SimCorp — Annual Report 2021

Feb 15, 2022

SIMCORP - 2021 SIMCORP a/sWeidekampsgade162300Copenhagen S4535448800www.simcorp.com155052815299000WVEJNSG42AK882021-01-012021-12-312020-01-012020-12-311871Regnskabsklasse Dhttps://www2.simcorp.com/SustainabilityReport2021https://www2.simcorp.com/SustainabilityReport2021https://www2.simcorp.com/SustainabilityReport2021www.simcorp.com/corporate-governanceÅrsrapport15505281Simcorp A/SWeidekampsgade 162300 København SxWizard version 1.1.1090.0, by EasyX Aps. www.easyx.euRevisionspåtegningGrundlag for konklusionKonklusionhttps://www2.simcorp.com/DataEthicsPolicy202133771231337712315299000WVEJNSG42AK882021-01-012021-12-315299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember5299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember05299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember15299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember25299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember05299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember15299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember25299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember35299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember45299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember55299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember65299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember75299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember85299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember95299000WVEJNSG42AK882020-01-012020-12-315299000WVEJNSG42AK882021-01-015299000WVEJNSG42AK882020-01-015299000WVEJNSG42AK882021-12-315299000WVEJNSG42AK882020-12-315299000WVEJNSG42AK882021-01-01ifrs-full:IssuedCapitalMember5299000WVEJNSG42AK882021-01-01ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000WVEJNSG42AK882021-01-01ifrs-full:RetainedEarningsMember5299000WVEJNSG42AK882021-01-01simcorp:DividendForTheYear5299000WVEJNSG42AK882021-01-012021-12-31ifrs-full:RetainedEarningsMember5299000WVEJNSG42AK882021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000WVEJNSG42AK882021-01-012021-12-31simcorp:DividendForTheYear5299000WVEJNSG42AK882021-12-31ifrs-full:IssuedCapitalMember5299000WVEJNSG42AK882021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000WVEJNSG42AK882021-12-31ifrs-full:RetainedEarningsMember5299000WVEJNSG42AK882021-12-31simcorp:DividendForTheYear5299000WVEJNSG42AK882020-01-01ifrs-full:IssuedCapitalMember5299000WVEJNSG42AK882020-01-01ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000WVEJNSG42AK882020-01-01ifrs-full:RetainedEarningsMember5299000WVEJNSG42AK882020-01-01simcorp:DividendForTheYear5299000WVEJNSG42AK882020-01-012020-12-31ifrs-full:RetainedEarningsMember5299000WVEJNSG42AK882020-01-012020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000WVEJNSG42AK882020-01-012020-12-31simcorp:DividendForTheYear5299000WVEJNSG42AK882020-12-31ifrs-full:IssuedCapitalMember5299000WVEJNSG42AK882020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299000WVEJNSG42AK882020-12-31ifrs-full:RetainedEarningsMember5299000WVEJNSG42AK882020-12-31simcorp:DividendForTheYear5299000WVEJNSG42AK882021-12-31cmn:ConsolidatedMember5299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember05299000WVEJNSG42AK882021-01-012021-12-31cmn:ConsolidatedMember1iso4217:EURiso4217:EURxbrli:shares Annual Report 2021 SimCorp A/S Weidekampsgade 16 2300 Copenhagen S Denmark Company reg. no: 15505281 simcorp.com The world of investment management is defined by ever increasing complexity and pressure to generate alpha. Every day, our clients are faced with new demands, instruments, regulations, and technologies. But the real problem is when the tools and services designed to deal with this rapidly evolving set of challenges introduce yet more fragmentation and complexity. Complexity that ties up resources and prevents clients from reaching their full potential and exploiting new opportunities. That is why the SimCorp platform is designed to empower the world’s institutional investors to simplify their operating models so they can seize opportunities and grow profitably. → Learn more at simcorp.com SimCorp Annual Report 2021 3 Contents 4 — 57 58 — 104 105 — 127 Management report Consolidated financial statements Financial statements of SimCorp A/S 05 06 07 09 12 14 15 18 20 22 23 31 37 39 44 48 51 52 53 54 SimCorp at a glance 060 064 068 077 084 087 093 101 Statements 107 111 112 115 117 119 123 125 Statements Performance and progress CEO and Chairman letter Financial highlights and key figures Market and trends Section 1: Basis of preparation Section 2: Revenue and clients Section 3: Employees Section 1: Basis of preparation Section 2: Revenue and clients Section 3: Employees Section 4: Tax Section 4: Tax Business model Section 5: Invested capital Section 6: Financing items Section 7: Other disclosures Section 5: Invested capital Section 6: Financing items Section 7: Other disclosures Strategy update Case: GAM Investments 2022 outlook Business unit review Financial review 2021 Risk management Case: Danske Bank Asset Management Corporate governance report Shareholder information Board of Directors → Sustainability Report 2021 https://www2.simcorp.com/SustainabilityReport2021 Executive Management Board Group Management Committee Statements and signatures Independent Auditor’s Reports → Remuneration Report 2021 https://www2.simcorp.com/Remunerationreport2021 SimCorp Annual Report 2021 Management report 4 Management report 4 — 57 SimCorp Annual Report 2021 Management report SimCorp at a glance 5 SimCorp at a glance SimCorp offers an industry-leading front-to-back Software as a Service (SaaS) investment management platform and ecosystem, comprising partners, services, consultancy, and third-party connectivity. We offer clients the operating efficiency and flexibility they need to succeed in an increasingly complex world. 1,998 67 +300 employees nationalities across 27 locations clients Revenue and EBIT margin (EURm) 496.3 EURm (2020: 456.0 EURm) (%) 30 500 450 400 350 300 Revenue 2021 28 26 24 22 55.9% ARR as % of revenue 2021 (2020: 55.0%) Annual Recuring Revenue Last Twelve Months (ARR LTM) Other revenue 2020 2021 2017 2018 2019 2020 2021 Revenue (left axis) EBIT margin (right axis) SimCorp Annual Report 2021 Management report Performance and progress 6 Performance and progress SimCorp delivered solid performance and progress on its strategic imperatives in 2021. We achieved our financial guidance for the year, added nine new clients, and strengthened existing client relations. We are well-positioned to continue our growth trajectory in the years ahead. Free cash flow five year development (EUR ‘000) Free cash flow 100 80 60 40 20 Free cash flow1 decreased by EUR 13.2m in 2021 from EUR 91.8m in 2020 to EUR 78.6m. Cash conversion2 was 71% in 2021 compared with 104% in 2020. 1 2 Cash flow from operations reduced by CAPEX and lease payments. Free cash flow divided by profit for the year. 2017 2018 2019 2020 2021 Recurring and non-recurring revenue (EURm) 2021 outlook achieved Everything as a Service (%) 80 26.7% With Annual Recurring Revenue (ARR)3 comprising more than half of total revenue, we are progressing well in our transformation of SimCorp into a technology-enabled service company. ARR constituted 55.9% of total revenue in 2021 compared with 55.0% in 2020 and 48.6% in 2019. 600 450 300 150 0 EBIT margin 60 40 20 0 We delivered on the financial outlook for 2021 and generated revenue growth in local curren- cies of 8.7% (2020: 1.4%) and EBIT margin in local currencies of 26.9% (2020: 27.6%). 3 Annual Recuring Revenue Last Twelve Months. 8.8% Revenue growth Non-recurring revenue (left axis) ARR (left axis) ARR share of revenue (right axis) 2019 2020 2021 7 Strong client traction on cloud and business services Peter Schütze Chair of the Board of Directors SimCorp delivered ARR1 growth of 10.5% in 2021. Despite the continued impact of COVID-19, we expanded our engage- ment with existing clients, added nine2 new clients, and generated revenue of EUR 496.3m, EBIT of EUR 132.4m, and free cash flow of EUR 78.6m. A year in transition has positioned us for a prosperous future as a truly global technology-enabled service company with a highly relevant offering and strong client traction. During 2021, we experienced a rising demand for our Software as a Service (SaaS) offerings and our cloud-based business services. This represents a significant opportunity for us to expand our business as we are increasing the pace of our transformation to a SaaS company. Our services portfolio and its inherent optionality demonstrate a strong fit with the increased focus among institutional investors on their core business processes and their wish to outsource non-differentiating operations. Looking to the future with a successful CEO transition 2021 has in many ways offered the opportunity to reflect on our journey as a company. On September 2, we celebrated our 50th anniversary. The journey from 1971 has taken us far, with many significant milestones to celebrate. But the strongest testament to our success remains our dedicated employees and loyal clients from around the world. The strong partnerships we build and nurture together remain fundamental to our development and growth. Christian Kromann Chief Executive Officer Extending our thanks and sincere gratitude for the successful evolution and growth during Klaus Holse’s nine-year leadership, we look ahead as our fourth CEO 1 2 ARR: Annual Recurring Revenue Last Twelve Months. Four new SimCorp Dimension, two new SimCorp Coric, and three new clients through our existing outsourcing partners. SimCorp Annual Report 2021 Management report CEO and Chairman letter 8 takes the wheel, sharing the same fundamental vision and values as his three predecessors. Christian Kromann brings strong industry knowledge, client focus, and execution power, which are fundamental capabilities to be able to take SimCorp successfully through its current transformation process. Strategy update Thank you During 2021, we made solid progress on our strategic priorities, which have proven to be in alignment with the market trend towards cloud and business service offerings. Our strongly committed and skilled staff remains the foundation that enables us to stay uniquely positioned to achieve sustained long-term growth, while maintaining resilience against the continued challenges caused by COVID-19. We thank everyone at SimCorp for your persistent commitment, true engagement, and relentless hard work. Sharing a genuine passion to never let a client down, every single employee demonstrates daily the culture of our company captured in “the 4Cs”, by being capable, collaborative, and curious, while demonstrating courage. With more than 30 of our clients already running SimCorp Dimension as a Service (SCDaaS), we are well underway on our journey to become a true SaaS company. Going forward, our commitment is to offer a superior SaaS portfolio with immediate access to our expansive ecosystem of innovative offerings and tools. This will give our clients the agility and scalability they need to unlock their growth potential and stay competitive. We also reflect upon 50 years of company history, where our core commitment to our clients remains the same and is captured in our corporate purpose of ‘Enabling a prosperous life in a liveable world’. Our purpose, which continues to drive our business growth, is also what shapes our commitment to making a positive impact in a world faced with imminent challenges. Our appreciation also goes to our shareholders for their support of our strategy and our business partners for their trust and co-operation, all helping us in our efforts to increase our value creation. Last but by no means least, we extend our gratitude to our clients, new as well as existing ones, who have shown their commitment to stay strongly connected despite still challenging times and continue to place their business with SimCorp. New clients Our sustainability promise Despite the headwinds of COVID-19, where we have seen sustained impact throughout the year, we are very happy to welcome six new clients to SimCorp; four SimCorp Dimension clients and two standalone Coric clients. In addition, we welcomed three new clients through our outsourcing partners. We take on the responsibility to embed sustainability across all our business, as everything and everybody count. It is a journey, which starts with a commitment to go beyond what we are required to do. To succeed with this ambition, we have established a Sustainability Committee and a cross- organizational governance structure to ensure transparency and accountability for the targets we set. Distribution of profit In 2021, we paid a dividend of EUR 40.1m, equal to DKK 7.50 per share, and acquired treasury shares for EUR 40.1m. Cloud and other innovative technologies are key enablers of sustainability, which we will leverage and explore to reduce the carbon footprint of our own and our clients’ operations. To help drive positive change in the world, we will provide the quality ESG data and transparency to our clients, which is in higher and higher demand. Based on the financial performance in 2021, the Board of Directors intends to propose to shareholders at the AGM a dividend of EUR 39.9m, equal to DKK 7.50 per share, for the financial year 2021. Furthermore, we plan to initiate a new share buyback program, acquiring treasury shares for a forecast amount of EUR 40.0m in 2022, split into two programs of EUR 20m each. And equally important, as our people are the core of everything we do, we will continue to strive to ensure a truly diverse and inclusive workplace with equal opportunities, and where all find meaning in work. SimCorp Annual Report 2021 Management report Financial highlights and key figures 9 Financial highlights and key figures Revenue (EURm) EUR ’000 2021 2020 2019 2018 2017 Income statement 500 400 300 200 100 Revenue 496,274 147,796 132,417 5,001 455,970 140,390 124,296 -8,200 454,531 142,576 127,824 -23 382,626 109,268 103,345 -809 343,405 92,851 88,894 -1,204 87,690 66,497 Earnings before interest, tax, depreciation, and amortization (EBITDA) Operating profit (EBIT) Financial items, net Profit before tax 137,418 109,992 116,096 88,258 127,801 96,901 102,536 76,971 Profit for the year Statement of financial position Share capital 5,441 323,107 - 5,441 278,250 - 5,441 230,020 20,000 99,557 55,650 81,804 151,774 31,851 437,912 5,441 169,059 - 5,467 116,581 30,000 44,256 5,528 Equity 2017 2018 2019 2020 2021 Bank loan/revolving credit facility Intangible assets Property, plant, and equipment1 92,691 43,692 96,543 221,000 47,692 526,312 95,725 47,650 82,513 175,928 53,051 470,842 40,444 5,377 Reported revenue Revenue signed at Jan 1 for the coming year Receivables 79,165 85,684 47,500 270,267 86,080 49,946 31,412 230,616 Contract assets EBIT (EURm) Cash and cash equivalents Total assets 150 125 100 75 Cash flow Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Free cash flow 90.696 -5,675 -90,996 78,628 -1,259 -5,975 7.4365 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 Investment in property, plant, and equipment Net change in cash and cash equivalents EUR/DKK rate of exchange at December 31 21,642 7.4393 -15,958 7.4697 16,051 7.4673 308 7.4449 50 1 2021, 2020, and 2019 include right-of-use-assets. 2017 2018 2019 2020 2021 SimCorp Annual Report 2021 Management report Financial highlights and key figures 10 Financial highlights and key figures (continued) EUR ’000 2021 2020 2019 2018 2017 EBITDA margin (%) Orders and ARR 32 30 28 26 24 Order book value2 (EUR ’000) Order intake2 (EUR ’000) Annual Recurring Revenue (ARR) Last Twelve Months (EUR ‘000) Financial ratios 72,953 137,604 277,352 56,069 115,102 250,902 38,182 99,679 45,508 105,877 - 24,790 81,821 - 220,943 Revenue growth (%) 8.8 8.7 0.3 -0.1 18.8 15.5 - 11.4 9.5 16.0 10.6 - Organic revenue growth (%) ARR growth (%) 10.5 55.9 29.8 26.7 71.5 44.7 8.9 13.6 55.0 30.8 27.3 104.0 46.6 8.7 - ARR as share of total revenue (%) EBITDA margin (%) 48.6 31.4 28.1 73.3 65.3 9.3 - - 28.6 27.0 104.1 82.4 8.2 27.0 25.9 77.2 107.4 7.6 2017 2018 2019 2020 2021 EBIT margin (%) Cash conversion ROIC (return on invested capital) (%) Receivables turnover ratio Equity ratio (%) 61.4 35.4 59.1 33.4 52.5 46.5 62.6 59.7 50.6 64.5 EBIT margin (%) Return on equity (%) 30 28 26 24 22 Employees Number of employees at year-end Average number of employees – FTE 1,998 1,871 1,901 1,840 1,871 1,703 1,660 1,554 1,547 1,421 2 2019 order book and order intake have been restated to include Subscription Services such as Datacare and Regulatory Reporting Platform (RRP), and 2018 order intake has been restated to include SimCorp Italiana (Sofia). 2017 2018 2019 2020 2021 SimCorp Annual Report 2021 Management report Financial highlights and key figures 11 Financial highlights and key figures (continued) 2021 2020 2019 2018 2017 Earnings per share (EUR) Share performance 4 3 2 1 0 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 (%) 2.76 2.74 2.27 8.11 1.01 7.50 36.4 72.9 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 Total payout ratio (%) Market value ratios 2017 2018 2019 2020 2021 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) 96.12 714.8 11.9 34.8 42.2 40.5 39.9 40.1 3,831 121.72 909.5 17.3 101.41 757.5 17.5 59.67 445.6 14.0 30.9 28.6 40.5 39.5 39.9 2,362 47.46 353.30 16.0 55.2 41.9 28.4 46.2 48.7 33.7 Market capitalization (EURm) Share capital (m) 40.5 40.5 40.7 5,000 4,000 3,000 2,000 1,000 Average number of shares (m) Average number of shares – diluted (m) Market capitalization – EURm 39.7 39.7 39.4 40.0 40.1 39.9 4,826 4,016 1,870 2017 2018 2019 2020 2021 SimCorp Annual Report 2021 Management report Market and trends 12 Market and trends SimCorp market shares (SimCorp Dimension) EMEA 26% 151 of 570 potential clients Total Attractive market drivers Despite the challenges caused by COVID-19, asset managers and asset owners have shown resilience with positive asset growth, and in some segments double-digit growth.1 We expect the industry to continue its growth trajectory in the coming years. In 2021, the EMEA business unit leveraged the good growth opportunities in the market, delivering a solid performance and a high deal closure rate despite COVID-19 and a relative high market penetration. The North American and APAC business units faced headwinds in 2021 from the impact of COVID-19, which caused postponed or longer sales processes. The long-term growth potential in all three regions remains however strong, with SimCorp well positioned to increase its market share. North America 16% 7% Industry consolidation continues as investment managers are pursuing scale benefits to counter increasing costs of technology, cyber security, and regulatory compliance, while simultaneously aiming to increase differentiation. Leading investment managers are sharpening their focus on directly alpha-generating activities through increasing digitalization and cloud-transformation as well as outsourcing of operational responsibility. This focus on simplicity is expected to lead the majority of buy-side companies to significantly increase spend on optimizing/ improving their operating models. 37 of 550 potential clients APAC 1 Latest growth figures available: • • • Global Asset Management: 11% AUM growth to EUR 83.9tn in 2020. Source: BCG, Global Asset Management 2021. Global Institutional Pension Assets: 11% asset growth to EUR 42.7tn in 2020. Source: WTW/Thinking Ahead Institute’s Global Pension Asset Study. Global SWF Assets: 6% asset growth to over EUR 9.3tn in 2021. Source: Global SWF. 11% 207 of 1,300 potential clients 19 of 180 potential clients SimCorp Annual Report 2021 Management report Market and trends 13 Within this attractive market, SimCorp provides highly relevant services and solutions to: The mega trends in global investment management are driving the dynamics of the industry and impacting the market conditions for SimCorp as a vendor in the investment management solutions industry. • Clients looking to retain operational responsibility for most of their technology and business • Firms aiming to externalize operational responsibility for large parts of their business • Asset servicers seeking to leverage a world-class technology platform and selected business services as underlying infrastructure components in their offering. Based on our technology stronghold and continued development of our cloud-based offerings and services, we are well-positioned to meet the accelerating need for technology-driven operating models with solutions that fully address the top priorities of the investment management industry, including: Investment management Mega trends Investment management Industry dynamics SimCorp Market conditions • Low interest environment • Fee and cost pressure • Increase in outsourcing of business operations • Cost savings and cost-efficient automated operations • Cost-effective regulatory compliance • Scalable operating platforms to support growth • Improved, digitized client servicing • Risk management • Investment in multi-asset and ESG capabilities • Growth in passives and alternative investments • Focus on outcome- based, complete, and flexible offers • Control of and easy access to data • Digitalization • Industry consolidation and differentiation • Demand for coverage • Shifts in demographics of all assets classes and client expectations • Increased focus on go-to-market and client experience excellence Market segments • Focus on operational efficiency, time, and cost to client value • Increasing regulatory complexity Asset management Fund management Insurance Treasury • Drive for operating efficiency, data integrity, and transparency Central banks Sovereign wealth Wealth management • Cloud, big data, and automation necessary Asset servicing Life/pension SimCorp Annual Report 2021 Management report Business model 14 Business model SimCorp’s business model is designed to empower global institutional investors to tackle complexity and meet the pressure to generate alpha. Offering scale, efficiency, and choice, all based on a solid data foundation, our business model supports investment decisions via a natively integrated front-to-back platform across all asset classes. Business services Empowered by our technology platform Enhanced and expanded by our partner ecosystem SaaS platform Integrated data & workflows Based on our strong data core Front-to-back coverage across all asset classes SimCorp offers full end-to-end coverage across our clients’ investment management value chain. We support all roles and functions throughout their daily operations from portfolio construction to accounting and reporting. Covering our clients’ value chain end-to-end Data management Investment management Accounting & operations Analysis & reporting Integrated data and workflows SaaS platform Business services Based on a strong data core comprising our market-leading investment book of record (IBOR) and accounting book of record (ABOR), the SimCorp platform solves our clients’ data and integration challenges. Data plays an increasingly important role to provide new insights for investment decisions and process efficiency. We constantly evolve our data management services to replace complexity with simplicity and efficiency for our clients. The move to cloud accelerates, and we see a high demand for cloud-based services – both from new and existing clients. Our cloud-based services are enhanced and expanded through our partner ecosystem, which offers an unparalleled choice of market-leading tools and third-party data and analytics, all seamlessly embedded and integrated into our Open Platform. Our technology-enabled business services help our clients optimize their operations and allow them to focus on value- creation in their core business, while we take responsibility for their non-core business processes. In 2021, our Data Management Services (Datacare), gained momentum, and our portfolio was further strengthened with our Investment Accounting Services. SimCorp Annual Report 2021 Management report Strategy update 15 Strategy update Our strategic achievements have been driven by our ongoing cloud technology transformation and guided by our three strategic imperatives. Based on these imperatives, we continue our efforts to better empower the world’s largest institutional investors to seize opportunities across assets classes, simplify their operating models, and grow profitably. In 2019, we launched our current strategy. Based on our business model, our aim is to provide a more complete offering strongly focused on business outcome and to transform SimCorp into a technology-enabled service company that simplifies our clients’ operations and enables their investments. In 2021, we reached key strategic milestones and accelerated our transformation to a SaaS company. Optionality and simplicity replaces complexity As the market remains defined by ever-increasing complexity, our clients keep facing new opportunities, demands, regulations, and choices. We commit to help tackle the challenges caused by eliminating the obstacles that impede their agility and efficiency. Core to our offering is superior optionality, which in combination with our platform and services have simplicity at its centre. We extend this optionality and simplicity into our clients’ strategy, organization, and operating model, and by taking over and managing their non-core activities, we help them focus on what sets them apart. Strategic imperatives Customer experience leadership We put our clients’ needs and success at the core of our business to constantly deepen our relationship and mutual value creation over time. Deliver Everything as a Service We deliver software and select business processes to generate specific outcomes on behalf of our clients. Our transition to a SaaS company has high traction We are investing in accelerating our Software as a Service (SaaS) transition, which is progressing to plan as demonstrated by several key achievements in 2021. Our SaaS platform is now fully operational with more than 50 SaaS clients in total. Through our partnership with Microsoft, we can now leverage the Azure cloud platform to achieve new levels of scalability. Single-point access to our investment platform provides our clients with immediate access to an expansive ecosystem of innovative offerings and the tools they need to succeed. Offer ecosystem enabled innovation We open our technology platform and business model to exploit third-party innovation, increase development velocity, and expand client access to value creating optionality. SimCorp Annual Report 2021 Management report Strategy update 16 Value creation for our clients and shareholders compliant accounting; analytics and reporting; and advisory services. Business services broaden our total addressable market and will contribute to ARR growth. ARR (EURm) The journey and our transformation will continue in the coming years, as we keep investing in upgrading and scaling our technology platform. We will also continue extending our front-to-back leadership through new cloud-based offerings, while still accommodating those of our clients who continue to operate our software on-premise. (%) 400 100 Tailored organization and stronger ecosystem 300 200 100 0 75 50 25 0 During 2021, we established a dedicated unit with responsibility for the delivery of our cloud-based services to strengthen our SaaS operations and ensure a smooth and simple transition for our clients. The new unit combines capabilities and employees from existing organizational units and will be scaled significantly as the operational backbone of our business going forward. Overall, the positive traction in our strategic transformation positions us well to leverage the strong drivers in our core market and deliver on our financial ambition to generate long-term, double-digit, annual revenue growth, and to gradually increase our profitability margin, recognizing inevitable fluctuations in both revenue growth and profitability margin from year to year due to timing of orders and investments. Ultimately, our strategic transformation and constant focus allows SimCorp to continue to provide persistent shareholder value. Also, we accelerated the efforts to build a stronger ecosystem of partner offerings complementing and enhancing our front office suite with a choice of market- leading tools for alpha generation and decision making. Since Q4 2020, eight new partners joined SimCorp’s Open Platform, designed to democratize access to industry innovation and simplify vendor management for clients. We will continue to develop commercial partnerships with third-party solution providers as a lever to innovate and scale our business, while enabling freedom of choice and offering more value-creating optionality to our clients. 2019 2020 2021 Annual Recurring Revenue (ARR) Last Twelve Months (left axis) ARR in % of revenue (right axis) Testament to the traction of our strategy, we added eight new Dimension-based SaaS clients (SCDaaS) in 2021, of Expanding our SaaS platform with business services Demand for our technology-enabled services is on the rise as our clients focus on their core business and look to simplify and externalize operational responsibility for non-differentiating processes. 75% of SimCorp Dimension clients onboarded in 2021 chose as a Service agreements, and the share of SaaS revenue increased as five existing SimCorp Dimension clients migrated from on-premise installations. which five out of the eight were existing clients moving from an on-premise to a hosted solution. In addition, we saw that our Annual Recurring Revenue (ARR) grew by 10.5% in 2021 and now accounts for 55.9% of total revenue (see bar chart above). → Learn how Qontigo and SimCorp partnered to provide a fully managed portfolio optimization and risk management & modelling service within SimCorp Dimension https://www2.simcorp.com/simcorp-qontigo As an integral part of our strategy, we are enhancing our SaaS offering by delivering business services, leveraging our natively integrated front-to-back technology foundation (See business model page 14). Our Data Management Services (Datacare) gained momentum in 2021 following the build-out and solidification completed in 2020. In 2021, we also launched our Investment Accounting Services, which enable outsourcing of back-office functions by delivering timely, accurate, multi-jurisdictional, and regulatory 57% 89% of buy-side used of buy-side expect to increase their usage over the next three years1 managed services within investment operations and accounting 1 According to Managed Services study conducted by SimCorp in 2021. SimCorp Annual Report 2021 Management report Strategy update 17 Accelerating our transformation While we maintained the overall strategic course in 2021, we have accelerated our transformation into a technology- enabled service company. Expanding and optimizing our SaaS platform Our unique natively-integrated end-to-end technology foundation positions us extremely well to expand the breadth of our SaaS offering. Bringing new cloud offers to market, combined with our focus on automation and operational efficiency, enables us to create more value for clients and ultimately grow annual recurring revenue (ARR) and earnings. Broadening our front-to-back leadership We are solidifying the leading position and competitiveness of our integrated front-to-back, multi-asset investment management platform through the ongoing expansion of our SaaS offering. Growing our ecosystem with more partners and tools We continue building strong partnerships, expanding our ecosystem and offering an unparalleled choice of market- leading tools and third-party data and analytics, all seam- lessly embedded and integrated in our Open Platform. Our clients get easy access to a relevant array of frontier innovation that reflects their operating models, offering the optionality they need to stay differentiated and ahead in the market. In addition, we will continue to build out our functional coverage of the investment value chain as well as the coverage of new instruments and asset classes, with a particular focus on front office, ESG, and cross-asset capabilities. For the majority of our clients, the key question is ‘time to cloud’. Our ability to not only support this migration, but equally accelerate the optimization of our SaaS platform will remain a constant focus for us. Core to our success is the focused execution of a comprehensive API roadmap, enabling an ever-increasing range of access points for partner innovation. As a recent example, we strengthened our offering to clients operating in the growing private market investments space through a partnership with and investment in Domos, which enables us to significantly simplify the management of alternatives in cross-asset portfolios. Further, with our new ESG investing solutions, we are expanding our services to clients, allowing fast and easy access to sustainability performance by integrating sustainability data and KPIs into core investment processes. As such, following the client traction we have achieved, we will continue to expand our portfolio of SaaS offers and take responsibility for delivering an increasing portion of clients’ business processes. As such, we will focus on leveraging the recently established partnerships with Colmore, SIX, Qontigo, Intellibonds, and FundApps – among others – and continue to enter new alliances and embed third-party tools and services to complement and enhance our offering. SimCorp Annual Report 2021 Management report Case: GAM Investments 18 Case: GAM Investments Transparency, efficiency, and growth are key priorities for GAM Investments Managing around CHF 100bn (EUR 96.5bn) of assets, Swiss-based GAM has worked with SimCorp since 2004, and a long-term license agreement with SimCorp allows them to service their clients with a highly streamlined approach. All GAM investment teams are planned to move onto the SimCorp Dimension platform by the end of 2022. He elaborates: “Consolidating our front and middle office systems is an important step towards achieving this. SimCorp is an industry leader, and its single platform solution is uniquely suited to the future direction of GAM and moves GAM’s technology platform to a best-in-class model. Moreover, a single platform ensures that the same datasets are used throughout the investment management value chain, improving data quality, enabling scalability, and reducing the time for onboarding new clients.” In addition to SimCorp Dimension, GAM will also use SimCorp Gain and SimCorp’s Datacare Service for enterprise data management, as well as SimCorp Coric for a new reporting solution. “The complete solution is all about reducing complexity,” says Peter Sanderson, Group CEO. From a vendor perspective, SimCorp CEO, Christian Kromann emphasizes the significance SimCorp Annual Report 2021 Management report Case: GAM Investments of the agreement, as it “highlights several of SimCorps strategic objectives: It is cloud-based, includes multiple services elements, and the client can demonstrate substantial benefits of utilizing our partner ecosystem.” we were able to overcome the challenges we faced, and we both share the same values in efficient delivery for clients. By maintaining strong project governance and continuous, transparent communications, GAM and SimCorp have problem-solved and successfully delivered together. As a team, we always feel aligned and able to navigate the inevitable migration challenges as they occur.” The agreement was entered into right at the start of the COVID-19 pandemic, adding an unforeseen challenge to implementation. A full switch to remote working meant that GAM had to decide as to whether to pause the project or push it forward. Opting for the latter, the project has been delivered in close collaboration between GAM and SimCorp despite the challenges of COVID-19. Using SimCorp Dimension as the foundation across GAM’s entire business, enables the global investment manager to effectively streamline and standardize its operations, and hence focus more on delivering to its clients and growing the business. By reducing the number of systems GAM uses, a higher data quality is implied and therefore a better basis for investment decisions. Peter Sanderson adds that “Due to the strong trusted partnership between GAM and SimCorp, “SimCorp’s single platform solution is uniquely suited to the future direction of GAM and moves GAM’s technology platform to a best-in-class model.” Peter Sanderson Group CEO of GAM Investments SimCorp Annual Report 2021 Management report 2022 outlook In 2022, SimCorp expects revenue growth in local currencies of between 7% and 12%, with an EBIT margin measured in local currencies of between 23.0% and 26.0%. Included in the expected EBIT margin for 2022 is a negative short-term impact of around 2%-points from planned investments in the future, including investments in new SaaS operations and solutions, as well as a higher salary increase in 2022 compared with recent years. In 2022, SimCorp expects Annual Recurring Revenue (ARR) in local currency to grow between 10% and 15%. Financial targets 2022 In local currencies Revenue growth ARR growth 2022 guidance 2021 achieved 7%-12% 10%-15% 8.7% 10.4% 26.9% EBIT margin 23.0%-26.0% 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 31-36 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. Market developments for 2022 experience the highest negative impact from COVID-19 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 management solutions make the company well-positioned for increasing its market share in 2022. restrictions in NA and APAC. SimCorp expects COVID-19 restrictions to be maintained until vaccine programs have been successfully implemented across its markets. In the short term, this leads to some hesitancy in clients’ decision making, thereby causing longer sales processes. We expect the impact of COVID-19 restrictions to continue through Q1 2022, tapering off towards the end of H1 2022 with a normalization not expected before H2 2022. As mentioned on pages 12-13, SimCorp regards the underlying market drivers and trends as attractive. However, in the short-term, SimCorp regards the environment as slightly negative to its business, due to the continued challenges caused by the COVID-19 pandemic. We On the other hand, gauging the input from our clients and global financial outlook reports, one key topic emerges: the need for investment management companies to replace SimCorp Annual Report 2021 Management report 2022 outlook 21 legacy platforms with more efficient, tech-driven, automated solutions. COVID-19 has clearly augmented this need and the persisting demand for lower cost, better data, a more digitized customer experience, and regulatory and ESG compliance. Included in the expected EBIT margin for 2022 is a negative short-term impact of around 2%-points from planned investments in the future, including investments in new SaaS operations and solutions, such as Investment Accounting Services (IAS). The extra demand driven investments in 2022 are expected to lead to additional revenue and higher EBIT margin in coming years. We also expect a higher salary increase in 2022 compared with recent years due to higher inflation and demand for skilled labor. For 2022, SimCorp expects a group effective tax rate of between 23% and 25% compared with a realized effective tax rate of 20.0% in 2021 and 24.0% in 2020. The effective tax rate of 20.0% in 2021 was impacted by refunds of withholding taxes related to prior years, and in 2022 we expect to return to a normal effective tax rate. 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 2022 as described above. For 2022, SimCorp expects a cash conversion of between 70% and 80% compared with a realized cash conversion of 71% in 2021 and 104% in 2020. The lower expected free cash flow is due to the negative impact of increased contract assets following expected higher subscription- based license revenue. Cash conversion is defined as free cash flow divided by profit for the year. In 2022, SimCorp expects Annual Recurring Revenue (ARR) in local currency to grow between 10% and 15%. In addition, SimCorp expects to continue to benefit from new significant deals with existing clients and cross-selling between its core offering SimCorp Dimension and its other integrated solutions for client reporting, data management and investment accounting services. Based on the exchange rates prevailing at the end of January 2022, SimCorp estimates reported revenue to be positively impacted from currency fluctuations by around 1.3% and reported EBIT margin to be positively impacted from currency fluctuations by around 0.2%-points. Income will vary considerably from one reporting period to the next as the timing of license sales by nature varies.ꢀ Revenue and profit outlook for 2022 SimCorp’s ambition is to generate long-term, double-digit, annual revenue growth, and to gradually increase our profitability margin, recognizing inevitable fluctuations in both revenue growth and profitability margin from year to year due to timing of orders and investments. Exchange rate Exchange rate Main currencies EUR per 100 January 31, 2022 Average rates 2021 Average rates 2020 USD CAD AUD SGD GBP CHF NOK SEK 89.64 70.26 63.21 66.18 120.26 96.12 9.99 84.65 67.52 63.39 63.02 116.52 92.60 9.85 87.32 65.03 60.37 63.37 112.47 93.35 9.28 SimCorp entered 2022 with signed revenue for the full year of EUR 323.2m, an increase of EUR 34.0m or 11.8% compared with the beginning of 2021. Based on the current business environment, the signed revenue and current pipeline, SimCorp’s market position, and planned investments, the expectations for 2022 are to grow revenue in local currencies between 7% and 12%, and to generate an EBIT margin measured in local currencies of between 23.0% and 26.0%. 9.53 9.85 9.54 SimCorp Annual Report 2021 Management report Performance and highlights 22 Business unit review EMEA North America APAC SimCorp Sofia Despite the impact of COVID-19, the mature EMEA business unit performed satisfactorily with total revenue increasing by 10% compared with 2020. The growth was primarily driven by strong license sales (both new and additional licenses) and SaaS revenue. Three new SimCorp Dimension clients were signed, all including Coric or Gain solutions as well. Two of the three new SimCorp Dimension clients are running on SimCorp’s SaaS platform. The strong performance demonstrates the EMEA business unit’s ability to gain new clients as well as upsell to existing clients. Two SimCorp Dimension clients canceled their contracts, bringing the total number of clients up to 151. Three clients canceled their Gain contracts, while three new Gain clients were added. The new client wins and the order intake from additional The North American business unit APAC also experienced headwinds in 2021 from postponed or longer sales processes due to the negative impact of COVID-19. Despite this, the APAC business unit’s total revenue increased by 22% compared with 2020. The increase was mainly driven by SaaS revenue and professional services revenue. After several years with strong growth in new client wins, no new clients were signed in the APAC region in 2021. SimCorp continues to see the APAC region as a promising region with growth potential and the lack of new client wins as a temporary effect of COVID-19. No SimCorp Dimension clients canceled their contracts, resulting in SimCorp still servicing 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 71m at the end of 2021 compared with EUR 66m at the end of 2020. SimCorp Sofia delivered a solid experienced headwinds from the impact of COVID-19, with restrictions on the ability to meet in person leading to postponed or longer sales processes. The total revenue increased by 8% compared with 2020, which was below expectations, however, SimCorp continues to see the North American market as a strong long-term growth market. The growth was primarily driven by additional license sales and SaaS revenue. One new SimCorp Dimension client was signed, while one SimCorp Dimension client canceled its contract. Two new standalone SimCorp Coric clients were signed in 2021. One Gain contract was canceled and another one signed in 2021. Two out of the three new license deals (SimCorp Dimension and SimCorp Coric) signed will run on SimCorp’s SaaS offering. Total installed SimCorp Dimension license base was EUR 147m at the end of 2021 compared with EUR 136m at the end of 2020. performance in 2021 with total revenue growth of 14%, driven by continued solid performance within professional services. No new clients were signed in 2021, while no clients canceled their contracts, keeping the total number of SimCorp Sofia clients at 47, of which five are also Dimension clients. SimCorp Sofia continues to operate well as a separate and independent business unit providing advanced investment management solutions for the Italian insurance market. licenses increased the value of the total installed SimCorp Dimension license base by EUR 42m, reaching EUR 716m. EURm 2021 2020 Change EURm 2021 2020 Change EURm 2021 2020 Change EURm 2021 2020 Change Revenue 357.6 323.8 10% Revenue 114.9 106.5 8% Revenue 46.3 19 2 37.9 19 2 22% Revenue Clients 23.6 47 20.8 47 14% Dimension clients Coric clients Gain clients 151 43 150 42 Dimension clients Coric clients Gain clients 37 28 6 37 26 6 Dimension clients Coric clients Gain clients 41 41 2 2 SimCorp Annual Report 2021 Management report Financial review 2021 COVID-19 SimCorp generated revenue of EUR 496.3m in 2021, an increase of 8.8% compared with 2020. The order intake was EUR 137.6m, an increase of EUR 22.5m or 19.5% compared with 2020, and the order book increased in 2021 by EUR 16.9m to EUR 73.0m at the end of 2021, contributing to positive business growth. SimCorp generated EBIT of EUR 132.4m. The EBIT margin was 26.7%. The Annual Recurring Revenue (ARR) growth in 2021 was 10.5%. SimCorp views the performance in 2021 as satisfactory, taken the COVID-19 situation into account. For the second consecutive year, SimCorp was in 2021 impacted by continued restrictions on the ability to meet in person caused by the COVID-19 pandemic, which has led to some hesitancy in clients’ decision making, thereby causing longer sales processes, especially for new client engagements, and with the highest negative impact in North America and APAC. Being a crisis-prepared organization, we believe SimCorp has been and still 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. During the COVID-19 pandemic, we have been cost- conscious, but also invested in our future. Looking ahead, we will continue to make large investments in technology, product development and our service offerings to continuously serve our clients better. Financial expectations and results 2021 In local currencies Achieved Annual Report 2020 Feb. 10, 2021 2021 Revenue growth EBIT margin 8.7% 6% - 11% Financial expectations and results 2021 26.9% 24.5% - 27.5% In the 2020 Annual Report, SimCorp announced 2021 expectations for revenue growth measured in local currencies of between 6% and 11% and an EBIT margin measured in local currencies of between 24.5% and 27.5%. No changes to the 2021 expectations were made SimCorp Annual Report 2021 Management report Financial review 2021 24 throughout the year, and the revenue growth measured in local currencies of 8.7% and EBIT margin measured in local currencies of 26.9% achieved in 2021 were both in line with the financial guidance given. In 2021, we also welcomed three new clients through three of our existing outsourcing clients. Order intake for software licenses (EURm) 160 120 80 40 0 SimCorp Coric sold two new standalone solutions and one solution as part of a new SimCorp Dimension deal. The two new standalone SimCorp Coric solutions sold in 2021 were signed in North America. The financial guidance and the realized financial results can be seen in the table on page 23. Order intake and order book In 2021, four Gain license orders and four SimCorp Datacare solutions were sold to existing SimCorp Dimension clients or as part of a new SimCorp Dimension deal. In 2021, total order intake of EUR 137.6m was an increase of EUR 22.5m compared with 2020. The increase was primarily due to higher order intake for SimCorp Dimension, excluding CDD, which increased from EUR 79.2m in 2020 to EUR 91.3m in 2021, primarily driven by several significant deals signed with existing clients. Additional license sales were higher than last year due to several significant deals signed with existing clients in H2 2021. Some of these deals included conversions from perpetual to subscription-based licenses, driven by increased engagement with our clients and extended functional scope, such as alternative investments, ESG and Datacare. Our newly launched ESG offering was successful as sold to 25 clients in 2021. 2017 2018 2019 2020 2021 SimCorp Dimension SimCorp Coric SimCorp Sofia SimCorp Gain & Datacare Datacare order intake of EUR 17.5m compared with an order intake of EUR 12.9m in 2020 also contributed to the total order intake growth. SimCorp Dimension orders related to SimCorp’s Client-Driven Development (CDD) program was EUR 9.4m compared with an order intake of EUR 5.8m in 2020. The order intake for SimCorp Coric was EUR 10.1m compared with EUR 8.6m in 2020. For SimCorp Sofia, the order intake was EUR 6.3m compared with EUR 6.1m in 2020, and SimCorp Gain had an order intake of EUR 3.0m compared with EUR 2.5m in 2020. SimCorp Dimension license base and additional license sales (EURm) (%) 10 EUR 32.6m of the additional order intake was due to eight clients converting their perpetual contracts to subscription- based license contracts. For the eight clients converting in 2021, the annual subscription-based payments will be slightly higher than the software updates and support fees under the perpetual contracts due to the sale of additional functionality in connection with the conversions, but the annual software updates and support fees will be around EUR 6m lower, as the subscription license revenue under IFRS 15 is recognized on contract completion. 1,000 900 800 700 600 8 6 4 2 SimCorp Dimension license solutions were sold to four new clients in 2021, all on subscription-based terms, with a total order inflow of EUR 16.4m, compared with sales to 12 new clients in 2020 with a total order inflow of EUR 20.5m. The average size of initial SimCorp Dimension license deals increased from EUR 1.7m in 2020 to EUR 4.1m in 2021. 2017 2018 2019 2020 2021 In comparison, additional order intake increased by EUR 18.1m due to five conversions in 2020, resulting in annual software updates and support fees being decreased by EUR 3.0m. License base (left axis) Additional license sales in % of license base (right axis) Three out of the four SimCorp Dimension initial license orders in 2021 were signed in EMEA, while one was signed in North America. Three out of the four initial license orders were selected as a Service (hosted) solutions. Conversion rate: Additional licenses as a percentage of the installed license base beginning of year. License base: Accumulated license order value. SimCorp Annual Report 2021 Management report Financial review 2021 25 At year-end 2021, 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 4.1 years for SimCorp Dimension, 3.0 years for SimCorp Coric, 3.7 years for SimCorp Gain, and less than one year for SimCorp Sofia as most agreements are renewed annually at the beginning of the year. 2021 Revenue growth 2020 Revenue growth 0.1% 8.8% 8.7% 1.5% 1.4% -1.1% Total contract value outstanding, excluding as a Service offerings, at December 31, 2021 was around EUR 423m (December 31, 2020: EUR 336m), of which around EUR 107m is payable in 2022 (EUR 69m payable in 2021). 0.3% -0.1% Organic / Local FX currencies impact Reported Organic M&A impact Local currencies FX impact Reported In 2021, we added eight new SimCorp Dimension as a Service clients, bringing the total number of SimCorp Dimension clients on a hosted solution to 34. Five out of the eight new SimCorp Dimension as a Service clients were existing clients moving from an on-premise to a hosted solution. Seven of the 34 as a Service clients had signed up for our newly launched SimCorp Dimension solution hosted by Microsoft Azure, of which three are existing clients moving from an on-premise to a hosted solution. Total order book increased by EUR 16.9m from January 1, 2021 to EUR 73.0m at December 31, 2021, primarily due to Datacare, which accounted for EUR 16.1m of the increase from EUR 13.8m at December 31, 2020 to EUR 29.9m at December 31, 2021. The total value of the installed SimCorp Dimension license base increased by 6.5% to EUR 934m. Adjusted for currency effect the increase was 4.5%. Measured as a percentage of the total value of the installed SimCorp Dimension license base, the additional license sales were 7.1% in 2021 compared with 6.7% in 2020. The total value of the installed license base for SimCorp Dimension clients who have an installed license base above EUR 2m accounted for 92% of the value of the total installed license base compared with 91% in 2020. The order book includes order book for SimCorp Dimension Client-Driven Development (CDD) of EUR 12.8m (December 31, 2020: EUR 13.9m), SimCorp Dimension, excluding CDD of EUR 23.3m (December 31, 2020: EUR 22.3m), SimCorp Coric contracts of EUR 3.9m (December 31, 2020: EUR 3.0m), SimCorp Sofia contracts of EUR 1.2m (December 31, 2020: EUR 1.5m), SimCorp Gain contracts of EUR 0.4m (December 31, 2020: EUR 0.2m), and Regulators Reporting Platform (RRP) contracts of EUR 1.5m (December 31, 2020: EUR 1.4m). The order book is a consequence of income recognition being deferred until certain conditions are fulfilled or subscription services revenue recognized over the contract period. At the end of 2021, we also have 18 SimCorp Coric as a Service clients and 12 SimCorp Gain as a Service clients on a hosted solution. Some clients have both Dimension, Coric, and Gain, and, in total, we have more than 50 as a Service clients on a hosted solution. The share of subscription-based license agreements in the installed SimCorp Dimension license base increased from 28% at the end of 2020 to 35% at the end of 2021. In total, 79 (equivalent to 38%) out of 207 SimCorp Dimension clients are on subscription-based license agreements, while the remaining 128 SimCorp Dimension clients are on a perpetual license agreement. In comparison, 70 (equivalent to 34%) out of 206 SimCorp Dimension clients were on subscription-based license agreements in 2021. Most standalone SimCorp Coric and SimCorp Sofia clients are on subscription-based license agreements. Three clients canceled SimCorp Dimension contracts in 2021. In addition, four SimCorp Gain licenses were canceled. The annual software updates and support fee for the canceled contracts amounted to EUR 1.8m, equivalent to 0.4%-points of 2021 revenue compared with EUR 3.0m in 2020, equivalent to 0.7% points of 2020 revenue. SimCorp Annual Report 2021 Management report Financial review 2021 26 total license fee revenue accounted for 22.9% of the Group’s total revenue compared with 20.1% in 2020. Additional license sales split Income statement 2021 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 comprise initial sales to new clients and additional sales to existing clients. License fee from initial sales decreased by 3.7% from EUR 22.4m in 2020 to EUR 21.5m in 2021. Currency fluctuations impacted license fee from initial sales negatively by 2.1%. The decrease in license fee from new sales resulted from fewer deals signed in North America and APAC than in 2020. Additional regular license sales 50% (2020: 55%) Renewals 20% (2020: 18%) Conversions 30% (2020: 27%) SimCorp generated revenue of EUR 496.3m in 2021 compared with EUR 456.0m in 2020, equivalent to an increase of 8.8%. Exchange rate fluctuations for the period had a small positive impact on revenue of 0.1%. Measured in local currencies, revenue thus increased organically by 8.7%. The acquisition of AIM Software took place in 2019 and thus only impacted revenue growth in 2020. The impact of currency fluctuations and the acquisition of AIM Software on revenue growth is shown on page 25. License fee from additional sales – consisting of additional regular license sales to existing clients, renewals of subscription-based licenses, and conversion of perpetual licenses to subscription-based licenses – increased by 33.7% from EUR 69.2m in 2020 to EUR 92.5m in 2021. Currency fluctuations impacted license fee from additional sales positively by 0.9%. The underlying organic growth was 32.8%. 92.5 million EUR (2020: 69.2) In 2021, additional regular license sales accounted for 50% (2020: 55%) of the total additional license sales, conversions accounted for 30% (2020: 27%), while renewals accounted for the remaining 20% (2020: 18%), of which approximately 7%-points related to SimCorp Sofia renewals, 6%-points SimCorp business model is evolving more and more from a software solution model towards a Software as a Service (SaaS) delivery model. SimCorp therefore commenced reporting Annual Recurring Revenue (ARR) on a quarterly basis in 2020. In 2021, the ARR was EUR 277.4m, which was equivalent to 55.9% of total revenue. In 2020, the ARR was EUR 250.9m, which was equivalent to 55.0% of total revenue. The ARR growth in 2021 was 10.5% in EUR, and 10.4% in local currencies. Revenue Share of revenue Share of revenue 2020 Organic revenue growth local currencies Revenue growth Total license fee recognized from initial licenses to new clients and additional licenses to existing clients was EUR 114.0m, an increase of EUR 22.5m, or 24.6%, compared with 2020. Currency fluctuations impacted total license fee positively by 0.2%. Measured in local currencies, the organic increase was 24.4%. License fee for 2021 included revenue interest of EUR 2.0m related to the financing element in contract assets (2020: EUR 2.3m). In total, the reported EUR ‘000 2021 21,533 2021 2020 22,364 Licenses – initial sales Licenses – additional sales Software updates and support Professional services Hosting and other fees Total revenue 4.3% 18.6% 36.1% 33.9% 7.1% 4.9% 15,2% 38.7% 33.9% 7.3% -3.7% 33.7% 1.6% 8.5% 5.6% 8.8% -1.6% 32.8% 1.4% 8.7% 5.0% 8.7% 92,506 69,188 179,361 167,894 34,980 176,575 154,730 33,113 496,274 100.0% 455,970 100.0% SimCorp Annual Report 2021 Management report Financial review 2021 27 related to SimCorp Coric renewals, 6%-points related to SimCorp Dimension renewals, and 1%-points related to SimCorp Gain renewals. revenue was 8.7%. Fees from professional services accounted for 33.8% of total revenue in 2021 compared with 33.9% in 2020. Costs Total operating costs (including depreciation and amortization) increased by 9.6% from EUR 332.5m in 2020 to EUR 364.6m. Currency fluctuations increased the total operating costs by 0.4%. Measured in local currencies, the operating costs increased by 9.2% compared with 2020. The increase in operating costs was primarily a result of increased hosting and salary costs. Software updates and support revenue increased by 1.6% from EUR 176.6m last year to EUR 179.4m with the completion and implementation of new client installations and new functionality to existing clients. Currency Hosting and other fees increased from EUR 33.1m in 2020 to EUR 35.0m, due to adding more clients on a hosted as a Service solution. fluctuations increased the software updates and support revenue by 0.2%. Consequently, organic growth for 2021 in software updates and support revenue was 1.4%. Software updates and support revenue accounted for 36.1% of total revenue compared with 38.7% in 2020. License agreements signed in 2021 will increase annual software updates and support revenue by around EUR 8m once fully implemented (2020: EUR 8m), while canceled contracts in 2021 and conversions from perpetual to subscription-based licenses will decrease annual software updates and support revenue by around EUR 8m (2020: EUR 6m). Revenue distribution The ten largest clients generated 23% (2020: 25%) of SimCorp’s total revenue. In 2021, the largest client accounted for 4.0% (2020: 5.5%) of the revenue. The average number of full-time employees increased by 31 or 1.7% from 1,840 in 2020 to 1,871 in 2021. The number of employees (headcount) was 1,998 at the end of 2021 compared with 1,901 at the end of 2020, an increase of 97 employees. SimCorp entered 2022 with signed revenue for the full year of EUR 323.2m – an increase of EUR 34.0m or 11.8% compared with the beginning of 2021. 70% of SimCorp’s total operating costs were directly related to employees compared with 74% in 2020. In 2021, SimCorp achieved a top-line growth in its business unit in APAC of 22%, in its EMEA business unit of 10%, while revenue in its North American business unit only increased by 8% due to fewer new clients signed in 2021 than in recent years. The SimCorp Sofia business unit generated growth of 14% in 2021 (for more details, see the Business Unit Review 2021, page 22). Cost of sales increased by 17.7% to EUR 197.0m. Measured in local currencies, the organic increase in cost of sales was 17.3%. The increase was partly related to an increase in the hosting and services activities, and partly due to an internal restructuring made in Q2 2021, moving staff from our product division to customer support, to strengthen the Fees from professional services increased by 8.5% from EUR 154.7m last year to EUR 167.9m. Currency fluctuations decreased the professional services revenue by 0.2%. Consequently, organic growth in professional services Operating costs Costs 2021 Share of costs 2021 Share of revenue 2021 Costs 2020 Share of costs 2020 Share of revenue 2020 Organic growth local currencies EUR ’000 Growth 17.7% -0.1% 0.1% Cost of sales 196,982 91,771 50,230 25,583 364,566 54.0% 25.2% 13.8% 7.0% 39.7% 18.5% 10.1% 5.2% 167,415 91,830 50,198 23,077 332,520 50.3% 27.6% 15.1% 7.0% 36.7% 20.1% 11,0% 5.1% 17.3% -0.3% -0.9% 9.8% Research and development costs Sales and marketing costs Administrative expenses Total operating costs 10.9% 9.6% 100.0% 73.5% 100.0% 72.9% 9.2% SimCorp Annual Report 2021 Management report Financial review 2021 28 customer experience. Cost of sales represented 39.7% of revenue compared with 36.7% in 2020. 2020. The net financial income in 2021 as well as the net financial expense in 2020 were primarily related to foreign exchange adjustments. 2021 EBIT margin 26.9% -0.2% 26.7% Research and development costs decreased by 0.1% to EUR 91.8m. Measured in local currencies, research and development costs decreased by 0.3%. The decrease was due to the internal restructuring made in Q2 2021 moving staff from product division to customer support. Research and development costs were 18.5% of revenue in 2021, compared with 20.1% in 2020. Profit before tax was EUR 137.4m against EUR 116.1m in 2020. The estimated tax charges for 2021 amounted to EUR 27.4m against EUR 27.8m in 2020. The effective tax rate was 20.0% compared with 24.0% in 2020, as in 2021, the effective tax rate was impacted by refunds of withholding taxes related to prior years. Consequently, the effective tax rate of 20.0% was lower than the expectation announced in the 2020 Annual Report of an expected effective tax rate for 2021 of between 23% and 25%. Sales and marketing costs increased by 0.1% to EUR 50.2m. Measured in local currencies, sales and marketing costs decreased by 0.9%. Sales and marketing costs represented 10.1% of revenue compared with 11.0% in 2020. Organic/Local currencies FX impact Reported The Group profit after tax was EUR 110.0m compared with EUR 88.3m in 2020. After the net effect of foreign currency translation differences and remeasurements of defined benefit plans of EUR 4.0m, the total comprehensive income amounted to EUR 114.0m against EUR 85.6m in 2020. ꢀ Administrative expenses increased by 10.9% to EUR 25.6m. Measured in local currencies, administrative expenses increased by 9.8%. Administrative expenses were 5.2% of revenue compared with 5.1% in 2020. 2020 EBIT margin 28.5% 0.9% 27.6% -0.3% 27.3% Statement of financial position Group performance SimCorp had total assets of EUR 526.3m at December 31, 2021 compared with EUR 470.8m at December 31, 2020. The increase of EUR 55.5m was primarily related to changes in contract assets of EUR 45.1m. SimCorp generated an EBIT of EUR 132.4m compared with EUR 124.3m in 2020, an increase of EUR 8.1m. The reported EBIT margin was 26.7% compared with the EBIT margin of 27.3% in 2020. When measured in local currencies, the EBIT margin was 26.9% in 2021. The currency and acquisition (2020) impact on EBIT margin is shown to the right on this page. Cash holdings decreased by EUR 5.4m from EUR 53.1m at December 31, 2020 to EUR 47.7m. Compared with December 31, 2020 contract assets increased by EUR 45.1m from EUR 175.9m to EUR 221.0m. New and additional subscription-based licenses added EUR 74.6m to contract assets, foreign exchange adjustments added EUR 8.6m, and net adjustment in financing element added EUR 1.4m. Reductions in 2021 stem from invoiced subscription-based license fees from opening balance of EUR 39.4m, and from adjustments to expected credit loss provision of EUR 0.1m. Organic M&A impact Local currencies FX impact Reported In 2021, EBITDA was EUR 147.8m compared with EUR 140.4m in 2020, an increase of EUR 7.4m. The EBITDA margin was 29.8% compared with the EBITDA margin of 30.8% in 2020. Share of profit after tax in associates of EUR 0.2m, financial income of EUR 5.8m, and financial expenses of EUR 1.0m resulted in a net financial income of EUR 5.0m in 2021 compared with a net financial expense of EUR 8.2m in SimCorp Annual Report 2021 Management report Financial review 2021 29 Receivables increased by EUR 14.0m from EUR 82.5m at December 31, 2020 to EUR 96.5m. Changes in equity There was a net cash outflow of EUR 5.7m from investing activities compared with EUR 2.7m in 2020. The increase was due to the investment in Domos. The Group’s equity amounted to EUR 323.1m on December 31, 2021. This was an increase of EUR 44.9m compared with December 31, 2020. Equity was reduced by the purchase of treasury shares of EUR 40.1m and by dividends of EUR 40.1m. Equity was increased by comprehensive income in 2021 of EUR 114.0m as well as effects of share- based remuneration of EUR 11.0m, net of tax. In accordance with IFRS 9 ‘Financial Instruments’, SimCorp has made an expected credit loss provision of EUR 1.4m related to contract assets and receivables at December 31, 2021 (December 31, 2020: EUR 1.4m). Free cash flow (cash flow from operations reduced by CAPEX and lease payments) was EUR 78.6m compared with EUR 91.8m in 2020, a decrease of EUR 13.2m. The Group’s total non-current assets were EUR 147.3m compared with EUR 150.9m on December 31, 2020. Cash conversion, defined as free cash flow divided by profit for the year, was 71% compared with 104% in 2020. The lower cash conversion was primarily due to increased contract assets following higher subscription-based license revenue, and the development in changes in working capital explained above. The cash conversion of 71% was in line with the expectation announced in the 2020 Annual Report of an expected cash conversion for 2021 of between 70% and 80%. Cash flow statement Operating activities generated a net cash inflow of EUR 90.7m against EUR 104.6m last year. Goodwill was EUR 61.6m at December 31, 2021 compared with EUR 61.4m at December 31, 2020. No impairment of goodwill was made in 2021. In 2021, changes in working capital were negative at EUR 11.2m in 2021, compared with three consecutive years with positive changes in working capital of EUR 9.3m in 2020, EUR 11.5m in 2019 and EUR 21.9m in 2018. Changes in working capital in 2021 were negatively impacted by a one-off payment of EUR 6.6m following a change in the Danish Holiday Act and postponed payments of income taxes and social charges offered under government COVID-19 related support schemes payments where payments without these support schemes would have been paid in 2020. This contributed to the decrease in Other payables of EUR 9.2m from the end of 2020 to the end to 2021. In addition, receivables increased by EUR 14.0m due to the increased revenue. The carrying amount of acquired software was EUR 9.8m compared with EUR 11.5m at the end of 2020 and the value of client relationships was EUR 21.2m compared with EUR 22.9m at the end of 2020. The decreases were due to amortization. Cash used in financing activities in 2021 of EUR 91.0m related to dividend payments of EUR 40.1m, purchase of The carrying amount of leasehold assets was EUR 40.1m compared with EUR 43.7m at the end of 2020. The decreases were due to amortization. Free cash flow/ Cash flow to shareholders (EURm) 100 Other property, plant, and equipment amounted to EUR 3.6m compared with EUR 4.0m at the end of 2020. 75 50 25 0 Other financial assets amounted to EUR 4.8m compared with EUR 0.4m at the end of 2020. The increase in 2021 was due to an investment in Domos. Changes in contract assets were EUR -44.9m compared with EUR -24.6m in 2020, due to higher subscription-based license revenue in 2021 than in 2020. Deferred tax assets were EUR 3.1m compared with EUR 4.2m at the end of 2020. Payment of income taxes amounted to EUR 23.3m, against EUR 20.7m in 2020. 2017 2018 2019 2020 2021 SimCorp’s total liabilities were EUR 203.2m at December 31, 2021, compared with EUR 192.6m a year earlier. The increase relates mainly to higher trade payables. Other non-cash items of EUR 12.4m was primarily related to unrealized exchange gains and other adjustments. Free cash flow Dividends Purchase of treasury shares SimCorp Annual Report 2021 Management report Financial review 2021 30 treasury shares of EUR 40.1m, and repayment of lease liabilities of EUR 10.8m, compared with payment of dividends 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 in 2020. Equity increased from EUR 265.3m at December 31, 2020 to EUR 291.2m at December 31, 2021. Profit allocation The Board of Directors intends to recommend to shareholders at the Annual General Meeting 2022 that, of the total recognized comprehensive income of EUR 95.1m, dividends of EUR 39.9m be declared, representing DKK 7.50 per share of DKK 1, and that EUR 55.2m be transferred to retained earnings. Treasury shares In 2021, SimCorp purchased 575,475 treasury shares with a nominal value of DKK 1 at an average price of DKK 794.17 per share, totaling EUR 40.1m. SimCorp delivered 152,806 treasury shares with a nominal value of DKK 1 on the vesting of restricted stock units. Furthermore, 1,697 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 shareholders at the Annual General Meeting 2021. At December 31, 2021, SimCorp held 1,072,118 treasury shares with a nominal value of DKK 1 each (2.6% of the total share capital) at a cost of EUR 85.6m and a market value of EUR 103.1m. 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. The parent company SimCorp A/S In 2021, the parent company generated revenue of EUR 250.2m, an increase of EUR 14.6m compared with 2020. The parent company received dividends totalling EUR 20.3m from subsidiaries in 2021 compared with EUR 24.9m in 2020. Profit before tax for the year was EUR 110.7m against EUR 108.1m in 2020. Income tax amounted to EUR 15.8m compared with EUR 19.4m in 2020. Net profit was EUR 94.9m compared with EUR 88.7m in 2020. SimCorp Annual Report 2021 01 Risk analysis Risk management An Enterprise Risk Management process is applied to identify relevant risks in SimCorp’s major units. As SimCorp operates in a continually changing and volatile business environment, its Board of Directors and management regard it as essential that its enterprise risk exposure is thoroughly assessed, monitored and controlled on an ongoing basis. This happens through a structured and constantly improved enterprise risk management process, which is closely linked to our strategy execution, applying a framework of risk policies and risk mitigating procedures. 02 Risk evalution SimCorp management continually monitor risk development in the SimCorp Group. The Board of Directors and management are deeply committed to prepare the company for different risks and uncertainties which could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, reputation, future 03 Risk control activities, results and liquidity. The Audit and Risk Committee carries out an analysis of the ongoing process for identifying and reporting risks. SimCorp Annual Report 2021 Management report Risk management 32 Risk category Risk mitigation As a software company with a core business based on modern information technology, a failure to adequately protect itself against IT security risks, would represent 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 monitors its technical infrastructure to identify and minimize risk to the Cyber-attack 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, and SimCorp regularly employs third-party testers to perform penetration testing, security reviews and auditing. SimCorp continually reviews third-party hosting providers’ compliance with security commitments, and we receive and review third-party assurance and penetration testing reports. SimCorp currently delivers SimCorp Dimension as a Service (hosted) for 34 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 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. SimCorp’s business is based on specialized expertise and innovation. It is imperative that SimCorp continues to attract, develop, and retain the most skilled employees and management talent. Failure to do so constitutes a risk to the Group. To ensure SimCorp’s ability to attract talented employees, 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. Substantial resources are allocated to training and development programs to ensure the strengthening of professional and personal skills across the organization. People and corporate culture SimCorp’s new strategy to become a technology-enabled service company requires new and different capabilities in terms of client insights and understanding, software engineering (cloud computing), sales and operational capabilities, and leadership. Diversity, equity, and inclusion initiatives ensure the widest talent pool possible, exemplified by the launch of a Women´s Mentorship Program. In order to map where we may lack critical resources, a company-wide capability review has been completed and a gap analysis has been created. A new leadership model focusing on improving the entire leadership skillset, including talent enablement, has been developed and is ready for implementation. SimCorp is deeply dependent on having the right people across the value chain. The supply of talent is provided internally through development of talent and from the market. For some roles, there is fierce competition for talent. Hence, SimCorp’s ability to successfully attract, hire, onboard and retain our talent – and do this in a scalable and efficient way – is critical for our long-term success. Not embracing a diverse and inclusive culture presents a risk of not attracting the best people. Planning on the forecasted needed resources is in place, allowing the preparation for recruiting of talent in the right locations as well as building the skills internally on the existing workforce. Moreover, it is considered a genuine risk to SimCorp’s long-term position, if the company’s corporate values do not continue to serve as a core basis for business execution and development. To ensure SimCorp’s business is conducted in accordance with corporate values, a Guideline for Good Business Behavior for all employees and a Code of Conduct for Suppliers hav been established, and annual online training is conducted. In addition, SimCorp maintains a whistleblower system as a means of increasing focus on transparency and enabling reporting and action on suspected irregularities in the business. SimCorp Annual Report 2021 Management report Risk management 33 Risk category Risk mitigation Responding timely to investment management market trends is critical to SimCorp’s ability to stay competitive. 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. 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 4.0% (2020: 5.5%) of total revenue. Markets and clients With offices and sales across the world, SimCorp is from time to time affected by geopolitical uncertainties and unrest. Potential political and economic unrest in countries and regions where SimCorp operates or plans to operate is monitored and fully considered when making operational and strategic decisions. Political and pandemic risks Since 2007, SimCorp has had a development unit based in the Ukraine. SimCorp continuously monitors the political situation in countries where we and The possible close down of countries due to pandemic, terror, war etc. could pose a threat to SimCorp’s product offering, sales, and service efforts. The same goes for our employees’ well-being. our clients operate. The situation in Ukraine is being monitored closely, and we have contingency plans for the operating environment and our employees. Structured sales reviews, the ability to do remote demos 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 in times of crisis. SimCorp Annual Report 2021 Management report Risk management 34 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 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. Regulatory issues and fiscal policies 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’s Group Finance department manages the company’s currency and financial exposures pursuant to the treasury policy approved by the Board of Directors, and it is required to keep the overall currency and financial exposure within defined limits. 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. 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. Failure to comply with local data protection regulation also represents a risk. SimCorp has implemented a number of business procedures and controls to maintain transparency of individual activities and an overview of financial exposure. SimCorp’s Group Legal and Compliance department ensures and monitors data regulation compliance. Financial reporting involves the risk of non-compliance with applicable regulations. 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: Financial reporting There is also a risk that internal controls may not detect or prevent significant errors and omissions in financial reporting. → www.simcorp.com/corporate-governance The Executive Management Board monitors compliance and provides the Board of Directors with relevant reports. SimCorp Annual Report 2021 Management report Risk management 35 Risk category Risk mitigation Implementation projects not being priced correctly or clearly scoped poses a risk of cost overruns, as well as causing delivery risk to be transferred to SimCorp. SimCorp professional services apply a global delivery model leveraging a standard methodology based on industry best practices and standard components. This Software approach includes comprehensive project plans and regular client meetings. It is key for SimCorp to provide standardized end-to-end serviced solutions, both during implementation and after clients have gone live. implementation and services After going live with the solution, the most apparent risk is possible breach of service level agreements, security requirements, or other committed standards. Offering SimCorp Dimension as a Service introduces operational risks from running clients’ operational IT environments. This in turn exposes SimCorp to potential financial and reputational risks should operations be negatively impacted by errors or downtime. 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. 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’s consultants undergo regular training, and have relevant industry standard and SimCorp specific certifications, 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. SimCorp regularly receives independent assurance reports from our third-party service providers, and the hosting providers have undergone due diligence performed by SimCorp and its external partners. Furthermore, SimCorp has reciprocal agreements with its third-party service providers. SimCorp has a targeted security awareness program on secure development standards. Patch and upgrade servers are part of the product and are protected like other servers. Product innovation, improved technical infrastructure, and enhanced technical capabilities are fundamental to meeting new system requirements in the market and this continues to be a risk for SimCorp. Being unable to deliver those elements in a timely fashion could mean that SimCorp’s product and services would end up as legacy offerings. 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 change in market and client demands. This also shortens the period of extensive control and testing prior to new version releases, securing an even better software quality. Product innovation and quality 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. SimCorp continually raises and follows up on internal quality targets and has been able to reduce the number of errors in new software releases. As part of our transition to cloud, we have 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. 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. In 2021, 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. SimCorp Annual Report 2021 Management report Risk management 36 Risk category Risk mitigation SimCorp sells software products to on-premise and cloud-based clients. Clients being affected by security incidents directly from our product stack or supply chain poses a significant risk. Furthermore, data breaches, including personal information and market sensitive information, remain one of the top concerns for our clients. SimCorp’s products are subject to a range of security controls prior to release, including peer review and static code analysis by automated code review tools. We recommend clients use Citrix as an additional protection layer. Security breaches in products supported by SimCorp Governance of third-party software components is performed, the suppliers of such software are diligently screened, using both expert assessments of the product as well as in-house proof of concept and on-going automated review. As Business Processes as a Service is becoming increasingly sought after in the market, not being able to execute on our launch of these new service offerings poses a risk of sunk costs, but more significantly of not seizing a new market opportunity and staying competitive in our current market. SimCorp has established tight project governance in collaboration with external consultants to ensure the monitoring process. In addition, we have established a new incubator business unit to ensure focus on the launch of the new service offers. In the new business unit, industry experts have been hired to lift our domain skillsets and elevate our service delivery capabilities. Business Processes as a Service SimCorp is going through a transformational change. To succeed with our transformation, our organization at all levels needs to understand and embrace our corporate strategy. Failing to do this will put the overall transformation and hence medium-long term company performance at risk. The strategy execution can also be hindered by inefficient change management across the organization. SimCorp is increasing strategy and transformation communication via a combination of more frequent, more targeted, and granular (personalized to specific audiences), and more leadership-driven communication. This entails providing more information on the strategic journey, how we progress, why we are winning. Strategy execution From the change support side, we are building a “change community” to support change efforts across the organization through sparring, facilitation, and guiding the business/project leaders owning the various activities. SimCorp Annual Report 2021 Management report Case: Danske Bank Asset Management 37 Case: Danske Bank Asset Management New ESG solutions from SimCorp help Danske Bank AM achieve sustainability ambitions 95% of all Danske Invest funds are ESG funds or funds with a sustainable investment Enabling ESG investments for clients is a core aim of SimCorp’s wider sustainability strategy. A concrete example is a development partnership with Danske Bank Asset Management (AM). SimCorp’s new ESG solution, co-created with Danske Bank AM, will enable them to bring in any type of sustainability data to their platform, create tailor-made sustianability Key Performance Indicators (KPIs) and integrate those into the entire investment management value-chain. objective1 Danske Bank AM is one of the largest asset managers in the Nordics. They have a long track record of integrating sustainability consider- ations into their financing and investment activities. With a commitment to decarbonize their portfolios and investments into net-zero by 2050, Danske Bank AM found a need to continuously evolve their investment Christian Kromann, CEO of SimCorp, said: “Enabling ESG and sustainable investing for our clients is a core aim of our wider sustainability strategy, and close client partnerships remain a formidable way to support our clients’ long-term strategic ambitions.” operations platform. Having automated sustainability data at their fingertips, analysts and portfolio managers will always have an up-to-date view of how their portfolio, holdings and benchmarks are per- forming against relevant sustainability metrics. 1 About 95% of Danske Invest funds are classified as so-called article 8 or article 9 funds as defined in the EU’s Sustainable Finance Disclosure Regulation, see https://danskebank.com/news-and-insights/ news-archive/news/2021/01122021 SimCorp Annual Report 2021 Management report Case: Danske Bank Asset Management 38 Christian Heiberg, CEO of Danske Bank Asset Management, said: “The sustainable agenda is rapidly picking up speed and we are fully focused on constantly improving our Reporting obligations for financial firms Danske Bank was the first client to go live with SimCorp’s ESG investing framework. Part of the outcome of the co-creation partnership between Danske Bank and SimCorp is also an SFDR solution that will cover the Sustainable Finance Disclosure Regulation and EU taxonomy regulation. sustainability efforts to stay ahead of the curve and be one of the best Nordics banks for responsible investments. This requires a strong infrastructure and that we continuously work to develop our investment operations platform. Our partnership and collaborative co-creation approach with SimCorp is an important part of ensuring that we have relevant tools and systems to consistently integrate sustainability- related perspectives in our investment Set to be introduced in 2022, the second phase of EU’s SFDR will oblige financial firms to comply with various reporting requirements and SimCorp’s new SFDR solution will among other enable the periodic reporting as prescribed by SFDR, enabling a classification of ESG funds and funds with a sustainable investment objective. management processes and products.” → Read the full case https://www2.simcorp.com/danske-bank “The sustainable agenda is rapidly picking up speed and we constantly improve our sustainability efforts to stay ahead of the curve. This requires a strong infrastructure.” Christian Heiberg CEO of Danske Bank Asset Management SimCorp Annual Report 2021 Management report Corporate governance report 39 Corporate governance report → Corporate Governance Guidelines 2021 Composition and qualifications of the Board of Directors, Executive Management Board, and committees SimCorp’s Board of Directors has reviewed each of the recently revised recommendations on corporate governance issued by Nasdaq Copenhagen and has concluded that, with one exception (severance payments), SimCorp is in full compliance with the recommendations. The Board has decided on specific measures on the exception. https://www2.simcorp.com/CorporateGovernanceGuidelines2021 The BoD is constituted to ensure its independence, adequate collective competences, and experiences within executive management disciplines related to global corporations, information technology, and business-to-business sale and deployment of software and delivery of technology-enabled services, and to comprise 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 association, 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. At the Annual General Meeting (AGM) 2022, Hervé Couturier will step down as member of the BoD and, accordingly, following the AGM 2022, the BoD will consist of six shareholder- elected members and three employee-elected members. → Statutory Report on the Recommendations on Corporate Governance 2021 https://www2.simcorp.com/StatutoryReport2021 SimCorp’s stakeholder relationships SimCorp’s overall management objective is to promote the long-term interests of the company, and thus of all stakeholders. Achieving this objective assumes that SimCorp establishes lasting and constructive relationships with the Group’s primary stakeholders: clients, employees, shareholders, and society. As part of its annual strategy objective setting, the Board of Directors (BoD) considered SimCorp’s purpose of “enabling a prosperous life in a liveable world” and agreed it is in support of the long-term value creation of the company and should be pursued on a daily basis. SimCorp’s Corporate Governance Guidelines are intended to ensure an efficient and adequate management of SimCorp within the framework defined by applicable legislation, rules, and recommendations for listed companies in Denmark and by SimCorp’s Articles of Association, vision, and values. The Statutory Report on the Recommendation on Corporate Governance 2021 demonstrates that, with one exception (severance payments), SimCorp is in full compliance with the recommendations. Self-assessment The work of the Board of Directors As part of its annual cycle activities, the BoD carries out a self-assessment. In 2021, the Board decided to engage external assistance in the annual evaluation, which comprised an evaluation of the work and contribution of the EMB, the BoD, the Audit and Risk Committee, and the Nomination and Remuneration Committee within the areas of strategy, finance, risk management, sales, organization, management, operations and ESG. The 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. SimCorp Annual Report 2021 Management report Corporate governance report 40 The BoD concluded that amongst them, they possess the necessary competencies to and qualifications to perform their duties. 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. remuneration packages and policies for the BoD and EMB, Board of Directors and committees – meeting participation in 2021 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 Remuneration Nomination and Board of Audit and Risk Remuneration Committee Directors Committee Peter Schütze Morten Hübbe Simon Jeffreys Hervé Couturier Adam Warby 6/6 4/4 4/4 Committee. In 2021, the committee held four meetings. 6/6 Finally, the BoD concluded that SimCorp complies with the Danish Corporate Governance Guidelines’ recommendation that at least half of the members elected by the AGM are independent. 6/6 5/5 Exception from the corporate governance recommendations: 6/6 4/4 4/4 6/6 5/5 5/5 Severance payments Joan Binstock Susan Standiford Else Braathen Vera Bergforth Hugues Chabanis 6/6 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 of ownership as the severance payment is up to nine months, and the notice period is extended to 24 months for two execu- tives and 36 months for one executive. In future agreements, SimCorp will ensure the total remuneration does not exceed the recommended threshold. Refer to our Remuneration Report for more details on severance payments. Risk management 4/4 The BoD has overall responsibility for ensuring that SimCorp maintains appropriate 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 BoD have defined and described the most critical risks to SimCorp and the related mitigating actions. For a more detailed description, see ‘Risk Management’, pages 31-36. 6/6 5/5 6/6 6/6 Each member of the BoD and EMB member provided written comments and feedback on a comprehensive questionnaire which included questions on, inter alia, cooperation within the BoD, the committees and between the BoD and EMB, quality and relevance of the material provided to the BoD, the time spent on various matters and the role of the chairmanship. This was followed up by a personal interview between each member of the BoD and EMB and the external facilitator of the self-assessment and with a final report and discussion with the entire BoD and EMB. → Remuneration Report 2021 https://www2.simcorp.com/Remunerationreport2021 Further, the company maintains a whistleblower 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 whistleblower hotline are electronically submitted directly to the Chair of the Audit and Risk Committee and another member of SimCorp’s BoD. Audit and Risk Committee The Audit and Risk Committee is responsible for assisting the BoD by monitoring SimCorp’s financial reporting, its internal financial control and enterprise risk management, 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 Chair deem necessary, however, as a minimum, the Committee will meet four times a year at appropriate times in the reporting and audit cycle. In 2021, five meetings were held. → Whistleblower Policy https://www2.simcorp.com/whistleblower-policy The BoD also evaluated, whether the total number of management functions, including their level and complexity, taken on by each board member was appropriate. Nomination and Remuneration Committee The Nomination and Remuneration Committee 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, It was concluded that the BoD’s work is effective, that the members collectively contribute to the required areas of expertise, and that none of the directors is over-boarded. SimCorp Annual Report 2021 Management report Corporate governance report 41 The Danish corporate governance guidelines recommend that the majority of the members of the Committee qualify as independent, and that the committee should possess the necessary financial expertise. The members of the Audit and Risk Committee qualify, and are shown in the table on page 40. See SimCorp’s Corporate Governance Guidelines for a full description of the Audit and Risk Committee’s activities. Assessment Auditor fee – SimCorp A/S During 2021, the SimCorp Audit and Risk Committee was satisfied with auditor independence, and with the manage- ment of risks within the areas it monitors for the BoD. EUR ’000 2021 210 68 2020 157 16 Audit fees Other service fees Total auditor fee 278 32% 173 10% Data ethics Non-Audit Services (NAS)/Audit fee ratio Statement on data ethics, cf. Section 99 d of the Danish Financial Statements Act External auditor – 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. → Data Ethics Policy https://www2.simcorp.com/DataEthicsPolicy2021 Auditor fee – SimCorp Group In 2021, SimCorp adopted a Data Ethics Policy, the aim of which is to raise awareness of and enhance SimCorp’s data ethical values and their anchoring in our organization. The policy is applicable to all types of data processing, regardless of whether it includes personal data. The policy is universal and aims to embrace all scenarios in which data ethics considerations are relevant. EUR ’000 2021 521 34 2020 437 17 Audit fees Tax and VAT advice fees Other service fees Total auditor fee 71 21 During the year, the Audit and Risk Committee has been informed about the external auditor’s policies and proce- dures for safeguarding its objectivity and independence, and the audit partners and firm rotation requirements 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. 626 20% 475 9% Non-Audit Services (NAS)/Audit fee ratio SimCorp processes data on our employees, our clients’ employees, our shareholders, and partners to administer our relationships and to support our decisions. The nature of the services which SimCorp provides requires that SimCorp processes transactional and portfolio data on behalf of our clients. SimCorp never engages in selling data which it has obtained through such processed data. Other ongoing activities As part of its annual cycle activities, the Audit and Risk Committee reviews SimCorp’s accounting policies, compliance with reporting requirements, risk policy and assessment, internal controls, whistleblower policy, insurance principles, and interim reports. It does deep-dives into specific topics, for example, risk associated with long-term contracts. Furthermore, SimCorp has adopted significant safeguards in order to provide a high degree of security and integrity of such data. SimCorp – only to a limited extent – uses artificial intelligence and machine learning. All new and existing employees will participate in training programs which include topics on data ethics. SimCorp Annual Report 2021 42 Corporate social responsibility Statement on corporate social responsibility, cf. Section 99 a of the Danish Financial Statements Act → Sustainability Report 2021 https://www2.simcorp.com/SustainabilityReport2021 Corporate social responsibility (CSR) in SimCorp is firmly based on the Group’s Sustainability Policy. SimCorp’s commitment to corporate sustainable development is based on combining financial performance with socially responsible behavior and environmental awareness. → Sustainability Policy https://www2.simcorp.com/SustainabilityPolicy2021 SimCorp’s commitment to CSR is described in its policies and codes of conduct, including the company’s ‘Sustainability Policy’, ‘Diversity, Equity and Inclusion Policy’, ‘Code of Conduct for Suppliers’, ‘Data Ethics Policy’, ‘Remuneration Guidelines’, and ‘Corporate Governance Guidelines’. These documents include guidelines on ethics, data privacy, human rights, the environment, stakeholder engagement, corporate governance, bribery, and anti-corruption that govern our professional and commercial relations with internal and external stakeholders. CO₂ emission, expand support for our clients’ ESG investments, create a truly diverse, equitable, and inclusive workplace, and ensure meaning in work. Our approach to human rights is outlined in our Guideline for Good Business Behavior for employees and our Code of Conduct for Suppliers, which is also the foundation for our businessrelationshipswithsuppliers. Itispartoftheprocure- ment process that suppliers are requested to confirm compli- ance with the Universal Declaration of Human Rights and the core Conventions of the International Labour Organization (ILO), and to respect an equal status between the sexes and between persons of different races and religion. Further, SimCorp does not knowlingly accept products and services which have directly or indirectly been designed, manufactured, produced, or procured in contravention of local environmental legislation or other SimCorp joined the UN Global Compact in 2019 and commits to submitting an annual Communication on Progress (CoP) concerning our implementation of its Ten Principles. SimCorp’s contribution to specific targets related to the UN’s Sustainable Development Goals and our achievements on a wide range of non-financial ESG targets and metrics are included in our Sustainability Report 2021. CO₂ emission is the key environmental impact affected by SimCorp’s business model (see page 14). To reduce its own and its clients negative impact, SimCorp has a plan in place for moving its own operations from on-premise data centers to the cloud, offering its clients cloud hosting, and developing and offering energy-efficient services. Our cloud transformation, new technologies, and people initiatives are key enablers of realizing our ambitions on sustainability, which aim to reduce our own and our clients’ Due to the nature of its business model and its associated risks, SimCorp does not have a specific human rights policy. SimCorp Annual Report 2021 Management report Corporate governance report 43 legislation, or by means of corruption, bribery, or other fraudulent behavior. we expand our reach to a larger talent pool. We learn, share best practices, and aim for continual improvement to increase diversity, equity and inclusion across our organization. EU Taxonomy Report on EU Taxonomy Eligibility 2021 is included in our Sustainability Report 2021 → Code of Conduct for Suppliers https://www2.simcorp.com/CodeofConductforSuppliers2021 → Sustainability Report 2021 https://www2.simcorp.com/SustainabilityReport2021 We acknowledge both the societal and business benefits of creating an organization that increasingly reflects the realities of our clients and the locations we operate in around the globe. By expanding on diversity, we gain access to valuable perspectives and critical skillsets that allow us to be more innovative, competitive, and sustainable as an organization. SimCorp maintains high standards on confidentiality and protection of personal data, which is ensured through compliance with technical data security standards and processes, as well as ongoing employee training on how to handle data confidentially. A framework is in place to ensure that SimCorp complies with the General Data Protection Regulation (GDPR) and other similar national regulations. As part of the EU Sustainable Finance Action Plan, the EU Taxonomy was developed as a tool to help investors, companies, issuers, and project promoters navigate the transition to a low-carbon, resilient, and resource-efficient economy. As part of the first implementation phase entering into force by January 2022, technical screening criteria have been issued for economic activities which substantially contribute to climate change mitigation or adaptation. Regarding gender diversity of the BoD, it is SimCorp’s target to have at least two shareholder-elected directors of the underrepresented gender. The goal was reached with the election of Susan Standiford to the BoD at the AGM in 2021. Diversity Report on the underrepresented gender and diversity, cf. Sections 99 b and 107 d of the Danish Financial Statements Act is included in our Sustainability Report 2021 For 2021, we have not found any material taxonomy-eligible activities. Regarding gender diversity in the EMB, SimCorp has set a target of 25% women, which has not yet been met. When recruiting new EMB members, gender, age, nationality, and professional experience should be taken into account to ensure and increase diversity. The recruitment process for EMB members should also follow SimCorp’s guidelines and best practices on securing a diverse candidate pool. → Sustainability Report 2021 https://www2.simcorp.com/SustainabilityReport2021 SimCorp has a global, company-wide ambition to reach a gender representation of 40% of the underrepresented gender across all organizational levels by 2030 and has publicly committed to this target. As part of our greater Diversity, Equity, and Inclusion agenda, we recognize that diversity goes beyond gender. We track, report, and advocate for diversity of gender, age, and nationality on a global scale, while also encouraging additional local initiatives. However, our special focus on strengthening the gender balance in our organization is due to the impact gender has on both local and global sustainability agenda and targets. Our activities to help us reach our goals are described in the Sustainability Report 2021. At the end of 2021, people managers in SimCorp comprised 67.5% men (2020: 72.9%) and 32.5% (2020: 27.1%) women. SimCorp’s total employee population comprised 66.5% men (2020: 67.4%), 33.3% women (2020: 32.5%), and undeclared 0.2% (2020: 0.1%). As described in the previous section on self-assessment of the BoD and EMB, the diversity of the members with regard to educational background and nationalities is regarded as satisfactory. As we increase the balance of gender in SimCorp, we simultaneously increase other diversity dimensions, as SimCorp Annual Report 2021 Management report Shareholder information 44 Shareholder information The SimCorp share The share price at December 31, 2021 was DKK 714.80 62.3m, while the average number of trades per day declined by 10% to 2,121. In 2021, SimCorp’s share price declined by 21% after having increased by 164% in the period 2016 to 2020. Liquidity in the SimCorp share measured by average daily trading turnover was down by 26% to DKK 62.3m. per share, equal to a market capitalization of EUR 3.8bn (DKK 28.2bn). The share price declined by 21% in 2021. By comparison, the Nasdaq Copenhagen Large Cap index, which includes the SimCorp share, increased by 21%. In the period 2016 to 2020, the SimCorp share increased by 164%. Relative to 2020, the average daily turnover of SimCorp shares on Nasdaq Copenhagen declined by 26% to DKK Share capital SimCorp’s nominal share capital is DKK 40,500,000 divided into 40,500,000 shares of DKK 1. SimCorp holds 1,071,389 (2020: 849,449) treasury shares of DKK 1 equivalent to 2.6% (2020: 2.1%) of the share capital. Shareholder structure At December 31, 2021, SimCorp had more than 13,500 registered shareholders representing around 97% of the company’s share capital, an increase of approximately 500 registered shareholders during the year. SimCorp OMXC Large Cap (rebased) Turnover EURm (left axis) 1,250 Share price development and trading activity 2021 300 Approximately 58% (2020: 56%) of the share capital was held or managed by the 25 largest shareholders, and around 83% (2020: 81%) of the registered share capital was held by shareholders based outside Denmark. 240 180 120 60 1000 750 500 250 At December 31, 2021, around 5% (2020: 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 82% of the company’s shares, an increase compared with the 80% at year-end 2020. Around 41% (2020: 40%) of SimCorp shares were managed by investors who are also clients of SimCorp. In accordance with section 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec SimCorp Annual Report 2021 Management report Shareholder information 45 55 of the Danish Companies Act, the following investors have reported holding more than 5% of SimCorp’s share capital: The share-based incentive program based on restricted stock units will continue in 2022 and comprises restricted stock units with a market value of approximately EUR 5.3m on the date of grant. Shareholder structure by geography 2021 Denmark • Mawer Investment Management Ltd., 6.2% • Ameriprise Financial Inc. group, USA, with a part held by the subsidiary Columbia Wanger Asset Management LLC, 5.1% 16.9% (2020: 18.6%) Furthermore, in September 2021, the following restricted stock units were granted to the CEO and CFO as retention programs, 11,562 restricted stock units to Christian Kromann in connection with his appointment as CEO and 5,781 restricted stock units to Michael Rosenvold, CFO as part of a retention incentive. The fair value of these restricted stock units amounted to EUR 2.0m at the time of allotment. The restricted stock units will vest 1/3 after three years, 1/3 after four years and 1/3 after five years condi- tional upon continued service and an increased investment in SimCorp shares by Christian Kromann of DKK 5m, and by Michael Rosenvold of DKK 2.5m, both to be completed by end of August 2023. In addition, 1,466 restricted stock units related to LTIP 2021 were granted to Christian Kromann in connection with his appointment as CEO. North America 41.3% (2020: 35.2%) UK 23.4% (2020: 26.5%) Europe (ex. DK and UK) 18.2% (2020: 19.5%) Share-based incentive schemes In accordance with the remuneration policy, approved by the shareholders at the Annual General Meeting 2021, the Board of Directors approved the share-based LTIP for management and key employees based on restricted stock units. The fair value of the restricted stock units amounted to EUR 4.3m at the time of allotment, and a total of 41,678 restricted stock units of DKK 1 were granted, including 21,459 restricted stock units to the Executive Management Board and 228 restricted stock units to employee-elected members of the Board of Directors. Rest of the world 0.2% (2020: 0.2%) Shareholder structure by category 2021 The above-mentioned LTIP restricted stock units will vest after three years, subject to continuing employment and subject to conditions with respect to average annual minimum business growth and annual average net operating profit after tax for the financial years 2021-2023. If the two latter conditions are only partially met, the number of shares transferred after three years will be reduced, potentially to zero. In addition, regional retention programs, totaling 17,038 restricted stock units were granted in 2021 as retention programs for senior employees in EMEA, North America, and APAC. The fair value of these restricted stock units amounted to EUR 1.9m at the time of allotment. The RSUs will vest after three years subject to continued employment and certain performance conditions for the financial years 2021 to 2023. Institutional investors 81.8% (2020: 80.6%) Private investors 10.8% (2020: 11.7%) Employees and management 4.8% (2020: 5.6%) Treasury shares In addition, 61,609 restricted stock units relating to the corporate bonus program for 2020 were granted in 2021 and distributed among employees in the Group, including 461 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. Furthermore during 2021, 3,502 RSUs were granted to senior employees in the Group as part of sign-on agreements and incentive programs. The fair value at grant date was EUR 0.4m. The RSUs will vest after three years subject to continued employment and certain performance conditions for the financial years 2021 to 2023. 2.6% (2020: 2.1%) SimCorp Annual Report 2021 Shareholder information 46 SimCorp’s share-based incentive schemes are further detailed in note 3.2 to the financial statements. In accordance with SimCorp’s Remuneration Policy, members of the Board of Directors will in 2022 continue to receive SimCorp shares with a total value equal to one third of their total remuneration, or for members with residence outside of Denmark, they may choose to receive a cash payment instead, provided the cash payment is invested in SimCorp shares. Financial calendar 2022 Share data 2022 March 24, 2022 Annual General Meeting 2022 Stock exchange Nasdaq Copenhagen A/S 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 shareholders in general. March 29, 2022 Expected date for pay-out of dividend Index OMXC25 Management shares/restricted stock units Sector Technology As at December 31, 2021, the members of the company’s Board of Directors held a total of 59,167 SimCorp shares and 1,606 restricted stock units were held by employee- elected members of the Board. The members of the Group’s Executive Management Board held a total of 225,107 SimCorp shares and 96,289 restricted stock units. May 19, 2022 Publication of interim financial report Q1 2022 (early morning) ISIN code DK0060495240 Short code Aug 12, 2022 Publication of interim financial report H1 2022 (early morning) SIM Additional information on the holdings of SimCorp shares and restricted stock units by members of the Board of Share capital DKK 40,500,000 Nominal size Nov 15, 2022 DKK 1 Publication of interim financial report 9M 2022 (early morning) Total remuneration of Board of Directors and committees1 Number of shares 40,500,000 Nomination and Renumeration Committee Fee Board DKK Audit and Risk Committee Technology Committee Negotiable papers Yes Multiplier Multiplier 0.75 DKK 315,000 N/A Multiplier 0.375 DKK 157,500 N/A Multiplier 0.50 DKK 210,000 N/A Chair 3 2 1 1,260,000 840,000 420,000 Vice-chair Member N/A N/A N/A Restriction in voting rights No 0.375 157,500 0.1875 78,750 0.25 105,000 1 Total remuneration to be proposed at the Annual General Meeting in March 2022 (cash and share-based). SimCorp Annual Report 2021 Management report Shareholder information 47 Directors, the Executive Management Board, and other related parties is disclosed in note 7.2 to the financial statements. The adjusted Remuneration Policy take effect if and when approved by the shareholders at the Annual General Meeting in March 2022. be distributed for the financial year 2021. The dividends of EUR 39.9m are equivalent to 36.3% of Group profit for the year and 50.7% of free cash flow in 2021. Annual general meeting The current Policy for remuneration of the Board of Directors and Executive Management Board can be found on the company’s website. In order to be eligible for dividends, shares must be registered before March 24, 2022. The ex-dividend date is March 25, 2022. Dividends for the financial year 2021 are expected to be paid on March 29, 2022. The Annual General Meeting of SimCorp A/S will be held on: Thursday, March 24, 2022 at 3pm at SimCorp’s headquarters, Weidekampsgade 16, Copenhagen, Denmark. It will also be possible to participate in Annual General Meeting via webcast. Agenda and proposed resolutions will be published on Thursday, February 24, 2021, with notice sent by email to all shareholders. → Remuneration Policy https://www2.simcorp.com/RemunerationPolicy2021 Based on the current cash position and business outlook, SimCorp expects to initiate a share buyback program in 2022 for a forecasted 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 2021 to the end of 2022. The program will be carried out in compliance with the provisions of Regulation No. 596/2014 of the European Parliament, the Council on market abuse, MAR, and delegated legislation under MAR. 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. Six of the seven 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. Hervé Couturier has decided not to stand for re-election. Brief biographies of the current members of the Board of Directors are found on pages 49-50. Dividends and share buyback 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 free cash flow. 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 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. Investor relations With the transformation of SimCorp to a technology-based services company, there comes a big need for a technology transformation. The successful technology transformation will be a key success factor for SimCorp and will require a continuous investment into transformation projects. In order to provide for Board oversight and sparring with management on the technology transformation, the Board of Directors will propose to establish a Technology Committee. Consequently, the Board of Directors will propose changes to its remuneration. The Board of Directors will not propose any changes to the existing base fee and multipliers, but propose remuneration for the Technology Committee of DKK 210,000 (multiplier 0.5) for the Chair of the Technology Committee and DKK 105,000 (multiplier 0.25) for the ordinary members of the Technology Committee (see table on page 46). 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. 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 The Board of Directors has considered SimCorp’s cash position and liquidity forecast, and on the basis thereof, the Board of Directors intends to recommend to the shareholders at the Annual General Meeting that dividends of EUR 39.9m, equal to DKK 7.50 per share of DKK 1, Announcements to Nasdaq Copenhagen in 2021 can be found at www.simcorp.com/en/news-and-announcements SimCorp Annual Report 2021 Board of Directors 5 4 10 6 2 3 7 1. Peter Schütze, Chair 2. Morten Hübbe, Vice-chair 3. Hervé Couturier 4. Simon Jeffreys 8 1 5. Adam Warby 6. Joan A. Binstock 7. Susan Standiford 8. Else Braathen 9. Vera Bergforth1 10. Hugues Chabanis 1 Not present at the photoshoot SimCorp Annual Report 2021 Management report Board of Directors 49 Peter Schütze Morten Hübbe Hervé Couturier Simon Jeffreys Adam Warby Chair Vice-chair Business address: SimCorp A/S, Weidekampsgade 16, 2300 Copenhagen S, Denmark. Business address: Tryg, Klausdalsbrovej 601, 2750 Ballerup, Denmark. Business address: Kerney Partners, 54, rue Franklin, 78100 Saint Germain en Laye, France. Business address: Aon UK Ltd., The Aon Centre, 122 Leadenhall Street, London EC3V 4AN, UK. Business address: Avanade Inc., 30 Cannon Street, London, EC4M 6XH, UK. Personal and educational background Born 1948, Danish citizen, MSc (Econ.). Personal and educational background Born 1972, Danish citizen, BSc (Int. BA & Modern Languages), MSc (Fin. & Acc.). Personal and educational background Born 1958, French citizen, MSc (Industrial Engineering) from École Centrale de Paris. 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 1960, British citizen, B.Sc. in Mechanical Engineering from Imperial College, London. Career and directorships Former CEO of Nordea Bank Danmark A/S. Chair of SimCorp A/S’ Board of Directors since 2019 and Vice-chair 2012-2019. Member of SimCorp A/S’ Nomination and Remuneration Committee since 2017. Chair of the Board of Directors of DSB SOV, Nordea-fonden and Tietgenfonden. Vice-chair of Lundbeckfonden and Lundbeckfond Invest A/S. Member of Falck A/S, Axelfuture, the Systemic Risk Council, and Gösta Enboms Fond. Chair of the investment Career and directorships Career and directorships Career and directorships Career and directorships Former CEO of Avanade Inc. Group CEO of Tryg since 2011. From 2002-2011 Group CFO of Tryg. Member of SimCorp A/S’ Board of Directors since 2018 and Vice-chair since 2019. Chair of SimCorp A/S’ Nomination and Remuneration Committee since 2019. Board member of TJM Forsikring. Chair of Conscia and Siteimprove. 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, Former PwC Global Investment Management Leader and senior audit partner, and Chief Operating Officer of the Wellcome Trust. Member of SimCorp A/S’ Board of Directors since 2011. Chair of SimCorp A/S’ Audit and Risk Committee since 2013. Director and Chair of the Audit Committee of the Boards of Directors of St James’s Place plc. Chair of the Audit and Risk Committees of Templeton Emerging Markets (Microsoft & Accenture joint venture) from 2008-2019. Member of SimCorp A/S’ Board of Directors since 2017. Member of SimCorp A/S’ Audit Committee since 2019. Chair of the Board of Heidrick & Struꢁles. Chair of Junior Achievement Europe. Board member of SoftwareONE Holding AG. Independence Is regarded as independent. Independence Is regarded as independent. Sportradar and Kyriba. committee of Danish SDG Investment Fund and Dronning Margrethe den II’s Arkæologiske Fond. Investment Trust plc., and the Crown Prosecution Service. Chair of Aon UK Ltd. and Henderson International Income Trust plc. Relevant competences and experiences Independence Is not regarded as independent. 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. 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. Relevant competences and experiences International experience in software development for the financial and B2B sectors, as well as general management skills. Independence Is regarded as independent. Relevant competences and experiences 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 development and governance of companies with IT and consultancy activities. More than 30 years of management experience from an international financial company as well as several board positions both as chair and member. Involvement in IT development and trading operations in financial institutions. SimCorp Annual Report 2021 Management report Board of Directors 50 Joan A. Binstock Susan Standiford Else Braathen Vera Bergforth Hugues Chabanis Business address: Lovell Minnick Partners, LLP, 1155 Avenue of the Americas, New York, NY 10036, USA. Business address: Total Jobs Group, Blue Fin Building, 110 Southwark Street, London, SE1 0SU Business address: SimCorp A/S, Weidekampsgade 16, 2300 Copenhagen S, Denmark. Business address: SimCorp GmbH, Justus-von-Liebig-Straße 1, 61352 Bad Homburg, Germany. Business address: SimCorp France S.A.S., 23 rue de Vienne, 3rd floor, 75008 Paris, France. United Kingdom. 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. 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. Personal and educational background Born 1967, US citizen, BA, Anthropology & Mathematics, University of Illinois, IL, USA Directorships Directorships Directorships Employee-elected member of SimCorp A/S’ Board of Directors since 2019. Member of the Board of Directors of Domos FS. Career and directorships 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. Career and directorships Chief Product and Technology Officer, StepStone. Previous positions include Chief Technology Officer of IKEA IT AB and CTO and COO within international technology companies. Former CFO and COO at Lord, Abbett & Co. LLC. (1999-2018). Prior to joining Lord Abbett, Joan worked inter alia for Goldman Sachs within the Capital Markets Group and for PricewaterhouseCoopers, LLC as a manager, 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 of Brown Brothers Harriman US Mutual Funds, KKR Real Estate Trust, and Morgan Stanley Direct Lending Funds. Relevant competences and experiences Relevant competences and experiences More than 15 years in risk management in leading financial institutions, as well as in SimCorp’s Product Management shaping the risk solutions of SimCorp Dimension. Relevant competences and experiences 17 years in the Alternative Investments Software industry and different job positions including consulting, sales, presales, and product management across Europe, North America, and Africa. Independence Is regarded as independent. More than 30 years’ experience from the financial industry within private asset management, custodian, insurances & pensions, and fund administration. Expertise within back office operations, fund administration, accounting, and business analysis. 15 years with SimCorp, taking on different roles in Global Presales, Consultancy, and Go-to-Market. Relevant competences and experiences 30 years of technical and managerial experience from various industries including software. Technology visionary leader with knowledge how to market and deliver innovative value-based solutions. Independence Is regarded as independent. Relevant competences and experiences Experience from the financial services industry within finance, risk management and operations, including software selection and implementation. SimCorp Annual Report 2021 51 Executive Management Board 1 1. Christian Kromann Born 1972. Chief Executive Officer. Employed since 2019. 3 Present position held since 2021. Member of SimCorp A/S’ Executive Management Board. Member of the Board of Directors of deriStrat AB. 2 2. Michael Rosenvold Born 1967. Chief Financial Officer. Employed since 2017. Present position held since 2017. 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. Chair of the Audit Committee of DHI A/S. 3. Georg Hetrodt Born 1966. Chief Product Officer. Employed since 1998. Present position held since 2009. Member of SimCorp A/S’ Executive Management Board. Chair of the Board of Directors of Dyalog Ltd. SimCorp’s Executive Management Board is a part of Group Management Committee presented on page 52. SimCorp Annual Report 2021 Management report Group Management Committee 52 Group Management Committee1 Hans Otto Engkilde James Corrigan Oliver Johnson Jochen Müller Fred Bouteiller Born 1969 Born 1976 Born 1985 Born 1966 Born 1971 SimCorp EMEA, Managing Director Employed since 1999 Present position held since 2020. SimCorp North America, Managing Director Employed since 2014 Present position held since 2014. Chief Commercial Officer, SimCorp APAC, Managing Director Employed since 2017 Present position held since 2017. Investment Accounting Services, Managing Director Employed since 1996 Present position held since 2019. Global Services, Employed since 2020 Present position held since 2020. Marc Henoch Marc Schröter Thomas Hejlsberg Piet Syhler Malene Krohn Born 1973 Born 1969 Born 1963 Born 1964 Born 1973 Global Managed Services Employed since 2003 Present position held since 2020. Global Product Management Employed since 1995 Present position held since 2014. Architecture and Technology, Chief Technology Officer Employed since 2018 Product Division Employed since 2020 Present position held since 2020. Product Division Employed since 1998 Present position held since 2019. Present position held since 2018. Marlene Nyholm Voss Johan Rosengreen Kringel Martin Schak Møller Christoffer de Maré Born 1973 Born 1976 Born 1975 Born 1970 Chief Human Resources Officer Employed since 2014 Present position held since 2019. Chief of Staff Group Legal and Compliance Employed since 2008 Present position held since 2018. Xaas Delivery 1 The three Executive Management Board members (see page 51) are also members of Group Employed since 2018 Present position held since 2018. Employed since 2015 Present position held since 2021. Management Committee. SimCorp Annual Report 2021 Management report Statements and signatures 53 Statements and signatures Statement by the Board of Directors and the Executive Management Board In our opinion, the Consolidated Financial Statements and a description of the most significant risks and elements of uncertainty facing the Group and the Parent Company. the Parent Company Financial Statements give a true and fair view of the financial position at December 31, 2021 of the Group and the Parent Company and of the results of the Group and Parent Company operations and cash flows for 2021. The Board of Directors and Executive Management Board have today considered and adopted the Annual Report of SimCorp A/S for the financial year January 1 – December 31, 2021. In our opinion, the Annual Report of SimCorp A/S for the financial year January 1 – December 31, 2021 with the file name simcorp-2021-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. In our opinion, the 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 results for the year and of the financial position of the Group and the Parent Company as well as 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. We recommend that the Annual Report be adopted at the Annual General Meeting. Copenhagen, February 15, 2022. Executive Management Board Board of Directors Christian Kromann Chief Executive Officer Michael Rosenvold Chief Financial Officer Peter Schütze Chair Morten Hübbe Vice-chair Hervé Couturier Else Braathen Simon Jeffreys Vera Bergforth Adam Warby Georg Hetrodt Joan Binstock Susan Standiford Hugues Chabanis Chief Product Officer SimCorp Annual Report 2021 Management report Independent Auditor’s Reports 54 Independent Auditor’s Reports To the shareholders of SimCorp A/S Basis for opinion We conducted our audit in accordance with International Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2021. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Report on the audit of the Financial Statements 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. Our opinion 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 2021 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 2021 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. Accounting for taxation The Group operates in a complex multinational tax environment and there are open tax and transfer pricing cases with domestic and foreign tax authorities. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and 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. We focused on this area as the amounts involved are potentially material and the valuation of tax assets and liabilities are associated with estimation uncertainty and judgement. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. 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. What we have audited How our audit addressed the key audit matter The Consolidated Financial Statements and Parent Company Financial Statements of SimCorp A/S for the financial year 1 January to 31 December 2021 comprise income statement and statement of comprehensive income, cash flow statement, statement of financial position, statement of changes in equity 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”. In understanding and evaluating Management’s judgement, we considered the status of recent and current tax authority audits and enquiries, the outcome of previous claims, judgmental positions taken in tax returns and current year estimates and developments in the tax environment. 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 8 years including the financial year 2021. 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. SimCorp Annual Report 2021 Management report Independent Auditor’s Reports 55 Statement on Management Report Management is responsible for Management Report. Key audit matter How our audit addressed the key audit matter 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. The Group and the Parent Company provide its products and services to customers in bundled packages as multi-element contracts, and recognition of revenue is subject to the inherent complexities in the software industry. Our opinion on the Financial Statements does not cover Management Report, and we do not express any form of assurance conclusion thereon. For revenue recognized we challenged and evaluated Management’s assessment that the customers have the ability to direct use and obtain substantially all benefits for the licenses transferred. 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. 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. For revenue recognized point in time we challenged and evaluated Management’s documentation for right to payment and that the licenses have 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. 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. For multi-element contracts, we challenged and evaluated Management’s allocation of revenue to the identified performance obligations in the contracts and assessed the allocation of the standalone selling prices to the performance obligations including rebates, discounts, allowances and inherent interests. Further, we focused on presentation in the statement of financial position of contracts assets and revenue recognition for fixed fee projects due to the inherent estimation uncertainty. Moreover, we considered whether Management Report includes the disclosures required by the Danish Financial Statements Act. Refer to note 2.1 “Revenue”, 2.2 “Segment information”, 2.3 “Future performance obligations” and note 2.4 “Contract balances” in the Consolidated Financial Statements and note 2.1 “Revenue”, 2.2 “Future performance obligations” and note 2.3 “Contract balances” in the Parent Company Financial Statements. We assessed the percentage of completion 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. 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 Statements Act. We did not identify any material misstatement in Management Report. 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 determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. SimCorp Annual Report 2021 Management report Independent Auditor’s Reports 56 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 applicable, 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. • 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 effectiveness of the Group’s and the Parent Company’s internal control. 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. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. 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, actions taken to eliminate threats or safeguards applied. 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 aꢁregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent 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 our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Company to cease to continue as a going concern. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. • 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, misrepresentations, or the override of internal control. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. SimCorp Annual Report 2021 Management report Independent Auditor’s Reports 57 Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements 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 2021 with the filename simcorp- 2021-12-31-en.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 taꢁing of the Consolidated Financial Statements. respects, in compliance 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: • Testing whether the annual report is prepared in XHTML format; Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • Obtaining an understanding of the company’s iXBRL taꢁing process and of internal control over the taꢁing process; Hellerup, February 15, 2022 PricewaterhouseCoopers • The preparing of the annual report in XHTML format; • Evaluating the completeness of the iXBRL taꢁing of the Consolidated Financial Statements; Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be taꢁed using judgement where necessary; • 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; Rasmus Friis Jørgensen State Authorised Public Accountant mne28705 • Ensuring consistency between iXBRL taꢁed data and the Consolidated Financial Statements presented in human- readable format; and • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL taꢁed data with the audited • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Consolidated Financial Statements. In our opinion, the annual report of SimCorp A/S for the financial year 1 January to 31 December 2021 with the file name simcorp-2021-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Thomas Baunkjær Andersen State Authorised Public Accountant mne35483 Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material SimCorp Annual Report 2021 Consolidated financial statements 58 Consolidated financial statements 58 — 104 SimCorp Annual Report 2021 Consolidated financial statements 59 Consolidated financial statements Statements Section 2 Section 4 Section 6 Revenue and clients Tax Equity, capital structure and Financing items 060 Income statement 060 Statement of comprehensive income 061 Cash flow statement 062 Statement of financial position 063 Statement of changes in equity 064 Notes 68 2.1 Revenue 84 4.1 Income tax 85 4.2 Deferred tax 093 6.1 Equity, treasury shares, and dividends 094 6.2 Risk 099 6.3 Financial assets and liabilities 100 6.4 Financial income and expenses 71 73 2.3 Future performance obligations 74 2.4 Contract balances 2.2 Segment information 76 2.5 Receivables 105 SimCorp A/S Section 1 Section 3 Section 5 Section 7 Basis of preparation Employees Invested capital Other disclosures 64 1.1 Accounting policies, estimates, and judgments 77 3.1 Employee cost 87 5.1 Acquisition of enterprises 88 5.2 Intangible assets 90 5.3 Property, plant, and equipment 101 102 103 103 103 7.1 Earnings per share 7.2 Related party transactions 7.3 Auditors’ remuneration 7.4 Contingent liabilities 7.5 Events after statement of financial position date 7.6 Associates 78 3.2 Share based remuneration 81 3.3 Pension and similar liabilities 83 3.4 Provisions 103 103 7.7 Subsidiaries SimCorp Annual Report 2021 Consolidated financial statements Statements 60 Consolidated financial statements Income statement Statement of comprehensive income EUR ’000 Note 2.1, 2.2 2021 496,274 196,982 299,292 709 2020 455,970 167,415 288,555 846 EUR ’000 Note 2021 2020 Revenue Profit for the year 109,992 88,258 Cost of sales 3.1, 3.2, 5.2, 5.3 Other comprehensive income Gross profit Items that will not be reclassified subsequently to the income statement: Other operating income Research and development costs Sales and marketing costs Administrative expenses Operating profit (EBIT) Share of profit after tax in associates Financial income 3.1, 3.2, 5.2, 5.3 3.1, 3.2, 5.2, 5.3 3.1, 3.2, 5.2, 5.3 91,771 50,230 25,583 132,417 174 91,830 50,198 23,077 124,296 104 Remeasurements of defined benefit plans Tax, remeasurement of defined benefit plans 3.3 1,934 -396 47 -1 Items that may be reclassified subsequently to the income statement, when specific conditions are met: Foreign currency translation differences for foreign operations Other comprehensive income after tax Total comprehensive income 2,500 4,038 -2,742 -2,696 85,562 6.4 6.4 5,774 101 114,030 Financial expenses Profit before tax 947 8,405 137,418 27,426 109,992 116,096 27,838 88,258 Tax on the profit for the year Profit for the year 4.1 Earnings per share EUR ’000 Note 7.1 2021 2.76 2.74 2020 2.22 2.20 Earnings per share – EPS (EUR) Diluted earnings per share – EPS-D (EUR) 7.1 SimCorp Annual Report 2021 Consolidated financial statements Statements 61 Consolidated financial statements Cash flow statement Cash flow 2021 (EUR '000) EUR ’000 Note 2021 109,992 15,379 -174 2020 88,258 16,094 -104 90,696 -5,675 -90,996 Profit for the year Amortization and depreciation Share of profit after tax in associates Financial income 5.2, 5.3 6.4 6.4 4.1 -5,774 947 -101 Financial expenses 8,405 Tax on profit for the year Other non-cash items1 27,426 12,904 11,332 -1,663 -44,861 -11,169 5 27,838 -7,037 10,997 -2,055 -24,558 9,302 Adjustment share based remuneration Changes in provisions 3.4 2.4 Changes in contract assets Changes in working capital 53,051 616 47,692 Financial income received 101 Financial expenses paid -319 -1,901 -20,674 104,565 -2,399 -361 Income tax paid 4.1 5.3 6.4 -23,329 90,696 -1,259 -4,507 91 Net cash from operating activities Purchase of property, plant, and equipment Sale and purchase of financial assets, net Dividends from associates 79 Net cash used in investing activities Dividends paid -5,675 -40,086 -40,102 -10,808 - -2,681 -39,879 -10,006 -10,357 -20,000 -80,242 21,642 31,851 -442 Purchase of treasury shares Repayment of lease liability Repayment from credit facilities/loans Net cash used in financing activities Change in cash and cash equivalents Cash and cash equivalents at January 1 Foreign exchange adjustment of cash and cash equivalents Cash and cash equivalents at December 31 6.1 5.3 -90,996 -5,975 53,051 616 47,692 53,051 1 In 2021, other non-cash items of EUR 12.9m were primarily related to unrealized exchange gains and other adjustments. (In 2020: EUR -7.0m primarily related to unrealized exchange losses). SimCorp Annual Report 2021 Consolidated financial statements Statements 62 Consolidated financial statements Statement of financial position December 31 EUR ’000 Note 2021 2020 EUR ’000 Note 2021 2020 Assets Liabilities and equity Share capital Goodwill 5.2 5.2 5.2 61,645 9,801 61,367 11,471 22,887 95,725 43,684 1,063 5,441 -2,225 280,003 39,888 323,107 32,088 33,121 9,743 5,441 -4,725 237,409 40,125 278,250 34,547 28,323 11,119 73,989 9,630 Software Exchange adjustment reserve Retained earnings Proposed dividend Total equity Client relationships Total intangible assets Leasehold 21,245 92,691 40,095 860 5.3 5.3 5.3 Technical equipment Other equipment, fixtures, fittings and prepayments Total property, plant and equipment Investments in associates Deposits Lease liabilities 5.3 4.2 2,737 2,903 Deferred tax 43,692 909 47,650 881 Provisions 3.4, 4.2 7.6 6.3 4.2 Total non-current liabilities Lease liabilities 74,952 8,577 2,123 2,031 5.3 2.4 Deferred tax 3,091 4,173 Prepayments from clients Trade payables 31,239 29,126 49,993 8,886 26,231 17,747 59,158 5,118 Other financial assets Total other non-current assets Total non-current assets Receivables 4,843 404 10,966 147,349 96,543 221,000 2,060 7,489 Other payables 150,864 82,513 175,928 1,194 Income tax payables Provisions 4.1 3.4 2.5 2.4 4.1 432 719 Contract assets Total current liabilities Total liabilities 128,253 203,205 526,312 118,603 192,592 470,842 Income tax receivables Prepayments 11,668 47,692 378,963 526,312 7,292 Total liabilities and equity Cash and cash equivalents Total current assets Total assets 53,051 319,978 470,842 SimCorp Annual Report 2021 Consolidated financial statements Statements 63 Consolidated financial statements Statement of changes in equity Exchange adjustment reserve Movements in equity 2021 (EUR '000) Share capital Retained earnings Dividends for the year 114,030 -40,086 EUR ’000 Total 11,332 -317 -40,102 2021 Equity at January 1 5,441 -4,725 - 237,409 109,992 1,538 40,125 278,250 109,992 4,038 323,107 Net profit for the year - - - - - - Total other comprehensive income Total comprehensive income for the year Transactions with owners Dividends paid to shareholders Share-based payment 2,500 2,500 278,250 111,530 114,030 - - 39 11,332 -317 -40,125 -40,086 11,332 -317 - - - Tax, share-based payment Purchase of treasury shares Proposed dividends to shareholders Equity at December 31 - - - - - - - - -40,102 -39,888 280,003 -40,102 - 39,888 39,888 5,441 -2,225 323,107 2020 Equity at January 1 5,441 -1,983 - 186,643 88,258 46 39,919 230,020 88,258 -2,696 85,562 Net profit for the year - - - - - - Total other comprehensive income Total comprehensive income for the year Transactions with owners Dividends paid to shareholders Share-based payment -2,742 -2,742 88,304 - - 40 10,997 1,556 -39,919 -39,879 10,997 1,556 - - - Tax, share-based payment Purchase of treasury shares Proposed dividends to shareholders Equity at December 31 - - - - - - - - -10,006 -40,125 237,409 -10,006 - 40,125 40,125 5,441 -4,725 278,250 SimCorp Annual Report 2021 Consolidated financial statements Section 1 64 1.1 Accounting policies, estimates, and judgments Section 1 Basis of preparation 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. General Basis of measurement The annual report for the period January 1 – December 31, 2021, includes the consolidated financial statements of SimCorp A/S (the Parent) and its subsidiary undertakings (the Group), as well as separate financial statements for SimCorp A/S. Reference is made to page 111 for the Parent’s specific accounting policies. SimCorp A/S is incorporated and domiciled in Denmark. 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. Basis of consolidation 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. Subsidiaries 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. 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 additional requirements in the Danish Financial Statements Act. Accounting policies focus on the accounting choices within the 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. 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. 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: On February 15, 2022 the Board of Directors and the Executive Management Board considered and approved the annual report for 2021 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, 2022. The directors have the power to amend and reissue the financial statements. Section 1 Basis of preparation Section 2 Revenue and clients Section 3 Employees 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 Section 4 Tax Section 5 Invested capital Section 6 Equity, capital structure and financing items Section 7 Other disclosures Presentation Currency The financial statements are presented in EUR, rounded to the nearest EUR 1,000. The functional currency of the Parent is DKK. SimCorp Annual Report 2021 Consolidated financial statements Section 1 65 1.1 Accounting policies, estimates, and judgments (continued) 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 Specific disclosures required by IFRS are presented, unless the information is considered immaterial to the economic decision making of the users. share-based payments, and other sales The cash flow statement is presented according 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. employee related costs, travel and meeting expenses, marketing expenses, withholding taxes, depreciation and amortization, and indirect costs such as technological infrastructure directly or indirectly attributable to the Group’s sales and marketing activities. Other operating income Operating costs Other operating income consists of income of a secondary nature relative to the activities of the Group, including gains on sale of intangible assets and property, plant and equipment and government grants. Government grants relate to research and development funding in the United Kingdom. Operating costs are allocated into cost of sales, research and development, sales and marketing costs, and administrative expenses. 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. 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 technological infrastructure directly or indirectly attributable to the Group’s administrative activities. Cost of sales cover costs incurred to achieve the year’s revenue, including costs of delivering and implementing systems, hosting and infrastructure costs, third party costs, courses, and support. These primarily comprise salaries, 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. As the grant is compensation for costs incurred it is recognized as other operating income in the period in which it is receivable. 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. Accounting estimates and judgments While applying the Group’s accounting policies, in addition to estimations, management 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. In 2021, the subsidiaries received EUR 83 thousand in COVID-19 related government assistance as tax relief, job growth incentive and job indemnity. Around EUR 60 thousand was reported as other operating income, the remaining was offset against expenses. Research and development costs comprise salaries, share-based payments, other employee related costs, depreciation and amortization, and other costs directly attributable 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 capitalization. For capitalization criteria see note 5.2. Cash from investing activities are related to the sale and purchase of long-term investments, including subsidiaries, fixed, intangibles and financial assets. Statement of comprehensive income Other comprehensive income consists 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. The estimates and judgments applied are based on assumptions which management believes to be reasonable, but which are inherently uncertain and unpredictable. Such assumptions may be incomplete or inaccurate, and unexpected events or circumstances may arise. Materiality The financial statements separately present items considered individually material. Individually immaterial items are aꢁregated with other items of similar nature in the statements or in the notes. Sales and marketing costs comprise salaries, commissions, bonuses, SimCorp Annual Report 2021 Consolidated financial statements Section 1 66 1.1 Accounting policies, estimates, and judgments (continued) 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. The amendment to IFRS 16 Leases has been assessed to have no impact on the consolidated financial statements. Therefore, the Group has chosen not to implement this amendment. 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. The implementation of these new or amended standards and interpretations has been assessed and had no material impact on the financial statements. Non-IFRS measures New financial reporting standards not yet adopted Certain measures disclosed regarding the Group’s financial performance, financial position and cash flows are not defined in IFRS. Management considers the following to be key accounting estimates and assumptions used in the preparation of the financial statements: Certain new accounting standards and interpretations have been published that are not yet in effect or endorsed by the EU and therefore not relevant for the preparation of 2021 consolidated financial statements. The Group expects to implement these standards as they take effect. These are defined under other non-IFRS measures and may not be defined and calculated by other companies in the same manner and may therefore not be comparable. • Revenue (note 2.1) • Tax and deferred tax (Section 4) Risk factors specific to the Group are described in the management report on pages 31-36 and in note 6.2. 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. New financial reporting standards The Group has applied the following standards and amendments for the first time in the reporting period starting January 1, 2021: iXBRL reporting The 2021 Annual report is prepared in the XHTML format which can be displayed in a standard browser in line with the new European Single Electronic Format (‘ESEF’). The primary statements are taꢁed using inline eXtensible Business Reporting Language (iXBRL) and comply with the ESEF taxonomy. • Revised conceptual framework for financial reporting • Amendment to IFRS 16, Leases COVID-19 Related Rent Concessions. SimCorp Annual Report 2021 Consolidated financial statements Section 1 67 1.1 Accounting policies, estimates, and judgments (continued) Financial ratio definitions Other non-IFRS measures definitions License base Revenue growth EBITDA Revenue current year x 100 / revenue last year earnings before interest, tax, depreciation, and amortization EBITDA / revenue x 100 accumulated order value for SimCorp Dimension clients Order intake value of initial and additional licenses contracts, subscription services agreements and client driven development agreements entered into during the reporting period EBITDA margin (%) EBIT margin (%) Invested capital operating profit (EBIT) / revenue x 100 Order book accumulated order intake value, where revenue could not be total assets – cash and cash equivalents – provisions – 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 prepayments from clients – trade payables and other payables ROIC (return on invested capital) Receivables turnover ratio Equity ratio (%) EBITDA / average invested capital x 100 revenue / receivables at year-end Revenue signed total revenue commitment for licenses, software updates and support fee, professional services, as a service offering, etc. equity at year-end / total assets at year-end x 100 profit for the year / average equity x 100 Return on equity (ROE) (%) Revenue, operating cost, and EBIT growth and margin 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 / average number of diluted shares Organic revenue, operating cost, and EBIT growth and margin in local currency effect of acquisitions, and exchange rate movements are excluded when calculating growth and EBIT margin by restating the measure for the current period at the previous year’s average rates and by excluding the effect of acquisitions in the first year the acquired company is included in the reported numbers 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 CAPEX purchase of intangible fixed assets + purchase of property, plant, and equipment – proceeds from sale of property, plant, and equipment dividends paid plus value of share buybacks / profit for the year x 100 Average number of shares number of shares issued, excluding treasury shares, as an average for the year 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 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 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 Market value ratio definitions Annualized contract value (ACV) Annual recurring revenue (ARR) initial and additional order intake divided by contract term (years) Price / Book value per share (P/BV) price / book value (BVPS) total revenue – total license fee + subscription based license fee – implementation services – other non-recurring fees. ARR is measured for last twelve months Price / Diluted price earnings (P/E Diluted) price / diluted earnings per share Price / Cash flow (P/CF) price / cash flow per share (CFPS) ARR as share of total revenue (%) ARR / total revenue x 100 SimCorp Annual Report 2021 Consolidated financial statements Section 2 68 2.1 Revenue Section 2 Revenue and clients 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 types updates and support fees include both 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. initial license and additional license-based software updates and support fees. Performance obligations include: unspecified future upgrades, maintenance and helpline support. License fees can be derived from 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. subscription or from perpetual license agreements. Subscription agreements give the right to use the software for a Accounting policies which relate to a particular note to the income statement have been included within each individual note. 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. In this section, the following notes are presented: 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 Software updates and support fees relate to contracts made on perpetual and subscription-based license terms. Software Revenue per type 2021 Type Licenses – initial sales 2021 4% 2020 5% Licenses – additional sales Software updates and support Professional services 19% 36% 34% 7% 15% 39% 34% 7% Hosting and other fees SimCorp Annual Report 2021 Consolidated financial statements Section 2 69 2.1 Revenue (continued) Accounting policies, judgments and estimates interrelated with the subscription fees, license fees and software updates and support fees or services sold under prior agreements, and how the subscription fees, license fees and software updates and support fees or services under the new agreement are priced. Conversion of perpertual license agreement to a subscription based license agreement is acounted for as a termination of the perpertual license agreement and a new subscription license agreement Judgment is required in determining whether a component is considered a separate performance obligation, in particular, professional 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. 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. Contract Identification Contracts can include several components, in this situation, the total contract sum is allocated to the separate performance obligations for the purpose of revenue recognition. 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. Separate contracts with the same client are treated as one contract if entered into at or near the same time and economically interrelated. Contracts closed more than 6 months apart are not considered to be entered at the same time. Options to acquire additional components 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 subscriptions fees, license fees, software updates and support fees sold with the option. Where standalone selling prices for a performance obligation are observable and reasonably 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. Performance obligation identification Contracts often include several components. License fees from new clients, license fees from additional sales to existing clients, software updates and support fees, professional services, hosting, training, Datacare, Coric, Digital Portal, IAaaS, other services, and third-party products constitute the main performance obligations. The fees allocated to the different performance obligations are recognized separately. In determining whether the various contracts are interrelated judgment is required. 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. 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 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. Estimate 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. 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 If not renewable, with highly variable pricing, and no substantial direct costs to estimate based on a cost-plus margin approach, allocation is achieved by applying a residual approach. We use this The consideration attributable to license fees in subscription-based agreements are discounted to net present value when the value of the financing element SimCorp Annual Report 2021 Consolidated financial statements Section 2 70 2.1 Revenue (continued) technique in particular for license and software updates and support. Revenue recognition 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. completion unless client acceptance is required. 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. Once the standalone price for other components 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: 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. Revenue from software updates and support agreements is recognized on a straight-line basis over the contract period. 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. 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. Apportionment applied Client-driven development entails direct cooperation between SimCorp’s development team and the client for a client-defined software. Such agreements are individually evaluated to determine if revenue is recognized at a point in time or over time. Dimension Coric Gain Sofia Licenses 50% 75% 50% 50% Software updates and support 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 50% 25% 50% 50% Software as a Service (SaaS), such as on-boarding and operating services, hosting fees, Datacare, Coric Digital Portal, Regulatory Reporting Platform (RRP), and Investment Accounting Services (IAS), are revenue recognized over the term of the service. Total apportionment 100% 100% 100% 100% Professional services fees are recognized based on work performed for time and material contracts. Fixed fee agreements are recognized based on percentage of generally recognized at that point-in-time. When the contract contains functionality gaps or requires client acceptance of Revenue Share of revenue Share of revenue 2020 Revenue growth local currencies Revenue growth EUR '000 2021 21,533 2021 2020 22,364 Licenses – initial sales Licenses – additional sales Software updates and support Professional services Hosting and other fees Total revenue 4.3% 4.9% 15.2% 38.7% 33.9% 7.3% -3.7% 33.7% 1.6% 8.5% 5.6% 8.8% -1.6% 32.8% 1.4% 8.7% 5.0% 8.7% 92,506 18.6% 36.1% 33.9% 7.1% 69,188 179,361 167,894 34,980 176,575 154,730 33,113 496,274 100.0% 455,970 100.0% SimCorp Annual Report 2021 Consolidated financial statements Section 2 71 2.1 Revenue (continued) 2.2 Segment information Where SimCorp stands ready to provide the service (such as access to e-learning and hosting operating services) revenue is recognized based on time elapsed – ratably over the period applicable. Judgment is applied in determining which method to use. invoiced. Significant countries are defined as countries representing 5.0% or more of the Group’s revenue. None of the reported licenses – initial sales is derived from perpetual sales (2020: EUR 0.0). 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 organized into business units regularly reviewed by the Executive Management Board, who is responsible for assessing the Group’s performance and making resource allocation decisions. Accounting policies The accounting policies of the reported segments 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 From the reported licenses – additional sales EUR 23.9m is derived from perpetual sales (2020: EUR 18.8m). All the judgments and estimates mentioned above can significantly impact the timing and amount of revenue to be recognized. The Group has no client contributing revenue of more than 4.0% (2020: 5.5%) of total revenue. 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. investments in associates. Segment reporting is prepared in accordance with the Group’s internal management reporting structure for performance management and resource allocation. The geographical distribution of revenue is based on the country in which the client is Revenue allocation by country (significant) 2021 2020 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 other business units for the right to distribute SimCorp Dimension software, and broker fees. Segment income and costs consist of transactions between the segments. Such transactions are made on market terms. EUR '000 81,695 68,049 40,429 31,665 31,184 30,566 30,103 25,885 156,698 496,274 % 16.5% 13.7% 8.1% EUR '000 81,459 73,912 31,286 20,945 30,673 28,104 26,718 29,660 133,213 455,970 % 17.9% 16.2% 6.9% USA Germany Switzerland France Canada Italy Research and development and Corporate functions are not operating segments, and the disclosure forms part of the reconciliation to Group totals rather than being information about operating segments. 6.4% 4.6% 6.3% 6.7% 6.2% 6.2% 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. Netherlands Denmark Other 6.1% 5.9% 5.2% 6.5% Information about liabilities and additions to assets by segment are not regularly provided to the Executive Management Board. 31.5% 100.0% 29.1% 100.0% Total SimCorp Annual Report 2021 Consolidated financial statements Section 2 72 2.2 Segment information (continued) Segment information EUR '000 Asia and Australia North America SimCorp Research and development Corporate functions Elimination/ Not allocated EMEA Sofia Group 2021 Licenses – initial sales Licenses – additional sales Software updates and support Professional services Hosting and other fees 12,398 66,844 132,886 90,334 19,875 322,337 35,238 357,575 2,080 5,021 7,055 14,101 26,060 48,420 10,152 105,788 9,113 - 6,540 4,840 11,310 33 - - - - 21,533 92,506 179,361 167,894 34,980 496,274 - - - - 15,178 17,830 3,696 397 - - - - 943 281 - - External revenue 43,805 2,480 22,723 887 1,340 204,079 205,419 281 Revenue between segments Total segment revenue 52,816 53,097 -304,613 -304,613 46,285 114,901 23,610 496,274 EBITDA 46,301 4,414 2,319 694 10,969 1,321 11,890 1,413 118,879 1,812 -42,562 5,725 - - 147,796 15,379 Depreciation and amortization Segment operating profit (EBIT) Financial items, net 41,887 1,625 9,648 10,477 50,962 117,067 60,605 -48,287 3,100 - 132,417 5,001 5,001 Profit for the period before tax Total assets 137,418 526,312 254,817 46,265 103,216 7,347 2020 Licenses – initial sales Licenses – additional sales Software updates and support Professional services Hosting and other fees 2,346 54,406 132,990 88,256 18,449 296,447 27,332 323,779 5,954 603 14,064 8,704 - 5,475 4,753 9,493 3 - - - - 22,364 69,188 176,575 154,730 33,113 455,970 - - - - 13,305 13,487 2,550 24,973 43,494 10,672 101,907 4,617 554 - - - - 1,257 1,811 183,855 185,666 182 - - External revenue 35,899 2,022 19,724 1,122 20,846 182 Revenue between segments Total segment revenue 55,927 56,109 -274,875 -274,875 37,921 106,524 455,970 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 -11,493 17,933 - 124,296 -8,200 -8,200 Profit for the period before tax Total assets 116,096 470,842 153,678 40,358 81,887 44,053 99,059 33,874 Research and Development, corporate functions and elimination / not allocated are not operating segments but part of reconciliation of the segment data to the group income statement. SimCorp Annual Report 2021 Consolidated financial statements Section 2 73 2.2 Segment information (continued) 2.3 Future performance obligations 2021 EUR '000 58,929 2020 EUR '000 Non-current asset allocation by country (significant) The amount of a customer contract’s transaction price that is allocated to the remaining performance obligations represents contracted 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 % 40.8% 20.5% 16.4% 5.0% % 40.7% 21.1% 18.6% 6.1% Austria 59,704 30,972 27,283 9,015 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. Italy 29,633 23,707 7,257 Denmark United Kingdom Geographical allocation of fixed assets is based on the country in which economic benefits are derived from the asset. 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. The transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of December 31, 2021 is EUR 554.8m (2020: EUR 405.6m). 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. Significant countries are defined as countries representing 5.0% or more of the Group’s non-current 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 estimates 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 141.3m in 2021 (2020: EUR 113.3m) of the amount allocated to the future performance obligations as of December 31, 2021 will be recognized during 2022. EUR 342.3m (2020: EUR 228.6m) 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. SimCorp Annual Report 2021 Consolidated financial statements Section 2 74 2.4 Contract balances Contract balances consist of client-related assets and liabilities. EUR 84.8m (2020: EUR 67.3m) and finance income recognized EUR 2.0m (2020: EUR 2.3m). Foreign exchange as well as adjustments also had a positive impact partly off-set by deduction of expected credit loss provision with overall positive impact of EUR 8.6m (2020: EUR -7.3m). The overall balance was reduced by invoiced subscription-based license fees of EUR 50.3m (2020: EUR 37.9m). prepayments 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 estimated sales value of the proportion of the contract completed at the statement of financial position date. 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. recognition, resulting in liabilities. 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 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. When a client pays consideration in advance, or an amount of consideration is due contractually before transferring of the license or service, then the amount received in advance is presented as a liability. Contract liabilities represent mainly Contract assets increased by EUR 45.1m with subscription-based licenses adding Contracts in progress relating to fixed fee professional services are measured at the Changes in contract assets Invoiced from opening balance Financing income recognized Invoicing of contract assets Opening balance Net additions Closing balance EUR '000 Adjustments1 EUR '000 2021 31,893 24,057 50,456 44,944 32,656 20,603 22,368 2020 21,476 17,264 38,801 33,754 27,941 19,411 23,890 1 to 6 months 2021 7 to 12 months 13 to 24 months 25 to 36 months 37 to 48 months 49 to 60 months After 60 months Total contract assets(gross) Contract assets (gross) Contract interest element Loss allowance 182,537 -5,435 -39,434 74,610 -624 9,264 -700 - - 2,042 - 226,977 -4,717 - - -1,174 -86 -1,260 Contract assets (NPV) 175,928 -39,434 73,900 8,564 2,042 221,000 2020 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 -5,435 226,977 182,537 - - -269 - -1,174 Contract assets (NPV) 151,774 -34,032 63,139 -7,302 2,349 175,928 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. SimCorp Annual Report 2021 Consolidated financial statements Section 2 75 2.4 Contract balances (continued) Changes in contract liabilities EUR '000 Revenue recognized from liability Opening balance Net additions Closing balance opening balance Adjustments1 2021 Contract liabilities – licenses Contract liabilities – software updates and support Contract liabilities – services Contract liabilities – other 3,573 7,429 5,338 9,891 26,231 1,965 6,513 -2,474 -7,376 -4,902 -9,883 -24,635 59 31 3,123 6,597 7,282 142 35 7,860 13,616 29,376 13,659 31,239 Contract liabilities (prepayments from clients) 267 2020 Contract liabilities – licenses Contract liabilities – software updates and support Contract liabilities – services Contract liabilities – other 4,463 6,707 3,994 9,514 24,678 3,225 7,656 3,948 7,831 22,660 -3,696 -6,541 -2,517 -6,928 -19,682 -419 -393 -87 3,573 7,429 5,338 9,891 26,231 -526 -1,425 Contract liabilities (prepayments from clients) 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 provision is measured at the estimate of the lifetime expected credit losses. 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. upon delivery, consequently, we expense sales commissions concurrently with revenue recognition. Amounts invoiced on account in excess of work completed are included in prepayments under current liabilities. Expected loss rates between 0.03% - 14.13% are applied (2020: 0.04% - 13.36%), based on average default rates by region as published by Standard & Poor. For additional 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 Contract assets from contracts with customers are measured at amortized cost less expected credit losses. Contract assets are within the scope of impairment requirements in IFRS 9. information refer to note 6.2 Risk. 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 commissions earned by the sales force. Commissions are typically related to the license fee which is recognized upfront 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 subsequent For contract assets the simplified approach is used, and the expected loss concessions or payments may be granted SimCorp Annual Report 2021 Consolidated financial statements Section 2 76 2.5 Receivables Receivables Accounting policies Additionally, allowances for individual 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 2021 56,060 38,018 -116 2020 52,575 27,356 -251 Receivables are recognized when control over licenses or services, etc. is transferred to a client before the client pays consider- ation and the right to consideration is not conditional on SimCorp’s future performance. Trade receivables from clients Accrued revenue Loss allowance Other receivables 2,581 2,833 Total receivables at December 31 96,543 82,513 Expected loss allowance and impairments are recognized in the income statement under operating expenses. No security has been received with respect to trade receivables. Aging of trade receivables from clients at December 31 Not due 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. 42,248 9,184 3,760 868 37,232 10,446 4,297 600 Overdue between 1 and 30 days Overdue between 31 and 90 days Overdue over 90 days 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. Total trade receivables from clients 56,060 52,575 Trade receivables for performance obliga- tions satisfied over time are recognized gradually, as the performance obligation is satisfied and in full once the invoice is due. No impairment was recognized for trade receivables in 2021 (2020: 0.0m). Receivables are initially recognized at fair value, and subsequently carried at amortized cost less expected loss allow- ance. Expected loss allowance is recorded on a portfolio basis. The simplified approach is applied and on initial The Group’s exposure to currency and credit risk for trade receivables is disclosed in note 6.2 Risk. measurement of receivables, all credit losses expected during the lifetime of the receivables are considered. SimCorp Annual Report 2021 Consolidated financial statements Section 3 77 3.1 Employee cost Section 3 Employees 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. Employee costs consist of salaries, sales commissions, bonuses, pensions and social costs, share-based payments, vacation pay, and other benefits. Management expects commissions paid to employees as a result of signing new client contracts to be recoverable. Such commissions are deferred and expensed when the related revenues are recognized. Deferred commissions are presented under prepayments in the statement of financial position. Accounting policies 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. Where SimCorp provides long-term Accounting policies which relate to a particular note to the income statement have been included within each individual note. incentives and benefits, costs are accrued to match the rendering of services by the employees. The accounting policy for share- based remuneration is described in note 3.2. In this section, the following notes are presented: Employee cost 3.1 Employee cost EUR '000 2021 197,601 4,299 2020 190,429 4,005 3.2 Share based remuneration 3.3 Pension and similar liabilities 3.4 Provisions Salaries Defined contribution pension plans Defined benefit pension plans Share-based payments 801 830 10,035 19,291 232,027 1,998 8,739 Social security and other costs Total employee cost 18,665 222,668 1,901 Number of employees at the end of the period Average number of employees – FTE 1,871 1,840 Average number of employees by function Function Professional services 2021 42% 35% 15% 8% 2020 42% 35% 14% 9% Research and development Internal support and service Sales and sales support SimCorp Annual Report 2021 Consolidated financial statements Section 3 78 3.1 Employee cost (continued) 3.2 Share based remuneration 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. The Group Management Committee expanded from six members in 2020 to 13 members in 2021. SimCorp’s Board of Directors has adopted an 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. Upon resignation employees forgo all unvested RSUs, these are reported as canceled. The number of the RSUs is adjusted 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. The accounting treatment for defined benefit plans is described in note 3.3. Remuneration to the Executive Management Board, the Group Management Committee and Board of Directors is given below: Accounting policies In the 2021 financial year, EUR 10.0m was charged to the income statement in Remuneration to Executive Management Board, Group Management Commitee and Board of Directors Share-based payments comprise equity- settled 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 statement as employee cost over the vesting period. Expenses are recog- nized 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. respect of share-based remuneration: EUR 5.3m related to issued RSUs, EUR 4.5m related to corporate bonus 2021 provision, and EUR 0.2m related to shares to the Board of Directors (2020: EUR 8.7m charged to the income statement, of which EUR 7.7m from RSUs, EUR 0.7m from corporate bonus 2020 provision and EUR 0.2m from shares to the Board of Directors). EUR '000 2021 2,494 171 2020 2,177 166 Salaries Other benefits (short-term benefits) Share-based payment 3,260 1,513 7,438 3,341 167 2,027 1,118 5,488 1,571 298 Performance-related bonus (short-term benefits) Executive Management Board total Salaries 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. Other benefits (short-term benefits) Share-based payment 1,080 1,122 5,710 568 744 Performance-related bonus (short-term benefits) Group Management Committee total Board fees 583 Most of these awards are described in detail below. Other share-based payment plans not described below, are, individually and in aꢁregate, immaterial to our 3,196 406 Fees for committee work (short-term benefits) Travel allowance (short-term benefits) Share-based payment 123 95 Shares to the Board of Directors 18 3 consolidated financial statements. Members of the Board of Directors receive shares as a minor part of their overall remuneration. Shares are granted subject to approval at the Annual General Meeting. In the financial year January 1 to December 31, 2021, a cost of EUR 175 thousand (2020: EUR 248 thousand) was charged to the income statement in respect of this 175 248 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. Board of Directors total 884 752 Total 14,032 9,436 SimCorp Annual Report 2021 Consolidated financial statements Section 3 79 3.2 Share based remuneration (continued) program. The company will allot 1,697 treasury shares after publication of the Annual Report to members of the Board of Directors (2020: 2,587 treasury shares). (2020: 22,687), 228 RSUs were granted to are not included in the specification on the next page. retention programs for senior employees in EMEA, North America, and APAC. The fair value of these RSUs amounted to EUR 1.9m. The RSUs will vest after three years, subject to continued employment. Furthermore, the RSUs are subject to conditions with respect to average annual minimum business growth for the respec- tive business units and to annual average net operating profit after tax for the Group for the financial years 2021 to 2023. If the two conditions are only partially satisfied, the number of shares transferred after three years will be reduced, and may possibly lapse completely. employee elected members of the Board of Directors (2020: 156) and 19,991 RSUs were granted to other employees (2020: 25,374). Fair value at grant date was EUR 4.3m (2020: EUR 4.7m), and EUR 1.1m was charged to the income statement for 2021 (2020: EUR 0.8m). 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 aꢁregate, immaterial to our consolidated financial statements. Restricted stock units (RSUs) 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, 2020 to December 31, 2021. Corporate bonus program 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 subsidiaries. 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. Granted 2021 CEO and CFO retention programs Long-term incentive program Furthermore during 2021, 3,502 RSUs were granted to senior employees in the Group as part of sign-on agreements and incentive programs. Fair value at grant date was EUR 0.4m. The RSUs will vest after three years subject to continued employ- ment and certain performance conditions for the financial years 2021 to 2023. 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 11,562 RSUs were granted to Christian Kromann in connection with his appointment as CEO and 5,781 RSUs to Michael Rosenvold, CFO as part of a retention incentive. The fair value of these RSUs amounted to EUR 2.0m. The RSUs will vest 1/3 after three years, 1/3 after four years and 1/3 after five years conditional upon continued service and an increased investment in SimCorp shares by Christian Kromann of DKK 5m, and by Michael Rosenvold of DKK 2.5m, both to be completed by end of August 2023. In 2021, 61,609 RSUs were granted including 461 RSUs to employee elected members of the Board of Directors. Fair value at grant date was EUR 6.7m (2020: EUR 7.1m). EUR 1.6m was charged to the income statement for 2021 (2020: EUR 1.7m). Vested 2021 In 2021, 4,052 RSUs related to other incentive programs vested. 2,390 RSUs granted to Michael Rosenvold in connection with his appointment as CFO in 2017, and 1,662 to other senior employees. number of shares transferred after three years is reduced (performance adjustment) and may possibly lapse completely. In addition, 1,466 RSUs related to LTIP 2021 were granted to Christian Kromann in connection with his appointment as CEO. Upon resignation employees forgo all unvested RSUs. These are reported as canceled. In 2021, 21,459 RSUs were granted to Executive Management Board In March 2022, the company will grant RSUs as part of its corporate bonus for 2021. EUR 1.7m was charged to the income statement in 2021 (2020: EUR 1.4m). These Canceled 2021 13,569 RSUs were canceled due to employees discontinuing their employment with SimCorp in 2021. Regional retention programs 17,038 RSUs were granted for regional SimCorp Annual Report 2021 Consolidated financial statements Section 3 Board of 80 3.2 Share based remuneration (continued) RSUs Long term incentive Corporate Executive Other employees Number of RSUs bonus Other Total Directors1 Management Board 2021 Outstanding January 1, 2021 Granted 166,532 41,678 -64,651 -4,888 154,232 61,609 -81,516 -6,251 26,712 39,349 -4,052 -3,144 58,865 347,476 142,636 -150,219 -14,283 325,610 1,853 689 -936 - 93,961 40,268 -37,940 - 251,662 101,679 -111,343 -14,283 227,715 Vested Canceled/transferred Outstanding December 31, 2021 138,671 128,074 1,606 96,289 of which vesting: 2022 51,032 65,263 18,044 3,197 26,062 5,781 5,781 134,339 92,510 87,199 5,781 735 488 383 - 30,847 23,930 29,950 5,781 102,757 2023 46,576 42,737 68,092 2024 41,063 20,074 56,866 2025 - - - - - - 2026 5,781 - 5,781 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 2,269 687 101,192 22,687 -28,790 -1,128 - 298,618 99,605 Vested -26,532 -3,716 -2,640 26,712 -1,092 -11 -133,757 -5,074 Performance adjustment Canceled/transferred Outstanding December 31, 2020 -2,684 -2,406 154,232 -7,730 - -7,730 166,532 347,476 1,853 93,961 251,662 of which vesting: 2021 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 - 2022 2023 2024 1,244 Charge to the income statement EURm 2021 4.44 2.85 2.77 4.14 0.91 0.66 8.12 7.65 2020 1 Board of Director’s restricted stock units are acquired in the capacity of employees of SimCorp. SimCorp Annual Report 2021 Consolidated financial statements Section 3 81 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. during which the employees earn the right to the benefits. Pensions and similar liabilities EUR '000 2021 2020 Pension liabilities Accounting policies, judgments and estimates At January 1 15,593 508 14,505 -125 252 831 87 Foreign exchange adjustment and other adjustments Employee contributions 304 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. Expensed in the income statement Calculated interest 801 74 The settlement amount of EUR 2,367 thousand, relates to two retirees covered by the Swiss pension that have left, and in regards to this the employer has no further obligation. Actuarial loss/(gain) change in demographic assumptions Actuarial loss/(gain) change in financial assumptions Actuarial loss/(gain) change in experience Payroll taxes -782 -762 -258 -67 72 106 102 -55 Settlements -2,367 351 - 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 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 Present value of pension liabilities at December 31 -182 15,593 13,395 Fair value of plan assets estimated actuarially and shown net of the fair value of any plan assets in the statement of financial position as pension obligations. At January 1 11,299 340 10,232 -83 The pension obligations of the Parent company 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. Foreign exchange adjustment Calculated interest 55 62 Return on plan assets in addition to calculated interest Employee contributions 138 326 314 655 - Differences between estimated pension assets and liabilities and their realized values are termed actuarial gains and losses. Actuarial gains and losses are recognized in the statement of other comprehensive income. 368 Employer contributions 811 Settlements -2,367 351 Benefits paid through pension assets Other -182 -25 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. Under a defined-benefit plan, the Group carries the risk in respect of future developments in interest rates, inflation, mortality, or disability. -26 Fair value of plan assets at December 31 Net liability included in the statement of financial position 10,969 2,426 11,299 4,294 Changes in benefits earned to date are actuarially 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 SimCorp Annual Report 2021 Consolidated financial statements Section 3 82 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 2021 Belgium 2021 2021 2020 2020 2020 Shares - - 6.8% 63.7% 16.1% 13.4% - 6.8% 63.7% 16.0% 13.5% - 3.5% 85.1% - 4.1% 86.3% - Bonds - - Property - - - - The actuarial assessments of assets and liabilities in the Norwegian defined-benefit plan have been prepared by Storebrand Pensjonstjenester AS (Norway). Other financial assets 11.4% - 9.6% - Assets held at Allianz Suisse collective foundation 100.0% 100.0% 100.0% 100.0% Total 100.0% 100.0% 100.0% 100.0% For the Swiss defined-benefit plan, the actuarial assessments of assets and liabilities have been prepared by Allea Ltd (Switzerland). Most important assumptions for actuarial calculations Switzerland Norway Belgium 2021 0.4% 1.3% 2020 0.3% 1.0% 2021 1.5% 2.5% 2020 1.7% 2.3% 2021 0.9% - 2020 0.3% - Discount rate Future salary increases For the Belgian defined-benefit plan, the actuarial assessments of assets and liabilities have been prepared by Willis Towers Watson (Belgium). Sensitivity analysis on reported pension liabilities Switzerland 2021 Norway Belgium EUR '000 2020 -1,302 1,828 206 2021 -371 500 2020 -371 494 2021 -948 1,202 - 2020 -1,076 1,384 - Sensitivity analysis Discount rate +1% Discount rate -1% Future remuneration +1% Future remuneration -1% -941 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. 1,336 230 225 217 -207 -185 -195 -189 - - offsetting changes in another assumption (although this is not always the case). For defined-contribution plans, the For a defined-contribution plan, the employer is obliged to pay a defined con- tribution (for example a fixed percentage of an employee’s salary) to independent insurance companies. 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 accompanied by The Group expects to pay EUR 739 thousand to the defined-benefit pension plans in 2022 (2020: EUR 694 thousand for the year 2021). SimCorp Annual Report 2021 Consolidated financial statements Section 3 83 3.4 Provisions Accounting policies, judgments and estimates 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 representing 1/13 of the annual cost per month. Provisions Anniversary bonuses Termination indemnity EUR '000 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. 2021 Liability at January 1 Foreign exchange adjustment Used during the year Reversal of unused liabilities Provisions for the year Total provisions 2,293 11 4,294 169 3,142 - 2,109 37 11,838 217 -46 - -361 - -340 -20 -747 -521 792 -1,894 -143 2,426 -2,435 1,302 10,175 Pension 504 3,285 149 Refer to note 3.3 Pension and similar 2,529 1,935 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. liabilities. Expected due dates for provisions: Falling due within 1 year Falling due within 2 to 5 years Falling due after 5 years Total provisions Other 181 964 - - 76 304 175 759 432 2,027 Other provisions contain, among others, the obligation to re-establish leased offices when the premises are vacated as well as holiday allowances (2020) required by the Danish Holiday Act. 1,384 2,529 2,426 2,426 2,905 3,285 1,001 1,935 7,716 10,175 2020 Liability at January 1 Foreign exchange adjustment Used during the year Reversal of unused liabilities Provisions for the year Total provisions 2,046 6 4,273 -41 2,854 - 4,648 -31 13,821 -66 The present value of the re-establishment obligation is included in the cost of the property plant and equipment and depreciated accordingly. -81 - -311 - -6,764 -106 -7,156 -217 -48 -63 370 2,293 125 4,294 599 3,142 4,362 2,109 5,456 11,838 Anniversary bonuses 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. This provision results from the Group’s commitment of one month’s pay in connection with employees’ 25th and 40th anniversary. Expected due dates for provisions: Falling due within 1 year Falling due within 2 to 5 years Falling due after 5 years Total provisions 219 923 - - 141 141 359 843 719 1,907 1,151 2,293 4,294 4,294 2,860 3,142 907 9,212 2,109 11,838 Termination indemnity 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% 1 Includes re-establishment of rented premises and holiday allowances (2020) required by the Danish Holiday Act. Provisions used in 2020 relate mainly to the balance moved to current liabilities as amount paid in 2021 in connection with the Danish Holiday Act. SimCorp Annual Report 2021 Consolidated financial statements Section 4 84 4.1 Income tax Section 4 Accounting policies The tax deduction on share-based remu- neration for the year is recognized as taxable income in the income statement to the extent that the tax deduction is attributable to the share-based payment expenses recognized in the income state- Tax 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. 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 was EUR 27.4m compared with EUR 27.8m in 2020. Income tax has decreased, primarily due to prior year refunds of withholding taxes. ment. The value of the excess tax reduction, if any, is recognized directly in equity. Income tax EUR '000 2021 2020 Tax for the year: The Group’s effective tax rate has decreased from 24.0% in 2020 to 20.0% in 2021, primarily due to prior year adjustments related to refunds of withholding taxes. Tax on profit 27,426 397 27,838 1 Tax on other comprehensive income Total tax 27,823 27,839 Tax on profit for the year breaks down as follows: Current tax 4.1 Income tax 4.2 Deferred tax 22,809 4,200 372 23,811 3,915 80 Deferred tax Prior-year adjustments Changes in tax rates 45 32 Total tax on profit for the year Tax paid during the year 27,426 23,329 27,838 20,674 Tax on profit for the year breaks down as follows: Tax calculated on the year's pre-tax profit, 22% (2020: 22%) Difference in tax in subsidiaries relative to 22% (2020: 22%) Changes in tax rates 30,144 1,703 45 25,501 1,051 32 Tax effect: Non-taxable income -2,141 1,282 -2,672 1,221 2,705 27,838 21.7% 24.0% Non-deductible expenses Other, including prior-year adjustments Total tax on profit for the year Effective tax excl. Other, incl. prior-year adjustments, rate Effective tax rate -3,607 27,426 22.6% 20.0% SimCorp Annual Report 2021 Consolidated financial statements Section 4 85 4.2 Deferred tax Accounting policies, judgments and estimates Deferred tax reflects assessment of future taxable income across all legal entities. Actual future taxes may deviate from these estimates. Deferred tax EUR '000 2021 -24,150 139 2020 Deferred tax at January 1 Foreign exchange adjustment Deferred tax, profit and loss Prior-year adjustment, profit and loss Change in tax rates -20,574 -148 -3,915 104 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. -4,200 173 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. -45 -32 Adjustment of deferred tax, other comprehensive income Adjustment of deferred tax, equity -397 -1 -1,550 -30,030 416 Net deferred tax (liability)/asset at December 31 Recognized in the statement of financial position as follows: Deferred tax assets -24,150 Deferred tax assets, including the tax value of tax losses carried forward, are 3,091 -33,121 -30,030 4,173 -28,323 -24,150 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. Deferred tax liabilities Net deferred tax (liability)/asset at December 31 The uncertainty of the tax treatment of IFRS 15, to be classified as deferred tax, amounts to approximately EUR 28m (2020: EUR 25m), related to Parent company. Tax risks Bilateral APAs SimCorp operates in more than 20 countries through sales companies, while development is carried out in a few countries, mainly Denmark and Ukraine, and support and services are delivered locally as well as from shared centers in primarily Poland and India. This leads to transactions between Group Companies. SimCorp follows the OECD principles in setting internal transfer prices for these transactions. This implies a tax risk, as the transactions are subject to judgment in each country. SimCorp has reduced its risk using bilateral advanced pricing An APA is an agreement between a 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. taxpayer and a tax authority determining the transfer pricing method for a taxpayer’s international transactions for future years. The APA is for a certain period and based on certain terms and conditions. SimCorp has entered into bilateral APAs, which means agreements that are negotiated between tax authorities of the two countries that the transactions cover. An APA provides assurance with respect to the tax outcome for the international transactions, by determining in advance arm’s length pricing. 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 2022, EUR 0.7m (2020: EUR 0.3m in 2021) of the deferred tax assets are expected to be utilized. The tax value of tax losses not capitalized is EUR 0.8m (2020: EUR 0.8m). 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. agreements (APAs). SimCorp has entered into bilateral APAs with the tax authorities in the countries SimCorp Annual Report 2021 Consolidated financial statements Section 4 86 4.2 Deferred tax (continued) where internal transactions are most Deferred tax Recognized in: significant. Transactions covered by APAs are internal transactions between Denmark and the US and Germany, respectively. Foreign exchange adjustment Other comprehensive Balance January 1 Profit and loss Balance December 31 EUR '000 income Equity 2021 Withholding tax Intangible assets -7,024 -1,030 -9,417 -27,029 2,536 -42 11 6,532 -5,641 740 - - -534 -6,660 -8,888 -31,167 2,149 3,258 7,814 49 SimCorp is subject to withholding taxes from various countries. The most significant withholding tax impact relates to France. Property, plant, and equipment, owned Property, plant, and equipment, right-of-use Contract assets - - -211 -19 56 - - -4,119 -443 609 - - Lease liabilities, current Current liabilities - - R&D tax credit 2,561 88 - - R&D Tax credit is based on tax incentive from the Danish Government. In 2020 and 2021, the qualifying R&D expenses can be deducted with 130%. The qualifying devel- opment must meet criteria’s such as being new technological developments for the company, innovative and entail uncertainty. Lease liabilities, non-current Provisions, non-current Share-based payment Tax losses carry-forward Total 7,698 176 30 -60 - -397 - - - 1,076 -660 225 3,964 1 -1,550 - 2,640 1,309 -30,030 2,515 49 -1,255 -4,072 - -24,150 139 -397 -1,550 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 SimCorp has applied the R&D tax credit of 130% for certain R&D expenses. 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 - - - 2,561 Lease liabilities, non-current Provisions, non-current Share-based payment Tax losses carry-forward Total -1,573 363 - 7,698 -1 - - 1,076 3,378 3,533 -20,574 15 155 416 - 3,964 -62 -148 -956 - 2,515 -3,843 -1 416 -24,150 SimCorp Annual Report 2021 Consolidated financial statements Section 5 87 5.1 Acquisition of enterprises Section 5 Accounting policies, judgments and estimates Provisional values are used for initial recognition where there is uncertainty regarding the identification and Invested capital Business combinations 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 affected 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 consideration relating to business combinations are recognized in the income statement. 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. Newly acquired or newly established enterprises are recognized in the consolidated financial statements from the effective dates of acquisition. The takeover method is applied for acquisitions if the Parent company gains control of the entity. Additions to property, plant, and equipment amounted to EUR 7.0m in 2021 (2020: EUR 5.9m). Additions in 2021 comprise mainly lease extensions and purchase of equipment. The net aꢁregate value of identifiable assets and liabilities is measured in accordance with IFRS 3 Business Combinations. In this section, the following notes are presented: Transaction costs related to acquisitions are charged to the income statement as administration expenses at the time of acquisition. 5.1 Acquisition of enterprises 5.2 Intangible assets 5.3 Property, plant, and equipment SimCorp did not enter into acquisitions in 2020 or 2021. SimCorp Annual Report 2021 Consolidated financial statements Section 5 88 5.2 Intangible assets Accounting policies, Proprietary software for resale Client relationships judgments and estimates Costs of development projects for software for resale are recognized as intangible assets where they are clearly defined and identifiable, 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. 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. Goodwill Initially, goodwill is recognized at cost. Subsequently, goodwill is measured at cost less accumulated impairment. Goodwill is not amortized. 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. Capitalized development costs comprise 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. To the extent that the development costs are not capitalized, they are recognized as research and development costs in the income statement. 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. Other intangible assets Intangible assets with limited economic lives are measured at cost less accumulated amortization and impairment losses. Intangible assets include proprietary and acquired software as well as client rela- tionships. Amortization is provided on a straight-line basis over the estimated useful lives of the assets, which are as follows: Acquired software Software acquired is measured at cost less accumulated amortization and accumulated impairment losses. • • Software up to 10 years Client relationships up to 20 years SimCorp Annual Report 2021 Consolidated financial statements Section 5 89 5.2 Intangible assets (continued) Intangible assets Amortization Client Intangible EUR '000 Goodwill Software relationships assets total EUR '000 2021 1,135 1,031 827 2020 Cost of sales 1,175 1,141 874 2021 Research and development costs Sales and marketing costs Administrative expenses Total amortization Cost at January 1 61,367 23,899 261 28,393 235 113,659 774 Foreign exchange adjustment Disposals 278 541 626 - -2 - -2 3,534 3,816 Cost at December 31 Amortization at January 1 Foreign exchange adjustment Amortization 61,645 24,158 12,428 189 28,628 5,506 85 114,431 17,934 274 - - 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 expected to produce economic benefits to the Group. - 1,742 -2 1,792 - 3,534 -2 Disposals - - Amortization at December 31 Carrying amount at December 31 14,357 9,801 7,383 21,245 21,740 92,691 For the SimCorp Group, the measurement of intangible assets, including goodwill, could be affected by significant changes in judgment and assumptions underlying their calculation. 61,645 2020 Cost at January 1 61,178 23,882 -171 183 28,578 -185 - 113,638 -572 588 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. Foreign exchange adjustment Additions on acquisition of subsidiaries Disposals -216 405 The estimated useful life reflects the period over which the Group expects to derive economic benefit from intangible assets. - 5 - 5 Cost at December 31 Amortization at January 1 Foreign exchange adjustment Amortization 61,367 23,899 10,534 104 28,393 3,547 -62 113,659 14,081 42 - - - 1,795 -5 2,021 - 3,816 -5 Disposals - - Amortization at December 31 Carrying amount at December 31 12,428 11,471 5,506 22,887 17,934 95,725 Carrying amounts and assumptions 61,367 Discount rate after tax Annual average growth Up to Up to Goodwill Amortization period 10 years 20 years EUR '000 2021 37,470 24,175 61,645 2020 37,192 24,175 61,367 2021 7% 2020 7% 2021 10% 0% 2020 SimCorp Dimension SimCorp Sofia 10% 0% 7% 7% Total carrying amount Discount rate before tax: SimCorp Dimension 9% (2020: 9%), SimCorp Sofia 10% (2020:10%). SimCorp Annual Report 2021 Consolidated financial statements Section 5 90 5.2 Intangible assets (continued) 5.3 Property, plant, and equipment When performing the impairment test, an 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). At December 31, 2021, 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 The Group chose to present right-of-use assets together with the underlying assets of the same nature which it owns. 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 at the reporting date to remeasure lease liabilities and right-of-use assets. Accounting policies SimCorp Dimension was assessed for SimCorp Coric and SimCorp Gain. 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. 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. The impairment test at December 31, 2021 showed no indication of impairment for 2021 (2020: 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. None of the Groups’ right-of-use assets meet the definition of investment property. 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. The impairment testing for the intangible assets is based on testing for the profit center Research and Development. Extension and termination options are included 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 commencement date whether it is reasonably certain to exercise such options and reassesses if there is a significant event. For SimCorp Sofia, the estimated growth rate is based on management’s expecta- tions. For SimCorp Dimension, the expected growth rate is based on SimCorp’s own market intelligence process, through which information is 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 Leasehold includes right of use assets related to the rental of premises as well as improvements. The Group leases land and buildings for its office space for three to ten years. The future cash flows are based on Technical equipment includes IT and other equipment owned and leased. budgets and management’s estimates of expected developments over the next five years. Revenue growth assumptions, EBIT, and discount rate constitute the most material parameters in the calculations. companies. Other equipment includes leased cars and owned fixtures and fittings. Additionally, some leases provide for additional payments based on changes to local price indices, these amounts are generally determined annually. SimCorp Annual Report 2021 Consolidated financial statements Section 5 91 5.3 Property, plant, and equipment (continued) 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. Lease liabilities arise from the adoption of Depreciation and development costs, sales and marketing costs, or administrative expenses. IFRS 16. Details on lease liabilities, amounts recognized in the income statement and statement of cash flow in relation to leases follow. 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 recognized as a change in accounting estimate. Property, plant, and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, which are as follows: • Leasehold over the lease term up to 10 years • Technical equipment up to 3 years • Other equipment, fixtures, and fittings up to 5 years Lease liabilities EUR '000 2021 8,577 2020 10,039 23,919 12,110 46,068 44,177 9,630 Payable within 1 year Impairment, depreciation, and amortization are recognized in cost of sales, research Payable within 2 to 5 years 24,194 8,191 Payable after 5 years Total undiscounted lease liabilities 40,962 40,665 8,577 Total lease liabilities included in the statement of financial position Depreciation Current EUR '000 2021 3,758 3,476 2,787 1,824 11,845 2020 3,781 3,673 2,811 2,013 12,278 Non-current 32,088 34,547 Cost of sales Research and development costs Sales and marketing costs Administrative expenses Total depreciation Amounts recognized in the income statement EUR '000 2021 530 1,043 72 2020 617 797 256 15 Interest on lease liabilities Variable lease payments not included in the measurement of lease liabilities Expenses related to short-term lease Expenses related to low-value assets Total recognized in profit and loss 4 1,649 1,685 Amounts recognized in the statement of cash flow EUR '000 2021 10,808 10,808 2020 10,042 10,042 Repayment of lease liability Total recognized in statement of cash flow SimCorp Annual Report 2021 Consolidated financial statements Section 5 92 5.3 Property, plant, and equipment (continued) Other equipment, fixtures, fittings and prepayments Property, plant, and equipment Leasehold Technical equipment Property, plant, and EUR '000 Right-of-use Improvements Right-of-use Owned Right-of-use Owned equipment total 2021 Cost at January 1 59,363 1,474 7,270 269 401 14 8,452 139 2,232 4 4,899 110 82,617 2,010 Foreign exchange adjustment Additions 4,850 421 54 436 795 -208 2,823 919 1 403 6,959 Disposals -1,328 64,359 17,663 492 -253 7,707 5,286 294 -10 459 64 -235 8,792 7,726 109 -312 5,100 3,309 83 -2,346 89,240 34,967 981 Cost at December 31 Depreciation at January 1 Foreign exchange adjustment Depreciation 2 9,343 474 133 -10 189 270 588 712 -149 1,483 1,340 595 11,845 -2,245 45,548 43,692 Disposals -1,328 26,170 38,189 -253 5,801 1,906 -221 8,202 590 -284 3,703 1,397 Depreciation at December 31 Carrying amount at December 31 2020 Cost at January 1 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 Foreign exchange adjustment Additions 490 -873 401 518 2 757 -295 2,232 494 29 1,167 -1,277 4,899 3,837 -61 Disposals -125 7,270 4,945 -150 616 -556 8,452 7,528 -46 -3,135 82,617 26,630 -992 Cost at December 31 Depreciation at January 1 Foreign exchange adjustment Depreciation 59,363 9,308 -766 9,121 - 417 -873 64 787 638 -242 919 1,313 699 12,278 -2,949 34,967 47,650 Disposals -125 5,286 1,984 -543 7,726 726 -1,166 3,309 1,590 Depreciation at December 31 Carrying amount at December 31 17,663 41,700 337 Depreciation period Up to 10 years Up to 3 years Up to 5 years SimCorp Annual Report 2021 Consolidated financial statements Section 6 93 6.1 Equity, treasury shares, and dividends Section 6 Accounting policies Except for the cases specified in the preceding period, the company’s existing Equity, capital structure, and financing items This section presents how SimCorp manages its capital structure. SimCorp’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. 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 shareholders shall be under an obligation to have their shares redeemed in full or in part by the company or any other party. On December 31, 2021, the share capital amounted to DKK 40,500,000 divided into 40,500,000 shares (unchanged from 2020). 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 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 In this section, the following notes are presented: restrictions on transferability or voting rights. 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. represented at the relevant 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 preceding 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 44 to 47 for additional information. This authority is valid for a period of five years, expiring on March 1, 2025, 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. SimCorp Annual Report 2021 Consolidated financial statements Section 6 94 6.2 Risk 6.1 Equity, treasury shares, and dividends (continued) Treasury shares 660.78 per share). In 2021, SimCorp A/S delivered 152,806 treasury shares as part of the share-based remuneration program for a nominal value of DKK 152,806 (2020: DKK 163,686) calculated at an average market price of DKK 813.55 per share (2020: DKK 731.05 per share), equal to a calculated price of EUR 16.7m (2020: EUR 16.4m). including the requirement for cash, credit facilities, and equity. Due to the nature of its operations, investments, and financing, the Group is exposed to changes in exchange rates and interest rates. The market value of treasury shares at December 31, 2021 was EUR 103.1m (2020: EUR 103.0m). The treasury shares are carried at EUR 0.0m (2020: EUR 0.0m) in the financial statements. SimCorp intends to pay dividends of at least 40% of the Group free cash flow. In addition, the company buys treasury shares provided that it does not anticipate specific cash requirements. The Group’s policy is to direct financial management towards the management of financial 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 trans- ferred to SimCorp A/S which operates as the internal bank for the Group. 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 company’s share capital, including the company’s current holding of treasury shares. The company acquires treasury shares to reduce share capital and to cover obligations arising from restricted stock unit programs. SimCorp is predominantly equity financed and its guiding principle is that excess capital after funding of organic and acquisitive growth opportunities should be returned to investors. In 2021, SimCorp A/S acquired 375,475 treasury shares for EUR 40.1m, at an average price of DKK 794.17 per share (2020: EUR 10.0m at an average price of DKK Capital structure and management and dividends policy The Board of Directors regularly assesses the need to adjust the capital structure, In 2021, SimCorp acquired EUR 40.1m in SimCorp shares as part of a share buyback program (2020: EUR 10.0m). In 2022, given there are no specific requirements for liquidity, SimCorp expects to buy back shares with the intention to purchase shares for EUR 40.0m in two half yearly buyback programs of EUR 20.0m each. The scope and nature of the Group’s financial instruments appear from the income statement and the statement of financial position in accordance with the accounting policies applied. Acquisition value EUR '000 Percentage of share capital Treasury shares Number of shares 2021 Distribution of dividends to shareholders has no tax consequences for the company. This note provides information about factors that may influence amounts, time of payment, or reliability of future payments, where such information is not provided directly in the financial statements. At January 1 849,449 - 52,627 209 2.1 - Foreign exchange adjustment Purchases 375,475 -152,806 1,072,118 40,102 -7,329 85,609 0.9 -0.4 2.6 The Board of Directors intends to Used RSU program At December 31 recommend to the shareholders at the Annual General Meeting that dividends of approximately EUR 39.9m (2020: EUR 40.1m), equal to DKK 7.50 (2020: 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. This note addresses only financial risks directly related to the Group’s financial instruments as detailed in note 6.3 Financial assets and liabilities. 2020 At January 1 900,481 - 50,900 219 2.2 - Foreign exchange adjustment Purchases 112,654 -163,686 849,449 9,996 -8,488 52,627 0.3 -0.4 2.1 Used RSU program At December 31 SimCorp Annual Report 2021 Consolidated financial statements Section 6 95 6.2 Risk (continued) Currency exposure 2021 2020 Currency exposure, subsidiaries Contract Cash/ Net Contract Cash/ Net EUR '000 SEK/DKK CAD/DKK GBP/DKK CHF/DKK SGD/DKK USD/DKK EUR/DKK 2021 9,676 2020 EUR ‘000 EUR/GBP SEK/DKK CAD/USD USD/EUR EUR/SEK EUR/CHF EUR/DKK USD/SGD USD/GBP Receivables assets equivalents Debt 434 - position Receivables assets equivalents Debt 436 259 198 - position 7,201 13,538 10,034 8,869 486 227 524 - 569 660 155 10 776 897 434 385 270 - 1,175 1,269 128 235 116 1,408 1,511 328 13,715 15,821 17,639 21,323 41,720 44,854 669 56 189 - 1,060 1,294 2,683 3,617 9,345 12,992 17,139 128 492 802 91 593 593 1,186 7,891 1,519 5,190 15,589 8,208 25,283 36,023 33,156 408 848 6,869 - 2,310 - 126 - 4,501 1,438 - 3,290 - 119 19 2,769 2,516 61 81 - 1,393 12,931 13,915 1,433 - 1,897 14,261 4,916 7,719 124 4,426 - 1,204 3,988 3,629 1,483 1,888 1,036 1,732 The Group’s most important operational and commercial risk factors are described in more detail on pages 31-36 of the annual report. translated from their functional currency to EUR at the exchange rates ruling on the dates of underlying transactions. The average exchange rate for the month is used to reflect the transaction dates’ exchange rates. The currency exposure for the Group is shown in the table above and the currency exposure for the Subsidiaries is shown in the table to the right. receivables with its subsidiaries, in which much of the cross-currency exposure stems from USD/DKK: EUR 41.7m (2020: EUR 36.0m) and SGD/DKK: EUR 21.3m (2020: EUR 25.3m). Currency risk The exposure for the Group relates Currency risk is the risk that arises from changes in exchange rates and affects the Group’s result. predominantly to USD/GBP and USD/SGD, as the subsidiaries in the UK and Singapore have entered into several contracts in USD. 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 1.7m (2020: EUR 0.8m) for a 10% change in the USD/ GBP exchange rate and EUR 1.3m (2020: EUR 1.6m) for a 10% change in the USD/ SGD exchange rate (an appreciation of the USD in relation to the GBP and the SGD would have positive impact, a depreciation would have a negative impact). SimCorp A/S, the parent company, trades with it subsidiaries in their functional currencies, and is therefore also exposed to and impacted by currency fluctuations. The Group’s foreign subsidiaries are not severely impacted by foreign exchange fluctuations, as both income and costs are generally settled in the functional (local) currency of the individual entity and material cash balances are transferred to SimCorp A/S. The Group‘s currency exposure (excluding translation exposure) based on the SimCorp A/S has entered into distribution agreements with its subsidiaries for functional currencies of the individual Group companies shows that the majority of the cross-currency exposure comes from the USD/GBP exchange rate: EUR 17.1m (2020: EUR 8.2m) and the USD/SGD exchange rate: EUR 13.0m (2020: EUR 15.6m). SimCorp Dimension and received a product fee related to their distribution activities. SimCorp's subscription based agreements with clients have a duration of 5 to 10 years, SimCorp A/S' trade receivables with the subsidiaries have matching terms. The consolidated income statement is impacted by changes in exchange rates. The results of foreign subsidiaries are Based on the net exposure of the Group on the Parent company trade receivables with its subsidiaries the hypothetical impact of In addition, the Group has currency exposure on the Parent company trade SimCorp Annual Report 2021 Consolidated financial statements Section 6 96 6.2 Risk (continued) exchange rate fluctuations on the profit before tax for the year and equity would be EUR 4.2m (2020: EUR 3.6m) for a 10% change in the USD/DKK exchange rate and EUR 2.1m (2020: EUR 2.5m) for a 10% change in the SGD/DKK (an appreciation of the DKK in relation to the USD and the SGD would have negative impact, a depreciation would have a positive impact). Interest risk Debt Change in average exchange rate in relation to EUR The Group’s interest rate risks are generally related to its bank deposits and revolving credit facilities. 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 2020 2019 to 2020 Functional currency to 2021 5.01% 3.82% -0.80% 0.22% 3.60% -3.28% 6.12% 3.22% -0.54% 3.06% AUD CAD CHF DKK GBP HKD NOK SEK SGD USD -2.96% -3.64% 3.70% Deposits September 15, also expiring July 31, 2022. The Group had cash deposits of EUR 47.7m on December 31, 2021 (2020: EUR 53.1m) 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 2021 (2020: -0.5% and 0.0%) for significant cash deposits. On December 31, 2021, 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. 0.17% -1.58% -1.33% -8.71% 1.03% 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. SimCorp’s cash flow is by nature impacted by the annual dividend, the seasonal credit facility is used to optimize the debt -3.35% -2.30% structure. See note 6.3 Financial assets and liabilities for additional information. When placing surplus funds, the Group generally seeks to minimize its net exposure in individual currencies. To match part of the USD surplus, we use USD in Ukraine for salaries. Revenue by currency Sensitivity Currency EUR 2021 38% 18% 7% 2020 40% 19% 10% 3% 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 (2020: positive impact of EUR 0.5m). USD DKK SGD GBP Currency exposures from investments in subsidiaries have not been hedged. The related exchange rate adjustments are recognized in other comprehensive income. 5% 8% 7% CHF 8% 7% CAD SEK 5% 3% 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 table at the top shows the change in average exchange rate for the main currencies impacting the Group’s operating profit. The table to the left shows the Group Revenue split by currency. 4% 5% NOK AUD 3% 6% 3% 2% SimCorp Annual Report 2021 Consolidated financial statements Section 6 97 6.2 Risk (continued) Liquidity risk Credit risk The maximum exposure to credit risk equals the following carrying amounts: The main banking relationship is with Nordea Bank and their S&P rating is AA-. Group liquidity is managed by Group Treasury, with the objective of ensuring effective liquidity management by obtaining sufficient committed credit facilities to provide 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 2022 are Receivables and contract assets 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 region. Two factors are therefore considered when estimating expected loss rates: the actual 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 2021 47,692 56,060 38,018 226,977 2,581 2020 53,051 52,575 27,356 182,537 2,833 Cash and cash equivalents Trade receivables from clients Accrued revenue considered to be adequate to meet the obligations of the Group as they fall due. Contract assets (gross) Other receivables Maximum credit exposure 371,328 318,352 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. The Group is not exposed to significant risks concerning individual clients or business partners 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. The Group primarily enters financial instruments and transactions with the Group’s relationship banks. Group treasury monitors the Group’s gross credit exposure to banks and operates with individual limits on banks based on rating and access to netting of assets and liabilities. Current and non-current financial liabilities are depicted below: 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 0.03% up to 2.50% (2020: 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. Financial liabilities – December 31 Current Non-current 1 to 6 months 2021 7 to 12 months 2 to 5 years Later than 5 years EUR '000 2020 4,902 2021 2020 2021 2020 22,703 495 2021 8,091 - 2020 Lease liabilities Trade payables Other payables Total financial liabilities 4,491 4,086 959 - 4,728 1,299 23,997 11,844 24,785 49,993 79,269 15,950 49,472 70,324 3,382 - 3 - 9,686 - - 5,045 15,713 27,379 23,198 8,091 11,847 SimCorp Annual Report 2021 Consolidated financial statements Section 6 98 6.2 Risk (continued) For unrated clients and clients that do not have investment grade rating, an expected loss rate from 0.36% up to 14.13% (2020: 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 rate might be applied to certain clients after individual assessment resulting in the weighted average expected loss rates depicted on the credit risk exposure on receivables and contract assets table. 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: 2021 2020 Credit risk exposure on receivables and contract assets Weighted average expected loss rate Weighted Loss Carrying amount EUR '000 average expected loss rate Loss Carrying amount EUR '000 allowance EUR '000 allowance EUR '000 Not due 0.44% 0.58% 0.11% 0.33% 0.44% 1,316 53 301,170 9,131 0.52% 0.37% 0.26% 26.30% 0.56% 1,241 39 240,449 10,406 4,286 Not more than 30 days More than 30 days but not more than 90 days More than 90 days1 If there is no reasonable expectation of recovery, the gross carrying amount is written-off. Indicators that there is no reasonable 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. 4 3,757 11 3 903 134 1,425 467 Total 1,376 314,961 255,608 1 Includes allowance resulting from individual assessment of outstanding balances. The expected loss allowance has developed as follows: No client represents more than 4.4% (2020: 5.6%) of total receivables from clients. Expected loss allowance EUR '000 2021 2020 Expected timing of invoicing for the contract assets balance can be found in note 2.4. Balance at January 1 Foreign exchange adjustment Net loss allowance recognized Amounts written off 1,425 -18 1,193 -118 350 - -31 - Balance at December 31 1,376 1,425 SimCorp Annual Report 2021 Consolidated financial statements Section 6 99 6.3 Financial assets and liabilities Accounting policies, judgments and estimates modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. Financial assets 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. The difference in the respective carrying amounts is recognized in the income statement. After initial recognition, interest- bearing loans and borrowings are Deposits are primarily related to the leasing of offices. Security deposits which will not be returned within one year of the subsequently measured at amortized cost using the effective interest rate method. statement of financial position date are recognized as non-current assets. Financial liabilities Financial liabilities comprise lease liabilities, borrowings, trade payables and other payables. 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. SimCorp has access to: 1) a multi-currency committed revolving credit facility of EUR 40.0m expiring July 31, 2022, 2) a seasonal 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. Lease liabilities Lease liabilities arise from the adoption of IFRS 16. For additional information on lease liabilities refer to notes 5.3. Other financial assets comprise investments in shares of unlisted entities. Deposits Borrowings On December 31, 2021, the Group had a committed revolving credit facility of EUR 40.0m, of which EUR 0.0m had been drawn and EUR 3.4m used for guarantees. 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 2021 2,031 24 2020 Cost at January 1 Foreign exchange adjustment Additions 2,095 -21 82 17 Trade payables and other payables Other payables include bonus and commission accruals, vacation pay obligations, payroll taxes and VAT. Payables are measured at cost. Disposals -14 -60 Carrying amount at December 31 2,123 2,031 A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on Exposure to currency and liquidity risk for trade and other payables as well as borrowings is disclosed in note 6.2. substantially different terms, or the terms of an existing liability are substantially SimCorp Annual Report 2021 Consolidated financial statements Section 6 100 6.3 Financial assets and liabilities (continued) 6.4 Financial income and expenses Financial assets and liabilities by measurement category Accounting policies Borrowing cost, except for commitment fees on credit facilities, are recognized in Measured Financial income and expenses include: interest income, interest expense, 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. at amortized Carrying amount EUR ‘000 cost amortization 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. 2021 Deposits 2,123 4,843 2,123 4,843 Other financial assets Non-current financial assets Receivables Dividends on investments in associates are recognized in the Group’s income statement in the financial year in which the dividends are declared. 6,966 6,966 96,543 47,692 144,235 32,088 32,088 8,577 96,543 47,692 144,235 32,088 32,088 8,577 Cash and cash equivalent Current financial assets Lease liabilities Non-current financial liabilities Lease liabilities Financial income EUR '000 2021 5 2020 Trade payables 29,126 49,993 87,696 29,126 49,993 87,696 Interest income, financial assets carried at amortized cost Dividends from associates Foreign exchange gains, net Total financial income 22 79 - Other payables 91 Current financial liabilities 5,678 5,774 101 2020 Deposits 2,031 404 2,031 404 Other financial assets Non-current financial assets Receivables Financial expenses 2,435 2,435 82,513 53,051 135,564 34,547 34,547 9,630 82,513 53,051 135,564 34,547 34,547 9,630 EUR '000 2021 32 2020 54 Cash and cash equivalent Current financial assets Lease liabilities Interest expenses, financial assets carried at amortized cost Interest expenses, financial liabilities carried at amortized cost Interest expenses, pension 303 16 279 23 Non-current financial liabilities Lease liabilities Interest expenses, lease 570 11 617 18 Interest expenses, reestablishment Other financial expenses Trade payables 17,747 59,158 86,535 17,747 59,158 86,535 15 9 Other payables Foreign exchange losses, net - 7,405 8,405 Current financial liabilities Total financial expenses 947 SimCorp Annual Report 2021 Consolidated financial statements Section 7 101 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 understanding 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 2021 109,992 40,500,000 -646,387 39,853,613 291,766 40,145,379 2.76 2020 88,258 Profit for the year (EUR´000) Average number of shares 40,500,000 -820,562 39,679,438 355,737 40,035,175 2.22 Average number of treasury shares Average number of shares in circulation Average dilutive impact of outstanding restricted stock units Average number of diluted shares in circulation Earnings per share – EPS (EUR) In this section, the following notes are presented: 7.1 Earnings per share Diluted earnings per share – EPS-D (EUR) 2.74 2.20 7.2 Related party transactions 7.3 Auditors’ remuneration 7.4 Contingent liabilities In 2021, the performance conditions for the 2019 LTIP was met, i.e. no adjustment made in 2021 (2020: a performance adjustment reducing number of restricted stock units by 2.497 for 2018 program was made as the performance was 96.4%). No adjustments to allotted restricted stock units in 2020 and 2021 programs as the conditions stipulated in note 7.1 are expected to be met. 7.5 Events after statement of financial position date 7.6 Associates 7.7 Subsidiaries SimCorp Annual Report 2021 Consolidated financial statements Section 7 102 7.2 Related party transactions SimCorp’s related parties exercising a significant influence comprise the company’s Board of Directors and Executive Manage- ment Board as well as relatives of these persons. Related parties also comprise companies in which the individuals General Meeting for terms of one year. Members of the Board of Directors elected by the employees 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 48-50 for additional information on Board of Directors members. Interest in the company of members of the Board of Directors and the Executive Management Board: mentioned above have material interests. Other related parties are considered to be Group’s associates. All agreements relating to these transactions are based on market price (arm’s length). Shareholdings, Board of Directors and Executive Management Board Number of shares Board of Directors Peter Schütze 2021 2020 Trade from associates amounted in 2021 to EUR 833 thousand compared with EUR 1.0m in 2020. 12,819 7,470 9,456 12,241 1,845 1,179 169 12,229 7,088 9,249 11,935 855 Morten Hübbe Herve Couturier Simon Jeffreys The Group did not enter into any Adam Warby agreements, deals, or other transactions in 2021 in which the Parent company’s Board of Directors or Executive Management Board had a financial interest, except for transactions following from the Joan A. Binstock Susan Standiford1 689 - Else Braathen 8,642 2,606 2,740 59,167 8,102 2,179 1,329 53,655 Vera Bergforth employment relationship. See note 3.2 and the remuneration report. Hugues Chabanis Board of Directors, total Executive Management Board Christian Kromann Georg Hetrodt Key Management Personnel (cf. IAS 24) consists of the Board of Directors and the Executive Management Board. Remuner- ation to members of the Board of Directors and the Executive Management Board is disclosed in note 3.1 and the remuneration report. 7,472 110,000 17,524 4,178 115,782 13,150 Michael Rosenvold Klaus Holse2 90,111 86,581 Executive Management Board, total 225,107 219,691 Total shareholdings by members of the Board of Directors and the Executive Management Board 284,274 273,346 Members of the Board of Directors are elected by the shareholders at the Annual 1 2 Elected March, 2021 Resigned December, 2021 SimCorp Annual Report 2021 Consolidated financial statements Section 7 103 7.2 Related party transactions (continued) 7.4 Contingent liabilities 7.7 Subsidiaries Restricted stock units, Board of Directors and Executive Management Board The Group is party to legal proceedings and inquiries from authorities when investi- gating 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. In 2021, the Group has simplified it’s legal structure and made the below changes, which have no impact for the Group’s financial position. Number of restricted stock units Board of Directors 2021 2020 Else Braathen 448 1,158 1,606 546 1,307 1,853 Hugues Chabanis SimCorp Gain Inc, USA was liquidated and SimCorp Gain LTD, UK is undergoing liquidation. Board of Directors, total Executive Management Board Christian Kromann 29,680 13,394 21,443 31,772 96,289 12,466 18,197 20,120 43,178 93,961 SimCorp France acquired APL Ville S.r.l. from SimCorp Italiana S.r.l. and following that APL Ville S.r.l. merged into SimCorp France S.A.S. Georg Hetrodt Michael Rosenvold 7.5 Events after statement of financial position date Klaus Holse Executive Management Board, total Total restricted stock units granted to members of the Board of Directors and the Executive Management Board No material events have occurred after December 31, 2021, that have consequences for the annual report 2021. SimCorp Gain S.C.A. merged with SimCorp Luxemburg S.A, and following the merger changed to SimCorp Luxemburg S.a.r.l. 97,895 95,814 SimCorp Italiana S.r.l. and Sofia Online S.r.l. merged into SimCorp Italiana S.r.l on December 31, 2021. 7.3 Auditors’ remuneration 7.6 Associates Fees to independent auditors In 2021, audit fees included the audit of the consolidated and local financial statements, including additional audit procedures due to implementation of a new ERP system. Tax fees related primarily to tax compliance service. Other service fee primarily related to advice on Associates The Group holds an ownership interest of 24.8% in Dyalog Ltd and 24.99% (2020: 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. EUR '000 2021 521 34 2020 437 17 Audit fees Tax and VAT advice fees Other service fees 71 21 Total auditors’ remuneration 626 475 sustainability reporting. Non-Audit Services (NAS)/ Audit fee ratio 20% 9% In 2020, the audit fees included implementation of audit standard ISA540 and audit of remuneration reporting. SimCorp Annual Report 2021 Consolidated financial statements Section 7 104 7.7 Subsidiaries (continued) Group’s subsidiaries are at December 31, 2021 and December 31, 2020 Subsidiaries Ownership interest Name Registered office London, United Kingdom Bad Homburg, Germany Vienna, Austria 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2020 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Share capital 100,000 GBP 102,258 EUR 17,500 EUR Notes SimCorp Ltd. SimCorp GmbH SimCorp Österreich GmbH SimCorp Norge AS SimCorp Sverige AB SimCorp Benelux SA/NV SimCorp USA Inc. Oslo, Norway 1,000,000 NOK 100,000 SEK 62,000 EUR Stockholm, Sweden Brussels, Belgium New York, USA 7,010,000 USD 100,000 CHF 999,992 AUD SimCorp Schweiz AG SimCorp Asia Pty. Ltd. SimCorp Singapore Pte. Ltd. SimCorp Ukraine LLC SimCorp Canada Inc. Zurich, Switzerland Sydney, Australia Singapore, Singapore Kiev, Ukraine 1 SGD 2,968,254 UAH Vancouver, Canada 8,500,001 CAD SimCorp France acquired APL Ville S.r.l.. APL Vill S.r.l. thereafter merged into SimCorp Frane S.A.S SimCorp France S.A.S Paris, France 100% 100% 500,000 EUR SimCorp Hong Kong Ltd. SimCorp Luxembourg S.A. SimCorp Coric Ltd. Hong Kong, China 100% - 100% 100% 100% 100% 14,000,002 HKD 31,000 EUR 120 GBP Merged with SimCorp Gain S.C.A. Luxembourg, Luxembourg Wolverhampton, United Kingdom Barcelona, Spain 100% 100% SimCorp Iberia S.L. 3,000 EUR SimCorp Italiana had a 100% owned subsidiary in Italy; Sofia Online S.r.l. (merged at 31.12.2021) SimCorp Italiana S.r.l. SimCorp Sp z.o.o. Milan, Italy 100% 100% 100% 100% 100% 100% 2,100,000 EUR 5,000 PLN Warsaw, Poland Luxemburg, Luxemburg Former SimCorp Gain SCA merged with SimCorp Luxemburg S.A. and renamed SimCorp Luxembourg S.a.r.l. 44,636 EUR SimCorp Japan KK SimCorp India LLP Tokyo, Japan Noida, India 100% 100% 100% 100% 1 JPY INR 100,000 SimCorp Ltd. has a branch in the United Arab Emirates and in Azerbaijan. SimCorp Sverige AB has a branch in Finland. SimCorp Sverige AB owns 1% of SimCorp Benelux SA/NV and 1% of SimCorp India LLP. SimCorp Benelux SA/NV has branches in the Netherlands, Luxembourg and France. 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. had a 100% owned subsidiary in Italy; Sofia Online S.r.l. (merged at 31.12.2021) SimCorp Luxembourg S.a.r.l has 100% owned subsidiaries in Luxemburg, Switzerland and Austria, and UK (under liquidation). SimCorp Annual Report 2021 Financial statements of SimCorp A/S 105 Financial statements of SimCorp A/S 105 — 127 SimCorp Annual Report 2021 Financial statements of SimCorp A/S 106 Financial statements of SimCorp A/S Statements Section 2 Section 4 Section 6 Revenue and clients Tax Financing items 107 107 Income statement Statement of comprehensive income 112 2.1 Revenue 112 2.2 Future performance obligations 117 118 4.1 Income tax 4.2 Deferred tax 123 6.1 Financial assets and liabilities 124 6.2 Financial income and expenses 108 Cash flow statement 109 Statement of financial position 113 114 2.3 Contract balances 2.4 Receivables 110 111 Statement of changes in equity Notes Section 1 Section 3 Section 5 Section 7 Basis of preparation Employees Invested capital Other disclosures 111 1.1 Accounting policies, estimates, and judgments 115 116 3.1 Employee cost 3.2 Provisions 119 5.1 Investments in associates and subsidiaries 125 7.1 Related party transactions 126 7.2 Auditors’ remuneration 126 7.3 Contingent liabilities 126 7.4 Events after statement of financial position dates 120 5.2 Intangible assets 121 5.3 Property, plant, and equipment SimCorp Annual Report 2021 Financial statements of SimCorp A/S Statements 107 Financial statements of SimCorp A/S Income statement Statement of comprehensive income EUR ’000 Note 2.1 2021 250,191 81,660 168,531 29,945 58,491 19,066 35,458 85,461 25,842 588 2020 235,572 69,902 165,670 30,650 58,210 12,795 35,449 89,866 25,228 6,991 EUR '000 Note 2021 2020 Profit for the year Other comprehensive income 94,948 88,664 Revenue Cost of sales 3.1,3.2,5.2,5.3 Items that will not be reclassified subsequently to the income statement: Gross profit Other operating income Research and development costs Sales and marketing costs Administrative expenses Operating profit (EBIT) Financial income Foreign currency translation differences for foreign operations Other comprehensive income after tax Total comprehensive income 128 128 813 813 3.1,3.2,5.2,5.3 3.1,3.2,5.2,5.3 3.1,3.2,5.2,5.3 95,076 89,477 Proposed distribution Dividends 39,888 55,188 95,076 40,125 49,352 89,477 6.2 6.2 Transferred to retained earnings Financial expenses Profit before tax 110,715 15,767 94,948 108,103 19,439 88,664 Tax on the profit for the year Profit for the year 4.1 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Statements 108 Financial statements of SimCorp A/S Cash flow statement EUR ’000 Note 2021 94,948 3,982 -25,842 588 2020 88,664 4,456 Profit for the year Amortization and depreciation Financial income 5.2, 5.3 6.2 -25,228 6,991 Financial expenses 6.2 Tax on profit for the year 4.1 15,767 3,810 11,332 -268 19,439 162 Other included in operating income Adjustment share-based remuneration Changes in provisions 10,997 -2,099 -2,817 -19,396 309 Changes in contract assets Changes in working capital Financial income received 2,388 -36,784 130 Financial expenses paid -358 -400 Income tax paid 4.1 -12,377 57,316 1 -11,233 69,845 -1,100 -1,637 -404 Net cash from operating activities Investment in subsidiaries, net Purchase of property, plant, and equipment Sale and purchase of financial assets, net Dividends from associates 5.1 5.3 -149 -4,420 50 6.2 6.2 41 Dividends from subsidiaries Net cash used in investing activities Dividends paid 20,275 15,757 -40,086 -40,102 -3,433 - 24,878 21,778 -39,879 -10,006 -3,672 -20,000 -73,557 18,066 8,552 Purchase of treasury shares Repayment of lease liability Loan repayment 5.3 Net cash used in financing activities Change in cash and cash equivalents Cash and cash equivalents at January 1 Foreign exchange adjustment of cash and cash equivalents Cash and cash equivalents at December 31 -83,621 -10,548 26,583 -108 -35 15,927 26,583 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Statements 109 Financial statements of SimCorp A/S Statement of financial position December 31 EUR ’000 Note 2021 2020 EUR ’000 Note 2021 2020 Assets Liabilities and equity Share capital Software 11 11 121 121 5,441 245,878 39,888 291,207 18,023 23,274 1,991 5,441 219,738 40,125 265,304 20,749 19,121 2,232 Total intangible assets Leasehold 5.2 Retained earnings Proposed dividends Total equity 20,881 174 24,026 323 Technical equipment Other equipment, fixtures, fittings and prepayments Total property, plant, and equipment Investments in subsidiaries Investments in associates Other financial assets Deposits 1,199 1,372 Lease liabilities 5.3 4.2 3.2 5.3 5.1 5.1 6.1 6.1 22,254 137,874 138 25,721 137,825 157 Deferred tax Provisions Total non-current liabilities Lease liabilities 43,288 2,899 42,102 3,135 4,843 404 5.3 2.3 1,442 1,441 Prepayments from clients Debt to subsidiaries Trade payables 2,626 2,180 Total other non-current assets Total non-current assets Receivables 144,297 166,562 192,274 8,107 139,827 165,669 150,973 10,566 4,190 16,148 15,014 14,205 4,489 11,330 7,184 2.4 2.3 Other payables 25,464 1,169 Contract assets Income tax payables Provisions Prepayments 7,092 3.2 86 113 Cash and cash equivalents Total current assets Total assets 15,927 223,400 389,962 26,583 192,312 357,981 Total current liabilities Total liabilities 55,467 98,755 389,962 50,575 92,677 357,981 Total liabilities and equity SimCorp Annual Report 2021 Financial statements of SimCorp A/S Statements 110 Financial statements of SimCorp A/S Proposed dividends for the year Statement of changes in equity Share capital Retained earnings EUR '000 Total 2021 Equity at January 1 5,441 219,738 94,948 128 40,125 265,304 94,948 128 Net profit for the year - - - - - - Total other comprehensive income Total comprehensive income for the year Transactions with owners Dividends paid to shareholders Share-based payment 95,076 95,076 - 39 11,332 -317 -40,125 -40,086 11,332 -317 - - Tax, share-based payment Purchase of treasury shares Proposed dividends to shareholders Equity at December 31 - - - - - -40,102 -39,888 245,878 -40,102 - 39,888 39,888 5,441 291,207 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 Transactions with owners Dividends paid to shareholders Share-based payment 89,476 89,476 - 40 10,997 1,556 -39,919 -39,879 10,997 1,556 - - Tax, share-based payment Purchase of treasury shares Proposed dividends to shareholders Equity at December 31 - - - - - -10,006 -40,125 219,738 -10,006 - 40,125 40,125 5,441 265,304 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 1 111 1.1 Accounting policies, estimates, and judgments Section 1 Basis of preparation General Foreign currency translation 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, 2021 includes the financial statements of SimCorp A/S, the Parent company. Foreign exchange adjustments of intra-group accounts are recognized in the income statement in SimCorp A/S’ financial statements. 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 considered part of the net investment are not, per se, considered a partial divestment of a subsidiary. A number of new standards and interpre- tations not applicable/mandatory for the preparation of the 2021 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. Statement of compliance SimCorp A/S financial statements are pre- sented 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 significant monetary effect on the statements of the Parent’s results, assets and liabilities or the equity. Financial assets Investments in subsidiaries and associates are measured at cost in the Parent company’s financial statements. 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. 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. Accounting policies are unchanged from last year. 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. Risk For information on risk refer to note 6.2 of the consolidated financial statements and overview of risk factors in “Risk management”, pages 31-36. SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 2 112 2.1 Revenue 2.2 Future performance obligations The transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at December 31, 2021, is EUR 19.7m (2020: EUR 28.8m). This amount mostly comprises obligations to provide software updates and support, agreements which require client acceptance of functionality, and support or hosting subscriptions and support, as the respective contracts typically have durations of multiple years. Section 2 Revenue and clients Revenue EUR '000 2021 10,777 56,264 120,563 45,549 17,038 250,191 2020 17,377 43,913 122,141 29,291 22,850 235,572 Licenses – initial sales Licenses – additional sales Software updates and support Professional services Hosting and other fees Total revenue Management expects that EUR 7.3m (2020: EUR 10.4m in 2021) of the amount allocated to the future contract obligations as of December 31, 2021 will be recognized during 2022. EUR 12.5m (2020: EUR 18.4m) is expected to be recognized as revenue within 2 to 5 years. For accounting policies, estimates and judgments, please refer to the consolidated financial statements note 2.3. SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 2 113 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. Changes in contract assets Invoiced from opening balance Opening Net additions Closing balance EUR '000 balance Adjustments1 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. 2021 Contract asset (gross) Loss allowance Contract asset (NPV) 10,582 -16 1,075 7 -3,511 - -30 - 8,116 -9 10,566 1,082 -3,511 -30 8,107 Contract assets are expected to be realized within the Parent’s normal operating cycle, 49.1% (2020: 33.3%) of it is expected to be realized within the next twelve months, 50.9% (2020: 66.7%) within the next 2 to 5 years. 2020 Contract liabilities represent mainly pre- payments 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 Contract asset (gross) Loss allowance Contract asset (NPV) 7,788 -14 4,847 -2 -2,140 - 87 - 10,582 -16 7,774 4,845 -2,140 87 10,566 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 modifications), change in time frame for a right to consideration to become unconditional or for a performance obligation to be satisfied. Revenue recognized from opening balance recognition, resulting in contract liabilities. Changes in contract liabilities Opening balance Net additions Closing balance 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. EUR '000 Adjustments 2021 Contract liabilities – licenses Contract liabilities – software updates and support Contract liabilities – services Contract liabilities – other 321 524 908 712 -321 -524 -950 -97 - - - - - 908 712 1,237 98 379 666 339 340 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 liabilities (prepayments from clients) 2,180 2,338 -1,892 2,626 2020 Contract liabilities – licenses Contract liabilities – software updates and support Contract liabilities – services Contract liabilities – other - 36 321 524 - -36 - - 321 524 938 40 552 -257 -38 4 - 1,237 98 96 Contract liabilities (prepayments from clients) 1,014 1,493 -331 4 2,180 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 2 114 2.4 Receivables Accounting policy 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. An expected loss rate of 0.03% - 0.91% (2020: 0.04% - 1.04%) is applied, based on corporate investment grade 1-year average default rates by region as published by Standard & Poor. Receivables EUR '000 2021 3,950 4,532 -3 2020 4,360 4,419 -6 Trade receivables from clients Accrued revenue Loss allowance Receivables from subsidiaries Other receivables 183,795 - 141,416 784 Total receivables at December 31 The aging of trade receivables from clients was at December 31: Not due 192,274 150,973 3,226 168 2,903 1,132 216 Not more than 30 days More than 30 days but not more than 90 days More than 90 days 21 535 109 Total trade receivables from clients 3,950 4,360 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 3 115 3.1 Employee costs Section 3 Employees Employee costs consist of salaries, sales commissions, bonuses, pensions and social costs, share-based payments, vacation pay, and other benefits. For additional disclosures on share-based remuneration refer to note 3.2 of the consolidated financial statements. Employee costs EUR '000 2021 69,274 1,729 10,035 169 2020 66,062 1,696 8,739 169 Salaries Defined contribution pension plans Share-based payments Social security costs Total employee costs 81,207 587 76,666 574 Number of employees at the end of the period Average number of employees 553 550 Remuneration to the Executive Management Board and Board of Directors is given below: Remuneration to Executive Management Board and Board of Directors EUR '000 2021 2,494 171 2020 2,177 166 Salaries Other benefits Share-based payment Performance-related bonus Executive Management Board total Board fees 3,260 1,513 7,438 568 2,027 1,118 5,488 406 Fees for committee work Travel allowance 123 95 18 3 Share-based payment Board of Directors total Total 175 248 884 752 8,322 6,240 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 3 116 3.2 Provisions Provisions Re-establishment costs for rented premises Holiday allowances in 2020 contained the provision for holiday allowance required by the Danish Holiday Act. Provisions used during 2021 relate to the balance moved to current liabilities as amount was settled 2021. Holiday allowance Anniversary bonuses EUR '000 Total 2021 Liability at January 1 - - - - - - 656 1,689 1 2,345 1 Foreign exchange adjustment Used during the year Reversal of unused liabilities Provisions for the year Total provisions - - -3 -3 Re-establishment provisions cover the costs of restoring leasehold premises. - -521 248 1,414 -521 255 2,077 7 663 Provisions for anniversary bonuses result from the Company’s commitment of one month’s pay in connection with employees’ 25th and 40th anniversaries. Expected due dates for provisions: Falling due within 1 year Falling due within 2 to 5 years Falling due after 5 years Total provisions - - - - - - 86 514 86 514 663 663 814 1,477 2,077 1,414 2020 Liability at January 1 2,291 10 618 2 1,528 6 4,437 18 Foreign exchange adjustment Used during the year Reversal of unused liabilities Provisions for the year Total provisions -6,526 - - -49 -6,575 -48 - -48 252 1,689 4,225 - 36 656 4,513 2,345 Expected due dates for provisions: Falling due within 1 year Falling due within 2 to 5 years Falling due after 5 years Total provisions - - - - - - 113 611 113 611 656 656 965 1,621 2,345 1,689 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 4 117 4.1 Income tax Seccttiioonn 4 Tax Income tax EUR '000 2021 2020 Tax for the year: SimCorp A/S’ income taxes amount to EUR 15.8m relative to EUR 19.4m in 2020. Income tax decreased due to prior year refunds of withholding taxes. Tax on profit 15,767 15,767 19,439 19,439 Total tax Tax on profit for the year breaks down as follows: Current tax 13,206 2,565 -4 14,767 4,816 Deferred tax Prior-year adjustments Total tax on profit for the year Tax paid during the year Tax on profit for the year breaks down as follows: -144 15,767 12,377 19,439 11,233 SimCorp A/S’ effective tax rate decreased from 18.0% to 14.2% due to prior year refunds of withholding tax. Tax calculated on the year's pre-tax profit, 22% (2020: 22%) Dividends from subsidiaries and associates Tax effect: 24,295 -4,472 23,779 -5,483 The Danish corporate tax rate was 22% in 2021, which was unchanged from 2020. Non-taxable income -2,749 1,417 -2,537 1,240 2,440 19,439 18.0% Non-deductible expenses Other, including prior-year adjustments Total tax on profit for the year Effective tax rate -2,724 15,767 14.2% Deferred tax has changed from EUR 19.1m in 2020 to EUR 23.3m in 2021, which mainly relates to increases in deferred tax on contract assets. For accounting policies, estimates, and judgments, please refer to Section 4 of the consolidated financial statements. SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 4 118 4.2 Deferred tax Deferred tax Deferred tax EUR '000 2021 -19,121 -9 2020 -14,550 -67 Foreign Recognition Balance January 1 exchange in profit Recognition Balance in equity December 31 Net deferred tax (liability)/asset at January 1 Foreign exchange adjustment EUR'000 adjustment and loss 2021 Adjustment of deferred tax, profit and loss Prior-year adjustment, profit and loss Adjustment of deferred tax, equity Net deferred tax (liability)/asset at December 31 Recognized in the statement of financial position as follows: Deferred tax liabilities -2,565 -29 -4,816 -104 Intangible assets -27 - - 25 83 - - -2 Property, plant and equipment, owned -1,550 -23,274 416 277 360 -19,121 Property, plant and equipment, right-of-use -5,095 -2 534 - -4,563 -23,274 -23,274 -19,121 -19,121 Contract assets -24,961 689 -9 -1 - -2,713 -51 - -27,683 637 Net deferred tax (liability)/asset at December 31 Lease liabilities, current Current liabilities - 976 6 - - 982 Lease liabilities, non-current Provisions, non-current Share-based payment Total 4,565 491 2 -602 -101 225 3,965 390 - - 3,964 -19,121 1 -1,550 -1,550 2,640 -23,274 -9 -2,594 2020 Intangible assets -58 - 31 - - -27 Property, plant and equipment, owned 360 1 -84 277 Property, plant and equipment, right-of-use -5,726 -23 654 - -5,095 Contract assets -19,859 731 -88 2 -5,014 -44 - -24,961 689 Lease liabilities, current Current liabilities - - 1,043 5,121 460 4 -71 976 Lease liabilities, non-current Provisions, non-currrent Share-based payment Total 20 2 -576 29 - 4,565 491 - 3,378 -14,550 15 -67 155 416 416 3,964 -19,121 -4,920 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 5 119 5.1 Investments in associates and subsidiaries Section 5 Invested capital The Parent accounts for its investments in subsidiaries and associates at cost. Additions to investments in subsidiaries in 2020 related to capital injection to SimCorp Iberia. Please refer to note 7.6 in the consolidated financial statements for a list of subsidiaries. Investment in associates EUR '000 2021 157 1 2020 157 - Cost at January 1 Foreign exchange adjustment Disposals -20 138 138 - Cost at December 31 Carrying amount at December 31 157 157 Investments in subsidiaries EUR '000 2021 137,825 50 2020 136,167 558 Cost at January 1 Foreign exchange adjustment Additions - 1,100 Transfers -1 - Cost at December 31 Carrying amount at December 31 Dividends received 137,874 137,874 20,275 137,825 137,825 24,878 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 5 120 5.2 Intangible assets For a description of the accounting policies, please refer to the consolidated financial statements note 5.2. Intangible assets – software EUR '000 2021 8,050 3 2020 8,017 33 Cost at January 1 Foreign exchange adjustment Cost at December 31 Depreciation at January 1 Foreign exchange adjustment Depreciation 8,053 7,929 3 8,050 7,753 32 110 8,042 11 144 Depreciation at December 31 Carrying amount at December 31 7,929 121 Amortization EUR ‘000 2021 28 2020 27 Cost of sales Research and development costs Sales and marketing costs Administrative expenses Total amortization 51 73 7 9 24 35 110 144 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 5 121 5.3 Property, plant, and equipment 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 Other equipment, fixtures, fittings and prepayments Property, plant, and equipment total Technical equipment Leasehold EUR '000 Right -of-use Improvement Right-of-use Owned Right-of-use Owned 2021 Cost at January 1 29,697 11 2,569 74 - 6,212 2 415 - 2,605 1 41,572 15 Foreign exchange adjustment Additions 1 - - - 92 268 -138 545 244 -6 57 417 Disposals - - - - - -138 Cost at December 31 Depreciation at January 1 Foreign exchange adjustment Depreciation 29,708 6,157 2 2,570 2,083 1 74 12 -3 25 - 6,306 5,951 2 2,663 1,404 1 41,866 15,851 -3 3,096 - 58 219 - 166 -108 296 249 308 - 3,872 -108 Disposals - Depreciation at December 31 Carrying amount at December 31 9,255 20,453 2,142 428 34 40 6,172 134 1,713 950 19,612 22,254 2020 Cost at January 1 29,218 119 2,137 9 772 3 6,565 27 325 1 2,824 11 41,841 170 Foreign exchange adjustment Additions 360 536 -113 2,569 2,137 9 172 -873 74 72 143 -54 415 107 - 1,029 -1,259 2,605 2,279 9 2,312 -2,751 41,572 14,094 58 Disposals - -452 6,212 6,003 25 Cost at December 31 Depreciation at January 1 Foreign exchange adjustment Depreciation 29,697 3,053 13 515 2 3,091 - 50 368 -873 12 375 149 -12 244 171 279 4,312 -2,613 15,851 25,721 Disposals -113 2,083 486 -452 5,951 261 -1,163 1,404 1,201 Depreciation at December 31 Carrying amount at December 31 6,157 23,540 62 Depreciation period Up to 10 years Up to 3 years Up to 5 years SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 5 122 5.3 Property, plant, and equipment (continued) Depreciation Amounts recognized in income statement EUR ‘000 2021 989 2020 823 EUR '000 2021 223 27 2020 254 44 Cost of sales Interest on lease liabilities Research and development costs Sales and marketing costs Administrative expenses Total depreciation 1,808 246 2,186 267 Variable lease payments not included in the measurement of lease liabilities Expenses related to short-term lease - 9 829 1,036 4,312 Total recognized in profit and loss 250 307 3,872 Amounts recognized in the statement of cash flow Lease liabilities EUR '000 2021 3,433 3,433 2020 3,672 3,672 EUR '000 2021 3,069 2020 3,352 Repayment of lease liability Total recognized in statement of cash flow Payable within 1 year Payable within 2 to 5 years 11,805 6,806 11,789 9,719 Payable after 5 years Total undiscounted lease liabilities 21,680 20,922 2,899 24,860 23,884 3,135 Total lease liabilities included in the statement of financial position Current Non-current 18,023 20,749 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 6 123 6.1 Financial assets and liabilities Section 6 Financing items 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. 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. Other financial assets comprise investments in shares of unlisted entities. Financial assets Financial assets comprise deposits of EUR 1.4m (2020: EUR 1.4m), receivables of EUR 192.3m (2020: EUR 151.0m), and cash and cash equivalents of EUR 15.9m (2020: EUR 26.6m). For addition information on receivables refer to note 2.4. Financial liabilities Financial liabilities comprise lease liabilities of EUR 20.9m (2020: EUR 23.9m), and trade payables and other payables of EUR 29.2m (2020: EUR 32.6m). Trade payables and other payables Other payables include bonus and commission accruals, vacation pay obligations, payroll taxes and VAT. Payables are measured at cost. Deposits are primarily related to 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. Deposits EUR '000 2021 2020 1,436 5 Cost at January 1 Foreign exchange adjustment Additions 1,441 1 - - 6 Disposals -6 Carrying amount at December 31 1,442 1,441 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 6 124 6.2 Financial income and expenses Financial income EUR '000 2021 130 2020 306 3 Interest income, subsidiaries Interest income, financial assets carried at amortized cost Dividends from subsidiaries Dividends from associates Foreign exchange gains, net Total financial Income - 20,275 50 24,878 41 5,387 25,842 - 25,228 Financial expenses EUR '000 2021 46 2020 80 Interest expenses, subsidiaries Interest expenses, financial liabilities carried at amortized cost Interest expenses, financial assets carried at amortized cost Interest expenses, lease 245 32 258 54 223 7 254 7 Interest expenses, reestablishment Other financial expenses 35 8 Foreign exchange losses, net - 6,330 6,991 Total financial expenses 588 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 7 125 7.1 Related party transactions Section 7 Other disclosures For the Parent company, in addition to transactions with other related parties depicted in note 7.2 of the consolidated financial statements, related parties also comprise subsidiaries and associates in which SimCorp A/S has a controlling or significant influence. Trading with subsidiaries and associates is conducted on arm’s length terms. Ownership interests are shown in note 7.7 of the consolidated financial statements. Interest on outstanding balances with subsidiaries and associates is specified in note 6.2 in the financial statements of the Parent company. In 2021, the Parent company has received dividends of EUR 20.3m (2020: EUR 24.9m) from subsidiaries and dividends of EUR 0.05m from The Parent company’s outstanding balance with subsidiaries comprises receivables of EUR 183.8m, current account EUR 44.4m and non-current group contract asset EUR 139.4m (2020: EUR 141.4m, current account 37.5m and non-current group contract asset EUR 103.9m) and payables of EUR 16.1m (2020: EUR 11.3m). associates (2020: EUR 0.04m). 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. Balances with subsidiaries and associates comprise ordinary trade balances relating to the purchase and sale of services. The current account balance 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. Trading with subsidiaries and associates EUR '000 2021 62,110 533 2020 58,514 719 Purchases of services from subsidiaries Purchases of services from associates Sale of services to subsidiaries 224,064 220,152 SimCorp Annual Report 2021 Financial statements of SimCorp A/S Section 7 126 7.2 Auditors’ remuneration 7.3 Contingent liabilities and other financial liabilities In 2021, audit fees included the audit of the Parent company’s financial statements, including additional audit procedures due to implementation of a new ERP system. As part of building long-term client Bank guarantees have been provided for rent commitments in Australia, Belgium, France, Germany, Luxembourg, and USA. relationships, 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 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 company’s financial position. In 2020, audit fees included implementation of audit standard ISA540. SimCorp A/S has issued guarantees for its subsidiaries’ delivery commitments to clients for a total of EUR 49.2m (2020: EUR 46.5m). Auditors' remuneration EUR '000 2021 210 68 2020 157 16 The Parent company expects to issue letters of support to certain subsidiaries. Audit fees SimCorp A/S has financial commitments with suppliers for EUR 65m (2020: EUR 6m) mainly related to infrastructure services for the cloud solutions. Other service fees Total 278 32% 173 10% The Parent company has provided guarantee for credit facilities totalling EUR 4.4m (2020: EUR 4.4m) to certain subsidiaries. Non-Audit Services (NAS)/Audit fee ratio 7.4 Events after statement of financial position date No material events have occurred after December 31, 2021 that have consequences for the Annual Report 2021. SimCorp Annual Report 2021 Financial statements of SimCorp A/S Addresses 127 Addresses SimCorp Corporate Headquarters SimCorp A/S SimCorp GMBH SimCorp Iberia S.L. SimCorp Gain (Austria) GMBH Invalidenstrasse 2, 6th floor 1030 Vienna SimCorp Asia PTY. Ltd. Level 17, 68 Pitt Street 2000 Sydney NSW Australia Weidekampsgade 16 2300 Copenhagen S Denmark Justus-von-Liebig-Straße 1 61352 Bad Homburg Germany Travessera de Gracia no. 11 Barcelona 08021 Spain Austria Phone +45 35 44 88 00 Phone +49 6172 9240-0 Phone: +33 1 5535 5454 Phone: +43 1 5120099 Phone +61 2 9240 3500 SimCorp Ukraine LLC V. Stusa 35-37, 2nd floor 03142 Kiev Ukraine Phone +380 44 594 95 60 SimCorp Österreich GMBH Invalidenstrasse 2, 6th floor, 1030 Vienna Austria Phone +43 1 5120099 SimCorp France S.A.S. 19-23 Bis rue de Vienne 75008 Paris France Phone +33 1 5535 5454 SimCorp North America SimCorp Hong Kong Ltd. Level 19, Two International Finance Centre, 8 Finance Street, Central, Hong Kong SimCorp USA Inc. One State Street Plaza 1 State Street, 29th Floor New York, NY 10004 USA Phone: +852 3101 7954 SimCorp Sp. Z.O.O Ul. Puławska 182, 4th floor 02-670 Warsaw Poland Phone: +48 22 104 81 100 SimCorp Schweiz AG Sihlquai 253 8005 Zurich Switzerland Phone +41 44 360 59 00 SimCorp Luxembourg S.a.r.l. rue Eugène Ruppert 20 2453 Luxembourg Luxembourg Phone +352 26 49 35 65 SimCorp Japan Phone: +1 212 994 9400 Level 27 Tokyo Sankei Building 1-7-2 Otemachi, Chiyoda-ku 100-0004 Tokyo SimCorp Canada Inc. 100 Wellington Street West TD West Tower, Suite 2204 (PO Box 123) Toronto, Ontario M5K 1H1 Canada Japan Phone: +81 3 3242 3263 SimCorp Europe SimCorp Benelux SA/NV 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 India LLP SimCorp Sverige AB Torsgatan 13 111 23 Stockholm Sweden Unit No. 402 A 13/2/3, Highway Tower II Sector 62 Noida Gautam Buddha Nagar UP 201309 IN Phone +1 647 591 9200 SimCorp Coric Inc. 100 Summer Street Suite 1950, 19th Floor Boston, MA 02110 USA India Phone +46 8 528 015 00 SimCorp Netherlands (Dutch branch of SimCorp Benelux SA/NV) Gustav Mahlerplein 109-111 1082 MS Amsterdam The Netherlands Phone: +91-120-2401088 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 SimCorp Norge AS Biskop Gunnerusgate 14A 0051 Oslo Norway Phone +47 23 10 41 00 Phone: +1 617 588 5141 www.simcorp.com info@simcorp.com Phone: +31 (0)20 708 57 64 SimCorp APAC Phone: +971 2 654 4004 SimCorp Finland SimCorp Italiana S.R.L. Via Monferrato, 1 20144 Milano SimCorp Singapore PTE. Ltd. 18 Robinson Road #21-02 Singapore 048547 Singapore Phone +65 6916 0483 (Finnish branch of SimCorp Sverige AB) C/O Spaces Tripla, Workery West 6th floor, Firdonkatu 2 T 63 00520 Helsinki SimCorp Coric Ltd. 2nd floor 100 Wood Street London EC2V 7AN United Kingdom Italy Phone: +39 02 4855871 Finland Phone +44 20 7260 1900 Phone +358 9685 2010 About SimCorp SimCorp provides integrated, best-in-class, multi-asset investment management solutions to the world’s leading asset managers, fund managers, asset servicers, pension and insurance funds, wealth managers, central banks, sovereign wealth funds, and treasury. Deployed on premise or in the cloud, SimCorp’s core solution, SimCorp Dimension®, alongside SimCorp Coric®, SimCorp Gain™, and SimCorp Sofia™ form a powerful and complete solution. Together with a range of managed services, they support the entire investment life cycle, based on a market-leading IBOR. SimCorp invests around 20% of its annual revenue in R&D, helping clients develop their business and stay ahead of ever-changing industry demands. Listed on Nasdaq Copenhagen, SimCorp is a global company, with regional offices across EMEA, North America, and Asia Pacific. For more information, please visit simcorp.com Legal notice The contents of this publication are for general information and illustrative purposes only and are used at the reader’s own risk. SimCorp uses all reasonable endeavors to ensure the accuracy of the information. However, SimCorp does not guarantee or warrant the accuracy, completeness, factual correctness, or reliability of any information in this publication and does not accept liability for errors, omissions, inaccuracies, or typographical errors. The views and opinions expressed in this publication are not necessarily those of SimCorp. © 2022 SimCorp A/S. All rights reserved. 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