students, recorded revenues of €32 million in 2021 up to divestment date and is proﬁtable. The business had approximately 55 FTEs at divestment date. The group deployed the post-tax proceeds towards additional share repurchases to mitigate the adjusted EPS dilution resulting from the disposal. ← → Wolters Kluwer 2021 Annual Report 129 Note 8 – Acquisitions and Divestments continued In 2021, net divestment proceeds amounted to €76 million, including deferred considerations received. In 2020, net divestment proceeds amounted to €50 million and included the divestment of Belgian training assets, the sale of the minority stake in Logical Images, the divestment of certain German businesses, the sale of the investment in Medicom, the sale of ComplyTrack, the sale of the Flood Determinations Solution, and the sale of the French legal notices business Annonces & Formalités Légales. Divestment-related results on operations, equity-accounted investees, and financial assets 2021 2020 Divestments of operations: Consideration receivable in cash 75 41 Financial assets at fair value through profit or loss Note 22 6 – Deferred divestment consideration receivable Note 26 – 1 Consideration receivable 81 42 Intangible assets Note 18 47 24 Other non-current assets Note 19 2 0 Current assets (including assets held for sale) 17 32 Current liabilities (including liabilities held for sale) (8) (19) Employee benefits Note 31 – (1) Deferred tax assets/(liabilities) (7) (1) Net identiﬁable assets/(liabilities) 51 35 Reclassiﬁcation of foreign exchange differences on loss of control, recognized in other comprehensive income (40) 0 Book proﬁt/(loss) on divestments of operations (10) 7 Divestment expenses (8) (2) Restructuring of stranded costs following divestments Note 32 (2) (4) Divestment-related results included in other gains and (losses) Note 12 (20) 1 Divestments of equity-accounted investees and financial assets: Consideration receivable in cash – 17 Carrying value of equity-accounted investees – (10) Divestment-related results included in total ﬁnancing results Note 15 0 7 Cash effect of divestments: Consideration receivable in cash 75 58 Cash included in divested operations 0 (8) Deferred divestment consideration receivable 1 – Receipts from divestments, net of cash disposed 76 50 130 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 9 – Assets/Liabilities Classiﬁed as Held for Sale continued Effect of 2021 divestments Revenues Adjusted operating profit Totals for the year 2021 4,771 1,205 Minus: Contribution of 2021 divested operations (35) (12) Pro forma totals for the year 2021 4,736 1,193 At their divestment dates, the 2021 divested operations jointly had approximately 280 FTEs. Note 9 – Assets/Liabilities Classiﬁed as Held for Sale 2021 2020 Assets of disposal groups classified as held for sale 101 – Liabilities of disposal groups classified as held for sale (74) – Net assets of disposal groups classified as held for sale 27 0 ACCOUNTING POLICIES Non-current assets and disposal groups are classiﬁed as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within 12 months from the date of classiﬁcation. When the group is committed to a sale plan involving a loss of control of a subsidiary, all assets and liabilities of that subsidiary are classiﬁed as held for sale when the criteria described above are met, regardless of whether the group will retain a non-controlling interest in its former subsidiary after the sale. When the group is committed to a sale plan involving a divestment of an investment in an equity-accounted investee, or a portion thereof, the investment, or the portion, is classiﬁed as held for sale when the criteria described above are met. The group then ceases to apply the equity method in relation to the portion that is classiﬁed as held for sale. Any retained portion of an investment in an equity-accounted investee that has not been classiﬁed as held for sale continues to be accounted for using the equity method. The amount of goodwill allocated to a disposal group is based on its relative value compared to the value of the group of cash- generating units to which the goodwill belongs. Non-current assets and disposal groups classiﬁed as held for sale are measured at the lower of the carrying amount and fair value less costs of disposal. ← → Wolters Kluwer 2021 Annual Report 131 Note 10 – Sales Costs DISPOSAL GROUPS – GENERAL 2021 2020 Legal & Regulatory – French and Spanish legal information businesses 27 – Net assets of disposal groups classified as held for sale 27 0 On December 9, 2021, Wolters Kluwer Legal & Regulatory announced that it has entered into exclusive discussions to sell its legal information businesses in France and Spain following receipt of a binding offer. Upon completion of the transaction, the group will receive €120 million in cash for its assets, subject to certain working capital adjustments. The intended divestment will sharpen the Legal & Regulatory division’s focus on businesses where it has the strongest market positions and the best opportunities to drive future growth. Signing of a ﬁnal agreement is conditional upon completion of the consultation with the European and French works councils. Completion of the transaction would be conditional upon antitrust approval in Spain and is expected during 2022. The French and Spanish legal information units to be sold employ approximately 650 FTEs. In 2021, the units generated revenues of approximately €85 million and were proﬁtable. The units primarily support law ﬁrms, corporations, and the public sector with information products in digital and print formats. In France, the business includes Lamyline for legal professionals and Liaisons Sociales for labor law and HR specialists, among other offerings including training. In Spain, the business includes La Ley for legal professionals, CISS for tax and HR specialists, as well as online training services. ASSETS AND LIABILITIES OF DISPOSAL GROUPS The assets and liabilities of the disposal groups can be speciﬁed as follows at December 31: 2021 2020 Non-current assets 73 – Cash and cash equivalents 2 – Other current assets 26 – Non-current liabilities (14) – Deferred income (27) – Other current liabilities (33) – Net assets of disposal groups classified as held for sale 27 0 RESULTS OF DISPOSAL GROUPS 2021 2020 Revenues 85 85 Adjusted operating profit 11 12 Operating profit 11 12 132 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 11 – General and Administrative Costs 2021 2020 Research, development, and editorial costs 466 433 General and administrative operating expenses 920 903 Amortization and impairment of acquired identifiable intangible assets Note 14 164 144 Total 1,550 1,480 ACCOUNTING POLICIES General and administrative costs include costs that are neither directly attributable to cost of revenues nor to sales costs. These costs include product development cost, information technology cost, general overhead cost, amortization of acquired identiﬁable intangible assets, amortization of other intangible assets (if not part of cost of revenues), depreciation of property, plant, and equipment, depreciation of right-of-use assets, and impairment of goodwill, intangible assets other than goodwill, property, plant, and equipment, and right-of-use assets. Note 12 – Other Gains and (Losses) 2021 2020 Divestment-related results Note 8 (20) 1 Acquisition-related costs Note 8 (5) (11) Fair value changes of contingent considerations Note 30 0 4 Additions to acquisition integration provisions Note 32 (4) (2) Total (29) (8) ACCOUNTING POLICIES Other gains and losses relate to items which are different in their nature or frequency from operating items. These include divestment-related results (including directly attributable divestment costs), additions to provisions for restructuring of stranded costs following divestments, acquisition-related costs, additions to acquisition integration provisions, and subsequent fair value changes of contingent considerations. See also Note 4 – Benchmark Figures. ← → Wolters Kluwer 2021 Annual Report 133 Note 13 – Personnel Expenses 2021 2020 Salaries and wages and other benefits 1,715 1,633 Social security charges 148 148 Costs of deﬁned contribution plans 80 77 Expenses related to deﬁned beneﬁt plans Note 31 11 17 Equity-settled share-based payments Note 34 24 24 Total 1,978 1,899 Employees Headcount at December 31 19,827 19,169 In full-time equivalents at December 31 19,454 18,785 Thereof employed in the Netherlands 1,155 1,200 In full-time equivalents average per annum * 19,741 19,180 * Average full-time equivalents per annum include temporary help and contractors, whereas headcount and its full-time equivalent only relate to staff on the payroll ofthe group. Note 14 – Amortization, Impairment, and Depreciation 2021 2020 Amortization of acquired identifiable intangible assets Note 18 131 144 Impairment of acquired identifiable intangible assets Note 18 38 – Reversal of impairment of acquired identifiable intangible assets Note 8/18 (5) – Amortization of other intangible assets Note 18 194 180 Impairment of other intangible assets Note 18 18 17 Depreciation of property, plant, and equipment Note 19 25 26 Depreciation of right-of-use assets Note 20 71 73 Impairment of right-of-use assets Note 20 1 2 Total 473 442 For further disclosure on critical estimates and judgments, refer to Note 18 – Goodwill and Intangible Assets other than Goodwill. 134 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 15 – Financing Results 2021 2020 Financing income Interest income for financial assets, measured at amortized cost: Interest income on short-term bank deposits 2 5 Interest income on bank balances and other 2 5 Other financing income: Derivatives – foreign exchange contracts, not qualifying as hedge 0 0 Total ﬁnancing income 4 10 Financing costs Interest expense for financial liabilities, measured at amortized cost: Euro Commercial Paper program and bank borrowings 0 0 Bonds and private placements (50) (57) Amortization of fee expense for debt instruments Note 29 (1) (2) Interest expense on bank overdrafts and other (5) (7) Other financing expense: Unwinding of discount of lease liabilities Note 29 (9) (11) Net foreign exchange gains/(losses) (15) 24 Derivatives – foreign exchange contracts, not qualifying as hedge 0 (1) Items in hedge relationships: Interest rate swaps (2) (2) Foreign exchange gains/(losses) on loans subject to cash ﬂow hedge 4 6 Net change in fair value of cash ﬂow hedges reclassiﬁed from other comprehensive income (4) (6) Total ﬁnancing costs (82) (56) Net ﬁnancing results (78) (46) Other finance income/(costs) Divestment-related results on equity-accounted investees Note 8 – 7 Fair value changes of financial assets Note 22 (5) 0 Financing component employee beneﬁts Note 31 (1) (2) Total other ﬁnance income/(costs) (6) 5 Total ﬁnancing results (84) (41) ← → Wolters Kluwer 2021 Annual Report 135 Note 16 – Income Tax Expense 2021 2020 Current income tax expense 209 226 Adjustments previous years 6 2 Deferred tax expense: Changes in tax rates 1 0 Origination and reversal of temporary differences (15) (12) Movements in deferred tax assets and liabilities Note 23 (14) (12) Total Note 23 201 216 ACCOUNTING POLICIES Income tax on the result for the year is made up of current and deferred tax. Income tax is recognized in proﬁt or loss except to the extent that it relates to business combinations and/or items directly recognized in equity or other comprehensive income. Current income tax is the expected tax payable or tax receivable on the taxable income for the year, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable or tax receivable in respect of previous years. The group recognizes deferred tax assets and liabilities for all taxable temporary differences between the carrying amounts of assets or liabilities in the consolidated statement of ﬁnancial position for ﬁnancial reporting purposes and their tax base for taxation purposes. Deferred tax assets and liabilities are not recognized for temporary differences arising from: • Initial recognition of goodwill; • Investments in subsidiaries to the extent that the parent can control the timing of the reversal of the temporary differences, and it is probable that they will not reverse in the foreseeable future; and • Initial recognition of an asset or liability in a transaction, which is not a business combination and that, at the time of the transaction, affects neither accounting proﬁt nor taxable proﬁt. A deferred tax asset is recognized for deductible temporary differences and for the carry-forward of unused tax losses and unused tax credits, to the extent that it is probable that future taxable proﬁts will be available against which these can be utilized. Deferred tax assets are reviewed at the end of each reporting period and are remeasured to the extent that it is no longer probable that the related tax beneﬁts will be realized. Deferred tax assets and liabilities are not discounted and are measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period. The effect of changes in income tax rates on the deferred tax position is recognized in proﬁt or loss if, and to the extent that, the deferred tax position was originally formed through proﬁt or loss. Deferred tax assets and liabilities, including those associated with right-of-use assets and lease liabilities, are offset if there is a legally enforceable right to offset current income tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current income tax assets and liabilities on a net basis or their tax assets and liabilities will be realized simultaneously. Uncertain tax positions are assessed at a ﬁscal unity level. If it is probable that a tax authority will accept an uncertain tax position in the income tax ﬁling, then the group determines its accounting tax position consistent with the tax treatment used or planned to be used in its income tax ﬁling. If this is not probable, then the group reﬂects the effect of uncertainty in determining its accounting tax position using either the most likely amount or the expected value method, depending on which method better predicts the resolution of the uncertainty. CRITICAL ESTIMATES AND JUDGMENTS Income tax is calculated based on income before tax, considering the local tax rates and regulations. For each operating entity, the current income tax expense is calculated and differences between the accounting and tax base are determined, resulting in deferred tax assets or liabilities. These calculations may deviate from the ﬁnal tax assessments. 136 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 16 – Income Tax Expense continued A deferred tax asset is recognized for deductible temporary differences and the carry-forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable proﬁt will be available. Management assesses the probability that taxable proﬁt will be available against which the unused tax losses or unused tax credits can be utilized. In determining the amount of current and deferred tax, the group considers the impact of uncertain tax positions and whether additional taxes, penalties, and interest may be due. The group believes that its current income tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax laws, rules, and prior experience. The group operates in several countries with different tax laws and rules. Considering this complex multinational environment in which the group operates, global transfer pricing policies are implemented for transactions between members of the group. These transactions are documented as required by international standards. However, local tax authorities might challenge these transactions. The group considered potential challenges and accounted for potential uncertain tax positions. The assessment for uncertain tax positions relies on estimates and assumptions, based on the judgments of tax professionals within the group, supplemented by external tax advisors and may involve a series of estimates about future events. New information may become available that causes the group to change its estimate regarding the adequacy of existing income tax liabilities. Such changes to income tax liabilities will impact the income tax expense, positively or negatively, in the consolidated statement of proﬁt or loss in the period that such a determination is made. Changes in tax rates are considered if these tax rate changes are substantially enacted before year end. Governments are expected to introduce changes in tax law following Organisation for Economic Co-operation and Development (OECD), EU, and other international guidelines. Reported income tax amounts will therefore be subject to continued judgment, estimation uncertainty, and measurement adjustments. Refer also to Note 23 – Tax Assets and Liabilities. RECONCILIATION OF THE EFFECTIVE TAX RATE The group’s effective tax rate in the consolidated statement of proﬁt or loss differs from the Dutch statutory income tax rate of 25%. The table below reconciles the statutory income tax rate with the effective income tax rate in the consolidated statement of proﬁt or loss: 2021 2020 in millions of euros, unless otherwise stated % % Proﬁt before tax 929 937 Income tax expense at the Dutch statutory income tax rate 25.0 232 25.0 234 Tax effect of: Rate differential (2.5) (23) (2.6) (24) Tax incentives, exempt income, and divestments 0.1 1 (2.3) (21) Recognized and unrecognized tax losses (0.3) (3) 0.1 1 Adjustments previous years 0.7 6 0.2 2 Changes in income tax rates 0.1 1 0.0 0 Other taxes 1.0 9 0.8 7 Non-deductible costs and other items (2.5) (22) 1.9 17 Total 21.6 201 23.1 216 Rate differential indicates the effect of the group’s taxable income being generated and taxed in jurisdictions where tax rates differ from the Dutch statutory income tax rate. ← → Wolters Kluwer 2021 Annual Report 137 Note 16 – Income Tax Expense continued The effective tax rate decreased to 21.6% (2020: 23.1%), resulting from a favorable impact of ﬁnalization of tax audits, partly offset by taxable divestments. For income tax recognized directly in the consolidated statements of changes in total equity and other comprehensive income, reference is made to Note 23 – Tax Assets and Liabilities. Note 17 – Non-controlling Interests The group’s shares in signiﬁcant consolidated subsidiaries that were not fully owned at December 31 are: ownership in % 2021 2020 Akadémiai Kiadó Kft. (Budapest, Hungary) 74 74 ACCOUNTING POLICIES Non-controlling interests reﬂect the portion of the proﬁt or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the group. Losses applicable to the non-controlling interest in a subsidiary are allocated to the non-controlling interest even if these losses cause the non-controlling interest to have a debit balance. Remeasurements of non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. The movements in non-controlling interests are as follows: 2021 2020 Position at January 1 0 0 Dividends paid (1) 0 Share of proﬁt in non-controlling interests, net of tax 0 0 Foreign exchange differences 1 0 Position at December 31 0 0 Non-controlling interests in the equity of consolidated participations, totaling €0 million (2020: €0 million), are based on third-party shareholdings in the underlying shareholders’ equity of the subsidiaries. Financial information of non-controlling interests based on 100% ownership, is as follows: 2021 2020 Revenues 5 5 Adjusted operating proﬁt 2 2 Net proﬁt 1 2 Total assets 1 1 Total liabilities 1 1 Total equity 0 0 Total cash and cash equivalents 0 0 138 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 18 – Goodwill and Intangible Assets otherthanGoodwill Goodwill Acquired identifiable intangible assets Other intangible assets 2021 2020 Position at January 1 Purchase value 3,978 2,344 1,801 8,123 8,223 Accumulated amortization and impairment (9) (1,226) (1,250) (2,485) (2,529) Book value at January 1 3,969 1,118 551 5,638 5,694 Movements Investments – – 223 223 213 Acquired through business combinations Note 8 68 47 0 115 423 Divestments of operations Note 8 (41) (5) (1) (47) (24) Disposals of assets – – (1) (1) 0 Net expenditures 27 42 221 290 612 Amortization Note 14 – (131) (194) (325) (324) Impairment Note 14 – (38) (18) (56) (17) Reversal of impairment Note 8/14 – 5 0 5 – Reclassiﬁcations Note 8 (2) – – (2) 0 Transfer to assets classified as held for sale Note 9 (50) 0 (9) (59) – Foreign exchange differences 236 49 24 309 (327) Total movements 211 (73) 24 162 (56) Position at December 31 Purchase value 4,189 2,367 1,942 8,498 8,123 Accumulated amortization and impairment (9) (1,322) (1,367) (2,698) (2,485) Book value at December 31 4,180 1,045 575 5,800 5,638 At both December 31, 2021, and December 31, 2020, the book value of other intangible assets relates for the vast majority to development of software. ← → Wolters Kluwer 2021 Annual Report 139 Note 18 – Goodwill and Intangible Assets otherthanGoodwill continued ACCOUNTING POLICIES Goodwill The group measures goodwill at the acquisition date as the sum of the fair value of the consideration transferred (including deferred and contingent consideration) and the recognized amount of any non-controlling interests in the acquiree, less the net recognized fair value amount of the identiﬁable assets acquired and liabilities assumed. Any contingent consideration payable (such as earnout arrangements) is recognized at fair value at the acquisition date. Costs related to acquisitions which the group incurs in a business combination are expensed as incurred. Goodwill associated with divested operations is allocated and measured on the basis of the relative value of the divested operation and the portion of the cash generating unit (CGU) retained. Acquired identiﬁable intangible assets Identiﬁable intangible assets acquired through business combinations mainly consist of customer relationships (subscriber accounts), technology (databases, software, and product technology), trademarks, brand names, and titles. Other intangible assets Other intangible assets mainly relate to purchased and self-developed information systems and software. Software development costs are capitalized if the group can demonstrate the technical feasibility of completing the software project so that it will be available for use or sale, the intention to complete the development project, the ability to sell or use the end- product, how the end-product will yield probable future economic beneﬁts, the availability of adequate technical/ﬁnancial/other resources to complete the project, and the ability to reliably measure the expenditure attributable to the project. Capitalization of software depends on several judgments. While management has procedures in place to control the software development process, there is uncertainty regarding the outcome of the development process (timing of technological developments, technological obsolescence, and/or competitive pressures). Useful lives of assets The useful lives of assets are estimated in line with common market practice. The group reviews the remaining useful lives of its assets annually. If the expected remaining useful lives of assets are different from previous estimates, the amortization period shall be changed accordingly, which will impact the amortization in proﬁt or loss prospectively. Apart from goodwill (which has an indeﬁnite useful life), intangible assets are amortized on a straight-line basis over their estimated useful lives from the day they are available for use. The estimated useful lives are as follows: • Acquired identiﬁable intangible assets, based on nature of the underlying asset: ﬁve to 30 years; and • Other intangible assets: three to ﬁve years. Impairment At the end of each reporting period, it is assessed whether there is an indication that an intangible asset may be impaired. If any such indication exists, then the group estimates the recoverable amount of the asset. If the recoverable amount is below the carrying value, the asset is impaired. Goodwill is tested for impairment annually, at July 1, and when an impairment trigger has been identiﬁed. 140 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 18 – Goodwill and Intangible Assets otherthanGoodwill continued CRITICAL ESTIMATES AND JUDGMENTS Measurement Upon acquisition, the values of intangible assets acquired are estimated, mostly applying one of the methodologies below: • Relief from royalty approach: this approach assumes that if the identiﬁable intangible asset was not owned, it would be acquired through a royalty agreement. The value of owning the asset equals the beneﬁts from not having to pay royalty fees; • Multi-period excess earnings method: under this approach, cash ﬂows associated with the speciﬁc acquired identiﬁable intangible assets are determined. Contributory charges of other assets that are being used to generate the cash ﬂows are deducted from these cash ﬂows. The net cash ﬂows are discounted to arrive at the value of the asset; or • Cost method: the cost method reﬂects the accumulated cost that would currently be required to replace the asset. These valuations are usually performed by management of the acquiring CGU in close cooperation with an external consulting ﬁrm. These calculations require estimates like future cash ﬂows, royalty rates, discount rates, useful life, churn rate, and rate of return. The methodologies applied in this respect are in line with common market practice. Impairment test Impairment tests require estimates of a discount rate, future cash ﬂows, and a perpetual growth rate. These estimates are made by management that manages the business to which the assets belong. The future cash ﬂows cover a ﬁve-year period and are based on Vision & Strategy Plans (VSPs), prepared by management, and approved by the Executive Board. The annual goodwill impairment test did not result in the recognition of an impairment. The outcome of the group’s sensitivity analysis was that no reasonably possible change in any of the key assumptions would cause the carrying amount to exceed the recoverable amount. The allowed change in growth, discount rate, and adjusted operating proﬁt margin was at least 300 basis points for each of the groups of cash generating units. On top of the annual goodwill impairment test, the group performed an in-depth impairment triggering event analysis on its other non-current assets. In this analysis, the development of new sales, attrition rates of existing customers, growth rates, and cost measures were the main drivers. The group concluded that there was no impairment trigger for the majority of the other non-current assets, consisting mainly of acquired identiﬁable intangible assets. For Learner's Digest and certain assets in the Health operating segment, and for certain assets in the Governance, Risk & Compliance operating segment, we identiﬁed a triggering event in 2021. For these three U.S.-based units, expectations of market growth, new sales, and pipelines deteriorated and there was downward pressure on renewals. Following a value-in-use scenario analysis, whereby the critical key assumptions were new sales, attrition rates, and the effectiveness of cost measures, the group recognized an impairment on these three units’ acquired identiﬁable intangible assets of €38 million in total. CARRYING AMOUNTS OF GOODWILL AND ACQUIRED IDENTIFIABLE INTANGIBLE ASSETS PER OPERATING SEGMENT Goodwill Acquired identifiable intangible assets 2021 2020 Health 1,058 204 1,262 1,221 Tax & Accounting 1,492 269 1,761 1,627 Governance, Risk & Compliance 1,029 345 1,374 1,316 Legal & Regulatory 601 227 828 923 Total 4,180 1,045 5,225 5,087 ← → Wolters Kluwer 2021 Annual Report 141 Note 18 – Goodwill and Intangible Assets otherthanGoodwill continued IMPAIRMENT TESTING OF GOODWILL The group performs an annual impairment test by comparing the carrying amount of the groups of CGUs to which the goodwill belongs, net of related deferred taxes, to the recoverable amount of the groups of CGUs. The groups of CGUs for goodwill impairment testing represent the lowest level at which goodwill is monitored by management, whereby management considers the integration of the group’s business operations, and the global leverage of assets, capital, and staff. Acquisitions are integrated into existing business operations and the goodwill arising from a business combination is allocated to the groups of CGUs that are expected to beneﬁt from the synergies of the acquisition. The total number of groups of CGUs for goodwill impairment testing purposes was six in 2021 (2020: six groups of CGUs). The recoverable amount is determined based on the higher of the value-in-use and the fair value less costs of disposal. If there is sufﬁcient headroom, the group only determines the value-in-use. The recoverable amount is determined by discounting the future cash ﬂows to be generated from the continuing use of the groups of CGUs. These valuations are based on non-observable market data. The recoverable amount calculations in 2021 were determined in a consistent manner with prior years. The cash ﬂow projections are based on actual operating results and the long-term VSPs, as approved by the Executive Board. The 2021 annual impairment test showed that the recoverable amount for all identiﬁed groups of CGUs for goodwill impairment testing exceeded their carrying amounts. Key assumptions The group’s key assumptions include assumptions that are based on non-observable market data (level 3 input). The period over which the group estimates its cash ﬂow projections is ﬁve years. After ﬁve years, cash ﬂow projections are extrapolated using an appropriate perpetual growth rate that is consistent with the long-term average market growth rate. The 2021 weighted average long- term growth rate is 2.2% for the U.S. and 0.3% for Europe (2020: 1.4% for the U.S. and 0.0% for Europe). In addition, the following key assumptions were used in the projections: • Revenue growth: based on actual experience, an analysis of market growth, and the expected development of market share; and • Adjusted operating proﬁt margin development: based on actual experience and management’s long-term projections. Adjusted operating proﬁt is deemed the best approximation for future cash ﬂows. The estimated pre-tax cash ﬂows are discounted to their present value using a pre-tax weighted average discount rate for the individual groups of CGUs between 7.7% and 8.7% (2020: between 8.0% and 8.6%), with a weighted average of 8.5% (2020: 8.2%). In determining the discount rate, the group used a risk-free rate based on the long-term yield on Dutch government bonds with a maturity of 20 years, adjusted for country risk premiums and country-speciﬁc inﬂation differentials. In determining the discount rate, the group applied the following assumptions: 2021 2020 Risk-free rate United States (in %) 2.2 1.4 Risk-free rate Europe (in %) 0.3 0.0 Market risk premium (in %) 7.0 7.3 Tax rate (in %) 25.0 21.7 Re-levered beta 0.77 0.81 142 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 18 – Goodwill and Intangible Assets otherthanGoodwill continued Sensitivity analysis The impairment testing includes an assessment if a reasonably possible change in a key assumption would cause the carrying amount of goodwill to exceed the recoverable amount. The outcome of the sensitivity analysis was that no reasonably possible change in one of the key assumptions would cause the carrying amount to exceed the recoverable amount. The sensitivity per group of CGUs for the 2021 and 2020 goodwill impairment test, respectively, is as follows: Applied weighted average growth rate Allowed change (in basis points) Allocated goodwill at December 31, 20212021 sensitivity per group of CGUs Decline in growth Increase in discount rate Decrease in adjusted operating profit margin Health Learning, Research & Practice 1.4% >300 >300 >300 534 Clinical Solutions 2.3% >300 >300 >300 524 Tax & Accounting Americas and Asia Paciﬁc 1.9% >300 >300 >300 1,076 Tax & Accounting Europe 0.3% >300 >300 >300 416 Governance, Risk & Compliance 2.1% >300 >300 >300 1,029 Legal & Regulatory 1.6% >300 >300 >300 601 Total 1.9% 4,180 Applied weighted average growth rate Allowed change (in basis points) Allocated goodwill at December 31, 20202020 sensitivity per group of CGUs Decline in growth Increase in discount rate Decrease in adjusted operating profit margin Health Learning, Research & Practice 0.8% >300 >300 >300 494 Clinical Solutions 1.4% >300 >300 >300 484 Tax & Accounting Americas and Asia Paciﬁc 1.1% >300 >300 >300 943 Tax & Accounting Europe 0.0% >300 >300 >300 411 Governance, Risk & Compliance 1.3% >300 >300 >300 958 Legal & Regulatory 0.8% >300 >300 >300 679 Total 1.1% 3,969 IMPAIRMENT TESTING OF ACQUIRED IDENTIFIABLE INTANGIBLE ASSETS AND OTHER INTANGIBLE ASSETS The following impairments were recognized on the acquired identiﬁable intangible assets and other intangible assets: 2021 2020 Acquired identifiable intangible assets – Learner's Digest and certain assets within Health 27 – Acquired identifiable intangible assets – certain assets within GRC 11 – Other intangible assets 18 17 Total 56 17 The impairment of other intangible assets relate to a small portion of the group’s internally-developed software initiatives. ← → Wolters Kluwer 2021 Annual Report 143 Note 19 – Property, Plant, and Equipment Land and buildings Other fixed assets 2021 2020 Position at January 1 Purchase value 124 251 375 485 Accumulated depreciation and impairment (84) (207) (291) (390) Book value at January 1 40 44 84 95 Movements Investments 4 13 17 25 Acquired through business combinations Note 8 0 0 0 2 Divestments of operations Note 8 (2) 0 (2) 0 Disposals of assets 0 0 0 (7) Net expenditures 2 13 15 20 Depreciation Note 14 (6) (19) (25) (26) Transfer to assets classified as held for sale Note 9 (1) (2) (3) – Foreign exchange differences 2 2 4 (5) Total movements (3) (6) (9) (11) Position at December 31 Purchase value 125 255 380 375 Accumulated depreciation and impairment (88) (217) (305) (291) Book value at December 31 37 38 75 84 In 2020, the group entered into a sale and lease back transaction for property in the Netherlands. This transaction resulted in a net book gain of €0 million and a cash inﬂow of €7 million. 144 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 20 – Leasing ACCOUNTING POLICIES Property, plant, and equipment, consisting of land, buildings, and other assets such as ofﬁce equipment and vehicles, are valued at cost less accumulated depreciation and any impairment. Leasehold improvements are presented as part of land and buildings. Depreciation is recognized in the consolidated statement of proﬁt or loss on a straight-line basis over the estimated useful life of each part of an item of property, plant, and equipment. Land is not depreciated. The estimated useful lives for property, plant, and equipment are as follows: • Buildings: 20 to 40 years; • Leasehold improvements: equal to the lease term, unless the economic life of the leasehold improvement is shorter; and • Other assets: three to ten years. ACCOUNTING POLICIES The group leases primarily real estate and, to a lesser extent, IT equipment and cars. The ﬁxed rental periods mostly vary from one year to 15 years, but may have renewal and/or termination options. For real estate and IT equipment, lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Leases are recognized as a right-of-use asset and a corresponding liability at the same date at which the leased asset is available for use by the group. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. The lease liability is discounted based on the incremental borrowing rate, because the rate implicit in the lease cannot readily be determined. The ﬁnance cost is charged to proﬁt or loss over the lease period in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The group elected to apply the practical expedients to exclude all short-term leases and all leases for which the underlying asset is of low value, and not to apply IFRS 16 to leases of intangible assets (such as software). For IT equipment and car leases, the group elected to apply the practical expedient to not separate non-lease components from lease components, and instead to account for these components as a single lease component. Payments associated with short-term leases and low-value leases are recognized on a straight-line basis as an expense in proﬁt or loss. Short-term leases are leases with a lease term of 12 months or less, considering any reasonably certain optional lease periods. Low-value leases comprise small items of ofﬁce furniture and IT equipment. The total expenses arising from short-term leases and low-value leases are insigniﬁcant. The group is to a very limited extent a lessor. ← → Wolters Kluwer 2021 Annual Report 145 Note 20 – Leasing continued ESTIMATES AND JUDGMENTS IFRS 16 requires management to use estimates for setting the discount rate and to apply judgment in the assessment of renewal and termination options (i.e., optional lease periods) in the lease contracts. Discount rate The discount rate applied is based on the incremental borrowing rate for the respective leases considering the primary economic environment of the lease, the currency, the credit risk premium, the lease term, and the nature of the leased asset. At December 31, 2021, the weighted average discount rate is 2.4% (2020: 2.8% ). Renewal and termination options Renewal and termination options are included in several real estate and other lease contracts. These terms are used to maximize operational ﬂexibility in terms of managing contracts. Most contract-speciﬁc renewal and termination options are exercisable only by the group and not by the respective lessor. In determining the lease term, the group considers all facts and circumstances that create an economic incentive to use the optional lease period. Optional lease periods are only included in the lease term if it is reasonably certain that the optional lease period will be used. The assessment is reviewed if a signiﬁcant change in circumstances occurs which affects this assessment and that is within the control of the group. Real estate leases that are annually renewed or that have an indeﬁnite contract term are on average leased for ﬁve years. Optional periods arising from renewal options of other real estate leases are mostly not considered to be reasonably certain, since the rent is often reset at the market price at the renewal option date. Optional periods after termination option dates are often considered in the lease term, due to termination penalties included in the contract. Impairment of right-of-use assets A lessee should apply IAS 36 Impairment of Assets to determine whether there is an impairment trigger regarding the right-of- use asset and account for any impairment loss identiﬁed. In the group, this primarily may apply to the asset class real estate. The impairment of a real estate right-of-use asset becomes relevant in case of vacant ofﬁce space. If vacant ofﬁce space is identiﬁed, this space is considered a CGU on its own, when that space can contractually and practically be sublet. An impairment is recognized when the recoverable amount is lower than the carrying value. Mostly, the recoverable amount will be based on expected future sublease receipts, estimated by an external real estate broker. The carrying value may not only include the right-of-use asset, but also any directly related associated assets such as leasehold improvements. The group’s real estate rationalization program resulted in impairments on right-of-use assets of €1 million (2020: €2 million). 146 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 20 – Leasing continued MOVEMENT SCHEDULE OF RIGHTOFUSE ASSETS Real estate Other leases 2021 2020 Position at January 1 Purchase value 589 74 663 673 Accumulated depreciation and impairment (305) (39) (344) (332) Book value at January 1 284 35 319 341 Movements Additions from new leases 12 12 24 71 Additions from sale and leaseback Note 19 – – – 5 Acquired through business combinations Note 8 2 – 2 4 Contract modifications and reassessments of options 17 3 20 (4) Net additions 31 15 46 76 Depreciation Note 14 (52) (19) (71) (73) Impairment Note 14/18 (1) – (1) (2) Transfer to assets classified as held for sale Note 9 (9) (1) (10) – Foreign exchange differences 16 2 18 (23) Total movements (15) (3) (18) (22) Position at December 31 Purchase value 578 80 658 663 Accumulated depreciation and impairment (309) (48) (357) (344) Book value at December 31 269 32 301 319 ← → Wolters Kluwer 2021 Annual Report 147 CONTRACTUAL MATURITIES OF LEASE LIABILITIES 2021 2020 Within one year 70 72 Between one and two years 61 60 Between two and three years 51 52 Between three and four years 42 44 Between four and five years 33 37 Between five and ten years 91 103 Ten years and more 17 24 Effect of discounting (34) (44) Total lease liabilities at December 31 Note 29 331 348 CASH OUTFLOW FOR LEASES 2021 2020 Interest portion of lease payments 9 11 Repayment of principal portion of lease liabilities 68 74 Total 77 85 OTHER DISCLOSURES At December 31, 2021, the future undiscounted cash outﬂow arising from leases not yet commenced and to which the group is committed amounted to €0 million (2020: €0 million). The group’s lease agreements do not impact any covenants. Note 20 – Leasing continued 148 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements The group’s shares in equity-accounted investees at December 31 are: ownership in % 2021 2020 HaoYisheng (Beijing, China) 22 22 ACCOUNTING POLICIES Interests in equity-accounted investees (associates) are accounted for using the equity method and are initially recognized at cost, which includes goodwill identiﬁed upon acquisition and transaction costs. Associates are recognized from the date the group has signiﬁcant inﬂuence, and recognition ceases the date the group has lost its signiﬁcant inﬂuence over the equity investment. When an interest in an associate is increased to a controlling interest, the equity interest previously held is treated as if it was disposed of and reacquired at fair value on the acquisition date. Any resulting gain or loss compared to the carrying amount is recognized in proﬁt or loss. Any amount that has previously been recognized in other comprehensive income, and that would be reclassiﬁed to proﬁt or loss following a divestment, is similarly reclassiﬁed to proﬁt or loss. MOVEMENT SCHEDULE OF EQUITYACCOUNTED INVESTEES 2021 2020 Position at January 1 8 8 Divestments – (5) Dividends received – (1) Share of proﬁt in equity-accounted investees, net of tax 1 6 Foreign exchange differences 1 0 Position at December 31 10 8 In 2020, the group sold its 40% equity shareholding in Logical Images, Inc. Refer also to Note 8 – Acquisitions and Divestments. For the equity-accounted investees at December 31, 2021, and December 31, 2020, respectively, the ﬁnancial information (at 100%) and the group’s weighted proportionate share is as follows: Total equity-accounted investees Group’s share 2021 2020 2021 2020 Total assets 28 25 6 5 Total liabilities 16 20 3 4 Total equity 12 5 3 1 Revenues 24 23 5 5 Net proﬁt for the year 5 6 1 1 Note 21 – Investments in Equity-accounted Investees ← → Wolters Kluwer 2021 Annual Report 149 Note 22 – Financial Assets 2021 2020 Financial assets at fair value through profit or loss 0 0 Finance lease receivables 0 1 Other non-current financial assets 5 4 Total 5 5 The exposure to credit risk of the ﬁnancial assets is considered immaterial. Refer to Note 30 – Financial Risk Management. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2021 2020 Position at January 1 0 0 Financial assets arising from divestment of operations Note 8 6 – Revaluation gain/(loss) on financial assets at fair value through profit or loss Note 15 (5) 0 Foreign exchange differences (1) 0 Position at December 31 0 0 Note 23 – Tax Assets and Liabilities DEFERRED TAX ASSETS AND LIABILITIES temporary differences arising from: Assets Liabilities 2021 2020 Intangible assets 9 (399) (390) (403) Property, plant, and equipment and right-of-use assets 6 (5) 1 5 Employee beneﬁts 37 0 37 42 Tax value of loss carry-forwards recognized 38 – 38 43 Other items 123 (41) 82 80 Total before set-off of tax 213 (445) (232) (233) Set-off of tax (151) 151 0 0 Position at December 31 62 (294) (232) (233) The actual recognition of deferred tax assets depends on the generation of future taxable income during the periods in which the temporary differences become deductible. Based on projected future taxable income and available strategies, the group considers the future realization of these deferred tax assets as being probable. Other items mainly include recognition of deferred tax assets and liabilities for temporary differences on working capital items. 150 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 23 – Tax Assets and Liabilities continued MOVEMENTS IN TEMPORARY DIFFERENCES, 2021 Balance at January 1, 2021 Acquisitions/ divestments Transfer to assets and liabilities classified as held for sale (Note 9) Recognized in profit or loss (Note 16) Recognized in equity and other comprehensive income Foreign exchange differences Balance at December 31, 2021 Intangible assets (403) 4 0 34 – (25) (390) PPE and right-of-use assets 5 – 0 (4) – 0 1 Employee beneﬁts 42 0 0 (4) (4) 3 37 Tax value of loss carry-forwards recognized 43 – – (8) – 3 38 Other items 80 4 (1) (4) 0 3 82 Total (233) 8 (1) 14 (4) (16) (232) MOVEMENTS IN TEMPORARY DIFFERENCES, 2020 Balance at January 1, 2020 Acquisitions/ divestments Transfer to assets and liabilities classified as held for sale (Note 9) Recognized in profit or loss (Note 16) Recognized in equity and other comprehensive income Foreign exchange differences Balance at December 31, 2020 Intangible assets (414) (33) – 24 – 20 (403) PPE and right-of-use assets 6 – – (1) – 0 5 Employee beneﬁts 40 0 – 3 0 (1) 42 Tax value of loss carry-forwards recognized 39 14 – (8) – (2) 43 Other items 83 1 – (6) 1 1 80 Total (246) (18) 0 12 1 18 (233) ← → Wolters Kluwer 2021 Annual Report 151 Note 23 – Tax Assets and Liabilities continued MOVEMENTS IN OVERALL TAX POSITION 2021 2020 Position at January 1 Current income tax assets 23 22 Current income tax liabilities (169) (163) Deferred tax assets 72 86 Deferred tax liabilities (305) (332) Overall tax position (379) (387) Movements Total income tax expense Note 16 (201) (216) Deferred tax from acquisitions and divestments 8 (18) Current income tax from acquisitions and divestments 0 0 Deferred tax on items recognized directly in other comprehensive income (4) 1 Paid income tax 277 221 Transfer to assets and liabilities classified as held for sale Note 9 1 – Foreign exchange differences (17) 20 Total movements 64 8 Position at December 31 Current income tax assets 59 23 Current income tax liabilities (142) (169) Deferred tax assets 62 72 Deferred tax liabilities (294) (305) Overall tax position (315) (379) The current income tax liabilities include, to a large extent, uncertain tax positions, of which most of the liabilities are expected to be settled beyond one year. For the critical estimates and judgments applied to uncertain tax positions, refer to Note 16 – Income Tax Expense. The group paid income taxes for the amounts of €166 million (2020: €126 million) in North America, €104 million (2020: €89 million) in Europe, and €7 million (2020: €6 million) in Asia Paciﬁc and Rest of World. The amount of deferred tax assets arising from recognized tax loss carry-forwards, which relate to tax jurisdictions where the group continued to incur tax losses in the current and/or preceding year, was €11 million at December 31, 2021 (2020: €44 million). It is considered probable based on forecasts that future taxable proﬁts will be available. UNRECOGNIZED TAX LOSSES AND TEMPORARY DIFFERENCES The group has not recognized deferred tax assets that relate to unused tax losses and temporary differences amounting to €253 million (2020: €255 million), as it is not probable that future taxable proﬁt will be available against which the group can use the beneﬁts. Of these unused tax losses and temporary differences, 11% expire within the next ﬁve years (2020: 10%), 13% expire after ﬁve years (2020: 17%), and 76% carry forward indeﬁnitely (2020: 73%). In addition, the group has not recognized net deferred tax assets of €20 million (2020: €15 million), relating to unused state tax losses in the U.S. Of these unused state tax losses, 21% expire within the next ﬁve years (2020: 34%), and 79% expire after ﬁve years (2020: 66%). 152 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 23 – Tax Assets and Liabilities continued DEFERRED TAX ON ITEMS RECOGNIZED IMMEDIATELY IN OTHER COMPREHENSIVE INCOME AND EQUITY 2021 2020 Amount before tax Tax Amount net of tax Amount before tax Tax Amount net of tax Exchange differences on translation of foreign operations, recycling of foreign exchange differences on loss of control, and net investmenthedges 339 0 339 (337) 1 (336) Gains/(losses) on cash ﬂow hedges 10 – 10 (18) – (18) Remeasurement gains/(losses) on deﬁned beneﬁt plans 16 (4) 12 0 0 0 Recognized in other comprehensive income 365 (4) 361 (355) 1 (354) Share-based payments 24 – 24 24 – 24 Recognized in equity 24 – 24 24 – 24 Note 24 – Inventories 2021 2020 Work in progress 21 19 Finished products and trade goods 44 49 Total 65 68 ACCOUNTING POLICIES Inventories are valued at the lower of cost and net realizable value. The cost of inventories includes all costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to complete the sale. Inventories also include internally developed commercial software products. The cost of internally produced goods includes the developing, manufacturing, content, and publishing costs. Trade goods purchased from third parties are valued at the purchase price. At December 31, 2021, the provision for obsolescence deducted from the inventory carrying values amounted to €18 million (2020: €18 million). In 2021, an amount of €2 million was recognized as an expense for the change in the provision for obsolescence (2020: €2 million) and is presented as part of cost of revenues in the consolidated statement of proﬁt or loss. ← → Wolters Kluwer 2021 Annual Report 153 Note 25 – Contract Assets and Liabilities 2021 2020 Trade receivables 1,008 986 Non-current contract assets 19 21 Current contract assets 138 111 Non-current deferred income 113 112 Current deferred income 1,709 1,518 Other current contract liabilities 80 66 ACCOUNTING POLICIES Contract assets and contract liabilities The group recognizes the following contract-related assets: unbilled revenues, cost to obtain a contract, and cost to fulﬁll a contract. The group recognizes the following contract-related liabilities: deferred income and the provisions for returns, refunds, and other liabilities. In general, when either party to a customer contract has performed, the group recognizes unbilled revenues or deferred income, depending on the relationship between the group’s performance and the timing of the customers’ payment. Where the group has performed by transferring a good and/or service to the customer and the customer has not yet paid the related consideration, unbilled revenues or a receivable is presented in the consolidated statement of ﬁnancial position, depending on the nature of the group’s right to consideration. For contracts whereby neither party has performed, trade receivables and deferred income balances are presented on a net basis. A contract asset is recognized when the group’s right to consideration is conditional on something other than the passage of time, for example future performance of the entity. A receivable is recognized when the group’s right to consideration is unconditional except for the passage of time. Cost to obtain a contract Incremental cost for obtaining a contract (primarily sales commissions) will be capitalized and amortized if the contract term is expected to be longer than 12 months, as the practical expedient of IFRS 15 is applied. The amortization period will usually be one to ﬁve years, or the underlying contract life if longer, subject to the nature of the underlying performance obligations. Cost to fulﬁll a contract If the group incurs cost to fulﬁll a revenue contract with a customer (e.g., costs that are explicitly chargeable to the customer under the contract, set-up cost, or pre-contract costs), an asset is recognized if these costs directly relate to a contract, generate or enhance resources that will be used in satisfying performance obligations in the future, and are expected to be recovered. The amortization of set-up and pre- contract costs is recognized as an expense over the term of the associated contract. Impairment Any impairment of assets relating to contracts with customers is measured, presented, and disclosed in accordance with IFRS 9. Deferred income Deferred income is presented in the consolidated statement of ﬁnancial position when a customer has paid an amount of consideration prior to the group performing. It represents the part of the amount invoiced to customers that has not yet met the criteria for revenue recognition and thus still must be earned as revenue by means of the delivery of goods and/or services in the future. Deferred income is recognized at its nominal value. 154 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 25 – Contract Assets and Liabilities continued Provisions for returns, refunds, and otherliabilities The group recognizes a contract liability if the group receives consideration from a customer and expects to refund some or all of that consideration to the customer or for transferred goods and/or services with a right of return. The contract liability is measured as the amount of the consideration for which the group does not expect to be entitled to. ESTIMATES AND JUDGMENTS The assessment of the nature of sales commission plans for meeting the capitalization criteria requires judgment. The applicable amortization period of the incremental cost to obtain a contract is estimated by the group, by matching the useful life of the capitalized sales commissions with the expected beneﬁts of the underlying contract. GENERAL In general, the group applies payment terms in line with common industry practice. There are no contracts with a material ﬁnancing component. There are contracts with variable consideration, but the related estimates are almost never constrained. To a very limited extent, the group acts as an agent in its contracts with customers. Most of the goods and/or services require prepayment of the consideration. However, the group also has contracts with customers where invoicing occurs after delivery of the goods and/or services. Trade receivables and unbilled revenues are shown net of impairment losses amounting to €83 million (2020: €84 million). The fair value of the receivables approximates the carrying amount. Impairment losses on trade receivables and unbilled revenues are presented as part of sales costs in the consolidated statement of proﬁt or loss. LOSS ALLOWANCE 2021 2020 Position at January 1 84 72 Divestment of operations (1) – Transfer to assets classified as held for sale (1) – Additions to loss allowances Note 10 20 36 Usage of loss allowances (25) (19) Foreign exchange differences 6 (5) Position at December 31 83 84 For further information on credit risk, refer to Note 30 – Financial Risk Management. ← → Wolters Kluwer 2021 Annual Report 155 Note 25 – Contract Assets and Liabilities continued CONTRACT ASSETS current and non-current Unbilled revenues Cost to obtain a contract Cost to fulfill a contract 2021 2020 Position at January 1 75 32 25 132 157 Recognized as revenues in the year 331 – – 331 321 Newly recognized cost to fulfill a contract – – 391 391 322 Transferred to trade receivables (315) – (397) (712) (637) Newly recognized cost to obtain a contract – 29 – 29 21 Amortization of capitalized sales commissions Note 10 – (23) – (23) (21) Autonomous movements in contract assets 16 6 (6) 16 6 Acquired through business combinations 0 1 – 1 0 Divestments of operations – – – 0 (4) Transfer to assets classified as held for sale (1) – – (1) – Foreign exchange differences 5 1 3 9 (27) Position at December 31 95 40 22 157 132 The group did not recognize an impairment loss on the unbilled revenues during the year (2020: nil). DEFERRED INCOME current and non-current 2021 2020 Position at January 1 1,630 1,679 New and existing contracts with customers 3,683 3,434 Recognized as revenues from opening balance (1,518) (1,550) Recognized as revenues in the year on new and existing contracts (2,007) (1,810) Change in netting against trade receivables (45) (30) Autonomous movements in deferred income 113 44 Acquired through business combinations 6 21 Divestments of operations (2) (11) Transfer to liabilities classified as held for sale Note 9 (27) – Foreign exchange differences 102 (103) Position at December 31 1,822 1,630 No material amount of revenues was recognized in 2021 from performance obligations satisﬁed or partially satisﬁed in previous years, because of events such as changes in transaction price. Furthermore, we did not have material changes in deferred income because of changes in our estimates or because of contract modiﬁcations. The aggregate amount of the transaction price allocated to the remaining performance obligations that are unsatisﬁed at year-end 2021 was €3,727 million (2020: €3,133 million), of which €1,822 million was included in deferred income (2020: €1,630 million). The unfulﬁlled performance obligations not recognized in deferred income relate to multi-year contracts agreed with customers, whereby we expect to satisfy these performance obligations for a large part within one year and for the remainder between one to ﬁve years. 156 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 25 – Contract Assets and Liabilities continued OTHER CONTRACT LIABILITIES 2021 2020 Position at January 1 66 39 Additions to provision for returns, refunds, and other 90 108 Usage of provision for returns, refunds, and other (76) (79) Autonomous movements in other contract liabilities 14 29 Transfer to liabilities classified as held for sale (4) – Foreign exchange differences 4 (2) Position at December 31 80 66 Note 26 – Other Receivables 2021 2020 Prepaid royalties 18 20 Non-current other receivables 18 20 Prepaid royalties 81 74 Other prepayments 251 160 Miscellaneous receivables 34 35 Interest receivable 0 2 Deferred divestment consideration receivable Note 8 – 1 Current other receivables 366 272 ← → Wolters Kluwer 2021 Annual Report 157 Note 27 – Cash and Cash Equivalents 2021 2020 Deposits 610 112 Cash and bank balances 391 611 Total cash and cash equivalents in the consolidated statement of financial position 1,001 723 Minus: Bank overdrafts used for cash management purposes Note 29 (9) (359) Plus: Cash included in assets held for sale Note 9 2 – Total cash and cash equivalents including cash included in assets held for sale in the consolidated statement of cash flows 994 364 ACCOUNTING POLICIES Cash and cash equivalents comprise cash and bank balances and call deposits. Bank overdrafts predominantly result from cash pool arrangements and are presented within borrowings and bank overdrafts in current liabilities. The group discloses the ﬁnancial assets and ﬁnancial liabilities within these arrangements on a gross basis. An amount of €0 million (2020: €0 million) relates to cash and cash equivalent balances of entities that the group does not fully own (see Note 17 – Non-controlling Interests). All deposits are on-demand deposits that are readily convertible into cash. At December 31, 2021, bank balances include an amount of approximately €45 million (2020: €36 million) of restricted cash, primarily due to local exchange control regulations that provide for restrictions on exporting cash and/or capital from the relevant country. Note 28 – Trade and Other Payables 2021 2020 Trade payables 123 133 Salaries and holiday allowances 284 220 Social security premiums and other taxation 88 75 Pension-related payables 24 17 Royalty payables 90 87 Other accruals and payables 300 252 Interest payable 34 35 Deferred and contingent acquisition payables Note 29 1 0 Total 944 819 158 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 29 – Long-term Debt Nominal value Effective interest rate in % Nominal interest rate in % Repayment commitments 1-5 years Repayment commitments >5 years 2021 2020 Bonds 2008-2028 (100.00 * ) €36 6.812 6.748 – 36 36 36 Bonds 2013-2023 (99.709 * ) €700 2.950 2.875 699 – 699 699 Bonds 2014-2024 (99.164 * ) €400 2.640 2.500 399 – 399 398 Bonds 2017-2027 (99.659 * ) €500 1.575 1.500 – 498 498 498 Bonds 2020-2030 (99.292 * ) €500 0.862 0.750 – 495 495 495 Bonds 2021-2028 (99.958 * ) €500 0.307 0.250 – 498 498 – Bonds, measured at amortized cost 1,098 1,527 2,625 2,126 Private placement 2008-2038, measured at amortizedcost ¥20,000 3.330 3.330 – 153 153 157 Deferred and contingent acquisition payments, measured at fair value 1 – 1 0 Other debt, measured at amortized cost 10 – 10 9 Derivative ﬁnancial instruments, measured atfairvalue – 2 2 8 Other long-term debt 11 2 13 17 Total long-term debt (excluding lease liabilities) 1,109 1,682 2,791 2,300 Lease liabilities ** 260 276 Total long-term debt 3,051 2,576 * Issue price of the ﬁnancial instrument. ** For the repayment commitments of lease liabilities, refer to Note 20 – Leasing. ← → Wolters Kluwer 2021 Annual Report 159 Note 29 – Long-term Debt continued RECONCILIATION LONGTERM DEBT TO NET DEBT 2021 2020 Total long-term debt 3,051 2,576 Borrowings and bank overdrafts: Euro Commercial Paper program – 100 Bank overdrafts, measured at amortized cost Note 27 9 359 Total borrowings and bank overdrafts 9 459 Short-term lease liabilities 71 72 Deferred and contingent acquisition payables, measured at fair value Note 28 1 0 Total short-term debt 81 531 Gross debt 3,132 3,107 Minus: Cash and cash equivalents Note 27 (1,001) (723) Deferred divestment consideration receivable Note 26 – (1) Net debt 2,131 2,383 ACCOUNTING POLICIES Financial instruments Financial instruments comprise the following: • Non-derivative ﬁnancial assets and liabilities: ﬁnancial assets designated at fair value through proﬁt or loss, trade and miscellaneous receivables, cash and cash equivalents, borrowings and bank overdrafts, trade payables, and short- and long-term debt; and • Derivative ﬁnancial assets and liabilities: currency forwards and cross-currency interest rate swaps. Financial assets and liabilities are offset and presented as net in the consolidated statement of ﬁnancial position when the group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. The group recognizes non-derivative ﬁnancial assets and liabilities on the trade date. Non-derivative ﬁnancial assets Trade and miscellaneous receivables are measured at amortized cost, less accumulated impairment. Impairment of non-derivative ﬁnancial assets The determination of the provision for impairment is based on the group’s historical average of three years of credit losses, which is used as a proxy for expected losses on trade receivables with similar characteristics and credit proﬁle. Trade receivables longer than one year overdue and trade receivables with speciﬁc risk with no reasonable expectation of recovery, are impaired and provided for in full, unless reliable supporting information to conclude otherwise is available. The group does not present its impairment losses separately in the consolidated statement of proﬁt or loss, but in the notes thereto. Non-derivative ﬁnancial assets designated at fair value throughproﬁt orloss Non-derivative ﬁnancial assets designated at fair value through proﬁt or loss comprise equity investments and are measured at fair value. Fair value changes are recognized in proﬁt or loss. 160 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 29 – Long-term Debt continued Non-derivative ﬁnancial liabilities measured at amortized cost Financial liabilities measured at amortized cost are bonds, the Euro Commercial Paper program, private placements, other long-term and short-term debt, and trade payables. The group initially recognizes non-derivative ﬁnancial liabilities at fair value less any directly attributable transaction costs. After initial recognition, these ﬁnancial liabilities are measured at amortized cost with any difference between cost and redemption value being recognized in proﬁt or loss over the period of the borrowings, using the effective interest method. Non-derivative ﬁnancial liabilities designated at fair value through proﬁt orloss Non-derivative ﬁnancial liabilities designated at fair value through proﬁt or loss comprise contingent considerations and are measured at fair value. Changes therein are recognized in proﬁt or loss. Derivative ﬁnancial instruments and hedging activities The group holds derivative ﬁnancial instruments to hedge risk exposures. Derivative ﬁnancial instruments are initially recognized at fair value on the date a derivative contract is concluded and are subsequently remeasured at fair value. The method of recognizing gains or losses depends on whether the derivative is designated as a hedging instrument and if so, the nature of the item being hedged. The group designates certain derivatives as either: • Hedges of a risk associated with a recognized asset or liability or a highly probable forecast transaction (cash ﬂow hedge); • Hedges of a net investment in a foreign operation (net investment hedge); or • Currency forward instruments to protect the group’s net proﬁt (not qualifying for hedge accounting). With respect to foreign currency forwards used in the cash ﬂow hedges and the net investment hedges, the group designates as a hedging instrument only the change in the value of the spot component of a forward contract (and not the forward element). The differential between the contracted forward rate and the market spot rate, deﬁned as forward points, is recognized in other comprehensive income, and accumulated in the hedge reserve within total equity. Cash ﬂow hedge The effective part of changes in the fair value of derivatives that are designated and qualify as cash ﬂow hedges are recognized in other comprehensive income. Amounts accumulated in the hedge reserve are reclassiﬁed to proﬁt or loss in the same period the hedged item affects the proﬁt or loss within the line where the result from the hedged transaction is recognized. The gain or loss relating to the ineffective part of the hedging relationship is recognized in proﬁt or loss within ﬁnancing results. Reclassiﬁcation of hedge reserve to proﬁt or loss When a hedging instrument matures or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the hedge reserve at that time remains in the hedge reserve and is reclassiﬁed when the hedged transaction is ultimately recognized in proﬁt or loss. When a hedged transaction is no longer expected to occur, the cumulative gain or loss in the hedge reserve is reclassiﬁed to proﬁt or loss. Net investment hedge Fair value changes of derivative ﬁnancial instruments that are used to hedge the net investment in foreign operations, which are determined to be an effective hedge, are recognized directly in other comprehensive income in the translation reserve. Gains and losses accumulated in the translation reserve are reclassiﬁed to proﬁt or loss when the foreign operation is disposed. If a hedging relationship is terminated and the derivative ﬁnancial instrument is not sold, future changes in the fair value of the derivative ﬁnancial instrument are recognized in proﬁt or loss. The gain or loss relating to the ineffective part of the hedging relationship is recognized in proﬁt or loss within ﬁnancing results. ← → Wolters Kluwer 2021 Annual Report 161 Note 29 – Long-term Debt continued Derivatives that do not qualify for hedge accounting Changes in the fair value of any derivative ﬁnancial instruments that do not qualify for hedge accounting are recognized in proﬁt or loss within ﬁnancing results. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES Gross debt, excluding lease liabilities, derivative ﬁnancial instruments, and bank overdrafts Balance at January 1, 2021 Net cash flows Acquisitions/ Divestments Unwinding of discount Foreign exchange differences Other non-cash movements Balance at December 31, 2021 Bonds 2,126 500 – 1 – (2) 2,625 Private placements 157 – – 0 (4) – 153 Other gross debt 109 (100) 2 – 1 – 12 Total 2,392 400 2 1 (3) (2) 2,790 Balance at January 1, 2020 Net cash flows Acquisitions/ Divestments Unwinding of discount Foreign exchange differences Other non-cash movements Balance at December 31, 2020 Bonds 1,629 496 – 2 – (1) 2,126 Private placements 413 (250) – 0 (6) – 157 Other gross debt 238 (121) 0 – (4) (4) 109 Total 2,280 125 0 2 (10) (5) 2,392 Lease liabilities current and non current 2021 2020 Position at January 1 348 368 Additions from new leases 24 71 Additions from sale and leaseback – 6 Acquired through business combinations Note 8 2 4 Transfer to liabilities classified as held for sale (11) – Contract modifications and reassessments of options 19 (4) Repayment of lease liabilities (interest and principal portion) (77) (85) Unwinding of discount of lease liabilities Note 15 9 11 Foreign exchange differences 17 (23) Position at December 31 331 348 For accounting policies, estimates, and judgments on lease liabilities, refer to Note 20 – Leasing. 162 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 29 – Long-term Debt continued LOAN MATURITY The following amounts of gross debt (excluding lease liabilities) at December 31, 2021, are due within and after ﬁve years: 2021 2023 704 2024 405 2025 0 2026 0 Due after 2026 1,682 Long-term debt 2,791 Short-term debt (2022) 10 Total (excluding lease liabilities) 2,801 FINANCIAL LIABILITIES MEASURED AT AMORTIZED COST Bonds The group has senior bonds outstanding for an amount of €2,625 million at December 31, 2021 (2020: €2,126 million). The nominal interest rates on the bonds are ﬁxed until redemption. On March 30, 2021, the group issued a €500 million seven-year senior unsecured Eurobond. The bonds were sold at an issue price of 99.958 percent and carry an annual coupon of 0.250 percent. The senior unsecured bonds will mature on March 30, 2028. The net proceeds of the offering will be used for general corporate purposes. Private placements The group holds private placements in Japanese yen. These private placements (¥20,000 million) are converted to and hedged against euro via cross-currency interest rate swaps. These swaps have been collateralized for credit risk in line with the treasury risk management policies. There is no collateral outstanding at December 31, 2021 (2020: no collateral outstanding). Multi-currency revolving credit facility Effective July 2021, the group concluded a one-year extension to its €600 million multi-currency revolving credit facility from July 2023 to July 2024, retaining an option to extend by another year. Furthermore, in July 2021, multi-year sustainability or Environmental, Social, and Governance (ESG) targets are introduced in our credit facility, which links these targets to the interest rates in the credit facility. The interest rates on the multi-currency revolving credit facility are variable. The credit facility is for general corporate purposes. At December 31, 2021, no amounts were drawn under the facility (December 31, 2020: no amounts drawn). The multi-currency revolving facility is subject to customary conditions, including a ﬁnancial credit covenant. The credit facility covenant requires that the consolidated net senior borrowings (excluding fully subordinated debt) to adjusted EBITDA shall not exceed 3.5. In 2021 and 2020, the group was comfortably within the thresholds stipulated in the ﬁnancial covenant of the credit facility. Euro Commercial Paper program The group has a Euro Commercial Paper (ECP) program in place, under which it may issue unsecured, short-term debt (ECP notes) for a maximum of €1.0 billion. The program provides ﬂexible funding for short-term cash needs at attractive rates. At December 31, 2021, no ECP notes were outstanding (2020: €100 million outstanding, included in borrowings and bank overdrafts). DEFAULTS AND/OR BREACHES There were no defaults or breaches on the loans and borrowings during 2021 and 2020. ← → Wolters Kluwer 2021 Annual Report 163 Note 30 – Financial Risk Management RISK MANAGEMENT FRAMEWORK The group’s activities are exposed to a variety of ﬁnancial risks, including market, liquidity, and credit risk. Identiﬁcation and management of ﬁnancial risks are carried out by the central treasury department (Corporate Treasury), whereby the treasury operations are conducted within a framework of policies and guidelines (Treasury Policy), which have been approved by the Executive Board and the Supervisory Board. The Treasury Policy is reviewed at least annually, considering market circumstances and market volatility, and is based on assumptions concerning future events, subject to uncertainties and risks that are outside of the group’s control. The Treasury Committee, comprising the Vice President Group Accounting & Reporting, Controller Corporate Ofﬁce, Executive Vice President Treasury & Risk, and representatives of the Corporate Treasury and Treasury Back-Ofﬁce, meets quarterly to review treasury activities and compliance with the Treasury Policy, and reports directly to the Executive Board and the Audit Committee. The Treasury Back-Ofﬁce reports deviations directly to the CFO and the Executive Vice President Treasury & Risk. Under the Internal Control Framework, the ﬁnancial reporting controls, including policy and procedures, of the Corporate Treasury Department are periodically reviewed. Corporate Treasury reports quarterly to the Audit Committee on its compliance with the Treasury Policy. The group’s funding activities are carried out by Corporate Treasury, using long-term capital market instruments and committed credit facilities to ensure optimal ﬁnancial ﬂexibility and capital efﬁciency. The borrowings, together with cash generated from operations, are lent or contributed as equity to the operating companies. The group targets a net-debt-to-EBITDA ratio of approximately 2.5. However, the group could temporarily deviate from this relative indebtedness ratio. At December 31, 2021, the net-debt-to-EBITDA ratio was 1.4 (2020: 1.7). All treasury activities – in particular, the use of derivative ﬁnancial instruments – are subject to the principle of risk minimization and are executed by specialist treasury personnel. For this reason, ﬁnancial transactions and risk positions are managed in a central treasury management and payment system. It is the group’s policy that material currency translation and variable interest exposures are partially hedged by Corporate Treasury, in accordance with the annual treasury plan approved by the Audit Committee. The group does not purchase or hold derivative ﬁnancial instruments for speculative purposes. The group’s risk proﬁle is deﬁned and reviewed regularly. Although the economic environment has become more challenging because of the volatility in ﬁnancial markets, the exposure to ﬁnancial risks for the group has not signiﬁcantly changed, nor the approach to these risks. MARKET RISK Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the group’s proﬁt or loss or the value of its holdings of ﬁnancial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. CURRENCY RISK The group has identiﬁed transaction and translation risks as the main currency risks. The transaction risk exposure within individual group entities is relatively immaterial. The transaction prices invoiced to customers for goods and/or services are mainly denominated in the customers’ local currencies. Given the nature of the business, almost all related costs are also incurred in those local currencies. Derivative ﬁnancial instruments to hedge transaction risks are therefore not frequently used. HEDGE ACCOUNTING Translation risk is the risk that exchange rate gains or losses arise from translating the statement of proﬁt or loss, statement of ﬁnancial position, and statement of cash ﬂows of foreign subsidiaries to the group’s presentation currency (euro) for consolidation purposes. The group’s risk management strategy practice is that material currency translation exposures (including U.S. dollar net investments) are partially hedged by Corporate Treasury. Currency exposures, which impact the statements of ﬁnancial position and/or proﬁt or loss by 10% or more, are considered material. The translation exposure on the statement of cash ﬂows is partly mitigated by matching cash inﬂows and outﬂows in the same currency. The group’s main translation risk is its exposure to the U.S. dollar. 164 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 30 – Financial Risk Management continued In line with its risk management strategy, the group manages the translation risk using three types of risk mitigating actions, of which two types of transactions are designated as a hedge and for which the group applies hedge accounting. Net investment hedge The group partially protects total equity for foreign exchange differences using U.S. dollar currency forward contracts qualifying as net investment hedges, which partially offset the translation risk on U.S. dollar-denominated subsidiaries and long-term receivables of the U.S. operations, being the hedged item. The fair value changes of the net investment hedge partially offset the currency differences on translation of U.S. dollar-denominated subsidiaries and long-term receivables from U.S. operations, both being recognized in other comprehensive income. The group had U.S. dollar forward contracts outstanding for a total notional amount of €177 million ($200 million) at December 31, 2021 (2020: €163 million or $200 million). These hedges create a U.S. dollar balance sheet cover with a future settlement date and had a carrying value of €0 million at December 31, 2021. The group had U.S. dollar liabilities outstanding for a total notional amount of €406 million ($460 million) at December 31, 2021 (2020: €385 million or $472 million). The U.S. dollar liabilities include net investment hedges and other U.S. dollar-denominated liabilities. The U.S. dollar balance sheet cover of 10% (2020: 11%) is deﬁned as the sum of U.S. dollar net investment hedges and other U.S. dollar liabilities outstanding, divided by the group’s net investment in U.S. dollar-denominated assets. Cash ﬂow hedge The group protects against the translation differences on the Japanese yen private placement (2021 and 2020: ¥20,000 million) and the related interest payments, using cash ﬂow hedges by means of four cross-currency interest rate swaps. The fair value changes of the cash ﬂow hedges are recognized in equity until the hedging relationship with the corresponding hedged instrument is terminated. At that moment the translation differences are reclassiﬁed to proﬁt or loss. Currency forwards The group partially protects net proﬁt for foreign exchange differences using U.S. dollar and other currency forwards not qualifying for hedge accounting. The fair value changes of these currency forwards are recognized in ﬁnancing results and partially offset any translation risk on proﬁt or loss elements. In 2021, the group swapped 50% (2020: 95%) of the net ﬁnancing results of €78 million (2020: €46 million) into U.S. dollars, using foreign exchange derivatives of $40 million (2020: $40 million). Sensitivity Based on the percentage of 50% for net ﬁnancing results payable in U.S. dollars, an instantaneous 1% decline of the U.S. dollar against the euro at December 31, 2021, with all other variables held constant, would result in a decrease of approximately €0.4 million in net ﬁnancing results (2020: €0.3 million). Hedge effectiveness Before applying hedge accounting, the group assesses, in accordance with the group’s risk management policies and the parameters of the hedge, whether the designated hedge is highly effective. In 2021, the group did not record ineffectiveness because of hedging activities (2020: no ineffectiveness). The group measures hedge effectiveness on a forward-looking basis at the inception of the hedging relationship, and on an ongoing basis at reporting dates through a qualitative assessment of the critical terms of the hedging instrument and the hedged item. The hedge values will generally move in the opposite direction because of the same risk and hence an economic relationship exists. The results of these effectiveness tests all satisﬁed the effectiveness criterion during the year. ← → Wolters Kluwer 2021 Annual Report 165 Note 30 – Financial Risk Management continued INTEREST RATE BENCHMARK REFORM  PHASE 2 The ﬁxed interest payments on the Japanese Yen private placements are converted to and hedged against euro via cross-currency interest rate swaps. The Interest Rate Benchmark Reform did not impact these ﬁxed interest payments. However, both the Japanese Libor and Euribor were inputs in the fair value determination. Therefore, the group had some exposure to the Japanese yen Libor and Euribor. As from 2022, the Japanese yen Libor will be replaced by the Tokia Overnight Rate (TONA) in the fair value determination. The Euribor reference will only be replaced once this rate is discontinued. In addition, the Euro Overnight Index Average (EONIA) reference in the Credit Support Annex will be amended to the Euro Short-Term Rate (€STR) in the ﬁrst quarter of 2022. In 2020, a corporate IBOR-reform work group was set up in response to the announcements regarding the required transition to alternative benchmark rates. This work group assessed which contracts had a reference to an IBOR, both for third-party contracts and internal contracts. IBOR references were primarily used in internal ﬁnancing-related contracts. At December 31, 2021, all U.K., Swiss and Japanese IBOR references in these internal contracts were replaced by alternative benchmark rates. Other IBOR references will only be replaced once such IBORs are discontinued. The IBOR-reform did not result in changes to the group’s risk management strategy. CURRENCY RISK SENSITIVITY The following table details the group’s sensitivity to a 1% weakening of the U.S. dollar against the euro: 2021 2020 Revenues (31) (30) Adjusted operating proﬁt (10) (9) Operating proﬁt (10) (8) Adjusted net proﬁt (6) (5) Proﬁt for the year (6) (4) Shareholders’ equity at December 31 (35) (32) Adjusted free cash ﬂow (9) (8) SENSITIVITY ANALYSIS A sensitivity analysis on the derivative ﬁnancial instruments portfolio yields the following results, assuming an instantaneous 1% decrease of the U.S. dollar and Japanese yen against the euro from their levels at December 31, 2021, and an instantaneous 1% increase of the U.S. dollar, Japanese yen, and euro interest rates respectively: in millions Hedged risk Amount Type of instrument Exchange rate movement € Interest rate movement € Cash ﬂow hedge Changes in ¥ ﬂoating interest payments and ¥ exchange rates ¥20,000 Cross-currency interest rate swaps (2) (1) Net investment hedge Changes of the U.S. dollar net investments due to ﬂuctuations of U.S. dollar exchange rates $200 Forward contracts 2 0 166 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 30 – Financial Risk Management continued INTEREST RATE RISK The group is exposed to interest rate risk. The group aims to mitigate the impact on its results and cash ﬂows of interest rate movements, both by arranging ﬁxed or variable rate funding and by use of derivative ﬁnancial instruments. At December 31, 2021, the group’s interest rate position (excluding cash and cash equivalents and lease liabilities) was 100% (2020: 97%) carried at a ﬁxed rate. The credit facility and the Euro Commercial Paper program have a variable interest rate. Assuming the same mix of variable and ﬁxed interest rate instruments, an instantaneous increase of interest rates of 1% compared to the rates on December 31, 2021, with all other variables held constant, would hardly result, on an annual basis, in an increase of net ﬁnancing results (2020: €1 million). LIQUIDITY RISK Liquidity risk is the risk that the group will encounter difﬁculty in meeting the obligations associated with its ﬁnancial liabilities that are settled by delivering cash or another ﬁnancial asset. The group’s approach to manage liquidity is to ensure, as far as possible, that it will have enough liquidity to meet its liabilities when they are due. The group actively manages liquidity risk by maintaining enough cash and cash equivalents, and by the availability of committed borrowing capacity. To reduce liquidity risk, the group has established the following minimum requirements: • No more than 25% of outstanding gross debt minus available cash should be repayable within a 12-month period; • Acquiring of funding to start at least one year in advance of all maturing debt or alternative committed funding should be in place; and • Minimum headroom of €500 million (sum of unused committed credit facilities, cash and cash equivalents, and receivable derivative ﬁnancial instruments, minus other short-term debt, current deferred acquisition payables, current payable derivative ﬁnancial instruments, and bank overdrafts). Per December 31, 2021, the group has access to the unused part of the committed credit facilities of €600 million in total (2020: €600 million) and has cash and cash equivalents of €1,001 million (2020: €723 million), minus other short-term debt, current deferred acquisition payables, bank overdrafts, Euro Commercial Paper, and current payable derivative ﬁnancial instruments totaling €10 million (2020: €459 million). The headroom was €1,591 million at year-end 2021 (2020: €864 million). No assets have been collateralized or in any other way secured under debt contracts. Exposure to liquidity risk The following tables relate to the remaining contractual cash ﬂows of ﬁnancial liabilities at the reporting date. These tables show net cash ﬂow amounts for derivative ﬁnancial instruments that have simultaneous cash settlements. The amounts for the non-derivative ﬁnancial instruments are gross and undiscounted and include estimated interest payments and exclude the impact of netting agreements. For the remaining contractual cash ﬂows of lease liabilities, refer to Note 20 – Leasing. ← → Wolters Kluwer 2021 Annual Report 167 Note 30 – Financial Risk Management continued CONTRACTUAL CASH FLOWS 2021 Carrying amount Contractual undiscounted cash flows Less than 1 year 1-2 years 2-5 years More than 5 years Non-derivative financial liabilities (excl. lease liabilities) Bonds: Bonds 2008-2028 36 52 2 2 7 41 Bonds 2013-2023 699 740 20 720 – – Bonds 2014-2024 399 430 10 10 410 – Bonds 2017-2027 498 547 8 8 23 508 Bonds 2020-2030 495 534 4 4 11 515 Bonds 2021-2028 498 509 1 1 4 503 Private placements: Private placement 2008-2038 153 237 5 5 15 212 Long- and short-term deferred and contingent acquisition payables 2 2 1 1 – – Other debt 10 10 – 5 5 – Borrowings and bank overdrafts 9 9 9 – – – Trade payables 123 123 123 – – – Total 2,922 3,193 183 756 475 1,779 Derivative financial instruments (Receipts) (175) (175) – – – Payments 177 177 – – – Foreign exchange derivatives 0 2 2 0 0 0 (Receipts) (237) (5) (5) (15) (212) Payments 253 8 8 23 214 Cross-currency interest rate swaps 2 16 3 3 8 2 Total 2 18 5 3 8 2 168 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 30 – Financial Risk Management continued CONTRACTUAL CASH FLOWS 2020 Carrying amount Contractual undiscounted cash flows Less than 1 year 1-2 years 2-5 years More than 5 years Non-derivative financial liabilities (excl. lease liabilities) Bonds: Bonds 2008-2028 36 54 2 2 7 43 Bonds 2013-2023 699 760 20 20 720 – Bonds 2014-2024 398 440 10 10 420 – Bonds 2017-2027 498 554 8 8 23 515 Bonds 2020-2030 495 538 4 4 11 519 Private placements: Private placement 2008-2038 157 250 5 5 16 224 Long- and short-term deferred and contingent acquisition payables 0 0 0 0 – – Other debt 9 9 – 5 4 – Borrowings and bank overdrafts 459 459 459 – – – Trade payables 133 133 133 – – – Total 2,884 3,197 641 54 1,201 1,301 Derivative financial instruments (Receipts) (164) (164) – – – Payments 163 163 – – – Foreign exchange derivatives 0 (1) (1) 0 0 0 (Receipts) (250) (5) (5) (16) (224) Payments 260 8 8 23 221 Cross-currency interest rate swaps 8 10 3 3 7 (3) Total 8 9 2 3 7 (3) ← → Wolters Kluwer 2021 Annual Report 169 Note 30 – Financial Risk Management continued CREDIT RISK Credit risk represents the loss that would be recognized if a customer or counterparty to a ﬁnancial instrument fails to meet its contractual obligations, and arises principally from the group’s receivables from customers and investments in debt securities. The carrying amount of non-derivative ﬁnancial assets represents the maximum credit exposure and amounted to €2,138 million at December 31, 2021 (2020: €1,822 million). Financial instruments and excess cash at ﬁnancial institutions The group is exposed to credit risks due to its use of derivatives and because of excess cash deposited at banks. It is the group’s policy to conclude ﬁnancial transactions under ISDA (International Swap Dealers Association) master agreements. Cash invested and ﬁnancial transactions are only concluded with ﬁnancial institutions with strong credit ratings (at least a credit rating of A-/A3). Furthermore, credit limits per counterparty are in place and are monitored periodically. At December 31, 2021, there were no material credit risk concentrations outstanding while the average weighted credit rating of counterparties was A (2020: A+). The aim is to spread transactions among counterparties. No credit limits were materially exceeded during the reporting period and management does not expect any losses from non-performance by these counterparties on current outstanding contracts. Trade receivables The group has a natural exposure to credit risk in its operational business. This exposure of the group’s operating companies to credit risk is inherently limited, considering the diversiﬁed customer portfolio of the group, and since a substantial part of the transactions is prepaid by customers. The group’s operating companies actively monitor the solvency of their key accounts and assess creditworthiness of customers before concluding a contract. The group determines the impairment on trade receivables and unbilled revenues using the lifetime expected credit loss model, whereby the historical credit losses on trade receivables (a credit event) are used as a base for the future expected credit losses. The accounting policy and the assumptions are periodically evaluated by the group using macroeconomic data and historical back- testing of the assumptions. The trade receivables that are neither past due nor impaired have sound creditworthiness and meet the credit rating grades as deﬁned in the internal policy for assessing the impairment of ﬁnancial assets. For estimates and judgments applied in determining the loss allowance on trade receivables, refer to Note 10 – Sales Costs. 170 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 30 – Financial Risk Management continued FAIR VALUE OF FINANCIAL INSTRUMENTS The following table shows the carrying amounts and fair values of ﬁnancial assets and liabilities (excluding lease liabilities), including their levels in the fair value hierarchy. 2021 2020 Carrying value Fair value Level 1 Level 2 Level 3 Carrying value Fair value Non-derivative financial instruments: Financial assets at fair value through profit or loss 0 0 0 0 0 Unbilled revenues * 95 95 75 75 Trade receivables * 1,008 1,008 986 986 Miscellaneous receivables * 34 34 35 35 Interest receivable * 0 0 2 2 Deferred divestment consideration receivable * – – 1 1 Cash and cash equivalents * 1,001 1,001 723 723 Total non-derivative ﬁnancial assets 2,138 2,138 1,822 1,822 Bonds 2008-2028 36 50 50 36 54 Bonds 2013-2023 699 727 727 699 748 Bonds 2014-2024 399 422 422 398 434 Bonds 2017-2027 498 529 529 498 547 Bonds 2020-2030 495 503 503 495 523 Bonds 2021-2028 498 493 493 – – Private placement 2008-2038 153 206 206 157 218 Long and short-term deferred and contingent acquisition payables 2 2 2 0 0 Other debt * 10 10 9 9 Borrowings and bank overdrafts * 9 9 459 459 Trade payables * 123 123 133 133 Interest payable * 34 34 35 35 Total non-derivative ﬁnancial liabilities 2,956 3,108 2,724 206 2 2,919 3,160 Derivative financial instruments: Non-current payable 2 2 2 8 8 Total derivative ﬁnancial instruments 2 2 2 8 8 * Fair value approximates the carrying amount. ← → Wolters Kluwer 2021 Annual Report 171 FAIR VALUE HIERARCHY The fair value has been determined by the group based on market data and appropriate valuation methods/quotes. Valuation methods include: • Level 1: reference to quoted prices (unadjusted) in active markets for similar assets and liabilities; • Level 2: inputs other than quoted prices that are observable for the asset or liability and that may have a signiﬁcant impact on the fair value, either directly (i.e., as prices) or indirectly (i.e., derived from prices) based on discounted cash ﬂow analysis, using data input of observable ﬁnancial markets and ﬁnancial institutions; and • Level 3: inputs for the asset or liability that are not based on observable market data. The valuation method can be based on discounted cash ﬂow analysis, or other models that are substantially identical. There has been no change in the fair value hierarchy compared to 2020. The Level 3 fair value movements in non-derivative ﬁnancial liabilities are as follows: 2021 2020 Balance at January 1 0 11 Acquired through business combinations Note 8 2 0 Settlements Note 8 0 (6) Fair value changes of contingent considerations Note 12 0 (4) Foreign exchange differences 0 (1) Balance at December 31 2 0 DEFERRED AND CONTINGENT ACQUISITION PAYABLES ACCOUNTING POLICIES The contingent considerations are based on a discounted cash ﬂow model, which considers the present value of expected payments, using a risk-adjusted discount rate. The expected payment is determined by considering possible scenarios, the amount to be paid under each scenario, and the probability of each scenario. The estimated fair value could potentially increase (or decrease) if assumptions change. The fair value of the deferred and contingent acquisition payables balance amounted to €2 million (2020: €0 million) and can be presented as follows: Fair value December 31, 2021 Of which: short term Of which: long term Maximum exposure (undiscounted) Fair value December 31, 2020 Total 2 1 1 2 0 Note 30 – Financial Risk Management continued 172 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 31 – Employee Beneﬁts 2021 2020 Retirement plans 28 45 Other post-employment beneﬁt plans 52 58 Other long-term employment beneﬁts 10 12 Total 90 115 ACCOUNTING POLICIES Deﬁned contribution plans Obligations for contributions to deﬁned contribution plans are recognized as personnel expenses in proﬁt or loss in the period during which services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or reduction in future payments is available. Deﬁned beneﬁt plans The group’s net obligation in respect of deﬁned employee beneﬁt plans is calculated separately for each plan by estimating the amount of future beneﬁts that employees have earned in the current and prior periods, discounting that amount, and deducting the fair value of any plan assets. The calculation of deﬁned beneﬁt obligations is performed annually by a qualiﬁed actuary using the projected unit credit method. When the calculation results in a potential asset for the group, the recognized asset is limited to the present value of economic beneﬁts available in the form of any future refunds from the plan, or reductions in future contributions to the plan. To calculate the present value of economic beneﬁts, consideration is given to any applicable minimum funding requirements. All remeasurement gains and losses of the net deﬁned beneﬁt liabilities or assets, which consist of actuarial gains and losses, return on plan assets (excluding interest), and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, in the period in which they occur. The group determines the net interest expense or income on the net deﬁned beneﬁt liability or asset for the period by applying the discount rate used to measure the deﬁned beneﬁt obligation at the beginning of the annual period to the net deﬁned beneﬁt liability or asset, considering any changes in the net deﬁned beneﬁt liability or asset during the period resulting from contributions and beneﬁt payments. Net interest expense and other expenses related to deﬁned beneﬁt plans, such as fund administration costs, are recognized in proﬁt or loss, when incurred. When the beneﬁts of a plan are changed or when a plan is curtailed, the resulting change in the deﬁned beneﬁts that relates to past service or the gain or loss on curtailment is recognized directly in proﬁt or loss. The group recognizes gains and losses on the settlement of a deﬁned beneﬁt plan when the settlement occurs. A curtailment occurs when an entity signiﬁcantly reduces the number of employees covered by a plan. Amendments to the terms of a deﬁned beneﬁt plan will be considered plan amendments and will be fully accounted for as past service costs. If a plan amendment, curtailment, or settlement occurs, the current service cost and the net interest for the period after the remeasurement are determined using the assumptions applied for the remeasurement. Long-term service beneﬁts The group’s net obligation in respect of long-term service beneﬁts, such as jubilee beneﬁts, is the amount of future beneﬁts that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to its present value, with the fair value of any related assets deducted. ← → Wolters Kluwer 2021 Annual Report 173 Note 31 – Employee Beneﬁts continued CRITICAL ESTIMATES AND JUDGMENTS The net plan assets or liabilities of the deﬁned employee beneﬁt plans and the costs related to the pension and post-retirement medical plans are based on actuarial and economic assumptions. The main economic assumptions are: • Discount rate; • Rate of pension increase; • Inﬂation; and • Medical trend rate. For actuarial assumptions, the group uses generally accepted mortality rates (longevity risk). The withdrawal rates and retirement rates are based on statistics provided by the relevant entities based on past experiences. RETIREMENT PLANS AND OTHER POSTEMPLOYMENT BENEFIT PLANS The provisions for retirement and other post-employment plans relate to deﬁned employee beneﬁt plans. The group has arranged pension schemes in various countries for most of its employees in accordance with the legal requirements, customs, and local situation of the countries involved. These retirement schemes are partly managed by the group itself and partly entrusted to external entities, such as company pension funds and insurance companies. In addition, the group provides certain employees with other beneﬁts upon retirement. These beneﬁts include contributions towards medical health plans in the United States, where the employer refunds part of the insurance premiums for retirees, or, in the case of uninsured schemes, bears the medical expenses while deducting the participants’ contributions. CHARACTERISTICS OF MATERIAL PLANS The Netherlands United States United Kingdom Retirement plans Type of benefits Pensions Pensions Pensions Type of plan Career average Final salary Final salary Status of plan Open Frozen Frozen Service costs Yes No No Status of plan funding Funded Funded Funded Other post-employment plans Type of benefits Post-retirement medical plan Type of plan Annual insurance premium coverage Status of plan Closed Service costs Yes Status of plan funding Unfunded There are open retirement plans for new entrants in the Netherlands and Belgium. The group has closed plans in Belgium, Canada, and Australia. A closed plan means that no new members can join the pension plans. However, current participants in the plan can still accrue for future service beneﬁts, and therefore the plan incurs service costs for the active participants. If a plan is frozen, the plan is closed to new entrants and existing participants do not build up future service beneﬁt accruals. The group has frozen plans in the U.S., the U.K., and Canada. These plans will have an annual service cost of zero. 174 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 31 – Employee Beneﬁts continued In addition to the retirement plans and other post-employment plans, the group has other long-term employment beneﬁt plans in the Netherlands, the U.S., Belgium, Germany, France, India, Poland, Japan, Mexico, Australia, and New Zealand. RETIREMENT PLANS The group has its largest deﬁned beneﬁt retirement plan in the Netherlands with deﬁned beneﬁt obligations of €1.3 billion as of December 31, 2021, followed by the United Kingdom and the United States with deﬁned beneﬁt obligations of €129 million and €92 million respectively. There are also retirement plans in Belgium, Canada, and Australia. All plans are funded schemes. The deﬁned beneﬁt plans in the Netherlands, the U.S., and the U.K. are insured with the company’s self-administrated pension funds, which are separate legal entities with plan assets being held independently of the group. The Netherlands In the Netherlands, the scheme is a career average salary scheme. Members accrue a portion of their current salary at a rate calculated to enable them to reach a pension level based on their average salary. The Dutch pension plan is subject to the supervision of the Dutch Central Bank (DNB). The scheme funding level is determined by the new Financial Assessment Framework (nFTK), whereby funding liabilities are determined based on a 120-month moving average of the 20-year forward rate. Beneﬁt reductions, if necessary, will be smoothed over time when recovery to full funding within eight years is not expected. Reductions will amount to one-eighth of the deﬁcit at the measurement date. Indexation of pension entitlements will not be allowed at funding ratios below 110%, while full indexation will be allowed only at funding ratios higher than approximately 125% (these are year- and plan-speciﬁc). The Dutch pension scheme has an unaudited 12-month rolling average coverage ratio of 120.2% at December 31, 2021 (2020: 106.0%). If this ratio is below 104%, a rolling eight-year recovery plan should be submitted to the DNB, on an annual basis. The pension premiums are in general based on contributions by the employer (two-thirds) and employees (one-third). The total annual pension contribution has been determined at 31.7% of base salary for 2021, of which the employer contributed the excess above the 24.0% basic premium. The pension base is capped but will be corrected for inﬂation annually. United States The U.S. retirement scheme has an annual statutory valuation which forms the basis for establishing the employer contribution each year (subject to ERISA and IRS minimums). The U.S. scheme was a ﬁnal salary-based scheme, based on years of credited service, but is now a frozen plan. The pay and beneﬁt accruals are frozen. The plan ﬁduciaries of the U.S. scheme are required by law to act in the interest of the fund’s beneﬁciaries. The ﬁduciary duties for the scheme are allocated between committees which are staffed by senior employees of the group. The investment committee has the primary responsibility for the investment and management of plan assets. United Kingdom The U.K. retirement scheme is a ﬁnal salary-based scheme, but it is a frozen plan. The trustees of the pension fund are required by law to act in the interest of the fund’s beneﬁciaries and are responsible for the investment policy regarding the assets of the fund. The board of trustees consists of an equal number of company-appointed and member-nominated directors. The level of funding is determined by statutory triennial actuarial valuations in accordance with pension legislation. Where the scheme falls below 100% funded status, the group and the scheme trustees must agree on how the deﬁcit is to be remedied. Pension rate increase is usually a ﬁxed promise and is built into the funding requirement. The U.K. Pensions Regulator has signiﬁcant powers and sets out in codes and guidance the parameters for scheme funding. At December 31, 2021, the future deﬁcit contribution commitments were no longer larger than the surplus in the U.K. plan and therefore there was no additional balance sheet liability (2020: €2 million) recognized in respect of these contributions. ← → Wolters Kluwer 2021 Annual Report 175 Note 31 – Employee Beneﬁts continued OTHER POSTEMPLOYMENT PLANS Other post-employment plans exist in the United States, Canada, and Italy. These plans have no plan assets and are unfunded. The main plan is the post-employment medical plan in the U.S., which has been closed to new entrants in 2021. The group funds the U.S. post-employment medical plan obligations on a pay-as-you-go basis. If healthcare costs in the future increase more than anticipated, the actuarially determined liability – and as a result the related other post-employment beneﬁt plan expense – could increase along with future cash outﬂows. FUNDING REQUIREMENTS Funding requirements of the plans are based on local legislation and separate actuarial valuations for which the assumptions differ from the assumptions used under IAS 19. The funding requirements are based on each pension fund’s actuarial measurement framework set out in the funding policies of the individual plans. In the Netherlands, there is no formal requirement to fund deﬁcits of the plan by the employer. In the United States, there are minimum contribution requirements. In case the statutory funded status falls below certain thresholds, the U.S. Pension Protection Act requires the deﬁcit to be rectiﬁed with additional minimum employer contributions, spread over a seven-year period, to avoid restrictions on the ability to pay some accelerated beneﬁt forms, such as lump sums. These funding levels are reassessed annually. The trustees of the U.K. plan and the group ﬁnalized the latest triennial valuation in 2020 for funding purposes in 2021. The U.K. Pensions Regulator has the power to demand more funding and support where a pension scheme has been exposed to an unacceptable level of risk. As part of the 2017 actuarial funding valuation, the parent company issued a guarantee of £18 million, with a negative pledge issued by a Wolters Kluwer U.K. group company. Both guarantees remain effective under the new valuation. In addition, it has been agreed that there will be no planned deﬁcit contribution until 2024, unless the coverage ratio will fall under 97%. The funding will be reassessed based on a new triennial valuation to be ﬁnalized in 2024. RISK MANAGEMENT OF MAIN PLANS IN THE GROUP The retirement and other post-employment plans expose the group to actuarial risks, such as longevity risks, interest rate risks, investment and market risks, and currency risks. The group has restructured employee beneﬁt plans in the past by moving existing and newly hired employees to deﬁned contribution plans or by freezing the plans (either with no future service beneﬁt accruals and/or no new participants entering the plan). These redesigns reduce or cancel future beneﬁt accruals in the plans and consequently reduce the pace of liability growth. The group also reviews periodically its ﬁnancing and investment policies (liability-driven investments) and its liability management (lump-sum offerings). The various plans manage their balance sheet to meet their pension promise. By using asset liability management (ALM) studies, major risk sources are identiﬁed, and the impact of decisions is assessed by quantifying the potential impact on elements like future pensions, contributions, and funded ratio. These ALM studies also determine risk and return measures that consider the interests of all stakeholders. The outcome of these studies results in a risk-return trade-off, taking the duration of pension liabilities into account, which will be an integral part of the investment strategy. The investment strategy covers the allocation of asset classes and hedging strategies, and also decisions on new and alternative asset classes, passive versus active investments, leverage, and the use of derivatives. ACTUARIAL ASSUMPTIONS FOR RETIREMENT AND OTHER POSTEMPLOYMENT BENEFIT PLANS The discount rate is the yield rate at the end of the reporting period on high-quality corporate bonds that have maturity dates approximating the terms of the group’s obligations and that are denominated in the same currency in which the beneﬁts are expected to be paid. The calculation is performed annually by qualiﬁed actuaries. 176 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 31 – Employee Beneﬁts continued The following weighted average principal actuarial assumptions were used to determine the pension expense and other post- employment plans’ expense for the year under review, and deﬁned beneﬁt obligations at the end of the reporting period: in % 2021 2020 Retirement plans Discount rate to discount the obligations at year end 1.3 0.8 Discount rate for pension expense 0.8 1.3 Expected rate of pension increases (in payment) at year end 2.2 1.5 Expected rate of pension increases (in deferral) at year end 2.2 1.4 Expected rate of inflation increase for pension expense 2.2 1.9 Other post-employment benefit plans Discount rate to discount the obligations at year end 2.1 1.6 Discount rate for pension expense 1.6 2.4 Medical cost trend rate 3.0 3.0 For most of the retirement and other post-employment schemes, the discount rate is determined or validated using a general accepted methodology in selecting corporate bonds by the group advisory actuary. For the U.S. plans, the discount rate is based on the yield curve/cash ﬂow matching approach which uses spot yields from the standard FTSE and the timing of the cash ﬂows of the plan. Mortality assumptions for the most important plans are based on the following retirement mortality tables: • The Netherlands: AG projection table 2020, including fund speciﬁc 2019 experience loading (2020: AG projection table 2020, including fund-speciﬁc 2019 experience loading); • U.S.: Pri-2012 Mortality Table with MP 2021 projections, being the current standard mortality table (2020: Pri-2012 Mortality Table with MP 2020 projections); and • U.K.: SAPS S3 (Year of Birth) CMI 2019 projections with 1.25% long-term improvement rate (2020: SAPS S3 (Year of Birth) – CMI 2019 projections with 1.25% long-term improvement rate). Assumptions regarding future mortality experience are set based on actuarial advice and best estimate mortality tables in the applicable countries. The current life expectancies underlying the value of the deﬁned beneﬁt retirement obligations at December 31, 2021, are as follows: in years The Netherlands United States United Kingdom Life expectancy at age of 65 now – Male 21.6 20.5 22.2 Life expectancy at age of 65 now – Female 24.0 22.5 23.9 Life expectancy aged 65 in 20 years – Male 23.5 22.7 23.2 Life expectancy aged 65 in 20 years – Female 25.8 25.0 25.2 Given the nature of the deﬁned beneﬁt obligations in Belgium, Italy, and Australia, with lump-sum beneﬁt payments at retirement date instead of annuity payments, the impact of changing life expectancy after the retirement age on the plan liabilities is limited in these countries. ← → Wolters Kluwer 2021 Annual Report 177 Note 31 – Employee Beneﬁts continued SENSITIVITY RETIREMENT PLANS in millions of euros Gross service cost Defined benefit obligations 2021 Baseline 23 1,645 Change compared to baseline Decrease of assumption Increase of assumption Decrease of assumption Increase of assumption Discount rate (change by 1%) 9 (6) 349 (266) Pension increase rate (change by 0.5%) (3) 3 (126) 143 Inflation increase rate (change by 0.5%) (3) 4 (132) 150 Mortality table (change by one year) – 1 – 74 Gross service cost represents the annual accrual of liability due to another year of service, excluding any interest or offsetting employee contributions, and therefore differs from the current service cost included in the calculation of the pension expense. SENSITIVITY OF THE DEFINED BENEFIT OBLIGATIONS DBO OF RETIREMENT PLANS IN THE CONSOLIDATED STATEMENT OF FINANCIALPOSITION AND THE DEFINED BENEFIT EXPENSE OF THE RETIREMENT PLANS IN THE CONSOLIDATED STATEMENT OF PROFIT ORLOSS P&L The Netherlands United States United Kingdom DBO P&L DBO P&L DBO P&L Discount rate sensitivity – – Pension increase sensitivity – – – Inﬂation rate sensitivity – – – Mortality sensitivity – – Pension rate increases are only applicable for the plans in the Netherlands and the United Kingdom. Pension increases in the Netherlands are related to price inﬂation. However, these increases are conditional and depend on the funding position of the Dutch pension fund. Pension increases are therefore capped. The pension increase assumption is based on the liability ceiling approach and determined as the rate of increase such that the present value of vested beneﬁts, including the assumed rate of pension increases, is not greater than the fair value of plan assets. For 2021, this resulted in a Dutch pension increase assumption of 2.11% compared to 1.36% at year-end 2020. Since the retirement plans in the United States and the United Kingdom are frozen, the service cost is zero and not sensitive for changes in discount rate, pension increases, inﬂation, or longevity. SENSITIVITY OF OTHER POSTEMPLOYMENT PLANS in millions of euros Gross service costs Defined benefit obligations 2021 Baseline 1 52 Change compared to baseline Discount rate (by -1%) 0 6 Discount rate (by +1%) 0 (5) The actual medical cost trend rate in the United States exceeds the applied medical cost trend rate for its main medical plan, which is capped at 3% (2020: 3%) according to the plan rules. The main U.S. medical plan is therefore hardly sensitive to medical cost increases. 178 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 31 – Employee Beneﬁts continued PLAN LIABILITIES AND PLAN ASSETS Defined benefit retirement plans Other post- employment plans 2021 2020 2021 2020 Plan liabilities Fair value at January 1 1,652 1,565 58 61 Settlements (23) – (4) – Employer service cost 19 16 1 1 Interest expense on deﬁned beneﬁt obligations 14 20 1 1 Administration costs and taxes 2 2 – – Beneﬁts paid by fund (52) (52) – – Benefits paid by employer – – (3) (3) Remeasurement (gains)/losses 24 122 (4) 1 Divestments of operations – (5) – – Contributions by plan participants 3 3 – – Plan amendments and curtailments (11) (2) 0 0 Foreign exchange differences 17 (17) 3 (3) Fair value at December 31 1,645 1,652 52 58 Plan assets Fair value at January 1 1,621 1,533 0 0 Settlements (23) – (4) – Interest income on plan assets 14 19 – – Return on plan assets greater than discount rate 45 122 – – Beneﬁts paid by fund (52) (52) (3) (3) Contributions by employer 14 18 7 3 Contributions by plan participants 3 3 – – Divestments of operations – (4) – – Foreign exchange differences 19 (18) – – Fair value at December 31 1,641 1,621 0 0 Funded status Deﬁcit/(surplus) at December 31 4 31 52 58 Irrecoverable surplus 24 14 – – Net liability at December 31 28 45 52 58 ← → Wolters Kluwer 2021 Annual Report 179 Note 31 – Employee Beneﬁts continued Defined benefit retirement plans Other post- employment plans 2021 2020 2021 2020 Pension expenses Employer service cost 19 16 1 1 Settlement gain 0 – 0 – Past service costs – plan amendment (11) 0 0 0 Past service costs – curtailment 0 (2) – – Interest expense on irrecoverable surplus 0 0 – – Interest expense on deﬁned beneﬁt obligations 14 20 1 1 Interest income on plan assets (14) (19) – – Administration costs and taxes 2 2 – – Total pension expense 10 17 2 2 Of which is included in: Personnel expenses Note 13 10 16 1 1 Other ﬁnance (income)/costs Note 15 0 1 1 1 In 2021, there was an asset ceiling in the U.K. pension plan of €24 million (2020: €12 million). The surplus is not recognized as a pension asset as there is no unconditional right to a refund of this surplus from the U.K. scheme. The U.K. pension fund has no liability in respect of minimum funding requirements (2020: €2 million). Plan amendments/curtailments/settlements In 2021, there was one plan amendment gain (2020: €2 million curtailment gains). The Dutch pension fund will decrease the accrual rate as of January 1, 2022, from 1.875% to 1.58%. The 2021 decision on the lower accrual rate resulted in a plan amendment gain of € 11 million on the deﬁned beneﬁt obligations. In May 2021, there was a retiree life insurance buyout of the U.S. other post-retirement beneﬁt plan. As a result, the plan has been remeasured which resulted in a small gain following the settlement of the deﬁned beneﬁt obligations and the associated payments of € 4 million each. In October 2021, there was a small plan amendment loss following the extension of the participation in the executive retiree medical plan to Nancy McKinstry upon her retirement. In November 2021, the group announced the annuity buyout of the deﬁned beneﬁt obligations in the Canadian pension fund. The Canadian pension and ﬂex plans will wind up as of April 30, 2022 and a small curtailment gain was realized from the earnings freeze upon wind-up of the plan. The annuity buyout resulted in settlement reductions of the deﬁned beneﬁt obligations and plan assets by €23 million. Employer contributions The group’s employer contributions to be paid to the deﬁned beneﬁt retirement plans in 2022 are estimated at €12 million (2021: actual employer contributions of €14 million). 180 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 31 – Employee Beneﬁts continued REMEASUREMENTS The pre-tax cumulative amount of remeasurement gains/losses recognized in the consolidated statement of comprehensive income is as follows: 2021 2020 Position at January 1 (154) (154) Recognized in other comprehensive income 16 0 Cumulative amount at December 31 (138) (154) REMEASUREMENT GAINS/LOSSES FOR THE YEAR 2021 2020 Remeasurement gains due to experience adjustments 24 12 Remeasurement gains/(losses) due to changes in demographic assumptions (2) 30 Remeasurement losses due to changes in ﬁnancial assumptions (42) (166) Remeasurement losses on deﬁned beneﬁt obligations (20) (124) Return on plan assets greater than discount rate 45 122 Change in irrecoverable surplus, other than interest and foreign exchange differences (9) 2 Recognized remeasurement gains on defined benefit plans in other comprehensive income 16 0 Experience adjustments result from changes, such as changes in plan populations, data corrections, and differences in cash ﬂows. Changes in demographic assumptions relate to differences between the current and previous actuarial assumptions in mortality tables, rate of employee turnover, disability, and early retirement. Changes in ﬁnancial assumptions relate to differences between the current and previous actuarial assumptions, such as discount rate, pension rate increase, price increases, and future salary and beneﬁt levels. In 2021, the overall remeasurement losses were mainly due to the increase in the pension increase assumption in the Dutch pension fund for active and inactive participants, partly offset by ﬁnancial assumption gains in all retirement plans following the increase in discount rates compared to the prior year, and experience gains. The actual consolidated return on plan assets for the year ended December 31, 2021, was a gain of €59 million (2020: gain of €141 million). ← → Wolters Kluwer 2021 Annual Report 181 Note 31 – Employee Beneﬁts continued DURATION Duration is an indicator of the plan liabilities’ sensitivity for changes in interest rates. The liability-weighted duration for the deﬁned beneﬁt plan liabilities at year end is as follows: number of years 2021 2020 Retirement plans The Netherlands 19.0 19.1 United Kingdom 15.2 15.6 United States 12.0 12.4 Other post-employment plans United States 9.2 9.4 INVESTMENT MIX The breakdown of plan assets as of December 31 is as follows: 2021 Quoted Unquoted 2020 Quoted Unquoted Equity Equity 494 494 – 424 424 – Private equity 3 – 3 3 – 3 Bonds Government bonds 435 435 – 532 532 – Corporate bonds 348 348 – 425 424 1 Asset-backed securities 108 108 – – – – Other Insurance contracts 67 – 67 70 – 70 Real estate 108 56 52 87 42 45 Derivatives and other securities 28 28 – 52 52 – Cash 50 50 – 28 28 – Total 1,641 1,519 122 1,621 1,502 119 At December 31, 2021, 93% of the plan assets relate to quoted ﬁnancial instruments (2020: 93%). Plan assets do not include any direct investments in the group or ﬁnancial instruments issued by the group, nor do they include any property or other assets used by the group. However, pension plans invest in index funds and as a result these plans may indirectly hold ﬁnancial instruments issued by the group. PROPORTION OF PLAN ASSETS in % 2021 2020 Equity 30 26 Bonds 55 59 Other 15 15 Total 100 100 182 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 32 – Provisions 2021 2020 Provision for restructuring commitments 12 39 Provision for acquisition integration 0 1 Restructuring provisions 12 40 Legal provisions 16 7 Other provisions 6 5 Total 34 52 Of which short term 27 48 ACCOUNTING POLICIES A provision is recognized when: the group has a present legal or constructive obligation because of a past event; it is probable that an outﬂow of resources in the form of economic beneﬁts will be required to settle the obligation; and the amount of the obligation can be reliably estimated. Restructuring provision The provisions for restructuring include liabilities arising from changes in the organizational structure, integration of activities, expected redundancy payments, and onerous contracts. A provision for restructuring is recognized only when the general recognition criteria are met. Redundancy payments are recognized as an expense when the group is demonstrably committed – without realistic possibility of withdrawal – to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination beneﬁts as a result of an offer made to encourage voluntary redundancy. Acquisition integration provision The acquisition integration provisions relate to non-recurring expenses to be incurred for the integration of activities acquired through business combinations, and mainly consists of expected redundancy payments, IT migration costs, and onerous contracts. Legal provisions For legal and judicial proceedings against the company and its operating entities, a legal provision is recognized only if an adverse outcome is probable and the amount of the loss can be reliably estimated. If one of these conditions is not met, the proceeding or claim is disclosed as a contingent liability, if material. Other provisions Other provisions primarily include provisions for dilapidation commitments on real estate. ESTIMATES AND JUDGMENTS Legal provisions The group is involved in legal and judicial proceedings in the ordinary course of business. Provisions and contingencies relating to these matters are periodically assessed based on the latest information available, usually after consultation and with the assistance of lawyers and other specialists. The actual outcome of a proceeding or claim may differ from the estimated liability and consequently may affect the actual result. The prediction of the outcome and the assessment of a possible loss by management are based on management’s judgments and estimates. Refer to Note 37 – Commitments, Contingent Assets, and Contingent Liabilities. ← → Wolters Kluwer 2021 Annual Report 183 Note 32 – Provisions continued MOVEMENTS IN PROVISIONS Restructuring provisions Legal provisions Other provisions 2021 2020 Non-current provisions at January 1 1 1 2 4 5 Add: short-term provisions 39 6 3 48 24 Total provisions at January 1 40 7 5 52 29 Movements Additions for restructuring of stranded costs Note 8 2 – – 2 4 Additions for acquisition integration Note 12 4 – – 4 2 Other additions 3 8 1 12 43 Total additions 9 8 1 18 49 Appropriation of provisions (34) (1) (1) (36) (19) Release of provisions (2) (1) 0 (3) (7) Transfer to liabilities classified as held for sale Note 9 (1) – 0 (1) – Exchange differences and other movements 0 3 1 4 0 Total movements (28) 9 1 (18) 23 Total provisions at December 31 12 16 6 34 52 Less: short-term provisions (11) (14) (2) (27) (48) Non-current provisions at December 31 1 2 4 7 4 Other additions to the restructuring provision of €3 million mainly relate to restructuring programs announced in Tax & Accounting and Legal & Regulatory. 184 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 33 – Capital and Reserves SHARE CAPITAL AND NUMBER OF SHARES The authorized share capital amounts to €143.04 million, consisting of €71.52 million in ordinary shares (596 million of ordinary shares with a nominal value of €0.12 per ordinary share) and €71.52 million in preference shares (596 million of preference shares with a nominal value of €0.12 per preference share). ORDINARY SHARES The issued share capital consists of ordinary shares. On September 10, 2021, the company completed the reduction in ordinary share capital approved by shareholders at the Annual General Meeting of Shareholders held on April 22, 2021. In 2021, the company canceled 5,000,000 ordinary shares previously held as treasury shares (2020: 5,500,000 ordinary shares were canceled). Consequently, in 2021, the total number of issued ordinary shares is reduced to 262,516,153, with a nominal value of €32 million (2020: 267,516,153 shares, with a nominal value of €32 million). Shares repurchased by the company are added to and held as treasury shares. Part of these treasury shares is retained and used to meet future obligations under share-based incentive schemes. At December 31, 2021, share buybacks have not yet been executed for an amount of €50 million under the existing mandate. Incremental costs directly attributable to the issuance of ordinary shares are recognized as a deduction from equity, net of any tax effects. PREFERENCE SHARES Preference share capital is classiﬁed as equity if it is non-redeemable, or redeemable only at the company’s option, and any dividends are discretionary. There are no preference shares issued. REPURCHASE AND REISSUE OF SHARE CAPITAL TREASURYSHARES When share capital recognized as equity is repurchased (treasury shares), the amount of the consideration paid, including directly attributable costs, is recognized as a change in equity. For a reconciliation of the weighted-average number of shares and earnings per share, see Note 7 – Earnings per Share. NUMBER OF SHARES Number of ordinary shares Minus: number of treasury shares Total number of ordinary shares outstanding in thousands of shares, unless otherwise stated 2021 2020 2021 2020 2021 2020 At January 1 267,516 273,016 (5,072) (6,361) 262,444 266,655 Cancelation of shares (5,000) (5,500) 5,000 5,500 0 0 Repurchased shares – – (4,957) (5,116) (4,957) (5,116) Long-Term Incentive Plan – – 705 905 705 905 At December 31 262,516 267,516 (4,324) (5,072) 258,192 262,444 Issued share capital at €0.12 (€’000) 31,502 32,102 Proposed dividend per share (€) 1.57 1.36 Proposed dividend distribution (€’000) 405,362 356,924 ← → Wolters Kluwer 2021 Annual Report 185 Note 33 – Capital and Reserves continued TREASURY SHARES Treasury shares are measured at cost, representing the market price on the acquisition date. This reserve is not available for distribution. Treasury shares are deducted from retained earnings. The group will offset the dilution of its performance share issuance annually via share repurchases. In 2021, the group executed a share buyback of €410 million (2020: €350 million), originally consisting of a share buyback of €350 million and subsequently expanded to €410 million following the divestiture of the U.S. legal education business in Wolters Kluwer Legal & Regulatory. The group repurchased 5.0 million (2020: 5.1 million) of ordinary shares under this program at an average stock price of €82.62 (2020: €68.41). In 2021, the group used 0.7 million shares held in treasury for the vesting of the LTIP grant 2018-20. LEGAL RESERVE PARTICIPATIONS Legal reserve participations contain appropriations of proﬁts of group companies, which are allocated to a legal reserve based on statutory and/or legal requirements. The legal reserve is not available for distribution. HEDGE RESERVE Hedge reserve relates to the effective portion of the changes in fair value of the hedging instruments used for cash ﬂow hedging and net investment hedging purposes. The hedge reserve is a legal reserve and not available for distribution. TRANSLATION RESERVE Translation reserve contains foreign exchange differences arising from the translation of the net investments in foreign operations. When a foreign operation is sold, accumulated exchange differences that were recognized in equity prior to the sale are reclassiﬁed from equity to proﬁt or loss as part of the gain or loss on divestment. The translation reserve is a legal reserve and is not available for distribution. DIVIDENDS Dividends are recognized as a liability upon being declared. Pursuant to Article 29 of the Articles of Association, and with the approval of the Supervisory Board, a proposal will be submitted to the Annual General Meeting of Shareholders to make a total distribution of €1.57 per share over ﬁnancial year 2021 (dividend over ﬁnancial year 2020: €1.36 per share). The group applies a semi-annual dividend frequency. On February 21, 2021, the Supervisory Board and the Executive Board resolved to distribute an interim dividend of €0.54 per share, equal to 40% of prior year’s dividend (2020 interim dividend: 40% of prior year’s dividend). The interim dividend was paid on September 23, 2021. Subject to the approval of the Annual General Meeting of Shareholders, a ﬁnal dividend of €1.03 per ordinary share will be paid in cash on May 18, 2022. Refer also to Note 50 – Proﬁt Appropriation. The group has a progressive dividend policy under which it expects to increase the total dividend per share each year. Dividend distributions 2021 2020 2019 Originally proposed 405 357 315 Actual payments: Interim dividend 140 124 105 Final dividend 232 210 Total dividend distribution 356 315 186 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 33 – Capital and Reserves continued FREE DISTRIBUTABLE RESERVES The share premium reserve, retained earnings, and undistributed proﬁt for the year are available for dividend distribution. OPTION PREFERENCE SHARES The company has granted an option to purchase preference shares to the Wolters Kluwer Preference Shares Foundation (Stichting Preferente Aandelen Wolters Kluwer). The dividend on these shares would equal a normal market rate of return, based on a weighted average interest rate applied by the European Central Bank. Therefore, the fair value of the option is deemed to be zero. SHAREHOLDER’S EQUITY MOVEMENT SCHEDULE For the equity movement schedule, refer to Note 47 – Shareholders’ Equity. Note 34 – Share-based Payments ACCOUNTING POLICIES The Long-Term Incentive Plan (LTIP) qualiﬁes as an equity-settled share-based payments transaction. Executive Board members and senior management are awarded shares under the LTIP with performance conditions based on Diluted Earnings per Share (EPS) at constant currencies and Total Shareholder Return (TSR) for the LTIP awards 2019-21 and 2020-22. For the LTIP 2021-23 award, the diluted EPS performance measure has been replaced by diluted adjusted EPS, and a new performance measure of Return on Invested Capital (ROIC) has been introduced. The fair value of shares awarded is recognized as an expense with a corresponding increase in equity. The fair value is measured at the grant date and spread over the period during which the employees become unconditionally entitled to the shares. The amount recognized as an expense is adjusted for the actual forfeitures due to participants’ resignations before the vesting date. TSR-condition The fair value of the shares based on the TSR performance condition, a market condition under IFRS 2 – Share-based Payment, is measured using a Monte Carlo simulation model, considering the terms and conditions upon which the shares were awarded. (Adjusted) EPS-condition and ROIC-condition The fair values of the shares based on the non-market performance conditions of (adjusted) EPS and ROIC are equal to the opening share price of the Wolters Kluwer shares of the year of the grant, adjusted by the present value of the future dividend payments during the three-year performance period. The amount recognized as an expense in each year is adjusted to reﬂect the number of share awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market conditions at the vesting date. LONGTERM INCENTIVE PLAN General For the Executive Board, the LTIP 2019-21 and 2020-22 awards depend partially on the TSR performance (50% of the value of the conditionally awarded rights on shares) and partially on the EPS performance (50% of the value of the conditionally awarded rights on shares). For senior management, the LTIP 2019-21 and 2020-22 awards depend partially on the TSR performance (50% of the conditionally awarded rights on shares) and partially on the EPS performance (50% of the conditionally awarded rights on shares). The LTIP 2021-23 award is based on the TSR performance (weighting of 50%), diluted adjusted EPS performance (weighting at 30%), and ROIC performance (weighting of 20%). The TSR-related LTIP awards for the Executive Board and senior management are based on the same payout schedules. ← → Wolters Kluwer 2021 Annual Report 187 Note 34 – Share-based Payments continued In 2021, €24 million has been recognized within personnel expenses in proﬁt or loss (2020: €24 million) related to the total cost of the LTIP grants for 2019-21, 2020-22, and 2021-23. Refer to Note 13 – Personnel Expenses. Conditionally awarded TSR-related LTIP shares For the conditional TSR awards that were awarded up to and including 2021, the payout of shares after three years fully depends on the group’s TSR relative to a pre-deﬁned group of 15 peer companies. Vesting of these conditional grants is subject to the condition that the participant stays with the group until the plan’s maturity. The performance period of the LTIP is three years, at the beginning of which a base number of shares (norm payout) is conditionally awarded to each beneﬁciary. The expense of the TSR-related LTIP is recognized ratably in proﬁt or loss over the performance period. Actual awards at the end of the performance period will range from 0% to 150% of the norm payout. There will be no payout for the Executive Board and senior management if the group ends below the eighth position in the TSR ranking, while other payouts will be made as follows: 150% for ﬁrst or second position, 125% for third or fourth position, 100% for ﬁfth or sixth position, and 75% for seventh or eighth position. Conditionally awarded (adjusted) EPS- and ROIC-related LTIP shares The amount recognized as an expense in a year is adjusted to reﬂect the number of share awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market conditions at the vesting date. For the (adjusted) EPS and ROIC- related shares, there will be no payout if the performance over three years is less than 50% of the target. In case of overachievement of the target, the Executive Board members and senior management can earn up to a maximum of 150% of the conditionally awarded shares. KEY ASSUMPTIONS TO THE TSR SHARES The fair value of TSR shares is calculated at the grant date using a Monte Carlo simulation model. For the TSR shares granted in the LTIP 2021-23, the fair value is estimated to be €47.03 as of January 1, 2021. The inputs to the valuation were the Wolters Kluwer share price of €69.06 on the grant date (January 1, 2021) and an expected volatility of 21.8% based on historical daily prices over the three years prior to January 1, 2021. Dividends are assumed to increase annually (from the 2020 dividend) based on historical trend and management plans. The model assumes a contractual life of three years and uses the risk-free rate on Dutch three-year government bonds. Fair value summary of conditionally awarded LTIP shares The fair value of each conditionally awarded share under the running LTIP grants for the Executive Board and senior management of the group, as determined by an external consulting ﬁrm, is as follows: in euros Fair value of Adjusted EPS and ROIC shares at grant date Fair value EPS shares at grant date Fair value TSR shares at grant date LTIP 2021-23 64.06 – 47.03 LTIP 2020-22 – 60.68 40.85 LTIP 2019-21 – 48.18 35.12 The fair values of the conditionally awarded shares under the LTIP 2021-23 grants increased compared to the prior year plan, mainly because of the higher share price of Wolters Kluwer at January 1, 2021, compared to January 1, 2020. 188 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 34 – Share-based Payments continued LTIP 201820 The LTIP 2018-20 vested on December 31, 2020. On Total Shareholder Return (TSR), Wolters Kluwer ranked fourth relative to the peer group of 15 companies, resulting in a payout of 125% of the conditional base number of shares awarded to the Executive Board and senior management. The EPS-related shares resulted in a payout of 135%. A total of 705,214 shares were released on February 25, 2021. At that date, the volume-weighted average price of Wolters Kluwer N.V. was €64.9899. LTIP 201820: NUMBER OF SHARES VESTED AND THE CASH EQUIVALENT THEREOF number of shares, unless otherwise stated Outstanding at December 31, 2020 Increase in conditional number of TSR shares (25%) Increase in conditional number of EPS shares (35%) Payout/ vested shares February 25, 2021 Cash value vested shares * Executive Board 142,306 20,485 21,128 183,919 11,953 Senior management 400,962 50,148 70,185 521,295 33,879 Total 543,268 70,633 91,313 705,214 45,832 * Cash value in thousands of euros; calculated as the number of shares vested multiplied by the volume average price on February 25, 2021. LTIP 201921 The LTIP 2019-21 vested on December 31, 2021. On Total Shareholder Return (TSR), Wolters Kluwer ranked fourth relative to its peer group of 15 companies, resulting in a payout of 125% of the conditional base number of shares awarded to the Executive Board and senior management. The EPS-related shares resulted in a payout of 150%. The shares will be released on February 24, 2022. The volume weighted average price for the shares released will be based on the average exchange price of the shares traded on Euronext Amsterdam N.V. on February 24, 2022, the ﬁrst day following the company’s publication of its annual results. NUMBER OF PERFORMANCE SHARES OUTSTANDING LTIP 2019-21 number of shares Total EPS-condition TSR-condition Conditionally awarded grant 2019 563,283 272,172 291,111 Forfeited in previous years (36,121) (18,060) (18,061) Shares outstanding at January 1, 2021 527,162 254,112 273,050 Forfeited during the year (52,462) (26,231) (26,231) Effect of 125% vesting based on TSR-ranking 61,725 – 61,725 Effect of 150% vesting based on EPS-ranking 114,015 114,015 – Vested at December 31, 2021 650,440 341,896 308,544 LTIP 2020-22 base number of shares at 100% payout Total EPS-condition TSR-condition Conditionally awarded grant 2020 448,223 213,365 234,858 Forfeited in previous years (4,733) (2,367) (2,366) Shares outstanding at January 1, 2021 443,490 210,998 232,492 Forfeited during the year (43,880) (21,941) (21,939) Shares outstanding at December 31, 2021 399,610 189,057 210,553 ← → Wolters Kluwer 2021 Annual Report 189 Note 34 – Share-based Payments continued LTIP 2021-23 base number of shares at 100% payout Total Adjusted EPS- condition ROIC-condition TSR-condition Conditionally awarded grant 2021 456,649 132,695 88,463 235,491 Forfeited during the year (26,245) (7,874) (5,249) (13,122) Shares outstanding at December 31, 2021 430,404 124,821 83,214 222,369 OVERVIEW OF OUTSTANDING PERFORMANCE SHARES: LTIP 202022 AND LTIP 202123 base numbers of shares at 100% payout LTIP 2020-22 LTIP 2021-23 Total Conditionally awarded grant 2020 448,223 – 448,223 Forfeited in previous years (4,733) – (4,733) Shares outstanding at January 1, 2021 443,490 0 443,490 Conditionally awarded grant 2021 – 456,649 456,649 Forfeited during the year (43,880) (26,245) (70,125) Shares outstanding at December 31, 2021 399,610 430,404 830,014 Note 35 – Related Party Transactions The company has a related party relationship with its subsidiaries, equity-accounted investees, the pension funds, and members of the Supervisory Board and the Executive Board. Wolters Kluwer N.V. has ﬁled a list of the subsidiaries at the Dutch Commercial Register in The Hague, the Netherlands. Related party transactions are conducted at arm’s length with terms comparable to transactions with third parties. For transactions with key management, refer to Note 38 – Remuneration of the Executive Board and the Supervisory Board and the Remuneration Report. The group has no signiﬁcant transactions or outstanding balances with its equity-accounted investees other than its equity- interest holdings. Note 36 – Audit Fees With reference to Section 2:382a (1) and (2) of the Dutch Civil Code, the following fees for the ﬁnancial year have been charged by Deloitte Accountants B.V. to the company, its subsidiaries, and other consolidated entities. Deloitte is not involved in most of the statutory audits of operating companies that are outside the scope of the group audit. AUDIT FEES 2021 Deloitte Accountants B.V. Other Deloitte member firms and affiliates Total Deloitte Statutory audit of annual accounts 1.0 2.0 3.0 Other assurance services 0.1 0.0 0.1 Tax advisory services – 0.0 0.0 Other non-audit services 0.0 0.2 0.2 Total 1.1 2.2 3.3 190 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 36 – Audit Fees continued AUDIT FEES 2020 Deloitte Accountants B.V. Other Deloitte member firms and affiliates Total Deloitte Statutory audit of annual accounts 0.9 2.0 2.9 Other assurance services 0.1 0.1 0.2 Tax advisory services – 0.0 0.0 Other non-audit services – – 0.0 Total 1.0 2.1 3.1 The audit fees for 2021 and 2020 include ﬁnal invoicing with respect to the statutory audits of 2020 and 2019, respectively. Note 37 – Commitments, Contingent Assets, andContingent Liabilities GUARANTEES The group has the following outstanding guarantees at December 31: 2021 2020 Parental performance guarantees to third parties 12 12 Guarantee to the trustees of the U.K. retirement plan Note 31 21 20 Other guarantees (mainly real estate) 12 19 Drawn bank credit facilities 1 1 Royalty guarantees to health societies 4 3 Total 50 55 At December 31, 2021, the total guarantees issued for bank credit facilities on behalf of several subsidiaries amounted to €113 million (2020: €101 million), of which €112 million was not utilized (2020: €100 million). CONTINGENT ASSETS A part of the 2020 divestment-related consideration is contingent on future events. The related contingent asset amounted to a maximum of €3 million in total at December 31, 2021 (2020: €3 million). LEGAL AND JUDICIAL PROCEEDINGS The group is involved in legal and judicial proceedings in the ordinary course of business. Provisions and contingencies relating to these matters are periodically assessed based upon the latest information available, usually with the assistance of lawyers and other specialists. While it is not practically possible to estimate the success-rate of claims against the group, the group has a policy to insure the operating units against such claims. OTHER COMMITMENTS For any commitments with respect to the group’s share buybacks, refer to Note 33 – Capital and Reserves. ← → Wolters Kluwer 2021 Annual Report 191 Note 38 – Remuneration of the Executive Board andthe Supervisory Board REMUNERATION EXECUTIVE BOARD The table below provides the total compensation of the Executive Board recognized in the consolidated statement of proﬁt or loss: in thousands of euros 2021 2020 Fixed compensation: Salary 2,042 2,073 Social security 44 44 Defined contribution plan 157 121 Other benefits 775 357 Total fixed compensation 3,018 2,595 Variable compensation: STIP 2,853 2,406 LTIP * 6,345 5,926 Total variable compensation 9,198 8,332 Sub-total fixed and variable compensation 12,216 10,927 Tax-related costs 565 717 Total remuneration Executive Board 12,781 11,644 * LTIP share-based payments are based on IFRS accounting policies and therefore do not reﬂect the actual payout or value of performance shares released upon vesting. SHARES OWNED BY EXECUTIVE BOARD MEMBERS At December 31, 2021, the Executive Board jointly held 412,167 shares of the company (2020: 498,767 shares). REMUNERATION SUPERVISORY BOARD The total remuneration of the Supervisory Board members was €678 thousand in 2021 (2020: €673 thousand). SHARES OWNED BY SUPERVISORY BOARD MEMBERS At December 31, 2021, Mrs. A.E. Ziegler held 1,894 American Depositary Receipts of shares of the company (2020: none of the members owned shares). For further details, refer to the Remuneration Report. 192 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 39 – Overview of Signiﬁcant Subsidiaries Below is a list of signiﬁcant subsidiaries at December 31, 2021, in alphabetical order (legal entity name and the division it belongs to). The group has a 100% interest in all these subsidiaries. AUSTRALIA • Wolters Kluwer Australia Pty Limited (Tax & Accounting) BELGIUM • Wolters Kluwer Belgium NV (Tax & Accounting and Legal & Regulatory) • Wolters Kluwer Financial Services Belgium NV (Governance, Risk & Compliance) CANADA • Wolters Kluwer Canada Limited (Tax & Accounting) FRANCE • Enablon S.A.S. (Legal & Regulatory) • Holding Wolters Kluwer France S.A.S. (Legal & Regulatory) • Wolters Kluwer France S.A.S. (Legal & Regulatory) GERMANY • Wolters Kluwer Deutschland GmbH (Legal & Regulatory) • Wolters Kluwer Software und Service GmbH (Tax & Accounting) IRELAND • Wolters Kluwer Finance Ireland DAC (Corporate Ofﬁce) • Wolters Kluwer Ireland Holding Limited (Corporate Ofﬁce) ITALY • Tagetik Software S.r.l. (Tax & Accounting) • Wolters Kluwer Italia S.r.l. (Tax & Accounting and Legal & Regulatory) LUXEMBOURG • Wolters Kluwer Financial Services Luxembourg S.A. (Governance, Risk & Compliance) POLAND • Wolters Kluwer Polska SP. z o.o. (Legal & Regulatory) SPAIN • Wolters Kluwer Tax and Accounting España, S.L. (Tax & Accounting) THE NETHERLANDS • eVision Industry Software B.V. (Legal & Regulatory) • Wolters Kluwer Global Business Services B.V. (Global Business Services) • Wolters Kluwer Holding Nederland B.V. (Legal & Regulatory) • Wolters Kluwer International Holding B.V. (Corporate Ofﬁce) • Wolters Kluwer Nederland B.V. (Legal & Regulatory) • Wolters Kluwer Technology B.V. (Digital eXperience Group) • Wolters Kluwer USA Holding B.V. (Corporate Ofﬁce) UNITED KINGDOM • Wolters Kluwer Holdings (UK) PLC (Tax & Accounting) • Wolters Kluwer (UK) Limited (Tax & Accounting) UNITED STATES • CCH Incorporated (Tax & Accounting and Legal & Regulatory) • C T Corporation System (Governance, Risk & Compliance) • Emmi Solutions, LLC (Health) • eOriginal, Inc. (Governance, Risk & Compliance) • Health Language, Inc. (Health) • National Registered Agents, Inc. (Governance, Risk & Compliance) • Ovid Technologies, Inc. (Health) • Universal Tax Systems, Inc. (Tax & Accounting) • UpToDate, Inc. (Health) • Wolters Kluwer DXG U.S., Inc. (Digital eXperience Group) • Wolters Kluwer ELM Solutions, Inc. (Governance, Risk & Compliance) • Wolters Kluwer Financial Services, Inc. (Tax & Accounting and Governance, Risk & Compliance) • Wolters Kluwer Health, Inc. (Health) • Wolters Kluwer North America, Inc. (Corporate Ofﬁce) • Wolters Kluwer R&D U.S. LP (Digital eXperience Group) • Wolters Kluwer United States Inc. (Global Business Services and Corporate Ofﬁce) • Wolters Kluwer U.S. Corporation (Corporate Ofﬁce) ← → Wolters Kluwer 2021 Annual Report 193 Note 39 – Overview of Signiﬁcant Subsidiaries continued In addition to these signiﬁcant subsidiaries, the group has other consolidated entities in the countries listed, and also in the following countries: Austria, Brazil, China, Czech Republic, Denmark, Hong Kong, Hungary, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Norway, Portugal, Qatar, Romania, Russia, Singapore, Slovakia, South Africa, South Korea, Sweden, Switzerland, and Ukraine. The group also has branches in Finland, Saudi Arabia, Taiwan, Thailand, and United Arab Emirates. Apart from certain cash restrictions, (refer to Note 27 – Cash and Cash Equivalents), there are no signiﬁcant restrictions on the group’s ability to access or use assets, or to settle liabilities within these subsidiaries. There are no interests in consolidated structured entities. Refer to Note 8 – Acquisitions and Divestments for the consequences of losing control of subsidiaries during 2021 and 2020. The ﬁnancial statements of the parent and the subsidiaries used in the preparation of the consolidated ﬁnancial statements have the same reporting date. Note 40 – Events after Balance Sheet Date Subsequent events were evaluated up to February 22, 2022, which is the date the consolidated ﬁnancial statements were authorized for issuance by the Executive Board and the Supervisory Board. There are no events to report. 194 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Company Financial Statements 195 Statement of Profit or Loss of Wolters Kluwer N.V. 196 Statement of Financial Position of Wolters Kluwer N.V. 197 Note 41 – Significant Accounting Policies 198 Note 42 – Financial Assets 198 Note 43 – Other Receivables 198 Note 44 – Cash and Cash Equivalents 199 Note 45 – Borrowings and Bank Overdrafts 199 Note 46 – Personnel Expenses 200 Note 47 – Shareholders’ Equity 202 Note 48 – Commitments and Contingent Liabilities 202 Note 49 – Details of Participating Interests 202 Note 50 – Profit Appropriation 203 Authorization for issuance Notes to the Company FinancialStatements ← → Wolters Kluwer 2021 Annual Report 195 Company FinancialStatements Statement of Profit or Loss of Wolters Kluwer N.V. in millions of euros, for the year ended December 31 2021 2020 General and administrative (costs)/income 61 78 Operating profit 61 78 Financing income third parties 3 8 Financing income related parties 2 5 Financing costs third parties (75) (52) Financing costs related parties (1) (4) Total financing results (71) (43) Profit/(loss) before tax (10) 35 Income tax expense (23) (28) Profit/(loss) after tax (33) 7 Results from subsidiaries, net of tax Note 42 761 714 Profit for the year 728 721 196 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Statement of Financial Position of Wolters Kluwer N.V. in millions of euros and before appropriation of results, at December 31 2021 2020 Non-current assets Financial assets Note 42 7,352 6,838 Other intangible assets 2 – Deferred tax assets 7 12 Total non-current assets 7,361 6,850 Current assets Other receivables Note 43 250 202 Cash and cash equivalents Note 44 599 109 Total current assets 849 311 Total assets 8,210 7,161 Equity Issued share capital Note 33 32 32 Share premium reserve 87 87 Legal reserves 215 (118) Other reserves 1,355 1,365 Undistributed profit 728 721 Shareholders’ equity Note 47 2,417 2,087 Non-current liabilities Bonds Note 29 2,625 2,126 Private placements Note 29 153 157 Derivative financial instruments Note 29 2 8 Total non-current liabilities 2,780 2,291 Current liabilities Debts to subsidiaries 2,959 2,283 Borrowings and bank overdrafts Note 45 3 450 Other payables 51 50 Total current liabilities 3,013 2,783 Total liabilities 5,793 5,074 Total equity and liabilities 8,210 7,161 ← → Wolters Kluwer 2021 Annual Report 197 Note 41 – Significant Accounting Policies GENERAL Unless otherwise indicated, the amounts in these financial statements are in millions of euros. ACCOUNTING POLICIES The company financial statements of Wolters Kluwer N.V. are prepared in accordance with the Dutch Civil Code, Book 2, Title 9, with the application of the regulations of section 362.8 allowing the use of the same accounting policies as applied for the consolidated financial statements. These accounting policies are described in the Notes to the Consolidated Financial Statements. Subsidiaries are valued using the equity method, applying the IFRS accounting policies as endorsed by the European Union. The company will, upon identification of a credit loss on an intercompany loan and/or receivable, eliminate the carrying amount of the intercompany loan and/or receivable for the value of the identified credit loss. Any related party transactions between Wolters Kluwer N.V. and its subsidiaries, equity-accounted investees, the pension funds, or with members of the Supervisory Board and the Executive Board are conducted at arm’s length with terms comparable to transactions with third parties. For the following disclosures, reference is made to the notes to the consolidated financial statements: • Note 29 – Long-term Debt; • Note 33 – Capital and Reserves; • Note 34 – Share-based Payments; • Note 35 – Related Party Transactions; • Note 38 – Remuneration of the Executive Board and the Supervisory Board; • Note 39 – Overview of Significant Subsidiaries; and • Note 40 – Events after Balance Sheet Date. COMPARATIVES The comparative disclosures were adjusted as follows: • Within shareholders' equity, an amount of €19 million is reclassified from the translation reserve to the hedge reserve, to adjust for an erroneous classification, at January 1, 2020, and December 31, 2020. Refer to Note 47 – Shareholders' Equity. Certain immaterial reclassifications have been made to the comparative statement of financial position and the related notes to conform to the current year presentation and to improve insights. These reclassifications have had no impact on the comparative shareholders’ equity and comparative profit for the year. Notes to the Company FinancialStatements 198 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 42 – Financial Assets 2021 2020 Equity value of subsidiaries 7,352 6,838 Total 7,352 6,838 MOVEMENT EQUITY VALUE OF SUBSIDIARIES 2021 2020 Position at January 1 6,838 6,846 Results from subsidiaries, net of tax 761 714 Dividends received from subsidiaries (615) (374) Remeasurement gains/(losses) on defined benefit plans, net of tax 14 0 Foreign exchange differences 354 (348) Position at December 31 7,352 6,838 Note 43 – Other Receivables 2021 2020 Receivables from subsidiaries 235 195 Current income tax assets 8 0 Miscellaneous receivables and prepayments 7 7 Total 250 202 Note 44 – Cash and Cash Equivalents Cash and cash equivalents comprise cash balances and on demand deposits that are readily convertible into cash. There is no restricted cash. ← → Wolters Kluwer 2021 Annual Report 199 Note 45 – Borrowings and Bank Overdrafts 2021 2020 Euro Commercial Paper program – 100 Bank overdrafts 3 350 Total 3 450 Note 46 – Personnel Expenses 2021 2020 Salaries and wages and other benefits 30 29 Social security charges 2 2 Costs of defined contribution plans 1 0 Expenses related to defined benefit plans 1 1 Equity-settled share-based payments Note 34 24 24 Total 58 56 Employees In full-time equivalents at December 31 135 139 Thereof employed outside the Netherlands 20 20 In full-time equivalents average per annum * 137 138 * Average full-time equivalents per annum include temporary help and contractors, whereas full-time equivalents at December 31 only relate to staff on the payroll ofthe company. 200 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 47 – Shareholders’ Equity Legal reserves Other reserves Issued share capital Share premium reserve Legal reserve participations Hedge reserve Translation reserve Treasury shares Retained earnings Undistributed profit Shareholders’ equity Balance at January 1, 2020 * 33 87 139 (110) 213 (279) 1,628 669 2,380 Items that are or may be reclassified subsequently to the statement ofprofitor loss: Exchange differences on translation of foreign operations (348) (348) Exchange differences on translation of equity-accounted investees 0 0 Net gains/(losses) on hedges of net investments in foreign operations 11 11 Effective portion of changes in fair value of cash ﬂow hedges (24) (24) Net change in fair value of cash ﬂow hedges reclassified to the statement ofprofit or loss 6 6 Items that will not be reclassified to the statement of profit or loss: Remeasurements on defined benefit plans 0 0 Tax on other comprehensive income: Income tax on other comprehensive income 1 0 0 1 Other comprehensive income for the year, net of tax (6) (348) 0 (354) Profit for the year 721 721 Total comprehensive income for the year (6) (348) 0 721 367 Appropriation of profit previous year 669 (669) 0 Transactions with owners of the company, recognized directly in equity: Share-based payments 24 24 Cancelation of shares (1) 346 (345) 0 Release LTIP shares 61 (61) 0 Final cash dividend 2019 (210) (210) Interim cash dividend 2020 (124) (124) Repurchased shares (350) (350) Other movements (6) 0 6 0 Balance at December 31, 2020 * 32 87 133 (116) (135) (222) 1,587 721 2,087 * Restated for certain reclassifications. See Note 41 – Significant Accounting Policies. ← → Wolters Kluwer 2021 Annual Report 201 Note 47 – Shareholders’ Equity continued Legal reserves Other reserves Issued share capital Share premium reserve Legal reserve participations Hedge reserve Translation reserve Treasury shares Retained earnings Undistributed proﬁt Shareholders’ equity Balance at January 1, 2021 32 87 133 (116) (135) (222) 1,587 721 2,087 Items that are or may be reclassified subsequently to the statement ofprofitor loss: Exchange differences on translation of foreign operations 313 313 Exchange differences on translation of equity-accounted investees 1 1 Recycling of foreign exchange differences on loss of control 40 40 Net gains/(losses) on hedges of net investments in foreign operations (16) (16) Effective portion of changes in fair value of cash flow hedges 6 6 Net change in fair value of cash flow hedges reclassified to the statement ofprofit or loss 4 4 Items that will not be reclassified to the statement of profit or loss: Remeasurements on defined benefit plans 16 16 Tax on other comprehensive income: Income tax on other comprehensive income 0 (4) (4) Other comprehensive income/(loss) for the year, net of tax (6) 354 12 360 Profit for the year 728 728 Total comprehensive income for the year (6) 354 12 728 1,088 Appropriation of profit previous year 721 (721) 0 Transactions with owners of the company, recognized directly in equity: Share-based payments 24 24 Cancelation of shares 0 336 (336) 0 Release LTIP shares 49 (49) 0 Final cash dividend 2020 (232) (232) Interim cash dividend 2021 (140) (140) Repurchased shares (410) (410) Other movements (15) 0 15 0 Balance at December 31, 2021 32 87 118 (122) 219 (247) 1,602 728 2,417 The legal reserves and treasury shares reserve are not available for dividend distribution to the owners of the company. 202 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Note 48 – Commitments and Contingent Liabilities GUARANTEES Pursuant to section 403 of the Dutch Civil Code, Book 2, the company has assumed joint and several liability for the debts arising out of the legal acts of several subsidiaries in the Netherlands. The relevant declarations have been filed with and are open for inspection at the Dutch Commercial Register for the district in which the legal entity respective to the liability has its registered office. The company has the following outstanding guarantees at December 31: 2021 2020 Parental performance guarantees to third parties 12 12 Guarantee to the trustees of the U.K. retirement plan 21 20 Drawn bank credit facilities 1 1 Total guarantees outstanding 34 33 At December 31, 2021, the total guarantees issued for bank credit facilities on behalf of several subsidiaries amounted to €113 million (2020: €101 million), of which €112 million was not utilized (2020: €100 million). At December 31, 2021, share buybacks have not yet been executed for an amount of €50 million under the existing mandate. The company forms part of a Dutch fiscal unity and pursuant to standard conditions has assumed joint and several liability for the tax liabilities of the fiscal unity. Note 49 – Details of Participating Interests A list of subsidiaries and affiliated companies, prepared in accordance with the relevant legal requirements (Dutch Civil Code, Book 2, Part 9, Section 379) is filed at the offices of the Chamber of Commerce of The Hague, the Netherlands. An overview of significant subsidiaries is included in Note 39 – Overview of Significant Subsidiaries. Note 50 – Profit Appropriation 2021 2020 Proposed dividend distribution Note 33 405 357 Proposed additions to retained earnings 323 364 Profit for the year 728 721 At the 2022 Annual General Meeting of Shareholders, the company will propose a final dividend distribution of €1.03 per share, to be paid in cash on May 18, 2022. This will bring the total dividend for 2021 to €1.57 per share (2020: €1.36 per share), an increase of 15% over the prior year. ← → Wolters Kluwer 2021 Annual Report 203 Authorization for Issuance Alphen aan den Rijn, February 22, 2022 Executive Board N. McKinstry, CEO and Chair of the Executive Board K.B. Entricken, CFO and Member of the Executive Board Supervisory Board F.J.G.M. Cremers, Chair A.E. Ziegler, Vice-Chair B.J.F. Bodson J.A. Horan J.P. de Kreij S. Vandebroek C.F.H.H. Vogelzang 204 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements To the shareholders and the Supervisory Board of Wolters Kluwer N.V. Report on the audit of the financial statements for the year ended December 31, 2021, included in the 2021 Annual Report. OUR OPINION We have audited the accompanying financial statements for the year ended December 31, 2021, of Wolters Kluwer N.V., based in Alphen aan den Rijn, the Netherlands. The financial statements include the consolidated financial statements and the company financial statements as set out on pages 99 to 203 of the annual report. In our opinion: • The accompanying consolidated financial statements give a true and fair view of the financial position of Wolters Kluwer N.V. as at December 31, 2021, and of its result and its cash ﬂows for the year ended December 31, 2021, in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and with Part 9 of Book 2 of the Dutch Civil Code; and • The accompanying company financial statements give a true and fair view of the financial position of Wolters Kluwer N.V. as at December 31, 2021, and of its result for the year ended December 31, 2021, in accordance with Part 9 of Book 2 of the Dutch Civil Code. The consolidated financial statements comprise: 1. The consolidated statement of financial position as at December 31, 2021; 2. The following statements for the year ended December 31, 2021: the consolidated statement of profit or loss, the consolidated statements of comprehensive income, changes in total equity and cash ﬂows; and 3. The notes to the consolidated financial statements, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise: 1. The company statement of financial position as at December 31, 2021; 2. The company statement of profit or loss for the year ended December 31, 2021; and 3. The notes to the company financial statements, comprising a summary of the significant accounting policies and other explanatory information. BASIS FOR OUR OPINION We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the Our responsibilities for the audit of the financial statements section of our report. We are independent of Wolters Kluwer N.V. in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence), and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics). We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Information in support of our opinion We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The following information in support of our opinion was addressed in this context, and we do not provide a separate opinion or conclusion on these matters. Materiality Based on our professional judgment, we determined the materiality for the financial statements as a whole at €60 million (2020: €50 million). The materiality is based on 6.5% of profit before tax (2020: 5.3%). We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons. Other Information on the Financial Statements Independent Auditor’sReport ← → Wolters Kluwer 2021 Annual Report 205 Materiality overview Materiality for the financial statements as a whole €60 million Basis for materiality 6.5% of profit before tax Threshold for reporting misstatements €3 million Audits of the group entities (components) were performed using materiality levels determined by the judgment of the group engagement team, considering the materiality for the consolidated financial statements as a whole and the reporting structure within the group. For the significant components (i.e, business units Corporate Legal Services U.S., UpToDate U.S., and Tax & Accounting U.S.), the audits are performed using a materiality level of €26.4 million (2020: €19.3 million). For the other components, the materiality levels are in the range of €14.4 million to €24.0 million (2020: €10.5 million to €17.5 million). We agreed with the Supervisory Board that misstatements in excess of €3 million, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds. SCOPE OF THE GROUP AUDIT Wolters Kluwer N.V. is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of Wolters Kluwer N.V. Our group audit mainly focused on significant group entities. Our assessment of entities that are significant to the group was done as part of our audit planning and was aimed to obtain sufficient coverage of the risks of material misstatement for significant account balances, classes of transactions, and disclosures that we have identified. In addition, we considered qualitative factors as part of our assessment. In establishing the overall group audit strategy and plan, we determined the type of work that needed to be performed at the components by the group engagement team and by component auditors. We responded to changes relevant to the group in 2021 in determining the components in our scope and the nature of procedures to be performed. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those components to be able to conclude whether sufficient and appropriate audit evidence had been obtained as a basis for our opinion on the financial statements as a whole. With the exception of two, all component auditors are Deloitte member firms. The group engagement team directed the planning, reviewed the work performed by component auditors, and assessed and discussed the results and findings with the component auditors. Due to the COVID-19 pandemic, similar as in the prior year, the direction and supervision of the component auditors was performed remotely. The group engagement team held multiple virtual meetings with all the individual component auditors and management of the relevant group entities, and participated at a minimum in the component auditor closing calls. For selected component auditors (in North America, Germany, and Spain), remote file reviews were conducted to evaluate the work undertaken and to assess their findings. The group consolidation, financial statement disclosures, and a number of central accounting and/or reporting items were audited by the group engagement team. These items include impairment testing on goodwill and acquired identifiable intangible assets, audit procedures on the acquisition and divestment of certain assets and businesses (including assets and liabilities classified as held for sale), group accounting for current and deferred income taxes, share-based payments, the implementation of CCH Tagetik, the group’s new corporate performance management tool used for consolidation, the Wolters Kluwer N.V. company financial statements, and certain critical accounting positions subject to management estimates. Specialists were involved, amongst others, in the areas of information technology; accounting and reporting; pensions; forensic; environmental, social, and governance; and valuation. As part of our year-end audit procedures, we have considered our assessment of significant group entities in order to ensure we have obtained appropriate coverage of the risks of material misstatement for significant account balances, classes of transactions, and disclosures that we have identified. In summary, the group engagement team has: • Performed procedures at a group level on centralized key audit matters; • Performed audit procedures at Wolters Kluwer N.V. company-only; • Used the work of Deloitte component auditors, or performed specific audit procedures ourselves, when auditing the components in the Netherlands (2), Europe (9), and North America (10), and used the work of non-Deloitte component auditors in Europe (1) and the Netherlands (1); and • Performed (extended) analytical procedures at group level on the other group entities. 206 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements The group entities subject to full-scope audits and audits of specified account balances and classes of transactions comprise approximately 80% of consolidated revenues and approximately 90% of consolidated total assets. For the remaining entities, we performed a combination of specific audit procedures and analytical procedures at group level relating to the risks of material misstatement for significant account balances, classes of transactions, and disclosures that we have identified. Audit coverage Audit coverage of consolidated revenues 80% Audit coverage of consolidated total assets 90% By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group's and company’s financial information to provide an opinion on the consolidated and company financial statements. SCOPE OF AUDIT APPROACH ON FRAUD RISKS AND NON-COMPLIANCE WITH LAWS AND REGULATIONS In accordance with Dutch Standards on Auditing, we are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatements, whether due to fraud or error. Non-compliance with law and regulation may result in fines, litigation, or other consequences for the group that may have a material effect on the financial statements. Audit approach on fraud risks In identifying potential risks of material misstatements due to fraud, we obtained an understanding of the group and its environment, including the entity’s internal controls. We evaluated the group’s fraud risk assessment and made inquiries with management, those charged with governance and others within the group, including but not limited to the Corporate Risk Committee and Internal Control department. We evaluated several fraud risk factors to consider whether those factors indicated a risk of material misstatement due to fraud. We involved our forensic specialists in our risk assessment and in determining the audit responses. Following these procedures, and the presumed risk under the prevailing auditing standards, we considered the fraud risks in relation to management override of controls, including evaluating whether there was evidence of bias by the Executive Board, the executive leadership team, and other members of management, which may represent a risk of material misstatement due to fraud. As part of our audit procedures to respond to these fraud risks, we evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as among others the code of conduct, whistleblower procedures and incident registration. We evaluated the design and implementation and, where considered appropriate, tested the operating effectiveness of the internal controls relevant to mitigate these risks. As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption in close collaboration with our forensic specialist. We evaluated whether these factors indicate that a risk of material misstatement due fraud is present. Further, we performed substantive audit procedures, including detail testing of journal entries and supporting documentation in relation to post-closing adjustments. Data analytics, including analyses of high risk journals, are part of our audit approach to address fraud risks, which could have a material impact on the financial statements. The procedures prescribed are in line with the applicable auditing standards and are not primarily designed to detect fraud. We identified the following fraud risks: • Management Override of Controls; and • Manual entries to revenue outside the fulfillment system. We incorporated elements of unpredictability in our audit. We also considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliance. Independent Auditor’sReport continued ← → Wolters Kluwer 2021 Annual Report 207 We considered available information and made inquiries of relevant executives, directors (including internal audit, internal control, legal, corporate tax, and divisional CFOs) and the Supervisory Board. We evaluated whether the selection and application of accounting policies by the group, particularly those related to subjective measurements and complex transactions, may be indicative of fraudulent financial reporting. We evaluated whether the judgments and decisions made by management in making the accounting estimates included in the financial statements indicate a possible bias that may represent a risk of material misstatement due to fraud. Management insights, estimates and assumptions that might have a major impact on the financial statements are disclosed in Note 3 of the financial statements. We performed a retrospective review of management judgments and assumptions related to significant accounting estimates reﬂected in prior year financial statements. We refer to the audit procedures as described in the separate section Our key audit matters below in addressing fraud risks in connection with revenue recognition and potential management override on specific estimates, such as those applied in the valuation of goodwill and acquired identifiable intangible assets. Our procedures did not lead to indications for fraud potentially resulting in material misstatements. Audit approach on non-compliance with laws andregulations We assessed the laws and regulations relevant to the group through discussions with management, reading minutes and reports of internal audit, and inspection of selected documents regarding compliance with laws and regulations. We involved our forensic specialist in this evaluation. As a result of our risk assessment procedures on laws and regulations, and while realizing that the effects from non-compliance could considerably vary, we considered the adherence to (corporate) tax law and financial reporting regulations, the requirements under the International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and Part 9 of Book 2 of the Dutch Civil Code with a direct effect on the financial statements as an integrated part of our audit procedures, to the extent material for the related financial statements. We obtained sufficient appropriate audit evidence regarding stipulations of those laws and regulations generally recognized to have a direct effect on the financial statements. Apart from these, the group is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts and/or disclosures in the financial statements, for instance through imposing fines or litigation. Given the nature of the group’s business and the complexity of the applicable laws and regulations, we considered data and privacy legislation and there is a risk of non-compliance with the requirements of such laws and regulations. In addition, we considered major laws and regulations applicable to listed companies, including the Dutch Corporate Governance Code, the EU taxonomy for sustainable activities, and the European Single Electronic Reporting Format. Our procedures are more limited with respect to these laws and regulations that do not have a direct effect on the determination of the amounts and disclosures in the financial statements. Compliance with these laws and regulations may be fundamental to the operating aspects of the business, the group’s ability to continue its business, or to avoid material penalties (e.g., compliance with the terms of licenses, permits, or intellectual property rights) and therefore non-compliance with such laws and regulations may have a material effect on the financial statements. Our responsibility is limited to undertaking specified audit procedures to help identify non-compliance with those laws and regulations that may have a material effect on the financial statements. Our procedures are limited to (i) inquiry of management, the Supervisory Board, the Executive Board, and others within the group as to whether the group is in compliance with such laws and regulations and (ii) inspecting correspondence, if any, with the relevant licensing or regulatory authorities to help identify non-compliance with those laws and regulations that may have a material effect on the financial statements. Naturally, we remained alert to indications of (suspected) non-compliance throughout the audit. Finally, we obtained written representations that all known instances of (suspected) fraud or non-compliance with laws and regulations have been disclosed to us. 208 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Audit approach on going concern Our responsibilities, as well as the responsibilities of the Executive Board and the Supervisory Board, related to going concern under the prevailing standards are outlined in the Description of responsibilities regarding the financial statements section below. The Executive Board has assessed the going concern assumption, as part of the preparation of the consolidated financial statements, and as disclosed in Note 1. The Executive Board believes that no events or conditions, including the COVID-19 pandemic, give rise to doubt about the ability of the group to continue in operation at least 12 months from the end of the reporting period. We have obtained management’s assessment of the entity’s ability to continue as a going concern, and have assessed the going concern assumption applied. As part of our procedures, we evaluated whether sufficient appropriate audit evidence has been obtained regarding, and have concluded on, the appropriateness of management’s use of the going concern basis of accounting in the preparation of the consolidated financial statements. Based on these procedures, we did not identify any reportable findings related to the entity’s ability to continue as a going concern. OUR KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reﬂection of all matters discussed. Management evaluated the impact of the COVID-19 pandemic on the group’s business in Note 3. We assessed the impact of COVID-19 on our audit approach. For our specific considerations regarding our group audit, refer to Scope of the group audit above. Our specific considerations related to the valuation of goodwill and acquired identifiable intangible assets and internal controls over financial reporting are included in the respective key audit matters below. In 2021, we considered the purchase price allocation for significant new business combinations no longer a key audit matter, since no significant business combinations were completed during the financial year. The key audit matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Independent Auditor’sReport continued ← → Wolters Kluwer 2021 Annual Report 209 Key audit matters Description How the key audit matter was addressed in the audit Valuation of goodwill and acquired identifiable intangible assets The group has €4,180 million of goodwill and €1,045 million of acquired identifiable intangible assets (December 31, 2020: €3,969 million and €1,118 million respectively), as disclosed in Note 18. Goodwill and acquired identifiable intangible assets represent 58% (2020: 61%) of consolidated total assets and 216% (2020: 244%) of consolidated total shareholders’ equity. Goodwill is subject to an annual impairment test. The value-in-use of goodwill and acquired identifiable intangible assets is dependent on expected future cash flows from the underlying group of Cash Generating Units (CGUs) for goodwill and individual CGUs for acquired identifiable intangible assets. The impairment assessment prepared by management includes a variety of internal and external factors. In connection with these factors, management made significant estimates that require the use of valuation models and a significant level of management judgment, potentially subject to management override, particularly the assumptions related to the weighted average cost of capital, the perpetual growth rates, and the adjusted operating profit margin. For goodwill, an annual impairment test was performed. The annual impairment test for goodwill did not result in an impairment. During the year, management performed triggering event analyses for its assets, including acquired identifiable intangible assets. For acquired identifiable intangible assets in the individual CGU Learner's Digest (Health) and individual CGUs within the Governance, Risk & Compliance and Health operating segment, triggers for impairment were identified. The impairment tests performed resulted in impairment adjustments to the acquired identifiable intangible assets of €38 million. The sensitivity analysis has been disclosed in Note 18. We obtained an understanding of the process in place and identified controls in the impairment assessment of the group for goodwill and acquired identifiable intangible assets as a basis for our mainly substantive audit approach. We obtained management’s triggering event analysis, also including the impact of the COVID-19 pandemic, and for the individual CGUs where a trigger for impairment was identified, we obtained the respective impairment assessment and have evaluated the impairment test models. We involved valuation specialists to assess the models used and the key assumptions applied as outlined in Note 18. Our valuation specialists assisted us specifically in evaluating the weighted average cost of capital, the perpetual growth rates, and other rates applied by benchmarking against independent data and peers in the industry. We evaluated management’s key assumptions used for cash ﬂow projections (including adjusted operating profit margins), weighted average cost of capital, and perpetual growth rates. We compared rates in use with historical trends and external data and performed sensitivity analyses. We reconciled forecasted cash ﬂows per group of CGUs to authorized budgets and obtained an understanding how these budgets were compiled. For the individual CGU Learner's Digest (Health operating segment) and individual CGUs within the Governance, Risk & Compliance and Health operating segment where impairment triggers were identified for acquired identifiable intangible assets, these procedures were performed for the individual CGUs. We also evaluated the adequacy of the disclosures provided by the group in Note 18 in relation to its impairment assessment. Observations We did not identify any reportable matters in management’s valuation of goodwill and acquired identifiable intangible assets and the respective impairment adjustments recorded, as well as the corresponding disclosures included in Note 18. 210 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Key audit matters continued Description How the key audit matter was addressed in the audit Revenue recognition Revenue (transactions) may be subject to manual adjustments outside the fulfillment systems. There is a risk of material misstatement that these revenue adjustments are based on manual journal entries that are non-valid, inaccurate, and/or that allocate revenue to the improper period. The group’s revenue recognition policies are disclosed in Note 6. Significant complex new and/or amended revenue arrangements may also require careful consideration and judgment in determining the correct revenue recognition pattern in accordance with IFRS 15. For such contracts, the group may fail to defer revenue recognition, or allocate the incorrect selling price to the different elements in the arrangements in accordance with IFRS 15 requirements, potentially resulting in inaccurate and improper revenue recognition. Component auditors were involved in performing audit procedures on the identified risk on revenue recognition. The revenue recognition audit procedures performed on existing contracts were focused on manual adjustments, which could impact the accuracy, occurrence, and cut-off of recorded revenue, especially around period-end. We obtained an understanding of the revenue processes, and tested design and implementation of controls in place, including segregation of duties, relevant to our audit. Manual entries to revenue recorded were evaluated with authorized source documents such as the underlying contract, customer acceptance form, and/or third-party delivery confirmation. The recognition of revenue, contract assets, and contract liabilities, including deferred income, was evaluated with the underlying contract, customer acceptance form, and/or third-party delivery confirmation. We evaluated proper allocation of the contract value to the different performance obligations and evaluated the revenue recognition patterns applied, in accordance with IFRS 15. For significant acquisitions completed in the prior year (eOriginal and XCM Solutions), we specifically evaluated the accounting treatment of the material revenue streams (primarily Software as a Service) in accordance with IFRS 15. Our risk assessment in connection with revenue recognition did not change, since the overall product portfolio of the group remained materially unchanged as compared to the prior year. We also evaluated the adequacy of the disclosures provided by the group in Note 6. Observations Based on our procedures performed, we did not identify any reportable matters in manual adjustments to revenue, significant new and/or amended revenue arrangements, and corresponding disclosures included in Note 6. Independent Auditor’sReport continued ← → Wolters Kluwer 2021 Annual Report 211 Key audit matters continued Description How the key audit matter was addressed in the audit Internal controls over financial reporting The group has its businesses in a large number of countries and locations. The group operates various IT systems, processes, and procedures locally that are important for the continuity of its business operations and for the reliability of its financial reporting. In addition, the group is exposed to IT- related risks and cyber threats that could affect their IT infrastructure and system availability, applications, and company and customer data. During 2021, the group completed the implementation of CCH Tagetik, the group’s new corporate performance management tool used for consolidation. As a result of the COVID-19 pandemic, substantially all of the group’s employees have been working remotely since March 2020 and during the full 2021 financial year. Local Internal Control officers were involved in evaluating the implications on a day-to- day basis. We have considered the group’s internal controls over financial reporting as a basis for designing and performing the audit activities that are deemed appropriate for our audit. We are, however, not required to perform an audit on internal controls over financial reporting and accordingly we do not express an opinion on the effectiveness of the group’s controls over financial reporting. We have tailored our audit procedures to the diverse (local) IT landscapes and the implemented internal controls. We have included specialized IT auditors in our audit teams to test the reliability and continuity of the automated data processing, solely to the extent necessary within the scope of the financial statements audit. Where relevant to the audit, we have tested the operating effectiveness of (IT) controls and performed additional audit procedures. Also, we have involved specialized IT auditors to evaluate the group’s annual cyber assessment, and we have held inquiries with key stakeholders addressing IT- related risks and cyber threats. Also, in conjunction with our component audit teams and specialized IT auditors, we have specifically considered the implementation of CCH Tagetik in our audit. Observations The impact of the COVID-19 pandemic on the remote execution of controls remains limited, since many controls were already executed digitally. We have reported our observations on internal controls over financial reporting to the Audit Committee and have performed additional audit procedures, where deemed needed, with satisfactory results. 212 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Independent Auditor’sReport continued REPORT ON THE OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT 2021 In addition to the financial statements and our auditor's report thereon, the annual report 2021 contains other information that consists of: • Strategic Report; • Governance; and • Other Information as required by Part 9 of Book 2 of the Dutch Civil Code. Based on the following procedures performed, we conclude that the other information: • Is consistent with the financial statements and does not contain material misstatements; and • Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code. We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard on Auditing 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements. Management is responsible for the preparation of the other information, including the Report of the Executive Board in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by Part 9 of Book 2 of the Dutch Civil Code. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Engagement We were appointed by the General Meeting of Shareholders as auditor of Wolters Kluwer N.V. on April 23, 2014, for the audit of the financial year 2015 and have operated as statutory auditor ever since that financial year. In the General Meeting of Shareholders on April 19, 2018, we were re-appointed for a period of four years for the financial years 2019 through 2022. No prohibited non-audit services We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. European Single Electronic Reporting Format (ESEF) The group has prepared its annual report in ESEF. The requirements for this are set out in the Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF). In our opinion, the annual report, prepared in XHTML format, including the partially marked-up consolidated financial statements, as included in the reporting package by the group, complies in all material respects with the RTS on ESEF. Management is responsible for preparing the annual report including the financial statements in accordance with RTS on ESEF, whereby management combines the various components into a single reporting package. Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package complies with the RTS on ESEF. Our procedures, taking into account Alert 43 of the NBA (the Netherlands Institute of Chartered Accountants), included amongst others: • Obtaining an understanding of the company’s financial reporting process, including the preparation of the reporting package; • Obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance and the XBRL extension taxonomy files has been prepared in accordance with the technical specifications as included in the RTS on ESEF; and • Examining the information related to the consolidated financial statements in the reporting package to determine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF. ← → Wolters Kluwer 2021 Annual Report 213 DESCRIPTION OF RESPONSIBILITIES REGARDING THE FINANCIAL STATEMENTS Responsibilities of management for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS-EU and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of the financial statements, management is responsible for assessing the group's ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the group or to cease operations or has no realistic alternative but to do so. Management should disclose events and circumstances that may cast significant doubt on the group's ability to continue as a going concern in the financial statements. The Supervisory Board is responsible for overseeing the group's financial reporting process. Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing, and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion. We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements, and independence requirements. Our audit included among others: • Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtaining an understanding of internal control relevant to the audit 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 group's internal control. • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Concluding on the appropriateness of management's use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the group to cease to continue as a going concern. • Evaluating the overall presentation, structure, and content of the financial statements, including the disclosures. • Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising, and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items. 214 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Independent Auditor’sReport continued We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identified during our audit. In this respect we also submit an additional report to the Audit Committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor's report. We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest. Amsterdam, February 22, 2022 Deloitte Accountants B.V. B.E. Savert ← → Wolters Kluwer 2021 Annual Report 215 ARTICLE 29 OF THE ARTICLES OF ASSOCIATION Paragraph 1 From the profit as it appears on the annual accounts adopted by the General Meeting, a dividend shall be distributed on the preference shares, whose percentage – calculated on the paid part of the nominal amount – is equal to that of the average of the interest rate on Basis Refinancing Transactions (Refi interest of the European Central Bank). These are weighted according to the number of days over which this rate of interest applies during the financial year over which the dividend was paid, increased by a debit interest rate to be determined by the large Dutch banks and also increased by a margin determined by the Executive Board and approved by the Supervisory Board of one percentage point (1%) minimum and four percentage points (4%) maximum. The dividend on the preference shares shall be calculated on an annual basis on the paid part of the nominal amount. If in any financial year the distribution referred to in the first full sentence cannot be made or can only be made in part because the profits are not sufficient, the deficiency shall be distributed from the distributable part of the company’s equity. No further dividend shall be distributed on the preference shares. Paragraph 2 Subsequently such allocations to reserves shall be made as the Executive Board shall determine, subject to the approval of the Supervisory Board. Paragraph 3 Any balance remaining after that shall be distributed at the disposal of the General Meeting of Shareholders. Paragraph 5 Distribution of profit shall be made after adoption of the annual accounts showing that it is permitted. Paragraph 6 Subject to approval of the Supervisory Board, the Executive Board may resolve on distribution of interim dividend, provided the requirements of paragraph 4 have been met, according to an interim statement of assets and liabilities. It shall relate to the position of the assets and liabilities no earlier than on the first day of the third month before the month in which the resolution on distribution of interim dividend is made known. It shall be drawn up with observance of valuation methods considered generally acceptable. The statement of assets and liabilities shall include the amounts to be reserved by virtue of the law. It shall be signed by the Members of the Executive Board; if the signature of one or more of them is lacking this shall be stated with reasons. The statement of assets and liabilities shall be deposited at the office of the Commercial Register within eight days after the day on which the resolution on distribution is made known. Paragraph 7 If a loss is suffered for any year, that loss shall be transferred to a new account for set-off against future profits, and for that year no dividend shall be distributed. Based on the proposal of the Executive Board that has been approved by the Supervisory Board, the General Meeting of Shareholders may resolve, however, to delete such a loss by writing it off on a reserve that need not be maintained, according to the law. ARTICLE 30 OF THE ARTICLES OF ASSOCIATION Paragraph 1 On the proposal of the Executive Board that has been approved by the Supervisory Board, the General Meeting of Shareholders may resolve that a distribution of dividend on ordinary shares shall be made entirely or partially not in money but in ordinary shares in the capital of the company. Paragraph 2 On the proposal of the Executive Board that has been approved by the Supervisory Board, the General Meeting of Shareholders may resolve on distributions in money or in the manner as referred to in Paragraph 1 to holders of ordinary shares against one or more reserves that need not be maintained under the law. Articles of Association Provisions GoverningProfitAppropriation Other Information 216 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements ACTIVITIES The Board of the Wolters Kluwer Preference Shares Foundation (the Foundation) met twice in 2021. Due to the global pandemic, the meetings were virtual. The matters discussed included the company’s results, the execution of the strategy, the impact of the global pandemic, the financing of the company, acquisitions and divestments, developments in the market, and the general course of events at Wolters Kluwer. Representatives of the Executive Board of the company, the chair of the Supervisory Board, and corporate staff attended the meetings to give the Board of the Foundation information about the developments within Wolters Kluwer. The Board of the Foundation also followed developments of the company outside of board meetings, among other through receipt by the board members of press releases. As a result, the Board of the Foundation has a good view on the course of events at Wolters Kluwer. The Board of the Foundation also closely monitored the developments with respect to corporate governance and relevant Dutch legislation and discussed that topic during the meeting. Furthermore, the financing of the Foundation and the composition of the Board of the Foundation were discussed. The Foundation acquired no preference shares during the year under review. EXERCISE OF THE PREFERENCE SHARES OPTION Wolters Kluwer N.V. and the Foundation have concluded an agreement based on which preference shares can be taken by the Foundation. This option on preference shares is at present a measure that could be considered as a potential protection at Wolters Kluwer against exercising inﬂuence by a third party on the policy of the company without the consent of the Executive Board and Supervisory Board, including events that could threaten the strategy, continuity, independence, identity, or coherence between the activities of the company. The Foundation is entitled to exercise the option on preference shares in such a way that the number of preference shares taken will be no more than 100% of the number of issued and outstanding ordinary shares at the time of exercise. Among other things by the exercise of the option on the preference shares by the Foundation, the Executive Board and the Supervisory Board will have the possibility to determine their position with respect to, for example, a party making a bid on the shares of Wolters Kluwer, and its plans, or with respect to a third party that otherwise wishes to exercise decisive inﬂuence, and enables the boards to examine and implement alternatives. COMPOSITION OF THE BOARD OF THE WOLTERS KLUWER PREFERENCE SHARES FOUNDATION Mr. Voogd retired in 2021, due to the expiration of his final term. The Board of the Foundation appointed Mr. Bouw as new Chair and Mr. Tiemstra as Vice-Chair. In addition, the Board of the Foundation appointed Mr. Visser as new member. The Foundation is a legal entity that is independent from the company as stipulated in clause 5:71 (1) sub c of the Act on financial supervision (Wet op het financieel toezicht). All members of the Board of the Foundation are independent from the company. Alphen aan den Rijn, February 22, 2022 Board of Wolters Kluwer Preference Shares Foundation P. Bouw, Chair J.S.T. Tiemstra, Vice-Chair J.H.M. Lindenbergh G.W.Ch. Visser Report of the Wolters Kluwer Preference SharesFoundation ← → Wolters Kluwer 2021 Annual Report 217 Additional information regarding Wolters Kluwer shares andbonds is provided in this chapter. ORDINARY SHARES AND ADRS Wolters Kluwer N.V. ordinary shares are listed on Euronext Amsterdam under the symbol WKL. During 2021, the average daily trading volume of Wolters Kluwer shares on Euronext Amsterdam was 521,131 shares (2020: 677,347), according to Euronext. American Depositary Receipt (ADR) program Wolters Kluwer has a sponsored Level I American Depositary Receipt (ADR) program. Each Wolters Kluwer ADR represents one ordinary share (ADR ratio 1:1). Wolters Kluwer ADRs are denominated in U.S. dollars and are traded on the over-the-counter (OTC) securities market in the United States. Wolters Kluwer ADRs receive the same dividends as the ordinary shares converted into U.S. dollars at the prevailing €/$ exchange rate. For more information contact our ADR depositary bank: Deutsche Bank Trust Company Americas, c/o American Stock Transfer & Trust Company, Peck Slip Station, P.O. Box 2050 New York, N.Y. 10272-2050, United States, or visit www.adr. db.com. Securities codes and ticker symbols System Ordinary shares ADRs ISIN NL0000395903 US9778742059 Sedol 5671519 2977049 Bloomberg WKL:NA WTKWY:US Reuters RIC WLSNc.AS WTKWY CUSIP – 977874205 Exchange Euronext Over-the-counter (OTC) SHARE PRICE PERFORMANCE Wolters Kluwer shares ended the year 2021 up 50%, closing the year at €103.60. Over the ﬁve-year period ending December 31, 2021, Wolters Kluwer shares have increased by 201%, signiﬁcantly outperforming the Amsterdam AEX index and the STOXX Europe 600, which increased 65% and 35%, respectively. Wolters Kluwer ADRs (quoted in U.S. dollars) appreciated 225% over this ﬁve-year period, signiﬁcantly outperforming the S&P 500, which rose 113%. Five-year share price performance 2017-2021 € 2017 2018 2019 20212020 110 90 100 80 70 60 50 40 30 20 10 Wolters Kluwer N.V. AEX (rebased) STOXX Europe 600 (rebased) Source: Nasdaq/FactSet data. Indices rebased to Wolters Kluwer share price. Wolters Kluwer Shares andBonds 218 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Wolters Kluwer Shares andBonds continued DIVIDEND POLICY AND DIVIDEND PROPOSAL Dividend policy Wolters Kluwer is committed to a progressive dividend policy. Proposed annual increases in the dividend per share take into account our ﬁnancial performance, market conditions, and our need for ﬁnancial ﬂexibility. The policy takes into consideration the characteristics of our business, our expectations for future cash ﬂows, and our plans for organic investment or for external investment in acquisitions. Proposed 2021 dividend We are proposing to increase the total dividend for the ﬁnancial year 2021 by 15% (2020: 15% increase) to €1.57 per share (2020: €1.36). We will therefore recommend a ﬁnal dividend of €1.03 per share, subject to approval of shareholders at the Annual General Meeting in April 2022. For 2022, we intend to maintain the interim distribution at 40% of prior year total dividend. Shareholders can choose to reinvest interim and ﬁnal dividends by purchasing additional Wolters Kluwer shares through the Dividend Reinvestment Plan (DRIP) administered by ABN AMRO Bank N.V. SHARE BUYBACK PROGRAMS As a matter of policy since 2012, Wolters Kluwer offsets the dilution caused by our annual incentive share issuance with share repurchases (Anti-Dilution Policy). In addition, when appropriate, we return capital to shareholders through further share buyback programs. Shares repurchased by the company are added to and held as treasury shares. Treasury shares are either canceled or are held to meet future obligations under share-based incentive plans. During 2021, we repurchased 5.0 million shares for a total consideration of €410 million, including 0.7 million shares to offset incentive share issuance (2020: 0.9 million). As of December 31, 2021, we held 4.3 million shares in treasury. A summary of amounts repurchased and cancelations over the past few years is shown below. Share repurchases and cancelations 2017-2021 Shares repurchased million Total consideration € million Average share price € Treasury shares canceled million Treasury shares released for LTIP million 2021 5.0 410 82.62 5.0 0.7 2020 5.1 350 68.41 5.5 0.9 2019 5.5 350 63.80 6.7 1.0 2018 11.5 550 47.81 10.6 1.3 2017 7.8 300 38.62 11.6 1.4 Share buyback 2022 On February 23, 2022, we will announce our intention to spend up to €600 million on share repurchases during 2022, including repurchases to offset incentive share issuance. As of February 22, 2022, €50 million of this 2022 buyback had already been completed. We believe this level of cash return leaves us with ample headroom to support our dividend plans, to sustain organic investment, and to make selective acquisitions. The share repurchases may be suspended, discontinued, or modiﬁed at any time. At the Annual General Meeting in April 2022, we will propose canceling any or all treasury shares that are not used for share-based incentive plans. ← → Wolters Kluwer 2021 Annual Report 219 SHARE CAPITAL AND MARKET CAPITALIZATION Shares issued and outstanding The number of issued ordinary shares on December 31, 2021, was 262.5 million (2020: 267.5 million), of which 4.3 million were held in treasury. In September 2021, 5.0 million treasury shares were canceled. During 2021, 5.0 million shares were repurchased and added to treasury, while 0.7 million shares were released for long-term incentive plans. The diluted weighted average number of ordinary shares used to compute the diluted earnings per share ﬁgures was 261.8 million in 2021. Market capitalization Based on issued ordinary shares (including 4.3 million treasury shares), the market capitalization of Wolters Kluwer as of December 31, 2021, was €27.2 billion (December 31, 2020: €18.5 billion). Shares issued and outstanding number of shares in millions 2021 2020 Issued ordinary shares (December 31) 262.5 267.5 Treasury shares (December 31) 4.3 5.1 Issued ordinary shares outstanding (December 31) 258.2 262.4 Weighted average number of ordinary shares outstanding 260.4 265.0 Diluted weighted average number of ordinary shares 261.8 266.6 SHAREHOLDER STRUCTURE Wolters Kluwer has 100% free ﬂoat and a widely distributed, global shareholder base. Approximately 92% of the issued ordinary shares of Wolters Kluwer is held by institutional investors. The remaining 8% is held by retail investors, broker-dealers, or held in treasury by Wolters Kluwer. As of October 2021, nearly half of our issued share capital is held by investors in North America, mainly the United States and Canada. Institutions based in the United Kingdom held 23%, while institutions based in continental Europe owned 18%. Institutions in Asia Paciﬁc & Rest of World own approximately 3% of our issued share capital. Approximately 20% of issued share capital is held in passive, index, or quant funds. Based on a broad deﬁnition of sustainable investing, ESG funds hold approximately 30% of our issued share capital. Shareholders who have notiﬁed the Dutch Authority for the Financial Markets (AFM) indicating a capital interest exceeding the AFM’s reporting thresholds can be found on the AFM website (www.afm.nl). Geographical distribution of issued share capital United States 40% Canada 8% United Kingdom 23% France 5% Switzerland 3% Germany 3% Netherlands 2% Rest of Europe 5% Asia Paciﬁc & ROW 3% Retail 4% Broker/Dealers/Other 3% Treasury shares 1% Source: Nasdaq Corporate Solutions, as of October 2021. 220 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Wolters Kluwer Shares andBonds continued Some of the most widely followed indices that include Wolters Kluwer shares are shown below. Wolters Kluwer weight in selected indices Index Weight % AEX ® 3.18% Euronext ® 100 0.71% Euronext ® Eurozone ESG Leaders Select 40 2.43% EURO STOXX ® 0.49% EURO STOXX ® MEDIA 35.86% STOXX ® Europe 600 0.25% STOXX ® Europe 600 Media 14.74% STOXX ® Europe 600 ESG-X 0.26% MSCI Europe Commercial & Professional Services 12.96% Sources: Euronext, STOXX, MSCI. Weights as of December 31, 2021. INDUSTRY CLASSIFICATIONS AND INDICES Wolters Kluwer is currently classiﬁed in different industry sectors by the global index providers. Industry classiﬁcation by main index providers Main index provider System used Wolters Kluwer Industry Classification (Code) Bloomberg BICS Technology: Software & Technology Services (1814) STOXX, FTSE Russell ICB Consumer Discretionary: Media: Media: Publishing (5557) MSCI, S&P, Dow Jones GICS Industrials: Commercial & Professional Services: Research & ConsultingServices(20202020) Sources: Bloomberg, FTSE Russell, MSCI, S&P Global, STOXX. RESEARCH RATINGS Wolters Kluwer is covered by over 20 sell-side analysts. Of those who regularly publish research, as of January 12, 2022, ﬁve have a Buy rating, eleven have a Hold rating, and two rate the shares a Sell. A diverse range of ﬁrms produce environmental, social, and governance (ESG) research and ratings on Wolters Kluwer. A selection of publicly available ESG ratings is shown below. A list of analysts can be found on our Investor Relations website www.wolterskluwer.com/en/investors/analysts/analyst-coverage Selected ESG ratings ESG rating 2021 2020 Description MSCI ESG Rating AAA AAA MSCI rating uses a scale of AAA – CCC. AAA is the top score. ISS Governance Quality Score 1 1 ISS quality scores (introduced 2020) are on a scale of 1 – 10, with a lower score denoting lower risk. ISS Social Quality Score 2 4 ISS Environment Quality Score 3 3 Sustainalytics ESG Risk Score 9.5 9.6 Sustainalytics risk score (introduced in 2020) is on a scale of 0–100. A lower score signals lower unmanaged ESG risk. A score of 9.5 is considered negligible risk. Sources: MSCI, ISS, Sustainalytics, as of January 12, 2022. ← → Wolters Kluwer 2021 Annual Report 221 BONDS AND OTHER FIXED INCOME SECURITIES Wolters Kluwer has six Eurobonds listed on the Luxembourg exchange, with a total face value of €2,636 million. Wolters Kluwer listed ﬁxed-income issues Debt security Due Amount € million Listing ISIN 2.875% senior bonds March 2023 €700 Luxembourg XS0907301260 2.500% senior bonds May 2024 €400 Luxembourg XS1067329570 1.500% senior bonds March 2027 €500 Luxembourg XS1575992596 0.250% senior bonds March 2028 €500 Luxembourg XS2324836878 6.748% senior bonds August 2028 €36 Luxembourg XS0384322656 0.750% senior bonds July 2030 €500 Luxembourg XS2198580271 Euro Commercial Paper Wolters Kluwer has a Euro Commercial Paper (ECP) program (established May 7, 2019) under which the company may issue unsecured, short-term debt (ECP notes) up to a maximum of €1.0 billion. The outstanding amount (included in borrowings and bank overdrafts) per December 31, 2021, is nil (December 31, 2020: €100 million). Type As of Issued € million Total facility € million Euro Commercial Paper (ECP) December 31, 2021 Nil 1,000 Sustainability-linked multi-currency revolving credit facility In July 2021, a one-year extension was agreed on our €600 million multi-currency revolving credit facility such that the facility now matures in July 2024 and still includes a further one-year extension option. At the same time, four ESG measures were linked to the credit facility. Type Term Drawn € million Total facility € million Multi-currency revolving credit facility July 2020 – July 2024 Nil 600 Credit ratings Maintaining investment grade credit ratings is a core policy of Wolters Kluwer. See the table below for current credit ratings and outlook. Agency Long-term Short-term Outlook Date of rating Date affirmed Moody’s Baa1 – Stable September 12, 2013 March 8, 2021 S&P BBB+ A-2 Stable March 7, 2013 April 30, 2021 Source: Moody’s, S&P Global. 222 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements INVESTOR RELATIONS Shareholder engagement Wolters Kluwer places great importance on a constructive dialogue with the investment community. We manage a comprehensive investor relations program designed to maintain regular interaction with investors and sell-side analysts. We communicate through our half-year and full-year earnings releases and presentations, trading updates, the annual report, and other information published on our investor relations website. We host live webcast presentations of our half-year and full-year results, hold the Annual General Meeting of Shareholders, and interact with investors on roadshows and at conferences. In December 2021, we hosted a virtual teach-in on our Health division and our central technology development team, Digital eXperience Group. During the year, the Executive Board met with shareholders representing around 40% of our issued share capital. Investor Relations is focused on helping the market understand our business, our strategy, our markets, as well as our ﬁnancial performance. We aim to be responsive and proactive and welcome direct feedback from investors. Wolters Kluwer is committed to a high degree of transparency in its ﬁnancial reporting and strives to be open with its shareholders and the wider investment community. Investor Relations website www.wolterskluwer.com/en/investors Investor relations policy Wolters Kluwer is strict in its compliance with applicable rules and regulations on fair disclosure to shareholders. Presentations are posted publicly on the company’s website at the same time as they are made available to analysts and investors. In adherence with fair disclosure rules, meetings and presentations do not take place during ‘closed periods’ before the publication of annual and quarterly ﬁnancial information. The company does not assess, comment upon, or correct, other than factually, any analyst report or valuation prior to publication. The company is committed to helping investors and analysts become better acquainted with Wolters Kluwer and its management, as well as to maintaining a long-term relationship of trust with the investment community at large. Financial calendar 2022-2023 2022 April 21 Annual General Meeting of Shareholders April 25 Ex-dividend date: 2021 final dividend April 26 Record date: 2021 final dividend May 4 First-Quarter 2022 Trading Update May 18 Payment date: 2021 final dividend, ordinary shares May 25 Payment date: 2021 final dividend, ADRs August 3 Half-Year 2022 Results August 30 Ex-dividend date: 2022 interim dividend August 31 Record date: 2022 interim dividend September 22 Payment date: 2022 interim dividend, ordinary shares September 29 Payment date: 2022 interim dividend, ADRs November 2 Nine-Month 2022 Trading Update 2023 February 22 Full-Year 2022 Results March 8 Publication of 2022 Annual Report Wolters Kluwer Shares andBonds continued ← → Wolters Kluwer 2021 Annual Report 223 in millions of euros, unless otherwise stated 2021 2020 2019 2018 * 2017 ** Revenues 4,771 4,603 4,612 4,259 4,368 Operating profit 1,012 972 908 967 830 Profit for the year, attributable to owners of the company 728 721 669 656 636 Adjusted EBITDA 1,514 1,422 1,382 1,274 1,179 Adjusted operating profit 1,205 1,124 1,089 986 970 Adjusted net financing costs 78 46 58 77 109 Adjusted net profit 885 835 790 682 639 Adjusted free cash flow 1,010 907 807 762 746 Proposed dividend distribution 405 357 315 266 239 Acquisition spending 108 395 34 166 313 Net capital expenditure 239 231 226 214 210 Amortization/impairment of other intangible assets and depreciation/impairment of PPE and right-of-use assets 309 298 293 288 209 Amortization/impairment of acquired identifiable intangible assets 164 144 182 175 187 Shareholders’ equity 2,417 2,087 2,380 2,254 2,228 Guarantee equity 2,417 2,087 2,380 2,254 2,232 Net debt 2,131 2,383 2,199 2,249 2,069 Capital employed 5,859 5,087 4,966 5,013 4,845 Total assets 9,028 8,350 8,775 8,544 8,477 Ratios As % of revenues: Operating profit 21.2 21.1 19.7 22.7 19.0 Profit for the year, attributable to owners of the company 15.3 15.7 14.5 15.4 14.6 Adjusted EBITDA 31.7 30.9 30.0 29.9 27.0 Adjusted operating profit 25.3 24.4 23.6 23.1 22.2 Adjusted net profit 18.6 18.1 17.1 16.0 14.6 ROIC (%) 13.7 12.3 11.8 10.6 10.0 Dividend proposal in % of adjusted net profit 45.8 42.8 39.8 39.0 37.4 Dividend proposal in % of profit for the year, attributable to owners of the company 55.7 49.5 47.1 40.5 37.6 Cash conversion ratio (%) 112 102 96 104 100 Net interest coverage 15.5 24.5 18.7 12.8 8.9 Net-debt-to-EBITDA 1.4 1.7 1.6 1.8 1.8 Net gearing 0.9 1.1 0.9 1.0 0.9 Shareholders’ equity to capital employed 0.41 0.41 0.48 0.45 0.46 Guarantee equity to total assets 0.27 0.25 0.27 0.26 0.26 Five-Year Key Figures 224 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements 2021 2020 2019 2018 * 2017 ** Information per share (€) Total dividend proposal in cash per share 1.57 1.36 1.18 0.98 0.85 Basic earnings per share 2.79 2.72 2.47 2.37 2.23 Adjusted earnings per share 3.40 3.15 2.92 2.47 2.24 Adjusted free cash flow per share 3.89 3.42 2.98 2.75 2.62 Based on fully diluted: Diluted earnings per share 2.78 2.70 2.46 2.35 2.21 Diluted adjusted earnings per share 3.38 3.13 2.90 2.45 2.22 Diluted adjusted free cash flow per share 3.87 3.40 2.96 2.73 2.59 Weighted average number of shares issued (millions) 260.4 265.0 270.3 276.7 285.1 Diluted weighted average number of shares (millions) 261.8 266.6 272.2 278.8 287.7 Stock exchange (€) Highest quotation 105.25 78.22 67.72 55.68 44.80 Lowest quotation 63.88 52.04 49.98 39.19 34.25 Quotation at December 31 103.60 69.06 65.02 51.66 43.48 Average daily trading volume Wolters Kluwer on Euronext Amsterdam N.V. (thousands of shares) 521 677 643 755 719 Employees Headcount at December 31 19,827 19,169 18,979 18,553 18,830 In full-time equivalents at December 31 19,454 18,785 18,361 18,134 18,315 In full-time equivalents average per annum 19,741 19,180 18,883 18,687 18,982 * Restated for IFRS 16, IFRIC 23, and certain reclassiﬁcations. ** Restated for IFRS 15. Five-Year Key Figures continued ← → Wolters Kluwer 2021 Annual Report 225 Glossary Adjusted ‘Adjusted’ refers to ﬁgures from continuing operations, adjusted for non-benchmark items and amortization and impairment of goodwill and acquired identiﬁable intangible assets. ‘Adjusted’ ﬁgures are non-IFRS compliant ﬁnancial ﬁgures but are internally regarded as key performance indicators to measure the underlying performance of the business. Adjusted earnings per share Adjusted net proﬁt divided by the weighted average number of ordinary shares outstanding. Adjusted EBITDA EBITDA adjusted for non-benchmark items in operating proﬁt. Adjusted free cash ﬂow Net cash from operating activities less net capital expenditure, plus paid acquisition and divestment expenses, plus dividends received, and one-off cash tax items. Adjusted free cash ﬂow is the cash ﬂow available for payments of dividends to shareholders, acquisitions, repayments of debt, and repurchasing of shares. Adjusted net ﬁnancing costs Total ﬁnancing results adjusted for non-benchmark items in total ﬁnancing results. Adjusted net proﬁt Proﬁt for the period from continuing operations attributable to the owners of the company, excluding the after- tax effect of non-benchmark items, amortization of acquired identiﬁable intangible assets, and impairment of goodwill and acquired identiﬁable intangible assets. Adjusted operating cash ﬂow Adjusted EBITDA plus or minus autonomous movements in working capital, less net capital expenditure, repayments of lease liabilities, and lease interest paid. Adjusted operating proﬁt Operating proﬁt before amortization and impairment of acquired identiﬁable intangible assets and impairment of goodwill, and adjusted for non- benchmark items. Adjusted operating proﬁt margin Adjusted operating proﬁt as a percentage of revenues. Adjusted proﬁt before tax Sum of adjusted operating proﬁt, adjusted net ﬁnancing costs, income from investments, and share of proﬁt of equity-accounted investees (net of tax). Allocated tax Adjusted operating proﬁt multiplied by benchmark tax rate. Basic earnings per share The proﬁt or loss attributable to the ordinary shareholders of the company, divided by the weighted average number of ordinary shares outstanding during the period. Benchmark tax rate Income tax on adjusted proﬁt, divided by adjusted proﬁt before tax. Capital employed Total assets, minus current liabilities and non-current deferred income. Cash conversion ratio Adjusted operating cash ﬂow divided by adjusted operating proﬁt. Constant currencies Income, expense, and cash ﬂows in local currencies are recalculated to euros, using the average exchange rates of the previous calendar year. Continuing operations The results of the group, excluding the results of those components that have been presented as discontinued operations. Diluted adjusted earnings per share Adjusted earnings per share amended for the effects of all dilutive potential ordinary shares. Shares conditionally awarded under LTIP-plans are included in the calculation of the diluted weighted average number of ordinary shares outstanding if the vesting conditions are satisﬁed. Diluted earnings per share Basic earnings per share amended for the effects of all dilutive potential ordinary shares. Shares conditionally awarded under LTIP-plans are included in the calculation of the diluted weighted average number of ordinary shares outstanding if the vesting conditions are satisﬁed. EBITA (Earnings before interest, tax, and amortization) Operating proﬁt before amortization and impairment of acquired identiﬁable intangible assets and impairment of goodwill. EBITDA (Earnings before interest, tax, depreciation, andamortization) Operating proﬁt before amortization and impairment of acquired identiﬁable intangible assets and impairment of goodwill, and before amortization and impairment of other intangible assets and depreciation and impairment of PPE, and right-of-use assets. Guarantee equity Sum of total equity, subordinated (convertible) bonds, and perpetual cumulative bonds. Invested capital Total assets minus current liabilities and non-current deferred income, excluding investments in equity- accounted investees, deferred tax assets, non-operating working capital, and cash and cash equivalents. This total summation is adjusted for accumulated amortization on acquired identiﬁable intangible assets, goodwill amortized pre-IFRS 2004, and goodwill written off to equity prior to 1996 (excluding acquired identiﬁable intangible assets/goodwill that have been impaired and/or fully amortized), less any related deferred tax liabilities. The average invested capital is based on ﬁve measurement points during the year. Net capital expenditure Sum of capitalized expenditure on PPE and other intangible assets, less any cash inﬂows arising from disposal of PPE and other intangible assets. Net debt Sum of long-term debt, borrowings and bank overdrafts, and deferred and contingent acquisition payments, minus cash and cash equivalents, divestment receivables, collateral deposited, and the net fair value of derivative ﬁnancial instruments. Net-debt-to-EBITDA ratio Net debt divided by EBITDA, adjusted for divestment-related results on operations. Net gearing Net debt divided by total equity. Net interest coverage Adjusted operating proﬁt, divided by adjusted net ﬁnancing costs. Non-benchmark items Non-benchmark items relate to expenses arising from circumstances or transactions that, given their size or nature, are clearly distinct from the ordinary activities of the group, and are excluded from the benchmark ﬁgures. Non-benchmark items in operating proﬁt include amortization and impairment of acquired identiﬁable intangible assets, impairment of goodwill, results from divestments (including directly attributable divestment costs), additions to and releases from provisions for restructuring of stranded costs following divestments, acquisition- related costs, additions to and releases from acquisition integration provisions, subsequent fair value changes on contingent considerations, and loss on remeasurement on assets classiﬁed as held for sale. Non-benchmark items in total ﬁnancing results are ﬁnancing component employee beneﬁts, gains and losses on ﬁnancial assets at fair value through proﬁt or loss, and divestment-related results on equity-accounted investees. NOPAT Net operating proﬁt after allocated tax. Adjusted operating proﬁt less allocated tax. Operating other receivables Operating other receivables consist of prepayments and miscellaneous receivables. Operating other payables Operating other payables consist of salaries and holiday allowances, social security premiums and other taxation, pension-related payables, royalty payables, and other accruals and payables. Organic revenue growth Calculated as revenue of the period, excluding the impact of acquisitions above a minimum threshold, divided by revenue of the period in the previous reporting period, adjusted for the impact of divestments of operations above a minimum threshold, all translated at constant currencies. Tax on adjusted proﬁt Income tax expense adjusted for tax beneﬁts on amortization and impairment of acquired identiﬁable intangible assets and impairment of goodwill, tax on non-benchmark items, and the income tax effect of any material changes in (income) tax laws and (income) tax rates in the jurisdictions where the group operates. Working capital Current assets less current liabilities. Working capital: non-operating working capital Total of receivables/payables of derivative ﬁnancial instruments, collateral, the short-term part of the restructuring provision, deferred and contingent acquisition payables, interest receivable/ payable, current income tax assets/ liabilities, divestment receivables, and borrowings and bank overdrafts. Working capital: operating working capital Working capital minus non-operating working capital minus cash and cash equivalents. 226 Wolters Kluwer 2021 Annual Report Strategic Report | Governance | Financial Statements Wolters Kluwer N.V. Zuidpoolsingel 2 P.O. Box 1030 2400 BA Alphen aan den Rijn The Netherlands [email protected] www.wolterskluwer.com www.linkedin.com/company/wolters-kluwer www.facebook.com/wolterskluwer www.twitter.com/wolters_kluwer Chamber of Commerce Trade Registry No. 33.202.517 Trademarks referenced are owned by Wolters Kluwer N.V. and/or its subsidiaries and may be registered in various countries. FORWARDLOOKING STATEMENTS AND OTHER IMPORTANT LEGALINFORMATION This report contains forward-looking statements. These statements may be identiﬁed by words such as "expect", "should", "could", "shall", and similar expressions. Wolters Kluwer cautions that such forward-looking statements are qualiﬁed by certain risks and uncertainties that could cause actual results and events to differ materially from what is contemplated by the forward-looking statements. Factors which could cause actual results to differ from these forward-looking statements may include, without limitation, general economic conditions; conditions in the markets in which Wolters Kluwer is engaged; behavior of customers, suppliers, and competitors; technological developments; the implementation and execution of new ICT systems or outsourcing; and legal, tax, and regulatory rules affecting Wolters Kluwer’s businesses; as well as risks related to mergers, acquisitions, and divestments. In addition, ﬁnancial risks such as currency movements, interest rate ﬂuctuations, liquidity, and credit risks could inﬂuence future results. The foregoing list of factors should not be construed as exhaustive. Wolters Kluwer disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Contact Information ABOUT THIS REPORT Sustainability information is integrated within the 2021 Annual Report. More information on sustainability is available at www.wolterskluwer.com/en/ about-us/sustainability This annual report is available as a PDF on www.wolterskluwer.com/en/investors/ ﬁnancials/annual-reports

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