SimCorp

SIMCORP - 2020 5299000J2N45DDNE4Y282020-01-012020-12-315299000J2N45DDNE4Y282019-01-012019-12-315299000J2N45DDNE4Y282020-01-015299000J2N45DDNE4Y282019-01-015299000J2N45DDNE4Y282020-12-315299000J2N45DDNE4Y282019-12-315299000J2N45DDNE4Y282020-01-01ifrs-full:IssuedCapitalMember5299000J2N45DDNE4Y282020-01-01ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000J2N45DDNE4Y282020-01-01ifrs-full:RetainedEarningsMember5299000J2N45DDNE4Y282020-01-01simcorp:DividendForTheYear5299000J2N45DDNE4Y282020-01-012020-12-31ifrs-full:RetainedEarningsMember5299000J2N45DDNE4Y282020-01-012020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000J2N45DDNE4Y282020-01-012020-12-31simcorp:DividendForTheYear5299000J2N45DDNE4Y282020-12-31ifrs-full:IssuedCapitalMember5299000J2N45DDNE4Y282020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000J2N45DDNE4Y282020-12-31ifrs-full:RetainedEarningsMember5299000J2N45DDNE4Y282020-12-31simcorp:DividendForTheYear5299000J2N45DDNE4Y282019-01-01ifrs-full:IssuedCapitalMember5299000J2N45DDNE4Y282019-01-01ifrs-full:SharePremiumMember5299000J2N45DDNE4Y282019-01-01ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000J2N45DDNE4Y282019-01-01ifrs-full:RetainedEarningsMember5299000J2N45DDNE4Y282019-01-01simcorp:DividendForTheYear5299000J2N45DDNE4Y282019-01-012019-12-31ifrs-full:SharePremiumMember5299000J2N45DDNE4Y282019-01-012019-12-31ifrs-full:RetainedEarningsMember5299000J2N45DDNE4Y282019-01-012019-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000J2N45DDNE4Y282019-01-012019-12-31simcorp:DividendForTheYear5299000J2N45DDNE4Y282019-12-31ifrs-full:IssuedCapitalMember5299000J2N45DDNE4Y282019-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000J2N45DDNE4Y282019-12-31ifrs-full:RetainedEarningsMember5299000J2N45DDNE4Y282019-12-31simcorp:DividendForTheYeariso4217:EURiso4217:EURxbrli:shares SIMCORP ꢀANNUAL REPORT ꢀ2020 SimCorp A/S • Weidekampsgade 16 • 2300 Copenhagen S • Denmark • Company reg. no: 15505281 • www.simcorp.com SIMCORP ANNUAL REPORT 2020 | 2 A leading provider of fully integrated front-to-back, multi-asset, investment management solutions to the world’s largest institutional investment management companies Empowering unmatched operational eﬃciency and investment enablement MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S 3 4 5 6 7 9 SimCorp at a glance Business units, products and clients Business unit review Performance and highlights CEO and Chairman letter Highlights 2016-2020 17 Financial review 2020 24 Risk management 45 Income statement 45 Statement of comprehensive income 46 Cash ﬂow statement 47 Statement of ﬁnancial position 48 Statement of changes in equity 49 Notes 93 Income statement 93 Statement of comprehensive income 94 Cash ﬂow statement 95 Statement of ﬁnancial position 96 Statement of changes in equity 97 Notes 27 Corporate governance report 31 Shareholder information 35 Board of Directors 38 Executive Management Board 39 Group Management Committee 40 Statements and signatures 11 Vision and strategy 15 Financial targets 2021 RELATED REPORTS Sustainability Report 2020 Remuneration Report 2020 www2.simcorp.com/SustainabilityReport2020 www2.simcorp.com/RemunerationReport2020 DISCLAIMER: SimCorp’s annual report includes certain forward-looking statements regarding the Group’s future ﬁnancial situation. Such statements are based on SimCorp’s current plans, estimates, and projections. By nature, forward-looking statements involve inherent risks and uncertainties, both general and speciﬁc, and are thus not a guarantee of future performance. Accordingly, the actual performance may deviate materially from that expressed in such forward-looking statements due to a variety of factors. The main (but not all) factors of risk and uncertainty are dealt with in further detail under the heading “Risk Management” on pages 24-26 and in note 6.2 “Risk” in this annual report. Factors that may impact the Group’s revenue growth and proﬁtability margin from year to year include, but are not limited to, the timing of large deals and investments. Unless required by law or corresponding obligations, SimCorp A/S is under no duty and undertakes no obligation to update or revise forward-looking statements after the distribution of this document, whether as a result of new information, future events, or otherwise. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | SIMCORP AT A GLANCE 3 SIMCORP AT A GLANCE A leading provider of integrated front-to-back, multi-asset, investment management solutions to the world’s largest investment management companies LONG TRADITION OF INVESTING IN INNOVA- TION, EXPANSION, AND TRANSFORMATION OUR PRODUCTS A long-lasting partner Number of clients SimCorp’ core system provides fully integrated front-to-back multi-asset class support across the investment value chain. 49 206 years of experience (SimCorp Dimension) SEGMENTS Allocating around Average client tenure Dedicated solution for client communications and reporting automation. Asset management Treasury 20% 11.7 of revenue to R&D years (SimCorp Dimension) Central banks Fund management Dedicated enterprise data management solution for reference and market data management. A GLOBAL AND DIVERSE COMPANY Sovereign wealth Insurance Employees Culture Asset servicing Wealth management 1,901 Nationalities 68 Front-to-back investment management solution for the Italian insurance market. A truly diverse workplace for our courageous, capable, and curious employees, who collaborate to create value for our clients. Life/ pension Read more about our solutions www2.simcorp.com/Solutions MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | BUSINESS UNITS, PRODUCTS AND CLIENTS 4 BUSINESS UNITS, PRODUCTS AND CLIENTS EMEA APAC ALL PRODUCTS Revenue share 26% 11% +4 +4 150 of 570 potential clients 19 of 180 potential clients SimCorp Dimension® 85% SimCorp Coric® 4% Third-party 4% SimCorp Gain™ 3% SimCorp Sofia™ 4% Shared clients NORTH AMERICA TOTAL +12 159 42 +1 14 26 7% 16% 7 +4 +12 35 27 1 +0 +5 37 of 550 potential clients 206 of 1,300 potential clients SimCorp Dimension® SimCorp Coric® SimCorp Gain™ SimCorp Soﬁa™ Market share Figures are based on SimCorp estimates. Market share is calculated as number of SimCorp Dimension clients relative to the number of potential clients in each market. Market potential New clients in 2020 New standalone clients in 2020 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | BUSINESS UNIT REVIEW 5 BUSINESS UNIT REVIEW EMEA NORTH AMERICA APAC SIMCORP SOFIA The merged business unit EMEA comprises sale of SimCorp Dimension, SimCorp Coric, and SimCorp Gain across Europe, Middle East, and Africa, where SimCorp entered South Af- rica in 2020. Despite the impact of COVID-19, the business unit performed satisfactorily with total revenue increasing by 2% compared with 2019. The growth was primarily driven by strong additional license sales, including a new business partnership with State Street Bank International GmbH providing a fully integrated, front-to-back investment out- sourcing solution for insurance ﬁrms in EMEA. Four new SimCorp Dimension clients were signed in 2020, while one client canceled its contract, bringing the total number of clients up to 150. The new client wins and the order intake from additional licenses increased the value of the total installed SimCorp Dimension license base by EUR 15m, reaching EUR 674m. In the North American business unit, which now also includes the region’s sales of SimCorp Coric and SimCorp Gain, total rev- enue increased by 10% compared with 2019. The revenue was primarily driven by new license sales, professional services sales, and hosting revenue. Four new SimCorp Dimension clients were signed, while two SimCorp Dimension clients canceled their contracts, bringing the total number of clients up to 37, equaling an estimated market share of 7% in North America. Three out of the four new license deals signed in 2020 are based on SimCorp’s as a service (hosted) oﬀering. In addition, ﬁve new standalone SimCorp Coric clients, and one together with SimCorp Dimension, were signed in 2020. Total installed SimCorp Dimension license base was EUR 136m at the end of 2020. In APAC, the business unit, which now also includes the sales of SimCorp Coric and SimCorp Gain in the region, total revenue decli- ned by 31% compared with 2019. The decline was mainly driven by exceptionally high sales in 2019, which included a large deal in South Korea and the revenue recognition of a large deal signed in 2018. Four new SimCorp Dimension clients were signed in 2020, of which two are based on SimCorp’s as a service (hosted) oﬀering, while two clients canceled their contracts. With the two net new SimCorp Dimension clients added in 2020, SimCorp serves 19 SimCorp Dimension clients in the APAC region, corresponding to an estimated market share of 11%. The total value of the installed SimCorp Dimension license base was EUR 66m at the end of 2020. SimCorp serves two standalone SimCorp Coric clients and two standalone SimCorp Gain clients in APAC. SimCorp Soﬁa, continuing as a separate busi- ness unit, has developed above expectations in 2020. SimCorp Soﬁa delivered total revenue growth of 3%, driven by a continued strong performance of additional license sales to existing clients. One new SimCorp Soﬁa client was signed in 2020, while two clients canceled their contracts, bringing the total number of SimCorp Soﬁa clients to 42. EURm 2020 2019 Change EURm 2020 2019 Change EURm 2020 2019 Change EURm 2020 2019 Change Revenue 323.8 316.6 2% Revenue 106.5 37 96.5 35 21 7 10% Revenue 37.9 19 2 54.6 17 2 -31% Revenue Clients 20.8 20-2 43 3% Dimension clients Coric clients Gain clients 150 42 147 43 Dimension clients Coric clients Gain clients Dimension clients Coric clients Gain clients 42 26 41 47 6 2 2 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | PERFORMANCE & HIGHLIGHTS 6 PERFORMANCE & HIGHLIGHTS DELIVERING THROUGH THE PANDEMIC Revenue EUR million Revenue growth (local currencies) 456.0 1.4% With a total of 17 new clients signed and strong sales to existing clients during 2020, our win rate and performance have been satisfactory despite the challenges caused by the COVID-19 pandemic. A resilient operating model, a highly loyal client base, and last but not least a deeply committed team have enabled us to sustain SimCorp’s innovative solution delivery and business continuity through a time of signiﬁcant market volatility, and with a workforce largely working from home. 2019: 454.5 2019: 16.9% EBIT margin EBIT (local currencies) EUR million 124.3 27.6% 15.5% INCREASE VIRTUAL GO-LIVE IMPLEMENTATIONS RELEASES AND IN ORDER INTAKE UPGRADES ON TIME 2019: 127.8 2019: 27.7% Customer experience A highly dedicated custo- mer experience team and strong, long-lasting client relationships have enabled us to increase the order intake by 15.5% during a year when online collaboration has replaced face-to-face meetings. Virtual go-lives Releases and upgrades Our hardworking and Thanks to highly skilled implementation consultants and close collaboration with our loyal clients, we have together managed to perform go-live implementa- tions remotely in 2020. highly professional Product Development and Global Support teams have man- aged to keep up our usual activity level, delivering all planned releases on time and upgrading our clients 172 times (2019: 176). Net proﬁt Free cash ﬂow EUR million EUR million 88.3 91.8 2019: 96.9 2019: 70.9 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CEO AND CHAIRMAN LETTER 7 CEO AND CHAIRMAN LETTER SOLID PERFORMANCE UNDERPINNED BY RESILIENT BUSINESS MODEL SimCorp delivered a solid performance in 2020 despite challenges caused by the COVID-19 pandemic with 17 new client wins, revenue of EUR 456.0m, EBIT of EUR 124.3m, and free cash ﬂow of EUR 91.8m. A strategy on track, a highly loyal client base, and a deeply committed team position us well for a prosperous future. Peter Schütze Chairman Klaus Holse Chief Executive Oﬃcer MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CEO AND CHAIRMAN LETTER 8 A resilient and vastly adaptable business model together with ﬂexible, digital savvy staﬀ have kept SimCorp on a good track during an unprecedented year. from home. Our move to the cloud is further validated by this trend. Cloud computing can help accelerate our digital transformation and oﬀers a boost to innovation by empowering us to leverage new technologies like machine learning and high-performance computing. SimCorp has also signed its ﬁrst North American client development partner for Coric Digital Portal, a state-of-the-art client reporting SaaS portal built on Microsoft Azure, which oﬀers SimCorp clients a next- generation self-service portal with digital insights and engagement analytics. and acquired treasury shares for EUR 10m. Based on the ﬁnancial performance in 2020, the Board of Directors intends to propose to shareholders at the AGM a dividend of EUR 40.1m, equal to DKK 7.50 per share, for the ﬁnancial year 2020. Furthermore, we plan to initiate a new share buyback program, acquiring treasury shares for a forecast amount of EUR 40m in 2021, split into two programs of EUR 20m each. While people, processes, and technology have all been challenged across our industry, SimCorp’s innovative solution delivery and business continuity have been largely uninter- rupted through a time of signiﬁcant market volatility. High adaptability to virtual collabo- ration among our clients and employees has enabled us to continue doing business and many clients have gone live or done upgrades with assistance from SimCorp staﬀ working 100% remotely. This is the ultimate test of resilience, and we are grateful to our loyal clients and committed employees who have made this possible. SUSTAINABILITY AND ACCOUNTABILITLY Leveraging cloud and new technologies is a key enabler of sustainability, which is a main focus for SimCorp. Reducing our CO2 emission, expanding support for our clients’ ESG investments, creating a truly diverse and inclusive workplace, and ensuring meaning in work constitute our current sustainability priorities. SUPPORTING CLIENTS WITHOUT THE CONSTRAINT OF BORDERS In 2020, we announced the merger of SimCorp’s European market units, Central Europe, Southern Europe, and UK/Northern Europe/Middle East, into one integrated EMEA unit. The move is designed to support our clients by developing closer collaboration across borders and achieving greater scale and agility in key business functions. THANK YOU Staying on track to sustained long-term growth and successfully meeting the challeng- es of COVID-19 has been fully dependent on our highly capable and committed employees, and we would like to thank everyone at We believe that our employees and who we are as a company put us in a strong position to set ambitious sustainability targets, and we hold ourselves accountable for meeting these goals. SimCorp for your true dedication, agility, and relentless eﬀorts. Based on a passion to never let a client down, every single employee has lived the culture of our company captured in “the 4Cs”, by being capable, collaborative, and curious, while demonstrating courage. The high increase in virtual collaboration across all geographies during COVID-19 has proved to provide even bigger beneﬁts to our entire client base than an internal merger can genera- te. We will make sure we continue to leverage these positive experiences post-COVID-19. STRATEGY CONFIRMED AND TRANSFORMATION ONGOING During 2020, the Board of Directors has conﬁrmed the strategic direction, priorities, and imperatives as launched in 2019. Guided by our strategy, we have started our transition to become a true Everything as a Service company based on our cloud journey. BUILDING AN ECOSYSTEM OF PARTNERS ON AN OPEN PLATFORM A strong focus on building strategic part- nerships, most recently with State Street, is part of our strategic imperative ‘Ecosystem enabled innovation’. The goal is to strengthen our capacity and ability to innovate and oﬀer our clients optionality across their operations and the investment lifecycle, by leveraging an external ecosystem of partners. Our appreciation also goes to our sharehold- ers and business partners for their trust and co-operation. Last but not least, we extend our gratitude to our loyal clients, new as well as existing ones, who have demonstrated great ﬂexibility and adaptability to stay in close contact during these challenging times and continue to place their business with SimCorp. DISTRIBUTION OF PROFIT According to our proﬁt distribution policy, we intend to pay dividends of at least 40% of the annual net proﬁt and use additional cash to buy treasury shares depending on other cash requirements. In 2020, we paid a dividend of EUR 39.9m, equal to DKK 7.50 per share, Throughout the year, we have seen solid proof-points of transition progress, as many of our new clients have signed as a service agreements, and several existing clients have migrated from on-premise to cloud-based as a service setups. Alongside a number of new partnerships in 2020, solid R&D investments have enabled us to further strengthen our oﬀering, spanning from additional standard platform solutions shortening time to value for our clients, to new capabilities within Datacare meeting demands for more holistic managed data services. A steep increase in virtual collaboration during COVID-19 has fast-tracked the need for digitalization both at our clients and at SimCorp, with the majority of staﬀ working PETER SCHÜTZE Chairman of the Board of Directors KLAUS HOLSE Chief Executive Oﬃcer MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | HIGHLIGHTS 2016-2019 9 1/2 HIGHLIGHTS 2016-2020 REVENUE EUR ’000 2020 2019 2018 2017 2016 ORDERS Order book value Order intake 56,069 115,102 38,182 99,679 45,508 105,877 24,790 81,821 44,764 85,056 Reported revenue Revenue, signed at January 1 for the coming year EURm IFRS 15 restated revenue INCOME STATEMENT Revenue Earnings before interest, tax, depreciation, and amortization (EBITDA) Operating proﬁt (EBIT) Financial items, net Proﬁt before tax Proﬁt for the year COMPARABLE INCOME STATEMENT (Adjusted to IFRS 15 for illustrative purposes only) Restated revenue Restated earnings before interest, tax, depreciation, and amortization (EBITDA) Restated operating proﬁt (EBIT) Financial items, net 500 450 400 350 300 250 200 150 100 50 455,970 140,390 124,296 -8,200 116,096 88,258 454,531 142,576 127,824 -23 127,801 96,901 382,626 109,268 103,345 -809 102,536 76,971 343,405 92,851 88,894 -1,204 87,690 66,497 295,930 71,583 68,223 -630 67,593 50,992 309,248 84,901 81,541 -630 80,911 61,039 0 Proﬁt before tax Proﬁt for the year 2016 2017 2018 2019 2020 STATEMENT OF FINANCIAL POSITION Share capital Equity Bank loan/revolving credit facility Intangible assets Property, plant, and equipment Receivables Contract assets Cash and cash equivalents Total assets 5,441 278,250 - 95,725 47,650 82,513 175,928 53,051 470,842 5,441 230,020 20,000 99,557 55,650 81,804 151,774 31,851 437,912 5,441 169,059 - 40,444 5,377 79,165 85,684 47,500 270,267 5,467 116,581 30,000 44,256 5,528 86,080 49,946 31,412 230,616 5,575 72,571 - 10,995 4,779 80,041 - EBIT EURm Reported EBIT IFRS 15 restated EBIT 130 120 110 100 90 31,590 146,928 CASH FLOW Cash ﬂow from operating activities Cash ﬂow from investing activities Cash ﬂow from ﬁnancing activities Free cash ﬂow Investment in property, plant, and equipment Net change in cash and cash equivalents EUR/DKK rate of exchange at December 31 104,565 -2,681 -80,242 91,809 2,399 82,505 -60,214 -38,249 70,903 1,722 82,215 -1,720 -64,444 80,153 1,950 55,532 -26,930 -28,294 51,317 3,333 65,418 -4,309 -72,856 60,801 2,973 80 70 60 50 40 21,642 7.4393 -15,958 7.4697 16,051 7.4673 308 7.4449 -11,747 7.4344 30 20 10 * 2019 order book and order intake have been restated to include Subscription Services such as Datacare and SFTR, and 2018 order intake has been restated to include SimCorp Italiana (Soﬁa). 0 2016 2017 2018 2019 2020 ** The Group has applied IFRS 15 using the modiﬁed retrospective principle as a cumulative catch up adjustment to the opening balance of equity at January 1, 2017. Therefore, the comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. *** 2020 and 2019 include right-of-use-assets. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | HIGHLIGHTS 2016-2019 10 2 /2 HIGHLIGHTS 2016-2020 EBIT MARGIN 2020 2019 2018 2017 2016 EMPLOYEES Number of employees at year-end Average number of employees - FTE 1,901 1,840 1,871 1,703 1,660 1,554 1,547 1,421 1,376 1,275 % Reported EBIT margin IFRS 15 restated EBIT margin FINANCIAL RATIOS EBIT margin (%) EBIT margin (%) adjusted to IFRS 15 for illustrative purposes only ROIC (return on invested capital) (%) Receivables turnover ratio Equity ratio (%) 30 25 20 15 10 5 27.3 28.1 27.0 25.9 23.1 26.4 121.3 7.8 49.4 57.5 46.6 8.7 59.1 33.4 65.3 9.3 52.5 46.5 82.4 8.2 62.6 59.7 107.4 7.6 50.6 64.5 Return on equity (%) SHARE PERFORMANCE Earnings per share - EPS (EUR) Diluted earnings per share - EPS-D (EUR) Cash ﬂow per share - CFPS (EUR) Book value per share at year end - BVPS (EUR) Dividends per share - DPS (EUR) Dividends per share - DPS (DKK) Dividends payout ratio (%) 2.22 2.20 2.64 7.02 1.01 7.50 45.2 56.5 2.44 2.42 2.08 5.81 0.90 6.75 37.0 49.9 1.95 1.93 2.08 4.27 0.87 6.50 44.7 44.7 1.69 1.67 1.41 2.96 0.84 6.25 51.4 87.7 1.28 1.26 1.64 1.84 0.71 5.25 57.5 0 2016 2017 2018 2019 2020 Total payout ratio (%) 142.9 MARKET VALUE RATIOS Share price at year end - EUR Share price at year end - DKK Price/book value per share - P/BV (EUR) Diluted price earnings (P/E diluted) Price/cash ﬂow (P/CF) 121.72 909.50 17.3 55.2 46.2 101.41 757.50 17.5 41.9 48.7 59.67 445.60 14.0 30.9 28.6 47.46 353.30 16.0 28.4 33.7 46.30 344.20 25.2 36.8 28.3 Share capital (m) 40.5 40.5 40.5 40.7 41.5 Average number of shares (m) Average number of shares - diluted (m) Market capitalization - EURm 39.7 40.0 39.7 40.1 39.5 39.9 39.4 39.9 40.0 40.5 4,826 4,016 2,362 1,870 1,827 * The Group has applied IFRS 15 using the modiﬁed retrospective principle as a cumulative catch up adjustment to the opening balance of equity at January 1, 2017. Therefore, the comparative information has not been restated and continues to be reported under IAS 18 and IAS 11. Key ratios are calculated as per deﬁnitions given on page 51. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | VISION AND STRATEGY 11 VISION AND STRATEGY Driven by our passion to create value for our clients as their trusted business partner and opening up our native front-to-back, multi-asset, platform to an ecosystem of partners, we are strongly positioned to sustain long-term growth and proﬁtability. In 2019, we presented our new strategy, outlining how we are entering a new phase in the evolution of SimCorp, through which we are transforming SimCorp to become a software-enabled service company. The past year has demonstrated the robustness of our business model as we have successfully continued this transformation during a time of unprecedented challenges and volatility. annual revenue back into R&D, which togeth- er with the native integrated, muti-asset and front-to-back nature of our platform SimCorp Dimension diﬀerentiate our value proposition compared with the competition. BUSINESS MODEL RESOURCES VALUE CREATION o While adding to the solidity of our business model and reducing operational risk, the ﬂexibility and scalability of our solutions result in long-lasting client relationships, as they allow our mutual engagement to de- velop and grow over time. During COVID-19, we have continued our strong focus on constantly nurturing our client relationships through virtual meetings, workshops, and training programs. The strength of these relationships and a resilient operating model have enabled us to continue carrying out implementations, software updates and support activities, client-driven development programs, and professional services opera- tions. Approximately 90% of our annual revenue is derived from existing clients and more than 50% is recurring. For clients Operational eꢁciency and investment enablement Capital provided by investors A ROBUST BUSINESS MODEL SimCorp’s highly transparent business model builds on four main revenue drivers: software licenses; software updates and support; professional services; and hosting and other fees. These revenue drivers derive from our investments in our four best-in-class product oﬀerings: SimCorp Dimension®; SimCorp Coric®; SimCorp Gain™, and SimCorp Soﬁa™, along with third-party products and partnerships. Client loyalty Growth Proﬁtability Client loyalty Growth Revenue invested back in R&D For shareholders Return on Proﬁtability investment A talented, skilled, and diverse staꢀ For employees and society Jobs, salary, tax, and GDP To ensure that these oﬀerings are always up-to-date and at the forefront of the industry’s needs, we invest around 20% of COMPLETE OFFERS (bundled solutions, e.g. Datacare and Coric Digital Portal) contribution MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | VISION AND STRATEGY 12 STRATEGIC IMPERATIVES CLOUD TECHNOLOGY TRANSFORMATION CUSTOMER EXPERIENCE LEADERSHIP DELIVER EVERYTHING AS A SERVICE OFFER ECOSYSTEM ENABLED INNOVATION We take responsibility for solving our clients’ key business challenges We make it more easy, We strengthen our capacity and ability to innovate. ﬂexible, and cost-eﬀective to consume our oﬀerings. Our strategy will continue supporting and evolving our business model, empowering us to keep growing our engagement with existing clients and attracting new clients. customer experience has the potential to We have now gained some experience with what it means to operate managed services and will continue our journey towards becom- ing, at least partially, an operations company with a multi-delivery mode capability. solution providers as a lever to innovate and scale our business, while oﬀering more value-creating optionality to our clients. In addition, we will continue to build alliances with various capital markets infrastructure providers, such as custodians, to strengthen our platform value proposition and access market segments we are not able to reach as eﬀectively directly. become a real competitive diﬀerentiator and source of signiﬁcant value creation to SimCorp. We have transformed our go-to- market and engagement model, supported by an organizational setup based on client lifecycle needs and with clear accountabilities for driving client success. STRATEGIC IMPERATIVES During the past year, we have been guided by three strategic imperatives that are forming our overall strategic journey, with our cloud transformation as the underlying key enabler. In 2020, we have made solid progress on the execution of these imperatives, while gaining a deeper and broader understanding of the key steps we need to take on our journey towards becoming a software-enabled service company. Oﬀer ecosystem enabled innovation Our industry is becoming gradually more ecosystem-driven and we want to secure SimCorp’s long-term sustainability by transforming into a platform business oﬀering buy-side ﬁrms end-to-end digitalization of their investment life cycle needs. This implies building out an ecosystem of connected partners with complementary capabilities who leverage the SimCorp platform as a key gateway to the market. Deliver everything as a service The trend towards clients wanting to buy and consume everything as a service is continuing with growing momentum. We want to seize this opportunity and make it easy, ﬂexible, cost-eﬀective and highly valuable for clients to consume our technology solutions. CLOUD TECHNOLOGY TRANSFORMATION A foundation in the long term to realizing our strategic imperatives is our cloud technology transformation. Becoming ‘cloud-based’ is a multi-year endeavor and the license to operate and compete in the future, as it is the basis for delivering software as a service, cost-eﬀectively scaling our operations, and driving ecosystem enabled innovation. Take customer experience leadership We are already seeing early signs that elevating and working systematically with Moreover, we want to leverage our developing service capabilities to capture a signiﬁcantly larger share of our clients’ overall IT spend. We plan to accelerate the development of commercial partnerships with third-party MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | VISION AND STRATEGY 13 STRATEGIC PRIORITIES AND LONG-TERM AMBITION STATUS AND UPDATE Datacare to our priorities for 2021, in line with our transformation towards becoming an Everything as a Service company. eﬀorts on achieving front oﬃce market leadership and sustaining the momentum of our alternative investments oﬀering. tion of our updated strategy, SimCorp is well positioned to deliver on its ﬁnancial ambition of long-term, double-digit, annual revenue growth and gradually improved proﬁtability margin, with the inevitable ﬂuctuations in reve- nue growth and proﬁtability margin caused by the timing of orders and investments. We have focused strongly on progressing our strategic priorities for 2020, and as two of these, Standard Platform and SimCorp Gain, have now achieved scale, we will discontinue them as separate strategic priorities. In their place, we have added Coric Digital Portal and While our cloud technology transformation remains the foundation for our strategic imperatives, we will continue to focus our LONG-TERM AMBITION Based on evolving client needs, the current business environment, and a successful execu- 2020 STATUS OF ACHIEVEMENTS 2021 GOALS AND FOCUS FRONT OFFICE MARKET LEADERSHIP FRONT OFFICE MARKET LEADERSHIP During 2020, we further strengthened our position as a leading global front oﬃce solu- tion provider, with several key clients choos- ing our front oﬃce across North America, EMEA and APAC. ing for a wider set of analytics and greater automation. During 2021, we will continue focusing on partnerships, automation, and interoperabil- ity within a front oﬃce ecosystem, allowing clients to embed their own innovation and resulting analytics to facilitate both invest- ment and trading decision making. Those organizations who operate at scale will be able to further automate processes, while those who wish to diﬀerentiate themselves can embed their own intellectual property into the decision making processes. To meet our clients’ concern about pressure on market liquidity, we have made several product enhancements, which will allow cli- ents to make more out of the current market situation, the inventory they hold, and poten- tial investment opportunities. We envisage that during 2021, we will strike further strategic alliances with ﬁrms oﬀering solutions and analytics to completement those oﬀered by SimCorp. The solution has been further opened up to 3rd party applications via additional Applica- tion Programming Interfaces (APIs) allow- CLOUD LIFT CLOUD OFFER In 2020, we made good progress on the cloud lift to move SimCorp Dimension from a 2-tier to a 3-tier architecture, a journey that will continue into 2022. The 3-tier architecture will allow us to oﬀer high-scale public APIs, better resource utilization, and increased security. Most important, however, will be the capability to integrate bi-direc- tionally with cloud services. The cloud lift is a required step in transforming SimCorp into an Everything as a Service company and to open up our platform for ecosystem-enabled innovation. In 2021, we will focus on bringing new cloud- based services to market and launching SimCorp Dimension as a Service on public cloud (Microsoft Azure) as part of our trans- formation towards delivering Everything as a Service. on premise and in the cloud. We will contin- ue our work on providing additional cloud- based functionality for fast, scalable, and cost-eﬀective calculations for performance measurements, reporting, and historical data analysis. Furthermore, we have come far in building SimCorp Dimension as a Service on public cloud (Microsoft Azure), to be launched early 2021. We will further increase the connectivity of our open ecosystem with even more APIs giving easy access to SimCorp Dimension, In parallel, we will continue our cloud lift and re-architecture of SimCorp Dimension, continuing into 2022. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | VISION AND STRATEGY 14 2020 STATUS OF ACHIEVEMENTS 2021 GOALS AND FOCUS ALTERNATIVE INVESTMENTS EXCELLENCE ALTERNATIVE INVESTMENTS EXCELLENCE While adding advanced analytics and com- pliance capabilities to our core oﬀering, in 2020, we made a breakthrough with stream- lining alternatives investments transaction processing, leveraging advanced machine learning technology. straight-through-processing. Also, a solution has been initiated to handle alternatives illiquidity, pacing plans, and forecasting. In 2021, as alternatives remain a priority for asset managers, we will continue our strate- gic investment in the area, and support our clients on the SimCorp Dimension platform by further transforming and simplifying the handling of alternative investments, and con- tinue to deliver unique integrated outcomes for two main areas: expand the coverage of data and documents handled with automation, allowing clients to fully own the data processing value chain. Secondly, we will continue the journey on strategically forecasting and monitoring al- ternatives exposure in a cross-asset portfolio, with a ﬁrst set of oﬀers brought to the mar- ket. Based on these expansions, we expect to continue increasing the adoption of our core and innovative alternatives oﬀer across our existing client base. Overall, more than 50 clients have adopt- ed one or more of SimCorp’s solutions for alternatives, since the launch of our fully integrated alternative investments oﬀering, conﬁrming the market buy-in for our value proposition of an integrated front-to-back cross-asset IBOR and ABOR. Through our partnership with Alkymi, we are able to automate the processing of various PDFs and bring alternatives closer to traditional asset classes with Firstly, we will streamline data processing, building on the 2020 breakthrough, and EXPAND STANDARD PLATFORM CORIC ENGAGE In 2020, we continued the investment in our standard platform oﬀering, including new ar- eas of our solutions to both new and existing clients. Furthermore, we expanded the usage and coverage of our business process frame- work with additional IP and tools to help our clients eﬃciently capture the full value of SimCorp Dimension. In 2021, our standard platform solutions will be fully integrated in our oﬀerings across SimCorp’s business and serve as a basic ap- proach to all our cloud oﬀerings, ultimately as the foundation for all deliveries when Sim- Corp has transformed to an Everything as a Service company. Hence, Standard Platform will be retired as a separate strategic priority. In 2021, we will launch our oﬀer for Digital Client Communications, Coric Digital Portal, providing interactive data and document access to clients and their investors. Furthermore, we will continue to add func- tionality such as user analytics tools, which provide insights on client interests and usage, allowing asset managers to better understand the client base and respond proactively to their concerns and driving a better customer experience. Delivered as a cloud native solution, the oﬀer is fully automated, dynamically scaling to meet user demand. SIMCORP GAIN & DATACARE DATACARE In 2020, we successfully built out and so- lidiﬁed our Datacare oﬀer, adding four new Datacare clients, so the total is now ﬁve, of which three are fully live and operational, and a very mature pipeline for 2021. This signiﬁcant achievement is based on a very strong service design and a high degree of process integration across all teams deliver- ing the Datacare service. Following the acquisition of AIM Software, SimCorp GAIN is now integrated into Sim- Corp’s standard development and global support processes, and we have grown capacity in this area. Hence the product becomes a part of normal business and is retired as a separate strategic priority. Main focus in 2021 will be to further auto- mate and improve our operational processes in order to create scale as well as the build out of the Data Advisory pillar of our Data- care service to institutionalize the continu- ous generation of business know-how and its operationalization through the service. This will substantially support us in being able to grow with the business needs of our clients and continue to add value. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL TARGETS 2021 15 FINANCIAL TARGETS 2021 With its consistent high investments in cloud transformation and cloud-based oﬀerings, and further development of its service oﬀerings, SimCorp is strongly positioned to meet the accelerating need for tech-driven operating models, with solutions that fully address the top priorities of the investment management industry for 2021, including: solutions for client reporting and data management. In 2021, SimCorp expects revenue growth in local currencies of between 6% and 11%, with an EBIT margin measured in local currencies of between 24.5% and 27.5%. REVENUE AND PROFIT OUTLOOK FOR 2021 SimCorp’s ambition is to generate long-term, double-digit, annual revenue growth, and to gradually improve our proﬁtability margin, recognizing inevitable ﬂuctuations in both revenue growth and proﬁtability margin from year to year due to timing of orders and investments. MARKET DEVELOPMENTS causing longer sales processes. Hence, it is assumed that H1 2021 will be impacted by COVID-19 restrictions, while H2 2021 is expected to be less impacted as the world returns to more normal working conditions. Although the volume of deals available in the coming year is always diﬃcult to predict, SimCorp’s market performance over recent years, and its highly competitive integrated front-to-back, multi-asset, investment manage- ment solutions make the company well- positioned for increasing its market share in 2021. • Cost savings and cost-eﬃcient automated operations • • Cost-eﬀective regulatory compliance Scalable operating platforms to support growth Based on the current business environment, the current pipeline, SimCorp’s market position, and planned investments, the expectations for 2021 are to grow revenue in local currencies between 6% and 11%, and to generate an EBIT margin measured in local currencies of between 24.5% and 27.5%. On the other hand, gauging the input from our clients and global ﬁnancial outlook reports of consultancies and other experts, one key topic emerges: the need to replace legacy platforms with more eﬃcient, tech-driven, automated operating models. COVID-19 has clearly augmented this need and the persisting demand for lower cost, better data, a more digitized customer experience, and regulatory compliance. According to McKinsey, the COVID-19 pandemic has leaped forward the tech/digitalization agenda by ﬁve years. • • • Improved, digitized client servicing Risk management Everything as a Service On a macroeconomic level, SimCorp regards the underlying trends for 2021 as slightly negative to its business, due to the continued challenges caused by the COVID-19 pandemic and political turmoil. SimCorp expects SimCorp also expects to continue to beneﬁt from cross-selling between its core oﬀering SimCorp Dimension and its two integrated FINANCIAL TARGETS 2021 COVID-19 restrictions to be maintained until planned vaccine programs have been success- fully implemented across its markets. In the short term, this is expected to lead to some hesitancy in clients’ decision making, thereby 2021 Guidance 2020 In local currencies Realized Revenue growth EBIT margin 6% - 11% 1.4% 24.5% - 27.5% 27.6% 1 McKinsey: The COVID-19 recovery will be digital (2020). MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL TARGETS 2021 16 EXCHANGE RATE Exchange rate January 31, 2021 Average rates 2020 Average rates 2019 Main currencies EUR per 100 USD CAD AUD SGD GBP CHF NOK SEK 82.40 64.43 63.22 62.03 113.14 92.61 9.67 87.32 65.03 60.37 63.37 112.47 93.35 9.28 89.38 67.49 62.21 65.56 114.27 90.01 10.16 9.45 9.89 9.54 SimCorp changed its licensing model in 2016, from a perpetual license model to a sub- scription-based model. This applies to initial SimCorp Dimension licenses only, as existing clients have already acquired the right to use SimCorp Dimension under the perpetual license model and thereby can continue buying additional licenses under the perpetual model. Some existing clients, however, might choose to convert from a perpetual model to a subscription-based model. increasing contract assets on the statement of ﬁnancial position. be oﬀset by conversions and cancellations of existing contracts. For 2021, SimCorp expects a group eﬀective tax rate of between 23% and 25% compared with a realized eﬀective tax rate of 24.0% in 2020. Conversions from perpetual to subscrip- tion-based licenses are expected to be lower in 2021 compared with 2020, having an estimated 2%-points negative impact on revenue growth. To partly oﬀset the impact of fewer conversions, renewals of existing contracts are expected to be higher in 2021 compared with 2020, having an estimated 1%-point positive impact on revenue growth. In total, conversions and renewals are expect- ed to have an estimated negative impact on the revenue growth of 1%-point and estimated 0.7%-points negative impact on EBIT margin, which is included in the guidance. SimCorp oﬀers SimCorp Dimension as a Ser- vice (SCDaaS) to clients who prefer a hosted delivery model. SimCorp passes through the related costs to third-party IT-infrastructure providers at marginal proﬁts, which means that its SCDaaS oﬀering has a dilutive impact on EBIT margins. In 2021, the pass-through of hosting is expected to impact revenue growth positively by around 1%-points and to have a negative impact on the EBIT margin of 0.5%-points, which is included in the guidance. For 2021, SimCorp expects a cash conversion of between 70% and 80% compared with a realized cash conversion of 104% in 2020. The lower expected free cash ﬂow is due to the negative impact of increased contract assets following expected higher license revenue, postponed payments of income taxes and social charges oﬀered under government COVID-19 related support schemes, and a one-oﬀ payment in 2021 following a change in the Danish Holiday Act. Cash conversion is deﬁned as free cash ﬂow divided by proﬁt for the year. According to IFRS 15, subscription-based license revenue will be recognized in the year of sale, provided that no functionality gaps or unmet acceptance criteria exist. Revenue recognition is similar for subscription-based and perpetual licenses, although the subscrip- tion-based license fees are discounted to net present value. The cash ﬂow from a subscrip- tion-based contract will, however, be received over the contract period resulting in income recognition before cash is received and Based on the exchange rates prevailing at the end of January 2021, SimCorp estimates reported revenue to be negatively impacted from currency ﬂuctuations by around 1.2% and reported EBIT margin to be negatively impacted from currency ﬂuctuations by around 0.1%-points. Software updates and support revenue is estimated to be at the same level in 2021 as in 2020, as growth from new agreements with initial and existing clients, and small price increases due to low inﬂation, are expected to Income will vary considerably from one reporting period to the next as the timing of license sales by nature varies. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL REVIEW 2020 17 While we have been able to work eﬀective of between minus 5% and plus 5%, and an EBIT margin measured in local currencies of between 22.0% and 27.0%. remotely, we have experienced some hesitan- cy in clients’ decision making, thereby caus- ing longer sales processes in 2020. During the COVID-19 crisis, we have been cost-conscious, but also invested in our future. FINANCIAL On December 11, 2020, SimCorp upgraded its revenue expectations measured in local currencies to be between minus 2% and plus 4% and EBIT margin expectations to be between 25.0% and 28.0% measured in local currencies. The upgraded expectations were caused by a combination of a strategic expansion of an agreement with State Street Bank, which included a conversion from the existing perpetual license agreement to a new subscription-based license agreement, longer sales cycles due to COVID-19, as well as a successful execution of cost containment measures. REVIEW 2020 A steep increase in virtual collaboration during COVID-19 has fast-tracked the need for digitalization both at our clients and at SimCorp, Looking ahead, we will continue to make large investments in digitalization and technology, which will also be crucial in a post-COVID-19 environment, in order to keep ensuring the well-being of our employees and to better serve our clients. SimCorp generated revenue of EUR 456.0m in 2020, an increase of 0.3% compared with 2019 and 1.4% when measured in local currencies. SimCorp generated EBIT of EUR 124.3m. The reported EBIT margin was 27.3%, and 27.6% when measured in local currencies. Free cash ﬂow of EUR 91.8m was 29.5% higher than in 2019. SimCorp views the performance in 2020 as satisfactory, taken the COVID-19 situation into account. FINANCIAL EXPECTATIONS AND RESULTS 2020 In the 2019 Annual Report, SimCorp announced 2020 expectations for revenue growth meas- ured in local currencies of between 5% and 10% and an EBIT margin measured in local cur- rencies of between 24.0% and 27.0%. Extra investments in cloud lift and the integration of SimCorp Gain were expected to impact the EBIT margin negatively in 2020 by approxi- mately 2%-points and 1%-point, respectively. The development in ﬁnancial guidance and the realized ﬁnancial results can be seen in the table to the left. COVID-19 break, has witnessed a highly eﬀective remote working set-up and a tremendous capacity and capability amongst all employees to ﬁnd solutions to unprecedented problems. Being a crisis-prepared organization, we believe SimCorp is well-positioned and prepared to adapt and innovate during the pandemic, while keeping all safe and building resilience for the challenges and opportunities during and beyond the pandemic. In 2020, the COVID-19 pandemic created unprecedented challenges for individuals, businesses, and society. Since the outbreak of the pandemic, SimCorp has followed its development closely, both globally and locally, ensuring that the necessary precautions have been taken. At Group level, SimCorp’s COVID-19 crisis management task force, established right at the beginning of the out- ORDER INTAKE AND ORDER BOOK In 2020, total license order intake of EUR 115.1m iwas an increase of EUR 15.4m com- pared with 2019. The increase was primarily due to higher order intake for Datacare of EUR 12.9m compared with an order intake of EUR 2.0m in 2019 and higher order intake for SimCorp Dimension orders related to SimCorp’s Client-Driven Development (CDD) program of EUR 5.8m compared with an order intake of EUR 2.8m in 2019. Compared with 2019, the order intake for SimCorp Dimension, excluding CDD, increased slightly from EUR 77.1m in 2019 to EUR 79.2m in 2020. The order intake for SimCorp Coric was EUR 8.6m compared with EUR 10.6m in 2019. For SimCorp Soﬁa, the order intake was EUR On March 18, 2020, SimCorp suspended its guidance for 2020 as a consequence of the COVID-19 pandemic. FINANCIAL EXPECTATIONS AND RESULTS 2020 Based on the assumption that the global indu- stry would return to more normal working conditions after the holiday break in July and August, but with some expected delays in signing deals, SimCorp revised its guidance for 2020 on May 18, 2020, with expected revenue growth measured in local currencies Guidance updated 2020 Dec. 11, 2020 Guidance suspended May 18, 2020 March 18, 2020 Annual Report2019 Feb. 5, 2020 Realized Q1 2020 In local currencies Revenue growth EBIT margin 1.4% -2% - 4% -5% - 5% n/a n/a 5% - 10% 27.6% 25.0% - 28.0% 22.0% - 27.0% 24.0% - 27.0% MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL REVIEW 2020 18 6.1m compared with EUR 5.2m in 2019, and SimCorp Gain had an order intake of EUR 2.5m compared with 2.0m in 2019. GmbH. The agreement sees SimCorp and due to the sale of additional functionality in connection with the conversions, but the annual software updates and support fees will be EUR 3.0m lower, as the subscription license revenue under IFRS 15 is recognized on contract completion. The order book includes order book for SimCorp Dimension Client-Driven Develop- ment (CDD) of EUR 13.9m (December 31, 2019: EUR 17.0m), SimCorp Dimension, excluding CDD of EUR 22.3m (December 31, 2019: EUR 15.8m), SimCorp Coric contracts of EUR 3.0m (December 31, 2019: EUR 1.9m), SimCorp Soﬁa contracts of EUR 1.5m (December 31, 2019: EUR 0.8.), SimCorp Gain contracts of EUR 0.2m (December 31, 2019: EUR 0.8m.) and SFTR contracts of EUR 1.4m (December 31, 2019: EUR 0.0m.). The order book is a consequence of income recognition being deferred until certain conditions are fulﬁlled fulﬁlled or subscription services revenue recognized over the contract period. State Street Bank form a business partnership to provide a premier, fully integrated, front- to-back investment outsourcing solution for insurance ﬁrms in EMEA. The expansion of the engagement with State Street Bank Interna- tional GmbH includes a conversion from the existing perpetual license agreement to a new subscription-based license agreement. SimCorp Dimension license solutions were sold to 17 new clients in 2020, all on subscrip- tion-based terms, with a total order inﬂow of EUR 20.5m, compared with sales to 17 new clients in 2019 with a total order inﬂow of EUR 36.9m. The average size of initial SimCorp Dimension license deals decreased from EUR 3.1m in 2019 to EUR 1.7m in 2020. In comparison, additional order intake increased by EUR 10.8m due to three conversions in 2019, resulting in annual software updates and support fees being decreased by EUR 1.6m. The additional order intake increased by EUR 18.1m from ﬁve clients, including State Street Bank, converting their perpetual contracts to subscription-based license contracts. For the ﬁve clients converting in 2020, the annual subscription-based payments will be EUR 0.4m higher than the software updates and support fees under the perpetual contracts Total order book increased by EUR 17.9m from January 1, 2020 to EUR 56.1m at December 31, 2020, primarily due to the launch of the Data- care solution, which accounted for EUR 12.0m of the increase from EUR 1.8m at December 31, 2019 to EUR 13.8m at December 31, 2020. The 12 SimCorp Dimension initial license orders in 2020 were well distributed across SimCorp’s growth and mature markets. Four initial license orders were signed in the designated growth market North America, three of which were selected as a service (hosted) solutions. Four initial license orders were signed in EMEA, one of which was selected as a service (hosted) solution. Also, four initial license orders were signed in APAC, two of which were selected as a service (hosted) solutions. The total value of the installed SimCorp Dimension license base increased by 1.4% to EUR 877m. Adjusted for currency eﬀect the increase was 3.6%. Measured as a percentage of the total value of the installed SimCorp Dimension license base, the additional license sales were 6.7% in 2020 compared with 5.0% in 2019. The total value of the installed license base for SimCorp Dimension clients who have an installed license base above EUR 2m accounted for 91% of the value of the total installed license base compared with 92% in 2019. ORDER INTAKE FOR SOFTWARE LICENSES SIMCORP DIMENSION LICENSE BASE AND ADDITIONAL LICENSE SALES EURm SimCorp Dimension SimCorp Sofia SimCorp Coric License base (left axis) Additional license sales in % of license base (right axis) EURm SimCorp Gain & Datacare % 9 SimCorp Coric sold ﬁve new standalone solutions and one solution as part of a new SimCorp Dimension deal, one of which was selected as a service (hosted) solution. All six SimCorp Coric solutions sold in 2020 were signed in North America. In 2020, four SimCorp Datacare solutions were sold to existing SimCorp Dimension clients or as part of a new SimCorp Dimension deal. 120 110 100 90 80 70 60 50 40 30 20 10 0 900 800 700 600 500 400 300 200 100 0 8 7 6 5 4 3 2 1 0 The share of subscription-based license agree- ments in the installed SimCorp Dimension license base increased from 23% at the end of 2019 to 28% at the end of 2020. In total, 70 (equivalent to 34%) out of 206 SimCorp Dimension clients are on subscription-based license agreements, while the remaining 136 Additional license sales were signiﬁcantly higher than last year. The most notable additional license sale was the large strategic agreement referred to above with SimCorp’s existing client, State Street Bank International 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Conversion rate: Additional licenses as a percentage of the installed license base beginning of year. License base: Accumulated license order value. SimCorp Dimension clients are on a perpetual license agreements Most standalone SimCorp MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL REVIEW 2020 19 Coric and SimCorp Soﬁa clients are on subscription-based license agreements. comprise initial sales to new clients and 2020 REVENUE GROWTH 2019 REVENUE GROWTH additional sales to existing clients. 1.9% 18.8% 1.4% 16.9% 15.5% At year-end 2020, the average length of subscription-based license agreements at signing was around six years for SimCorp Dimension, around ﬁve years for SimCorp Coric, around ﬁve years for SimCorp Gain, and approximately one year for SimCorp Soﬁa. The remaining average length before renewal was 4.8 years for SimCorp Dimension, 2.9 years for SimCorp Coric, 3.1 years for SimCorp Gain, and less than one year for SimCorp Soﬁa as most agreements are renewed annually at the beginning of the year. SimCorp generated revenue of EUR 456.0m in 2020 compared with EUR 454.5m in 2019, equivalent to an increase of 0.3%. Exchange rate ﬂuctuations for the period had a negative impact on revenue of 1.1%. Measured in local currencies, revenue thus increased by 1.4%. The acquisition of AIM Software accounted for 1.5%-points, and measured in local currencies, the organic growth thus declined by 0.1%. 1.5% 1.4% -1.1% 0.3% -0.1% Organic M&A impact Local currencies FX impact Reported Organic M&A impact Local currencies FX impact Reported The impact of currency ﬂuctuations and the acquisition of AIM Software on revenue growth is shown to the right on this page. 2020 ADDITIONAL LICENSE SALES SPLIT 2019 ADDITIONAL LICENSE SALES SPLIT Total contract value outstanding, excluding as a service oﬀerings, at December 31, 2020 was around EUR 336m, of which around EUR 69m is payable in 2021. Total license fee recognized from initial licenses to new clients and additional licenses to existing clients was EUR 91.6m, a decrease of EUR 14.2m, or 13.4%, compared with 2019. Additional regular license sales 55% Additional regular license sales 57% Renewals 18% Renewals 19% Five clients canceled SimCorp Dimension contracts in 2020. Two SimCorp Coric, seven SimCorp Gain, and two small SimCorp Soﬁa licenses were canceled. The annual software updates and support fee for the canceled contracts amounted to EUR 3.0m, equivalent to 0.7%-points of 2020 revenue compared with EUR 2.6m in 2019, equivalent to 0.6%- points of 2019 revenue. EUR EUR Currency ﬂuctuations impacted total license fee negatively by 1.3%. Measured in local curren- cies, the decrease was 12.1%, and the under- lying organic revenue change in total license Conversions 27% Conversions 24% 69.2m 51.2m fee was a decline of 13.5% in 2020, reﬂecting a 1.4%-point positive impact from the acquisition of AIM Software. License fee for 2020 included revenue interest of EUR 2.3m related to the ﬁnancing element in contract assets (2019: EUR 2.1m). In total, the reported total license fee revenue accounted for 20.1% of the Group’s total revenue compared with 23.3% in 2019. The decrease in license fee from new sales was caused by revenue recognition of smaller deals than in 2019. 2020. Currency ﬂuctuations impacted license fee from additional sales negatively by 0.7% and the acquisition of AIM Software increased license fee from additional sales by 3.0%. The underlying organic growth was 33.0%. INCOME STATEMENT 2020 License fee from additional sales – consisting of additional regular license sales to existing clients, renewals of subscription-based REVENUE SimCorp derives revenue from four primary sources: license fees, software updates and support fees, fees from professional services, and hosting and other fees. License fees License fee from initial sales decreased by 59.0% from EUR 54.6m in 2019 to EUR 22.4m in 2020. Currency ﬂuctuation impacted license fee from initial sales negatively by 1.8%. In 2020, additional regular license sales accounted for 55% (2019: 57%) of the total additional license sales, conversions accounted for 27% (2018: 24%), while renewals licenses, and conversion of perpetual licenses to subscription-based licenses – increased by 15.2% from EUR 51.2m in 2019 to EUR 69.2m in MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL REVIEW 2020 20 2020 (for more details, see the Business Unit REVENUE Review 2020, page 5). Share of revenue Share of revenue Organicrevenue growth local currencies Revenue growth Revenue growth local currencies EUR ‘000 2020 2020 2019 2019 COSTS Total operating costs (including depreciation and amortization) increased by 1.6% from EUR 327.2m in 2019 to EUR 332.5m. Currency ﬂuctuations reduced the total operating costs by 0.6%. Measured in local currencies and adjusted for the impact of the acquisition of AIM Software of 2.8%, the organic operating costs decreased by 0.6% compared with 2019. Licenses - initial sales 22,364 69,188 4.9% 15.2% 38.7% 33.9% 7.3% 54,611 51,152 12.0% 11.3% 36.8% 33.7% 6.2% -59.0% 35.3% 5.4% -57.1% 36.0% 6.0% -57.1% 33.0% 4.8% Licenses - additional sales Software updates and support Professional services 176,575 154,730 33,113 167,494 153,218 28,056 1.0% 2.2% 0.6% Hosting and other fees 18.0% 20.1% 16.9% Total revenue 455,970 100.0% 454,531 100.0% 0.3% 1.4% -0.1% accounted for the remaining 18% (2019: 19%), of which approximately 8%-points related to SimCorp Soﬁa renewals, 4%-points related to SimCorp Coric renewals, 3%-points related to SimCorp Dimension renewals, and 3%-points related to SimCorp Gain renewals. and support revenue by around EUR 6.0m largest client accounted for 5.5% (2019: 4.4%) The organic decrease in operating costs was primarily a result of the cost reduction measures taken in early March 2020 after the COVID-19 breakout. The measures included travel restrictions, cancellations of confer- ences and events, hiring freeze on non-critical positions, and postponement of planned salary increases from January 1 to July 1, 2020 for all employees, and to January 1, 2021 for the Group Management Committee. At the same time, SimCorp remains committed to continue investing in its products, people, and strategic priorities, including cloud lift and other research and development priorities, to realize its long-term growth ambitions. Consequently, research and development costs increased organically by 8.1% in 2020, while all other cost lines declined organically. (2019: EUR 4.2m). of the revenue. Fees from professional services increased by 1.0% from EUR 153.2m last year to EUR 154.7m. Currency ﬂuctuations decreased the professional services revenue by 1.2%, while the acquisition of AIM Software increased the professional services revenue by 1.6%. Conse- quently, organic growth in profesional services revenue was 0.6%. Fees from professional services accounted for 33.9% of total revenue in 2020 compared with 33.7% in 2019. SimCorp business model is evolving more and more from a software solution model towards a service delivery model. SimCorp will therefore commence reporting Annual Recurring Revenue (ARR) on a quarterly ba- sis. In 2020, the ARR was EUR 250.9m, which was equivalent to 55.0% of total revenue. In 2019, the ARR was EUR 220.9m, which was equivalent to 48.6% of total revenue. The ARR growth in 2020 was 13.6% in EUR, and 14.4% in local currencies. Software updates and support revenue increased by 5.4% from EUR 167.5m last year to EUR 176.6m with the completion and implementation of new client installations and new functionality to existing clients. Currency ﬂuctuations decreased the software updates and support revenue by 0.6%, and the acquisition of AIM Software increased the software updates and support revenue by 1.2%. Consequently, organic growth for 2020 in software updates and support revenue was 4.8%. Software updates and support revenue accounted for 38.7% of total revenue com- pared with 36.8% in 2019. License agreements signed in 2020 will increase annual software updates and support revenue by around EUR 8m once fully implemented (2019: EUR 9m), while canceled contracts in 2020 and conver- sions from perpetual to subscription-based licenses will decrease annual software updates Hosting and other fees increased from EUR 28.1m in 2019 to EUR 33.1m, due to adding more clients on a hosted as a service solution and growth in selling third-party products. In 2020, we added six new SimCorp Dimension and one new SimCorp Coric as a Service clients, bringing the total number of clients on a hosted solution to 28, comprising 16 clients in North America, nine in EMEA, and three in APAC. SimCorp entered 2021 with signed revenue for the full year of EUR 289.2m – an increase of EUR 10.4m or 4% compared with the beginning of 2020. The average number of full-time employees increased by 137 or 8% from 1,703 in 2019 to 1,840 in 2020 (of which 68 employees are related to the acquisition of AIM Software). The number of employees (headcount) was 1,901 at the end of 2020 compared with 1,871 at the end of 2019, an increase of 30 employees. In 2020, SimCorp achieved a top-line growth in its North American business unit of 10% and in its EMEA business unit of 2%, while revenue in its business unit in APAC declined by 31% in tough comparison with an extraordinary perfomance in 2019. The SimCorp Soﬁa business unit generated growth of 2% in Revenue distribution The ten largest clients generated 25% (2019: 23%) of SimCorp’s total revenue. In 2020, the MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL REVIEW 2020 21 74% of SimCorp’s total operating costs were directly related to employees compared with 68% in 2019. OPERATING COSTS Organic growth local Share of Share of revenue 2020 Share of Share of revenue 2019 Growth local Costs 2020 costs 2020 Costs 2019 costs 2019 EUR ’000 Growth currencies currencies Cost of sales increased by 0.2% to EUR 167.4m. Measured in local currencies and adjusted for the impact from the acquisition of AIM Software, the organic decrease in cost of sales was 1.5%. Salary costs for implementa- tion consultants are included in this category and account for a signiﬁcant part of the cost of sales. Cost of sales represented 36.7% of revenue compared with 36.8% in 2019. Cost of sales 167,415 91,830 50,198 23,077 50.3% 27.6% 15,1% 7.0% 36.7% 20.1% 11.0% 5.1% 167,141 82,938 49,105 28,056 51.1% 25.3% 15.0% 8.6% 36.8% 18.2% 10.8% 6.2% 0.2% 10.7% 2.2% 1.0% 10.8% 3.3% -1.5% 8.1% Research and development costs Sales and marketing costs Administrative expenses -1.3% -20.6% -17.7% -17.9% Total operating costs 332,520 100.0% 72.9% 327,240 100.0% 72.0% 1.6% 2.2% -0.6% GROUP PERFORMANCE 2020 EBIT MARGIN 2019 EBIT MARGIN Research and development costs increased by 10.7% to EUR 91.8m. Measured in local currencies and adjusted for the impact of the acquisition of AIM Software, the organic increase in research and development costs was 8.1%. Research and development costs were 20.1% of revenue in 2020, compared with 18.2% in 2019. SimCorp generated an EBIT of EUR 124.3m compared with EUR 127.8m in 2019, a decrease of EUR 3.5m. The reported EBIT margin was 27.3% compared with the EBIT margin of 28.1% in 2019. When measured in local currencies the EBIT margin was 27.6% in 2020. The underlying organic EBIT margin was 28.5%, as the acquisition of AIM Software decreased the EBIT margin by 0.9%-points. The organic EBIT margin of 28.5% was on level with the organic EBIT margin of 28.6% in 2019. The currency and acquisition impact on EBIT margin is shown to the right on this page. 28.5% -0.9% 28.6% -0.9% 27.6% -0.3% 27.7% 0.4% 27.3% 28.1% Sales and marketing costs increased by 2.2% to EUR 50.2m. Measured in local currencies and adjusted for the impact of the acquisition of AIM Software, the organic decrease in sales and marketing costs was 1.3%. Sales and marketing costs represented 11.0% of revenue compared with 10.8% in 2019. Organic M&A impact Local currencies FX impact Reported Organic M&A impact Local currencies FX impact Reported In 2020, the share of proﬁt after tax in associates of EUR 0.1m, ﬁnancial income of EUR 0.1m, and ﬁnancial expenses of EUR 8.4m resulted in a net ﬁnancial expense of EUR 8.2m compared with a net ﬁnancial expense of EUR 23 thousand in 2019. The net ﬁnancial expense in 2020 were primarily related to foreign exchange adjustments. amounted to EUR 27.8m against EUR 30.9m in 2019. The eﬀective tax rate was 24.0% compared with 24.2% in 2019. STATEMENT OF FINANCIAL POSITION SimCorp had total assets of EUR 470.8m at December 31, 2020 compared with EUR 437.9m at December 31, 2019. The increase of EUR 32.9m primarily related to changes in contract assets and cash holdings. Administrative expenses decreased by 17.7% to EUR 23.1m due to the cost reduction meas- ures taken, especially related to travel restric- tions and cancellations of events. Measured in local currencies and adjusted for the impact of the acquisition of AIM Software, the organic decrease in administrative expenses was 20.6%. Administrative expenses decreased to 5.1% of revenue compared with 6.2% in 2019. The Group proﬁt after tax was EUR 88.3m compared with EUR 96.9m in 2019. After the net eﬀect of foreign currency translation diﬀerences and remeasurements of deﬁned beneﬁt plans of EUR 2.7m, the total com- prehensive income amounted to EUR 85.6m against EUR 97.2m in 2019. Cash holdings increased by EUR 21.2m from R 31.9m at December 31, 2019 to EUR 53.1m. The net cash position was also EUR 53.1m at Proﬁt before tax was EUR 116.1m against EUR 127.8m in 2019. The tax charges for 2020 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL REVIEW 2020 22 the end of December 2020 compared with EUR 11.9m at the end of December 2019, an increase of EUR 41.2m. relationships was EUR 22.9m compared with EUR 25.0m at the end of 2019. The decreases were due to amortization. year. For the third consecutive year, changes in working capital were positive at EUR 9.3m in 2020, EUR 11.5m in 2019 and EUR 21.9m in 2018. The positive change in working capital in 2020 was due to postponed payments of income taxes and social charges oﬀered under government COVID-19 related support schemes, leading to an increase in Other payables of EUR 10.2m from the end of 2019 to the end to 2020. Changes in contract assets were EUR -24.6m compared with EUR -63.5m in 2019. Payment of income taxes amounted to EUR 20.7m, against EUR 23.5m in 2019. Other non-cash items of EUR -7.0m was primarily related to unrealized exchange losses recognized in the income statement as ﬁnancial expenses. FREE CASH FLOW/ CASH FLOW TO SHAREHOLDERS EURm Free cash ﬂow Dividends Compared with December 31, 2019 contract assets increased by EUR 24.1m from EUR 151.8m to EUR 175.9m. New and additional subscription-based licenses added EUR 67.3m to contract assets, ﬁnance income recognized added EUR 2.3m, while invoiced subscription- based license fee reduced the balance by EUR 37.5m, and foreign exchange adjustments and expected loss provisions reduced the balance by EUR 8.0m. The carrying amount of leasehold assets was EUR 43.7m compared with EUR 51.6m at the end of 2019. The decreases were due to amortization. Purchase of treasury shares 100 90 80 70 60 50 40 30 20 10 0 Other property, plant, and equipment amount- ed to EUR 4.0m compared with EUR 4.1m at the end of 2019. Other ﬁnancial assets of EUR 0.4m includes an investment in Alkymi. Receivables increased slightly from EUR 81.8m at December 31, 2019 to EUR 82.5m. Deferred tax assets were EUR 4.2m compared with EUR 5.4m at the end of 2019. In accordance with IFRS 9 ‘Financial Instru- ments’, SimCorp has made an expected credit loss provision of EUR 1.4m related to contract assets and receivables at December 31, 2020 (December 31, 2019: EUR 1.2m). There was a net cash outﬂow of EUR 2.7m from investing activities compared with EUR 60.2m in 2019. The higher amount in 2019 was due to the acquisition of AIM Software. 2016 2017 2018 2019 2020 SimCorp’s total liabilities were EUR 192.6m at December 31, 2020, compared with EUR 207.9m a year earlier. The decrease was primarily due to repayment of the revolving credit facility of EUR 20m in 2020. lease liabilities of EUR 9.8m, and withdrawal from credit facilities of EUR 20.0m in 2019. Free cash ﬂow (cash ﬂow from operations reduced by CAPEX and lease payments) was EUR 91.8m compared with EUR 70.9m in 2019, an increase of EUR 20.9m or 29.5%. The Group’s total non-current assets were EUR 150.9m compared with EUR 163.5m on December 31, 2019. TREASURY SHARES CHANGES IN EQUITY In 2020, SimCorp purchased 112,654 treasury shares with a nominal value of DKK 1 at an average price of DKK 660,78 per share, to- taling EUR 10.0m. SimCorp delivered 163,686 treasury shares with a nominal value of DKK 1 on the vesting of restricted stock units. The Group’s equity amounted to EUR 278.3m on December 31, 2020. This was an increase of EUR 48.3m compared with December 31, 2019. Equity was reduced by the purchase of treasury shares of EUR 10.0m and by divi- dends of EUR 39.9m. Equity was increased by comprehensive income in 2020 of EUR 85.6m as well as eﬀects of share-based remuneration of EUR 12.6m, net of tax. Goodwill was EUR 61.4m at December 31, 2020 compared with EUR 61.2m at December 31, 2019. A ﬁnal purchase price adjustment of EUR 0.4m to liabilities was made during 2020 in relation to the acquisition of AIM Software, increasing the goodwill. No impairment of goodwill was made in 2020. Cash conversion, deﬁned as free cash ﬂow divided by proﬁt for the year, was 104%. Cash used in ﬁnancing activities in 2020 of EUR 80.2m related to dividend payments of EUR 39.9m, purchase of treasury shares of EUR 10.0m, repayment of lease liabilities of EUR 10.3m, and net repayment of credit facilities of EUR 20.0m compared with pay- ment of dividends of EUR 35.9m, purchase of treasury shares of EUR 12.5m, repayment of Furthermore, 2,587 treasury shares will be delivered after publication of this annual report as remuneration to the Board of Directors in accordance with a resolution adopted by share- The carrying amount of acquired software was EUR 11.5m compared with EUR 13.3m at the end of 2019 and the value of client CASH FLOW STATEMENT Operating activities generated a net cash inﬂow of EUR 104.6m against EUR 82.5m last holders at the Annual General Meeting 2020. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL REVIEW 2020 23 At December 31, 2020, SimCorp held 849,449 treasury shares with a nominal value of DKK 1 each (2.1% of the total share capital) at a cost of EUR 52.6m and a market value of EUR 103.0m. At December 31, 2019, SimCorp held 900,481 treasury shares with a nominal value of DKK 1 each (2.2% of the total share capital) at a cost of EUR 50.9m and a market value of EUR 91.3m. THE PARENT COMPANY SIMCORP A/S In 2020, the parent company generated revenue of EUR 235.6m, a decrease of EUR 0.2m compared with 2019. The parent company received dividends totaling EUR 24.9m from subsidiaries in 2020 compared with EUR 23.9m in 2019. Proﬁt before tax for the year was EUR 108.1m against EUR 118.4m in 2019. Income tax amounted to EUR 19.4m compared with EUR 22.4m in 2019. Net proﬁt was EUR 88.7m compared with EUR 96.0m in 2019. Equity increased from EUR 213.2m at December 31, 2019 to EUR 265.3m at December 31, 2020. PROFIT ALLOCATION The Board of Directors intends to recommend to shareholders at the Annual General Meeting 2021 that, of the total recognized comprehen- sive income of EUR 89.5m, dividends of EUR 40.1m be declared, representing DKK 7.50 per share of DKK 1, and that EUR 49.4m be transferred to retained earnings. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | RISK MANAGEMENT 24 RISK MANAGEMENT As SimCorp operates in a continually changing and volatile business environment, its Board of Directors and management regard it as essential that its risk exposure is thoroughly monitored and controlled on an ongoing basis, applying a framework of risk policies and risk mitigating procedures. MARKETS AND CLIENTS Risk category Risk mitigation Responding timely to investment management market trends is critical to SimCorp’s ability to stay competi- tive. Failing to spot these trends represents a risk. Competitors’ expansion of service-oﬀerings and distribution could also endanger SimCorp’s market-leading position. New local requirements or legislation may also inﬂuence the demand for SimCorp’s oﬀerings. With 40% of SimCorp’s client base belonging to the top 100 global investment managers, losing one of these or their default on payment could have a substantial impact on SimCorp’s revenue and proﬁtability. Through extensive ongoing market research and industry analysis, SimCorp keeps abreast of trends and movements in the global ﬁnancial markets. Its close and longstanding client relationships allow SimCorp to anticipate and respond to new preferences and requirements. In addition, SimCorp actively monitors contracts to manage risks. Although 40% of SimCorp’s clients are among the top 100 global investment managers, the SimCorp Group has no client with revenue of more than 5.5% (2019: 4.4%) of total revenue. SimCorp’s business involves commercial and ﬁnancial risks, which could have a negative impact on the company’s future activities and results. To manage risk, principal factors categorized as potential risks are system- atically monitored, analyzed, and managed. Overall, SimCorp’s management believes the company is prepared to mitigate its potential risk challenges. RISK MANAGEMENT AT SIMCORP RISK ANALYSIS An Enterprise Risk Management process is applied to identify relevant gross risks in SimCorp’s major units. POLITICAL AND PANDEMIC RISKS Risk category Risk mitigation With oﬃces and sales across the world, SimCorp is from time to time aﬀected by geopolitical uncertainties and unrest. Further, since 2007, SimCorp has had a development unit based in the Ukraine. With the UK leaving the EU, changing business conditions in the UK pose a risk for SimCorp’s local operations. With the close down of countries due to pandemic such as COVID-19, terror, war etc. ensuring SimCorp’s product oﬀering, sales and service eﬀorts are operating as close to normal as possible is crucial. Political and economic unrest in countries and regions where SimCorp operates or plans to operate is mon- itored and fully considered when making operational and strategic decisions. Due to the political situation in the Ukraine, SimCorp monitors the situation in that country. The Ukrainian oﬃce is based outside of Kiev and, so far, SimCorp has not seen any substantial risk associated with operating in the country. RISK EVALUTION SimCorp management continually monitor risk development in the SimCorp Group. For further details on procedures of SimCorp’s risk management, see pages 12-13 in its Corporate Governance Guidelines. SimCorp monitors the impact of Brexit. The UK’s contribution to the SimCorp Group’s revenue is less than 3% of total revenue. SimCorp’s business model has previously proved to be strong during crises when the impact has been low. Structured sales reviews, the ability to do remote demonstrations and implementations, as well as our standard platform initiative are in place to mitigate the risk of discontinuity to the daily operation of the business. RISK CONTROL The Audit and Risk Committee carries out an analysis of the ongoing process for identifying and reporting risks. SimCorp’s Corporate Governance Guidelines www2.simcorp.com/CorporateGovernanceGuidelines2020 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | RISK MANAGEMENT 25 REGULATORY ISSUES AND FISCAL POLICIES PEOPLE AND CORPORATE CULTURE Risk category Risk mitigation Risk category Risk mitigation Protecting SimCorp’s long-term business interests is vital to its continued operations. This includes legal risk that may impact SimCorp’s business. SimCorp believes contractual risk as well as legal risk related to regulatory requirements are critical. Failure to meet or implement regulatory requirements in a timely fashion with respect to, for instance, data protection, conﬁdentiality agreements, IPR, corruption and fraud constitutes a risk. SimCorp is subject to tax and ﬁscal policies in the countries in which the Group operates. Changes to local policies may aﬀect SimCorp’s tax and ﬁscal position. Due to the nature of SimCorp’s operations, the company is exposed to changes in currency exchange rates. SimCorp ensures that all contracts entered into are carefully worded. SimCorp’s due diligence and procurement processes, as well as the ‘Guideline for Good Business Behavior’ established for all employees and suppliers, ensure that the company’s value-based principles are adhered to, including safeguarding against corruption. SimCorp’s Group Finance department manages the company’s currency and ﬁnancial exposures pursuant to the treasury policy approved by the Board of Directors, and is required to keep the overall currency and ﬁnancial exposure within deﬁned limits. Furthermore, Group Finance ensures that, in line with the tax policy, SimCorp is at all times tax compliant in the countries in which SimCorp conducts business. SimCorp’s business is based on specialized expertise and innovation. It is imperative that SimCorp continues To ensure SimCorp’s ability to attract talented em- ployees, an ‘Employer Value Proposition’ program is in place to strengthen the company’s employer brand by increasing the awareness of what SimCorp has to oﬀer new employees. To retain talent in SimCorp, mentoring and leadership training programs are in place. to attract, develop, and retain the most skilled employees and management talent. Failure to do so constitutes a risk to the Group. Moreover, it is considered a genuine risk to Sim- Corp’s long-term position, if the company’s corporate values do not continue to serve as a core basis for business execution and development. SimCorp recognizes and values the uniqueness of every individual, and we will continue to invest in our people. Not embracing a diverse and inclusive culture possesses a risk of not attracting the right people. Substantial resources allocated to training and development programs ensure the strengthening of professional and personal skills across the organization. To ensure SimCorp’s business is conducted in accor- dance with corporate values, a Guideline for Good Busi- ness Behavior for all employees and suppliers has been established, and annual online training is conducted. In addition, SimCorp has established a whistleblower system as a means of increasing focus on transparency and enabling reporting on suspected irregularities in the business. The EU general data protection regulation (GDPR) applied from May 2018 with the objective to give citizens back control of their personal data. Failure to comply with GDPR represents a risk. SimCorp has implemented a number of business procedures and controls to have transparency of individual activities and an overview of ﬁnancial exposure. SimCorp’s Group Legal and Compliance department ensures and monitors GDPR compliance We want to build an inclusive culture, boost diverse talent, and increase female leadership. Our ambition is to put diversity into play, to ensure diﬀerent perspec- tives can come together, and that all voices are heard. PRODUCT INNOVATION AND QUALITY SOLUTIONS AND SERVICES Risk category Risk mitigation Risk category Risk mitigation Product innovation, improved technical infrastructure, and enhanced technical capabilities are fundamental to meeting new system requirements in the market. Being unable to deliver those elements in a timely fashion could potentially mean that SimCorp’s product and services would end up as legacy oﬀerings. SimCorp’s ability to oﬀer clients the best software with the highest possible conﬁgurability and ﬂexibility is paramount. Inadequate quality control and testing prior to the release of new software versions could increase the risk of reduced client satisfaction and loyalty. To enable optimal use of resources, lower the total cost of operations (TCO), ease upgrade, and make cloud beneﬁts available for our clients in an eﬃcient manner, we need SimCorp Dimension to operate in a 3-tier deployment model, on premises, in private, and in the public cloud. The 3-tier deployment model is the ﬁrst step in our cloud lift and is paramount for this transition. The main risk associated with the transition is the lack of necessary development capacity or capabilities. Quarterly, SimCorp oﬀers updated versions of SimCorp Dimension, including enhanced system functionality and technical infrastructure based on a systematic prioritization of client and market requirements. A best-practice agile development method enables quick adaptation to changes in market and client demands. This also shortens the extensive control and testing period prior to new version releases, securing an even better software quality. SimCorp continually raises and follows up on internal quality targets and has been able to reduce the number of errors in new software releases. To prepare for our transition to cloud, we have ﬁrst laid out the technical needs, ensured feasibility, done extensive estimation, and established burndown measurements. In addition, we have increased our eﬀorts to meet staﬀ needs in all our locations, and we are engaging with subcontractors to increase our capacity for this peak period. After going live with the solution, the most apparent risk is possible breach of service level agreements, security requirements, or other committed standards. Implementation projects not priced correctly or not having a clear scope, pose a risk of signiﬁcant cost overruns, as well as causing delivery risk to be transferred to SimCorp. Oﬀering SimCorp Dimension as a Service introduces operational risks of running clients’ operational IT en- vironments. This in turn exposes SimCorp to potential ﬁnancial and reputational risks should operations be negatively impacted by errors or downtime. Related services are provided by SimCorp and subcontractors engaged by SimCorp. If SimCorp fails to balance the requirements of clients and agreements with these subcontractors, SimCorp risks impairing the clients’ businesses as well as its own. SimCorp professional services apply a global delivery model leveraging a standard methodology based on industry best practices and standard components. This approach gives existing and new clients a lean and eﬃcient solution-delivery service, driving increased quality and value, while reducing risk and cost for small and large projects alike. It is key for SimCorp to provide standardized end-to-end serviced solutions, both during implementation and after clients have gone live. SimCorp has established various measures to control both external and internal risk to the provision of full-service packages. Externally, a due diligence process is conducted on each subcontractor to ensure it meets SimCorp’s requirements; ﬁnancially, organizationally, and product-wise. Internally, a clear description and overview of each delivery component allows for a clear segregation of duties. SimCorp’s consultants undergo regular training to maintain and develop the required knowledge and experience in relation to the operational services. Larger complex implementation contracts are evaluated, approved, and monitored using a Group standard. In 2020, we made good progress on the cloud lift to move SimCorp Dimension from a 2-tier to a 3-tier architecture, a journey that will continue into 2022. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | RISK MANAGEMENT 26 IT RISK Risk category Risk mitigation As a software company with a core business based on modern information technology, SimCorp’s failure to adequately protect itself against IT risk, represents a particular risk. Cybercrime including unauthorized access to SimCorp’s network and data could endanger applications as well as the infrastructure and the technical environment stored on SimCorp’s network. The same goes for virus attacks and theft of code and know-how which could also entail prolonged system breakdowns impairing productivity and potentially rendering SimCorp unable to service its clients. SimCorp currently delivers SimCorp Dimension as a Service (hosted) for 27 clients, operating the clients’ systems in a third-party hosted environment. Any failure of the hosting provider could result in prolonged system breakdowns that would impair productivity and potentially render SimCorp unable to service clients. SimCorp monitors its technical infrastructure to identify and minimize risk to the company’s production and operation. Established procedures and solutions enable a quick restoration of critical business services. SimCorp upholds a high data security level and strict access control to the physical environment and data network. Controls are monitored and reviewed to optimize information security. SimCorp management and employees are regularly updated on new potential cybercrime threats and how to minimize the risk of phishing and hacking. SimCorp has a disaster recovery plan for restoring all critical business services and makes use of state- of-the-art tracing software for detecting unintended access, or attempts, to SimCorp’s network. The suppliers of this software are diligently screened, using both expert assessments of the product as well as in-house proof of concept. SimCorp regularly receives an ISAE 3402 Type 2 report on our third-party service providers, and the hosting providers have undergone substantial successful due diligence performed by SimCorp and its external partners. Furthermore, SimCorp has back-to- back agreements with its third-party service providers. SimCorp hosting services are audited annually by an external third party, who provides ISAE3402 and SOC assurance reports. FINANCIAL REPORTING Risk category Risk mitigation Generally, ﬁnancial reporting involves the risk of non-compliance with applicable regulations. There is also a risk that internal controls may not detect or prevent signiﬁcant errors and omissions in ﬁnancial reporting. SimCorp’s business procedures and controls ensure compliance with ﬁnancial reporting requirements. The full wording of SimCorp management’s statutory responsibilities under section 107 b of the Danish Financial Statements Act is available on SimCorp’s website: www.simcorp.com/corporate-governance. The Executive Management Board monitors compliance and provides the Board of Directors with relevant reports. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CORPORATE GOVERNANCE REPORT 27 THE WORK OF THE BOARD OF DIRECTORS and the Nomination and Remuneration Committee within the areas of strategy, ﬁnance, risk management, sales, organization, management, and operations. The BoD also evaluated, whether the total number of management functions, including their level and complexity, taken on by each board member was appropriate. The Board of Directors (BoD) is a collective body for promoting the long-term interests of the company. The BoD has as its main three responsibilities to ensure: (i) that the company at all times has the right Executive Management Board (EMB); (ii) that the strategic direction of the company is set; and (iii) that the ﬁnancial and managerial control of the Group is conducted adequately. CORPORATE GOVERNANCE REPORT It was concluded that the BoD’s work is eﬀec- tive, that the members collectively contribute to the required areas of expertise, and that none of the directors is over-boarded. COMPOSITION AND QUALIFICATIONS OF THE BOARD OF DIRECTORS, EXECUTIVE MANAGEMENT BOARD, AND COMMITTEES The BoD is constituted to ensure its indepen- dence, adequate collective competences, and experiences within executive management disciplines related to global corporations, information technology, and business-to-busi- ness sales and implementation of software, and to hold a suﬃcient number of members to enable an appropriate distribution of tasks and an eﬀective decision-making process. As provided in the company’s articles of associa- tion, SimCorp’s BoD consists of between four and eight members elected by the company’s shareholders in addition to members elected by and among the company’s employees. Accordingly, following the Annual General Meeting (AGM) 2020, the BoD consists of six members shareholder-elected and three employee-elected members. SimCorp’s Board of Directors has reviewed each of the current Danish recommendations on corporate governance issued by Nasdaq Copenhagen and has concluded that, with one exception, SimCorp is in full compliance with the recommendations. The Board has decided on speciﬁc measures on the exception. The BoD also concluded that the diversity of the EMB and the BoD with regard to nationalities, educational backgrounds, gender, and age represented by its members is appropriate in light of the company’s strategy and markets. Finally, the BOD concluded that SimCorp complies with the Danish Corporate Gover- nance Guidelines’ recommendation that at least half of the members elected by the AGM are independent. SimCorp’s Corporate Governance Guidelines are intended to ensure an eﬃcient and ade- quate management of SimCorp within the framework deﬁned by applicable legislation, rules, and recommendations for listed compa- nies in Denmark and by SimCorp’s articles of association, vision, and values. The statutory report on the recommendation on corporate governance 2020 demonstrates that, with one exception, SimCorp is in full compliance with the Danish recommendations. Statutory report on the recommen- dations on corporate governance 2020 www2.simcorp.com/ StatutoryReportCorporateGovernance2020 At the AGM 2021, the BoD will propose Susan Standiford as a seventh shareholder-elected member of the BoD, which will bring the number of members of the underrepresented gender up to two of seven members. Susan Standiford brings extensive experience within software and technology from her leadership career at a number of international technolo- gy companies. SIMCORP’S STAKEHOLDER RELATIONSHIPS SimCorp’s overall management objective is to promote the long-term interests of the com- pany, and thus of all stakeholders. Achieving this objective assumes that SimCorp estab- lishes lasting and constructive relationships with the Group’s primary stakeholders: clients, employees, shareholders, and society. Self-assessment As part of its annual cycle activities, the BoD carries out a self-assessment. In 2020, the evaluation was facilitated internally by the Board, and comprised an evaluation of the work and contribution of the EMB, the BoD, the Audit and Risk Committee, Corporate Governance Guidelines 2020 www2.simcorp.com/ Risk management The BoD has the overall responsibility for ensuring that SimCorp maintains appropriate CorporateGovernanceGuidelines2020 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CORPORATE GOVERNANCE REPORT 28 of ownership as the severance payment is up to nine months, and the notice period is extended to 24 months for two executives and 36 months for one executive. In future agree- ments, SimCorp will ensure the total remu- neration does not exceed the recommended threshold. Refer to our Remuneration Report for more details on severance payments. on the left-hand side. See SimCorp’s Corporate Governance Guidelines for a full description of the Audit and Risk Committee’s activities. BOARD OF DIRECTORS AND COMMITTEES – MEETING PARTICIPATION IN 2020 Nomination and Board of Directors Audit and Risk Committee Remuneration Committee External auditor Peter Schütze Morten Hübbe Simon Jeﬀreys Hervé Couturier Adam Warby 6/6 6/6 6/6 6/6 6/6 4/4 4/4 – tasks, objectivity, and independence The Audit and Risk Committee reviews and monitors the company’s ongoing relations with and the independence of the external auditors. Based on recommendations from the Audit and Risk Committee and the external auditors, the Board of Directors decides whether there are areas to which the external auditors should pay special attention. 5/5 4/4 4/4 5/5 5/5 5/5 Remuneration Report 2020 www2.simcorp.com/RemunerationReport2020 Joan Binstock 6/6 Else Braathen 6/6 6/6 6/6 Vera Bergforth Hugues Chabanis AUDIT AND RISK COMMITTEE In November 2020, the BoD decided to formally make the Audit Committee respon- sible for risk oversight and renamed the committee ‘the Audit and Risk Committee’. The Audit and Risk Committee is responsible for assisting the BoD by monitoring Sim- Corp’s ﬁnancial reporting, its internal ﬁnancial control and enterprise risks, as well as the quality, eﬀectiveness, and independence of the external auditors for the SimCorp Group of companies. The Audit and Risk Committee consists of four members elected on a one-year term by and among the BoD. The Audit and Risk Committee meets as often as it and its Chairman deem necessary, however, as a minimum, the Committee will meet four times a year at appropriate times in the reporting and audit cycle. In 2020, ﬁve meetings were held. procedures to monitor, measure, and manage the company’s risks and that such procedures are ﬁrmly embedded in the company’s organization. As part of its risk management, the EMB and the BpD have deﬁned and described the most critical risks to SimCorp and the related mitigating actions. A more detailed description is provided in the section ‘Risk Management’, pp 24-26. NOMINATION AND REMUNERATION COMMITTEE During the year, the Audit and Risk Committee has been informed about the external audi- tor’s policies and procedures for safeguarding its objectivity and independence, and the audit partners and ﬁrm rotation requirements The Nomination and Remuneration Com- mittee assists the BoD with oversight of the competence proﬁle and composition of the BoD, nomination of the BoD and committee members, succession plans for the EMB, remuneration packages and policies for the BoD and EMB, and other tasks on an ad-hoc basis as decided by the BoD. The Nomination and Remuneration Committee consists of four members elected by the BoD on a one-year term by and among the BoD. Further, SimCorp’s CEO is a regular attendee at meetings of the Nomination and Remu- neration Committee. In 2020, the committee held four meetings. AUDITOR FEE - SIMCORP A/S EUR ’000 2020 2019 Audit fees 157 - 186 25 Tax and VAT advice fees Other service fees Further, the company maintains a whistle- blower hotline, which is intended to enable reporting on suspected irregularities in the business. SimCorp has engaged a third party, Got Ethics, who provides an internet-based reporting tool. Reports sent through the whis- tleblower hotline are electronically submitted directly to the Chairman of the Audit and Risk Committee and another member of SimCorp’s BoD. 16 15 Total auditor fee 173 226 Non-Audit Services (NAS)/ Audit fee ratio 10% 22% AUDITOR FEE - SIMCORP GROUP EUR ’000 2020 2019 Exception from the Danish corporate governance recommendations Severance payments Pursuant to the Danish corporate governance recommendations, it is recommended that the majority of the members of the Committee qualify as independent and the committee should possess the necessary ﬁnancial Audit fees 437 17 419 162 39 Tax and VAT advice fees Other service fees 21 Whistleblower Policy www2.simcorp.com/WhistleblowerPolicy For three of the four existing executive services agreements, the total severance pay during the notice period exceeds the recommended two years’ remuneration in the event of change Total auditor fee 475 620 Non-Audit Services (NAS)/ Audit fee ratio expertise. The members of the Audit and Risk Committee qualify, and are shown in the table 9% 48% MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CORPORATE GOVERNANCE REPORT 29 have been routinely observed. During the year, the Committee has approved audit-related and non-audit related services fees according to the Audit and Risk Committee guidelines for approval of non-audit services. Audit fees are for the audit of the consolidated and local company ﬁnancial statements. SimCorp’s approach to CSR is described in Travel and electricity and heat-related energy consumption are the key environmental factors aﬀected by SimCorp’s business model (see page 11). To reduce negative impact, SimCorp promotes responsibility and increasing use of modern technologies across its business operations, SimCorp’s travel policy guides employees to replace air travel with virtual meetings whenever possible, with a goal of reducing travel related CO2 emission by 50% compared with 2019. To track progress, we set KPIs and provide metrics for key impact actvities as part of our Sustainabilty report. technical data security standards and processes, as well as ongoing education of the employees on how to handle data conﬁdentially. A framework is in place to ensure that SimCorp complies with the General Data Protection Regulation (GDPR). its policies and business behavior guidelines, including the company’s ‘Corporate Social Responsibility Policy’, ‘Diversity and Inclusion Policy’, ‘Guideline for Good Business Behavior’, ‘Remuneration Guidelines’ and ‘Corporate Governance Guidelines’. These documents include guidelines on ethics, human rights, the environment, stakeholder engagement, governance, bribery, and anti-corruption that aim to maintain a professional and commercial relations with internal and external stakeholders based on mutual respect. DIVERSITY Other ongoing activities Report on the underrepresented gender and diversity, cf. Sections 99 b and 107 d of the Danish Financial Statements Act As part of its annual cycle activities, the Audit and Risk Committee reviews SimCorp’s accounting policies, compliance with report- ing requirements, risk policy and assessment, internal controls, whistleblower policy, insur- ance principles, and interim reports. It does deep-dives into speciﬁc topics, for example, risk associated with long-term contracts. Diversity Report 2020 www2.simcorp.com/DiversityReport2020 Guideline for Good Business Behavior www2.simcorp.com/ Due to the nature of its business model and its associated risks, SimCorp does not have a speciﬁc human rights policy and our approach to human rights is outlined in our Guideline for Good Business Behavior that is also the foundation for our business relationships with suppliers. It is part of the procurement process that suppliers are requested to conﬁrm adherence to a number of principles, including compliance with the UN convention on child labor, article 32.1, and the respect for an equal status between the sexes and between persons of diﬀerent races and religion. Further, SimCorp does not accept products and services which have directly or indirectly been designed, manufactured, produced, or procured in contravention of local environmental legislation or other legislation, or by means of corruption, bribery, or other fraudulent behavior. As described in our Diversity and Inclusion Policy, SimCorp aims to promote diversity. Regarding gender diversity, it is our objective to develop female talent within the business and to increase the proportion of women at all management levels. To ensure a strong focus on female leadership, SimCorp has set a target to increase the share of women in management positions to 34% by the end of 2023. Activities to reach this goal are de- scribed in the Diversity Report 2020. The goal is based on a wish to strengthen the versatility and total competences across the business and to improve decision-making processes. GuidelineForGoodBusinessBehavior Assessment During 2020, the SimCorp Audit and Risk Committee was satisﬁed with auditor inde- pendence, and with the management of risks within the areas it monitors for the BoD. CSR Policy www2.simcorp.com/CSRPolicy SimCorp joined the UN Global Compact in 2019 and commit to submitting an annual Communication on Progress (CoP) concerning our implementation of its principles. SimCorp’s contribution to speciﬁc targets related to UN’s Sustainable Development Goals and our results on a wide range of non-ﬁnancial ESG metrics are included in our Sustainability report. CORPORATE SOCIAL RESPONSIBILITY Statement on corporate social responsibility, cf. Section 99 a of the Danish Financial Statements Act Sustainability Report 2020 www2.simcorp.com/SustainabilityReport2020 Regarding gender diversity of the BoD, it is the company’s target to have at least two shareholder-elected directors of the under- represented gender, also corresponding to the share in general population in the industry. It is SimCorp’s goal to reach the target in 2021 with the election of Susan Standiford to the BoD. Corporate social responsibility (CSR) in SimCorp is ﬁrmly based on the Group’s CSR Policy and overall approach to sustainability. SimCorp’s commitment to corporate sus- tainable development is based on combining ﬁnancial performance with socially responsi- ble behavior and environmental awareness. Our cloud transformation, new technlogies, and people initiatives are key enablers of our focus on sustainability, which aims at reducing our CO2 emission, expanding support for our clients’ ESG investments, creating a truly diverse and inclusive workplace, and ensuring meaning in work. SimCorp maintains high standards on conﬁdentiality and protection of personal data, which is ensured through compliance with MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CORPORATE GOVERNANCE REPORT 30 Regarding gender diversity in the EMB, SimCorp has set a target for the group to con- sist of minimum 25% women. When recruiting new EMB members, gender, age, nationality and professional capabilities should be taken into account to ensure diversity. Furthermore, the recruitment process should follow SimCorp’s general guidelines on securing a diverse candidate ﬁeld. At the end of 2020, people managers in SimCorp comprised 69.6% (2019: 70.7%) men and 30.4% (2019: 29.3%) women. Overall, SimCorp’s staﬀ comprised 67.7% (2019: 67.7%) men and 32.3% (2019: 32.3%) women. As described in the previous section on self-as- sessment of the EMB and BoD, the diversity of each with regard to educational background and nationalities is regarded as satisfactory. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | SHAREHOLDER INFORMATION 31 SHAREHOLDER INFORMATION In 2020, SimCorp’s share price increased by 20%. Liquidity in the SimCorp share measured by average daily trading turnover was up by 18% to DKK 84.5m. SHARE PRICE DEVELOPMENT AND TRADING ACTIVITY, 2020 THE SIMCORP SHARE SHAREHOLDER STRUCTURE The share price at December 31, 2020 was DKK 905.50 per share, equal to a market capitalization of EUR 4.8bn (DKK 35.9bn). The share price increased by 20% in 2020. By comparison, the Nasdaq Copenhagen blue chip index (OMXC25), which includes the SimCorp share, increased by 34%. At December 31, 2020, SimCorp had Turnover EURm Per share of DKK 1 SimCorp OMXC25 (rebased) Turnover EURm more than 13,000 registered shareholders representing around 97% of the company’s share capital, an increase of approximately 3,000 registered shareholders during the year. Approximately 56% (2019: 51%) of the share capital was held or managed by the 25 largest shareholders, and around 81% (2019: 81%) of the registered share capital was held by shareholders based outside Denmark. 500 1,000 450 400 900 800 350 300 700 600 500 400 300 200 100 Relative to 2019, the average daily turnover of SimCorp shares on Nasdaq Copenhagen rose by 18% to DKK 84.5m, while the average number of trades per day increased by 25% to 2,356. 250 200 150 100 50 At December 31, 2020, around 6% (2019: 6%) of the company’s share capital was held by the company’s management and employees. Furthermore, SimCorp estimates that Danish and foreign institutional investors held some 80% of the company’s shares, an increase compared with the 79% at year-end 2019. Around 40% (2019: 36%) of SimCorp shares were managed by investors who are also clients of SimCorp. In accordance with section SHARE CAPITAL SimCorp’s nominal share capital is DKK 40,500,000 divided into 40,500,000 shares of DKK 1. SimCorp holds 849,449 treasury shares of DKK 1 equivalent to 2.1% of the share capital. 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | SHAREHOLDER INFORMATION 32 SHAREHOLDER STRUCTURE BY GEOGRAPHY SHAREHOLDER STRUCTURE BY CATEGORY 55 of the Danish Companies Act, the following investors have reported holding more than 5% of SimCorp’s share capital: 2020 18.6% 35.2% 26.5% 19.5% 0.2% 2019 19.0% 33.4% 31.1% 16.2% 0.3% 2020 2019 Denmark Institutional investors 80% 79% North America UK • • The Capital Group Companies, Inc., 10.0% SMALLCAP World Funds, Inc. (fund within Capital Group companies), 5.6% Private investors 12% 6% 13% 6% Employees and management Europe Rest of the world • Ameriprise Financial Inc. group, USA, with a part held by the subsidiary Columbia Wanger Asset Management LLC, 5.1% Treasury shares 2% 2% SHARE-BASED INCENTIVE SCHEMES In accordance with the remuneration policy, approved by the shareholders at the Annual General Meeting 2020, the Board of Directors approved the share-based LTIP for manage- ment and key employees based on restricted stock units. The fair value of the restricted stock units amounted to EUR 4.7m at the time of allotment, and a total of 48,217 restricted stock units of DKK 1 were granted, including 22,689 restricted stock units to the Executive Management Board and 156 restricted stock units to employee-elected members of the Board of Directors. are only partially met, the number of shares transferred after three years will be reduced, potentially to zero. SimCorp’s share-based incentive schemes are further detailed in note 3.2 to the ﬁnancial statements. Group’s Executive Management Board held a total of 224,691 SimCorp shares and 93,961 restricted stock units. In addition, 72,808 restricted stock units relating to the corporate bonus program for 2019 were granted in 2020 and distributed among employees in the Group, including 687 restricted stock units to employee-elected members of the Board of Directors. The restricted stock units will vest one third after one year, a further one third after two years, and the last third after three years, subject to vesting conditions. In accordance with SimCorp’s Remuneration Policy, members of the Board of Directors will in 2021 continue to receive SimCorp shares with a total value equal to one third of their total remuneration. Additional information on the holdings of SimCorp shares and restricted stock units by members of the Board of Directors, the Executive Management Board, and other related parties is disclosed in note 7.2 to the ﬁnancial statements. Furthermore, in connection with various appointments of senior employees during 2020, 1,954 restricted stock units were granted. The fair value amounted to EUR 0.2m at the time of allotment. It is the assessment of the Board of Directors that these remuneration principles ensure an appropriate alignment of the interests of the Board of Directors with SimCorp’s sharehold- ers in general. ANNUAL GENERAL MEETING The Annual General Meeting of SimCorp A/S will be held on: Wednesday, March 24, 2021 at 3 pm at SimCorp’s headquarters, Weidekampsgade 16, Copenhagen, Denmark. The share-based incentive program based on restricted stock units will continue in 2021 and comprises restricted stock units with a market value of approximately EUR 4.9m on the date of grant. Furthermore, EUR 1.7m are estimated to be granted for regional retention programs for senior employees in North America, EMEA, and APAC. The above-mentioned LTIP restricted stock units will vest after three years, subject to continuing employment and are subject to conditions with respect to average annual minimum business growth and annual average net operating proﬁt after tax for the ﬁnancial years 2020-2022. If the two latter conditions MANAGEMENT SHARES/RESTRICTED STOCK UNITS It will also be possible to participate in Annual General Meeting via webcast. As at December 31, 2020, the members of the company’s Board of Directors held a total of 53,655 SimCorp shares and 1,853 restricted stock units were held by employee-elected members of the Board. The members of the Agenda and proposed resolutions will be published on Wednesday, February 24, 2021, with notice sent by email to all shareholders. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | SHAREHOLDER INFORMATION 33 All members elected by the shareholders, who are currently serving on the Board of Directors, will stand for re-election at SimCorp’s Annual General Meeting. Brief biographies of the cur- rent members of the Board of Directors are found on pages 34-36. The Board intends to propose that Susan Standiford be elected as new member of the Board of Directors to meet the ideal competence proﬁles for the Board as identiﬁed during the Board of Directors’ annual self-assessment. The adjusted Remuneration Guidelines take eﬀect if and when approved by the share- holders at the Annual General Meeting in March 2021. The current guidelines for the remuneration of Board of Directors, Executive Management, and employees can be found on the company’s website: www.simcorp.com/ corporate-governance FINANCIAL CALENDER 2021 March 24, 2021 Annual General Meeting 2021 The Board of Directors further intends to propose that the shareholders authorize the company to acquire treasury shares of up to 10% of the company’s share capital. See section 198 of the Danish Companies Act. March 29, 2021 Expected date for pay-out of dividend The Board of Directors will propose changes to its remuneration, including its committees, to the Annual General Meeting. As the base fee has been unchanged since 2014, the Board proposes that the base fee increases to DKK 420,000 from currently DKK 375,000, while the multi-pliers remain the same for the Chairman and Vice-chairman positions within the Board and the member positions within the Audit and Risk Committee and the Nomination and Remuneration Committee. May 19, 2021 Aug 13, 2021 Nov 12, 2021 Publication of interim ﬁnancial report Q1 2021 (early morning) Publication of interim ﬁnancial report H1 2021 (early morning) Publication of interim ﬁnancial report 9M 2021 (early morning) SHARE DATA Stock exchange Index Nasdaq Copenhagen A/S OMXC25 Sector ISIN code Short code Share capital Nominal size Number of shares Negotiable papers Technology DK0060495240 SIM BOARD OF DIRECTORS & COMMITTEES – TOTAL REMUNERATION TO BE PROPOSED AT THE ANNUAL GENERAL MEETING IN MARCH 2021 (CASH AND SHARE-BASED) Nomination and DKK 40,500,000 DKK 1 Audit and Renumeration Committee Fee Board DKK Risk Committee 40,500,000 Yes Multiplier Multiplier DKK Multiplier DKK Restriction in voting rights No Chairman 3 2 1 1,260,000 840,000 420,000 0.75 N/A 315,000 N/A 0.375 N/A 157,500 N/A Vice-chairman Member 0.375 157,500 0.1875 78,750 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | SHAREHOLDER INFORMATION 34 DIVIDENDS AND SHARE BUYBACK Based on the current cash position and business outlook, SimCorp expects to initiate a share buyback program in 2021 for a fore- casted amount of EUR 40.0m. The program will be carried out in two half yearly buyback programs of EUR 20.0m each during the period from the release of the Annual Report 2020 to the end of 2021. The program will be carried out in compliance with the provisions of Regulation No. 596/2014 of the European Parliament and of the Council on market abuse (the Market Abuse Regulation - MAR) and delegated legislation under MAR. Maintaining a sound liquidity buﬀer is vital to SimCorp’s continued international expansion. Management considers this objective will be achieved when the cash holdings and credit lines exceed 10% of the projected costs for the coming year. On this basis, the company intends to pay dividends of at least 40% of the proﬁt on ordinary activities after tax. Additional cash will, unless other cash requirements are foreseen, be used to buy treasury shares. The purchase of treasury shares is expected to be carried out in com- pliance with the provisions of Regulation No. 596/2014 of the European Parliament and of the Council on market abuse (the Market Abuse Regulation - MAR) and delegated legislation under MAR. INVESTOR RELATIONS SimCorp pursues an open dialogue with investors and analysts about the company’s business and ﬁnancial performance. In order to ensure that all SimCorp’s stakeholders have equal access to corporate information, news is released to Nasdaq Copenhagen, the media, and on SimCorp’s website, where users can also subscribe to SimCorp’s news service. SimCorp’s Investor Relations team handles all contact with investors and the press on issues relating to the company’s shares. The Board of Directors has considered SimCorp’s cash position and liquidity fore- cast, and on the basis thereof, the Board of Directors intends to recommend to the shareholders at the Annual General Meeting that dividends of EUR 40.1m, equal to DKK 7.50 per share of DKK 1, be distributed for the ﬁnancial year 2020. The dividends of EUR 40.1m are equivalent to 45.5% of Group proﬁt for the year and 43.7% of free cash ﬂow in 2020. Please contact: Anders Hjort, Head of Investor Relations, phone: +45 35 44 88 00, investor@ simcorp.com, www.simcorp.com/en/investor/ contact-investor-relations In order to be eligible for dividends, shares must be registered before March 24, 2021. The ex-dividend date is March 25, 2021. Dividends for the ﬁnancial year 2020 are expected to be paid on March 29, 2021. Announcements to Nasdaq Copenhagen in 2020 can be found at www.simcorp.com/en/ news-and-announcements MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | BOARD OF DIRECTORS 35 BOARD OF DIRECTORS PETER SCHÜTZE Chairman MORTEN HÜBBE Vice-chairman HERVÉ COUTURIER Business address: Kerney Partners, 54, rue Franklin, 78100 Saint Germain en Laye, France. Business address: Tryg, Klausdalsbrovej 601, 2750 Ballerup, Denmark. Business address: SimCorp A/S, Weidekampsgade 16, 2300 Copenhagen S, Denmark. PERSONAL AND EDUCATIONAL BACKGROUND Born 1958, French citizen, MSc (Industrial Engineering) from École Centrale de Paris. PERSONAL AND EDUCATIONAL BACKGROUND Born 1972, Danish citizen, BSc (Int. BA & Modern Languages), MSc (Fin. & Acc.). PERSONAL AND EDUCATIONAL BACKGROUND Born 1948, Danish citizen, MSc (Econ.). CAREER AND DIRECTORSHIPS CAREER AND DIRECTORSHIPS CAREER AND DIRECTORSHIPS Former CEO of Nordea Bank Danmark A/S. Chair- man of SimCorp A/S’ Board of Directors since 2019 and Vice-chairman 2012-2019. Member of SimCorp A/S’ Nomination and Remuneration Committee since 2017. Chairman of the Board of Directors of DSB SOV, Falck A/S, Nordea-fonden and Nordea Bank-fonden. Deputy chairman of Lundbeckfonden and Lundbeckfond Invest A/S. Member of the Industrial Board of Axcel, Axcel Future, The Systemic Risk Council and Gösta Enboms Fond. Chairman of the investment committee of Danish SDG Investment Fund and Dronning Margrethe den II’s Arkæologiske Fond. Managing Partner in Kerney Partners. From 2012-2016 Executive Vice President and Chief Technology Oﬃcer in Amadeus S.A.S. Previously Executive Vice President in SAP, S1 Corporation and IBM. Member of SimCorp A/S’ Board of Directors since 2008 and member of SimCorp A/S’ Nomination and Remuneration Committee since 2017. Board member of Sabre, Infovista, Sportradar, Kyriba, and Unit4. Group CEO of Tryg A/S since 2011. From 2002-2011 Group CFO of Tryg A/S. Member of SimCorp A/S’ Board of Directors since 2018 and Vice-chairman since 2019. Chairman of SimCorp A/S’ Nomination and Remuneration Committee since 2019. Chairman of Siteimprove since 2020 and Conscia since 2020. Board member of KBC. Has resigned from this board role eﬀective from the spring of 2021. INDEPENDENCE Is not regarded as independent. INDEPENDENCE Is regarded as independent. RELEVANT COMPETENCES AND EXPERIENCES International experience in software development for the ﬁnancial and B2B sectors, as well as general management skills. RELEVANT COMPETENCES AND EXPERIENCES Chief executive management experience from a listed company and solid know-how of working with key market players like investors and regulators. INDEPENDENCE Is regarded as independent. RELEVANT COMPETENCES AND EXPERIENCES More than 30 years of management experience from an international ﬁnancial company as well as several board positions both as chairman and member. Involvement in IT development and trading operations in ﬁnancial institutions. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | BOARD OF DIRECTORS 36 BOARD OF DIRECTORS SIMON JEFFREYS ADAM WARBY JOAN A. BINSTOCK Business address: Avanade Inc., 30 Cannon Street, London, EC4M 6XH, UK. Business address: Aon UK Ltd., The Aon Centre, 122 Leadenhall Street, London EC3V 4AN, UK. Business address: Lovell Minnick Partners, LLP, 1155 Avenue of the Americas, New York, NY 10036, USA. PERSONAL AND EDUCATIONAL BACKGROUND Born 1960, British citizen, B.Sc. in Mechanical Engineering from Imperial College, London. PERSONAL AND EDUCATIONAL BACKGROUND Born 1952, British citizen, B.Com (Hons) from University of Cape Town, CA(SA), FCA, CPA. PERSONAL AND EDUCATIONAL BACKGROUND Born 1954, US citizen, MBA from NYU Stern School of Business, B.A. from State University of New York at Binghamton. Certiﬁed Public Accountant. CAREER AND DIRECTORSHIPS CAREER AND DIRECTORSHIPS CEO of Avanade Inc. (Microsoft & Accenture joint venture) from 2008-2019. Member of SimCorp A/S’ Board of Directors since 2017. Member of SimCorp A/S’ Audit and Risk Committee since 2019. Chairman of the Board of Heidrick & Struggles. Chairman of Junior Achievement Europe. Senior Advisor, KKR and member of the European PE Portfolio Management Committee. Former PwC Global Investment Management Leader and senior audit partner, and Chief Operat- ing Oﬃcer of the Wellcome Trust. Member of SimCorp A/S’ Board of Directors since 2011. Chair- man of SimCorp A/S’ Audit and Risk Committee since 2013. Director and Chairman of the Audit and Risk Committees of the Boards of Directors of St James’s Place plc and Templeton Emerging Markets Investment Trust plc. Chairman of Aon UK Ltd. and Henderson International Income Trust plc. Chair of the Audit and Risk Committee of the Crown Prosecution Service. CAREER AND DIRECTORSHIPS Formerly CFO and COO at Lord, Abbett & Co. LLC. Prior to joining Lord Abbett, Joan worked inter alia for Goldman Sachs Capital Markets Group and for PricewaterhouseCoopers, LLC Financial Services Audit Practice. Member of SimCorp A/S’ Board of Directors and SimCorp A/S’ Audit and Risk Committee since 2018. Member of the Board of Directors and Audit Committee of Center Square Asset Management, Morgan Stanley Direct Lending Fund, and Brown Brothers Harriman US Mutual Funds. Board member and Audit Chair of KKR Real Estate Trust. INDEPENDENCE Is regarded as independent. RELEVANT COMPETENCES AND EXPERIENCES More than 30 years of international experience in the software and technology services industries, including responsibility for strategy, M&A, enterprise sales, consulting, and managed service delivery from a career spanning IBM, Microsoft, and Avanade. INDEPENDENCE Is regarded as independent. INDEPENDENCE Is regarded as independent. RELEVANT COMPETENCES AND EXPERIENCES Group executive experience in a multinational corporation, including responsibility for strategy development and implementation, information technology and ﬁnance. Involved in the develop- ment and governance of companies with IT and consultancy activities. RELEVANT COMPETENCES AND EXPERIENCES Experience from the ﬁnancial services industry within ﬁnance, risk management and operations, including software selection and implementation. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | BOARD OF DIRECTORS 37 BOARD OF DIRECTORS ELSE BRAATHEN VERA BERGFORTH HUGUES CHABANIS Business address: SimCorp A/S, Weidekampsgade Business address: SimCorp GmbH, Justus-von-Li- Business address: SimCorp France S.A.S., 16, 2300 Copenhagen S, Denmark. ebig-Straße 1, 61352 Bad Homburg, Germany. 23 rue de Vienne, 3rd ﬂoor, 75008 Paris, France. PERSONAL AND EDUCATIONAL BACKGROUND Born 1967, Danish citizen, MSc. (Math and Economics) from Aarhus University. PERSONAL AND EDUCATIONAL BACKGROUND Born 1966, German citizen, Graduate Business Economist from Bankakademie Frankfurt. PERSONAL AND EDUCATIONAL BACKGROUND Born 1981, French citizen, MSc. (Business Intelligence) from EISTI. DIRECTORSHIPS DIRECTORSHIPS DIRECTORSHIPS Employee-elected member of SimCorp A/S’ Board of Directors since 2019. Employee-elected member of SimCorp A/S’ Board of Directors since 2016. Member of SimCorp A/S’ Audit and Risk Committee since 2016. Employee-elected member of SimCorp A/S’ Board of Directors since 2016. Member of SimCorp A/S’ Nomination and Remuneration Committee since 2017. RELEVANT COMPETENCES AND EXPERIENCES 16 years in the Alternative Investments Software industry and diﬀerent job positions including consulting, sales, presales, and product manage- ment across Europe, North America, and Africa. RELEVANT COMPETENCES AND EXPERIENCES More than 14 years in risk management in leading ﬁnancial institutions. 14 years in SimCorp’s Product Management shaping the risk solutions of SimCorp Dimension. RELEVANT COMPETENCES AND EXPERIENCES More than 30 years’ experience from the ﬁnancial industry within private asset management, custodi- an, insurances & pensions, and fund administration. Expertise within back oﬃce operations, fund administration, accounting, and business analysis. 14 years with SimCorp, taking on diﬀerent roles in Global Presales, Consultancy, and Go-to-Market. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | EXECUTIVE MANAGEMENT BOARD 38 EXECUTIVE MANAGEMENT BOARD KLAUS HOLSE MICHAEL ROSENVOLD GEORG HETRODT CHRISTIAN KROMANN Born 1961. Born 1967. Born 1966. Born 1972. Chief Executive Oﬃcer. Employed since 2012. Present position held since 2012. Chief Financial Oﬃcer. Employed since 2017. Present position held since 2017. Chief Product Oﬃcer. Employed since 1998. Present position held since 2009. Chief Operating Oﬃcer. Employed since 2019. Present position held since 2019. Member of SimCorp A/S’ Executive Management Board. Chairman of the Board of Directors of Tink AB, SuperOﬃce AS and Zenegy A/S. Member of the Board of Directors of Better Collective A/S. Member of the Supervisory Board of Industriens Arbejdsgivere i Danmark & Dansk Industri. Member of SimCorp A/S’ Executive Management Board. Member of the Board of Directors of DHI A/S, NIRAS Gruppen A/S, and Tabellae A/S. Chairman of the Audit Committee of DHI A/S. Member of SimCorp A/S’ Executive Management Board. Chairman of the Board of Directors of Dyalog Ltd. Member of SimCorp A/S’ Executive Management Board. Member of the Board of Directors of deriStrat AB. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | GROUP MANAGEMENT COMMITTEE 39 GROUP MANAGEMENT COMMITTEE HANS OTTO ENGKILDE JAMES CORRIGAN OLIVER JOHNSON JOCHEN MÜLLER Born 1969. Born 1976. Born 1985 Born 1966. SimCorp EMEA, Managing Director, Executive Vice President. Employed since 1999. SimCorp North America, Managing Director, Executive Vice President. Employed since 2014. SimCorp APAC, Managing Director, Senior Vice President. Employed since 2017. Chief Commercial Oﬃcer, Executive Vice President. Employed since 1996. Present position held since 2019. Present position held since 2020. Present position held since 2014. Present position held since 2017. HENRIK SCHLÆGEL FRED BOUTEILLER MARC HENOCH MARC SCHRÖTER Born 1958. Born 1969. Born 1971. Born 1973. SimCorp Global Services, Executive Vice President. Employed since 2013. Present position held since 2013. Global Product Management, Senior Vice President. Employed since 1995. Present position held since 2014. Global Services, Senior Vice President. Employed since 2020. Present position held since 2020. Global Managed Services, Senior Vice President. Employed since 2003. Present position held since 2020. THOMAS HEJLSBERG PIET SYHLER MALENE KROHN MARLENE NYHOLM VOSS Born 1964. Born 1973. Born 1963. Born 1973. Product Division, Senior Vice President Employed since 2020. Present position held since 2020. Chief Human Resources Oﬃcer, Senior Vice President. Employed since 2014. Present position held since 2019. Architecture and Technology, Chief Technology Oﬃcer, Senior Vice President. Employed since 2018. Product Division, Senior Vice President. Employed since 1998. Present position since 2019. Present position held since 2018. JOHAN ROSENGREEN KRINGEL MARTIN SCHAK MØLLER** Born 1976. Born 1975. Strategy and Corporate Development, Senior Vice President. Employed since 2018. Group Legal and Compliance, Senior Vice President. Employed since 2008. Present position held since 2018. Present position held since 2018. * The four Executive Management Board members (see page 37) are also members of Group Management Committee. ** Member of GMC since January 1, 2021. *** Will step down from his position in Spring 2021. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | STATEMENTS AND SIGNATURES 40 EXECUTIVE MANAGEMENT BOARD STATEMENTS AND SIGNATURES Klaus Holse Georg Hetrodt Chief Product Oﬃcer Chief Executive Oﬃcer STATEMENT BY THE BOARD OF DIRECTORS AND THE EXECUTIVE MANAGEMENT BOARD In our opinion, Management Report includes a true and fair account of the development in the operations and ﬁnancial circumstances of the Group and the Parent Company, of the re- sults for the year and of the ﬁnancial position of the Group and the Parent Company as well as a description of the most signiﬁcant risks and elements of uncertainty facing the Group and the Parent Company. Michael Rosenvold Christian Kromann The Board of Directors and Executive Mana- gement Board have today considered and adopted the Annual Report of SimCorp A/S for the ﬁnancial year January 1 – December 31, 2020. Chief Financial Oﬃcer Chief Operating Oﬃcer BOARD OF DIRECTORS The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. In our opinion, the annual report of SimCorp A/S for the ﬁnancial year January 1 - December 31, 2020 with the ﬁle name simcorp-2020-12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Peter Schütze Chairman Morten Hübbe Vice-chairman Hervé Couturier In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the ﬁnancial position at December 31, 2020 of the Group and the Parent Company and of the results of the Group and Parent Company operations and cash ﬂows for 2020. We recommend that the Annual Report be adopted at the Annual General Meeting. Copenhagen, February 10, 2021. Simon Jeﬀreys Vera Bergforth Adam Warby Joan Binstock Else Braathen Hugues Chabanis MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | STATEMENTS AND SIGNATURES 41 INDEPENDENT AUDITOR’S REPORTS To the shareholders of SimCorp A/S Basis for opinion Key audit matters 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. We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. Key audit matters are those matters that, in our professional judgement, were of most signiﬁcance in our audit of the Financial Statements for 2020. These matters were REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s and the Parent Company’s ﬁnancial position at 31 December 2020 and of the results of the Group’s and the Parent Company’s operations and cash ﬂows for the ﬁnancial year 1 January to 31 December 2020 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. KEY AUDIT MATTER We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion. Revenue recognition We assessed the design and implementation of the controls over the Group’s revenue cycle. We tested relevant controls including application controls and Management’s review controls. For revenue recognized we challenged and evaluated Management’s assessment that customers has the ability to direct use and obtain substantially all beneﬁts for the licenses transferred. For revenue recognized point in time we challenged and evaluated Management’s documentation for right to payment and that the licenses has been transferred and made available to the customer. For revenue recognized over time we challenged and evaluated Management’s assessment that customers over time consumes and beneﬁt from the services delivered. The Group and the parent company provide its products and services to clients in bundled packages as multi-element contracts, and recognition of revenue is subject to the inherent complexities in the software industry. Revenue is recognized when control is passed and if the revenue criteria for recognizing revenue over time or at a point of time have been met. We focused on this area due to the judgmental and complex nature of revenue recognition for multiple element arrangements that include identiﬁcation of performance obligations in the contracts and allocation of the relative standalone selling prices to the identiﬁed performance obligations. Independence We are independent of the Group in accor- dance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark. We have also fulﬁlled our other ethical responsibilities in accordance with the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of Sim- Corp A/S for the ﬁnancial year 1 January to 31 December 2020 comprise income statement and statement of comprehensive income, statement of ﬁnancial position, statement of changes in equity, cash ﬂow statement and notes, including summary of signiﬁcant accounting policies for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Further, we focused on presentation in the statement of ﬁnancial position of contracts assets and revenue recognition for ﬁxed fee and time and material projects due to the inherent estimation uncertainty. Refer to note 2.1 ”Revenue”, 2.2 “Segment information”, 2.3 “Future performance obligations and note 2.4 “Contract balanc- es” in the consolidated ﬁnancial statements and note 2.1 ”Revenue”, 2.2 ”Future perfor- mance obligations” and note 2.3 “Contract balances” in the parent company ﬁnancial statements. For multi-element contracts, we identiﬁed, challenged and evaluated Management’s allocation of revenue to the speciﬁc per- formance obligations in the contracts and assessed the allocation of the standalone selling prices to the performance obligations including rebates, discounts, allowances and inherent interests. We assessed the percentage of comple- tion on speciﬁc ﬁxed fee projects based on Management reports, project estimates and interview of project managers. We also assessed the outcome of prior period estimates. Appointment We were ﬁrst appointed auditors of SimCorp A/S on 31 March 2014 for the ﬁnancial year 2014. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of 7 years including the ﬁnancial year 2020. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | STATEMENTS AND SIGNATURES 42 ﬁnancial statements that are free from material • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain 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, misrepresen tations, or the override of internal control. Obtain 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 eﬀective- ness of the Group’s and the Parent HOW OUR AUDIT ADDRESSED misstatement, whether due to fraud or error. KEY AUDIT MATTER THE KEY AUDIT MATTER In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as ap- plicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company, or to cease operations, or has no realistic alternative but to do so. Accounting for taxation In understanding and evaluating Man- agement’s judgement, we considered the status of recent and current tax author- ity audits and enquiries, the outcome of previous claims, judgmental positions taken in tax returns and current year estimates and developments in the tax environment. We used our own local and international tax specialists, evaluated the adequacy of Management’s signiﬁcant assumptions and read correspondence with tax authorities to assess the valuation of tax assets and liabilities. The Group operates in a complex multina- tional tax environment and there are open tax and transfer pricing cases with domestic and foreign tax authorities. We focused on this area as the amounts involved are potentially material and the valua- tion of tax assets and liabilities are associa- ted with estimation uncertainty and judgement. Refer to note 4.1 “Income tax” and 4.2 • “Deferred tax” in the consolidated ﬁnancial statements as well as in the parent company ﬁnancial statements. Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. 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. Company’s internal control. Reporting on Management Report Management is responsible for Management Report. Based on the work we have performed, in our view, Management Report is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial State- ments Act. We did not identify any material misstatement in Management Report. • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclo- sures made by Management. Our opinion on the Financial Statements does not cover Management Report, and we do not express any form of assurance conclusion thereon. Conclude on the appropriateness of Man- agement’s use of the going concern basis of accounting and based on the audit evi- dence obtained, whether a material uncer- tainty exists related to events or conditions that may cast signiﬁcant doubt on the Group’s and the Parent Company’s In connection with our audit of the Financial Statements, our responsibility is to read Management Report and, in doing so, consider whether Management Report is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated ﬁnancial statements and parent company ﬁnancial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management deter- mines is necessary to enable the preparation of 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 As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism through- out the audit. We also: 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 or the Moreover, we considered whether Manage- ment Report includes the disclosures required by the Danish Financial Statements Act. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | STATEMENTS AND SIGNATURES 43 Parent Company to cease to continue as a going concern. our auditor’s report unless law or regulation precludes public disclosure about the matter Statements presented in human-readable format; and In our opinion, the annual report of SimCorp A/S for the ﬁnancial year 1 January to 31 December 2020 with the ﬁle name simcorp-2020-12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation. • • Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the under- lying transactions and events in a manner that achieves fair presentation. or when, in extremely rare circumstances, we determine that a matter should not be com- municated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest beneﬁts of such communication. • For such internal control as Management determines necessary to enable the prepa- ration of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compli- ance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: Hellerup, February 10, 2021 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 Obtain suﬃcient appropriate audit evidence regarding the ﬁnancial infor- mation of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, super- vision and performance of the group audit. We remain solely responsible for our audit opinion. REPORT ON COMPLIANCE WITH THE ESEF REGULATION As part of our audit of the Financial State- ments we performed procedures to express an opinion on whether the annual report of SimCorp A/S for the ﬁnancial year 1 January to 31 December 2020 with the ﬁlename simcorp-2020-12-31.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signiﬁcant audit ﬁndings, including any signiﬁcant deﬁciencies in internal control that we identify during our audit. • • Testing whether the annual report is prepared in XHTML format; Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements; We also provide those charged with governance 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. • • Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: Rasmus Friis Jørgensen State Authorised Public Accountant mne28705 Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identiﬁed; • • The preparing of the annual report in XHTML format; The selection and application of appro- priate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all ﬁnancial information required to be tagged using judgement where necessary; Ensuring consistency between iXBRL tag- ged data and the Consolidated Financial From the matters communicated with those charged with governance, we determine those matters that were of most signiﬁcance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in • • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. Thomas Baunkjær Andersen State Authorised Public Accountant mne35483 • MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CONSOLIDATED FINANCIAL STATEMENTS 44 CONSOLIDATED FINANCIAL STATEMENTS SECTION 3 EMPLOYEES SECTION 6 45 Income statement 45 Statement of comprehensive income 46 Cash ﬂow statement EQUITY, CAPITAL STRUCTURE, AND FINANCING ITEMS 47 Statement of ﬁnancial position 48 Statement of changes in equity 49 Notes 61 3.1 Employee cost 78 6.1 Equity, treasury shares, and dividends 80 6.2 Risk 84 6.3 Financial assets and liabilities 86 6.4 Financial income and expenses 62 3.2 Share based remuneration 65 3.3 Pension and similar liabilities 67 3.4 Provisions 93 SimCorp A/S SECTION 1 BASIS OF PREPARATION SECTION 4 TAX SECTION 7 OTHER DISCLOSURES 49 1.1 Accounting policies, estimates, 68 4.1 Income tax 69 4.2 Deferred tax and judgments 87 7.1 Earnings per share 88 7.2 Related party transactions 89 7.3 Auditors’ remuneration 90 7.4 Contingent liabilities 90 7.5 Events after statement of ﬁnancial position date SECTION 2 REVENUE AND CLIENTS SECTION 5 INVESTED CAPITAL 91 7.6 Subsidiaries and associates 52 2.1 Revenue 71 5.1 Acquisition of enterprises 73 5.2 Intangible assets 75 5.3 Property, plant, and equipment 55 2.2 Segment information 57 2.3 Future performance obligations 58 2.4 Contract balances 60 2.5 Receivables MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CONSOLIDATED FINANCIAL STATEMENTS 45 CONSOLIDATED FINANCIAL STATEMENTS INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME EUR ’000 Note 2020 2019 EUR ’000 Note 2020 2019 Revenue 2.1 455,970 167,415 454,531 167,141 Proﬁt for the year 88,258 96,901 Cost of sales 3.1, 3.2, 5.2, 5.3 Other comprehensive income Gross proﬁt 288,555 846 287,390 533 Items that will not be reclassiﬁed subsequently to the income statement: Other operating income Research and development costs Sales and marketing costs Administrative expenses 3.1, 3.2, 5.2, 5.3 3.1, 3.2, 5.2, 5.3 3.1, 3.2, 5.2, 5.3 91,830 50,198 23,077 82,938 49,105 28,056 Remeasurements of deﬁned beneﬁt plans 3.3 47 -1,473 323 Tax, remeasurement of deﬁned beneﬁt plans -1 Items that may be reclassiﬁed subsequently to the income statement, when speciﬁc conditions are met: Operating proﬁt (EBIT) Share of proﬁt after tax in associates Financial income 124,296 104 127,824 125 6.4 6.4 101 947 Foreign currency translation diﬀerences for foreign operations -2,742 -2,696 85,562 1,426 276 Financial expenses 8,405 1,095 Proﬁt before tax Tax on the proﬁt for the year 116,096 27,838 127,801 30,900 Other comprehensive income after tax Total comprehensive income 4.1 97,177 Proﬁt for the year 88,258 96,901 EARNINGS PER SHARE Earnings per share – EPS (EUR) 7.1 7.1 2.22 2.20 2.44 2.42 Diluted earnings per share – EPS-D (EUR) MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CONSOLIDATED FINANCIAL STATEMENTS 46 CONSOLIDATED FINANCIAL STATEMENTS CASH FLOW STATEMENT EUR ’000 Note 2020 2019 CASH FLOW 2020 Proﬁt for the year 88,258 16,094 -104 96,901 14,752 -125 EUR '000 Amortization and depreciation Share of proﬁt after tax in associates Financial income 5.2, 5.3 104,565 -2,681 -80,242 6.4 6.4 4.1 -101 -947 Financial expenses 8,405 27,838 -7,037 10,997 -2,055 -24,558 9,302 101 1,095 30,900 598 Tax on proﬁt for the year Other non-cash items Adjustment share based remuneration Changes in provisions 10,243 4,837 -63,492 11,496 135 3.4 Changes in contract assets Changes in working capital Financial income received Financial expenses paid Income tax paid 2.4 -442 53,051 31,851 -1,901 -20,674 -342 4.1 -23,546 Net cash from operating activities 104,565 82,505 Purchase of subsidiaries, net of cash acquired Purchase of property, plant, and equipment Sale and purchase of ﬁnancial assets, net Dividends from associates 5.2 5.3 6.3 6.4 - -2,399 -361 79 -58,468 -1,722 -105 81 Net cash used in investing activities -2,681 -60,214 Dividends paid -39,879 -10,006 -10,357 - -35,881 -12,488 -9,880 Purchase of treasury shares Repayment of lease liability Proceeds of credit facility/loans Repayment from credit facilities/loans 6.1 5.3 40,000 -20,000 6.3 -20,000 Net cash used in ﬁnancing activities -80,242 -38,249 Change in cash and cash equivalents 21,642 31,851 -442 -15,958 47,500 309 Cash and cash equivalents at January 1 Foreign exchange adjustment of cash and cash equivalents Cash and cash equivalents at December 31 53,051 31,851 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CONSOLIDATED FINANCIAL STATEMENTS 47 CONSOLIDATED FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION DECEMBER 31 EUR ’000 Note 2020 2019 EUR ’000 Note 2020 2019 ASSETS LIABILITIES AND EQUITY Goodwill 5.2 5.2 5.2 61,367 11,471 22,887 61,178 13,348 25,031 Share capital 5,441 -4,725 5,441 -1,983 Software Exchange adjustment reserve Retained earnings Client relationships 237,409 40,125 186,643 39,919 Proposed dividend Total intangible assets 95,725 99,557 Total equity 278,250 230,020 Leasehold 5.3 5.3 5.3 43,684 1,063 2,903 51,589 1,506 2,555 Technical equipment Lease liabilities Deferred tax Provisions 5.3 4.2 3.4 34,547 28,323 11,119 41,585 25,931 12,796 Other equipment, ﬁxtures, ﬁttings and prepayments Total property, plant and equipment 47,650 55,650 Total non-current liabilities 73,989 80,312 Investments in associates Deposits 881 2,031 4,173 404 808 2,095 5,357 - 6.3 Bank loan/revolving credit facility Lease liabilities - 9,630 26,231 17,747 59,158 5,118 719 20,000 10,063 24,678 18,503 48,922 4,389 Deferred tax 4.2 5.3 Other ﬁnancial assets Prepayments from clients Trade payables 2.4 Total other non-current assets Total non-current assets 7,489 8,260 Other payables 150,864 163,467 Income tax payables Provisions 3.4 3.4 Receivables 2.5 2.4 2.4 82,513 175,928 1,194 81,804 151,774 2,341 1,025 Contract assets Total current liabilities Total liabilities 118,603 192,592 470,842 127,580 207,892 437,912 Income tax receivables Prepayments 7,292 6,675 Cash and cash equivalents 53,051 31,851 Total liabilities and equity Total current assets Total assets 319,978 470,842 274,445 437,912 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | CONSOLIDATED FINANCIAL STATEMENTS 48 CONSOLIDATED FINANCIAL STATEMENTS STATEMENT OF CHANGES IN EQUITY Exchange Share capital Share premium adjustment reserve Retained earnings Dividends for the year EUR '000 Total MOVEMENTS IN EQUITY 2020 EUR '000 2020 85,562 -39,879 10,997 1,556 Equity at January 1 5,441 - - - -1,983 - 186,643 88,258 46 39,919 230,020 88,258 -2,696 -10,006 278,250 Net proﬁt for the year - - - - Total other comprehensive income -2,742 230,020 Total comprehensive income for the year Transactions with owners: - - -2,742 88,304 - 85,562 Dividends paid to shareholders Share-based payment - - - - - - - - - - - - - - - 40 10,997 1,556 -39,919 -39,879 10,997 1,556 -10,006 - - Tax, share-based payment - - Purchase of treasury shares Proposed dividends to shareholders -10,006 -40,125 40,125 Equity at December 31 5,441 - -4,725 237,409 40,125 278,250 2019 Equity at January 1 Reclassiﬁcation 5,441 9,963 -3,409 121,130 9,963 35,934 169,059 - -9,963 - - - Adjusted balance at January 1 Net proﬁt for the year 5,441 - - - -3,409 - 131,093 96,901 -1,150 35,934 169,059 96,901 276 - - - - Total other comprehensive income 1,426 Total comprehensive income for the year Transactions with owners: - - 1,426 95,751 - 97,177 Dividends paid to shareholders Share-based payment - - - - - - - - - - - - - - - 53 10,243 1,910 -35,934 -35,881 10,243 1,910 -12,488 - - Tax, share-based payment - - Purchase of treasury shares Proposed dividends to shareholders -12,488 -39,919 39,919 Equity at December 31 5,441 - -1,983 186,643 39,919 230,020 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 1 49 1.1 ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS SECTION 1 BASIS OF PREPARATION GENERAL BASIS OF CONSOLIDATION ble assets and property, plant and equipment and government grants. Government grants relate to research and development funding in the United Kingdom. This section provides an overview of the accounting policies and key accounting estimates. Accounting policies, management judgments and sources of estimation uncertainty are presented together with other related disclosures in the notes that deal with the relevant subject. Accounting policies, judgments and estimates that do not relate to a speciﬁc subject are presented in this section. The annual report for the period January 1 – December 31, 2020, includes the consolidated ﬁnancial statements of SimCorp A/S (the Parent) and its subsidiary undertakings (the Group), as well as separate ﬁnancial state- ments for SimCorp A/S. Reference is made to page 97 for the Parent’s speciﬁc accounting policies. SimCorp A/S is incorporated and domiciled in Denmark. The consolidated ﬁnancial statements have been prepared by including the ﬁnancial statements of the Parent and the subsidiaries, which have all been prepared in accordance with the Group’s accounting policies. Sub- sidiaries are entities controlled by the Parent. Control is established when SimCorp A/S is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aﬀect those returns through its power over the entity. As the grant is compensation for costs incurred it is recognized as other operating income in the period in which it is receivable. In 2020 the subsidiaries received circa EUR 200 thousand in COVID-19 related government assistance as income tax and wage subsidy, and rent concessions. Around EUR 130 thou- sand is reported as other operating income, the remaining was oﬀset against expenses. STATEMENT OF COMPLIANCE The consolidated ﬁnancial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU and require- ments in the Danish Financial Statements Act. Accounting policies focus on the accounting choices within the On consolidation, intra-group income and expenses, shareholdings, balances, dividends and realized and unrealized gains and losses on intra-group transactions are eliminated. Unrealized gains and losses on transactions with associates are eliminated in proportion to the Group’s shares in the associates. framework of the prevailing IFRS and refrain from repeating the underlying promulgated IFRS guidance, unless considered particularly important to the understanding of a note’s content. STATEMENT OF COMPREHENSIVE INCOME Other comprehensive income consists On February 10, 2021 the Board of Directors and the Executive Management Board consid- ered and approved the annual report for 2020 of SimCorp A/S and the Group. The annual report will be presented to the shareholders for approval at the Annual General Meeting to be held on March 24, 2021. The directors have the power to amend and reissue the ﬁnancial statements. of income and costs not included in the income statement, including exchange rate adjustments arising from the translation of foreign subsidiaries’ ﬁnancial statements into presentation currency, and actuarial gains or losses on deﬁned beneﬁt pension plans. Notes to the ﬁnancial statements are grouped into seven sections with the aim of reducing complexity and improving the reader’s experience. The notes are organized into the following sections: FOREIGN CURRENCY TRANSLATION Income and expenses and operating cash ﬂows of foreign subsidiaries that use a functional currency other than the euro are translated at average rates of foreign exchange computed on a monthly basis. Exchange rate diﬀerences resulting from foreign currency transactions as well as from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currency, are recognized under ﬁnancial income or ﬁnancial expenses. CASH FLOW STATEMENT The cash ﬂow statement is presented accord- ing to the indirect method commencing with the proﬁt for the year. The cash ﬂow statement shows how changes in items in the statement of ﬁnancial position and income aﬀect cash and cash equivalents. Section 1 Basis of preparation Section 2 Revenue and clients Section 3 Employees PRESENTATION CURRENCY The ﬁnancial statements are presented in EUR, rounded to the nearest EUR 1,000. The functional currency of the Parent is DKK. Section 4 Tax Section 5 Invested capital Section 6 Equity, capital structure and ﬁnancing items BASIS OF MEASUREMENT Cash and cash equivalents consist of cash at bank and in hand. Cash ﬂows in other currencies are translated into EUR at the average exchange rate for the respective year. The annual report has been prepared on a going concern basis and in accordance with the historical cost convention, except where IFRS explicitly requires use of other values. OTHER OPERATING INCOME Section 7 Other disclosures Other operating income consists of income of a secondary nature relative to the activities of the Group, including gains on sale of intangi- MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 1 50 1.1 ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS (CONTINUED) Cash from operating activities is assessed by converting income statement items from accrual to cash basis accounting. Starting with net proﬁt, non-cash items are reversed, and actual payments included. In addition, the change in working capital and contract assets is taken into consideration as it represents cash withheld in the statement of ﬁnancial position. Research and development costs comprise salaries, share-based payments, other uncertain and unpredictable. Such assumptions may be incomplete or inaccurate, and unexpect- ed events or circumstances may arise. - Interest rate benchmark reform amendments to IFRS 9, IAS 39 and IFRS 7 - Revised conceptual framework for ﬁnancial reporting employee related costs, depreciation and amortization, and other costs directly attribut- able to the Group’s research and development activities. Research and development costs are expensed in the year in which they are incurred when they do not qualify for capital- ization. For capitalization criteria see note 5.2. In addition, the company is subject to risks and uncertainties encountered in the ordinary course of business that may cause actual results to deviate from the estimates. The notes to the ﬁnancial statements contain information about the assumptions and the uncertainty of estimates at the statement of ﬁnancial position date involving the risk of changes that could lead to adjustments to the carrying amounts of assets or liabilities within the upcoming ﬁnancial year. These amendments did not have any impact on the amounts recognized in prior periods and are not expected to signiﬁcantly aﬀect the current or future periods. Cash from investing activities are related to the sale and purchase of long-term investments, including subsidiaries, ﬁxed, intangibles and ﬁnancial assets. Sales and marketing costs comprise salaries, commissions, bonuses, share-based payments, and other sales employee related costs, travel and meeting expenses, marketing expenses, withholding taxes, depreciation and amortiza- tion, and indirect costs such as technological infrastructure directly or indirectly attributable to the Group’s sales and marketing activities. NEW FINANCIAL REPORTING STANDARDS NOT YET ADOPTED Certain new accounting standards and inter- pretations have been published that are not mandatory for December 31, 2020 reporting periods and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. MATERIALITY The ﬁnancial statements separately present items considered individually material. Indi- vidually immaterial items are aggregated with other items of similar nature in the statements or in the notes. Speciﬁc disclosures required by IFRS are presented, unless the information is considered immaterial to the economic decision making of the users. Management considers the following to be key accounting estimates and assumptions used in the preparation of the ﬁnancial statements: Administrative expenses comprise salaries, bonuses, share-based payments and other employee costs and expenses, oﬃce costs, depreciation and amortization, expected loss allowance, and indirect costs such as technolog- ical infrastructure directly or indirectly attribut- able to the Group’s administrative activities. Revenue (note 2.1) IXBRL REPORTING Tax and deferred tax (Section 4) Acquisition of enterprises (note 5.1) Impairment (note 5.2) The 2020 Annual report is prepared in the XHTML format which can be displayed in a standard browser in line with the new Euro- pean Single Electronic Format (‘ESEF’). The primary statements are tagged using inline eXtensible Business Reporting Language (iXBRL) and comply with the ESEF taxonomy. OPERATING COSTS Operating costs are allocated into cost of sales, research and development, sales and marketing costs, and administrative expenses. Risk factors speciﬁc to the Group are de- scribed in the management report on pages 24-26 and in note 6.2. ACCOUNTING ESTIMATES AND JUDGMENTS While applying the Group’s accounting policies, in addition to estimations, manage- ment makes other judgments that may impact the application of accounting policies and reported amounts of assets, liabilities, costs, cash ﬂows, and related disclosures at the date of the ﬁnancial statements. Cost of sales cover costs incurred to achieve the year’s revenue, including costs of deliver- ing and implementing systems, hosting and infrastructure costs, third party costs, courses, and support. These primarily comprise sala- ries, share-based payments, other employee costs, external implementation consultants, hosting fees and other third-party costs, depreciation and amortization, and indirect costs, such as technological infrastructure. NEW FINANCIAL REPORTING STANDARDS The Group has applied the following stan- dards and amendments for the ﬁrst time in the reporting period starting January 1, 2020: Where a line item is not deﬁned in the ESEF taxonomy, an extension has been created and anchored to elements in the ESEF taxonomy, except for extensions which are subtotals. The annual report submitted to the Danish Financial Supervisory Authority consists of the XHTML document together with certain technical ﬁles, all included in a ﬁle named simcorp-2020-12-31.zip. - Deﬁnition of material - amendments to IAS 1 and IAS 8. - Deﬁnition of a business - amendments to IFRS 3 The estimates and judgments applied are based on assumptions which management believes to be reasonable, but which are inherently MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 1 51 1.1 ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS (CONTINUED) NON-IFRS MEASURES These are deﬁned under other non-IFRS mea- sures and may not be deﬁned and calculated by other companies in the same manner and may therefore not be comparable. Market value ratio deﬁnitions Price / Book value per share (P/BV) price / book value (BVPS) Certain measures disclosed regarding the Group’s ﬁnancial performance, ﬁnancial position and cash ﬂows are not deﬁned in IFRS. Price / Diluted price earnings (P/E Diluted) price / diluted earnings per share price / cash ﬂow per share (CFPS) Price / Cash ﬂow (P/CF) Financial ratio deﬁnitions EBIT margin (%) EBITDA operating proﬁt (EBIT) / revenue x 100 Other non-IFRS measures deﬁnitions License base accumulated order value for SimCorp Dimension clients earnings before interest, tax, depreciation, and amortization Order intake Order book value of initial and additional licenses contracts, subscription services agreements and client driven development agreements entered into during the reporting period Invested capital total assets – cash and cash equivalents – provisions – prepayments from clients – trade payables and other payables accumulated order intake value, where revenue could not be recognized yet, but deferred to future periods because either the license has not been delivered, the software functionality has not been developed, released or accepted by client yet, or certain conditions must be met before delivery ROIC (return on invested capital) Receivables turnover ratio Equity ratio (%) EBITDA / average invested capital x 100 revenue / receivables at year-end equity at year-end / total assets at year-end x 100 proﬁt for the year / average equity x 100 Revenue signed total revenue commitment for licenses, software updates and support fee, professional services, as a service oﬀering, etc. Return on equity (ROE) (%) Revenue, operating cost, and EBIT growth in local currency eﬀect of exchange rate movements is excluded by restating the measure for the current period at the previous year’s average rates when calculating growth Share performance deﬁnitions Cash ﬂow per share (CFPS) cash ﬂow from operating activities / CAPEX purchase of intangible ﬁxed assets + purchase of property, plant, and equipment – proceeds from sale of property, plant, and equipment average number of diluted shares Book value per share (BVPS) Dividends per share (DPS) Dividends payout ratio (%) Total payout ratio (%) equity at year-end / average number of shares dividends paid / number of shares at year-end dividends paid / proﬁt for the year x 100 Net cash position Free cash ﬂow cash and cash equivalents less bank loan/revolving credit facility net cash from operating activities less CAPEX less principal payment on lease liabilities dividends paid plus value of share buybacks / proﬁt for the year x 100 Cash conversion (%) free cash ﬂow / proﬁt for the year x 100 Total contract value (TCV) total contract value of subscription-based licenses, excluding as a service oﬀering Average number of shares number of shares issued, excluding treasury shares, as an average for the year Annualized contract value (ACV) Annual recurring revenue (ARR) initial and additional order intake divided by contract term (years) Average number of diluted shares number of shares issued, excluding treasury shares, as an average for the year plus the average dilutive impact of outstanding restricted stock units total revenue - total license fee + subscription based license fee – implementation services – other non-recurring fees MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 52 2.1 REVENUE SECTION 2 REVENUE AND CLIENTS REVENUE TYPES REVENUE PER TYPE 2020 This section provides information related to contracts with clients. This includes information on how revenue is classiﬁed and recognized, segments and information about client related balances in the statement of ﬁnancial position. Revenue is mainly derived from license fees from new clients, license fees from additional sales to existing clients, software updates and support fees, professional services, and hosting and other fees. 2020 2019 License – initial sales 5% 12% Licenses – additional sales Software updates and support Professional services 15% 39% 34% 7% 11% 37% 34% 6% License fees can be derived from subscription or from perpetual license agreements. Subscription agreements give the right to use the software for a determined period of time, which can be extended at the end of the initial term. Standard perpetual software licenses provide clients with the right to use the software whilst the software updates and support contract remains in force. License fees also include revenue from Client Driven Development agreements and standard platform oﬀerings. Hosting and other fees Accounting policies which relate to a particular note to the income statement have been included within each individual note. In this section, the following notes are presented: In determining whether the various contracts are interrelated judgment is required. 2.1 Revenue The hosting oﬀering provides the client with the infrastructure required to operate SimCorp Dimension. Other fees include, for instance, training and education as well as third party products and software as service fees. 2.2 Segment information 2.3 Future performance obligations 2.4 Contract balances 2.5 Receivables Considerations include: whether the contracts were negotiated as a package with a single commercial objective, whether the amount of consideration on one contract is dependent on the performance of another contract, or if some or all oﬀerings in the contract are a single performance obligation. Software updates and support fees relate to contracts made on perpetual and subscrip- tion-based license terms. Software updates and support fees include both initial license and additional license-based software updates and support fees. Performance obligations include: unspeciﬁed future upgrades, mainte- nance and helpline support. ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES CONTRACT IDENTIFICATION Additional agreements with existing clients can be a new contract or a modiﬁcation to existing contracts. Judgments making this determination consider: the presence of a connection between the new agreement and pre-existing contracts, whether subscription fees, license fees, software updates and support fees or services under the new agreement are highly interrelated with the subscription fees, license fees and software updates and support fees or services sold under prior agreements, and how the Contracts can include several components, in this situation, the total contract sum is allocat- ed to the separate performance obligations for the purpose of revenue recognition. Professional services agreements can include multiple performance obligations. The performance obligations are: imple- mentation services, validation and testing services, SimCorp Dimension on-boarding and operating services. SCDaaS operating services occur when, in addition to hosting, SimCorp undertakes the operation of the client’s system in a cloud-based environment. Separate contracts with the same client are treated as one contract if entered into at or near the same time and economically interre- lated. Contracts closed more than 6 months apart are not considered to be entered at the same time. subscription fees, license fees and software MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 53 2.1 REVENUE (CONTINUED) updates and support fees or services under the new agreement are priced. Options to acquire additional components ably consistent across customers, estimates are derived from SimCorp’s pricing history. Using this approach, professional services stand-alone value is determined based on the hourly billing rate for the relevant market unit. Hosting services are assumed to be quoted to the client at their stand-alone value if it is equal to or above hosting costs. If not renewable, with highly variable pricing, and no substantial direct costs to estimate based on a cost-plus margin approach, such as renewals or additional volumes require judgment in determining whether such options provide a material right to the client which the client would not receive without entering into that contract. In this judgment it is considered whether the options entitle the customer to a discount that exceeds the discount granted for the respective subscrip- tions fees, license fees, software updates and support fees sold with the option. PERFORMANCE OBLIGATION IDENTIFICATION allocation is achieved by applying a residual approach. We use this technique in particular for license and software updates and support. Contracts often include several components. License fees from new clients, license fees from additional sales to existing clients, software up- dates and support fees, professional services, hosting, training, and third-party products constitute the main performance obligations. The fees allocated to the diﬀerent performance obligations are recognized separately. Once the standalone price for other com- ponents is estimated, an apportionment is applied to allocate the price between license and software updates and support after deducting other performance obligations from the total consideration as follows: Where sales prices are not directly observable or are highly variable across customers, estimation techniques are applied, such as a cost-plus-margin approach. This approach is often applied to third party products. TRANSACTION PRICE Judgment is applied in determining the amount to which SimCorp expects to be entitled in exchange for transferring licenses, and software updates and support to a customer. The only performance obligation related to license agreements has been identiﬁed as the right to use the software. The right to use software license is considered a separate performance obligation when it satisﬁes the following conditions: can be delivered separately from other services, can be installed by a third party, can be used without upgrades, and is functional without upgrades or technical support. APPORTIONMENT APPLIED Dimension Coric Gain Soﬁa The consideration attributable to license fees in subscription-based agreements are discounted to net present value when the value of the ﬁnancing element is deemed signiﬁcant. If the period between licenses transfer, software updates and support and payment from the clients is a year or less no ﬁnancing component is recognized. Licenses 50% 50% 75% 50% 50% 50% 50% Software updates and support 25% Total apportionment 100% 100% 100% 100% Judgment is required in determining whether a component is considered a separate performance obligation, in particular, profes- sional services and implementation activities. Consideration is given as to whether the services signiﬁcantly integrate, customize or modify the software or hosting oﬀering. In general, implementation services and activities go beyond setup and qualify as a separate performance obligation. A hierarchy has been established to identify the standalone selling prices used to allocate the transaction price of a customer contract to the performance obligations in the contract. Where standalone selling prices for a perfor- mance obligation are observable and reason- MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 54 2.1 REVENUE (CONTINUED) Organic REVENUE RECOGNITION REVENUE Revenue growth local revenue growth local Revenue recognition requires an agreement with the client which creates enforceable rights and obligations between the parties, has commercial substance, and identiﬁes payment terms. In addition, it must be probable that the consideration determined in the contract will be collected. Share of revenue 2020 Share of revenue 2019 Revenue EUR '000 2020 2019 growth currencies currencies1 Licenses – initial sales 22,364 69,188 4.9% 15.2% 38.7% 33.9% 7.3% 54,611 51,152 12.0% 11.3% 36.8% 33.7% 6.2% -59.0% 35.3% 5.4% -57.1% 36.0% 6.0% -57,1% 33.0% 4.8% Licenses – additional sales Software updates and support Professional services 176,575 154,730 33,113 167,494 153,218 28,056 1.0% 2.2% 0.6% Hosting and other fees 18.0% 20.1% 16.9% Revenue is recognized when the client has obtained control of the license or service and has the ability to use and obtain substantially all the beneﬁts from the license or service. Total revenue 455,970 100.0% 454,531 100.0% 0.3% 1.4% -0.1% 1 Organic growth excludes foreign exchange adjustments and growth attributable to the acquisition of AIM Software. Such agreements are individually evaluated to determine if revenue is recognized at a point in time or over time. recognized based on time elapsed – ratably over the period applicable. Judgment is applied in determining which method to use. countries representing 5.0% or more of the SimCorp has therefore assessed that the client obtains control of the license when all the following criteria are met: a binding contract is entered into; the license is delivered; and the client has the right to use it. License revenue is therefore generally recognized at that point-in-time. Group’s revenue. None of the reported licenses - initial sales is derived from perpetual sales (2019: EUR 1.3m). From the reported licenses - additional sales EUR 18.8m is derived from perpetual sales (2019: EUR 16.3m). Professional services fees are recognized based on work performed for time and material contracts. Fixed fee agreements are recognized based on percentage of comple- tion unless client acceptance is required. The percentage-of-completion method requires estimation of total revenue and the stage of completion. The assumptions, estimates, and uncertainties inherent in determining the stage of completion aﬀect the timing and amounts of revenue recognized. Changes in estimates of progress towards completion and of contract revenue and costs are accounted for as cumulative catch-up adjustments to the reported revenue for the applicable contract. All the judgments and estimates mentioned above can signiﬁcantly impact the timing and amount of revenue to be recognized. The geographical distribution of revenue is based on the country in which the client is invoiced. Signiﬁcant countries are deﬁned as When the contract contains functionality gaps or requires client acceptance of functionality, the revenue recognition will be deferred until the time of delivery or acceptance. The consideration attributable to license fee in subscription-based agreements is discounted to net present value when the value of the ﬁnancing element is deemed signiﬁcant. The Group has no client contributing revenue of more than 5.5% (2019: 4.4%) of total revenue. REVENUE ALLOCATION BY COUNTRY (SIGNIFICANT) 2020 2019 EUR '000 EUR '000 % % USA 81,459 73,912 31,286 30,673 29,660 28,104 26,718 17,614 15,161 17.9% 16.2% 6.9% 6.7% 6.5% 6.2% 5.9% 3.9% 3.3% 73,693 51,720 28,276 27,291 25,205 32,554 22,446 30,675 22,848 16.2% 11.4% 6.2% 6.0% 5.5% 7.2% Germany Switzerland Canada Revenue from software updates and support agreements is recognized on a straight-line basis over the contract period. Denmark Italy Where SimCorp stands ready to provide the service (such as access to e-learning and hosting operating services) revenue is Netherlands Singapore United Kingdom 4.9% 6.7% 5.0% Client-driven development entails direct coop- eration between SimCorp’s development team and the client for a client-deﬁned software. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 55 2.2 SEGMENT INFORMATION The Group’s revenue arises primarily from the sale of software licenses and related services, and updates and support to clients. The Group’s operations are managed and orga- nized into business units regularly reviewed by the Executive Management Board, who is responsible for assessing the Group’s performance and making resource allocation decisions. other business units for the right to distribute SimCorp Dimension software, and broker fees. units Coric and Gain have been integrated into Segment income and costs consist of transactions between the segments. Such transactions are made on market terms. the remaining units and goodwill reallocated to Research and Development. Comparative disclosures have also been restated with regards to this change. Finally, the Group reports on corporate functions, which include shared services comprising administration, marketing, internal systems, global support and services division. These are managed on corporate level and costs are principally allocated and charged based on an allocation key for the segments. Consulting and support are charged on an hourly basis. External revenue originates from courses to clients. Information about liabilities and additions to assets by segment are not regularly provided to the Executive Management Board. ACCOUNTING POLICIES SimCorp does not provide segment revenue by revenue category as management believes it would signiﬁcantly harm the Group’s competitive position. The accounting policies of the reported seg- ments are the same as the Group’s described throughout the notes. Segment reporting shows revenue and operating proﬁt together with total assets that can be directly related to the individual segments. Unallocated assets are headquarters’ assets, cash, and investments in associates. Segment reporting is prepared in accordance with the Group’s internal man- agement reporting structure for performance management and resource allocation. The sales organization comprises four business units. Three business units have been identiﬁed based on countries that share the same market conditions and one is dedicated to Soﬁa software. In 2020, the former market units Central Europe, Southern Europe, and UK, Northern Europe and Middle East (UNM), were merged into one integrated EMEA unit. Comparative disclosures have been restated with regards to this change. In addition, former business In addition, the research and development business unit is responsible for all software development, except for Soﬁa. This segment derives revenue mainly from fees charged to MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 56 2.2 SEGMENT INFORMATION (CONTINUED) SEGMENT INFORMATION Asia and Australia North America SimCorp Soﬁa Research and development Corporate functions Elimination/ Not allocated EUR '000 EMEA Group 2020 External revenue 296,447 27,332 35,899 101,907 4,617 19,724 1,122 1,811 182 - 455,970 Revenue between segments 2,022 183,855 55,927 -274,875 - Total segment revenue 323,779 37,921 106,524 20,846 185,666 56,109 -274,875 455,970 EBITDA 28,508 3,006 3,070 680 7,713 1,382 8,569 1,639 97,746 3,110 -5,216 6,277 - - 140,390 16,094 Depreciation and amortization Segment operating proﬁt (EBIT) Financial items, net 25,502 2,390 6,331 6,930 94,636 99,059 -11,493 17,933 - 124,296 -8,200 -8,200 Proﬁt for the period before tax 116,096 Total assets 153,678 40,358 81,887 44,053 33,874 470,842 2019 External revenue 288,216 28,432 53,555 1,091 92,233 4,218 19,290 730 507 - 454,531 Revenue between segments 958 191,781 38,510 -264,990 - Total segment revenue 316,648 54,646 96,451 20,248 192,511 39,017 -264,990 454,531 EBITDA 25,698 3,497 4,332 8,994 1,410 7,775 1,631 107,692 -11,915 5,613 - - 142,576 14,752 Depreciation and amortization 575 2,026 Segment operating proﬁt (EBIT) Financial items, net 22,201 3,757 7,584 6,144 105,666 105,231 -17,528 17,543 - 127,824 -23 -23 Proﬁt for the period before tax 127,801 Total assets 129,659 44,588 79,358 43,691 17,842 437,912 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 57 2.2 SEGMENT INFORMATION (CONTINUED) 2.3 FUTURE PERFORMANCE OBLIGATIONS The amount of a customer contract’s trans- action price that is allocated to the remaining performance obligations represents contract- ed revenue that has not yet been recognized. Including amounts recognized as contract liabilities and amounts that are contracted but not yet delivered. ACCOUNTING ESTIMATES AND JUDGMENTS NON-CURRENT ASSET ALLOCATION BY COUNTRY (SIGNIFICANT) 2020 2019 EUR '000 EUR '000 % % This estimation is judgmental, as it needs to consider estimates of possible future contract modiﬁcations and the timing of satisfaction of performance obligations. The amount of transaction price allocated to the remaining performance obligations, and changes in this amount over time, are impacted by, among others, currency ﬂuctuations and possible contract modiﬁcations. Austria 59,704 30,972 27,283 9,015 40.7% 21.1% 18.6% 6.1% 61,673 32,490 29,449 11,098 8,377 39.0% 20.5% 18.6% 7.0% Italy Denmark United Kingdom USA 7,067 4.8% 5.3% The transaction price allocated to perfor- mance obligations that are unsatisﬁed or partially unsatisﬁed as of December 31, 2020 is EUR 405.6m (2019: EUR 327.1m). This amount mostly comprises obligations to provide software updates, agreements which require client acceptance of functionality, and support or hosting subscriptions and support, as the respective contracts typically have durations of multiple years. Geographical allocation of ﬁxed assets is based on the country in which economic beneﬁts are derived from the asset. Signiﬁcant countries are deﬁned as countries represent- ing 5.0% or more of the Group’s non-current assets. Non-current assets comprise intangible assets and property, plant and equipment owned by the segment/country, even if the income is earned outside the segment/country that owns the asset. Furthermore, they include non-current ﬁnancial assets other than deferred tax assets. Under the percentage-of-completion method used for ﬁxed fee services agreements, recognition of proﬁt is dependent upon the accuracy of a variety of estimates. Such esti- mates are based on various judgments with respect to multiple factors and are diﬃcult to accurately determine until the project is signiﬁcantly underway. Due to uncertainties inherent in the estimation process, it is possible that the actual timing of completion may vary from estimates. Management expects that EUR 113.3m in 2020 (2019: EUR 102.2m) of the amount allocated to the future performance obligations as of December 31, 2020 will be recognized during 2021. EUR 228.6m (2019: EUR 188.4m) is expected to be recognized as revenue within 2 to 5 years. The remaining part is expected to be recognized as revenue after 5 years. The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 58 2.4 CONTRACT BALANCES Contract balances consist of client-related assets and liabilities. EUR 67.3m (2019: EUR 84.5m) and ﬁnance Contract liabilities represent mainly prepay- ments from clients for unsatisﬁed or partially satisﬁed performance obligations in relation to licenses, software updates and support, and services. Software updates and support and hosting billing generally occurs at periodic intervals (e.g. quarterly or yearly) prior to revenue recognition, resulting in liabilities. estimated sales value of the proportion of the contract completed at the statement of ﬁnancial position date. income recognized EUR 2.3m (2019: EUR 2.1m). These items exceeded deductions from foreign exchange, expected credit loss provision and adjustments of EUR 7.6m (2019: EUR 0.3m) and invoiced subscription-based license fees of EUR 37.9m (2019: EUR 23.1m). There were no additions from acquisitions in 2020 (2019: EUR 2.6m). CONTRACT ASSETS Contract assets relate to the Group’s rights to consideration for software licensed to clients under subscription agreements with future payments, when that right is conditional on SimCorp’s future performance. Periodic ﬁxed fees for subscription services, software updates and support services, and other multiperiod agreements are typically invoiced yearly or quarterly in advance. Such fee prepayments account for the majority of our contract liability balance. The majority of license agreements are recognized as revenue in the year of sale. However, contracts with functionality gaps or acceptance criteria may have revenue recognition deferred, resulting in a contract liability when payment has occurred. If the timing of payments speciﬁed in the contract provides the client with a signiﬁcant ﬁnancing beneﬁt, the transaction price is adjusted to reﬂect this ﬁnancing component. CONTRACT LIABILITIES When a client pays consideration in advance, or an amount of consideration is due con- tractually before transferring of the license or service, then the amount received in advance is presented as a liability. Fees based on actual transaction volumes for SCDaaS subscriptions and fees charged for non-periodical services are invoiced as the services are delivered. While payment terms and conditions vary by contract type and region, our terms typically require payment within 30 to 60 days. Contract assets increased by EUR 24.1m with subscription-based licenses adding Contracts in progress relating to ﬁxed fee professional services are measured at the CHANGES IN CONTRACT ASSETS INVOICING OF CONTRACT ASSETS Invoiced Addition on Financing income recognized Opening from opening acquisition of Net Closing balance additions Adjustments1 EUR '000 2020 2019 EUR '000 balance balance subsidiaries 1 to 6 months 21,476 17,264 38,801 33,754 27,941 19,411 23,890 19,439 14,172 31,328 29,664 25,610 19,337 21,001 2020 7 to 12 months 13 to 24 months 25 to 36 months 37 to 48 months 49 to 60 months After 60 months Contract assets (gross) Contract interest element Loss allowance 160,551 -7,872 -905 -34,032 - - - 64,224 -816 -8,206 904 - - 2,349 - 182,537 -5,435 -1,174 - - -269 Contract assets (NPV) 151,774 -34,032 - 63,139 -7,302 2,349 175,928 2019 Total contract assets (gross) 182,537 160,551 Contract assets (gross) Contract interest element Loss allowance 91,773 -5,477 -612 -16,847 2,598 83,006 -4,528 -293 21 - - 2,133 - 160,551 -7,872 -905 - - - - - Contract assets (NPV) 85,684 -16,847 2,598 78,185 21 2,133 151,774 1 Adjustments include: reclassiﬁcations, cancellations and foreign exchange adjustments and cumulative catch-up adjustments (including those arising from change in estimate of transaction price and contract modiﬁcations), change in time frame for a right to consideration to become unconditional or for a performance obligation to be satisﬁed. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 59 2.4 CONTRACT BALANCES (CONTINUED) CHANGES IN CONTRACT LIABILITIES Revenue recognized from liability Addition on acquisition of subsidiaries Opening balance Net additions Closing balance EUR '000 opening balance Adjustments1 2020 Contract liabilities – licenses 4,463 6,707 3,994 9,514 - - - - 3,225 7,656 3,948 7,831 -3,696 -6,541 -2,517 -6,928 -419 -393 -87 3,573 7,429 5,338 9,891 Contract liabilities – software updates and support Contract liabilities – services Contract liabilities – other -526 Contract liabilities (prepayments from clients) 24,678 - 22,660 -19,682 -1,425 26,231 2019 Contract liabilities – licenses 4,451 5,760 2,495 4,998 625 491 68 960 6,030 2,598 7,470 -1,540 -5,755 -1,117 -3,700 -33 181 -50 97 4,463 6,707 3,994 9,514 Contract liabilities – software updates and support Contract liabilities – services Contract liabilities – other 649 Contract liabilities (prepayments from clients) 17,704 1,833 17,058 -12,112 195 24,678 1 Adjustments include: reclassiﬁcations, cancellations, foreign exchange adjustments and cumulative catch-up adjustments (including those arising from change in measurement of progress). ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES Amounts invoiced on account in excess of work completed are included in prepayments under current liabilities. provision is measured at the estimate of the lifetime expected credit losses. subsequent concessions or payments may be granted to customers and whether the customer is expected to pay the contractual fees. In this judgment, trading history is considered both with the respective customer and more broadly. sions earned by the sales force. Commissions are typically related to the license fee which is recognized upfront upon delivery, consequently, we expense sales commissions concurrently with revenue recognition. Expected loss rates between 0.04% - 13.36% are applied (unchanged from 2019), based on average default rates by region as published by Standard & Poor. For additional informa- tion refer to note 6.2 Risk. Contract assets from contracts with cus- tomers are measured at amortized cost less expected credit losses. Contract assets are within the scope of impairment requirements in IFRS 9. For contract assets the simpliﬁed approach is used, and the expected loss COSTS TO FULFILL CUSTOMER CONTRACTS The Group does not capitalize costs incurred to fulﬁl customer contracts. Direct costs for custom development and standard platform are expensed as incurred. INCREMENTAL COSTS OF OBTAINING CUSTOMER CONTRACTS The Group expenses the incremental costs of obtaining a customer contract as incurred. The incremental costs of obtaining a customer contract primarily consist of sales commis- Judgment is required in determining whether a right to consideration is conditional and thus qualiﬁes as contract assets. Estimates are made as to whether and to what extent MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 60 2.5 RECEIVABLES Additionally, allowances for individual For information about how the default risk for trade receivables is analysed and managed, how the loss rates for the provision matrix are determined, how credit impairment is determined and what the criteria for write oﬀs are, see the section on credit risk in note 6.2. RECEIVABLES receivables are recognized if there is objective evidence of credit impairment. Account balances are written oﬀ either partially or in full if judged that the likelihood of recovery is remote. EUR '000 2020 2019 Trade receivables from clients Accrued revenue 52,575 27,356 -251 49,061 29,193 -287 Loss allowance Other receivables 2,833 3,837 Total receivables at December 31 82,513 81,804 Expected loss allowance and impairments are recognized in the income statement under operating expenses. No security has been received with respect to trade receivables. No impairment was recognized for trade Aging of trade receivables from clients at December 31 Not due receivables in 2020 (2019: 7 thousand). 37,232 10,446 4,297 600 38,654 5,670 3,511 1,226 Overdue between 1 and 30 days Overdue between 31 and 90 days Overdue over 90 days The Group’s exposure to currency and credit risk for trade receivables is disclosed in note 6.2 Risk. Total trade receivables from clients 52,575 49,061 ACCOUNTING POLICY Trade receivables for performance obligations satisﬁed over time are recognized gradually, as the performance obligation is satisﬁed and in full once the invoice is due. Receivables are recognized when control over licenses or services, etc. is transferred to a client before the client pays consideration and the right to consideration is not conditional on SimCorp’s future performance. Receivables are initially recognized at fair value, and subsequently carried at amortized cost less expected loss allowance. Expected loss allowance is recorded on a portfolio basis. The simpliﬁed approach is applied and on initial measurement of receivables, all credit losses expected during the lifetime of the receivables are considered. Trade receivables represent receivables which have been invoiced to clients and remain outstanding. Accrued revenue consists mainly of revenue from the sale of perpetual software licenses and receivables from professional services contracts in progress which are yet to be invoiced. Other receivables are mainly sales and payroll taxes. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 61 3.1 EMPLOYEE COST SECTION 3 EMPLOYEES Employee costs consist of salaries, sales commissions, bonuses, pensions and social costs, share-based payments, vacation pay, and other beneﬁts. Where SimCorp provides long-term incentives and beneﬁts, costs are accrued to match the rendering of services by the employees. The accounting policy for share-based remunera- tion is described in note 3.2. Obligations related to contribution-based pension schemes are recognized in the income statement under employee costs in the period for which the related service is provided. This section provides information related to employee compensation arrangements and it should be read in conjunction with the remuneration report and note 7.2 on related party transactions. ACCOUNTING POLICY The accounting treatment for deﬁned beneﬁt Salaries, bonuses, pensions and social costs, share-based payments, vacation pay, and other beneﬁts are recognized in the year in which the associated services are rendered by the employees. plans is described in note 3.3. Accounting policies which relate to a particular note to the income statement have been included within each individual note. In this section, the following notes are presented: EMPLOYEE COST EUR '000 2020 2019 Salaries 190,429 4,005 830 180,590 3,691 674 Deﬁned contribution pension plans Deﬁned beneﬁt pension plans Share-based payments Social security and other costs Management expects commissions paid to employees as a result of signing new client contracts to be recoverable. Such commis- sions are deferred and expensed when the related revenues are recognized. Deferred commissions are presented under prepay- ments in the statement of ﬁnancial position. 3.1 Employee cost 8,739 18,665 8,193 17,704 3.2 Share based remuneration 3.3 Pension and similar liabilities 3.4 Provisions Total employee cost 222,668 210,852 Number of employees at the end of the period Average number of employees – FTE 1,901 1,840 1,871 1,703 AVERAGE NUMBER OF EMPLOYEES BY FUNCTION 2020 2019 Professional services 42% 42% Research and development 35% 14% 9% 35% 14% 9% Internal support and service Sales and sales support MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 62 3.1 EMPLOYEE COSTS (CONTINUED) 3.2 SHARE BASED REMUNERATION Remuneration to the Executive Management Board and Board of Directors is given below: SimCorp’s Board of Directors has adopted an when performance conditions are only partly met, such adjustments are reported under performance adjustments. All adjustments are recognized in the income statement as employee cost. overall policy for remuneration and incentive programs. The policy has been approved by shareholders at the Annual General Meeting with the overall objective being to promote awareness of proﬁtable growth and the Group’s long-term goals. REMUNERATION TO EXECUTIVE MANAGEMENT BOARD, GLOBAL MANAGEMENT COMMITEE AND BOARD OF DIRECTORS EUR '000 2020 2019 In the 2020 ﬁnancial year, EUR 8.7m was charged to the income statement in respect of share-based remuneration: EUR 7.7m relates to issued RSUs, EUR 0.7m relates to corporate bonus 2020 provision, and EUR 0.2m relates to shares to the Board of Directors (2019: EUR 8.2m charged to the income statement, of which EUR 6.5m from RSUs, EUR 1.4m from corporate bonus 2019 provision and EUR 0.2m from shares to the Board of Directors). Salaries 2,177 166 1,935 137 Other beneﬁts (short-term beneﬁts) Share-based payment ACCOUNTING POLICY 2,027 1,118 1,741 1,496 Performance-related bonus (short-term beneﬁts) Share-based payments comprise equity-set- tled restricted stock units (RSUs) issued to employees. The fair value of RSUs is measured at the grant date, adjusted for estimated dividends and recognized in the income Executive management board total 5,488 5,309 Salaries 1,571 298 1,883 201 Other beneﬁts (short-term beneﬁts) Share-based payment 744 656 Performance-related bonus (short-term beneﬁts) 583 568 statement as employee cost over the vesting period. Expenses are recognized as employee share-based payments and classiﬁed in the consolidated income statements according to the activities that the employees perform. The counter entry is recognized directly in equity. Global management committee total 3,196 3,308 As a result of the equity-settled share-based payments transactions, a commitment exists to grant SimCorp shares to employees. SimCorp meets these commitments using treasury shares to fulﬁl these obligations. Board fees 406 95 406 88 Fees for committee work (short-term beneﬁts) Travel allowance (short-term beneﬁts) Share-based payment 3 83 248 242 Board of directors total Total 752 819 Most of these awards are described in detail below. Other share-based payment plans not described below, are, individually and in aggregate, immaterial to our consolidated ﬁnancial statements. 9,436 9,436 SHARES TO THE BOARD OF DIRECTORS Members of the board of directors receive shares as a minor part of their overall The Executive Management Board (EMB) consists of four members. The fourth member of the EMB joined on August 1, 2019, and 2019 therefore only includes ﬁve months remuneration for one member of the EMB. remuneration. Shares are granted subject to approval at the Annual General Meeting. Assumptions are made in estimating the fair values for share-based payments, including number of RSUs expected to vest and number of employees estimated to become entitled to RSUs. In the ﬁnancial year January 1 to December 31, 2020, a cost of EUR 248 thousand (2019: EUR 242 thousand) was charged to the income statement in respect of this program. The company will allot 2,587 treasury shares after publication of the Annual Report 2020 to members of SimCorp’s Board of Directors (2019: 3,148 treasury shares). Upon resignation employees forgo all un- vested RSUs, these are reported as canceled. The number of the RSUs is also adjusted MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 63 3.2 SHARE BASED REMUNERATION (CONTINUED) RESTRICTED STOCK UNITS (RSUs) In 2020, 22,687 RSUs were granted to elected members of the Board of Directors. Fair value at grant date was EUR 7.1m (2019: EUR 5.9m). EUR 1.7m was charged to the income statement for 2020 (2019: EUR 1.3m). date was EUR 0.2m. The RSUs will vest after three years subject to continued employment and certain performance conditions for the ﬁnancial years 2020 to 2022. The Group grants RSUs to its employees and Executive Management Board (EMB) as part of its three incentive programs: long-term incentive program, corporate bonus, and special retention programs. The table which follows on the next page shows a summary of changes in the balance of outstanding RSUs from January 1, 2019 to December 31, 2020. Executive Management Board (2019: 24,728), 156 RSUs were granted to employee elected members of the Board of Directors (2019: 195) and 25,374 RSUs were granted to other employees (2019: 32,483). Fair value at grant date was EUR 4.7m (2019: EUR 4.7m), and EUR 0.8m was charged to the income statement for 2020 (2019: EUR 1.2m). In March 2021, the company will grant RSUs as part of its corporate bonus program for 2020. EUR 1.4m was charged to the income statement in 2020 (2019: EUR 1.4m). These are not included in the speciﬁcation on the next page. Vested 2020 In 2020, 26,532 RSUs related to other incentive programs vested. 15,581 related to the perfor- mance and retention program for the North American management team and 7,173 RSU’s granted to Michael Rosenvold in connection with his appointment as CFO in 2017, and 3,778 to other senior employees. Long-term incentive program Corporate bonus program RSUs are granted annually to members of the EMB and key employees as part of the long-term incentive program. These vest three years after being granted subject to continuing employment and conditions with respect to average annual minimum business growth and net operating proﬁt after tax for the three consecutive ﬁnancial years, including the year of grant. If the two last conditions are only partially satisﬁed, the undertaking with respect to the number of shares transferred after three years is reduced (performance adjustment) and may possibly lapse completely. Upon resignation employees forgo all unvested RSUs. These are reported as canceled. The annual corporate bonus program is linked to two key ﬁnancial metrics: business growth and Group EBIT. Employees have the following options: receive the year’s corporate bonus in cash; or waive their corporate cash bonus and elect to receive RSUs at a discount of 67%. Based on the waived bonus amount, the company grants RSUs to employees of the Parent company and its foreign subsid- iaries. One third of these RSUs vest after one year, a further one third after two years, and the remaining third after three years, subject to continuing employment. Other incentive programs RSUs with particular vesting conditions are occasionally granted to key personnel upon hiring as a part of a sign-on agreement, special performance incentives, or similar incentives. A short description of particular vesting conditions is provided below. Other share- based payment plans not described below, are, individually and in aggregate, immaterial to our consolidated ﬁnancial statements. Granted 2020 Canceled 2020 3,826 RSU’s were canceled due to performance conditions not achieved. One incentive plan with 2,640 RSUs was canceled due to the EMEA restructuring, and a new incentive plan will be entered into in 2021. Furthermore, 2,497 RSUs were canceled related to the LTIP RSU 2018 program covering the ﬁnancial years 2018-2020 as a performance adjustment, as the achievement was 96.4% of targets. During 2020, 1,954 RSUs were granted to se- nior employees in Denmark, USA, France and Switzerland as part of sign-on agreements and incentive programs. Fair value at grant In 2020, the following 72,808 RSUs were granted including 531 RSUs to employee MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 64 3.2 SHARE BASED REMUNERATION (CONTINUED) Executive Board of Management RSUs Long term incentive Corporate Other Number of RSUs bonus Other Total Directors1 Board employees 2020 Outstanding January 1, 2020 Granted 175,640 48,217 -52,144 -2,497 168,793 72,808 -84,963 - 57,646 1,954 402,079 122,979 -163,639 -6,213 2,269 687 -1,092 -11 101,192 22,687 -28,790 -1,128 - 298,618 99,605 -133,757 -5,074 Vested -26,532 -3,716 -2,640 Performance adjustment Canceled/transferred -2,684 -2,406 -7,730 - -7,730 Outstanding December 31, 2020 166,532 154,232 26,712 347,476 1,853 93,961 251,662 of which vesting: 2021 2022 2023 2024 65,365 52,950 48,217 - 81,729 48,121 24,382 - 4,052 20,173 1,243 151,146 121,244 73,842 1,244 936 582 335 - 37,940 30,847 23,930 1,244 112,270 89,815 49,577 - 1,244 2019 Outstanding January 1, 2019 Granted 187,609 55,357 -60,872 -15 190,638 77,108 -90,728 - 54,557 432,804 147,821 -163,867 -15 1,369 506 -710 - 92,324 339,111 116,371 -141,081 -15 15,356 30,944 Vested -12,267 -22,076 Performance adjustment Canceled/transferred - - - - -6,439 -8,225 -14,664 1,104 -15,768 Outstanding December 31, 2019 175,640 168,793 57,646 402,079 2,269 101,192 298,618 of which vesting: 2020 2021 2022 2023 2024 52,144 85,636 25,590 8,710 163,370 136,840 99,382 1,243 1,092 771 406 - 28,790 39,068 30,847 1,243 133,488 69,440 58,690 97,001 54,056 24,467 20,859 1,243 1,244 68,129 - - - - - - 1,244 - 1,244 Charge to the income statement EURm 2020 2.85 3.35 4.14 2.23 0.66 7.65 2019 0.88 6.46 1 Board of Director’s restricted stock units are acquired in the capacity of employees of SimCorp. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 65 3.3 PENSION AND SIMILAR LIABILITIES The Group has entered into pension and similar agreements with most employees. Obligations relating to deﬁned-contribution plans are recognized in the income statement in the period in which they are earned, and payments due are recognized in the statement of ﬁnancial position under other payables. ACCOUNTING ESTIMATES AND JUDGMENTS PENSIONS AND SIMILAR LIABILITIES EUR '000 2020 2019 Pension liabilities For deﬁned-beneﬁt plans, annual actuarial calculations are made of the net present value of future beneﬁts to be paid under the plan. The net present value is calculated based on assumptions of the future developments of salary, interest, inﬂation, and mortality rates. At January 1 14,505 -125 252 831 87 11,091 229 212 674 145 - Foreign exchange adjustment and other adjustments Employee contributions Expensed in the income statement Calculated interest Actuarial loss/(gain) change in demographic assumptions Actuarial loss/(gain) change in ﬁnancial assumptions Actuarial loss/(gain) change in experience Payroll taxes 72 For deﬁned-beneﬁt plans, the net present value is only calculated for those beneﬁts earned to date by employees. The present value of future pension payments is estimated actuarially and shown net of the fair value of any plan assets in the statement of ﬁnancial position as pension obligations. 106 102 -55 2,067 226 -53 Assumptions are assessed at reporting date and changes in these assumptions may signiﬁcantly aﬀect the liabilities and pension cost under deﬁned beneﬁt plans. Beneﬁts paid through pension assets -182 -86 Present value of pension liabilities at December 31 15,593 14,505 The pension obligations of the Parent com- pany and most foreign subsidiaries (all those with deﬁned-contribution plans) are covered by insurance. For a few foreign subsidiaries (those with deﬁned beneﬁt plans), the pension obligations are not covered or only partly covered by insurance. Fair value of plan assets At January 1 10,232 -83 8,409 160 112 808 269 582 -86 Diﬀerences between estimated pension assets and liabilities and their realized values are termed actuarial gains and losses. Actuar- ial gains and losses are recognized in the statement of other comprehensive income. Foreign exchange adjustment Calculated interest 62 Return on plan assets in addition to calculated interest Employee contributions Employer contributions Beneﬁts paid through pension assets Other 326 314 655 -182 -25 Changes in beneﬁts earned to date are actu- arially calculated and expensed immediately when the employees have already earned the right to the changed beneﬁts. Otherwise, they are recognized in the income statement over the period during which the employees earn the right to the beneﬁts. Under deﬁned-beneﬁt plans, the employer is obliged to pay a deﬁned beneﬁt (for example a ﬁxed percentage of an employee’s ﬁnal salary) to the employee after retirement. Un- der a deﬁned-beneﬁt plan, the Group carries the risk in respect of future developments in interest rates, inﬂation, mortality, or disability. -22 Fair value of plan assets at December 31 11,299 4,294 10,232 4,273 Net liability included in the statement of ﬁnancial position MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 66 3.3 PENSION AND SIMILAR LIABILITIES (CONTINUED) The plan entitles employees to deﬁned future beneﬁts. These primarily depend on number of years of service, salary level at retirement age, and the size of the national pension. ASSET ALLOCATION (LATEST AVAILABLE) Switzerland Norway Belgium 2020 2019 2020 2019 2020 2019 Shares - - - - - - - - 6.8% 63.7% 16.0% 13.5% - 8.0% 78.0% 11.0% 3.0% - 4.1% 4.0% 86.0% - Bonds 86.3% The actuarial assessments of assets and liabilities in the Norwegian deﬁned-beneﬁt plan have been done by Storebrand Pensjon- stjenester AS (Norway). Property - 9.6% - Other ﬁnancial assets 10.0% - Assets held at Allianz Suisse collective foundation 100.0% 100.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% For the Swiss deﬁned-beneﬁt plan, the actuarial assessments of assets and liabilities have been done by Allea Ltd (Switzerland). MOST IMPORTANT ASSUMPTIONS FOR ACTUARIAL CALCULATIONS Switzerland Norway Belgium 2020 2019 2020 2019 2020 2019 For the Belgian deﬁned-beneﬁt plan, the actuarial assessments of assets and liabilities have been done by Willis Towers Watson (Belgium). Discount rate 0.3% 1.0% 0.2% 1.5% 1.7% 2.3% 1.8% 2.3% 0.3% 0.6% Future salary increases - - SENSITIVITY ANALYSIS ON REPORTED PENSION LIABILITIES SENSITIVITY ANALYSIS Switzerland Norway Belgium Signiﬁcant actuarial assumptions for the determination of the pension beneﬁt liability are discount rate and expected future remuneration increases. The sensitivity analysis below has been determined based on reasonable likely changes in assumptions occurring at the end of the period. EUR '000 2020 2019 2020 2019 2020 2019 Discount rate +1% -1,302 1,828 206 -1,294 1,833 212 -371 494 217 -413 556 248 -1,076 -913 Discount rate -1% 1,384 1,183 Future remuneration +1% Future remuneration -1% - - - - -185 -188 -189 -214 The Group expects to pay EUR 694 thousand to the deﬁned-beneﬁt pension plans in 2021 (2019: EUR 558 thousand for the year 2020). For a deﬁned-contribution plan, the Group runs no risk in respect of future developments in interest rates, inﬂation, mortality, or disability. The analysis considers the single change shown in the table with all other assumptions assumed to remain unchanged. In practice, changes in one assumption may be accompa- nied by oﬀsetting changes in another assump- tion (although this is not always the case). For deﬁned-contribution plans, the employer is obliged to pay a deﬁned contribution (for example a ﬁxed percentage of an employee’s salary) to independent insurance companies. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 67 3.4 PROVISIONS ACCOUNTING POLICIES, ANNIVERSARY BONUSES PROVISIONS JUDGMENTS AND ESTIMATES This provision results from the Group’s com- mitment of one month’s pay in connection with employees’ 25th and 40th anniversary. Anniversary Termination indemnity EUR '000 bonuses Pension Other1 Total A provision is recognized when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outﬂow of the Group’s resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 2020 TERMINATION INDEMNITY Liability at January 1 2,046 4,273 2,854 4,648 13,821 In Italy, upon termination of employment for any reason, employers must pay a leaving indemnity (‘Trattamento di ﬁne Rapporto’ or TFR). Termination pay is calculated as 6.9% of each year’s annual salary, revalued on the basis of 75% of the inﬂation rate plus a ﬁxed rate of 1.5% during the period of accrual, and is paid as a lump sum when the employees leaves or transferred to private pension fund. The cost is accrued on a monthly basis repre- senting 1/13 of the annual cost per month. Foreign exchange adjustment 6 -81 -48 370 -41 - - -311 - -31 -6,764 -106 -66 -7,156 -217 Used during the year Reversal of unused liabilities Provisions for the year -63 125 599 4,362 5,456 In valuing provisions, the costs estimated to settle the liability are discounted if such discounting would have a material eﬀect on the measurement of the liability. A pre-tax discount rate is used that reﬂects the level of interest rates with the liability. Changes in the discount element during the year are recognized as ﬁnancial expenses. The present value of deﬁned-beneﬁt obligations and the related current service cost and past service cost were measured using the projected unit credit method. Total provisions 2,293 4,294 3,142 2,109 11,838 Expected due dates for provisions: Falling due within 1 year Falling due within 2 to 5 years Falling due after 5 years 219 923 - - 141 141 359 843 907 719 1,907 9,212 1,151 4,294 2,860 Total provisions 2,293 4,294 3,142 2,109 11,838 PENSION 2019 Refer to note 3.3 Pension and similar liabilities. Liability at January 1 1,735 4 2,682 2,637 - 1,930 42 8,984 114 OTHER Foreignexchangeadjustment Used during the year 68 Other provisions contain, among others, the obligation to re-establish leased oﬃces when the premises are vacated as well as holiday allowances required by the Danish Holiday Act. -57 -56 420 - - -351 - -412 -969 4,057 -820 Reversal of unused liabilities Provisions for the year -1,025 6,568 1,523 568 Total provisions 2,046 4,273 2,854 4,648 13,821 Expected due dates for The present value of the re-establishment obligation is included in the cost of the property plant and equipment and depreciat- ed accordingly. provisions: Falling due within 1 year Falling due within 2 to 5 years Falling due after 5 years 133 923 990 - - 372 541 520 3,219 909 1,025 4,683 8,113 4,273 1,941 Total provisions 2,046 4,273 2,854 4,648 13,821 Uncertainties exist with respect to pension obligation’s timing as well as timing and amount of re-establishment costs and termination indemnity. Judgment is used to determine when and whether such obligations will crystallize. 1 Includes re-establishment of rented premises and holiday allowances required by the Danish Holiday Act. Provisions used during the year relate mainly to the balance moved to current liabilities as amount to be paid in 2021 in connection with the Danish Holiday Act. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 4 68 4.1 INCOME TAX SECTION 4 TAX ACCOUNTING POLICY INCOME TAX This section contains all relevant disclosures and details regarding corporate income tax recognized within the ﬁnancial statements. The total tax on Group proﬁt for the year has decreased by EUR 3.1m to EUR 27.8m compared with EUR 30.9m in 2019. Income tax has decreased due to a lower proﬁt compared with 2019. EUR '000 2020 2019 The income tax for the year comprises current and deferred tax, including adjustments to prior years. Tax is recognized in the income statement, except to the extent it relates to items recognized in other comprehensive income or directly in equity. Tax for the year: Tax on proﬁt 27,838 30,900 -323 Tax on other comprehensive income 1 Total tax 27,839 30,577 Tax on proﬁt for the year breaks down as follows: Current tax 23,811 3,915 80 23,762 7,189 -18 Deferred tax The tax deduction on share-based Prior-year adjustments Changes in tax rates remuneration for the year is recognized as taxable income in the income statement to the extent that the tax deduction is 32 -33 The Group’s eﬀective tax rate has decreased from 24.2% in 2019 to 24.0% in 2020, primarily due to additional tax deductions on R&D expenses. Total tax on proﬁt for the year 27,838 20,674 30,900 23,546 attributable to the share-based payment expenses recognized in the income statement. The value of the excess tax reduction, if any, is recognized directly in equity. Tax paid during the year Tax on proﬁt for the year breaks down as follows: Tax calculated on the year's pre-tax proﬁt, 22% (2019: 22%) Diﬀerence in tax in subsidiaries relative to 22% (2019: 22%) Changes in tax rates 25,501 1,051 32 28,105 847 4.1 Income tax 4.2 Deferred tax -33 Tax eﬀect: Non-taxable income -2,672 1,221 2,705 -1,593 1,784 1,790 Non-deductible expenses Other, including prior-year adjustments Total tax on proﬁt for the year Eﬀective tax rate 27,838 24.0% 30,900 24.2% MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 4 69 4.2 DEFERRED TAX ACCOUNTING POLICIES, Deferred tax reﬂects assessment of future DEFERRED TAX JUDGMENTS AND ESTIMATES taxable income across all legal entities. Actual future taxes may deviate from these estimates. EUR '000 2020 2019 Deferred tax at January 1 -20,574 -148 -3,915 104 -32 -9,400 73 Deferred tax is calculated using the liability method on all temporary diﬀerences between the accounting and taxable values of assets and liabilities. Deferred tax assets are assessed yearly and recognized only to the extent that it is more likely than not that they can be utilized. Foreign exchange adjustment Deferred tax, proﬁt and loss -7,189 298 In some jurisdictions the tax treatment related to the adoption of IFRS 15 is yet to be determined, management assesses the tax treatment for those legal entities yearly. Management assessed that, for those jurisdictions, the most likely outcome is a deferred income of subscription-based license fees for tax purposes, related income tax is thus recognized as deferred tax. Prior-year adjustment, proﬁt and loss Change in tax rates 33 Adjustment of deferred tax, other comprehensive income Adjustment of deferred tax, equity Addition on acquisitions of subsidiaries -1 323 416 - 1,059 -5,771 Net deferred tax (liability)/asset at December 31 -24,150 -20,574 Deferred tax assets, including the tax value of tax losses carried forward, are recognized as other non-current assets and measured at the amount at which they are expected to be realized. These are either oﬀset against deferred tax liability or against tax on future earnings within the same legal entity or a jointly taxed entity. Recognized in the statement of ﬁnancial position as follows: Deferred tax assets 4,173 5,357 Deferred tax liabilities -28,323 -25,931 The uncertainty of the tax treatment of IFRS 15, to be classiﬁed as deferred tax, amounts to approximately EUR 25m (2019: 20m), related to Parent company. Net deferred tax (liability)/asset at December 31 -24,150 -20,574 Deferred tax is measured based on the tax legislation and statutory tax rates in the respective countries that will apply under the legislation in force on the statement of ﬁnancial position date when the deferred tax asset is expected to crystallize as current tax. Changes in deferred tax resulting from changes in tax rates are recognized in the income statement. The Group recognizes deferred tax assets relating to losses carried forward, if management assesses that these can be oﬀset against taxable income in the foreseeable future. For jurisdictions where IFRS 15 is not applicable for tax purposes, the revenue is deferred, and the related income tax is recognized as deferred tax. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 4 70 4.2 DEFERRED TAX (CONTINUED) Tax value of the capitalized tax losses are expected to be realized within the foreseeable future, as the aﬀected subsidiaries expect a suﬃcient future taxable income. In 2021, EUR 0.3m (2019: EUR 0.9m in 2020) of the deferred tax assets are expected to be utilized. The tax value of tax losses not capitalized is EUR 0.8m (2019: EUR 0.6m). DEFERRED TAX Recognized in: Foreign exchange January 1 adjustment Other com- prehensive income Addition on acquisi- tions Balance December 31 Balance Proﬁt and loss EUR '000 Equity 2020 Intangible assets -9,485 547 36 -19 308 -56 -65 -79 -258 32 2,425 -1,558 1,249 -4,787 380 - - - - - - - - - - - - - -7,024 -1,030 -9,417 -27,029 2,536 2,561 7,698 Property, plant, and equipment, owned Property, plant, and equipment, right-of-use Contract assets - -10,974 -22,186 2,221 2,181 9,529 682 - - - - Lease liabilities, current Current liabilities - - 459 - - Lease liabilities, non-current Provisions, non-current Share-based payment -1,573 363 - - - -1 - 1,076 3,378 3,533 15 155 416 - 3,964 2,515 Tax losses carry-forward -62 -956 - Total -20,574 -148 -3,843 -1 416 - -24,150 2019 Intangible assets -3,024 441 -43 -81 - 659 86 - - -7,077 -9,485 446 Property, plant, and equipment, owned Property, plant, and equipment, right-of-use Current assets - - - - -10,873 -113 - - - -10,873 0 112 1 - - - Contract assets -13,118 - -2 - -8,268 2,221 923 - - -798 -22,186 2,221 2,181 9,529 682 Lease liabilities, current Current liabilities - - - 1,217 - 41 78 24 -1 - - - - Lease liabilities, non-current Provisions, non-current Share-based payment 9,451 -797 - 323 - - 1,439 2,097 1,436 - 1,059 - -307 - 223 3,378 3,533 Tax losses carry-forward 56 -370 - 2,411 Total -9,400 73 -6,858 323 1,059 -5,771 -20,574 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 71 5.1 ACQUISITION OF ENTERPRISES SECTION 5 INVESTED CAPITAL ACCOUNTING POLICIES, Measurements are based on information avail- integration was charged to the income This section comprises notes which oﬀer a thorough understanding of the Group’s non-current assets. Additions in invested capital include separate asset acquisitions or business combinations. Furthermore, in this section are disclosed all lease related disclosures, including liabilities. JUDGMENTS AND ESTIMATES able on the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management. statement (2019: 1.1m). BUSINESS COMBINATIONS Provisional values are used for initial recogni- tion where there is uncertainty regarding the identiﬁcation and measurement of acquired assets, liabilities, and contingent liabilities at the date of acquisition. Such provisional values can be adjusted or additional assets or liabilities included until 12 months after the acquisition date if new information is available regarding circumstances that existed at the time of acquisition and which would have af- fected the fair value at the time of acquisition, had the information been known. Thereafter, no adjustments are made to goodwill, and changes in estimates of contingent consid- eration relating to business combinations are recognized in the income statement. Newly acquired or newly established enterprises are recognized in the consolidated ﬁnancial statements from the eﬀective dates of acquisition. These judgments, estimates, and assumptions can materially aﬀect the ﬁnancial position and proﬁt for several reasons. Such reasons include, but are not limited to: fair values assigned to assets subject to depreciation and amor- tization aﬀect the amounts of depreciation and amortization to be recorded in operating proﬁt in the periods following the acquisition, subsequent negative changes in the estimated fair values of assets may result in additional expense from impairment charges, subsequent changes in the estimated fair values of The takeover method is applied for acquisi- tions if the Parent company gains control of the entity. Identiﬁable assets, liabilities, and contingent liabilities in companies acquired are measured at their fair values at the dates of acquisition. Identiﬁable intangible assets are recognized if they can be separated or arise from a contractual right. Deferred tax is recognized on fair value adjustments. Additions to intangible assets amount- ed to EUR 0.6m in 2020 (2019: EUR 61.4m). The increase in 2020 relates to adjustments made to acquired goodwill and software. Additions to property, plant, and equipment amounted to EUR 5.9m in 2020 (2019: EUR 9.5m). Additions in 2020 comprise mainly lease extensions and purchase of equipment. liabilities and provisions may result in addi- tional expense (if increasing the estimated fair value) or additional income (if decreasing the estimated fair value). Any excess of the cost of acquisition over the fair value of the identiﬁable assets, liabilities, and contingent liabilities acquired is recog- nized as goodwill under intangible assets. SIMCORP GAIN In this section, the following notes are presented: On June 6, 2019, SimCorp entered into an agreement to acquire 100% of the shares in AIM Holding SCA and its subsidiaries (AIM Software – renamed SimCorp Gain) for an enterprise value of EUR 60.0m. The acquisition became eﬀective as of August 1, 2019. The purchase price was adjusted upwards by EUR 2.9m upon closing reﬂecting a higher value of net assets acquired. SimCorp Gain provides data management solutions to the buy-side community, helping ﬁnancial institutions aggregate, master and report on their market data. ACQUISITION COST Acquisition cost consists of the fair value of the purchase price of the enterprise acquired. The net aggregate value of identiﬁable assets and liabilities is measured in accordance with IFRS 3 Business Combinations. 5.1 Acquisition of enterprises 5.2 Intangible assets 5.3 Property, plant, and equipment In accounting for business combinations, judgment is required in determining whether an intangible asset is identiﬁable and should be recorded separately from goodwill. In addition, estimating the acquisition date fair values of the identiﬁable assets acquired and liabilities assumed involves considerable judgment. Transaction costs related to acquisitions are charged to the income statement as admin- istration expenses at the time of acquisition. In 2020, no cost related to acquisition and MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 72 5.1 ACQUISITION OF ENTERPRISES (CONTINUED) CONSIDERATION TRANSFERRED EUR '000 FAIR VALUE AT ACQUISITION 2019 December 30, December 30, EUR '000 2019 Adjustments 2020 Cash consideration 62,899 Intangible assets – client relationships Intangible assets – software Property, plant, and equipment Receivables 18,990 9,392 1,199 3,954 2,598 4,431 -5,771 -109 18,990 9,392 1,199 3,954 2,598 4,431 -5,771 -109 CASH FLOW FOR ACQUISITION EUR '000 2019 Contract assets Cash payment 62,899 -4,431 Cash and cash equivalents Deferred tax liability Cash and cash equivalents in acquired business Cash outﬂow for acquisition 58,468 Income tax payable Prepayments from clients Trade and other payables Lease liabilities -1,833 -2,120 -856 -1,833 -2,525 -856 -405 -405 Goodwill is attributable to a well-positioned business for investment management software and data management capabilities, a skilled assembled workforce and buyer synergies which will enable SimCorp to upgrade its SimCorp Dimension oﬀering with technical and commercial capabilities in data management. The purchase price allocation of the fair value of identiﬁed assets, liabilities and contingent liabilities is ﬁnal. Adjustments have been made to trade and other payables. Identiﬁable net assets 29,875 29,470 GOODWILL December 30, 2019 December 30, EUR '000 Adjustments 2020 Consideration transferred 62,899 -29,875 62,899 -29,470 Fair value of identiﬁable net assets 405 405 Goodwill 33,024 33,429 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 73 5.2 INTANGIBLE ASSETS ACCOUNTING POLICIES, Capitalized development costs comprise INTANGIBLE ASSETS JUDGMENTS AND ESTIMATES salaries plus overheads. Overheads comprise staﬀ costs, IT, and communications and amortization. Development costs comprise costs attributable to the Group’s development functions, including salaries, and other employee costs and amortization. Client relation- ships Intangible assets GOODWILL EUR '000 Goodwill Software total Initially, goodwill is recognized at cost. Subsequently, goodwill is measured at cost less accumulated impairment. Goodwill is not amortized. 2020 Cost at January 1 61,178 -216 405 - 23,882 -171 183 5 28,578 113,638 -572 588 Foreign exchange adjustment Additions/adjustments Disposals -185 - - To the extent that the development costs are not capitalized, they are recognized as research and development costs in the income statement. 5 The carrying amount of goodwill is tested for impairment at least annually. Impairment losses are recognized directly in proﬁt for the year and are not subsequently reversed. Cost at December 31 61,367 23,899 28,393 113,659 Amortization at January 1 Foreign exchange adjustment Amortization - - - - 10,534 104 3,547 -62 14,081 42 Acquired software 1,795 -5 2,021 - 3,816 -5 OTHER INTANGIBLE ASSETS Software acquired is measured at cost less accumulated amortization and accumulated impairment losses. Disposals Intangible assets with limited economic lives are measured at cost less accumulated amortization and impairment losses. Intangi- ble assets include proprietary and acquired software as well as client relationships. Amortization is provided on a straight-line basis over the estimated useful lives of the assets, which are as follows: Amortization at December 31 - 12,428 11,471 5,506 17,934 95,725 Carrying amount at December 31 61,367 22,887 Client relationships 2019 Acquisition related client relationships are initially recognized at fair value at the acquisition date and subsequently carried at cost less accumulated amortization and any accumulated impairment losses. The value of client relationships is amortized on a straight- line basis, based on the estimated duration of the acquired relationship or other relevant period if deemed appropriate. Cost at January 1 27,937 217 16,821 199 9,404 184 54,162 600 Foreign exchange adjustment Additions on acquisition of subsidiaries 33,024 9,392 18,990 61,406 Disposals - -2,530 23,882 - -2,530 • Software up to 10 years Cost at December 31 61,178 28,578 113,638 • Client relationships up to 20 years Amortization at January 1 Foreign exchange adjustment Amortization - - - 11,682 98 2,036 43 13,718 141 Proprietary software for resale 1,243 1,468 2,711 Costs of development projects for software for resale are recognized as intangible assets where they are clearly deﬁned and identi- ﬁable, where there are suﬃcient resources to implement the projects, and where it is probable that identiﬁable future income or cost reductions will cover the development and future operating costs. Disposals - - -2,489 10,534 13,348 - 3,547 -2,489 14,081 99,557 The carrying values of other intangible assets are reviewed annually for impairment to assess if there is an indication of impairment beyond what is expressed through normal amortization. If the carrying amount exceeds its recoverable amount, the carrying amount of the asset is written down to the recoverable amount. Amortization at December 31 Carrying amount at December 31 61,178 25,031 Up to 10 Up to 20 Amortization period years years MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 74 5.2 INTANGIBLE ASSETS (CONTINUED) When performing the impairment test, an constitute the most material parameters in the calculations. AMORTIZATION assessment is made as to the ability of individual cash generating units (CGUs) to generate suﬃcient positive net cash ﬂow in the future to support the value of the unit - value in use. The discount rate used in determining the value in use is based on the weighted average cost of capital (WACC). EUR '000 2020 2019 Cost of sales 1,175 1,141 874 1,130 530 At December 31, 2020, the carrying amount of goodwill was tested for impairment. The expected performance of SimCorp Soﬁa was assessed for SimCorp Italiana S.r.l. in order to verify if suﬃcient to oﬀset the carrying amount of the cash generating unit. The expected performance of SimCorp Dimension was assessed for SimCorp Coric and SimCorp Gain. Research and development costs Sales and marketing costs Administrative expenses 347 626 704 Total amortization 3,816 2,711 Cash generating units are deﬁned as the smallest group of identiﬁable assets which together generate incoming cash ﬂow from continued operations. For SimCorp Soﬁa this has been deﬁned as the business unit. All intangible assets apart from goodwill are considered to have limited useful economic lives. Determination of the useful life of client relationships at up to 20 years and software at up to 10 years is based on estimates regarding the period over which such assets are expect- ed to produce economic beneﬁts to the Group. The impairment test at December 31, 2020 showed no indication of impairment for 2020 (2019: nil). Management’s assessment is that currently no changes in key assumptions are reasonably likely to reduce the value in use below the carry value for any of the cash generating units. For the SimCorp Group, the measurement of intangible assets, including goodwill, could be aﬀected by signiﬁcant changes in judgment and assumptions underlying their calculation. SimCorp Gain and SimCorp Coric cash gener- ating units’ goodwill were in 2020 reallocated due to restructuring within the Group’s divisions. Reallocation was done based on the relative value of the redeﬁned CGU. Previous year was adjusted accordingly. IMPAIRMENT TEST Goodwill is tested for impairment once a year, other intangible assets are tested when there is indication of impairment. No indication of impairment beyond what is expressed through normal amortization has been perceived in relation to software and client relationships. The estimated useful life reﬂects the period over which the Group expects to derive economic beneﬁt from intangible assets. SimCorp Gain and Simcorp Coric have been integrated within the regional sales and marketing structure and into the research and development segment, previously covering exclusively SimCorp Dimension, but now also the product lines SimCorp Coric and SimCorp Gain. For SimCorp Soﬁa, the estimated growth rate is based on management’s expectations. For SimCorp Dimension, the expected growth rate is based on SimCorp’s own market intelligence process, through which information is CARRYING AMOUNTS AND ASSUMPTIONS collected from all key markets to form the basis for future market growth expectations. The internal expectations are then veriﬁed against available market data from external resources, including global market intelligence and research companies. Discount rate after tax Annual average growth Goodwill EUR '000 2020 2019 2020 2019 2020 2019 The future cash ﬂows are based on budgets and management’s estimates of expected de- velopments over the next ﬁve years. Revenue growth assumptions, EBIT, and discount rate SimCorp Dimension SimCorp Soﬁa 37,192 24,175 37,003 24,175 7% 7% 7% 8% 10% 0% 10% 0% Total carrying amount 61,367 61,178 Discount rate before tax: SimCorp Dimension 9% (2019: 9%) , SimCorp Soﬁa 10% (2019:11%). MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 75 5.3 PROPERTY, PLANT, AND EQUIPMENT The Group chose to present right-of-use assets together with the underlying assets of the same nature which it owns. Therefore, from January 1, 2020, property, plant and equipment includes right-of-use assets arising from lease agreements. Leasehold includes right of use assets related to the rental of premises as well as improve- ments. The Group leases land and buildings for its oﬃce space for three to ten years. at the reporting date to remeasure lease liabilities and right-of-use assets. Additionally, some leases provide for addi- tional payments based on changes to local price indices, these amounts are generally determined annually. None of the Groups’ right-of-use assets meet the deﬁnition of investment property. Technical equipment includes IT and other equipment owned and leased. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the income statement. Short-term leases are leases with a term of 12 months or less. Low-value assets comprise IT-equipment and small items of oﬃce furniture. Extension and termination options are includ- ed in a number of property and equipment leases across the group. These are used to maximize operational ﬂexibility in terms of managing the assets used in the group’s operations. The majority of extension and termination options held are exercisable only by the group and not by the respective lessor. The Group assesses at the lease commence- ment date whether it is reasonably certain to exercise such options and reassesses if there is a signiﬁcant event. ACCOUNTING POLICIES Other equipment includes leased cars and owned ﬁxtures and ﬁttings. Property, plant, and equipment are measured at cost less accumulated depreciation and accumulated impairment. Right-of-use assets are initially measured at cost consisting of the amount of the initial measurement of the leases liability, plus any lease payments made to the lessor at or before the commencement date less any lease incentives received and the initial estimate of refurbishment costs and any initial directs costs incurred by SimCorp as the lessee. LEASES The Group leases vehicles and equipment with lease terms of three to ﬁve years. Agreements might include options to purchase assets at the end of the contract term or guarantees in relation to the residual value of the leased asset at the end of the contract term. The use of vehicles and equipment is monitored and the estimated amount payable reassessed Lease liabilities arise from the adoption of IFRS 16. Details on lease liabilities, amounts recognized in the income statement and statement of cash ﬂow in relation to leases follow. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 76 5.3 PROPERTY, PLANT, AND EQUIPMENT (CONTINUED) DEPRECIATION Impairment, depreciation, and amortization are recognized in cost of sales, research and development costs, sales and marketing costs, or administrative expenses. LEASE LIABILITIES The basis of depreciation is calculated with due consideration to scrap value and any prior impairment write down. The estimated useful life and scrap value of each asset is determined at the date of acquisition and reassessed annually. When the scrap value equals the carrying amount of the asset, the asset ceases to be depreciated. Any change in depreciation period or scrap value is recog- nized as a change in accounting estimate. EUR '000 2020 2019 Payable within 1 year Payable within 2 to 5 years Payable after 5 years 10,039 23,919 12,110 10,301 28,085 16,098 Property, plant, and equipment are depreciat- ed on a straight-line basis over the estimated useful lives of the assets, which are as follows: Total undiscounted lease liabilities 54,484 51,648 46,068 44,177 Total lease liabilities included in the statement of ﬁnancial position Current 9,630 10,063 41,585 • Leasehold over the lease term up to 10 years • Technical equipment up to 3 years • Other equipment, ﬁxtures, and ﬁttings up to 5 years Non-current 34,547 AMOUNTS RECOGNIZED IN THE INCOME STATEMENT EUR '000 2020 2019 676 DEPRECIATION Interest on lease liabilities 617 EUR '000 2020 2019 Variable lease payments not included in the measurement of lease liabilities 797 256 15 723 384 13 Cost of sales 3,781 3,673 2,811 2,013 5,019 2,352 1,542 3,128 Expenses related to short-term lease Expenses related to low-value assets Research and development costs Sales and marketing costs Administrative expenses Total recognized in proﬁt and loss 1,685 1,796 Total depreciation 12,278 12,041 AMOUNTS RECOGNIZED IN THE STATEMENT OF CASH FLOW EUR '000 2020 10,042 10,042 2019 9,880 9,880 Repayment of lease liability Total recognized in statement of cash ﬂow MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 77 5.3 PROPERTY, PLANT, AND EQUIPMENT (CONTINUED) Other equipment, ﬁxtures, ﬁttings PROPERTY, PLANT, AND EQUIPMENT Leasehold Technical equipment Right-of-use and prepayments Property, plant, and equipment total EUR '000 Right-of-use Improvements Owned Right-of-use Owned 2020 Cost at January 1 Foreign exchange adjustment Additions 58,788 -1,819 2,403 -9 7,054 -277 618 781 3 8,771 -194 431 1,773 -3 5,113 -104 82,280 -2,394 5,866 490 -873 757 -295 1,167 -1,277 Disposals -125 -556 -3,135 Cost at December 31 59,363 7,270 401 8,452 2,232 4,899 82,617 Depreciation at January 1 Foreign exchange adjustment Depreciation 9,308 -766 9,121 - 4,945 -150 616 518 2 7,528 -46 494 29 3,837 -61 26,630 -992 417 -873 787 638 -242 699 12,278 -2,949 Disposals -125 -543 -1,166 Depreciation at December 31 17,663 41,700 5,286 1,984 64 7,726 726 919 3,309 1,590 34,967 47,650 Carrying amount at December 31 337 1,313 2019 - 48,708 1,859 5,949 927 8,799 - - 9,092 - Cost at January 1 - 1,111 134 628 - 5,335 23,226 50,600 2,376 8,299 1,199 - 781 Adjustment IFRS 16 adoption Foreign exchange adjustment Additions - 74 168 376 85 - - - - 141 599 103 - 747 84 Addition on acquisition of subsidiaries Transfers 1,345 -1,345 - - Disposals - 58,788 - -1,029 7,054 5,693 - 781 - -1,164 8,771 7,617 -100 -1,127 -3,420 Cost at December 31 1,773 5,113 82,280 Depreciation at January 1 Foreign exchange adjustment Depreciation - 1 4,539 -4 17,849 42 - 23 734 - 22 984 8,832 518 545 - 428 - 12,041 - 476 - -476 -1,029 4,945 - - - -1,095 7,528 Transfers Disposals -52 -1,126 -3,302 Depreciation at December 31 9,308 518 494 3,837 1,276 26,630 55,650 Carrying amount at December 31 49,480 2,109 263 1,243 1,279 Depreciation period Up to 10 years Up to 3 years Up to 5 years MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 78 6.1 EQUITY, TREASURY SHARES, AND DIVIDENDS SECTION 6 EQUITY, CAPITAL STRUCTURE, AND FINANCING ITEMS ACCOUNTING POLICY Except for the cases speciﬁed in the TREASURY SHARES preceding period, the company’s existing shareholders shall have a right to subscribe new shares proportionately to their existing holdings. The new shares shall be negotiable instruments, and no restrictions shall apply to the transferability of the shares. No share- holders shall be under an obligation to have their shares redeemed in full or in part by the company or any other party. The market value of treasury shares at December 31, 2020 was EUR 103.0m (2019: EUR 91.3m). The treasury shares are carried at EUR 0.0m (2019: EUR 0.0m) in the ﬁnancial statements. This section presents how SimCorp manages its capital structure. Sim- Corp’s capital structure management aims primarily to support business growth. It is the Group’s policy that any excess capital present after 1) funding growth opportunities and 2) leaving remaining cash reserves that cover at least 10% of the following year’s cost, be returned to investors. Treasury shares acquired by the Parent company are recognized in the statement of ﬁnancial position at zero value. Dividends from such shares are recognized in equity. On December 31, 2020, the share capital amounted to DKK 40,500,000 divided into 40,500,000 shares (unchanged from 2019). The company’s shares are traded on Nasdaq Copenhagen in denominations of DKK 1. No shares confer any special rights upon any shareholder. No shares are subject to restric- tions on transferability or voting rights. The Board of Directors has been authorized to let the company acquire treasury shares of up to a total nominal value of 10% of the com- pany’s share capital, including the company’s current holding of treasury shares. Unless Danish legislation provides for a greater majority or unanimity, the adoption of resolutions regarding amendments to the company’s articles of association and the company’s dissolution or merger with another company requires a majority of not less than two thirds of all the votes cast as well as of the voting share capital represented at the rel- evant general meeting, and that not less than 50% of the share capital is represented at the general meeting. Should less than 50% of the share capital be represented at the general meeting, and the resolution is adopted by not less than two thirds of the votes cast as well as of the voting share capital represented at the general meeting, another general meeting may be called within 14 days after the pre- ceding general meeting. At the new general meeting, the resolution can be adopted by not less than two thirds of the votes cast as well as of the voting share capital represented at the general meeting. Refer to pages 30 to 33 for additional information. In this section, the following notes are presented: In 2020, SimCorp A/S acquired 112,654 treasury shares for EUR 10.0m, at an average price of DKK 660.78 per share (2019: EUR 12.5m at an average price of DKK 617.86 per share). 6.1 Equity, treasury shares, and dividends 6.2 Risk 6.3 Financial assets and liabilities 6.4 Financial income and expenses The share capital may be increased in one or more issues by a total nominal amount of up to DKK 4,000,000 (4,000,000 shares of DKK 1 nominal value) as directed by the Board of Directors with respect to time and terms. In 2020, SimCorp A/S delivered 163.686 treasury shares as part of the share-based remuneration program for a nominal value of DKK 163.686 (2019: DKK 168,217) calculated at an average market price of DKK 731.05 per share (2019: DKK 575.42 per share), equal to a calculated price of EUR 16.4m (2019: EUR 13.0m). This authority is valid for a period of ﬁve years, expiring on March 1, 2022, and may be extended by the shareholders for one or more periods of up to ﬁve years at a time. The capital increase may be aﬀected by cash payment or otherwise. The capital increase may be aﬀected without pre-emption rights to the company’s existing shareholders, if the shares are issued at market price or as consideration for the company’s acquisition of an existing operation or speciﬁc assets of a value that equals the value of the shares issued. The company acquires treasury shares to reduce share capital and to cover obligations arising from restricted stock unit programs. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 79 6.1 EQUITY, TREASURY SHARES, AND DIVIDENDS (CONTINUED) CAPITAL MANAGEMENT AND DIVIDENDS POLICY The Board of Directors regularly assesses the need to adjust the capital structure, including the requirement for cash, credit facilities, and equity. SimCorp expects to buy back shares with the intention to purchase shares for EUR 40m in two half yearly buyback programs of EUR 20m each. TREASURY SHARES Acquisi- Percentage Number of shares tion value EUR '000 of share capital Distribution of dividends to shareholders has no tax consequences for the company. 2020 At January 1 900,481 - 50,900 219 2.2 - SimCorp intends to pay dividends of at least 40% of the Group proﬁt on ordinary activities after tax. In addition, the company buys treasury shares provided that it does not anticipate speciﬁc cash requirements. Foreign exchange adjustment Purchases The Board of Directors intends to recommend to the shareholders at the Annual General Meeting that dividends of approximately EUR 40.1m (2019: EUR 39.9m), equal to DKK 7.50 (2019: DKK 7.50) per 1 share, be distributed and that the company be authorized to acquire treasury shares for up to 10% of the company’s share capital. 112,654 -163,686 9,996 -8,488 0.3 -0.4 Used RSU program At December 31 849,449 52,627 2.1 2019 In 2020, SimCorp acquired EUR 10.0m in SimCorp shares as part of a share buyback program (2019: EUR 12.5). In 2021, given there are no speciﬁc requirements for liquidity, At January 1 917,718 - 46,401 -4 2.3 - Foreign exchange adjustment Purchases 150,980 -168,217 12,488 -7,985 0.3 -0.4 Used RSU program At December 31 900,481 50,900 2.2 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 80 6.2 RISK CHANGE IN AVERAGE EXCHANGE RATE IN RELATION TO EUR Due to the nature of its operations, invest- ments, and ﬁnancing, the Group is exposed to changes in exchange rates and interest rates. factors that may inﬂuence amounts, time of costs are generally settled in the functional (local) currency of the individual entity and material cash balances are transferred to SimCorp A/S. payment, or reliability of future payments, where such information is not provided directly in the ﬁnancial statements. Functional currency 2019 to 2020 2018 to 2019 The Group’s policy is to direct ﬁnancial AUD CAD CHF DKK GBP HKD NOK SEK -2.96% -3.64% 3.70% -1.50% 3.46% 3.61% -0.17% 1.32% 5.41% -2.17% -2.78% 4.30% 5.36% management towards the management of ﬁ- nancial risks related to operations and ﬁnance. The Group’s ﬁnancial risks are managed centrally by the group ﬁnance according to policies committed in writing and approved by the Board of Directors. The purpose is to ensure eﬃcient liquidity management. Excess liquidity is transferred to SimCorp A/S which operates as the internal bank for the Group. This note addresses only ﬁnancial risks directly related to the Group’s ﬁnancial instruments as detailed in note 6.3 Financial assets and liabilities. The consolidated income statement is impact- ed by changes in exchange rates. The results of foreign subsidiaries are translated from their functional currency to EUR at the exchange rates ruling on the dates of underlying 0.17% -1.58% -1.33% -8.71% 1.03% -3.35% -2.30% The Group’s most important operational and commercial risk factors are described in more detail on pages 24-26 of the annual report. transactions. The average exchange rate for the month is used to reﬂect the transaction dates’ exchange rates. The table shows the change in average exchange rate for the main currencies impacting the Group’s operating proﬁt. SGD USD CURRENCY RISK The scope and nature of the Group’s ﬁnancial instruments appear from the income state- ment and the statement of ﬁnancial position in accordance with the accounting policies applied. This note provides information about Currency risk is the risk that arises from changes in exchange rates and aﬀects the Group’s result. The Group’s foreign subsid- iaries are not severely impacted by foreign exchange ﬂuctuations, as both income and At the end of the reporting period the Group‘s currency exposure (excluding translation exposure) based on the functional currencies of the individual Group companies shows that REVENUE BY CURRENCY 2020 2019 EUR USD DKK SGD GBP CHF CAD SEK NOK AUD 40% 34% 19% 10% 3% 18% 10% 4% CURRENCY EXPOSURE 2020 2019 Cash/ Cash/ equiva- lents 7% 9% Receiv- ables Contract assets equiva- lents Net position Receiv- ables Contract assets Net position EUR ‘000 Debt Debt 7% 6% EUR/GBP SEK/DKK KRW/SGD EUR/CHF EUR/DKK EUR/SEK USD/GBP USD/SGD 434 385 1,175 1,269 - 235 116 436 1,408 1,511 1,514 1,519 5,190 7,891 502 258 - 1,371 1,833 - 94 23 324 1,643 2,114 - 3% 3% 259 - 5% 4% - 1,514 81 - - - - - 1,438 - - 1,784 6,356 450 3,290 - - 198 4,193 16 1,982 7,976 4,834 9,636 13,730 6% 10% 2% 1,897 3,290 4,916 14,261 7,719 119 4,426 19 2,198 4,385 6,641 13,694 4,771 17 2% 4,501 3,988 1,204 1,036 124 1,732 - 8,208 15,589 120 36 415 - MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 81 6.2 RISK (CONTINUED) the majority of the cross-currency exposure comes from the USD/SGD exchange rate: EUR 15.6m (2019: EUR 13.7m) and the USD/GBP exchange rate: EUR 8.2m (2019: EUR 9.6m). Deposits SimCorp’s cash ﬂow is by nature impacted by the annual dividend, the seasonal credit facility is used to optimize the debt structure. See note 6.3 Financial assets and liabilities for additional information. LIQUIDITY RISK The Group had cash deposits of EUR 53.1m on December 31, 2020 (2019: EUR 31.9m) carrying a variable rate of interest based on the money market rate. The eﬀective rate of interest varies with the currency and, made up at the statement of ﬁnancial position date, ﬂuctuated between -0.5% and 0.0% in 2020 (2019: -0.5% and 0.0%) for signiﬁcant cash deposits. Group liquidity is managed by Group Treasury, with the objective of ensuring eﬀective liquidity management by obtaining suﬃcient committed credit facilities to provide Based on the net exposure of the Group, the hypothetical impact of exchange rate ﬂuctuations on the proﬁt before tax for the year and equity would be EUR 1.6m for a 10% change in the USD/SGD exchange rate and EUR 0.8m for a 10% change in the USD/GBP exchange rate (an appreciation of the USD in relation to the SGD and the GBP would have positive impact, a depreciation would have a negative impact). adequate ﬁnancial resources. It is the Group’s policy that cash reserves must exceed 10% of the coming year’s expected costs. Cash reserve and expected cash ﬂow for 2021 are considered to be adequate to meet the obligations of the Group as they fall due. Sensitivity Exposure to interest risk arises from cash deposits, the revolving credit facility and seasonal facility. If interest rates increased by one percentage point, it would have a positive impact of EUR 0.5m (2019: negative impact of EUR 0.5m). Debt SimCorp has a revolving committed credit facility of EUR 40.0m expiring July 31, 2022 and a seasonal credit facility of EUR 30.0m covering the period from March 15 to Septem- ber 15, also expiring July 31, 2022. Cash reserve comprises cash and cash equivalent and unutilized credit facilities. The Group aims to have suﬃcient cash reserves to allow it to continue to operate adequately in case of unforeseen ﬂuctuations in cash. A corresponding decrease in interest rates would have the opposite impact. The impact of change in interest levels on the equity of the Group does not deviate signiﬁcantly from the impact on the proﬁt and loss for the year. The Group’s foreign exchange management policy is to balance incoming and outgoing payments in local currency as much as possible and generally seek to ensure that an increasing number of contracts entered into are EUR-denominated. When placing surplus funds, the Group generally seeks to minimize its net exposure in individual currencies. In order to mitigate currency risk in relation to Ukraine, SimCorp is using USD for salaries in that country. On December 31, 2020, there was no drawn on the credit facilities, however EUR 3.4m was utilized for various guarantees. The Group had unused credit facilities in banks of EUR 36.6m. Current and non-current ﬁnancial liabilities are depicted below: FINANCIAL LIABILITIES - DECEMBER 31 Current Non-current 1 to 6 months 7 to 12 months 2 to 5 years 2019 Later than 5 years Currency exposures from investments in sub- sidiaries have not been hedged. The related exchange rate adjustments are recognized in other comprehensive income. EUR '000 2020 2019 2020 2019 2020 2020 2019 Lease liabilities Revolving credit facility Trade payables Provisions 5,082 20,000 17,498 - 4,981 - 25,649 15,936 4,902 - 4,728 - 22,703 - 11,844 - 224 4,683 - - - 781 - 8,113 - 15,950 1,299 495 3 INTEREST RISK 1,025 2,762 - 719 9,686 1,907 9,212 The Group’s interest rate risks are generally related to its bank deposits and revolving credit facilities. Other payables 49,472 46,160 - - Total ﬁnancial liabilities 70,324 88,740 16,432 9,549 25,105 30,556 21,059 24,049 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 82 6.2 RISK (CONTINUED) CREDIT RISK The maximum exposure to credit risk equals the following carrying amounts: region. Two factors are therefore considered rate might be applied to certain clients after individual assessment resulting in the weight- ed average expected loss rates depicted on the credit risk exposure on receivables and contract assets table. when estimating expected loss rates: the actu- al credit loss experienced over the past seven years and a factor which reﬂects diﬀerences between economic conditions during the period over which the rates were collected, current conditions, and the Group’s view of economic conditions over the expected life of the receivables. CREDIT RISK EXPOSURE EUR '000 2020 2019 If there is no reasonable expectation of recovery, the gross carrying amount is written-oﬀ. Indicators that there is no reason- able expectation of recovery include, amongst others, the failure of a debtor to engage in repayment plan with the Group, and a failure to make contractual payments for a period greater than three hundred and sixty days past due. Cash and cash equivalents Trade receivables from clients Accrued revenue 53,051 52,575 27,356 31,851 49,061 29,193 160,551 Contract assets (gross) 182,537 Accumulated average corporate default rates by region as published by Standard & Poor are used as proxy for probability of loss as these provide an indication on counterpart default risk by region of origin. Higher expected loss rates are used for certain balances if individual assessment indicates a higher probability of default. Initially, an expected loss rate from 0.04% up to 2.89% (2019: 0.04% up to 2.89%) is applied for clients with investment grade rating depending on the length of the asset’s lifetime and location. For unrated clients and clients that do not have investment grade rating, an expected loss rate from 0.35% up to 13.36% (2019: 0.35% up to 13.36%) is applied depending on the length of the asset’s lifetime and the client’s geographical location. A higher Other receivables 2,833 3,837 Maximum credit exposure 318,352 274,493 The Group is not exposed to signiﬁcant risks concerning individual clients or business part- ners as clients are generally major investment managers in the ﬁnancial sector. Under the Group’s policy for assuming credit risk, all major clients and other business partners are assessed prior to any contract being signed. and operates with individual limits on banks based on rating and access to netting of assets and liabilities. No client represents more than 5.6% (2019: 6.9%) of total receivables from clients. Receivables and contract assets Expected timing of invoicing for the contract assets balance can be found in note 2.4. In assessing expected credit loss of trade receivables and contract assets which comprises many small balances, the Group uses an allowance matrix. Expected loss rates are calculated separately for exposures in diﬀerent segments based on common credit risk characteristics in relation to geographical The Group primarily enters into ﬁnancial instruments and transactions with the Group’s relationship banks. Group treasury monitors the Group’s gross credit exposure to banks MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 83 6.2 RISK (CONTINUED) The table below depicts information about exposure to credit risk and expected credit loss for trade receivables, accrued revenue and contract assets (gross) on December 31: CREDIT RISK EXPOSURE ON RECEIVABLES AND CONTRACT ASSETS 2020 2019 Weighted average expected loss rate Loss allowance Carrying amount Weighted average expected loss rate Loss allowance Carrying amount EUR '000 EUR '000 EUR '000 EUR '000 Not due 0.52% 0.37% 1,241 39 240,449 10,406 4,286 467 0.44% 0.16% 965 9 219,562 5,661 Not more than 30 days More than 30 days but not more than 90 days More than 90 days 1 0.26% 11 0.09% 3 3,508 1,010 26.30% 134 21.39% 216 Total 0.56% 1,425 255,608 0.52% 1,193 229,741 1 Includes allowance resulting from individual assessment of outstanding balances. The expected loss allowance has developed as follows: EXPECTED LOSS ALLOWANCE EUR '000 2020 2019 Balance at January 1 1,193 -118 350 - 712 12 Foreign exchange adjustment Net loss allowance recognized Amounts written oﬀ 476 -7 Balance at December 31 1,425 1,193 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 84 6.3 FINANCIAL ASSETS AND LIABILITIES ACCOUNTING POLICIES, A ﬁnancial liability is derecognized when the 40.0m expiring July 31, 2022, 2) a seasonal FINANCIAL ASSETS JUDGMENTS AND ESTIMATES obligation under the liability is discharged or canceled or expires. When an existing ﬁnancial liability is replaced by another from the same lender on substantially diﬀerent terms, or the terms of an existing liability are substantially modiﬁed, such an exchange or modiﬁcation is treated as the derecognition of the original liability and the recognition of a new liability. facility of EUR 30.0m covering the period from March 15 to September 15 expiring July 31, 2022. Together, they are available for general corporate purposes of the Group. Financial assets comprise other ﬁnancial assets, deposits, receivables and cash and cash equivalent. For additional information on receivables refer to note 2.5. All ﬁnancial assets and liabilities are measured at amortized cost. The carrying amount of these approximate fair value. Financial assets which have been modiﬁed or renegotiated during the period are assessed individually for impairment. On December 31, 2020, the Group had a committed revolving credit facility of EUR 40m, of which EUR 0.0m had been drawn and EUR 3.4m used for guarantees. Deposits are primarily related to the leasing of oﬃces. Security deposits which will not be returned within one year of the statement of ﬁnancial position date are recognized as non-current assets. Commitments which require a deposit will initially be recorded to the deposit asset account. If the deposit is not recovered, it is charged to the income statement. FINANCIAL LIABILITIES The diﬀerence in the respective carrying amounts is recognized in the income state- ment. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the eﬀective interest rate method. Financial liabilities comprise lease liabilities, borrowings, trade payables and other payables. Trade payables and other payables Other payables include bonus and commis- sion accruals, vacation pay obligations, payroll taxes and VAT. Payables are measured at cost. Lease liabilities Lease liabilities arise from the adoption of IFRS 16. For additional information on lease liabilities refer to notes 5.3. Exposure to currency and liquidity risk for trade and other payables as well as borrow- ings is disclosed in note 6.2. Other ﬁnancial assets comprise investments in shares of unlisted entities. Changes in liabilities arising from ﬁnancing activities in 2020 comprise withdrawals from the revolving credit facilities of EUR 40.0m, interest cost of EUR 0.2m and re-payment of EUR 40.0m. Borrowings DEPOSITS Debt is initially recognized at fair value less transaction cost. Fair value does not materially diﬀer from carrying amount since interest payable is close to current market rates. EUR '000 2020 2019 Cost at January 1 Foreign exchange adjustment Additions 2,095 -21 1,983 7 SimCorp has access to: 1) a multi-currency committed revolving credit facility of EUR 17 500 -395 Disposals -60 Carrying amount at December 31 2,031 2,095 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 85 6.3 FINANCIAL ASSETS AND LIABILITIES (CONTINUED) FINANCIAL ASSETS AND LIABILITIES BY MEASUREMENT CATEGORY Measured at amor- tized cost Carrying amount EUR ‘000 2020 Deposits 2,031 2,031 Other ﬁnancial assets 404 404 Non-current ﬁnancial assets 2,435 2,435 Receivables 82,513 53,051 82,513 53,051 Cash and cash equivalent Current ﬁnancial assets Lease liabilities 135,564 34,547 34,547 135,564 34,547 34,547 Non-current ﬁnancial liabilities Lease liabilities Trade payables Other payables 9,630 17,747 59,158 9,630 17,747 59,158 Current ﬁnancial liabilities 86,535 86,535 2019 Deposits 2,095 2,095 2,095 2,095 Non-current ﬁnancial assets Receivables 81,804 31,851 81,804 31,851 Cash and cash equivalent Current ﬁnancial assets Lease liabilities 113,655 41,585 41,585 113,655 41,585 41,585 Non-current ﬁnancial liabilities Revolving credit facility Lease liabilities 20,000 10,063 18,503 48,922 20,000 10,063 18,503 48,922 Trade payables Other payables Current ﬁnancial liabilities 97,488 97,488 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 86 6.4 FINANCIAL INCOME AND EXPENSES ACCOUNTING POLICY FINANCIAL INCOME EUR '000 2020 2019 Financial income and expenses include: interest income, interest expense, amortiza- tion of borrowing issue costs, realized and unrealized exchange gains and losses, refunds under the Danish tax prepayment scheme, changes to the fair value of derivative ﬁnancial instruments, withholding tax, amortization of ﬁnancial assets and liabilities, as well as surcharges under the Danish tax prepayment scheme. Interest income, ﬁnancial assets carried at amortized cost Dividends from associates 22 79 - 136 81 Foreign exchange gains, net 730 Total ﬁnancial income 101 947 FINANCIAL EXPENSES EUR '000 2020 2019 Interest expenses, ﬁnancial assets carried at amortized cost Interest expenses, ﬁnancial liabilities carried at amortized cost Interest expenses, pension 54 279 23 243 76 31 676 46 23 - Borrowing cost, except for commitment fees on credit facilities, are recognized in proﬁt or loss using the eﬀective interest method. Commitment fees on credit facilities are recognized on a straight-line basis over the term of the agreement. Interest expenses, lease 617 18 Interest expenses, reestablishment Other ﬁnancial expenses 9 Foreign exchange losses, net 7,405 Total ﬁnancial expenses 8,405 1,095 Dividends on investments in associates are recognized in the Group’s income statement in the ﬁnancial year in which the dividends are declared. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 87 7.1 EARNINGS PER SHARE SECTION 7 OTHER DISCLOSURES Earnings per share (EPS) and diluted earnings per share (EPS-D) are measured according to IAS 33. This section contains other required disclosures relevant for the under- standing of the Groups’ ﬁnancial statements, but which are not essential for the understanding of the individual themes in the previous sections. It includes information pertaining to the Executive Management Board, Board of Directors and other corporate governance related topics. EARNINGS PER SHARE 2020 2019 Proﬁt for the year (EUR´000) 88,258 96,901 Average number of shares 40,500,000 40,500,000 -820,562 -839,472 39,679,438 39,660,528 355,737 397,802 40,035,175 40,058,330 Average number of treasury shares Average number of shares in circulation Average dilutive impact of outstanding restricted stock units In this section, the following notes are presented: Average number of diluted shares in circulation Earnings per share – EPS (EUR) 2.22 2.20 2.44 2.42 Diluted earnings per share – EPS-D (EUR) 7.1 Earnings per share All allotted restricted stock units were included in 2019 as the conditions stipulated in note 3.2 were expected to be met. In 2020 adjustments were made in relation to the 2018 plan (96.4%). See also note 3.2. 7.2 Related party transactions 7.3 Auditors’ remuneration 7.4 Contingent liabilities 7.5 Events after statement of ﬁnancial position date 7.6 Subsidiaries and associates MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 88 7.2 RELATED PARTY TRANSACTIONS SimCorp’s related parties exercising a signiﬁ- cant inﬂuence comprise the company’s Board of Directors and Executive Management Board as well as relatives of these persons. Related parties also comprise companies in which the individuals mentioned above have material interests. Key Management Personnel (cf. IAS 24) SHAREHOLDINGS, BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT BOARD consists of the Board of Directors and the Executive Management Board. Remuneration to members of the Board of Directors and the Executive Management Board is disclosed in note 3.1 and the remuneration report. Number of shares 2020 2019 Board of Directors Peter Schütze 12,229 7,088 11,493 2,611 8,990 Morten Hübbe Herve Couturier 9,249 Members of the Board of Directors are elected by the shareholders at the Annual General Meeting for terms of one year. Members of the Board of Directors elected by the em- ployees are elected among all SimCorp Group employees every third year. Election was held in March 2019, the next election will be held in March 2022. Refer to pages 34-36 for additional information on Board of Directors members. Simon Jeﬀreys Adam Warby 11,935 855 11,554 637 Other related parties are considered to be Group’s associates. All agreements relating to these transactions are based on market price (arm’s length). Joan A. Binstock Else Braathen 689 389 8,102 2,179 1,329 7,442 1,920 379 Vera Bergforth Hugues Chabanis 1 Trade from associates amounted in 2020 to Board of Directors, total 53,655 45,415 EUR 1.0m compared with EUR 0.9m in 2019. Executive Management Board Klaus Holse 86,581 115,782 13,150 4,178 84,087 115,782 5,977 The Group did not enter into any agreements, deals, or other transactions in 2020 in which the Parent company’s Board of Directors or Executive Management Board had a ﬁnancial interest, except for transactions following from the employment relationship. See note 3.2 and the remuneration report. Georg Hetrodt Michael Rosenvold Christian Kromann 2 Interest in the company of members of the Board of Directors and the Executive Manage- ment Board: 3,108 Executive Management Board, total 219,691 208,954 Total shareholdings by members of the Board of Di- rectors and the Executive Management Board 273,346 254,369 1 Elected March, 2019 2 Appointed August, 2019 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 89 7.2 RELATED PARTY TRANSACTIONS (CONTINUED) 7.3 AUDITORS’ REMUNERATION Audit fees include the audit of the consolidat- ed and local ﬁnancial statements, including implementation of audit standard ISA540 and audit of remuneration reporting. In 2019, the Audit fees included audit of the adoption of IFRS 16, and the purchase price allocation related to the acquisition of SimCorp Gain. Tax fees relate primarily to assistance with obtaining an advanced transfer pricing agreement in Germany. RESTRICTED STOCK UNITS, BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT BOARD Number of restricted stock units 2020 2019 Board of Directors Else Braathen 546 677 Hugues Chabanis 1 1,307 1,592 Board of Directors, total 1,853 2,269 FEES TO INDEPENDENT AUDITORS Executive Management Board Klaus Holse 43,178 18,197 20,120 12,466 48,252 20,419 24,256 8,265 EUR '000 2020 2019 Georg Hetrodt Audit fees 437 17 419 162 39 Michael Rosenvold Christian Kromann 2 Tax and VAT advice fees Other service fees 21 Executive Management Board, total 93,961 101,192 Total auditors’ remuneration 475 620 48% Total restricted stock units granted to members of the Board of Directors and the Executive Management Board Non-Audit Services (NAS)/Audit fee ratio 9% 95,814 103,461 1 Elected March, 2019 2 Appointed August, 2019 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 90 7.4 CONTINGENT LIABILITIES 7.5 EVENTS AFTER STATEMENT OF FINANCIAL POSITION DATE The Group is party to legal proceedings and inquiries from authorities when investigating various issues. The outcome of such is not expected to have a signiﬁcant eﬀect on proﬁt for the year and the assessment of the Group’s ﬁnancial position. On July 22, 2020, the Danish Tax Agency (Skattestyrelsen) came to the ﬁnal conclusion that SimCorp’s products and services are subject to VAT. No material events have occurred after December 31, 2020, that have consequences for the annual report 2020. On this basis, SimCorp does not expect any contingent liability and therefore no eﬀect on proﬁt for the year and the assessment of the Group’s ﬁnancial position and accordingly, SimCorp has not made a provision for this in its annual accounts 2020. In 2019, SimCorp reported contingent liability related to SimCorp A/S and the so called “ATP-ruling” related to possible VAT exemp- tion for certain pension services. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 91 7.6 SUBSIDIARIES AND ASSOCIATES Group’s subsidiaries are at December 31, 2020 ASSOCIATES The Group holds an ownership interest of 24.8% in Dyalog Ltd and 30.0% in Opus Nebula Ltd. SimCorp’s investment in Dyalog Ltd, United Kingdom is a strategic investment as the company is an important supplier. The Group purchases APL licenses from Dyalog Ltd. both for SimCorp Dimension and SimCorp Soﬁa. SUBSIDIARIES Share capital Ownership interest NAME Registered oﬃce 2020 2019 SimCorp Ltd. London, United Kingdom Bad Homburg, Germany Vienna, Austria 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100,000 GBP EUR EUR NOK SEK EUR USD CHF AUD SGD UAH CAD EUR HKD EUR GBP EUR EUR PLN EUR JPY SimCorp GmbH 102,258 17,500 SimCorp Österreich GmbH SimCorp Norge AS Oslo, Norway 1,000,000 100,000 62,000 7,010,000 100,000 999,992 1 SimCorp Sverige AB SimCorp Benelux SA/NV SimCorp USA Inc. Stockholm, Sweden Brussels, Belgium New York, USA SimCorp Schweiz AG SimCorp Asia Pty. Ltd. SimCorp Singapore Pte. Ltd. SimCorp Ukraine LLC SimCorp Canada Inc. SimCorp France S.A.S SimCorp Hong Kong Ltd. SimCorp Luxembourg S.A. SimCorp Coric Ltd. Zurich, Switzerland Sydney, Australia Singapore, Singapore Kiev, Ukraine 2,968,254 8,500,001 500,000 14,000,002 31,000 120 Vancouver, Canada Paris, France Hong Kong, China Luxembourg, Luxembourg Wolverhampton, United Kingdom Barcelona, Spain SimCorp Iberia S.L. SimCorp Italiana S.r.l. SimCorp Sp z.o.o. 3,000 Milan, Italy 2,100,000 5,000 Warsaw, Poland SimCorp Gain S.C.A. SimCorp Japan KK Luxemburg, Luxemburg Tokio, Japan 44,636 1 SimCorp Benelux SA/NV has branches in the Netherlands, Luxembourg and France. SimCorp Ltd. has a branch in the United Arab Emirates and in Azerbaijan. SimCorp Sverige AB has a branch in Finland. SimCorp USA Inc. has a branch in Canada. SimCorp Coric Ltd. has a 100% owned subsidiary in the USA, SimCorp Coric Inc. SimCorp Italiana S.r.l. has a 100% owned subsidiary in France, APL Ville S.r.l. and a 100% owned subsidiary in Italy, Soﬁa Online S.r.l. SimCorp Singapore has a 100% owned branch in Thailand (closed as of June 30, 2019). SimCorp Gain S.C.A has 100% owned subsidiaries in Luxemburg, Switzerland, Austria, the USA and United Kingdom. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 92 FINANCIAL STATEMENTS OF SIMCORP A/S SECTION 3 EMPLOYEES SECTION 6 FINANCING ITEMS 93 Income statement 93 Statement of comprehensive income 94 Cash ﬂow statement 95 Statement of ﬁnancial position 96 Statement of changes in equity 97 Notes 102 3.1 Employee cost 103 3.2 Provisions 109 6.1 Financial assets and liabilities 110 6.2 Financial income and expenses SECTION 4 TAX SECTION 7 OTHER DISCLOSURES SECTION 1 BASIS OF PREPARATION 104 4.1 Income tax 105 4.2 Deferred tax 111 7.1 Related party transactions 111 7.2 Auditors’ remuneration 112 7.3 Contingent liabilities and other ﬁnancial liabilities 97 1.1 Accountingpolicies,estimates, and judgments 112 7.4 Events after statement of ﬁnancial position date SECTION 5 INVESTED CAPITAL SECTION 2 REVENUE AND CLIENTS 106 5.1 Investmentsinassociatesand subsidiaries 98 2.1 Revenue 98 2.2 Future performance obligations 99 2.3 Contract balances 101 2.4 Receivables 106 5.2 Intangible assets 107 5.3 Property, plant, and equipment MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL STATEMENTS OF SIMCORP A/S 93 FINANCIAL STATEMENTS OF SIMCORP A/S INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME EUR ’000 Note 2020 2019 EUR '000 Note 2020 2019 Revenue 2.1 235,572 69,902 235,780 69,198 Proﬁt for the year 88,664 95,985 Cost of sales 3.1,3.2,5.2,5.3 Other comprehensive income Gross proﬁt 165,670 30,650 58,210 12,795 35,449 166,582 31,172 59,304 12,291 32,176 Items that will not be reclassiﬁed subsequently to the income statement: Other operating income Research and development costs Sales and marketing costs Administrative expenses Foreign currency translation diﬀerences for foreign operations 813 813 -86 -86 3.1,3.2,5.2,5.3 3.1,3.2,5.2,5.3 3.1,3.2,5.2,5.3 Other comprehensive income after tax Total comprehensive income 89,477 95,899 Operating proﬁt (EBIT) Financial income 89,866 25,228 6,991 93,983 25,165 740 Proposed distribution Dividends 6.2 6.2 40,125 49,352 39,919 55,980 Financial expenses Transferred to retained earnings Proﬁt before tax Tax on the proﬁt for the year 108,103 19,439 118,408 22,423 89,477 95,899 4.1 Proﬁt for the year 88,664 95,985 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL STATEMENTS OF SIMCORP A/S 94 FINANCIAL STATEMENTS OF SIMCORP A/S CASH FLOW STATEMENT EUR ’000 Note 2020 2019 Proﬁt for the year 88,664 4,456 -25,228 6,991 95,985 4,411 -25,165 740 Amortization and depreciation Financial income 5.3 6.2 6.2 4.1 Financial expenses Tax on proﬁt for the year Other included in operating income Adjustment share-based remuneration Changes in provisions 19,439 162 22,423 34 10,997 -2,099 -2,817 -19,396 309 10,243 2,586 -2,029 -39,397 683 Changes in contract assets Changes in working capital Financial income received Financial expenses paid Income tax paid -400 -457 4.1 -11,233 -15,691 Net cash from operating activities 69,845 54,366 Investment in subsidiaries, net 5.1 5.3 6.1 6.2 6.2 -1,100 -1,637 -404 -61,089 -803 133 Purchase of property, plant, and equipment Sale and purchase of ﬁnancial assets, net Dividends from associates 41 41 Dividends from subsidiaries 24,878 23,898 Net cash used in investing activities 21,778 -37,820 Dividends paid -39,879 -10,006 -3,672 - -35,881 -12,488 -3,379 Purchase of treasury shares Repayment of lease liability Loan proceeds 5.3 40,000 -20,000 Loan repayment -20,000 Net cash used in ﬁnancing activities Change in cash and cash equivalents -73,557 18,066 -31,748 -15,202 Cash and cash equivalents at January 1 8,552 23,683 Foreign exchange adjustment of cash and cash equivalents -35 71 Cash and cash equivalents at December 31 26,583 8,552 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL STATEMENTS OF SIMCORP A/S 95 FINANCIAL STATEMENTS OF SIMCORP A/S STATEMENT OF FINANCIAL POSITION DECEMBER 31 EUR ’000 Note 2020 2019 EUR ’000 Note 2020 2019 ASSETS LIABILITIES AND EQUITY Share capital 5,441 219,738 40,125 5,441 167,800 39,919 Software 121 121 264 Retained earnings Proposed dividends Total intangible assets 5.2 5.3 264 Leasehold 24,026 323 26,165 819 Total equity 265,304 213,160 Technical equipment Lease liabilities Deferred tax Provisions 5.3 4.2 3.2 20,749 19,121 2,232 23,277 14,550 4,384 Other equipment, ﬁxtures, ﬁttings and prepayments 1,372 763 Total property, plant, and equipment 25,721 27,747 Investments in subsidiaries Investments in associates Other ﬁnancial assets Deposits 5.1 5.1 6.1 6.1 137,825 157 136,167 157 Total non-current liabilities 42,102 42,211 Bank loan / revolving credit facility Lease liabilities - 3,135 2,180 11,330 7,184 25,464 1,169 113 20,000 3,324 1,014 10,193 6,630 17,619 - 404 - 5.3 2.3 1,441 1,436 Prepayments from clients Debt to subsidiaries Trade payables Total other non-current assets Total non-current assets 139,827 165,669 137,760 165,771 Receivables 2.4 150,973 10,566 - 127,494 7,774 991 Other payables Contract assets 2.3 Income tax payables Provisions 3.2 53 Income tax receivables Prepayments 4,190 26,583 3,622 8,552 Total current liabilities Total liabilities 50,575 92,677 58,833 101,044 314,204 Cash and cash equivalents Total current assets Total assets 192,312 357,981 148,433 314,204 Total liabilities and equity 357,981 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | FINANCIAL STATEMENTS OF SIMCORP A/S 96 FINANCIAL STATEMENTS OF SIMCORP A/S STATEMENT OF CHANGES IN EQUITY Proposed dividends for the year Share capital Share Premium Retained earnings EUR '000 Total 2020 Equity at January 1 5,441 - - - 167,800 88,664 812 39,919 213,160 88,664 812 Net proﬁt for the year - - - - Total other comprehensive income Total comprehensive income for the year - - 89,476 - 89,476 Transactions with owners Dividends paid to shareholders Share-based payment - - - - - - - - - - 40 10,997 1,556 -39,919 -39,879 10,997 1,556 -10,006 - - Tax, share-based payment Purchase of treasury shares Proposed dividends to shareholders - - -10,006 -40,125 40,125 Equity at December 31 5,441 - 219,738 40,125 265,304 2019 Equity at January 1 Reclassiﬁcation 5,441 9,963 102,139 9,963 35,934 153,477 - -9,963 - - Adjusted balance at January 1 Net proﬁt for the year 5,441 - - - 112,102 95,985 -86 35,934 153,477 95,985 -86 - - - - Total other comprehensive income Total comprehensive income for the year Transactions with owners - - 95,899 - 95,899 Dividends paid to shareholders Share-based payment - - - - - - - - - - 53 10,243 1,910 -35,934 -35,881 10,243 1,910 -12,488 - - Tax, share-based payment - - Purchase of treasury shares Proposed dividends to shareholders -12,488 -39,919 39,919 Equity at December 31 5,441 - 167,800 39,919 213,160 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 1 97 SECTION 1 BASIS OF PREPARATION 1.1 ACCOUNTING POLICIES, ESTIMATES, AND JUDGMENTS GENERAL The accounting policies are the same as for the consolidated ﬁnancial statements, with exceptions described below. For a description of the accounting policies of the Group, please refer to the consolidated ﬁnancial statements. FINANCIAL ASSETS NEW FINANCIAL REPORTING STANDARDS NOT YET ADOPTED SimCorp A/S is a public limited company based in Denmark. The Annual Report for the period January 1 – December 31, 2020 includes the ﬁnancial statements of SimCorp A/S, the Parent company. Investments in subsidiaries and associates are measured at cost in the Parent company’s ﬁnancial statements. A number of new standards and interpre- tations not applicable/mandatory for the preparation of the 2020 annual report have been published. The Parent expects to implement the new applicable and approved, not yet eﬀective accounting standards and interpretations, as they take eﬀect. OTHER OPERATING INCOME Other operating income comprises income of a secondary nature relative to the activities of the Parent, including gains on the sale of intangible assets and property, plant, and equipment and income from subsidiaries for delivered services. STATEMENT OF COMPLIANCE FOREIGN CURRENCY TRANSLATION Foreign exchange adjustments of intra-group accounts are recognized in the income statement in SimCorp A/S’ ﬁnancial state- ments. Foreign exchange adjustments of intra-group accounts between SimCorp A/S and subsidiaries are considered part of the net investment in the subsidiaries concerned. Settlement of intra-group balances con- sidered part of the net investment are not, per se, considered a partial divestment of a subsidiary. SimCorp A/S ﬁnancial statements are present- ed in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU and additional requirements in the Danish Financial Statements Act. None of the other changed standards or interpretations are expected to have sig- niﬁcant monetary eﬀect on the statements of the Parent’s results, assets and liabilities or the equity. RISK The ﬁnancial statements are presented in EUR, which is the presentation currency of the activities of the Parent, rounded to the nearest EUR 1,000. The functional currency of the Parent company SimCorp A/S is DKK. For information on risk refer to note 6.2 of the consolidated ﬁnancial statements and overview of risk factors in “Risk management”, pages 24-26. Accounting policies are unchanged from last year. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 98 SECTION 2 REVENUE AND CLIENTS 2.1 REVENUE 2.2 FUTURE PERFORMANCE OBLIGATIONS The transaction price allocated to perfor- Management expects that EUR 10.4m (2019: EUR 8.7m in 2020) of the amount allocated to the future contract obligations as of Decem- ber 31, 2020 will be recognized during 2021. EUR 18.4m (2019: EUR 16.3m) is expected to be recognized as revenue within 2 to 5 years. REVENUE mance obligations that are unsatisﬁed or partially unsatisﬁed as at December 31, 2020, is EUR 28.8m (2019: EUR 25.1m). This amount mostly comprises obligations to provide software updates and support, agreements which require client acceptance of functional- ity, and support or hosting subscriptions and support, as the respective contracts typically have durations of multiple years. EUR '000 2020 2019 Licenses - initial sales 17,377 43,913 122,141 29,291 22,850 32,631 31,067 121,086 34,557 16,439 Licenses - additional sales Software updates and support Professional services Hosting and other fees For accounting policies, estimates and judgments, please refer to the consolidated ﬁnancial statements note 2.3. Total revenue 235,572 235,780 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 99 2.3 CONTRACT BALANCES Contract balances consist of client-related assets and liabilities. For accounting policies, estimates and judgments please refer to the consolidated ﬁnancial statements note 2.4. Contract assets relate to the Parent rights to consideration for software licensed to clients under subscription agreements with future payments, when that right is conditional on SimCorp’s future performance. Signiﬁcant changes in contract assets and liabilities during the period are presented below. Contract liabilities represent mainly prepay- ments from clients for unsatisﬁed or partially satisﬁed performance obligations in relation to licenses, software updates and support, and services. Software updates and support and hosting billing generally occur at periodic intervals (e.g. quarterly or yearly) prior to revenue recognition, resulting in contract liabilities. CHANGES IN CONTRACT ASSETS Invoiced from opening balance Opening Net additions Adjust- ments1 Closing balance EUR '000 balance 2020 Contract asset (gross) Loss allowance 7,788 -14 4,847 -2 -2,140 87 - 10,582 -16 - Contract asset (NPV) 7,774 4,845 -2,140 87 10,566 The majority of licenses agreements is revenue recognized in the year of sale. However, contracts with functionality gaps or acceptance criteria may have revenue recognition deferred, resulting in a contract liability when billing has occurred. 2019 Contract asset (gross) Loss allowance 6,254 3,054 -1,334 -186 7,788 -14 -19 5 - - Contract asset (NPV) 6,235 3,059 -1,334 -186 7,774 1 Adjustments include: reclassiﬁcations, foreign exchange adjustments, cumulative catch-up adjustments (including those arising from change in measurement of progress, change in estimate of transaction price and contract modiﬁ- cations), change in time frame for a right to consideration to become unconditional or for a performance obligation to be satisﬁed. Contracts in progress relating to ﬁxed fee professional services are measured at the estimated sales value of the proportion of the contract completed at the statement of ﬁnancial position date. Amounts invoiced on account in excess of work completed are included in prepayments under current liabilities. Contract assets are expected to be realized within the Parent’s normal operating cycle, 33.3% (2019: 34.5%) of it is expected to be realized within the next twelve months, 66.7% (2019: 65.5%) within the next 2 to 5 years. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 100 2.3 CONTRACT BALANCES (CONTINUED) CHANGES IN CONTRACT LIABILITIES Revenue recognized Net from opening Opening balance Closing balance EUR '000 additions balance Adjustments 2020 Contract liabilities - licenses - 36 321 524 552 96 - -36 - - 321 524 Contract liabilities - software updates and support Contract liabilities - services 938 40 -257 -38 4 - 1,237 98 Contract liabilities - other Contract liabilities (prepayments from clients) 1,014 1,493 -331 4 2,180 2019 Contract liabilities - licenses 1,008 43 - 36 -1,008 -43 - - - - - 36 Contract liabilities - software updates and support Contract liabilities - services 490 108 608 8 -160 -76 938 40 Contract liabilities - other Contract liabilities (prepayments from clients) 1,649 652 -1,287 - 1,014 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 2 101 2.4 RECEIVABLES ACCOUNTING POLICY An expected loss rate of 0.04% - 1.04% is applied, unchanged from 2019, based on corporate investment grade 1-year average default rates by region as published by Standard & Poor. When estimating expected credit loss on receivables from subsidiaries, the three-stage approach is applied while making use of the exception for low credit risk ﬁnancial assets. RECEIVABLES EUR '000 2020 2019 Trade receivables from clients Accrued revenue 4,360 4,419 -6 4,797 4,145 -4 Loss allowance Receivables from subsidiaries 141,416 117,569 Other receivables 784 987 Total receivables at December 31 150,973 127,494 The aging of trade receivables from clients was at December 31: Not due 2,903 1,132 216 4,048 184 Not more than 30 days More than 30 days but not more than 90 days More than 90 days 411 109 154 Total trade receivables from clients 4,360 4,797 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 102 SECTION 3 EMPLOYEES EMPLOYEE COSTS EUR '000 2020 2019 Salaries 66,062 1,696 8,739 169 66,588 1,641 8,193 162 3.1 EMPLOYEE COSTS Deﬁned contribution pension plans Share-based payments Remuneration of the Executive Management Board and Board of Directors is given on the remuneration report. For additional disclosures on share-based remuneration refer to note 3.2 of the consolidated ﬁnancial statements. Social security costs Total employee costs 76,666 76,584 Number of employees at the end of the period Average number of employees 574 550 574 527 Remuneration to the Executive Management Board and Board of Directors is given below: REMUNERATION TO EXECUTIVE MANAGEMENT BOARD AND BOARD OF DIRECTORS EUR '000 2020 2019 Salaries 2,177 166 1,935 137 Other beneﬁts Share-based payment Performance-related bonus 2,027 1,118 1,741 1,496 Executive management board total 5,488 5,309 Board fees 406 95 406 88 Fees for committee work Travel allowance 3 83 Share-based payment 248 242 Board of directors total Total 752 819 6,240 6,128 The Executive Management Board (EMB) consists of four members. The fourth member of the EMB joined on August 1, 2019, and 2019 therefore only includes ﬁve months remuneration for one member of the EMB. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 3 103 3.2 PROVISIONS Holiday allowances contain the provision for PROVISIONS holiday allowance required by the Danish Holiday Act. Provisions used during the year relate to the balance moved to current liabilities as amount to be paid in 2021. Re- establishment costs for Holiday allowance rented premises Anniversary bonuses EUR '000 Total Re-establishment provisions cover the costs of restoring leasehold premises. 2020 Liability at January 1 2,291 10 618 2 1,528 6 4,437 18 Foreign exchange adjustment Used during the year Provisions for anniversary bonuses result from the Company’s commitment of one month’s pay in connection with employees’ 25th and 40th anniversaries. -6,526 - - -49 -48 252 -6,575 -48 Reversal of unused liabilities Provisions for the year - 4,225 36 4,513 Total provisions - 656 1,689 2,345 Expectedduedatesforprovisions: Falling due within 1 year - - - - - 113 611 965 113 611 Falling due within 2 to 5 years Falling due after 5 years 656 1,621 Total provisions - 656 1,689 2,345 2019 Liability at January 1 - 612 1,239 -23 1,851 -23 Used during the year - - - - Reversal of unused liabilities Provisions for the year -57 -57 2,291 6 369 2,666 Total provisions 2,291 618 1,528 4,437 Expected due dates for provisions: Falling due within 1 year - 2,291 - - - 53 550 925 53 2,841 1,543 Falling due within 2 to 5 years Falling due after 5 years 618 Total provisions 2,291 618 1,528 4,437 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 4 104 4.1 INCOME TAX SECTION 4 TAX INCOME TAX SimCorp A/S’ income taxes amount to EUR 19.4m relative to EUR 22.4m in 2019. Income tax has decreased due to a lower proﬁt compared with 2019. EUR '000 2020 2019 Tax for the year: Tax on proﬁt 19,439 19,439 22,423 22,423 Total tax SimCorp A/S’ eﬀective tax rate has decreased from 18.9% to 18.0% primarily due to an increased R&D tax deduction in 2020. Tax on proﬁt for the year breaks down as follows: Current tax 14,767 4,816 -144 14,796 7,816 -189 Deferred tax Prior-year adjustments Total tax on proﬁt for the year Tax paid during the year 19,439 11,233 22,423 15,691 The Danish corporate tax rate was 22% in 2020, compared to 22% in 2019. Tax on proﬁt for the year breaks down as follows: Tax calculated on the year's pre-tax proﬁt, 22% (2019: 22%) Dividends from subsidiaries and associates Tax eﬀect: 23,779 -5,483 26,052 -5,267 Deferred tax has changed from EUR 14.6m in 2019 to EUR 19.1m in 2020, which mainly relates to increases in deferred tax on contract assets. Non-taxable income -2,537 1,240 2,440 -1,557 1,365 1,830 Non-deductible expenses Other, including prior-year adjustments For accounting policies, estimates, and judgments, please refer to Section 4 of the consolidated ﬁnancial statements. Total tax on proﬁt for the year Eﬀective tax rate 19,439 18.0% 22,423 18.9% MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 4 105 4.2 DEFERRED TAX DEFERRED TAX Recog- nition in proﬁt Foreign exch. adj. Recog- nition in December equity Balance DEFERRED TAX Balance EUR '000 2020 2019 EUR'000 January 1 and loss 31 Net deferred tax (liability)/asset at January 1 Foreign exchange adjustment -14,550 -67 -7,753 6 2020 Intangible assets -58 - 31 - - -27 Adjustment of deﬀerred tax, proﬁt and loss Prior-year adjustment, proﬁt and loss Adjustment of deferred tax, equity -4,816 -104 -7,816 -46 Property, plant and equipment, owned 360 1 -84 277 416 1,059 Property, plant and equipment, right-of-use Net deferred tax (liability)/asset at December 31 -19,121 -14,550 -5,726 -19,859 731 -23 -88 2 654 -5,014 -44 - -5,095 -24,961 689 Recognized in the statement of ﬁnancial position as follows: Deferred tax liabilities Contract assets - -19,121 -19,121 -14,550 -14,550 Lease liabilities, current Current liabilities - 1,043 5,121 460 4 -71 - - 976 Net deferred tax (liability)/asset at December 31 Lease liabilities, non-current Provisions, non-current Share-based payment 20 2 -576 29 4,565 491 - 3,378 15 155 416 3,964 Total -14,550 -67 -4,920 416 -19,121 2019 Intangible assets -95 - - 37 - - -58 Property, plant and equipment, owned 399 -39 360 Property, plant and equipment, right-of-use - -11,373 - 3 8 -5,729 -8,494 731 - -5,726 -19,859 731 Contract assets - Lease liabilities, current Current liabilities - - 820 -1 - 224 - 1,043 5,121 460 Lease liabilities, non-current Provisions, non-currrent Share-based payment - 5,121 64 - - 399 -3 -1 2,097 223 1,059 3,378 Total -7,753 6 -7,863 1,059 -14,550 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 106 SECTION 5 INVESTED CAPITAL 5.1 INVESTMENTS IN ASSOCIATES AND SUBSIDIARIES 5.2 INTANGIBLE ASSETS The Parent accounts for its investments in subsidiaries and associates at cost. Additions to investments in subsidiaries relate to the acquisition of SimCorp Gain and subsequent capital injections. For a description of the accounting policies, please refer to the consolidated ﬁnancial statements note 5.2. Please refer to note 7.6 in the consolidated ﬁnancial statements for a list of subsidiaries. INTANGIBLE ASSETS - SOFTWARE EUR '000 2020 2019 INVESTMENT IN ASSOCIATES Cost at January 1 Foreign exchange adjustment Disposals 8,017 10,551 -5 EUR '000 2020 2019 33 - Cost at January 1 157 157 -2,529 Cost at December 31 157 157 Cost at December 31 8,050 8,017 Carrying amount at December 31 157 157 Depreciation at January 1 Foreign exchange adjustment Depreciation 7,753 32 10,120 -4 144 - 155 INVESTMENTS IN SUBSIDIARIES Disposals -2,518 EUR '000 2020 2019 Depreciation at December 31 7,929 121 7,753 264 Cost at January 1 Foreign exchange adjustment Additions 136,167 558 75,102 -24 Carrying amount at December 31 1,100 61,089 AMORTIZATION Cost at December 31 137,825 137,825 24,878 136,167 136,167 23,898 EUR ‘000 2020 2019 Carrying amount at December 31 Dividends received Cost of sales 27 73 9 29 79 9 Research and development costs Sales and marketing costs Administrative expenses 35 38 Total amortization 144 155 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 107 5.3 PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment total For a description of the accounting policies, please refer to the consolidated ﬁnancial statements note 5.3. Lease liabilities, amounts recognized to the income statement and amounts recognized in the statement of cash ﬂow are presented below. PROPERTY, PLANT, AND EQUIPMENT Technical equipment Other equipment, ﬁxtures, ﬁttings and prepayments Leasehold Right -of-use Improvement EUR '000 Right-of-use Owned Right-of-use Owned 2020 Cost at January 1 Foreign exchange adjustment Additions 29,218 119 360 - 2,137 9 772 3 6,565 27 325 1 2,824 11 41,841 170 536 -113 172 -873 72 143 -54 1,029 -1,259 2,312 -2,751 Disposals -452 Cost at December 31 29,697 2,569 74 6,212 415 2,605 41,572 Depreciation at January 1 Foreign exchange adjustment Depreciation 3,053 13 2,137 9 515 2 6,003 25 107 - 2,279 9 14,094 58 3,091 - 50 368 -873 375 149 -12 279 4,312 -2,613 Disposals -113 -452 -1,163 Depreciation at December 31 6,157 2,083 12 62 5,951 261 244 1,404 1,201 15,851 25,721 Carrying amount at December 31 23,540 486 171 2019 Cost at January 1 Adjustment IFRS 16 adoption Foreign exchange adjustment Additions - 28,466 -9 3,745 - - 7,131 - - 210 - 3,286 14,162 29,448 -15 772 - -1 -1 - - - - -4 149 612 - - 206 - 151 - 597 - 1,103 - Transfers -612 -995 Disposals -768 -36 -1,058 -2,857 Cost at December 31 29,218 2,137 772 6,565 325 2,824 41,841 Depreciation at January 1 Foreign exchange adjustment Depreciation - 3,133 -1 - - 6,277 -14 - - 3,278 -1 12,688 -16 - 3,053 - - 515 - 508 120 -13 60 4,256 -2,834 Disposals -995 -768 -1,058 Depreciation at December 31 3,053 2,137 515 6,003 562 107 218 2,279 14,094 27,747 Carrying amount at December 31 26,165 - 257 545 Depreciation period Up to 10 years Up to 3 years Up to 5 years MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 5 108 5.3 PROPERTY, PLANT, AND EQUIPMENT (CONTINUED) DEPRECIATION AMOUNTS RECOGNIZED IN INCOME STATEMENT EUR ‘000 2020 2019 EUR '000 2020 2019 277 Cost of sales 823 2,186 267 796 2,190 248 Interest on lease liabilities 254 Research and development costs Sales and marketing costs Administrative expenses Variable lease payments not included in the measurement of lease liabilities 44 9 51 117 Expenses related to short-term lease 1,036 1,022 Total recognized in proﬁt and loss 307 445 Total depreciation 4,312 4,256 AMOUNTS RECOGNIZED IN THE STATEMENT OF CASH FLOW EUR '000 LEASE LIABILITIES 2020 3,672 3,672 2019 3,379 3,379 EUR '000 2020 2019 Payable within 1 year Payable within 2 to 5 years Payable after 5 years 3,352 11,789 9,719 3,568 11,698 12,547 Repayment of lease liability Total recognized in statement of cash ﬂow Total undiscounted lease liabilities 24,860 23,884 27,813 26,601 Total lease liabilities included in the statement of ﬁnancial position Current 3,135 3,324 Non-current 20,749 23,277 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 109 SECTION 6 FINANCING ITEMS 6.1 FINANCIAL ASSETS AND LIABILITIES All ﬁnancial assets and liabilities are measured at amortized cost. The carrying amount of these approximate fair value. Financial assets which have been modiﬁed or renegotiated during the period are assessed individually for impairment. Deposits are primarily related to leasing of FINANCIAL LIABILITIES Borrowings oﬃces. Security deposits which will not be returned within one year of the statement of ﬁnancial position date are recognized as non-current assets. Commitments which require a deposit will initially be recorded to the deposit asset account, if the deposit is not recovered it is charged to the income statement. Financial liabilities comprise lease liabilities of EUR 23.9m (2019: EUR 26.6m), borrowings of nil (2019: EUR 20m), and trade payables and other payables of EUR 32.6m (2019: EUR 24.2m). Debt is initially recognized at fair value less transaction cost. Fair value does not materially diﬀer from carrying amount since interest payable is close to current market rates. For addition information on borrowings refer to note 6.3 in the consolidated ﬁnancial statements. FINANCIAL ASSETS Lease liabilities Financial assets comprise deposits of EUR 1.4m (2019: EUR 1.4m), receivables of EUR 151.9m (2019: EUR 127.5m), and cash and cash equivalents of EUR 26.9m (2019: EUR 8.5m). For addition information on receivables refer to note 2.4. Lease liabilities arise from the adoption of IFRS 16. For additional information refer to note 5.3 Trade payables and other payables Other ﬁnancial assets comprise investments in shares of unlisted entities. Other payables include bonus and commis- sion accruals, vacation pay obligations, payroll taxes and VAT. Payables are measured at cost. DEPOSITS EUR '000 2020 2019 Cost at January 1 Foreign exchange adjustment Additions 1,436 1,569 - 5 6 10 Disposals -6 -143 Carrying amount at December 31 1,441 1,436 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 6 110 6.2 FINANCIAL INCOME AND EXPENSES FINANCIAL INCOME EUR '000 2020 2019 Interest income, subsidiaries 306 580 103 Interest income, ﬁnancial assets carried at amortized cost Dividends from subsidiaries 3 24,878 41 23,898 41 Dividends from associates Foreign exchange gains, net - 543 Total ﬁnancial Income 25,228 25,165 FINANCIAL EXPENSES Interest expenses, subsidiaries 80 258 54 145 - Interest expenses, ﬁnancial liabilities carried at amortized cost Interest expenses, ﬁnancial assets carried at amortized cost Interest expenses, lease 239 277 6 254 7 Interest expenses, reestablishment Other ﬁnancial expenses 8 73 - Foreign exchange losses, net 6,330 Total ﬁnancial expenses 6,991 740 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 111 SECTION 7 OTHER DISCLOSURES 7.1 RELATED PARTY TRANSACTIONS 7.2 AUDITORS’ REMUNERATION For the Parent company, in addition to trans- actions with other related parties depicted in note 7.2 of the consolidated ﬁnancial interests are shown in note 7.6 of the consoli- Audit fees include the audit of the Parent company’s ﬁnancial statements, including implementation of audit standard ISA540. dated ﬁnancial statements. statements, related parties also comprise subsidiaries and associates in which SimCorp A/S has a controlling or signiﬁcant inﬂuence. Interest on outstanding balances with subsidiaries and associates is speciﬁed in note 6.2 in the ﬁnancial statements of the Parent company. In 2020, the Parent company has received dividends of EUR 24.9m (2019: EUR 23.9m) from subsidiaries and dividends of EUR 0.04m from associates (2019: EUR 0.04m). AUDITORS' REMUNERATION EUR '000 2020 2019 Audit fees 157 - 186 25 The Parent company’s outstanding balance with subsidiaries comprises receivables of EUR 141.4m (2019: EUR 117.6m) and payables of EUR 11.3m (2019: EUR 10.2m). Tax and VAT advice fees Other service fees 16 15 Total 173 226 22% 10% Non-Audit Services (NAS)/Audit fee ratio Balances with subsidiaries and associates comprise ordinary trade balances relating to the purchase and sale of services. Outstand- ing balances carry interest and are subject to terms and conditions identical to those made with the Parent company’s and the Group’s clients and suppliers. The Parent company has provided delivery bonds to certain clients of its subsidiaries, and the Parent company has issued letters of support to certain subsidiaries, see note 7.4. Trading with subsidiaries and associates is conducted on arm’s length terms. Ownership TRADING WITH SUBSIDIARIES AND ASSOCIATES EUR '000 2020 2019 Purchases of services from subsidiaries Purchases of services from associates Sale of services to subsidiaries 58,514 719 53,174 552 220,152 220,321 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | NOTES SECTION 7 112 7.3 CONTINGENT LIABILITIES 7.4 EVENTS AFTER AND OTHER FINANCIAL LIABILITIES STATEMENT OF FINANCIAL POSITION DATE As part of building long-term client relation- ships, the company has made a commitment to, in some contracts, provide SimCorp Dimension product supports for up to ten years from the date of the contract. The Parent company is party to legal proceed- No material events have occurred after December 31, 2020 that have consequences for the Annual Report 2020. ings and inquiries from authorities when inves- tigating various issues. The outcome of such is not expected to have a signiﬁcant eﬀect on proﬁt for the year and the assessment of the company’s ﬁnancial position. SimCorp A/S has issued guarantees for its subsidiaries’ delivery commitments to clients for a total of EUR 46.5m (2019: EUR 66.8m). In 2019, SimCorp reported contingent liability related to SimCorp A/S and the so called “ATP-ruling” related to possible VAT exemp- tion for certain pension services. The Parent company expects to issue letters of support to certain subsidiaries. On July 22, 2020, the Danish Tax Agency (Skattestyrelsen) came to the ﬁnal conclusion that SimCorp’s products and services are subject to VAT. The Parent company has provided guarantee for credit facilities totalling EUR 4.4m to certain subsidiaries. Bank guarantees have been provided for rent commitments in Australia, Belgium, France, Germany, Luxembourg, and USA. On this basis, SimCorp does not expect any contingent liability and therefore no eﬀect on proﬁt for the year and the assessment of the Group’s ﬁnancial position and accordingly, SimCorp has not made a provision for this in its annual accounts 2020. MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SIMCORP A/S SIMCORP ANNUAL REPORT 2020 | ADDRESSES 113 ADDRESSES SIMCORP CORPORATE HEADQUARTERS SIMCORP GMBH SIMCORP IBERIA S.L. Travessera de Gracia no. 11 Barcelona 08021 SIMCORP CORIC LTD. PB Building The Development Centre University of Wolverhampton Science Park, Glaisher Drive Wolverhampton SIMCORP APAC Justus-von-Liebig-Straße 1 61352 Bad Homburg Germany SIMCORP ASIA PTY. LTD. Level 15, 68 Pitt Street Sydney NSW 2000 Australia SIMCORP A/S Spain Weidekampsgade 16 2300 Copenhagen S Denmark Phone +49 6172 9240-0 Phone: +33 1 5535 5454 SIMCORP ÖSTERREICH GMBH Invalidenstrasse 2, 6th ﬂoor, 1030 Vienna Austria Phone +43 1 5120099 SIMCORP FRANCE S.A.S. 23 rue de Vienne 75008 Paris France Phone +33 1 5535 5454 WV10 9RT West Midlands United Kingdom Phone +61 2 9240 3500 Phone +45 35 44 88 00 SIMCORP HONG KONG LTD. Level 19, Two International Finance Centre, 8 Finance Street, Central, Hong Kong SIMCORP UKRAINE LLC V. Stusa 35–37, 2nd ﬂoor 03142 Kiev Ukraine Phone +380 44 495 86 00 SIMCORP GAIN AUSTRIA GMBH Invalidenstrasse 2, 6th ﬂoor 1030 Vienna Austria Phone: +43 1 5120099 SIMCORP SCHWEIZ AG Sihlquai 253 8005 Zurich Switzerland Phone +41 44 360 59 00 SIMCORP LUXEMBOURG S.A. rue Eugène Ruppert 20 2453 Luxembourg Luxembourg Phone +352 26 49 35 65 Phone: +852 3101 7954 SIMCORP SINGAPORE PTE. LTD. #21-02, Robinson Road 18 Singapore 048547 Singapore Phone +65 6916 0483 SIMCORP SP. Z.O.O Ul. Puławska 182, 3d ﬂoor 02-670 Warsaw Poland Phone: +48 22 104 04 04 SIMCORP NORTH AMERICA SIMCORP USA INC. One State Street Plaza 1 State Street, 29th Floor New York, NY 10004 USA SIMCORP BENELUX SA/NV Building Stéphanie 1 Avenue Louise 143 1050 Brussels Belgium Phone +32 2 213 30 00 SIMCORP LTD. 2nd ﬂoor 100 Wood Street London EC2V 7AN United Kingdom Phone +44 20 7260 1900 SIMCORP JAPAN SIMCORP EUROPE Level 27 Tokyo Sankei Building 1-7-2 Otemachi, Chiyoda-ku 100-0004 Tokyo Japan Phone: +81 3 3242 3263 Phone: +1 212 994 9400 SIMCORP SVERIGE AB Torsgatan 13 111 23 Stockholm Sweden SIMCORP CANADA INC. 100 Wellington Street West TD West Tower, Suite 2204 (PO Box 123) Toronto, Ontario M5K 1H1 Canada SIMCORP NETHERLANDS (Dutch branch of SimCorp Benelux SA/NV) Gustav Mahlerplein 109-111 1082 MS Amsterdam The Netherlands SIMCORP LTD. ABU DHABI World Trade Center, Level 17 The Oﬃce World Trade Center Tower (Arabtec Building), Central Market Al Markaziya, PO Box: 3876 Abu Dhabi Phone: +971 (0)56 640 82 45 Phone +46 8 528 015 00 SIMCORP NORGE AS Biskop Gunnerusgate 14A 0051 Oslo Phone +1 647 591 9200 Phone : +31 (0)20 708 57 64 Norway Phone +47 23 10 41 00 SIMCORP CORIC INC. 100 Summer Street Suite 1950, 19th Floor Boston, MA 02110 USA SIMCORP ITALIANA S.R.L. Via Monferrato, 1 20144 Milano SIMCORP CORIC LTD. 2nd ﬂoor 100 Wood Street London EC2V 7AN United Kingdom SIMCORP FINLAND (Finnish branch of SimCorp Sverige AB) Salomonkatu 17 B 29 00100 Helsinki Italy Phone: +39 02 4855871 Phone: +1 617 588 5141 Phone +44 20 7260 1900 WWW.SIMCORP.COM [email protected] Finland Phone +358 9685 2010 SIMCORP A/S Weidekampsgade 16 2300 Copenhagen S Denmark Phone +45 35 44 88 00 [email protected] www.simcorp.com Company reg. no: 15505281

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