C O N N E C T I N G P E O P L E with their assets 2021 ANNUAL REPORT CONTENTS 02 Our Global Scale 04 FY2021 Highlights 06 A Message from the Chair 10 CEO and Managing Director's Report 18 Business Review 18 22 Retirement & Superannuation Solutions Banking & Credit Management 20 Corporate Markets 24 Link Fund Solutions 1 A global, digitally enabled business connecting millions of people with their assets – responsibly, securely and safely. From equities, pension and superannuation to investments, property and other financial assets, we partner with a diversified portfolio of global clients to provide robust, efficient and scalable services, purpose‑built solutions and modern technology platforms that deliver world class outcomes and experiences. We help manage regulatory complexity, improve data management and connect people with their assets, through exceptional user experiences that leverages the expertise of our people combined with technology, digital connectivity and data insights. 26 Our Board 28 Our Executive Team 30 A Spotlight on Our People 42 Sustainability Report 74 Financial Report 50 62 A Responsible business Sustainable growth 56 Aligning and building our capability LINK GROUP | Annual Report 2021 1 OUR GLOBAL SCALE 1 18 JURISDICTIONS AT THE END OF FY2021 Over 7,000 EMPLOYEES GLOBALLY OVER 6,000 CLIENTS GLOBALLY REVENUE $1.16b Retirement & Superannuation Solutions Corporate Markets Fund Solutions Banking & Credit Management 43% 31% 14% 12% 1 All data as at 30 June 2021. 2 Luxembourg United Kingdom Ireland France Germany Netherlands Italy Guernsey Isle of Man Jersey United Arab Emirates Hong Kong India Papua New Guinea South Africa Australia New Zealand Luxembourg United Kingdom Ireland France Germany Netherlands Italy United Arab Emirates Guernsey Isle of Man Jersey Hong Kong India Papua New Guinea South Africa Australia New Zealand LINK GROUP | Annual Report 2021 3 FY2021 HIGHLIGHTS REVENUE OPERATING EBIT 1 OPERATING NPATA 1 $1,160m FY2020 $1,230m $141m FY2020 $180m $113m FY2020 $138m STATUTORY NPAT 2 $(163)m FY2020 $(103)m NET OPERATING CASH FLOW 1 $293m NET DEBT $455m CASH CONVERSION 114% FY2020 $750m FY2021 TOTAL DIVIDEND 10.0 FY2020 10.0 cps cents per share ON MARKET BUYBACK Up to $150m Approximately 5% of issued capital 1 Operating EBITDA, Operating EBIT, Operating NPATA and Net Operating Cash Flow exclude 2 Statutory NPAT includes a non-cash impairment charge of $182.8 million related to the BCM business. Significant Items and are non-IFRS Financial Measures. See Appendix 1 of the OFR for the definitions of non-IFRS measures. 4 35% of all superannuation accounts in Australia serviced 37% of ASX 300 share registry 34% of FTSE 250 share registry Supporting 3 of the top 10 debt buyers across Europe Largest independent AFM provider 10 years average client relationship 48% of UK outsourced ACD market Won 24% of all IPO's in Australia and 27% in UK in FY2021 80% PEXA exchange transfer market penetration 2021 Digital Platform of the Year at Financial Standard's MAX Awards VIRTUAL MEETINGS PLATFORM LINK GROUP | Annual Report 2021 5 A MESSAGE FROM THE CHAIR 6 A Year of Challenge and Change "The ongoing impact of the global pandemic has resulted in unexpected and unprecedented challenges for all economies and societies. In these trying circumstances, Link Group’s leadership team and staff have done an extraordinary job to adapt and evolve how we work. We have responded quickly to changing conditions and remained focused on providing timely and reliable service to all our clients." Financial Performance Our key results for FY2021 were as follows: • Revenue of $1.16 billion • Operating EBIT of $141 million • Operating NPATA of $113 million • Statutory net loss after tax (NPAT) of $(163) million • Operating earnings per share of 21.3 cents • Total dividend of 10.0 cents per share (82% franked) Link Group’s Operating EBIT margin was 12% for the year, which is below our aspiration for the business. However, we expect to see this margin improve as we benefit from our Global Transformation program and an anticipated recovery in business conditions in the UK and Europe, as well as future growth in our Retirement & Superannuation Solutions (RSS) business. The pandemic has continued to impact some parts of our business, with Banking and Credit Management (BCM) being affected the most. The number of new non-performing loan portfolios coming to market has been lower than anticipated, particularly in Ireland which is a primary market for BCM. As a result, we have recorded a non-cash impairment charge of $183 million for this business unit for the FY2021 year. In spite of these headwinds in FY2021, we continued to see high levels of recurring revenue at 85% and strong free cash flows. The diversity of our revenues and strong capital and cash conversion has provided resilience to the business. RSS has delivered and supported our clients to navigate another year of significant regulatory change in Australia, while Corporate Markets has experienced positive momentum, particularly in Australia and India, with higher shareholder numbers and increased virtual Annual General Meeting (AGM) activity. In addition, we have continued to win new clients and grown Assets under Management in our Fund Solutions business and new mortgage origination services in BCM. PEXA performed very strongly in FY2021, contributing a total of $32.7 million to Link Group Operating NPATA, which was up by $15.6 million or 91% on the prior period. During the year, we explored various options to best highlight PEXA’s underlying value for our shareholders. Together with the two other PEXA shareholders it was decided that an IPO would deliver the optimal outcome. Link Group received net proceeds of $179.4 million from the PEXA IPO and our 42.8% shareholding in PEXA 1 remains a key asset for Link Group. In early July 2021, we provided the market with a restatement of our FY2019, FY2020 and 1H2021 financial results to reflect the realignment of the Link Group business units and revised tax effect accounting within PEXA and its resultant impact on Link Group’s equity accounted share of PEXA’s 1 profit and loss. Our reporting now reflects our four global business units: RSS, Corporate Markets, Fund Solutions and BCM. The Technology and Operations business unit has been dissolved, providing greater transparency in divisional financials and improved accountability in each business unit. Overall, our strong operating cash flow, capital and cash conversion, high levels of recurring revenue and geographic and asset diversification has provided the Board with the ability to return value to our shareholders. I am pleased to report that we are returning a total dividend of 10.0 cents per shares to shareholders for FY2021. We also announced in August 2021 an on-market share buyback of up to $150 million, representing approximately 5% of our issued capital. 1 Link Group holds (via its wholly owned subsidiary Link Property Pty Ltd) a 42.8% interest in PEXA Group Limited (formerly known as Torrens Group Holdings Pty Ltd). LINK GROUP | Annual Report 2021 7 A message from the Chair While our overall financial performance has remained sound, we recognise there is opportunity to further deliver value to our shareholders and remain confident that we can do so in the medium to longer term. Overview of Transactions During FY2021, we considered two conditional, non-binding indicative proposals to acquire 100% of the shares in Link Group, firstly from a consortium comprising Pacific Equity Partners and Carlyle Group which was received in October 2020, and secondly from SS&C Technology Holdings which was received in December 2020. The Link Group Board prioritised the maximisation of shareholder value when considering these non-binding indicative proposals and carefully evaluated both proposals, including obtaining advice from our financial, tax and legal advisors. Although we did not consider either proposal to represent compelling value for shareholders, we provided both parties with due diligence information to enable them to develop a proposal that may have been capable of being recommended to shareholders. This did not materialise as neither party provided a binding proposal. A New Chapter After a short transition period, Vivek Bhatia commenced as CEO and Managing Director on 2 November 2020 and has demonstrated all of the positive qualities that we had expected him to bring to the role. We have begun to transform Link Group with a renewed strategic objective to simplify, deliver and grow the business. The leadership team has made progress on these objectives and the Board is pleased to see a reinvigoration in the business as we enter FY2022. Link Group’s purpose is to connect people with their assets – safely, securely and responsibly. Our purpose is underpinned by our values: Client Focused, Adapt and Evolve, and Together We Achieve. These values are the standards by which we hold ourselves and each other to account and drive our ways of working to deliver on our purpose and strategy. A Sustainable Link Group The Board remains committed to sustainable and responsible business practices, and continued development of a diverse and inclusive culture and workforce. We have approved a refreshed corporate social responsibility strategy as well as updated sustainability and human rights policies. We have completed our combined Modern Slavery Statement for Australia and the UK, broadly aligned our strategy to the terms of the Paris Agreement and set a net zero carbon emissions target by FY2030. Upholding strong corporate governance practices, including vigilance in respect of risk management through improved information security and data protection, highlights our ability to operate as a responsible business to help build a more sustainable future. We also celebrate the diversity of our people and the richness that brings in perspectives and experience 8 to Link Group. Pleasingly, we have a balanced gender representation across the Board and Executive Leadership Team and most levels of staff and leaders, and remain focused on improving representation of women across our cohort of senior leaders. Diversity is a key focus for us and the management team continues to refine people policies and processes to provide equity for all our people. We are also pleased to advise that the Australian Council of Superannuation Investors assessed Link Group at a “Leading” level of environmental, social and governance reporting, following their annual review of reporting in the ASX200 for the period to 31 March 2021. Looking Ahead Although the year ahead will no doubt continue to see challenges associated with the pandemic, the Board and executive team will continue to focus on servicing our clients and supporting our people. We have clear strategic priorities and remain committed to ensuring we meet our goals, especially those in the medium to long term, so that we can deliver a resilient and sustainable business with a stronger financial performance for our shareholders. I am most appreciative of the support and hard work of my fellow non-executive directors during another very challenging year. On behalf of the Board, I would like to thank Vivek and the entire Link Group team for their continued dedication and commitment throughout FY2021 and to our clients and shareholders for your ongoing support. Michael Carapiet Chair LINK GROUP | Annual Report 2021 9 CEO AND MANAGING DIRECTOR'S REPORT 10 "I am proud of how we have continued to support our people, our clients and the community, and deliver for our shareholders during another year of uncertainty and change. I'd like to thank the Board and the team at Link Group for the warm welcome that they have given me in my first year in the organisation." Supporting Our People The health and wellbeing of our people was and remains a key priority, and we have made good progress this past year in developing new initiatives and resources to better support and develop our people. Commencing in the role, my focus was to get to know and understand our clients, our people, our shareholders and our other stakeholders. Our people are one of our greatest assets, so learning more about them and how best to support them became a primary focus when I commenced. COVID-19 presented its challenges in that respect, with travel and border restrictions making it impossible to meet all of our team in person. Nonetheless, I have been able to meet almost everyone through a series of virtual round tables and town halls, including some in person where permitted and safe. I’ve learnt that Link Group has talented, passionate people who strive to do their best for our clients on a daily basis. It is warming to see the strong collaborative culture that exists and the focus on going above and beyond for our clients. Continuing to support our people is a strong focus of our organisation, and I am pleased that we have made good progress in this area during FY2021. Our New Values and Recognising Our People In FY2021 we launched our refreshed purpose, ‘connecting people with their assets’, and introduced new values – Client Focused, Adapt and Evolve, and Together We Achieve. Our values underpin everything we do and how we do it, and I am delighted to see how well our people have embraced them. Our focus is to truly live and breathe our values every day and to recognise and reward those who do. To that end, we followed the launch of our new values with ‘Appreciate’, our global recognition program that publicly recognises people who are living our values, through an innovative social media style feed and mobile app. This has been extremely well received by our people, with over 2,700 recognitions awarded on the platform in the first 60 days of its launch. TOGETHER WE ACHIEVE CONNECTING PEOPLE WITH THEIR ASSETS CLIENT FOCUSED ADAPT AND EVOLVE Link Group's New Values LINK GROUP | Annual Report 2021 11 CEO and Managing Director's Report Hearing from Our People Earlier this year, we conducted an employee pulse survey followed by ‘Link Listens’, our first global employee engagement survey, both of which received strong response rates. Providing our people with the ability to speak up and voice their feedback, as well as taking the time to address these is key and with over 15,000 comments received, Link Listens has provided the leadership team and me with some genuine, valuable insights and a deeper understanding of our people. The survey showed that our people believe we are doing a lot of things really well; they understand their contribution to Link Group and importantly, believe we are providing equal opportunities. They also told us there are things we can do better. The leadership team and I have a clear action plan in place to address these opportunities and continue to provide regular updates to our people on our progress. COVID-19 With COVID-19 continuing to present its challenges through its multiple variants, we have invested in supporting our people through a number of initiatives: • Through Link Wellness, all our people have access to physical and mental wellness tools and support, including online advice and information, complimentary webinars and access to our Employee Assistance Programs. • Through our new FlexTogether ‘blended working’ program, we are co-designing with our people the working arrangements to best support them to work flexibly as a permanent feature of how we work, as well as safe ways to return to working in the office where permissible. • While COVID-19 has impacted all of us, in FY2021 we saw the devastating impact it had on India in particular. As a business, we made a donation to the PM CARES Fund for COVID-19 relief efforts in India, while our people rallied in some of our offices in Australia to hold their own morning tea fundraisers to support their colleagues in India. We also provided access and facilities on-site to vaccinate 60% of our people in India with at least their first dose at the end of FY2021, with this vaccination initiative ongoing. With remote working continuing in many of our locations, we have opened up multiple, new channels of communication via polls, surveys, videos, our Intranet, town halls, round tables and also a weekly blog, so that we can all stay connected. Continuing to hear from, learn about and supporting our people will be my ongoing priority and I look forward to one day being able to meet everyone in person. Our Australian colleagues galvanising to raise funds through morning teas for their colleagues in India. 12 Supporting Our Clients We are focused on simplifying the connectivity between financial market participants and enhancing the engagement experience for end-users, by leveraging the expertise of our people combined with our technology, digital connectivity and data analysis and insights. In FY2021, we focused on providing innovative solutions to make it easier and simpler for our clients to support their own customers, and on continued service excellence to our clients. Corporate Transactions FY2021 has also proven to be a busy, active year for our Corporate Markets team. We supported 42 listed issuers across the ASX and NZX in raising over A$13 billion via various pro-rata accelerated offer structures. Also in Australia, we managed the Woolworths demerger and supported the Endeavour Group listing. With over 400,000 shareholders and 28,000 employees, Endeavour is now an ASX Top 50 client and achieved a A$10.8 billion market capitalisation on entry to the ASX. Virtual and Hybrid Meetings Against the backdrop of COVID-19, we have been able to support our clients to safely engage with their members and shareholders through the use of our proprietary virtual meeting technology. This has allowed over 2,000 virtual and hybrid meetings to be held in FY2021; a significant increase from FY2020. This capability won ‘Digital Platform of the Year’ in Financial Standard’s 2021 Marketing and Sales Excellence Awards. It has also proven to be a strong cross selling opportunity, with the platform now being used by our superannuation fund clients and unlisted companies with their members and listed company clients with their shareholders. In the UK we supported numerous Initial Public Offerings (IPOs) including the Moonpig Group PLC IPO which launched with a market capitalisation of £1.2 billion, and Tinybuild Inc – the largest US company to ever list on the Alternative Investment Market (AIM). We also delivered the highest number of IPOs in India, including some of the largest in the country. These included CAMS, Gland Pharma, Burger King, Indigo Paints and Nazara, with more in progress for FY2022. Support During COVID-19 After mobilising within weeks in FY2020 to deliver on the Australian Government’s Early Release of Super (ERS) scheme, the scheme came to an end on 31 December 2020. Throughout the duration of the scheme, our RSS team facilitated over 2.4 million ERS transactions, totalling approximately A$18 billion in payments to Australians experiencing financial hardship as a result of the pandemic. Also in response to COVID-19, our BCM team supported banks, non-bank lenders and debt purchasers across the UK and Ireland to implement payment breaks for over 9,000 of our clients’ customers. LINK GROUP | Annual Report 2021 13 CEO and Managing Director's Report Supporting Superannuation Fund Members The continued investment we are making in experience-led, technology enabled solutions such as digital, data, user experience and personalisation has seen the renewal of 70% of RSS business, including key clients such as Cbus Super, HESTA, Hostplus, BUSSQ and Christian Super. We were also appointed to establish and manage the new Hostplus Service Excellence Centre, which saw Hostplus transition their Contact Centre, Communications, Complaints and Employer Servicing functions to Link Group, from 1 March 2021. FY2021 also saw our clients navigate the changing market landscape, with mergers increasingly featuring within the superannuation sector. We supported several of our clients in this space, completing the Ausfund transition into Hostplus in May 2021, with the Club Plus Super and LUCRF into Australian Super, Media Super into Cbus Super and Statewide into Hostplus transitions currently in progress. Expanding our European Capabilities for Fund Solutions Clients Following our announcement on 23 December 2020, we received regulatory approval and completed our acquisition of Casa4Funds in August 2021. Casa4Funds is one of Europe’s oldest independent third-party Management Companies (ManCo) and Alternative Investment Fund Managers (AIFM), headquartered in Luxembourg. With Casa4Funds on board, our clients will be able to leverage the combined strengths, experience and capabilities of Fund Solutions and Casa4Funds. As Europe’s largest investment fund centre, Luxembourg is a key market with a wide range of traditional and alternative asset classes, including private equity, infrastructure, real estate and debt. This acquisition will be integral to broadening our Management Company capability in this region and supporting our continued growth objectives to expand further in Europe. 14 Supporting Our Community We remain committed to building a more sustainable future by being a responsible business – one that effectively manages the environmental, social and governance (ESG) risks and opportunities that are important to us and our stakeholders. In addition to the progress in these areas as mentioned in the Chair’s message in FY2021: • We aligned our climate strategy to the Paris Agreement which seeks to limit global warming to below 2 degrees. We have set short, medium and long-term climate targets with a focus on reducing greenhouse gas (GHG) emissions, including an aspirational target to be net zero by FY2030. • We joined the Australian Sustainable Finance Institute (ASFI) as one of its founding members. Along with other ASFI members, we seek to help drive and coordinate the delivery of the Sustainable Finance Roadmap, an action plan spanning the next decade. • We successfully revamped and relaunched our CSR strategy, LinkTogether For Good, which supports education for the disadvantaged and vulnerable in the communities in which we operate. We established six community partnerships in our key regions of Australia, the UK, Ireland and India. While the pandemic continued to limit in-person volunteering, we continued to give back to the communities through virtual fundraising and contributed over A$320,000 in financial and non-financial support to our charitable and community partners in FY2021. We have also set an initial community target to more than double our giving by FY2025. An example initiative to support our community partners through LinkTogether For Good. LINK GROUP | Annual Report 2021 15 CEO and Managing Director's Report Delivering for Our Shareholders Simplify, Deliver and Grow In taking on this role, I recognised that we have a good business with solid fundamentals, great people and clients, and a strong upside for the taking. We have a diversified, resilient financial profile, with a strong international footprint, leading market positions in core markets and a customer base that includes some of the world’s leading blue-chip global financial institutions. All of this gives us a solid platform to build upon for future organic and inorganic growth opportunities. Following an expansive period of acquisition-led growth, I believe it is time to reframe our strategy to focus on how we Simplify, Deliver and Grow to transform Link Group into a growth-oriented, technology-led business and in doing so, create value for our shareholders. Since initially outlining our strategy in December 2020, I am pleased to report that we have been delivering against our objectives. Simplify Deliver Grow • Strategic view to portfolio management: divestment of Link Market Services South Africa completed in November 2020 and we elected not to pursue the acquisition of Pepper European Servicing in January 2021. • Created a look through value of our interest in PEXA with the successful IPO of PEXA in June 2021. • Simplified our operating model and financial reporting to make the business easier to understand. Our business unit realignment now reflects our four global business units. This has led to increased empowerment and accountability within the business. • Delivered new clients and major client renewals, including Corporate Markets’ clients BP p.l.c. and Qantas Airways, RSS clients Cbus Super, HESTA and Hostplus, Fund Solutions clients Black Rock, Vanguard and Temple Bar Investment Trust and BCM client Avant Money. • Progressed our global transformation program, leveraging our global hubs in Leeds, Melbourne, Maynooth and Mumbai. The program has delivered gross run rate benefits of $42 million to date, with $23 million of benefits in FY2021 alone. • Free cash flow of circa $139 million, improved operating cash conversion rate of 114% and delivering a total dividend of 10.0 cents per share for shareholders. • Increased cross sell and broadening of services provided to clients, for example with virtual meetings and our appointment to establish the Hostplus Service Excellence Centre. • Leveraging our technology and scale, for example via our Smart Pension partnership in the UK. The Smart Pension Master Trust that we service now consists of a member base of over 800,000 and £1.9 billion in funds under management. With the UK market mirroring characteristics of the Australian market, this presents a strong future growth opportunity. • Expansion into new markets, for example into Luxembourg, Europe’s largest investment fund centre, via our Casa4Funds acquisition. 16 Positioning for The Future I would like to thank all our people for their dedication and commitment during an unprecedented year. Our ability to work together is why we have been able to navigate successfully through this period – adapting and evolving the way we work to keep our people safe, deliver for our clients, deliver shareholder value and continue to support the community. I would also like to thank my Executive Leadership Team, and in particular wish to acknowledge the contributions of Janine Rolfe, Susan Ring and Robbie Hughes, who departed Link Group in FY2021. In turn, we welcome Sarah Turner, General Counsel and Company Secretary, Antoinette Dunne, CEO of BCM, and Nicole Pelchen, the incoming Chief Technology Officer, who will join us from October 2021. We recognise embracing and harnessing individual differences and gender equality brings the breadth of perspective and depth of experience critical to our success. As we strive to be an organisation where our people are reflective of the diverse clients we support, and their customers throughout the world, I am pleased that with the appointment of Nicole Pelchen, the Executive Leadership Team will achieve a 50:50 gender representation. Finally, but not least, I would like to take this opportunity to extend my thanks and appreciation to our clients, shareholders and the Link Group Board. Over the next 12 to 18 months, we are focused on reinvesting in the business, building stronger capabilities to tailor solutions for our clients, and positioning the organisation to harness the opportunities presented with favourable tailwinds in the sector. We are confident that we have strong opportunities ahead of us and that we have the right people, skill sets, technology and solutions to be successful and deliver, especially on our medium to long-term strategy. Vivek Bhatia CEO and Managing Director LINK GROUP | Annual Report 2021 17 Business Review RETIREMENT & SUPERANNUATION SOLUTIONS Our RSS business has confidently navigated a year of change and uncertainty with significant regulatory reform in the market and continued impact from the pandemic. Despite these challenges, the RSS business has continued to evolve its global service offering and identify opportunities for transformation and growth. “Our team’s knowledge and experience of the markets in which we operate, coupled with our strong partnership with our clients, has stood us in good stead throughout a challenging period. Our continued focus is to truly partner with our clients to deliver more innovative solutions that exceed their members’ expectations and help to build a healthier superannuation ecosystem.” Dee McGrath, CEO, Retirement & Superannuation Solutions 18 REVENUE OPERATING EBIT $507m FY2020 $529m $96m FY2020 $96m OPERATING EXPENSES $365m FY2020 $384m OPERATING EBIT MARGIN 19% FY2020 18% Our aim is to contribute towards a healthier superannuation ecosystem and to support our clients in navigating this increasingly complex and competitive environment. We achieve this through our strategic partnerships and investment in experience-led, technology-enabled solutions to differentiate our clients’ offering and deliver better outcomes for their members. Supporting our clients through a period of change Following a significant amount of regulatory upheaval in the superannuation industry, consolidation activity has accelerated with historic levels of fund mergers being announced. This has created opportunities for RSS as our clients’ member bases grow. Our proven track record of transitioning over 100 funds onto our platform across the past decade with an open ecosystem that enables our clients to access new and evolving solutions makes us a partner of choice for fund consolidation. Simplifying how we work In FY2021, we continued to invest in our technology, one of the key examples being our next generation member portal with the launch of a new Member Centre eXperience (MCX), a simplified member onboarding and account management platform with human-centred design at its core. Coupled with our newly designed and built member mobile app, this solution empowers our clients to manage their site content and marketing updates via a robust and flexible, yet easy to use content management system, providing control and agility for our clients and an engaging experience for members. Delivering innovative solutions In FY2021, we launched our Retirement Ready service in partnership with fintech Retirement Essentials. This is a great example of our open ecosystem at work as we collaborated with Retirement Ready, resulting in a solution that makes entering retirement as simple and affordable as possible for all members. The service fills a gap in the market for an all-encompassing retirement solution and provides funds with the tools they need to help their members manage the transition into retirement with ease. Our continued investment into technology and data, further broadened and scaled our superannuation ecosystem with over 200 Application Programming Interface (APIs) available, underpinning more than 50 million API calls per month to facilitate our clients in innovating and creating market leading automated, digital experiences. FY2021 saw a continued investment into our CX Data Hub and further roll-out to clients, providing them with a state-of-the-art, cloud-based data and analytics platform to help our clients to better understand and service their members. The Hub provides access to rich data sources and insights in a customised format to feed next best interaction and deep personalisation strategies – essential to remaining at the forefront of the industry. Growing in the future We have established a solid footprint in the UK market with our strategic investment in Smart, which in FY2021 culminated in a Smart Pension Master Trust member base of over 800,000 with strong year on year growth, and GBP1.9 billion in funds under management. With a continued shift towards defined contribution markets and changes to regulation creating a systematic shift towards models seen in Australia, we have a unique perspective on mature defined contribution markets and capabilities to inform effective transformation. They recently announced a collaboration between UK bank Barclays and Smart Pension that offers Barclays customers a simple pension solution that will deliver a successful retirement outcome for members. This strategic partnership demonstrates Smart's focus on delivering better outcomes for members and enabling our clients to provide more technology-enabled solutions for their members and provides a further platform for future growth. LINK GROUP | Annual Report 2021 19 Business Review CORPORATE MARKETS Our Corporate Markets business delivered a solid year of customer retention, new business wins and organic growth. We delivered strong recurring revenues from a client base that continues to grow – having acquired over 700 new clients, contributing to a total of more than 6,000 clients worldwide. “We have a significant opportunity with our combined offering in Corporate Markets. Our team brings together an enormous amount of experience and expertise; which together with our technology platforms, will enable us to deliver more solutions and services for our clients globally.” Paul Gardiner, CEO, Corporate Markets REVENUE OPERATING EBIT $365m FY2020 $387m $54m FY2020 $72m OPERATING EXPENSES $275m FY2020 $281m OPERATING EBIT MARGIN 15% FY2020 19% 20 We have a resilient and diversified business model, offering a wide range of services to both listed and unlisted clients, including share and unit registry, employee share plans, and company secretarial services, as well as investor relations, treasury, virtual meetings and omni-channel communications. Growing and supporting our clients Our focus on enhanced client engagement and expansion of our global capabilities has led to the renewal of numerous contracts with valuable clients, such as BP p.l.c. in the United Kingdom, and Qantas Airways Limited in Australia who utilises our full breadth of services. Our Treasury Solutions team contributed to the large number of client renewals, as well as winning several long-term retainer contracts with clients such as North Northamptonshire Council and Broxbourne Borough Council. We were also recognised as the ‘Registrar of Choice’ for the UK market in the recent Corporate Advisers Ranking Guide after winning the ‘Best Share Registrar’ award at the 2020 annual Shares Awards. In India, we acquired two regional corporate registry players and expanded our client base, with now over 1,500 listed clients. Building on the success experienced in other regions, we also extended our Orient Capital investor relations offering into India in November 2020 and have signed over 20 new clients. This is a key achievement, demonstrating our ability to leverage and expand our extensive range of Corporate Markets services across different regions. While the impact of COVID-19 presented its challenges, it also presented opportunities for our division. For example, FY2021 saw active equity markets, providing us with opportunities for new customer growth. We successfully listed 75 IPOs, making us the global market leader in this space. It was also a noteworthy year for capital raisings, having supported 42 listed issuers across the ASX and NZX raise over A$13 billion via various pro-rata accelerated offer structures. We also delivered a greater number of employee share schemes and managed Australia’s largest ever share plan to over 109,000 Woolworths employees. Furthermore, we updated our award-winning Investor Centre mobile app to include employee features, with 68% of Fortescue Metals Group employees downloading the app to access their recent share offer, an example of the constant drive towards technology-enabled solutions. Delivering a simpler client experience As part of our global transformation, we have continued to consolidate our offices, particularly in the UK, to simplify our operations and create further capacity, dedicated centres of excellence and new product capabilities. Our team in Mumbai has enhanced our IT infrastructure availability and delivered new digital capabilities to ensure our employees can service our clients safely, securely and efficiently, even in adverse times. We also re-engineered our operations and virtual meeting model in Germany to support the market, adding 70 new clients in FY2021. In the UK, we launched a new Shareholder Engagement Programme (“SEP”). The SEP aims to reduce the size and cost of a client’s share register by offering a simple and cost-effective channel for smaller shareholders (under £13,000 in value) to sell their shares. In addition, shareholders wishing to increase their holding can do so for a flat fee. The SEP also encourages more sustainable practices for shareholders who choose not to sell, reinforcing positive habits such as electronic communications and online engagement. Across the globe we have strengthened our client engagement programs – hosting live virtual events, webinars, webcasts, and online publications, developing new ways to share our insights and industry updates and maintain open communication with our client network. Virtual meetings With the ongoing pandemic and social distancing requirements, we remain focused on helping our clients engage with their stakeholders and deliver their meetings safely. We experienced rapid growth in the use of virtual meeting technology in FY2021, managing over 2,000 virtual meetings globally, a significant increase from the year prior. This included AGMs, general meetings, and member meetings in the UK, Germany, Australia, New Zealand, India, Papua New Guinea and the United Arab Emirates. Currently, we are the only registrar in the market to have developed an inhouse virtual meeting capability, which won ‘Digital Platform of the Year’ in Financial Standard’s 2021 Marketing and Sales Excellence Awards. We have also successfully extended this offering to RSS clients, delivering 14 virtual meetings for superannuation funds for their member meetings this financial year. The future ahead is an exciting one for Corporate Markets, as we continue to simplify our business, deliver solutions to clients through our technology platforms, and explore new markets to grow our business. LINK GROUP | Annual Report 2021 21 Business Review BANKING AND CREDIT MANAGEMENT “I am so proud of the entire team. We have continued to support clients by working collaboratively, adapting and mobilising new solutions and ways of working, and delivering exceptional service across Ireland, the UK, the Netherlands and Italy. I look forward to our future growth and expanding into new markets and service lines.” Antoinette Dunne, CEO, Banking & Credit Management 22 REVENUE $141m FY2020 $166m OPERATING EBIT $(12)m FY2020 $7m OPERATING EXPENSES $135m FY2020 $144m FY2021 has been a year of change for BCM, as we navigated both opportunities and challenges during the year. From 30 April, BCM rebranded externally to BCMGlobal. This involved a huge collaboration across the entire organisation to introduce a fresh identity to the marketplace. Activity in one of our biggest markets reduced significantly in FY2021 which impacted on our revenue expectations. In turn, this delivered a lower than expected EBITDA, and a write off of IT assets and investments from a depreciation and amortisation perspective ultimately resulted in a financial loss for FY2021. Growing and moving forward BCM provides services to banks, lenders and debt purchasers, supporting the origination of new loans, servicing portfolios of performing and non-performing loans (NPLs) and providing outsourced solutions. As COVID-19 created many challenges over the last 12 months across the whole industry, BCM has worked hard to continue to support our clients and their customers across the UK, Ireland, the Netherlands and Italy in line with European Central Bank and local regulatory initiatives. This has resulted in our UK clients giving us higher than ever satisfaction scores for how we have mobilised to support them and their customers during this difficult period. Growing and delivering in the face of COVID-19 In Ireland, BCM’s most defining growth achievement during FY2021 was our appointment to provide loan origination and primary services to Avant Money as it entered the Irish residential mortgage market. Avant Money, owned by Spanish banking group Bankinter, is an established leading provider of credit card and personal loan products in Ireland. This will make Bankinter the first overseas institution to enter the Irish mortgage market since the financial crisis, representing an important milestone. Our teams in Italy have also spent the last 12 months expanding our existing services to provide innovative value-added solutions for our clients. Throughout the pandemic in Italy, closures left prospective buyers unable to physically visit assets. We adapted to support our clients by repositioning our sales and marketing, delivering them exclusively online. This has resulted in the team overseeing double-digit million-Euro capex investments and selling hundreds of residential units together with sales of property from various asset classes, on behalf of our clients. In response to the pandemic, many governments introduced schemes for mortgage payment breaks to support consumers and corporates. In the UK and Ireland, customers could apply for a payment break of up to six months. BCM supported banks, non-bank lenders and debt purchasers across the UK and Ireland to implement payment breaks for over 9,000 customers. We accepted our first payment break applications within days of the government announcements and adapted to respond to client requirements, including a new customer portal in Ireland and sympathetic engagement with customers. Dutch banks also provided payment holidays and temporary bridge loans to consumers and entrepreneurs. Our team in the Netherlands worked with lenders to help them evaluate the risks in their portfolio and provide other interim services they needed – including data-driven portfolio risk analysis, temporary servicing and individual borrower analysis. Simplifying to enhance In the Netherlands, BCM uses a disruptive, technology-led approach to create a simple, quick and easy experience for mortgage brokers, lenders, investors and borrowers. Our end-to-end, cloud-based platform is designed to flex and scale for corporations of all sizes and needs across different markets, adding value and intelligence throughout the loan cycle. Now, even the most complex loan can be underwritten in less than one minute. In Ireland, BCM has also rolled out workflow automation and other central solutions to streamline the delivery of quality, accurate data to our key NPL clients. We are using these learnings to continue to develop and enhance our systems to ensure efficiency and ease of use for our people and clients in all regions. With a focus on growth in the area of loan origination and further embedding our services in the markets we operate in, BCM is excited for the future as we enhance and leverage our technology platforms to give our clients and their customers a simpler and better user experience in FY2022 and beyond. LINK GROUP | Annual Report 2021 23 Business Review LINK FUND SOLUTIONS “Link Fund Solutions has had a progressive year despite challenges posed by the pandemic. We have continued to support clients through market-leading technology, new centres of excellence and a focus on our clients globally. We look forward to continuing to deliver innovative solutions, backed by the expertise of our team, as we enter FY2022.” Chris Addenbrooke, CEO, Link Fund Solutions Globally, Link Fund Solutions (LFS) has experienced a positive year, despite challenges posed by COVID-19. Funds under management and administration grew to A$825 billion as at June 2021. We also won business with 13 new clients, totalling 185 clients globally, many of which were long-term contract renewals. We now provide transfer agency and administration services to seven of the top 10 global asset managers – including two new large global asset manager clients. LFS has continued to focus on environmental, social and governance (ESG) aspects, as governments, regulators and investors increasingly demand more from companies to consider the impact of their activities. LFS has supported investment managers to integrate ESG in their investment policies by engaging and working with data partners to support our clients with their ESG requirements, including by providing data-driven investment management solutions. 24 REVENUE OPERATING EBIT $170m FY2020 $173m $16m FY2020 $20m OPERATING EXPENSES $142m FY2020 $142m OPERATING EBIT MARGIN 9% FY2020 12% We continue to invest strongly in enhancing the client experience and driving to more efficient operating models. We have leveraged our Mumbai Hub for operational functions as part of Link Group’s global transformation program, allowing us to increase focus on client and investor interactions. From time to time, LFS receives enquiries, complaints or claims from investors or third parties in relation to the funds for which it acts, or has acted, as authorised corporate director (ACD) (in relation to authorised funds) or operator (in relation to unregulated funds). As disclosed on 18 June 2019, the Financial Conduct Authority (FCA) notified LFS that it was commencing an investigation into LFS as ACD to the LF Woodford Equity Income Fund, now known as the LF Equity Income Fund (Fund). As the FCA investigation is an ongoing and confidential process, Link Group is unable to make any further comment. We continue to act in the best interests of investors in the Fund as the orderly wind-up of the Fund progresses. Expanding our expertise to deliver for clients FY2021 also saw the acquisition of Luxembourg-headquartered Casa4Funds SA from Banor Capital, completed in August 2021 following regulatory approval from the Commission de Surveillance du Secteur Financier (CSSF). The acquisition provides additional scale for LFS in Luxembourg, Europe’s largest investment fund centre. It also provides access to Casa4Funds’ extensive experience across traditional and alternative asset classes, including private equity, real estate, infrastructure and debt. We are committed to reinforcing our position as one of Europe’s leading independent Management Companies and Authorised Fund Managers. We will now leverage the combined strengths, experience and capabilities of our existing operations in Luxembourg, Ireland and the UK with Casa4Funds to deliver market-leading services for fund managers and financial institutions around the globe. Simplifying, delivering and growing our digital services Our Digital Services Framework (DSF) will support new digital and integrated online services, moving into FY2022 with longer-term, future-proofed technology. We have introduced a global Cloud Centre of Excellence in our Leeds Hub that standardises practices, oversees and governs cloud architectures, and creates global synergies. The framework helps us move from large, complex applications to smaller, simpler, shareable microservices. Our DSF enables us to simplify, grow and deliver systems that give our clients the best, most efficient and resilient service. The DSF is now our ‘go to’ model for delivering changes and new features. It allows us to introduce new skills, technologies and tools, plus enhances our teams’ skills and creates roles within Link Group that are attractive to any technologist. For example, the PRU system which was developed for our client using the DSF, with features and functionality that were built and rigorously tested quickly. The Fund Manager Web has developed highly efficient transaction and reporting capabilities allowing our clients to better interact with their investors. Our DSF’s agility enables it to evolve with user demand while continuously providing a market-leading service. LINK GROUP | Annual Report 2021 25 OUR BOARD Michael Carapiet Independent Chairman and Non-Executive Director Vivek Bhatia CEO and Managing Director Glen Boreham, AM Independent Non-Executive Director Andrew (Andy) Green, CBE Independent Non-Executive Director Michael Carapiet was appointed as a Director and Chair of the Company in 2015. He is an ex-officio member of all Board Committees. Michael is Chair of Smartgroup Corporation Limited and Adexum Capital Limited. He was previously Chair of Insurance & Care NSW (icare), Chair of SAS Trustee Corporation and a Director of Southern Cross Media Group Limited. Michael has also served on Commonwealth Government boards including Infrastructure Australia, Clean Energy Finance Corporation and Export Finance Insurance Corporation. Michael has over 30 years of experience in banking and financial services and holds a Master of Business Administration from Macquarie University, Sydney. Vivek Bhatia joined Link Group in 2020 as CEO and Managing Director. Vivek has over two decades of experience in financial services, government and management consulting. Vivek is an experienced chief executive, having led a number of complex businesses throughout his career. Vivek joined Link Group from QBE Insurance Group where from 2018 he was Chief Executive Officer of the ASX-listed general insurance and reinsurance company’s Australia Pacific division. Vivek joined QBE from icare where he held the position of inaugural Chief Executive Officer and Managing Director. Prior to this, he co-led the Asia-Pacific Restructuring and Transformation practice at McKinsey & Company and also previously held senior executive roles at Wesfarmers Insurance, including responsibility for leading the Australian underwriting businesses of Lumley, WFI and Coles Insurance. Vivek holds an undergraduate degree in engineering, a post graduate in business administration and is a Chartered Financial Analyst (ICFAI). Glen Boreham was appointed a Non-Executive Director of the Company in 2015. He is Chair of the Technology & Transformation Committee and a member of the Human Resources and Remuneration Committee. Glen is a Director of Cochlear Limited and Southern Cross Media Group Limited and Strategic Advisor to IXUP. Previously, Glen was the Managing Director of IBM Australia and New Zealand. He has also previously served as Chair of Screen Australia, Advance and the Industry Advisory Board for the University of Sydney, as well as Deputy Chair of the Australian Information Industry Association and a Director of the Australian Chamber Orchestra. Glen holds a Bachelor of Economics from the University of Sydney and an Honorary Doctorate from the University of Technology Sydney. In January 2012, Glen was awarded a Member of the Order of Australia for services to business and the arts. Andy Green was appointed a Non-Executive Director of the Company in 2018. He is Chair of the Risk Committee and a member of the Technology & Transformation Committee. Andy is Chair of Simon Midco Ltd the holding company of Lowell Group, Chair of Gentrack Group Ltd and Senior Independent Director of Airtel Africa plc. He is a Commissioner at the UK’s National Infrastructure Commission, Chair of WaterAid UK, Vice Chair of The Disasters Emergency Committee and a trustee of WWF UK. Andy's earlier career at BT Group (formerly British Telecom) spanned more than 20 years, including as CEO of Global Services. He also previously served as Group Chief Executive of IT and management consultancy company Logica plc, and as Senior Independent Director at ARM Holdings plc. Andy holds a Bachelor of Science in Chemical Engineering with first class honours from Leeds University. 26 Peeyush Gupta, AM Independent Non-Executive Director Anne McDonald Independent Non-Executive Director Dr Sally Pitkin, AO Independent Non-Executive Director Fiona Trafford-Walker Independent Non-Executive Director Peeyush Gupta was appointed a Non-Executive Director of the Company in 2016. He is a member of each of the Risk and Audit Committees. With over 30 years of experience in the wealth management industry, Peeyush was previously co-founder and the inaugural CEO of IPAC Securities Limited, a wealth management firm spanning financial advice and institutional portfolio management. He has extensive corporate governance experience, having served as a Director on listed corporate, not-for-profit, trustee and responsible entity boards since the 1990s. Peeyush is currently the Chair of Charter Hall Direct Property Management Limited and Long Wale REIT and a Non-Executive Director of National Australia Bank, Insurance & Care NSW (icare), SBS and Quintessence Labs Pty Ltd. He is also a member of the Western Sydney University Board of Trustees. Peeyush holds a Masters of Business Administration (Finance) from the Australian Graduate School of Management and has completed the Advanced +45Management Program at Harvard Business School. He is a Fellow of the Australian Institute of Company Directors. In January 2019, Peeyush was awarded a Member of the Order of Australia for significant service to business, and to the community, through his governance and philanthropic roles. Anne McDonald was appointed a Non-Executive Director of the Company in 2016. She is a member of each of the Audit Committee and Human Resources and Remuneration Committee. Previously a partner at Ernst & Young for 15 years, Anne has over 35 years of business experience in finance, accounting, auditing, risk management and governance. She is an experienced director and has pursued a fulltime career as a Non-Executive Director since 2006. Anne is the Chair of Water New South Wales and a Non-Executive Director of St Vincent's Health Australia Limited and Transport Asset Holding Entity of New South Wales. She was previously Chair of Specialty Fashion Group, and a Non-Executive Director of Spark Infrastructure Group, GPT Group and a number of other businesses. Anne is a Chartered Accountant, a graduate of the Australian Institute of Company Directors and holds a Bachelor of Economics from the University of Sydney. Dr Sally Pitkin was appointed a Non-Executive Director of the Company in 2015. She is Chair of the Human Resources and Remuneration Committee and a member of the Risk Committee. Sally has 25 years of experience as a Non-Executive Director and board member across a wide range of industries in both private and public sectors, including listed companies, highly regulated industries, professional services and commercialisation of new technology. She is Chair of Super Retail Group Limited and a Non-Executive Director of The Star Entertainment Group Limited. She is a Fellow of the Australian Institute of Company Directors, and Chair of the Institute's Corporate Governance Committee. Formerly a senior corporate partner at a national legal firm, Sally has extensive corporate and banking law experience. She holds a PhD in Governance from The University of Queensland and a Master and Bachelor of Laws from the Queensland University of Technology. Fiona Trafford-Walker was appointed a Non-Executive Director of the Company in 2015. She is Chair of the Audit Committee and a member of the Technology & Transformation Committee. Fiona was previously an Investment Director at Frontier Advisors (Frontier). She was the inaugural Managing Director at Frontier and held that role for 11 years until 2011 when she became the Director of Consulting until 2017. Fiona played a critical role in growing Frontier and has over 28 years of experience in advising institutional investors on investment and governance-related issues. Fiona is a Director of Perpetual Limited, Eclipx Group Limited and Prospa Group Ltd, and Chair of Prospa’s Audit and Risk committee. Fiona is also a Director of Victorian Funds Management Corporation. Fiona holds a Master of Finance from RMIT University and a Bachelor of Economics from James Cook University. Fiona is also a Graduate of the Australian Institute of Company Directors. LINK GROUP | Annual Report 2021 27 OUR EXECUTIVE TEAM Vivek Bhatia CEO and Managing Director Vivek Bhatia joined Link Group in 2020 as CEO and Managing Director. Vivek has over two decades of experience in financial services, government and management consulting. Vivek is an experienced chief executive, having led a number of complex businesses throughout his career. Vivek joined Link Group from QBE Insurance Group where from 2018 he was Chief Executive Officer of the ASX-listed general insurance and reinsurance company’s Australia Pacific division. Vivek joined QBE from icare where he held the position of inaugural Chief Executive Officer and Managing Director. Prior to this, he co-led the Asia-Pacific Restructuring and Transformation practice at McKinsey & Company and also previously held senior executive roles at Wesfarmers Insurance, including responsibility for leading the Australian underwriting businesses of Lumley, WFI and Coles Insurance. Vivek holds an undergraduate degree in engineering, a post graduate in business administration and is a Chartered Financial Analyst (ICFAI). 28 Antoinette Dunne was appointed Chief Executive Officer of Banking & Credit Management on 1 June 2021. Antoinette joined Link Group in November 2017 when Capita Asset Services was acquired by Link Group. She was CEO and Executive Director of the BCMGlobal Irish and Italian businesses and has over 30 years’ experience in financial services working in Ireland, UK and Australia. Prior to joining Capita, Antoinette ran her own financial services consultancy business, was Head of Halifax Retail Bank in Ireland and Head of Bank of Scotland Mortgage, Asset Finance and Consumer Lending Businesses in Ireland. Antoinette is a Chartered Director (CDir) and a Fellow Member of Association of Chartered Certified Accountants (FCCA). Paul Gardiner Chief Executive Officer, Corporate Markets Paul Gardiner was appointed Chief Executive Officer of Corporate Markets in May 2021. Paul joined Link Group in 2006 when Orient Capital was acquired by Link Group from ASX Limited. His previous roles include Chief Technology & Operations Officer, and CEO of both Corporate Markets and Technology & Innovation. Paul has over 20 years’ experience in financial services, technology, operations, and data analytics, having joined Orient Capital in 2001. Paul holds a Bachelor of Commerce and a Higher Diploma in Marketing Practice from the National University of Ireland, Galway and a Masters of Business Studies (Management Information Systems) from University College, Dublin. Chris Addenbrooke Chief Executive Officer, Fund Solutions Chris Addenbrooke was appointed as Global Chief Executive Officer of Fund Solutions in 2019. Prior to this Chris was CEO of the fund solutions business of Capita Asset Services. Previous positions include Technical Director of BWD Rensburg (now part of Franklin Templeton) from 1987 to 2001. In 1988 Chris formed both Northern Registrars and Northern Administration and was Managing Director until 2003. Following the acquisition of Northern Administration and Northern Registrars by Capita, Chris was appointed CEO of Capita Registrars. Chris joined Link Group in November 2017 when Capita Asset Services was acquired by Link Group from Capita PLC. Chris has over 30 years in financial services, operations, IT, transfer agency, registration and fund governance, having joined the Water Authorities Superannuation Fund in 1979. Chris represents Link Group on a number of industry committees including the UK Markets Advisory Group and the TA Forum. Antoinette Dunne Chief Executive Officer, Banking & Credit Management Dee McGrath Chief Executive Officer, Retirement & Superannuation Solutions Dee McGrath joined Link Group as Chief Executive Officer of Retirement & Superannuation Solutions in May 2019. Dee has over 20 years’ experience in the financial services and technology industry. Dee’s previous senior appointments include National Australia Bank, Visa and HP, and prior to joining Link Group was Managing Partner, Global Business Services at IBM. Dee was a member of the Board of IBM Australia, Bluewolf Australia and Oniqua Holdings. Dee‘s qualifications include business studies, economics and strategic planning and is currently a member of Chief Executive Women. Andrew is a member of Chartered Accountants Australia and New Zealand and holds a Bachelor of Economics (Accounting and Finance) from Macquarie University. Wendy Phillis Chief Risk Officer Wendy Phillis joined Link Group as Chief Risk Officer in June 2019. Wendy has over 25 years’ experience in global leadership roles in risk, compliance and operations within the financial services industry and has held senior positions at ICAP and State Street. Prior to joining Link Group, Wendy was the Managing Director of Regulatory Solutions at Royal Bank of Canada’s Investor & Treasury Services (RBC I&TS) division. Wendy holds a Bachelor of Science in Physics from Dickinson College in Pennsylvania, an MBA from Simmons College Graduate School of Management in Massachusetts and the Financial Times Non-Executive Directors Diploma. Andrew MacLachlan Chief Financial Officer Andrew MacLachlan was appointed Chief Financial Officer on 1 January 2019. Andrew joined Link Group in 2009 and was Deputy Chief Financial Officer from 2013 to 2018. Andrew has over 25 years' experience in Finance and Accounting. His previous roles include Chief Financial Officer at Fero Group Pty Limited, Chief Financial Officer at Evans and Tate Limited and various roles at Singtel Optus and KPMG. Michael Rosmarin Chief People and Group Services Officer Michael Rosmarin was appointed Chief People & Group Services Officer in May 2021. Michael joined Link Group in early 2019 as Chief Human Resources & Brand Officer. Prior to joining Link Group Michael was Chief Operating Officer at Stockland. Michael has over 30 years’ experience in human resources and operational roles in Australia and Asia and has held executive human resources positions for Stockland, Westpac Banking Corporation and Goldman Sachs. Michael is a Fellow Certified HR Practitioner and Non-Executive Director of the Australian Human Resources Institute (AHRI) and is a graduate of the Australian Institute of Company Directors (GAICD). Michael holds a Bachelor of Arts degree in Psychology and a Master of Commerce degree from the University of NSW. Sarah Turner General Counsel and Company Secretary Sarah Turner joined Link Group in February 2021 as General Counsel and Company Secretary. Sarah has over 20 years’ experience in global leadership, company secretarial and legal services in Australia and the UK in industries including healthcare and technology as well as in private legal practice. Prior to Link Group, Sarah was most recently General Counsel & Company Secretary at REA Group Ltd, a global digital media company operating leading property websites in Australia, Asia and the US. Sarah was a member of the REA Executive Leadership Team and managed the global legal team. Sarah holds a Bachelor of Laws (Hons), a Bachelor of Arts, a Graduate Diploma in Applied Corporate Governance and is a graduate of the AICD Company Directors Course (GAICD) and a Fellow of the Governance Institute of Australia (FGIA, FCG). LINK GROUP | Annual Report 2021 29 A SPOTLIGHT ON OUR PEOPLE "The internal audit team is Link Group’s trusted advisor." Christopher Dixon RISK & COMPLIANCE, UK Chris is a Senior Manager in our Internal Audit (IA) Team and works closely with the rest of Link Group to ensure our organisation and clients are protected from key potential risks – including financial crime, fraud, information security and more. The key function of IA is to provide assurance that the control frameworks in the organisation are designed and operating effectively. This enables us to fulfil our legal and regulatory obligations as well as conduct our business is a well-controlled manner and mitigate key risks. The work of IA ultimately enables us to support connecting people with their assets, safely and responsibly. Chris has been at Link Group for two years but has been an internal audit specialist for more than 20 since graduating from university. He initially joined us when he saw our transformational journey as an opportunity to help us adapt and evolve. Although based in the UK, Chris is part of the global IA Team supporting our international operations. More recently he has worked hard to support the globalising of the IA function so Link Group can institute common processes and software, support the delivery of critical assurance and help to protect our entities and clients. Chris and the IA Team have spent the last 12 months working together to create a unified global risk-based assessment model for Link Group, mapping out every auditable entity and a five-year audit plan. This is an incredibly complex task that provides assurance to our businesses and, by extension, to our clients. Outside of work, he spends much of his time taxiing his four young children to gymnastics, football, the park and beyond. He’s a family man through and through – and most parents can agree that home-schooling throughout COVID-19 was certainly a new challenge! Chris believes the ingredient to success is collaboration. Together with the global IA Team, Chris works closely with colleagues all around the world, to achieve the best possible outcome for all. 30 LIVE CONTENT V1 "The key to success is looking ahead and anticipating our clients’ needs." LINK GROUP | Annual Report 2021 31 Jimmy O’Neill BCM GLOBAL, IRELAND Jimmy is our Director of Asset Management in Ireland, leading our teams and supporting clients across bank outsourcing, origination, private equity, business development and marketing. Jimmy has been instrumental in building a successful relationship with one of our newest clients, Avant Money, who appointed us in September 2020 as their mortgage servicer of choice. Avant Money is owned by Bankinter, a Spanish banking group, which is a leading mortgage provider in Spain, Portugal and Luxembourg. Avant Money is the first foreign institution to enter the mortgage market in Ireland since the financial crisis, representing an important milestone for our industry. Jimmy is excited to continue supporting Avant Money on their course to becoming one of the largest mortgage lenders in the Irish market. Jimmy focuses on building strong, collaborative client relationships and ensuring that we are their strategic partner of choice in achieving their objectives in Ireland and in other geographical jurisdictions Jimmy is a trained accountant with over 24 years of experience across venture capital, corporate finance, banking, mergers and acquisitions, corporate restructuring and more. Outside of work, he has a family with three young daughters and spends his free time playing soccer and running. He has taken part in marathons across Europe, including Paris, Venice, Rotterdam and Dublin. Jimmy believes the key to success is looking ahead. For Link Group, this means the ability to anticipate our clients’ needs. It’s crucial to foresee and proactively plan for client demand now and in the future so we can ensure we have the right platforms and models to deliver for them. A Spotlight on Our People WORKING TOGETHER FOR A SHARE IN SUCCESS “Pennon has always encouraged engagement with its customer base, so we’re proud to support them with this innovative new way to connect with their customers and shareholders.” Richard Nash, Corporate Markets, UK Gavin Taylor Katie Gould Neelam Patel Jay Ruperelia Darren Nicholls At Link Group, we embrace the challenge of finding new opportunities and new ways to help our clients achieve their customer engagement goals. We recently worked together with Pennon Group PLC, a British water utility company and long-standing registry client, on its unique customer scheme, WaterShare+ – a five-year business plan to return approximately £20 million to customers and introduce customers as shareholders in the company. We partnered with Pennon from the very beginning, participating in brainstorming sessions and meetings; taking the time to listen and understand their specific needs and goals for the project. The project team involved our people from across a wide range of areas and expertise, including registry, corporate actions, legal, compliance, and technology. We brought together our knowledge and experience to ensure we provided the best solutions across all aspects of the WaterShare+ scheme, from guidance on what the service should look like and how it should operate, through to the online journey and call centre approach for Pennon customers. Our regular and transparent communications and client focused approach were fundamental to the successful delivery of a dematerialised nominee service to 54,000 Pennon Group customers, who also became shareholders. Nimesh Desai Delighted with the outcome, Pennon commented: “We have a collaborative working relationship with Link Group and we’re very pleased with the positive response we’ve had to this initiative.” Richard Nash Sofia Norrgard Matt George Neil Mazerolle 32 Haresh Hinduja LINK INTIME, INDIA Anthony Ling RETIREMENT & SUPERANNUATION SOLUTIONS, DIGITAL PRODUCT MANAGER, AUSTRALIA “Believe in gratitude – be thankful for what you have, instead of what you do not have. Concentrate on keeping your clients happy, listen to their needs, and focus on the quality of the output.” Haresh Hinduja heads up our Primary Market Team for Link Intime in India. He joined Link Intime in 2006 as General Manager – Primary Market and has played an important role in helping us maintain our position as the leading IPO Registrar. This year, Haresh and his team managed some of the largest IPOs in the country. Through a strong focus on our clients’ needs and collaboration with other intermediaries, the team delivered the highest number of IPOs in India. Haresh has a wealth of experience, having managed India’s largest IPO to date – Coal India Limited in 2010 – and continues to spearhead the team’s efforts in this field. Over the years he has built strong relationships across the industry and continues to ensure Link Intime remains the first point of call for corporates looking to raise capital. Haresh is also a Trainer at the National Institute for Securities Market (NISM) for Corporate Registry and represents Link Intime in various committees of the market regulator (SEBI). In his spare time Haresh enjoys reading success stories in the corporate world as well as watching cricket and listening to music. “I am so proud to be part of such an important and transformative project to re‑platform our digital portals. The solution we have built will future‑proof our offering and result in a lot of happy clients as they start to reap the benefits of having an innovative and flexible digital platform for their members.” With 11 years' experience working at Link Group, Digital Product Manager Anthony Ling believes it is important to utilise human behaviour as drivers in the development phase for new technology. He believes it plays an important role in curating an efficient solution with a personalised and engaging customer experience. Having worked in several roles during his career at Link Group from the administration team, to support, to the web delivery team and most recently in the customer experience & solutions team dealing directly with our clients, Anthony has gained first-hand behavioural insights around how members use fund sites and mobile, what they want to do and where the pain points are. He has been able to incorporate these insights using the latest technologies and data to deliver an uplift in service and experience for members as demonstrated by the launch of our new Member Centre eXperience (MCX) platform. MCX is Link Group’s new member platform which replaces our existing Member Centre portal. The project focused on creating a market-leading member platform that empowers our clients to directly manage their site content and marketing updates via an intuitive and simple content management system. MCX delivers a simple member onboarding and account management platform with data driven personalisation to create a unique client-focused experience. When a progression opportunity arose during the project, Anthony was offered the opportunity to become the digital product manager and is now developing digital strategies across the RSS business. In his spare time Anthony is passionate about travelling and experiencing new cultures. Prior to the pandemic, Anthony enjoyed travelling to Cuba, Vietnam and Cambodia, where he was fascinated by the local culture and practices – taking his curiosity about human behaviour with him. He is passionate about working with other Link Group team members to move the dial on how we innovate and develop our solutions, bringing in new practices and new ideas to enhance the fund and member’s experience. LINK GROUP | Annual Report 2021 33 A Spotlight on Our People GLOBAL TRANSFORMATION SPOTLIGHT: MUMBAI HUB A central part of our transformation program, our state of the art Mumbai Hub in India has rapidly expanded over the past year to nearly 650 employees to provide services to our clients. 34 The Mumbai Hub has been designed to provide operations processing for a number of our businesses, including Corporate Markets and Fund Solutions, as well as technology services and some functional support services. As part of our Global Transformation program, the Mumbai Hub is key to our development of an integrated network that operates as a ‘follow the sun’ model to support our clients whenever they need it. The build out of our Mumbai Hub has enabled us to streamline our operations, innovate our current operations and create new capabilities. The team has worked collaboratively with various businesses and other Link Group hubs around the globe to share knowledge and information and to transition services to the Mumbai Hub as seamlessly as possible while continuously focusing on identifying opportunities to increase efficiencies and automate manual work flows. Our Orient Capital business is one example of how the team has been able to successfully support our clients. In FY2021, we transitioned some of our share register analysis, shareholder identification, compliance, research and proxy solicitation services to the Mumbai Hub. With Orient Capital onboarding 20 new clients since November 2020, 79 members of the team in Mumbai now provide support for this investor relations capability, augmenting our capacity and capability to deliver through two peak periods. The Mumbai Hub has truly demonstrated our values and our ability to remain client focused, adapt to evolving client needs and collaborate to deliver for our clients. Amit Rajdev HEAD OF FUND SOLUTIONS, MUMBAI HUB, INDIA “I believe that teamwork and group effort can move mountains. When we work together, we achieve great things.” Amit is a member of our Fund Solutions team, heading up the Mumbai operations which support both the UK and Australian Fund Solutions teams, providing a number of services, including transfer agency, fund accounting, reconciliation and transaction processing. FY2021 has been a pivotal time for the team, with a 50% increase in the scale of operations provided to the UK and supporting operations in Australia. The pandemic restrictions made the transition more challenging than normal, but the team showed great determination to overcome these, in part thanks to Amit’s leadership. Amit joined Link Group in June 2020 with more than 18 years’ experience in various financial roles and a proven track record of setting up and running large operations. Amit is now responsible for key operations for service delivery and he believes in keeping his team engaged and enjoys training the team to get the best outcomes for our clients. With positive feedback from both colleagues and our clients, Amit has displayed relentless client focus in the way he works. Outside of work, Amit is a family man who likes to spend his time with his children. With schools closed in India for more than 18 months now, he and his wife have their hands full. In his free time, he creates new recipes in the kitchen and watches Formula 1 and football. Amit believes that teamwork and group effort can move mountains. As part of the global Fund Solutions team, Amit and his team are working to provide industry leading service to our clients with the aim of continuous, year on year improvement. LINK GROUP | Annual Report 2021 35 A Spotlight on Our People Danielle Johnson LINK FUND SOLUTIONS, UK "Our customer service agents are at the heart of our business." Danielle is one of our 40 customer agents who support our UK transfer agency (TA) clients and their customers every day. She and her colleagues are at the heart of our Link Fund Solutions business. They act as the critical link and face of our brand for our clients’ advisers, customers and retail investors – often as their first point of contact. This means they require excellent people skills as expert communicators, quick-thinkers and problem-solvers. After tertiary studies, Danielle worked in a call centre where she honed her customer engagement skills. She was enticed by the idea of joining Link Group in 2019 because of our expertise in finance and career progression support. Danielle loves working with people. Since joining us, she’s built good working relationships with her colleagues and the advisers that she speaks to regularly. Throughout local lockdowns, Danielle has supported new starters by assisting with their training and onboarding while remote working. She’s found it challenging to miss out on in person contact with everyone, but she and her team have worked hard to make the process as seamless and welcoming as possible. She’s also excited to return to the new Leeds office! Mathew Eggins HEAD OF TAX AND STRATEGIC PROJECTS, AUSTRALIA "I thrive on solving business problems – simplifying the legal and financial requirements to deliver practical solutions. Link Group allows me to do this globally, providing me with great opportunities to grow." Mathew joined Link Group in Australia in November 2017 as a Senior Tax Manager and in 2019, he became the first Head of Tax. Last year Mathew’s role expanded to include Strategic Projects. Mathew has always been passionate about demystifying the complexities and rigour of taxation, first starting his career in tax in 2002. Through providing accurate and practical tax advice, Mathew’s mission is to help Link Group achieve our commercial objectives while balancing our tax obligations. In other words, Mathew has a strong focus on ensuring Link Group pays the right amount of tax in all jurisdictions. When Mathew’s not in the throes of tax, he’s working on major corporate activities such as an acquisition or divestment of a Link Group asset. While finishing his Master of Taxation with the University of Sydney last year, Mathew worked on some significant global projects, including Link Group’s involvement in PEXA, and the divestment of Corporate and Private Client Services. Internally Mathew has worked on setting up Link Group’s Mumbai Hub to help facilitate its Global Transformation, while also working through the potential impacts of Brexit to Link Group’s UK corporate structure. Always ready for a challenge, Mathew says he enjoys working for a fast-paced global company, where two days are never alike! 36 Kylie Turton LINK MARKET SERVICES, AUSTRALIA “Teamwork is important to us. We share our knowledge and experiences with each other, and this helps us to deliver the best outcomes for our clients.” Kylie Turton manages our Capital Markets team for Link Market Services, Australia. Since joining Link Market Services in 2008, Kylie has worked with many of our clients on mergers, acquisitions, and other corporate actions, supporting these companies through a time of high pressure and visibility. In capital markets, every project requires a high level of communication and collaboration with internal and external stakeholders, as well as a robust understanding of technical and operational processes, skills demonstrated by Kylie day in, day out. Kylie led the successful implementation of the recent demerger of Endeavour Group from Woolworths Group, which represented one of the most significant transactions undertaken within the Australian market in FY2021. This transaction was substantial in both size and complexity and was highly visible to the client and the market. Working within a tight schedule, Kylie remained focused on continually providing our client with updates and information to help them maximise the success of the transaction and achieve their strategic goals. Kylie received positive feedback from Woolworths for her engagement and communication from the early planning stages right through to execution. A SPOTLIGHT ON OUR PEOPLE LINK GROUP | Annual Report 2021 37 SPOTLIGHT: HOSTPLUS SERVICE EXCELLENCE CENTRE When Link Group was appointed to establish the Hostplus Service Excellence Centre (HSEC) in March 2021, this was a huge step strategically for Hostplus and us. The transition needed to be seamless for a fund that is so focused on delivering excellent service to their members and employers, and would see us welcoming more than 100 staff to Link Group. Key members of the Hostplus transition team included Anastasia Crisafi, Richelle Manalo, Priya Natarajan and Matthew Berry. 38 Spotlight: Hostplus Lachlan Allardice Our Client Partner Lachlan Allardice used his deep understanding of the client’s strategic goals to leverage Link Group’s developed solutions and help Hostplus establish this dedicated, tailored member and employer service centre and capability. With support from the broader team, the challenge was to deliver the solution during a lockdown that had the team working remotely and in just 90 days! Vicki Shields Lachlan joined Link Group in early 2020 looking for a new challenge after having spent the last decade leading client relationship teams in custody and banking. Lachlan’s commitment to working with clients and mobilising broader teams to help deliver solutions was evident in this project. Listening to our clients’ needs and partnering with them to provide the right solutions is crucial to developing strong and long-standing relationships. The transition itself was led by Vicki Shields, Head of Customer Contact Capability for RSS. Vicki’s background in managing large scale contact centre businesses and passion for delivering a positive customer experience ensured a high quality, value adding platform was delivered. A few days after the HSEC went live, David Elia, CEO of Hostplus, visited the newly established HSEC in our Collins Square, Melbourne office and stated, “It feels like it has always been here”. This was great feedback to receive and a testament to what had been delivered and how well the team had settled in. A partnership approach between Hostplus and the Link Group team truly demonstrating our ‘Together We Achieve’ and ‘Client Focused’ values, resulting in a high-quality outcome supporting the client’s strategic goal. Away from work, Lachlan has transitioned from playing a range of sports in his younger days to getting enjoyment from spending family time on his weekends watching his two daughters play netball and other activities. Outside of work, Vicki sets herself an annual personal goal that ranges from completing her MBA, the Melbourne Oxfam 100 km walk to completing a photography course. Her dedicated mindset and experience, and Lachlan and Vicki’s ability to work together to achieve success, are major reasons why we were able to seamlessly deliver the HSEC within the 90 days. LINK GROUP | Annual Report 2021 39 Spotlight on Appreciate We ‘Appreciate’ our People! When our People & Group Services team set out to launch our global recognition program ‘Appreciate’, our purpose was clear: provide our people with an easy and engaging way to recognise each other for living our values, while creating a common platform to show our appreciation. Through Appreciate, everyone at Link Group can nominate and acknowledge colleagues who have demonstrated our values through a social media feed so everyone can share and celebrate together. Our General Manager for Performance & Rewards, Marie Delaitre, says, “With the current environment, recognition is more important than ever. A simple thank you or recognition moment can go a long way in boosting engagement and making someone’s day. I’ve loved reading through the many recognition moments! They are heartfelt and a testament to the great work that happens at Link Group every day." “It’s also been a fantastic opportunity to embed our Link Group values as all nominations are linked to our values.” Teams from across the business – People, Risk, Communications, Information Security, and IT – demonstrated our ‘Together We Achieve’ value to deliver this new recognition platform for our people. And with a global project of this scale, it was inevitable the team would face some challenges, namely making sure all employee data was protected. To overcome this challenge, cross functional teams worked together conducting a rigorous assessment of processes to ensure that adequate controls were put in place. The results speak for themselves, with comments such as these from our people: “Terrific initiative to motivate others and get motivated.” “It’s lovely to see a recognition program launch – Elated!” We’re excited to keep appreciating each other and to see this recognition program continue to thrive! 40 Spotlight on Values Introducing our new values With our transition to a globally integrated organisation, in FY2021 we launched our refreshed values – Client Focused, Adapt and Evolve, and Together We Achieve. Given the critical role values play in our organisation, this initiative was championed and led by Michael Rosmarin, our Chief People & Group Services Officer, together with our global executive team and senior leaders. “We live and breathe our values every day. They shape how we work, our culture, and they unite us as a global organisation to deliver our purpose and strategy. It was important that our leaders set the tone in refreshing our values”, Michael said. As a result, leaders from across the organisation were involved in developing the values and underlying behaviours, which were tested with focus groups before being finalised. Putting the new value ‘Together We Achieve’ to the test, a working group representing our diverse global business units, global functions and geographic locations collaborated to develop a plan to launch and embed the values. With COVID-19 and so many of our people working remotely, CEO and Managing Director Vivek Bhatia, together with members of the executive leadership team, communicated with our people via videos and virtual updates to reinforce their commitment to our values and why they are so important. It’s been a success so far. This year’s employee engagement survey showed that shortly after the launch, the majority (77%) of our people felt they had a good understanding of our refreshed values. Through Appreciate, Link Group’s new recognition program, everyone at Link Group can now nominate and recognise their colleagues who truly demonstrate living our values. The values are also being incorporated into Link Group’s performance goals for FY2022. As an organisation we are now focused on embedding the values and living our values every day, in everything we do. CLIENT FOCUSED TOGETHER WE ACHIEVE ADAPT AND EVOLVE • We act with transparency and integrity in all our dealings • We listen to our clients' needs and partner with them to provide the right solutions for them and their customers • We are reliable and passionate about what we do, make good on our commitments and take accountability for getting things done • We work with our people, clients, stakeholders and the communities in which we operate to achieve positive outcomes • We unite around a common purpose as one Link Group team, and leverage our global expertise to deliver • We value diversity, and care about, respect and support each other to thrive and succeed • We are resilient, embrace challenges head on and act quickly to respond • We seek out opportunities, manage risks and learn from our mistakes and others to drive continuous improvement and growth • We are empowered to speak up and constructively challenge to get the best outcome LINK GROUP | Annual Report 2021 41 SUSTAINABILITY REPORT Our sustainability and CSR strategy supports our purpose of connecting people with their assets – safely, securely and responsibly. OUR SUSTAINABILITY COMMITMENT We strive to act responsibly, support our clients, contribute to employee wellbeing, diversity and inclusion and deliver mutual business and social benefits in the communities we operate in. 42 In FY2021 we made significant progress implementing our strategic priorities including updating our sustainability and human rights policies, the delivery of our first, combined Modern Slavery Statement for the UK and Australia (for the reporting period FY2020) and the successful launch of our CSR strategy, LinkTogether For Good (LTFG). Our current focus for LTFG is to support education for the vulnerable and disadvantaged in the communities we operate in. We are proud that in FY2021, we were able to announce six new community partners across our key regions in the UK, Ireland, India and Australia, who align to this important theme of education, together with a new community target to more than double our giving by FY2025. As part of progressing our sustainability strategy, we are aligned to the Paris Agreement, in addition to four of the 17 UN Sustainable Development Goals (SDGs), being goal 4. Quality Education, 5. Gender Equality, 8. Decent work and economic growth and 13. Climate Action. Further, we have committed to a target of achieving net zero carbon emissions by FY2030 and set short, medium and long-term targets to continue to reduce our scope 2 absolute GHG emissions. To further demonstrate our commitment, Link Group is proud to have joined Australian Sustainable Finance Institute (ASFI) as one of its founding members. ASFI is a collaborative entity formed of Australia’s financial sector leaders and peak bodies focused on shaping an Australian economy that prioritises human wellbeing, social equity and environmental protection with financial system resilience and stability in mind. LINK GROUP | Annual Report 2021 43 Sustainability Report OUR SUSTAINABILITY & CSR STRATEGY Link Group’s sustainability and CSR strategy supports our purpose of connecting people with their assets – safely, securely and responsibly. The strategy is based on three core pillars: 1. A Responsible Business 2. Aligning and Building our Capability, and 3. Sustainable Growth These pillars incorporate ESG focus areas considered to be material to our business. Our strategy is aligned to the Paris Agreement and includes short, medium and long-term targets with a focus on reducing GHG emissions to help us achieve net zero carbon emissions by FY2030. It also includes a community target to focus on increasing our uptake of volunteering and giving via our CSR strategy LinkTogether For Good. 44 Our sustainability strategy comprises three core pillars: PILLAR 1 A Responsible Business Focuses on our strong governance foundation. It demonstrates our business ethics and respect for human rights that we adopt in our approach to all aspects of our business, including our general operations, information security, privacy, business continuity and supplier management. We are also committed to act responsibly with regards to the impact our operations have on the environment to help build a sustainable future. SDG ALIGNMENT OUR TARGETS • Net zero carbon emissions by FY2030 • 80% operations certified to ISO27001:2013 by FY2023 PILLAR 2 Aligning and Building Our Capability Captures the continued investment we are making in our people and our systems to deliver global client solutions. This includes supporting employee wellbeing, development, engagement, career progression, collaboration, ensuring diversity, inclusion and gender equity. SDG ALIGNMENT OUR TARGETS By FY2022: • Board 30% women • Senior Executives 40% women • Women in Management 40% PILLAR 3 Sustainable Growth Demonstrates how Link Group builds a sustainable future by continuing to innovate and create new solutions for our clients. We invest in technology and platforms to deliver superior technology-enabled administration solutions, continue to identify ways to reduce our carbon footprint and positively contribute to the communities we operate in through our CSR strategy LinkTogether For Good. SDG ALIGNMENT OUR TARGETS • Net zero • carbon emissions by FY2030 Increase community giving by 2.5x by FY2025 LINK GROUP | Annual Report 2021 45 Sustainability Report ABOUT THIS SECTION This section covers the sustainability and CSR activities of Link Group across all our controlled entities during the period 1 July 2020 to 30 June 2021. Where appropriate, we include references to events that have occurred since the end of the financial reporting period, but prior to publication. This report covers more than 40 offices in the 18 jurisdictions in which we operated during the year unless otherwise stated. Please refer to the Annual Report for all major changes that occurred during the year. Reporting Link Group’s FY2021 sustainability and CSR disclosures have been prepared in accordance with the Global Reporting Initiative (GRI) Standards: Core option. We have selected our disclosures related to those that are the most material to our business and/or of the greatest importance and relevance to our stakeholders. For a full list of disclosures referenced in this report, please refer to the GRI Content Index available at https://www.linkgroup.com/sustainability.html. Link Group has an internal sustainability data verification process to verify the integrity of any periodic disclosures of this section. The information is validated by the business and our CSR and sustainability Manager. No external assurance was sought for our sustainability disclosures within this report. As part of the Link Group sustainability and CSR strategy, a continued focus area is to increase governance in data collection and data integrity across all major locations. To help achieve this, we have implemented a data management system (DMS) and reporting platform to house all sustainability and CSR related data required for reporting purposes. This allows for a consistent approach globally for recording, monitoring and reporting all sustainability related data. In FY2021, we continued to be guided by the GHG Protocol Corporate Accounting and Reporting Standard 1 to improve consistency to manage our GHG risks and our emissions disclosures through the use of standardised approaches and principles. 46 1 https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf Materiality and stakeholder engagement Material Topics Link Group’s approach continues to be structured around focus areas considered to be material to our business. In particular, we place a strong focus on risk management and sustainable business practices. This means that we aim to make integrity, information and data security, privacy and compliance part of everything we do. In FY2021, we further considered materiality in the context of emerging global trends and the SDGs. We also continued to review our material topics including current and emerging risks, particularly during the current COVID-19 pandemic. Our review demonstrates how our sustainability strategy continues to reflect Link Group’s significant or material economic, environmental and social impacts, and those that are most likely to influence the assessments and decisions of stakeholders including investors. Stakeholder engagement Our stakeholders benefit from Link Group building a responsible future of sustainable growth and success through our sustainability and CSR strategy. Link Group engages with a broad range of stakeholders and works collaboratively to manage business risks and opportunities. Link Group’s stakeholder groups include shareholders, clients and their customers, our people, suppliers, community partners, regulators and various governments. We are committed to engaging openly, honestly and at regular intervals with our stakeholders to understand their expectations and concerns. We aim to be transparent, responsive and accountable to our stakeholder groups. Method of stakeholder engagement We utilise a blend of indirect and direct engagement for our internal and external stakeholders. We engage with our people through surveys, regular email and video updates, town hall updates and round tables (in person and virtually) to understand how we can become a better place to work and to assist us in attracting and retaining talent. Monitored email boxes and anonymous communication channels are also available for our people to provide feedback on any number of topics, at any time. We engage with our external stakeholders in a number of ways, including and not limited to: • Client satisfaction surveys which incorporate ESG related questions; • interactions with key regulatory, government and industry bodies in all our jurisdictions; • regular participation in key industry meetings, conferences and forums; • regular client meetings to review our performance and identify issues and future needs; and • direct communication with clients, fund members, shareholders and investors. MATERIAL TOPICS 2 • market transformation • digital disruption • privacy • data safety and cyber • • security energy consumption responsible supply chain management • our people’s health • and safety employee development and wellbeing • diversity • inclusion and gender equity • human rights • • conduct and ethics community relations 2 The internal boundary for all material topics is Link Group, which includes all our controlled entities. The external boundary for all material topics includes our external impacts particularly the needs of our external stakeholders. LINK GROUP | Annual Report 2021 47 FY2021 PROGRESS PILLAR 3 Annual Sustainability Report incorporated in to the Link Group Annual Report PILLAR 1 PILLAR 2 SUSTAINABILITY & CSR STRATEGY IMPROVED REPORTING STANDARDS Sustainability & CSR strategy approved by the Board Adopted the GHG Protocol, a corporate accounting and reporting standard 6 LinkTogether For Good local community partners LINKTOGETHER FOR GOOD LAUNCH A global cause to support education for disadvantaged and vulnerable people with local delivery in the communities we operate. A global volunteer leave day announced for all employees Aug 2020 Sep Oct Nov Jan 2021 GLOBAL POLICIES Global Human Rights policy and Global Sustainability Policy approved by the Board and published INCREASED MODERN SLAVERY AWARENESS TRAINING Modern slavery awareness training for key people held across Australia, Germany, Hong Kong, India, New Zealand and the UK LINK TOGETHER FOR GOOD PARTNERS ANNOUNCED • 5 Local CSR Committees • 6 Partners across UK, Ireland, India and Australia Alignment to UN International Day of Education – 24th January 48 THIRD PARTY ASSESSMENT OF MODERN SLAVERY RISK OF SUPPLY CHAIN AND OPERATIONS: To provide certainty over where our high modern slavery risks are per country/industry and weighted by spend, to focus on improving our understanding of these risks through identified suppliers LINK GROUP NET ZERO CARBON EMISSIONS BY 2030 Our strategy is now aligned to the Paris Agreement and Link Group has set bold public targets focused on reducing our greenhouse gas emissions INTRODUCED YOUNG ENTERPRISE AS UK COMMUNITY PARTNER Meet and greet held in the UK to introduce our newest community partner COMMUNITY PARTNER MEET & GREETS COMMENCED With a new Link Group sustainability & CSR web page launched Feb Mar Apr May Jun 2021 GLOBAL ANNUAL MODERN SLAVERY STATEMENT Global Modern Slavery Statement approved by the Board and published GLOBAL SUSTAINABILITY DATA MANAGEMENT & REPORTING SYSTEM Implementation of one reporting system for all our sustainability data and reporting requirements EARTH HOUR Global participation across all locations EMPLOYEE FUNDRAISER VIA LINKTOGETHER FOR GOOD FOR ARDOCH'S DOUBLE IMPACT DAY A morning tea was held virtually and in person across our Australian office locations to raise funds and awareness for our community partner Ardoch. Link Group matched our employee's donations dollar for dollar LINK GROUP | Annual Report 2021 49 Sustainability Report PILLAR 1 SDG ALIGNMENT A RESPONSIBLE BUSINESS Link Group recognises that a strong corporate governance culture underpins sustainable value creation for shareholders. Our approach to corporate governance guides how we operate as an organisation in conducting business and serving our clients and their customers. It also supports sustaining long-term financial performance and creating value for our shareholders and key stakeholders. We remain committed to acting responsibly with regard to the impact our operations and supply chain have on the environment and communities we operate in. Our corporate governance framework drives our principles in how we operate, create sustainable value for our shareholders and build a strong foundation to deliver capable people and systems for business growth. The framework includes our purpose and values, internal controls, risk management processes and corporate governance policies to promote responsible management and conduct. We comply with the ASX Corporate Governance Council’s Principles and Recommendations (Fourth Edition). For more information on our corporate governance practices, please see our 2021 Corporate Governance Statement and related key governance documents, at https://linkgroup.com/ about-us.html. 50 CONTRIBUTION TO UN SDG GOAL 8 Link Group respects and promotes human rights and effective management of issues relating to modern slavery and human rights risks. We are committed to operating our business in a responsible and sustainable manner with regards to the impact our operations have on the environment to help build a sustainable future and have set a net zero carbon emissions target by FY2030. The below outlines our contribution to this important goal and the UN set targets. SDG TARGET 8.4 Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programmes on sustainable consumption and production, with developed countries taking the lead. SDG TARGET 8.8 Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment. OUR CONTRIBUTION 35% OF OUR PEOPLE COVERED BY COLLECTIVE BARGAINING AGREEMENTS GLOBALLY (excludes temporary and contractor employees) FY2021 ENERGY INTENSITY 0.77 tonnes of C02e per FTE 45% from FY2019 levels OUR GLOBAL TOTAL EMISSIONS & ELECTRICITY CONSUMPTION BY COUNTRY1 COUNTRY Australia United Kingdom India Ireland Netherlands New Zealand South Africa Germany Philippines Italy Luxembourg China Hungary Switzerland United Arab Emirates Total Scope 1 Scope 2 Scope 3 Total emissions FTE Emissions/FTE MWh tCO2-e tCO2e FY2019 4,479.64 3,171.26 899.99 786.65 97.35 140.94 277.83 131.99 103.88 33.00 268.17 16.53 136.44 75.27 4.51 FY2020 4,200.97 2,797.50 777.95 1,017.84 234.59 127.59 264.07 59.39 91.42 22.40 36.39 16.43 — — 2.64 FY2021 3,606.52 3,075.85 1,162.92 567.61 406.61 120.92 91.08 74.17 66.30 48.84 36.39 16.99 — — — 10,623.46 9,649.18 9,274.19 89.91 6,378.62 3,118.02 9,586.56 50.13 5,762.17 2,081.74 13.36 5,243.40 186.26 7,894.04 5,443.02 6,709 1.43 6,963.51 7,068.77 1.13 0.77 OUR CONTRIBUTION FY2021 ABSOLUTE SCOPE 2 EMISSIONS 17.8% from FY2019 levels OUR TARGETS ABSOLUTE SCOPE 2 EMISSIONS ê10% from FY2019 levels of 6,378 tC02-e by FY2023 ABSOLUTE SCOPE 2 EMISSIONS ê30% from FY2019 levels of 6,378 tC02-e by FY2025 SCOPE 2 EMISSIONS net zero by FY2025 ABSOLUTE SCOPE 2 EMISSIONS ê50% 1 by FY2030 REDUCE EMISSIONS INTENSITY (tCO2-e) per FTE ê50% from FY2019 1.50 tCO2-e baseline by FY2030 net zero EMISSIONS by FY2030 1 Note restatement of all emissions (tCO2-e), scope 1, scope 2, scope 3 and total emissions, emissions/FTE from FY2019 to FY2020 data. This is due to the consistent application of the GHG Protocol Corporate Accounting and Reporting Standard via implementation of Envizi data management system. LINK GROUP | Annual Report 2021 51 Information security, risk management and data privacy As custodians of data for thousands of market participants globally and the Personal Identifiable Information (PII) that we hold on their behalf, Link Group has a duty and responsibility to protect this information. We have a responsibility to safeguard information and prevent its misuse. Managing and protecting data is critical to maintaining the trust and confidence of our stakeholders and in safely connecting people with their financial assets across the world. We have robust controls in place including a large number that are designed to embed a culture of vigilance and awareness of information and data security, including: • privacy, cybersecurity and data protection risk assessments • a systematic information security management system (ISMS) independently reviewed and audited on an annual basis • restricted access controls for core systems and functions • organisation-wide clean desk policy • regular training on privacy, information security and data protection; and Our ISMS aligns to global and regional standards and principles to create a robust and mature framework for information security management. We align to a number of industry recognised standards such as ISO 27001:2013 and National Institute of Standards and Technology (NIST) cybersecurity resilience framework. We have completed a global audit process resulting in our continued ISO27001 certification in FY2021 in Australia, India including Link Intime and BCM in Ireland. In other jurisdictions including the UK, the Netherlands and Germany, we are currently aligned to ISO27001:2013 and will be working towards ISO27001:2013 certification in the near future. • information security and privacy policies and a code of conduct that outline potential disciplinary action for policy breaches. These measures reinforce privacy and data protection as a key part of Link Group’s culture. There are a number of other global standards and principles we align to which include relevant Privacy Act and Data Protection laws, GDPR, CIS Top 20, Mitre Att&ck Framework, and OWASP Top 10. Best practice standards and principles In addition to the controls previously mentioned, Link Group aligns to best practice international standards for risk management and various international and regional standards for information security/cybersecurity. Our risk management framework is aligned to international risk management guidelines (ISO 31000:2018) and provides a consistent approach for identifying, analysing, evaluating, treating, monitoring and reporting risks at all levels of the organisation. Further, in the regions below there are specific standards that we also align to: • Australia: ASAE 3402/GS007, APRA Prudential Standard CPS234, and ASD Essential 8; and • UK/Ireland: ISAE 3402, ISAE 3000, AAF01/06, and NSCS Cyber Essentials. Our ongoing commitment to deliver robust governance and risk management can be found in our Risk Committee Charter 1 and Risk Management Policy 2. 1 https://linkgroup.com/docs/LG-Risk-Committee-Charter.pdf. 2 https://linkgroup.com/docs/LG-Risk-Management-Policy.pdf. PILLAR 1 52 OVER 4,750 PEOPLE IN OUR GLOBAL BUSINESS ARE COVERED UNDER OUR ISO27001:2013 CERTIFICATION SCOPE This equates to APPROXIMATELY 70% 3 GLOBAL COVERAGE FY2023 TARGET: 80% OPERATIONS CERTIFIED TO ISO27001:2013 Approach to Tax In accordance with the Tax Risk Governance Policy 4, Link Group continues to adopt a conservative approach to taxation as outlined below. Managing tax risks We are committed to transparently complying with and disclosing all our tax obligations, by focusing on accurate compliance reporting and engaging with tax authorities. Provided the risk of any transaction is within our low tax risk appetite, we seek to gain clarity within the law and evaluate any potential tax outcomes. Tax planning Link Group does not sanction or support any activities which seek to aggressively structure tax affairs. We do implement efficient tax planning to support the business and reflect the commercial and economic activity, in accordance with the low tax risk appetite. Tax transparency We are committed to transparently disclosing our tax obligations and payments made in Australia and overseas. Link Group has published its UK tax strategy and reports additional tax information as outlined in the Australian Tax Transparency Code. Relationships with tax authorities We maintain open, transparent and positive working relationships with tax authorities and regulators around the world. All correspondence with tax authorities is handled by qualified tax experts within Link Group. International related party dealings (IRPD) We acknowledge our responsibility to comply with transfer pricing regulations for all IRPD. To meet these requirements, we have a Transfer Pricing policy, processes around IRPD invoices and regular IRPD reporting BREAKDOWN OF TAX PAID ($’000) Unaudited breakdown of all tax payments for year ended 30 June 2021 Corporate income tax Employer payroll tax 5 Total tax payment borne Employee payroll tax 6 Other tax Goods & services/ value added tax $'000 $'000 $'000 $'000 $'000 $'000 Australia and New Zealand 11,029 14,706 25,735 44,983 67,970 United Kingdom and Channel Islands 439 11,316 11,755 37,229 22,217 Ireland 56 7,901 7,957 3,257 10,630 – – – Other countries 2,225 5,716 7,941 5,251 1,893 141 3 As at 30 June 2021, based on total headcount excluding contractors and temps. 4 Available from https://linkgroup.com/corporategovernance.html. 5 Employer payroll taxes are calculated with respect to employee payroll headcount or similar and the liability is levied to Link Group. For example, payroll tax paid to Australian states, Fringe Benefits Tax in Australia or National Insurance Contributions in the United Kingdom. 6 Employee payroll taxes refers to monies withheld from employee’s wages that are considered individual personal taxation, often referred to as Pay As You Go (PAYG) or Pay As You Earn (PAYE). LINK GROUP | Annual Report 2021 53 Sustainability Report Our refreshed values and employee relations Refreshing our values to support our purpose and deliver on our strategy PILLAR 1 54 TOGETHER WE ACHIEVE CONNECTING PEOPLE WITH THEIR ASSETS CLIENT FOCUSED ADAPT AND EVOLVE In FY2021 Link Group refreshed our values to better support our purpose and deliver on our strategy. These core values guide how our people interact with each other and operate as an organisation, in conducting Link Group’s business, working with our stakeholders and the communities in which we operate, and serving clients and their customers. They reflect what is important to us and what sets us apart. They are the standards by which all our people hold themselves and each other to account. Grievances We take all reports of harassment, discrimination, bullying and any form of misconduct very seriously. Our grievance procedure facilitates the appropriate investigation and resolution of complaints. Workplace grievances: 36 workplace grievances filed with human resources for globally during FY2021, of which 36 were addressed and 33 resolved prior to 30 June 2021. We support the right of employees to bargain collectively and maintain productive engagement with trade unions, as well as negotiating directly with employees. We generally pay above-award rates. Employees covered by collective bargaining agreements globally 1 is 35%. 1 Does not include temporary or contractor employees. Supplier relationships Link Group’s direct social impacts predominately relate to the sourcing of goods and services within our supply chain. We seek to manage this by improving the sustainability of our supply chain as a responsible business, improving our relationship with our suppliers and working to improve transparency within the supply chain by adopting a continuous improvement approach year on year. We encourage our suppliers to work collaboratively, conduct business in an ethical and sustainable manner and to share our sustainability commitments within their operations. Our supply chain The majority of our supply chain is with contracted, preferred suppliers. This includes those related to information technology and the provision of professional services, which are our key suppliers. Other suppliers include those related to the provision of stationery, correspondence services, shipping, professional subscriptions, facilities services, travel, catering and marketing (branded and unbranded goods not for resale). Collectively, the above make up the majority of our supplier contracts and these relationships are managed by contract owners and senior managers in Link Group and overseen by Finance. To continue to deliver services and procure goods in a sustainable and responsible manner, we are strengthening our supplier governance program through a global alignment of supplier management and materiality assessments for completion during FY2022. This will include a consistent supplier management approach globally and continued due diligence activities on suppliers, both new and existing. Human rights Across our supply chain and within our operations, we aim to operate as a responsible and ethical business with respect for human rights. We continue to encourage our suppliers to conduct business in an ethical manner and to share our commitments in supporting human rights and in eliminating modern slavery in their organisation and supply chain, where possible. Through our annual mandatory compliance training we aim to educate our people on Link Group’s commitment to respecting human rights. In FY2021 we are pleased to report that modern slavery awareness training was introduced as part of the mandatory compliance training process, for key people. Over 90 employees have completed modern slavery awareness training across Australia, Germany, Hong Kong, India, New Zealand and the UK. In addition, we also conducted face to face and virtual modern slavery awareness training with the Board and executive leadership team, providing an overview of the issues, the associated risks relating to modern slavery, global regulatory controls and Link Group’s reporting requirements. It is our intention in FY2022 to continue to broaden the cohort of our people who will be participating in modern slavery training. Our commitment to respecting and supporting human rights is aligned to the UN Guiding Principles on Business and Human Rights and is outlined in our Code of Conduct and Ethics and Human Rights Policy. Modern slavery Link Group takes the risk of modern slavery seriously. As reported previously in FY2020, we conducted research to identify the key areas for potential human rights risks within our supply chain and mapped our suppliers 2 against these, to establish a baseline for identifying potential human rights risks. This is in addition to requests for tier 1 3 suppliers to complete an annual questionnaire. We use these results to work collaboratively with our suppliers to identify factors in their operations and supply chain, any outsourced activities and their supply chains related to modern slavery risk. The questionnaire is designed to understand priority alignment of sustainable practices, identify and assess risks that may be present, improve understanding of any tier 2 4 suppliers or presence of sub-contractors, improve transparency across shared supply chains and identify areas for further due diligence. In FY2021, our supplier questionnaire was issued to over 70 tier 1 suppliers globally. These included our largest material suppliers and those categorised as operating in identified key modern slavery risk areas. These suppliers represent 70% of our total global spend. The questionnaire had a response rate of 49% and the spend with those suppliers who responded equates to 59% of our total global supplier spend 5. There were no known instances of modern slavery incidents reported. Link Group is subject to both the UK and Australian legislation and in FY2021 we produced for the first time, a combined Modern Slavery Statement for the reporting period FY2020 to fulfil our obligations under both the UK and Australian legislation. Our FY2021 Modern Slavery Statement outlines Link Group’s progress towards identifying and addressing modern slavery risks within our business and supply chain. We continue to engage with our suppliers to understand how we can better work together to identify factors in our operations (including our supply chain) and their supply chains related to modern slavery risks. 2 There are approximately 2,400 total suppliers globally in our direct (tier 1) supply chain. 3 Tier 1 suppliers are those who directly supply Link Group with goods and services. 4 Tier 2 suppliers are part of the indirect supply chain i.e. any organisation who supplies goods or services that contribute to the tier 1 suppliers. 5 As at 30 June 2020. LINK GROUP | Annual Report 2021 55 Sustainability Report ALIGNING AND BUILDING OUR CAPABILITY Link Group continues to invest in our people and our systems to deliver global client solutions. The refreshed Link Group values, Client Focused, Adapt and Evolve, Together We Achieve, are critical to supporting our purpose and how we will deliver our sustainability and CSR strategy, as we aim for Link Group to be a place where our people belong, thrive and achieve together. We are committed to providing an inclusive, flexible and blended working environment where our people can thrive and achieve together, and their safety and wellbeing is prioritised. Investing in our people and systems At Link Group we are committed to creating a high performing company where difference is valued and each person can realise their potential and contribute to Link Group’s success. Innovation and collaboration are key priorities for Link Group. Our investment in people and systems gives us the tools, knowledge and capability to develop global client solutions. Part of being a global organisation is the ability to provide a wide range of development and career opportunities to our people. This helps us attract the right candidates to Link Group, bring out the best in our people and build the capabilities and skills we need to continue to deliver innovative solutions for our clients. In FY2021, we launched SPARK, our global frontline leaders program supporting new leaders to make the transition from technical specialists to strong and effective leaders. Rolled out across India, Europe, Australia and New Zealand, the program is a 14-week intensive virtual learning program encompassing classrooms, learning communities, eLearning, on the job activities and the application of a leader toolkit. Link Group also partnered with Microsoft to offer the Enterprise Skills Initiative (ESI) for all Link Group employees. The ESI program enables our people to access unlimited self-paced, virtual and online classroom training and provides them with the opportunity to upskill in a range of Microsoft’s technologies and complete globally recognised certification across Admin, AI, Data, DevOps and Security. In line with our continued focus on building one cohesive team and culture, we introduced an online orientation program to ensure all new starters globally have a consistent overview of Link Group as part of their onboarding experience. PILLAR 2 SDG ALIGNMENT 56 Inclusive and equitable workforce Diversity & Inclusion We recognise embracing and harnessing individual differences and gender equality brings the breadth of perspective and depth of experience critical to our success. We strive to be an organisation where our people are reflective of the diverse clients we support, as well as their customers throughout the world and the communities in which we operate. We remain committed to achieving gender balance and equity across all levels of management and the wider organisation. To broaden inclusion, awareness, ownership and reach of our diversity and inclusion (D&I) strategy, we established Link Group’s D&I Committee (chaired by the CEO and Managing Director and comprising members of the executive leadership team in FY2021). We also established D&I Working Groups for our three priority focus areas: Achieve gender balance and equity, Enhance employee wellbeing and Mainstream blended working. Each Working Group comprises representatives from across our organisation and is sponsored by a member of our executive leadership team and chaired by a member of our senior leadership team. In FY2021, the Board increased the measurable objective for gender representation to not less than 40% of the directors being of each gender for FY2022. We remain focused on improving representation of women across our cohort of senior leaders while maintaining a balanced representation across the other management levels and the wider organisation. We continue to review people policies and processes to reduce any bias and provide equity for all our people. Global Job Architecture In FY2021, we continued to develop a global job architecture (job levels, job families and market pay benchmarking) that will help support the fair comparison of roles, pay and promotions and help analyse and address pay gaps. LINK GROUP | Annual Report 2021 57 Sustainability Report CONTRIBUTION TO UN SDG GOAL 5 AND GOAL 8 Diversity, Inclusion and Gender Equity GOAL 5 ACHIEVE GENDER EQUALITY AND EMPOWER ALL WOMEN AND GIRLS. Link Group is committed to creating an environment where our people belong, thrive and achieve together as part of a diverse, inclusive and engaged workforce. We continue to invest in our people’s development so they can succeed in their roles and grow their careers. We remain focused on achieving gender balance of 40:40:20 at all levels of the organisation. Conduct, Ethics and Respect for all employees GOAL 8 PROMOTE SUSTAINED, INCLUSIVE AND SUSTAINABLE ECONOMIC GROWTH, FULL AND PRODUCTIVE EMPLOYMENT AND DECENT WORK FOR ALL. Link Group respects and promotes human rights and effective management of issues relating to modern slavery and human rights risks. We are committed to operating our business in a responsible and sustainable manner. The following outlines our contribution to these two important goals and UN set targets. 1 Percentage of employees retained who returned from, or are still on parental leave. 2 Excludes temporary and contractor employees. 3 As at 30 June 2021 includes 14 countries where Link Group operates globally, not including UAE. 4 Board includes the Managing Director. Senior Executives includes the Managing Director and members of the executive leadership team globally as at 30 June 2021. 5 Target not met due to relatively low turnover at the Senior Leader level. 6 The FY2023 target has been revised to reflect in the change in composition of the senior leadership roles following the transition to our global operating model and structures; and still represents a stretch target for the organisation. 7 Comprises women in senior leader roles (global) and people management roles globally excluding Link Intime in India and Germany (Munich and Frankfurt offices). 8 Proportion of permanent + fixed term 92.04%, temp + contractor 5.88%, parental leave 1.75%, casual 0.33%. 9 Total workforce excludes temporary and contractor employees. 10 Excludes temporary and contractor employees. 11 Excludes temporary and contractor employees. PILLAR 2 58 SDG target 5.1 end all forms of discrimination against women and girls everywhere. Our Contribution Parental Leave Eligible 2,322 women Utilised 280 women 95 men Retention rate 1 93% VOLUNTARY DEPARTURES 12-MONTH ROLLING TURNOVER RATE 18% SDG target 5.5 ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life. Our Contribution See Gender Equity Balance below EMPLOYEE STATUS Permanent Fixed-term Parental Casual HEADCOUNT FTE’S 6,368 6,201.9 317 127 24 305.2 116.4 24 SDG target 8.5 achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value. Our Contribution OVER 3 hours FACILITATED FACE-TO-FACE TRAINING PER PARTICIPATING FTE 10 EMPLOYEES OVER 51,174 hours COMPLIANCE TRAINING PER FTE EMPLOYEE OVER 7 hours AVERAGE TOTAL TRAINING PER EMPLOYEE 11, GLOBALLY OVER 5 hours COMPLIANCE TRAINING PER FTE EMPLOYEE Link Group Level 2 Board 4 Senior Executives Senior Leaders Actual FY2021 Gender Equity Balance 3 Women Men 38% 62% 44% 56% Global Target FY2022 Global Target FY2023 30% women 30% men 40% women 40% men 23%5 77% 30%6 women Women in Management 7 42% 58% 40% women All Employees 49% 51% N/A Total Employees 8 7,263 7,069 FTE Full-time employees 6% 6% 88% Permanent Fixed-term, casual or parental leave Not directly employed by Link Group Total Workforce 9 49% Women 51% Men Permanent Fixed-term Casuals 49% 50% 37.5% 51% 50% 62.5% LINK GROUP | Annual Report 2021 59 Sustainability Report Listening to our people Listening to our people and acting on their feedback is important to us. In FY2021, we introduced virtual and in person townhalls and roundtables. This provided our recently appointed CEO and Managing Director with invaluable feedback from our people, as well as the ability for our people to learn more about our future strategy and to connect with members of our leadership team. This was an important part of our engagement approach as many of our people continued to work remotely and were not able to connect with each other and their leaders in person. In February 2021, we conducted a short pulse survey to gauge how our people were feeling in these extraordinary times given the ongoing global pandemic. We also conducted Link Listens, our first comprehensive global employee engagement survey in April 2021. Link Listens aimed to understand what is required to continuously improve our organisation, the ways we work and the experience of our people. Together with our pulse survey, Link Listens has provided us with a baseline to measure our progress in improving employee engagement, and provided us with key insights into what we are doing well and the actions we can take to improve our people’s experience of working here. We are providing our people with regular updates on our progress against our organisation's action plan and checking in on the impact these changes are having via regular pulse surveys throughout the year. Global recognition program In May 2021, Link Group launched our global recognition program, Appreciate, to provide opportunities for our people to publicly recognise and thank colleagues for living our values. Appreciate helps us celebrate the many great examples of employees collectively demonstrating our values of Client Focused, Adapt and Evolve and Together we Achieve. If a colleague has gone above and beyond what is expected and lived our values in doing so, they are recognised and valued through our Appreciate program. Wellbeing The safety, health and wellbeing of our people is a key priority for Link Group. In response to the ongoing restrictions and prolonged impacts of the pandemic on our people in FY2021, Link Group rolled out a series of global and location specific webinars to support employee mental health and enhance personal resilience. Our people also have access to a range of resources and support including the Link Wellness Hub, a number of online wellness modules on Link Academy together with access to confidential local Employee Assistance Programs (EAP) and Employee Benefits programs. PILLAR 2 60 Blended working Having demonstrated our ability to work effectively remotely throughout the pandemic, we are adopting a blended working approach, combining remote working and working in the office, as a more permanent feature of how we work in the future. In FY2021, we initiated a project to develop our blended working model, outlining what blended working looks like for the different types of work across the organisation, and the supporting infrastructure (policies, processes, office booking systems and tools) required to support this. We also surveyed our people on their preferred working arrangement and held interviews and workshops with business representatives from across our organisation. A project to develop and pilot a number of initiatives to establish and support blended working within teams and offices commenced in April 2021. The pilot involved around 200 participants across three office locations in the UK (Leeds), India (Mumbai) and Australia (Rhodes). The outcomes of the pilot will help inform the progressive rollout of blended work arrangements and ways of working throughout FY2022. On 2 June 2021, we celebrated International Flexible Working Day, giving us an opportunity to reflect on the progress we are making towards mainstreaming flexible and blended working. To help celebrate International Flexible Working Day we encouraged all employees to adopt the practice of setting “25/50 minute meetings” where practicable, rather than the usual 30 or 60 minutes, to free up time to reflect, refresh and re-energise between meetings, as well as other practices to support increased flexibility in the way we work. Celebrating days of significance In FY2021, we celebrated International Women’s Day on 8 March 2021 and Pride Month on the 28 June 2021 to recognise and celebrate the diversity of our workforce. International Women’s Day International Women’s Day (IWD) celebrates women's achievements, raises awareness against bias and marks a call to action for accelerating gender parity. The 2021 IWD theme was brought to life by a #ChooseToChallenge selfie campaign, a call to action for our people to commit to how they will call out gender bias, stereotypes, and discrimination in their day to day lives. PRIDE Link Group is a proud ally of the LGBTQ+ community. Link Group recognises that Pride Month is not just a time to celebrate, it’s also an opportunity for us to encourage and educate all of our people to learn how to be an active ally for the LGBTQ+ community and equal rights. Our people held virtual or in person morning or afternoon teas and wore rainbow colours in celebration. This was a time to recognise the progress made around the world for greater LGBTQ+ inclusion and to also acknowledge the challenges many people within the community still face. Our executive leadership team supporting International Women’s Day. Our team in Mumbai Hub celebrating PRIDE month. LINK GROUP | Annual Report 2021 61 PILLAR 3 SDG ALIGNMENT SUSTAINABLE GROWTH Link Group continues to be committed to building a more sustainable future through identifying ways to reduce our carbon footprint and positively contribute to our communities through the launch of our CSR strategy, LinkTogether For Good. We have aligned our sustainability and CSR strategy to the Paris Agreement, a legally binding international treaty on climate change and committed to a target of net zero carbon emissions by FY2030. We also continue to research, innovate and create new solutions for our clients, in particular to better understand their environmental and social risks. 62 Environmental Performance Our sustainability and CSR strategy continues to focus on a people‑centric framework that’s robust, integrated, diverse, and designed around our hub locations with scalability and longevity in mind. As part of progressing our strategy, we have aligned our strategy to the Paris Agreement with targets now agreed and set, and endorsed by the Board, to reduce our greenhouse gas emissions. This includes a commitment to a target of net zero carbon emissions by FY2030. As we produce mainly intangible, technology‑based products and services requiring limited use of resources, our direct environmental impact largely relates to the resources we consume in our offices and our travel footprint. The continued pandemic has resulted in a significant reduction in our FY2021 organisational travel footprint which while not reflective of post‑COVID travel requirements, we will seek to keep at reduced levels overall. We will continue to manage these impacts in accordance with set targets by measuring progress, monitoring and reducing resource use, through the maintenance of innovative and sustainable workplaces. We are focused on improving our environmental performance through our dedicated strategy to reduce our impact year on year. This year we have implemented a DMS and reporting platform to house all sustainability and CSR related data required for reporting purposes. The system follows the GHG Protocol Corporate Accounting and Reporting Standard and allows for a consistent approach globally for recording, monitoring, and reporting all sustainability related data. This has significantly improved the accuracy, quality and consistency of our data and resulted in a restatement of our FY2019 baseline data and FY2020 data respectively. We have also begun assessment against the Task Force on Climate‑related Financial disclosures (TCFD) recommendations; climate change governance, risk management, and metrics and targets, with the view to commence disclosure reporting against the framework by end of FY2022. Carbon emissions and energy data for FY2021 7,000 6,000 7,000 5,000 6,000 4,000 5,000 3,000 4,000 3,000 2,000 2,000 1,000 1,000 0 0 12,000 10,000 8,000 6,000 4,000 2,000 Baseline FY2019 Baseline FY2019 FY2020 FY2020 FY2021 0 FY2021 12,000 10,000 8,000 6,000 4,000 2,000 0 Scope 1 (tCO2-e) Scope 1 (tCO2-e) Scope 2 (tCO2-e) Scope 2 (tCO2-e) Scope 3 (tCO2-e) Scope 3 (tCO2-e) Energy - gas + elec. (MWh) Energy - gas + elec. (MWh) LINK GROUP | Annual Report 2021 63 CONTRIBUTION TO UN SDG GOAL 4 AND GOAL 13 Community impact Environmental performance GOAL 4 ENSURE INCLUSIVE AND EQUITABLE QUALITY EDUCATION AND PROMOTE LIFELONG LEARNING OPPORTUNITIES FOR ALL. Link Group believes that education is crucial to improving communities and building a sustainable future. LTFG focuses on providing education support to the disadvantaged and vulnerable in our communities. A global focus to create positive local impact. Since the launch of LTFG in November 2020, we have taken the following actions outlined below to empower youth through literacy skills and numeracy skills development. GOAL 13 TAKE ACTION TO COMBAT CLIMATE CHANGE AND ITS IMPACTS. We continue to support our long-term sustainability by understanding and addressing the material financial impacts of climate-related risks and opportunities. In FY2021 we have achieved the following reductions in energy consumption as set out in FY2021 highlights below. SDG Goal 4 target 4.6 By 2030, ensure that all youth and a substantial proportion of adults, both men and women, achieve literacy and numeracy Our Contribution Proudly partnered with 6 Local Community Partners that align to education across key regions in India, United Kingdom, Ireland and Australia. Donated $231,142 toward improving education for the vulnerable and disadvantaged in our communities OUR TARGETS ABSOLUTE SCOPE 2 EMISSIONS ê10% from FY2019 levels of 6,378 tC02-e by FY2023 ABSOLUTE SCOPE 2 EMISSIONS ê30% from FY2019 levels of 6,378 tC02-e by FY2025 SCOPE 2 EMISSIONS net zero by FY2025 REDUCE EMISSIONS INTENSITY (tCO2-E) per FTE ê50% from the FY2019 1.43 tCO2-e baseline by 50% by FY2030 ABSOLUTE SCOPE 2 EMISSIONS ê50% from FY2019 levels of 6,378 tC02-e by FY2030 net zero EMISSIONS by FY2030 INCREASE CONTRIBUTION (donations and contribution in kind) é250% by FY2025 from the FY2019 baseline of $400k PILLAR 3 64 SDG Goal 13 target 13.1 Strengthen resilience and adaptive capacity to climate related hazards and natural disasters in all countries. FY2021 Highlights Emissions Travel Office space Absolute scope 2 emissions Total distance flown ê17.8% from FY2019 Total emissions of C02e 5,443 tonnes ê31% from FY2020 FY2020: 7,894 1 tonnes Emissions intensity of C02e per FTE 0.77 tonnes ê32% from FY2020 FY2020: 1.13 2 tonnes 607,744km FY2020: 8.95m 4 km Emissions of CO2e 141 tonnes FY2020: 1,951 5 tonnes CO2e Rail travel total distance travelled 101,142km FY2020: 1.54m km Rail travel emissions of CO2e 2.31 tonnes FY2020: 58.7 6 tonnes CO2e Proportion of sustainably-rated 3 office space globally 70% maintained from FY2020 Global electricity consumption ê4% from FY2020 Internal paper consumption ê6.8% from FY2020 1 Note restatement of total emissions due to recalculation of FY2020 scope 2. This is due to estimated electricity consumption data for Jun-20 now updated with actual and adoption of GHG protocol corporate reporting standards for emissions calculation to establish FY2019 as baseline year for our global footprint comparison. 2 Note restatement of FY2020 emissions intensity per FTE. 3 Definition of sustainably-rated buildings refers to LEED-certified to gold or above, BREEAM-certified excellent or above, or NABERS Level 5 or above. The UK buildings we occupy are compliant with the Energy Savings Opportunity Scheme (ESOS). Phase 3 of the scheme will be completed in 2023. 4 Note restatement of FY2020 business air travel km due to under-reporting of Germany and Luxembourg flights in FY2020. 5 Note restatement of FY2020 business air travel scope 3 emissions due to recalculation of scope 3 emissions applying the GHG protocol corporate reporting standards for emissions calculation. 6 Note restatement of FY2020 rail travel scope 3 emissions as above for footnote 29. LINK GROUP | Annual Report 2021 65 Sustainability Report Emissions from energy use and travel In FY2021, Link Group’s total emissions 1 were 5,443 tonnes of CO2e, reduced by 31% from FY2020 and attributed to a reduction in Scope 2 and Scope 3 emissions. Changes are attributable to the continued COVID-19 pandemic and our global hub strategy. Our scope 3 reductions are mainly due to the continued international border closures and lock-down measures to control the spread of COVID-19. Similarly, our emissions intensity decreased by 32% compared to FY2020 to 0.77 tonnes of CO2e per FTE. Our continued office leasing strategy seeks energy- efficient buildings that allow us to reduce our energy consumption and emissions. This strategy paired with our strategic global hubs will improve our capacity to provide enhanced service across multiple jurisdictions, to continue to reduce our carbon footprint and to establish a strong foundation for us to grow, support our clients and operate as a global organisation. It will also facilitate our clients’ growth ambitions. These strategies paired with our global adoption of blended working should see our energy consumption and emissions continue to reduce. During FY2021: • we closed offices in UK, the Netherlands, the Republic of Ireland, the Philippines and South Africa, • opened a new office location hub in Maarssen in the Netherlands and moved into a new building in Auckland, New Zealand; and • continued the build out of our global hubs in Leeds and Mumbai. The energy consumed in our office was almost entirely grid electricity, with less than 1% provided by gas in our European and UK offices. FY2021 Scope 2 emissions were 5,243 tonnes of CO2e and reduced 9% from FY2020, and we consumed a total of 9,274 MWh of electricity, a 4% reduction from FY2020 which can be attributed to reduced occupancy during the pandemic and our continued focus on energy use in all Link Group’s locations globally including our continued global hub delivery. Link Group’s FY2021 Scope 3 emissions decreased by 91% compared with FY2020 due to a decrease in flight miles globally from the pandemic. We continue to encourage the use of virtual conferencing that facilitates collaboration and helps reduce the need for business travel. COVID-19 has further escalated our business adoption of virtual collaborative measures. Please note the restatements listed in the footnotes for our FY2019 baseline data and FY2020 data are a result of the continued improvement on our data accuracy and governance practices. Resource efficiency We continue to raise awareness among our people, and improve our resource efficiency and waste production 2 across our global hub locations. Our resource and waste strategy continues to focus on our energy consumption, e-waste production and its disposal method and responsibly managing our paper consumption. In FY2021, we recycled and reused 10.89 tonnes of e-waste. Our internal paper consumption was 39.34 tonnes and decreased by 6.8% compared to FY2020. The environmental impact of our paper consumption continues to be addressed through an ongoing commitment to use certified sustainable 3 paper stock. Approximately 89% of our internal paper consumption is certified sustainable and 11% of our total internal paper consumption is certified carbon neutral. In FY2021 we recycled 427 4 tonnes of paper. A total of 964 5 tonnes of paper was consumed externally on behalf of our clients. We continue to encourage our clients to adopt improved sustainable approaches to communicating with their customers either electronically or through an ongoing commitment to use certified sustainable or recycled paper stock. In FY2021 62% of our external paper consumption consisted of certified sustainable, this was similar to FY2020. 1 As at 30 June 2021, includes all office hubs globally. Our total 3 Definition of certified sustainable refers to paper that is certified FSC/ emissions include Scope 1 (direct) emissions combusted on-site within office buildings (natural gas), Scope 2 (indirect) GHG emissions from the consumption of purchased electricity within office buildings we occupy as tenants and have operational control; and Scope 3 (indirect) corporate travel emissions from flights globally and ground travel (UK only). Our emissions disclosures cover our reporting requirements for FY2021 under the UK Streamlined Energy and Carbon Reporting framework (SECR). PEFC/ISO14001, carbon neutral or plantation grown. 4 Note restatement of recycled paper FY2020 reported total is 504.23 not 226 tonnes of paper due to under-reporting of India recycled paper. 5 Note restatement of paper external – EMEA under-reported for FY2020 by 225 t – total 966.35 t of paper, not 742 t and a total of 62% of total global paper use externally is 100% PECF Accredited sustainably sourced with chain of custody. 2 Due to internal sustainability data verification process we are not disclosing FY2021 waste data and proportion of general waste recycled due to incomplete data. 66 New Auckland Office CASE STUDY Energy efficient leasing strategy In June 2021 Link Group moved into our new Auckland office. Our Office Leasing Strategy aims to target the selection of energy-efficient buildings. Choosing the PwC Tower at Auckland Commercial Bay aligns with this target and helps us to work towards our goal of reducing our environmental impact. PwC is trying to secure a 5-star green star building rating and a 4-star NABERS NZ rating that will provide an industry accreditation of the many sustainable features built into the infrastructure and design of the tower. The office space accentuates a bright, airy feel for functional workstations and meeting spaces. The facilities of the office enable our people to separate their workspace from their recreational space supporting productivity and wellbeing including sit-to-stand desks to create flexible working stations and a purpose-built ‘end of trip’ facilities that enables employees to have a dedicated space away from their workstations to take their breaks and engage in activities. The building's sustainability highlights include: • Full rubbish sorting and recycling will be undertaken in the building, ensuring that land fill waste is reduced to an absolute minimum. • Harvesting and recycling of rainwater to operate the towers cooling system helping to reduce water consumption. • Efficient LED lighting which is fitted with motion sensors to automatically switch off any lighting in unused spaces. The system will also monitor natural daylight patterns to automatically dim any lighting that can be supplemented with natural daylight. Both these features help to reduce energy consumption. • The surrounding planting areas of the towers support the heating systems to use natural thermal energy. LINK GROUP | Annual Report 2021 67 Sustainability Report COMMUNITY IMPACT We believe that giving back to the communities we operate in is an important part of living our values. TARGET INCREASE CONTRIBUTION (donations and contribution in kind) é250% by FY2025 from the FY2019 baseline of $400k PILLAR 3 68 Here at Link Group we will continue to support numerous charitable causes across the communities we operate in three important categories: through our • CSR STRATEGY, LTFG • EMPLOYEE GIVING, allowing our people to utilise their volunteer leave and give back to their communities in a more meaningful way through their supported registered charities; and • SUPPORTING EMERGENCY RELIEF such as bushfire’s or the extreme impacts of COVID‑19. TOTAL CHARITABLE DONATIONS 1 $327,500+ OVER 400+ Volunteer leave hours In January 2021, Link Group provided all employees globally with one annual volunteer leave day per calendar year to allow them to give back to the community in a meaningful way. Unfortunately restrictions due to COVID-19 constrained our teams ability to participate in volunteering events and initiatives, resulting in a reduction in our total charitable contributions as our in-kind giving was reduced. We expect this to increase again post COVID-19. LinkTogether For Good In November 2020, we officially launched our CSR strategy, LTFG, which is focused on supporting education for disadvantaged and vulnerable people in the communities we operate in. LTFG reinforces our contribution by aligning our community initiatives towards this single global cause to increase our impact and reach. Education is crucial to improving communities and building a sustainable future. The key focus for us in FY2021 was to appoint several local, national community partners in our four key regions of Australia, the UK, Ireland and India. This allows our people to work together with a local community partner in the form of charitable giving and volunteering to truly give back to the community. Further information about LTFG and our community partners who will help bring LTFG to life can be found here https://www.linkgroup.com/linktogether-for-good.html. We introduced each LTFG community partner to our people via virtual meet-and-greets so they could learn about each of the community partners, understand the partnership and commitment to LTFG and learn how they can participate in a range of volunteering initiatives offered and give back to our local communities in support of these partnerships. 1 Amount provided via employee and corporate donations, sponsorships, workplace giving and in-kind support to charitable organisations. As at 30 June 2021, unless otherwise stated. LINK GROUP | Annual Report 2021 69 Sustainability Report Community Impact Spotlight on Ardoch, Australia Each year, our Australian community partner, Ardoch, hosts Double Impact Day as an annual fundraiser and this year’s focus was to raise money for disadvantaged children to access Science, Technology, Engineering and Maths (STEM) resources. Morning teas were hosted in various Australian offices across the country. To enable all our people to participate, we hosted a zoom event which included presentations from our CEO & Managing Director, Vivek Bhatia and guest speaker, Ardoch Board Member, Amanda Robbins. Link Group gave an upfront donation of $15,000 in support of Double Impact Day and pledged to match employee giving for the event up to $15,000. We raised over $23,000 in total with $4,400 donated by our employees on the day. This was a fantastic effort from our teams who rallied together to raise donations for their LTFG national community partner Ardoch on Tuesday June 15 for Double Impact Day. We look forward to increasing our contribution for all our community partners across all communities we operate in for LTFG. Supporting Ardoch's Double Impact Day Emergency relief In April 2021 as the COVID-19 healthcare crisis continued in India we pledged a $50,000 donation to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) to support the people of India in this battle. With both our Mumbai Hub and Link Intime teams in India, this country and region is of great importance for Link Group. During this time the safety and wellbeing of our people in India was our priority and we worked closely with our leadership teams. Our hearts and thoughts continue to be with everyone, especially those that have been personally impacted by this crisis. PILLAR 3 70 Ireland UK India Australia Our Community Partners basis.point Their vision is to help make a sustainable and tangible difference to the lives of those living in poverty, particularly young people, by supporting charities which focus on education. Young Enterprise (YE) reaches over 220,000 young people aged 5-18+ across the UK every year. Their financial capability and entrepreneurship education programmes help young people learn the vital skills needed to earn and look after their money. Ireland UK India Bharatiya Vidya Bhavan operates through local centres, called Kendras (the Sanskrit word for centres), which are spread across India. The institution provides national standard level of education to primary and secondary students including remote village areas, where it provides quality education to economically challenged families. SPRJ Kanyashala Trust Their mission is to provide every available opportunity to promote education of underprivileged girls and thereby enrich their lives and empower them. South Indian Education Society (SIES) strives to respond to a continuously changing educational landscape with its high standards of academic, professional and societal performance, helping to shape young minds in their formative years to become confident citizens. Ardoch is a children’s education charity focused on improving educational outcomes for children and young people in disadvantaged communities. Their vision is to become Australia’s most impactful education partner supporting children in disadvantaged communities. Australia GO Foundation works to create a brighter future for Indigenous Australians and provides mentoring, leaderships, networks and support to GO students on their journey from Kindergarten to Employment. LINK GROUP | Annual Report 2021 71 Sustainability Report Supporting LinkTogether For Good In the UK Andrew Lelliott from LFS used part of his volunteer leave to help judge our UK national community partner, Young Enterprise’s Company of the Year competition for North East and Yorkshire and Humber. Link Group supported the Financial Management Award and Andrew presented this Award to the winning group, who created a book series written by children, for children. Andrew said, “I was blown away by all the students’ professionalism, passion and ability to adapt for the challenges of remote working.” Employee Giving Danielle Stewart from RSS used her volunteer leave to participate in the annual “Bloody Long Walk” in Victoria, Australia, raising over $1100 for research into curing Mitochondrial disease. Completing the 35 km scenic walk and finishing the course in under 6 hours, Danielle was delighted with the opportunity to use her time for good. Danielle felt that “the Link volunteering day made all the difference in being able to complete the walk and recovering the day after.” Team Giving Throughout September 2020 our teams across Dublin, Maynooth and Belfast collaborated in a virtual km challenge. The Charity Committee in Ireland organised the challenge to raise vital funds for their respective charities: The Jack and Jill Foundation (Dublin and Maynooth) and Northern Ireland Children's Hospice (Belfast). Over 200 people, including team members and their friends and families tracked their kilometres as they each aimed to complete a virtual 376km during the month of September by walking, running or cycling. Why 376km? Well, this is the same distance as completing a loop route between our Belfast, Dublin and Maynooth offices and back again. These charities were selected and voted for by the local teams in Ireland to support with the help of the local Irish Charity Committee’s. With fundraising events for both charities being postponed or cancelled during these uncertain times, they needed our teams’ support more than ever. The teams raised over €9,690 for the two charities. PILLAR 3 72 Bake For India Employee Initiative Schubert Gomes and Rebecca Tse from Corporate Markets, in Sydney, Australia felt helpless at the continued impact COVID-19 was having on India and its community and were moved into action to kick off a MasterChef style bake off to raise funds for the COVID rescue effort for India. The morning tea brought over 200 people together for a good cause and sparked interest in our other offices to do the same. Schubert Gomes said, “after speaking to many friends, family members and colleagues in India and hearing how COVID has directly impacted them in such a negative way, I felt compelled to do something to provide support. It was heartwarming to see the generosity of our people. It’s not about the size of the donation but what it can achieve. As little as $10 can provide someone with ten meals.” The compassion of our people to give generously embodies our ‘Together We Achieve’ value. Their contributions meant that we successfully raised A$2,750 for CARE and with Link Group matching the donation, we have raised A$4,500. Our teams supporting Bake For India LINK GROUP | Annual Report 2021 73 FINANCIAL REPORT 74 FINANCIAL REPORT CONTENTS SECTION 01 Directors’ Report Directors and Company Secretaries Executive Key Management Personnel (KMP) Principal Activities Dividends Review of Operations Operating and Financial Review Remuneration Report Other Information Lead Auditor’s Independence Declaration 76 80 83 83 83 84 109 134 137 SECTION 02 Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 138 140 141 143 SECTION 03 Notes to the Financial Statements Preparation of this Report 1. General information 2. Basis of preparation 3. Restatement of prior period Operating Results 4. Operating segments 5. Equity-accounted investments 6. Revenue 7. Administrative and general expenses 8. Earnings per share 9. Taxation Operating Assets and Liabilities 10. Trade and other receivables 11. Trade and other payables 12. Fund assets and liabilities 13. Provisions 14. Employee benefits 15. Plant and equipment 16. Intangible assets 17. Notes to the statement of cash flows 144 144 147 148 151 153 155 156 157 161 161 162 162 164 164 166 170 Capital Structure, Financing and Risk Management 18. Interest-bearing loans and borrowings 19. Finance costs 20. Contingent liabilities 21. Investment and Financial risk management 22. Contributed equity 23. Reserves 24. Retained earnings 25. Share-based payment arrangements 171 172 172 173 178 179 181 181 Group Structure 26. Business combinations 27. Controlled entities 28. Parent entity disclosures 184 185 189 Other disclosures 190 29. Related parties 190 30. Auditor’s remuneration 31. Subsequent events 191 32. New standards and interpretations not yet adopted 191 SECTION 04 Directors’ Declaration SECTION 05 Independent Auditor’s Report Additional Shareholder Information Three-Year Summary 192 193 198 200 LINK GROUP | Annual Report 2021 LINK GROUP | Annual Report 2021 7575 DIRECTORS AND COMPANY SECRETARIES The Directors present their report together with the consolidated financial statements of Link Group, being Link Administration Holdings Limited (“the Company”) and its Controlled Entities, for the financial year ended 30 June 2021 and the auditor’s report thereon. The Directors of the Company at any time during or since the end of the financial year are: DIRECTOR EXPERIENCE AND BACKGROUND Michael Carapiet was appointed as a Director and Chair of the Company in 2015. He is an ex-officio member of all Board Committees. Michael is Chair of Smartgroup Corporation Limited and Adexum Capital Limited. He was previously Chair of Insurance & Care NSW (icare), Chair of SAS Trustee Corporation and a Director of Southern Cross Media Group Limited. Michael has also served on Commonwealth Government boards including Infrastructure Australia, Clean Energy Finance Corporation and Export Finance Insurance Corporation. Michael has over 30 years of experience in banking and financial services and holds a Master of Business Administration from Macquarie University, Sydney. Michael Carapiet Independent Chair and Non‑Executive Director Appointed 26.06.2015 Vivek Bhatia Chief Executive Officer & Managing Director Appointed 02.11.2020 Glen Boreham, AM Independent Non‑Executive Director Appointed 23.09.2015 76 Vivek Bhatia joined Link Group in 2020 as CEO and Managing Director. Vivek has over two decades of experience in financial services, government and management consulting. Vivek is an experienced chief executive, having led a number of complex businesses throughout his career. Vivek joined Link Group from QBE Insurance Group where from 2018 he was Chief Executive Officer of the ASX-listed general insurance and reinsurance company’s Australia Pacific division. Vivek joined QBE from icare where he held the position of inaugural Chief Executive Officer and Managing Director. Prior to this, he co-led the Asia-Pacific Restructuring and Transformation practice at McKinsey & Company and also previously held senior executive roles at Wesfarmers Insurance, including responsibility for leading the Australian underwriting businesses of Lumley, WFI and Coles Insurance. Vivek holds an undergraduate degree in engineering, a post graduate in business administration and is a Chartered Financial Analyst (ICFAI). Glen Boreham was appointed a Non-Executive Director of the Company in 2015. He is Chair of the Technology & Transformation Committee and a member of the Human Resources and Remuneration Committee. Glen is a Director of Cochlear Limited and Southern Cross Media Group Limited and Strategic Advisor to IXUP Limited. Previously, Glen was the Managing Director of IBM Australia and New Zealand. He has also previously served as Chair of Screen Australia, Advance and the Industry Advisory Board for the University of Technology, Sydney, as well as Deputy Chair of the Australian Information Industry Association and as a Director of the Australian Chamber Orchestra. Glen holds a Bachelor of Economics from the University of Sydney and an Honorary Doctorate from the University of Technology Sydney. In January 2012, Glen was awarded a Member of the Order of Australia for services to business and the arts. SECTION01 Directors’ Report DIRECTOR EXPERIENCE AND BACKGROUND Andy Green was appointed a Non-Executive Director of the Company in 2018. He is Chair of the Risk Committee and a member of the Technology & Transformation Committee. Andy is Chair of Simon Midco Ltd the holding company of Lowell Group, Chair of Gentrack Group Ltd and Senior Independent Director of Airtel Africa plc. Andy is a Commissioner at the UK’s National Infrastructure Commission, Chair of WaterAid UK, Vice Chair of The Disasters Emergency Committee and a trustee of WWF UK. Andy’s earlier career at BT Group (formerly British Telecom) spanned more than 20 years, including as CEO of Global Services. He also previously served as Group Chief Executive of IT and management consultancy company Logica plc, and as Senior Independent Director at ARM Holdings plc. Andy holds a Bachelor of Science in Chemical Engineering with first class honours from Leeds University. Peeyush Gupta was appointed Non-Executive Director of the Company in 2016. He is a member of each of the Risk and Audit Committees. With over 30 years of experience in the wealth management industry, Peeyush was previously co-founder and the inaugural CEO of IPAC Securities Limited, a wealth management firm spanning financial advice and institutional portfolio management. He has extensive corporate governance experience, having served as a Director on listed corporate, not-for-profit, trustee and responsible entity boards since the 1990s. Peeyush is currently the Chair of Charter Hall Direct Property Management Limited and Long Wale REIT and a Non-Executive Director of National Australia Bank, Insurance & Care NSW (icare), SBS and Quintessence Labs Pty Ltd. He is also a member of the Western Sydney University Board of Trustees. Peeyush holds a Masters of Business Administration (Finance) from the Australian Graduate School of Management and has completed the Advanced Management Program at Harvard Business School. He is a Fellow of the Australian Institute of Company Directors. In January 2019, Peeyush was awarded a Member of the Order of Australia for significant service to business, and to the community, through his governance and philanthropic roles. Anne McDonald was appointed a Non-Executive Director of the Company in 2016. She is a member of each of the Audit Committee and Human Resources and Remuneration Committee. Previously a partner at Ernst & Young for 15 years, Anne has over 35 years of business experience in finance, accounting, auditing, risk management and governance. She is an experienced director and has pursued a fulltime career as a Non-Executive Director since 2006. Anne is the Chair of Water New South Wales and a Non-Executive Director of St Vincent’s Health Australia Limited and Transport Asset Holding Entity of New South Wales. She was previously Chair of Specialty Fashion Group, and a Non-Executive Director of Spark Infrastructure Group, GPT Group and a number of other businesses. Anne is a Chartered Accountant, a graduate of the Australian Institute of Company Directors and holds a Bachelor of Economics from the University of Sydney. Andrew (Andy) Green, CBE Independent Non‑Executive Director Appointed 09.03.2018 Peeyush Gupta, AM Independent Non‑Executive Director Appointed 18.11.2016 Anne McDonald Independent Non‑Executive Director Appointed 15.07.2016 LINK GROUP | Annual Report 2021 77 SECTION01 Directors’ Report DIRECTORS AND COMPANY SECRETARIES (CONTINUED) DIRECTOR EXPERIENCE AND BACKGROUND Dr Sally Pitkin was appointed a Non-Executive Director of the Company in 2015. She is Chair of the Human Resources and Remuneration Committee and a member of the Risk Committee. Sally has 25 years of experience as a Non-Executive Director and board member across a wide range of industries in both private and public sectors, including listed companies, highly regulated industries, professional services and commercialisation of new technology. Sally is Chair of Super Retail Group Limited and a Non-Executive Director of The Star Entertainment Group Limited. She is a Fellow of the Australian Institute of Company Directors, and Chair of the Institute’s Corporate Governance Committee. Formerly a senior corporate partner at a national legal firm, Sally has extensive corporate and banking law experience. She holds a PhD in Governance from The University of Queensland and a Master and Bachelor of Laws from the Queensland University of Technology. Fiona Trafford-Walker was appointed a Non-Executive Director of the Company in 2015. She is Chair of the Audit Committee and a member of the Technology & Transformation Committee. Fiona was previously an Investment Director at Frontier Advisors (Frontier). She was the inaugural Managing Director at Frontier and held that role for 11 years until 2011 when she became the Director of Consulting until 2017. Fiona played a critical role in growing Frontier and has over 28 years of experience in advising institutional investors on investment and governance-related issues. Fiona is a Director of Perpetual Limited, Eclipx Group Limited, Prospa Group Ltd, and Chair of Prospa’s Audit and Risk committee. Fiona is also a Director of Victorian Funds Management Corporation. Fiona holds a Master of Finance from RMIT University and a Bachelor of Economics (with Honours) from James Cook University. Fiona is also a Graduate of the Australian Institute of Company Directors. John McMurtrie joined Link Group as Managing Director in 2002 and retired on 1 November 2020. John has over 40 years of business experience, more than 35 of which have been in the financial services industry, covering both the public and private sectors. John’s previous senior appointments include Executive General Manager of ASX’s Investors and Companies division and Chief Executive Officer of UBS Australia. He was previously Chair of Sydney Water Corporation and was the inaugural Chair of the National Electricity Code Administrator (NECA). John holds a Master of Economics and Bachelor of Economics (Hons) from the University of Adelaide. In January 2019, John was awarded a Member of the Order of Australia for significant service to the community through philanthropic initiatives, and to the finance industry. Sally Pitkin, AO Independent Non‑Executive Director Appointed 23.09.2015 Fiona Trafford‑Walker Independent Non‑Executive Director Appointed 23.09.2015 John McMurtrie, AM Managing Director Appointed 16.02.2007 Retired 01.11.2020 78 SECTION01 Directors’ Report DIRECTORS AND COMPANY SECRETARIES (CONTINUED) Company Secretaries Sarah Turner joined Link Group in February 2021 as General Counsel and Company Secretary and was appointed as Joint Company Secretary on 23 February 2021. Sarah has over 20 years’ experience in global leadership, company secretarial and legal services in Australia and the UK in industries including healthcare and technology as well as in private legal practice. Prior to Link Group, Sarah was most recently General Counsel & Company Secretary at REA Group Ltd, a global digital media company operating leading property websites in Australia, Asia and the US. Sarah was a member of the REA Executive Leadership Team and managed the global legal team. Sarah holds a Bachelor of Laws (Hons), a Bachelor of Arts, a Graduate Diploma in Applied Corporate Governance and is a graduate of the AICD Company Directors Course (GAICD) and a Fellow of the Governance Institute of Australia (FGIA, FCG). Emma Lawler was appointed Joint Company Secretary on 13 May 2019. Emma has more than 20 years’ corporate governance and company secretarial experience in public and private, listed and unlisted entities. Emma’s previous role was Senior Governance Consultant with Company Matters Pty Limited. Emma’s roles prior to joining Company Matters in 2008, included Head of Strategy & Consolidation Risk Solutions, BT Financial Group, Company Secretary at Westpac Banking Corporation and Company Secretary for the former NSW State Rail Authority. Emma holds a Bachelor of Business from the University of Technology and a Graduate Diploma of Applied Corporate Governance. Emma is also a Fellow of the Governance Institute of Australia. Janine Rolfe resigned as Company Secretary on 5 August 2020. In 2006, Janine established Company Matters Pty Limited, a wholly owned subsidiary of Link Group, a leading governance and company secretarial service consultancy. Prior to this, Janine was a company secretary and legal counsel at Qantas Airways Limited and before that a solicitor at Mallesons Stephen Jaques (now King & Wood Mallesons). Janine holds a Bachelor of Economics and a Bachelor of Laws (Hons) from the University of Sydney. Directors’ Meetings The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the Directors of the Company during the financial year are: BOARD – SCHEDULED BOARD – UNSCHEDULED RISK AUDIT COMMITTEE 1 HUMAN RESOURCES AND REMU‑ NERATION TECHNOL‑ OGY AND TRANSFOR‑ MATION NOMINATION SPECIAL PURPOSE M Carapiet 1 V Bhatia 2 G Boreham A Green P Gupta A McDonald S Pitkin F Trafford- Walker J McMurtrie 2 H 10 6 10 10 10 10 10 10 4 A 10 6 10 10 10 10 10 10 4 H 12 8 12 12 12 12 12 12 4 A 12 8 11 11 11 11 11 12 4 H 4 – – 4 4 – 4 – – A 4 3* 4* 4 4 4* 3 4* 1* H 4 – – – 4 4 – 4 – A 4 3* 3* 4* 4 4 3* 4 1* H 7 – 7 – – 7 7 – – A 6 5* 7 5* 4* 7 7 7* 2* H 3 – 3 3 – – – 3 – A 3 1* 3 3 3* 3* 3* 3 2* H 1 1 1 1 1 1 1 1 – A 1 1 1 1 1 1 1 1 – A MEMBER A OBSERVER H 27 1 24 22 – 2 27 1 22 19 – 2 22 17 – 1 – 1 – 23* – – 19* 22* – 22* 1* H Number of meetings held during the period in which the Director or Committee Member was appointed to the Board or Committee. A Number of meetings attended by the Director. All Directors are entitled to attend Committee meetings in an ex-officio capacity and attendance in an ex-officio capacity has been noted with an asterisk (*). The Managing Director, John McMurtrie is a Member of the Nomination Committee but is not a Member of any other Committee given he is an Executive Director. The Board also convenes Special Purpose Committee meetings from time to time as may be required. 1 Michael Carapiet is an ex-officio member of each of the Board Committees and a member of the Nominations Committee. 2 John McMurtrie retired on 1 November 2020 and Vivek Bhatia was appointed as a Director on 2 November 2020. LINK GROUP | Annual Report 2021 79 SECTION01 Directors’ Report EXECUTIVE KEY MANAGEMENT PERSONNEL (KMP) The Executive KMP of the Company at any time during or since the end of the financial year are: CONTINUING EXECUTIVE KMP EXPERIENCE AND BACKGROUND Chris Addenbrooke was appointed as Global Chief Executive Officer of Fund Solutions in July 2019. Prior to this Chris was CEO of the fund solutions business having joined Link Group in November 2017 when Capita Asset Services was acquired by Link Group from Capita plc. Previous positions include Technical Director of BWD Rensburg (now part of Franklin Templeton) from 1987 to 2001. In 1988 Chris formed both Northern Registrars and Northern Administration and was Managing Director until 2003. Following the acquisition of Northern Administration and Northern Registrars by Capita, Chris was appointed CEO of Capita Registrars. Chris has over 30 years in financial services, operations, IT, transfer agency, registration and fund governance, having joined the Water Authorities Superannuation Fund in 1979. Chris represents Link Group on a number of industry committees including the UK Markets Advisory Group and the TA Forum. Antoinette Dunne was appointed Chief Executive Officer of Banking & Credit Management on 1 June 2021. Antoinette joined Link Group in November 2017 when Capita Asset Services was acquired by Link Group. She was CEO and Executive Director of the BCMGlobal Irish and Italian businesses and has over 30 years’ experience in financial services working in Ireland, UK and Australia. Prior to joining Capita, Antoinette ran her own financial services consultancy business, was Head of Halifax Retail Bank in Ireland and Head of Bank of Scotland Mortgage, Asset Finance and Consumer Lending Businesses in Ireland. Antoinette is a Chartered Director (CDir) and a Fellow Member of Association of Chartered Certified Accountants (FCCA). Paul Gardiner was appointed Chief Executive Officer of Corporate Markets in May 2021. Prior to that appointment, Paul was Chief Technology & Operations Officer since 2019. Paul joined Link Group in 2006 when Orient Capital was acquired by Link Group from ASX Limited. His previous roles include Chief Technology & Operations Officer, and CEO of both Corporate Markets and Technology & Innovation. Paul has over 20 years’ experience in financial services, technology, operations, and data analytics, having joined Orient Capital in 2001. Paul holds a Bachelor of Commerce and a Higher Diploma in Marketing Practice from the National University of Ireland, Galway and a Masters of Business Studies (Management Information Systems) from University College, Dublin. Chris Addenbrooke Chief Executive Officer, Fund Solutions Antoinette Dunne Chief Executive Officer, Banking & Credit Management Paul Gardiner Chief Executive Officer, Corporate Markets 80 SECTION01 Directors’ Report EXECUTIVE KEY MANAGEMENT PERSONNEL (KMP) (CONTINUED) CONTINUING EXECUTIVE KMP EXPERIENCE AND BACKGROUND Andrew MacLachlan was appointed Chief Financial Officer on 1 January 2019. Andrew joined Link Group in 2009 and was Deputy Chief Financial Officer from 2013 to 2018. Andrew has over 25 years’ of experience in Finance and Accounting. His previous roles include Chief Financial Officer at Fero Group Pty Limited, Chief Financial Officer at Evans and Tate Limited and various roles at Singtel Optus and KPMG. Andrew is a member of Chartered Accountants Australia and New Zealand and holds a Bachelor of Economics (Accounting and Finance) from Macquarie University. Andrew MacLachlan Chief Financial Officer Dee McGrath Chief Executive Officer, Retirement & Superannuation Solutions Dee McGrath joined Link Group as Chief Executive Officer of Retirement & Superannuation Solutions in May 2019. Dee has over 20 years’ of experience in the financial services and technology industry. Dee’s previous senior appointments include National Australia Bank, Visa and HP, and prior to joining Link Group was Managing Partner, Global Business Services at IBM. Dee was a Member of the Board of IBM Australia, Bluewolf Australia and Oniqua Holdings. Dee‘s qualifications include business studies, economics and strategic planning and is currently a member of Chief Executive Women. LINK GROUP | Annual Report 2021 81 SECTION01 Directors’ Report EXECUTIVE KEY MANAGEMENT PERSONNEL (KMP) (CONTINUED) EXECUTIVES THAT CEASED TO BE KMP EXPERIENCE AND BACKGROUND John McMurtrie, AM Managing Director See Directors section for more detail. Robbie Hughes was the Chief Executive Officer of Banking & Credit Management until 3 March 2021. Robbie joined Link Group in November 2017 when Capita Asset Services was acquired by Link Group from Capita plc. Robbie has over 30 years’ experience in the financial services industry, which began in the pensions industry before moving to banking. His previous roles include Managing Director at Capmark Services, which was acquired by Capita PLC in 2009, where his focus was on growth through international expansion and acquisitions. He also held senior positions at GMAC Commercial Mortgage Europe, and Bank of Ireland. Robbie holds a Master of Business Administration from Dublin City University. Robbie Hughes Chief Executive Officer, Banking & Credit Management Lysa McKenna was appointed Co-Chief Executive Officer of Corporate Markets in January 2020 and held the position until 30 April 2021. Lysa remains an employee of Link Group and was subsequently appointed CEO, Corporate Markets APAC. Lysa joined Link Group in 2006 and was Chief Executive Officer of Link Market Services from 2017 to 2019, before taking overall responsibility of Corporate Markets, Asia Pacific in 2019. Lysa has over 20 years’ experience in the financial services industry, including positions at Computershare, Doyle Pension Management and Mercer. Lysa McKenna Co‑Chief Executive Officer, Corporate Markets Lysa is a Qualified Financial Advisor (QFA) and Fellow of the Life Insurance Association of Ireland, and a graduate of the Australian Institute of Company Directors (AICD). Lysa holds a Bachelor of Social Sciences, Politics and Social Policy and a Higher Diploma in Business Studies, from University College Dublin. Susan Ring was appointed Co-Chief Executive Officer of Corporate Markets in January 2020 and held the position until 30 April 2021. Susan joined Link Group in November 2018. Her entire career has been in the financial services industry, with over 25 years’ experience across insurance, pensions, and employee benefits. Her previous roles include Chief Executive Officer at Capita Employee Solutions and Unum Limited. Susan holds a BA (Hons) Degree and is professionally qualified as a Chartered Director, a Fellow of the Institute of Directors and also Pensions Management Institute. Susan Ring Co‑Chief Executive Officer, Corporate Markets 82 SECTION01 Directors’ Report PRINCIPAL ACTIVITIES Link Group’s principal activities during the course of the financial year were connecting people with their assets – safely, securely and responsibly. Link Group administers financial ownership data and drives user engagement, analysis and insight through technology. We deliver complete solutions for companies, large asset owners and trustees across the globe. Our commitment to market-leading client solutions is underpinned by our investment in people, processes and technology. There were no significant changes in the nature of the activities of Link Group during the year. DIVIDENDS Dividends paid by the Company during the financial year were: CENTS PER SHARE TOTAL AMOUNT FRANKED/UNFRANKED DATE OF PAYMENT Final 2020 Interim 2021 3.5 4.5 $18,561,496 $24,072,877 50% franked 60% franked 25.09.2020 09.04.2021 In addition, dividends approved or paid by the Company since the end of the financial year were $29,492,439, which equates to 5.5 cents per share, 100% franked. The record date for determining entitlements to the final dividend is 1 September 2021. Payment of the final dividend will occur on 20 October 2021. The Link Group Dividend Reinvestment Plan (DRP) will operate in respect of the 2021 final dividend. The DRP election deadline is 2 September 2021. REVIEW OF OPERATIONS The net loss after tax of Link Group for the financial year was $162.7 million (2020: net loss after tax of $102.5 million 1). Operating EBIT, which excludes certain significant items and acquired amortisation, for the financial year ended 30 June 2021 was $141.4 million (2020: $179.7 million). A reconciliation of Operating EBIT to the net profit of Link Group is included in Note 4 to the financial statements and further explanation of the results is included in the Operating and Financial Review section within this report. Operating NPATA, which excludes certain significant items and acquired amortisation, for the financial year ended 30 June 2021 was $113.2 million (2020: $137.6 million 1). Notwithstanding the net loss after tax, Link Group showed resilience in response to the challenges brought on by the COVID-19 pandemic across all global markets. During this period, Link Group maintained a focus on safeguarding the well-being of employees, as well as ensuring continuity of service for clients as outlined in the Operating and Financial Review. Further information about the results is included in the Full Year Results Presentation and can be obtained via the ASX website or by visiting the Link Group website at www.linkgroup.com. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. LINK GROUP | Annual Report 2021 83 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW 1. SUMMARY Revenue Operating EBIT Operating NPATA $1,160m $141m $113m 6% from FY2020 21% from FY2020 18% from FY2020 Statutory Loss after tax ($163m) Basic earnings per share (30.8)cps Net operating Cash Flow Conversion 114% 59% from FY2020 56% from FY2020 6% from FY2020 2. BASIS OF PREPARATION This OFR 1,2,3 is designed to assist shareholders’ understanding of Link Group’s business performance and the factors underlying our financial results and financial position. It complements the financial disclosures in the Financial Statements. The OFR covers the period from 1 July 2020 to 30 June 2021 (FY2021), including a comparative prior year (FY2020). A full reconciliation of the adjustments made to the statutory results is disclosed in more detail in section 5 (b). Consistent with previous disclosures, Link Group uses certain measures to manage and report on the business that are not recognised under Australian Accounting Standards or International Financial Reporting Standards (IFRS), collectively referred to as ‘non-IFRS financial measures’. These non-IFRS financial measures are summarised in Appendix 1 of this OFR. Given the extent of Significant items in the current and prior year statutory results, the Directors believe it will assist the readers’ understanding of performance to compare year-on-year results on an Operating before Significant items basis. Therefore, unless otherwise stated, all of the analysis is presented on an Operating basis, with reconciliation back to statutory results provided in section 5 (b). 1 All financial amounts contained in this OFR are expressed in Australian Dollars and rounded to the nearest $0.1 million, unless otherwise stated. Some numerical figures included have been subject to rounding adjustments. Any discrepancies between totals and sums of components in figures or tables contained in this OFR are due to rounding. 2 All prior year comparatives have been restated to reflect Link Group’s new segment reporting structure, specifically, reflecting 4 global business units 3 together with its strategic interest in PEXA, after dissolving the Technology and Operations business unit. Following a review by PEXA of the previous tax treatment of unrecognised losses, tax losses have now been recognised on the balance sheet of PEXA at the time of acquisition (January 2019) and in the subsequent FY2019, FY2020 and 1H FY2021 periods. This restatement was reflected in the PEXA Prospectus (released 14 June 2021) and revised PEXA statutory financial statements for FY2019 and FY2020 (re-issued on 21 May 2021). As a result, Link Group is also required to restate the previously disclosed equity accounted share of PEXA operating and statutory profit and loss for these periods. 84 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) 3. OVERVIEW OF RESULTS FY2021 was a year of challenge and change for Link Group, during which we have shown resilience in the face of the COVID-19 pandemic and continued to make progress on our Global Transformation program, whilst also simplifying the business by reorganising segment reporting to reflect 4 global Business Units and our strategic interest in PEXA. Link Group believes that this reorganisation along global business lines with clearly defined strategic priorities and growth opportunities will provide greater transparency of performance. In addition, the successful IPO of PEXA in July 2021 now provides full valuation transparency for investors in respect of this important equity accounted investment 1. Whilst the ongoing COVID-19 pandemic continues to impact Non-Recurring Revenues through lower interest rates and ongoing market uncertainty, lower operating financial measures compared to FY2020 also reflect: • normalisation of project revenue following elevated levels of regulatory change in FY2020 (PYS, PMIF and ERS) 2 in Retirement and Superannuation Solutions (RSS); • portfolio run-off and lack of new business opportunities in Banking and Credit Management (BCM); • impact of fund consolidation and reduced new fund inflows and launches in Fund Solutions (FS); and • sale of Link Market Services (South Africa) in October 2020 resulting in only a part-year contribution, thereby impacting Corporate Markets (CM). The net loss after tax of Link Group for FY2021 was $162.7 million, which was behind FY2020’s net loss of $102.5 million. This statutory loss resulted from an impairment charge of $182.8 million (comprised of $173.1 million in goodwill impairment and $9.7 million in software asset impairment) in respect of the BCM segment, which is experiencing challenging market conditions, particularly in relation to the non-performing loan market in Ireland, Italy, and the UK. Link Group continued to show resilience in response to the challenges brought on by the COVID-19 pandemic across all global markets. During this period, we maintained a focus on safeguarding the well-being of employees, as well as ensuring the continuity of service for clients. Link Group was aided by several factors including, but not limited to: • Continued investment in new technology and products to enable better servicing of our clients; • A resilient earnings profile supporting operating cash flow, with approximately 85% of revenue being recurring in nature, however, some business units saw market volatility impacting Non-Recurring Revenue; • Additional initiatives were implemented to reduce costs and support operating cash flow; • A strong liquidity position supported by cash reserves and committed, undrawn debt facilities; and • Debt serviceability and leverage remained comfortably within existing bank covenants. 1 At the IPO issue price of $17.13 per share, the market value of Link Group’s equity interest in PEXA is ~$1.3 billion at 30 June 2021. 2 Regulatory changes include ‘Protecting Your Super’ (PYS) legislation, ‘Putting Members’ Interests First’ (PMIF) legislation and ‘Early Release of Superannuation’ legislation (ERS). LINK GROUP | Annual Report 2021 85 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Link Group’s revenue by geographic region (as illustrated below in Figure 1) reflects our position as a global business with revenue derived from outside Australia and New Zealand (ANZ) at 43% compared to 45% in FY2020. Figure 1: External revenue by region External Revenue by Region FY2021 FY2020 (cid:31) ANZ 56.9% (cid:31) UK & Channel Islands 26.3% (cid:31) Ireland 9.9% (cid:31) Other overseas 6.9% (cid:31) ANZ 55.5% (cid:31) UK & Channel Islands 27.0% (cid:31) Ireland 11.0% (cid:31) Other overseas 7.0% 86 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) 4. STRATEGY FY2021 DOING WHAT WE SAID WE WOULD DO Simplify Deliver Grow • Secured all major RSS • • See through valuation of PEXA through an IPO • Business unit realignment and simplified financial reporting, for improved accountability and transparency • Link Market Services (South Africa) divestment completed • Withdrew from the acquisition of Pepper European Servicing (PES) client renewals • On market buyback of up to $150.0 million announced • Delivered 10.0 cps total full year dividend (82% franked) • $42 million of gross annualised savings delivered from Global Transformation to 30 June 2021 • Launched innovative technology solutions for clients in challenging environment (e.g. ERS response and virtual AGMs) • Improved cash conversion to 114% Increased cross sell & broadening of services provided to clients (e.g. Hostplus Service Excellence Centre, virtual AGMs) • Expansion into new markets – Fund Solutions in Luxemburg, the largest European investor fund centre and RSS in the growing UK pension market LINK GROUP | Annual Report 2021 87 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) 5. SOLID FINANCIAL RESULTS AND PLATFORM FOR FURTHER GROWTH Link Group delivered a satisfactory overall financial performance despite the challenging year in which we continued to experience some adverse economic impacts from the COVID-19 pandemic. The Retirement and Superannuation Solutions division continued to show strong underlying member growth, whilst the Corporate Markets division effectively responded to the ongoing global demand for virtual meetings. In addition, we continued to win new annuity business in Corporate Markets and Fund Solutions and we delivered savings of $23 million from the Global Transformation Program in FY2021. We have also maintained a prudent financial position. The financial year ended with comfortable leverage (below our guidance range of 2.0–3.0 times), substantial debt service capacity and high levels of cash-flow generation. Consistent with our stated objectives and the needs of the market and client base, Link Group continued to invest in our technology platforms and product and service innovation during FY2021. Table 1 below contains an overview of Link Group’s financial results. Table 1: Statutory & Operating Financial Results Statutory Results Revenue IN $M (Loss)/profit before tax Statutory NPAT Earnings per share (cents) Operating Results Operating EBITDA EBITDA after significant items Operating EBIT NPATA Operating NPATA Operating Earnings per share (cents) FY2021 FY2020 1,160.3 1,230.4 (141.5) (162.7) (30.8) 256.6 208.0 141.4 (108.8) 113.2 21.3 (90.0) (102.5) (19.7) 293.8 246.3 179.7 (42.9) 137.6 25.9 VARIANCE (%) (6) 57 59 56 (13) (16) (21) 154 (18) (18) (a) Statutory NPAT Statutory Net Profit after Tax (Statutory NPAT) reflected a loss of $162.7 million compared to a prior year Statutory NPAT loss of $102.5 million. The lower Statutory NPAT result in FY2021 reflects: • • recognition of an impairment charge relating to Banking and Credit Management; and lower Operating EBIT contribution from all Business Units; partially offset by: • net gain on assets held at fair value; • profit on disposal of LMS South Africa; • lower net finance expense from interest income on the PEXA shareholder loan and lower interest rates; and • an equity accounted profit after tax relating to the stronger operating result of Torrens Group Holdings Pty Ltd (PEXA’s parent entity) as it grew revenue and underlying earnings substantially during the year. 88 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) (b) Operating NPATA Link Group considers Operating NPATA to be a meaningful measure of after-tax profit as it excludes the impact of Significant items (including the impairment loss and fair value gain) and the large amount of non-cash amortisation of acquired intangibles reflected in NPAT. The measure includes the tax-effected depreciation and amortisation expense relating to all capital expenditure and the original cost of acquired software that is integral to the ongoing operating performance of the business. Operating NPATA of $113.2 million was down 18% on the prior year result of $137.6 million reflecting: • lower Operating EBIT performance in all Business Units; and • higher income tax expense; partially offset by: • an equity accounted profit after tax relating to the stronger operating result of Torrens Group Holdings Pty Ltd (PEXA’s parent entity) as it grew revenue and underlying earnings substantially during the year; and • lower interest expense. Figure 2 below provides a reconciliation of Operating NPATA to Statutory NPAT. Figure 2: Statutory & Operating Financial Results 1,2 113.2 -39.2 M $ D U A -182.8 -108.8 -102.5 -53.9 -162.7 Operating NPATA Significant Items (other) after tax Impairment NPATA Acquired amortisation after tax Statutory NPAT (FY 2021) Statutory NPAT (FY 2020) (c) Financial Performance by Division Link Group’s Operating EBIT result was $141.4 million, which was down 21% on the prior year result of $179.7 million. Operating EBIT margins of 12.2% compared to 14.6% in FY2020 reflects the impact of a changing revenue mix (i.e. lower levels of higher margin Non-Recurring Revenue) resulting from lower interest rates and temporary market uncertainty (impacting new NPL loan portfolios and fund launches) driven by the COVID-19 pandemic, combined with higher staff costs reflecting reinstated incentives, annual leave timing and the special equity grant, partly offset with cost-saving initiatives implemented in response to the pandemic and savings from the Global Transformation program. Excluding the impact of net increases to staff costs highlighted above (i.e. reinstated incentives, annual leave timing and the special equity grant partly offset by savings from temporary salary reductions), FY2021 Operating EBIT would have been only 2% lower than FY2020. 1 2 ‘Significant Items (other) after tax’ includes significant items both above and below the EBITDA line. This reconciliation reflects significant items after tax. Note Table 7 reflects significant items before tax. LINK GROUP | Annual Report 2021 89 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Table 2 below provides a summary of revenue and Operating EBIT by reporting segment. Table 2: FY2021 Revenue and Operating EBIT by reporting segment IN $M Revenue Retirement and Superannuation Solutions Corporate Markets Fund Solutions Banking and Credit Management Gross Revenue Eliminations Total Revenue Recurring Revenue % IN $M Operating EBIT Retirement and Superannuation Solutions Corporate Markets Fund Solutions Banking and Credit Management Head Office Total Operating EBIT Operating EBIT margin % FY2021 FY2020 VARIANCE (%) % of Gross Revenue Retirement & Superannuation Solutions Corporate Markets Fund Solutions Banking & Credit Management 43% 31% 14% 12% 506.9 364.9 170.5 141.1 529.4 387.1 173.0 165.7 1,183.4 1,255.1 (23.0) (24.7) 1,160.3 1,230.4 85% 83% (4) (6) (1) (15) (6) (7) (6) FY2021 FY2020 VARIANCE (%) 96.0 54.2 15.7 (12.1) (12.4) 141.5 12% 96.3 71.9 20.3 6.7 (15.5) 179.7 15% (0) (25) (23) (281) (20) (21) Retirement and Superannuation Solutions Retirement and Superannuation Solutions revenue decreased 4% year-on-year to $506.9 million resulting from a reduction in both Recurring Revenue and Non-Recurring Revenue. Operating EBIT was $96.0 million, which was $0.3 million or 0.2% lower than the prior year. The decrease on the prior year largely reflects the reduced levels of legislative change activity, impacting levels of fee for service revenue, the part year impact of client exits and the in-year revenue impact from PYS and client discounts, together with the normalisation of fee for service revenue following the conclusion of regulatory change programs (PYS, ERS and PMIF). Table 3: Retirement and Superannuation Solutions Revenue, Operating EBITDA and Operating EBIT IN $M Revenue Operating Expenses Operating EBITDA Depreciation & Amortisation Operating EBIT Recurring Revenue % Operating EBITDA margin % Operating EBIT margin % 90 FY2021 FY2020 VARIANCE (%) (4) (5) (2) (7) (0) 506.9 (364.5) 142.4 (46.3) 96.0 90% 28% 19% 529.4 (383.5) 145.9 (49.6) 96.3 87% 28% 18% SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Recurring Revenue of $454.1 million (or 89.6% of the total revenue) was down $4.5 million or 1% on the prior year. Recurring Revenue performance can be attributed mainly to the following factors: • part year impact of some client exits; • • revenue impact of the PYS legislation on member numbers; and impact of client discounts partly offset by: • underlying member (excl. ERFs) growth of 6.5% 1; • winning delivery of Hostplus client contact centre; • • indexation-linked price increases; and full year impact of UK pensions business. Non-Recurring Revenue of $52.8 million represents 10.4% of total Retirement and Superannuation Solutions revenue, and it decreased by 25% compared to the prior year largely resulting from higher legislative change activity in FY2020. Fee-for-service revenue projects completed during FY2021 included significant regulatory and legislative change programs particularly related to Early Release of Superannuation scheme, insurance changes and ‘Supermatch’ program. Corporate Markets During FY2021, Corporate Markets revenue was $364.9 million. That was 6% lower than the prior year mainly reflecting a reduction in Non-Recurring Revenue activity, coupled with the disposal of Link Market Services (LMS) South Africa. Operating EBIT decreased to $54.2 million, which was $17.7 million or 25% down on the previous year, due to the impact of reduced levels of higher margin Non-Recurring Revenue, continued pricing pressure in core registry services across all jurisdictions, partly offset by lower operating costs. Table 4: Corporate Markets Revenue, Operating EBITDA and Operating EBIT IN $M Revenue Operating Expenses Operating EBITDA Depreciation & Amortisation Operating EBIT Recurring Revenue % Operating EBITDA margin % Operating EBIT margin % FY2021 FY2020 VARIANCE (%) (6) (2) (15) 4 (25) 364.9 (275.4) 89.5 (35.3) 54.2 74% 25% 15% 387.1 (281.3) 105.8 (33.8) 71.9 72% 27% 19% Recurring Revenue of $270.8 million was $8.2 million behind prior year but increasing as a proportion of Total Revenue to 74%. The Recurring Revenue performance can be attributed mainly to the following factors: • disposal of LMS South Africa on 1 November 2020; • lower print and mail volumes; and • continued competitive fee pressure. partly offset by: • solid organic growth within our client base of ~5% in our major regions; • cross-selling of value-added services; and • strong overall client retention of >94%; Non-Recurring Revenue decreased to $94.2 million, which is a $14.0 million reduction on the previous year, reflecting lower levels of margin income, share dealing and investor relations support services, mainly due to the impact of COVID-19. 1 Underlying members assumes the full impact of PYS and ERS member losses is reflected in June 2020. LINK GROUP | Annual Report 2021 91 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Fund Solutions Fund Solutions has performed well under challenging circumstances in FY2021, as global equity markets make a steady recovery following the initial pandemic-related drop during FY2020. Fund Solutions’ Operating EBIT for the period was $15.7 million with a margin of 9%, which was down $4.6 million on the prior year result. The decrease in Operating EBIT compared to prior year largely reflects the adverse impact of several contract renegotiations and planned client exits. Net new money flows were also down as a result of economic uncertainty and weaker investor sentiment. Table 5 Fund Solutions Revenue, Operating EBITDA and Operating EBIT IN $M Revenue Operating Expenses Operating EBITDA Depreciation & Amortisation Operating EBIT Recurring Revenue % Operating EBITDA margin % Operating EBIT margin % FY2021 FY2020 VARIANCE (%) (1) 0 (10) 13 (23) 170.5 (142.3) 28.2 (12.5) 15.7 92% 17% 9% 173.0 (141.6) 31.3 (11.0) 20.3 92% 18% 12% Recurring revenue, reflecting 92% of total revenue, was down 2% on prior year, mainly attributable to a lower average basis points earned on assets under management (AuM) in the UK and Ireland. This can be attributed mainly to the following factors: • fewer sub-funds across the UK and Ireland following a number of client exits and contract renegotiations; and • sub-fund wind ups which broadly reflects the cessation of funds with sub-optimal Net Asset Value sizes; partly offset by: • additional sub-funds launched for new and existing clients, including Local Government Pension Schemes. Total EMEA assets under management and administration at 30 June 2021 amounted to £118.8 billion (up from £102.5 billion in the prior year) and reflect Fund Solutions’ position as a leading independent authorised fund manager in the UK based on market share. 92 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Banking and Credit Management During FY2021, Banking and Credit Management revenue was $141.1 million, reflecting a 15% reduction on the prior year. Operating EBIT for the period was ($12.1) million with a margin of (9%), which is down on the prior year. The decrease in Operating EBIT compared to prior year reflects the lower revenue result coupled with higher depreciation and amortisation charges, including client migration related amortisation. Table 6: Banking and Credit Management Revenue, Operating EBITDA and Operating EBIT IN $M Revenue Operating Expenses Operating EBITDA Depreciation & Amortisation Operating EBIT Recurring Revenue % Operating EBITDA margin % Operating EBIT margin % FY2021 FY2020 VARIANCE (%) (15) (6) (73) 17 (281) 141.1 (135.2) 5.9 (18.0) (12.1) 86% 4% (9%) 165.7 (143.5) 22.1 (15.4) 6.7 89% 13% 4% Banking and Credit Management revenue of $141.4 million was down 15% from $165.7 million in the prior year due to: • • lower revenue in the UK and Ireland mostly as a result of portfolio run-off and client losses; impact of COVID-19 pandemic-related market volatility and significant government stimulus programs on the NPL new business pipeline; partly offset by: • continued growth in origination revenue in the Netherlands and Ireland. Assets under administration at 30 June 2021 amounted to $114.7 billion (down from $131.9 billion in the prior year). LINK GROUP | Annual Report 2021 93 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) (d) Significant items Total Significant items expense of $275.9 million was higher than the prior year expense of $240.1 million. The table below reflects the impact of significant items on each line item. Table 7: Summary of Significant Items IN $M Significant Items/One‑off costs Business Combinations Costs Global Transformation Program Global RSS Tender Costs Total Significant Items (impacting EBITDA) Depreciation and amortisation Acquired amortisation Impairment of Intangibles Total Significant Items (impacting EBIT) Net finance expense Gain/(Loss) on Assets Held at Fair Value Gain on Disposal of Subsidiary Loss from Equity Accounted Investments 2 Total Significant Items (impacting NPBT) Tax benefit/(expense) Total Significant Items (impacting NPAT) 1 2 ‘nmf’ denotes a variance that is not meaningful. The market value of Link Group’s holding in PEXA is ~$1.3 billion. FY2021 FY2020 VARIANCE (%) (21.5) (27.2) 0.0 (48.6) (1.6) (46.9) (182.8) (279.9) (0.2) 2.6 15.3 (26.5) (288.6) 12.7 (275.9) (13.6) (31.3) (2.6) (47.5) (5.3) (52.9) (107.8) (213.4) (1.8) (23.0) 0.0 (17.2) (255.3) 15.2 (240.1) 58 (13) (100) 2 (70) (11) 70 31 (90) (111) nmf 1 55 13 (16) 15 The increase in Significant items impacting EBITDA was largely due to higher business combination/acquisition and divestment costs of $21.5 million. FY2021 business combination costs includes those associated with the responding to the PEP/Carlyle and SS&C proposals, the terminated PES acquisition, exploration of a PEXA de-merger/trade sale, and the successful PEXA IPO. The Group recognised an increased impairment expense impacting EBIT in FY2021, with a charge of $182.8 million related to the Banking and Credit Management Cash Generating Unit, comprised of $173.1 million in goodwill impairment and $9.7 million in software asset impairment. The value in use has reduced from prior periods following a reduction in forecast cash flows, primarily due to lower levels of non-performing loan books expected to come to market in the forecast period, following the economic impact and government responses to the COVID-19 pandemic. Additional significant items impacting NPBT in FY2021 include a $15.3 million gain recognised on disposal of LMS South Africa, a $17.1 million fair value loss on the Leveris investment, a $19.7 million fair value gain on the SMART Pension investment, and PEXA significant items. The fair value loss on Leveris reflects the full write-down of the investment following the Board of Directors of Leveris resolving to cease trading and proceed with a non-court liquidation. The income tax benefit reflects the tax effect of the above items. 94 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) (e) Other expenses below EBITDA Table 8: Other Expenses Below EBITDA IN $M EBITDA after Significant Items Depreciation and Amortisation EBITA Acquired Amortisation Impairment of Intangibles EBIT Net Finance Expense Gain/(Loss) on Assets Held at Fair Value Gain on Disposal of Subsidiary Profit/(Loss) from Equity Accounted Investments NPBT Tax Expense NPAT Add Back Acquired Amortisation and Impairment of Intangibles NPATA Add Back Significant Items After Tax Operating NPATA FY2021 FY2020 VARIANCE (%) 208.0 (116.7) 91.2 (46.9) (182.8) (138.4) (24.0) 3.6 15.3 1.9 (141.5) (21.2) (162.7) 53.9 (108.8) 221.9 113.2 246.3 (119.3) 127.0 (52.9) (107.8) (33.7) (33.2) (23.2) 0.0 (0.0) (90.0) (12.5) (102.5) 59.6 (42.9) 180.5 137.6 (16) (2) (28) (11) 70 311 (28) (116) nmf nmf 57 70 59 (10) 154 23 (18) Depreciation and Amortisation Depreciation and amortisation expense decreased by 2% to $116.7 million compared with the prior year largely due to lower amortisation on right of use assets, due to the ongoing consolidation of global premises. Acquired amortisation reflects the amortisation of client lists and the revaluation impact of acquired intangible assets resulting from business combinations. Acquired amortisation decreased by 11% to $46.9 million compared with the prior year. This reflected assets from prior years’ acquisitions reaching the end of their useful lives in FY2020 and FY2021. Net Finance Expense Net finance expense of $24.0 million is lower by $9.2 million on the previous year’s net finance expense largely reflecting the interest income received on PEXA shareholder loans, and lower interest expense benefiting from lower interest rates. Gain/(Loss) on Assets Held at Fair Value Gain on assets held at fair value increased to $3.6 million, reflecting a fair value gain on the SMART Pension investment, net of a fair value loss on the Leveris investment. Gain on Disposal of Subsidiary Gain on disposal of subsidiary of $15.3 million reflected the gain on disposal of LMS South Africa. Profit/(Loss) from Equity Accounted Investments Profit from equity accounted investments increased to $1.9 million, reflecting Link Group’s share of the stronger operating result of Torrens Group Holdings Pty Ltd (PEXA’s parent entity). Tax Expense The effective tax rate of (15%) is reflective of non-taxable items such as the impairment expense, gain on disposal and fair value adjustments. LINK GROUP | Annual Report 2021 95 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) 6. SOLID BALANCE SHEET AND CASH FLOW CONVERSION Link Group maintained a solid balance sheet in FY2021 with a moderate level of gearing (23.9% 1) as at 30 June 2021. The business generates high levels of cash while also maintaining a substantial ongoing investment in enhancing our proprietary systems and in new products and services. (a) Balance Sheet The cash balance of $395.0 million as at 30 June 2021 reflects $200 million of cash proceeds received on 30 June 2021 as a partial repayment of PEXA shareholder loans, prior to the PEXA IPO listing on 1 July 2021. Of the PEXA proceeds, $20.0 million was subsequently used to purchase shares in the IPO as part of the cornerstone commitment, with the remainder to be applied to debt repayments. Table 9: Summary Balance Sheet IN $M Assets Cash Trade & Other Receivables Other Current Assets Total Current Assets Deferred Tax Asset Other Non Current Assets Total Non Current Assets TOTAL ASSETS Liabilities Trade & Other Payables Interest Bearing Liabilities Other Current Liabilities Total Current Liabilities Interest Bearing Liabilities Deferred Tax Liability Other Non Current Liabilities Total Non Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed Equity Reserves Retained Earnings Non-Controlling Interest TOTAL EQUITY 1 Gearing ratio calculated as Senior Debt/(Market Capitalisation + Senior Debt). 96 AS AT 30 JUNE FY2021 FY2020 395.0 235.4 908.9 264.1 238.9 675.6 1,539.3 1,178.6 65.3 2,672.2 2,737.4 4,276.8 340.6 31.0 956.7 1,328.3 56.5 3,118.4 3,174.9 4,353.5 275.2 35.9 678.6 989.7 1,037.0 1,227.0 120.7 51.2 1,208.9 2,537.2 1,739.6 142.5 62.1 1,431.6 2,421.2 1,932.2 1,917.7 1,889.7 (11.2) (167.8) 0.8 16.7 21.2 4.6 1,739.6 1,932.2 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Interest-bearing liabilities have decreased by $195.0 million compared with the prior year. This largely reflects the stabilisation of global liquidity conditions since the prior year, thereby allowing a reduction of operating cash holdings back to normal levels. This has assisted in reducing interest carry costs during FY2021. Total contributed equity increased to $1,917.7 million from $1,889.7 million in the prior year as a result of shares issued in relation to staff remuneration and the dividend reinvestment plan. (b) Cash flow Cash flow conversion continues to be a key focus of the business and Link Group achieved a strong operating cash conversion rate of 114%, up by 6% on the previous year. Table 10: Summary Pro Forma Cash Flow IN $M Operating EBITDA Changes in Fund Assets & Liabilities Changes in Working Capital Net Operating Cash Flow Cash Impact of Significant Items Tax Interest Net Cash Provided by Operating Activities Capital Expenditure Right of use asset payments Free Cash Flow (available for capital management) Other investing activities Dividends Paid Other financing Activities Net Increase/(decrease) in Cash FY2021 256.6 (0.8) 37.2 292.9 (36.3) (14.1) (27.6) 214.9 (41.1) (34.9) 139.0 210.9 (33.0) (183.5) 133.4 FY2020 293.8 (0.8) 25.6 318.6 (51.7) (44.7) (32.6) 189.6 (107.3) (29.8) 52.5 (87.0) (101.8) (149.6) (285.8) VARIANCE (%) (13) 6 45 (8) (30) (68) (15) 13 (62) 17 165 (343) (68) 23 (147) Net Operating Cash Flow Conversion 114% 108% Working capital movement of $37.2 million reflects strong trade and other receivables performance, favourable timing differences on investment manager invoices in the Fund Solutions business and staff cost accruals including annual leave provisions. Favourable movements were partially offset by lower provisions and trade and other creditors, which included settlement of delayed VAT payments in the UK (allowable in FY2020 as a COVID-19 cash conservation measure). Capital expenditure is a key driver of future productivity, product growth and cost efficiency. The business uses a benchmark of 3–5% of Link Group revenue to guide capital expenditure initiatives. In FY2021, capital expenditure was $41.1 million, representing 3.5% of revenue, slightly below our benchmark and down on FY2020 due to the non-recurrence of one-off premises related capital expenditure and cash conservation measures undertaken during the pandemic. LINK GROUP | Annual Report 2021 97 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) (c) Net debt The Net Debt/Operating EBITDA ratio has decreased to 1.8 times. This reflects the impact of a lower net debt, mostly arising from the $200.0 million partial repayment of PEXA shareholder loans and a strong cash flow performance during the year. The Operating EBITDA/net interest cost ratio has marginally decreased to 11.7 times, reflecting lower earnings for the year. As at 30 June 2021, Link Group had $612.0 million of undrawn committed facilities available. On 5 July 2021, Facility A was cancelled by Link Group, reducing the available undrawn committed facilities by $275.0 million. This level of cash and available facilities provides capacity for various growth activities in FY2022. Table 11: Summary of Net Debt IN $M Assets Cash Long Term Debt Net Debt Pro forma debt ratios Net Debt/Operating EBITDA 1 Operating EBITDA/Net Interest Costs 2 1 2 Leverage calculated in accordance with Link Group’s debt agreement. Interest cover calculated in accordance with Link Group’s debt agreement. FY2021 FY2020 (395.0) 849.6 454.6 (264.1) 1,014.5 750.4 1.8x 11.7x 2.7x 12.1x 98 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) 7. PRO-ACTIVE MANAGEMENT OF RISKS (a) Link’s risk management strategy This section introduces Link Group’s approach to identifying and managing risks, and for fostering a strong risk culture. Risk Management Framework (RMF) The RMF sets the strategic approach for risk management by defining standards, objectives and responsibilities for all areas of the Group. It is then approved by the Link Group Board on recommendation of the Chief Risk Officer. It supports management in effective risk management and developing a strong risk culture. The RMF sets out: • segregation of duties utilising a Three Lines of Defence model; • • • the identification, management and reporting of risks; risk appetite requirements, which define the types and level of risk the Group is willing to undertake in the pursuit of its business strategy; and roles and responsibilities for managing risk: The RMF sets out the accountabilities of the Divisional Chief Executives, as well as Link Group committees. The RMF is complemented by policies and procedures which are aligned to the Group’s key risks: • policies set out principles and requirements for the activities of the Group (‘what’ must be done); and • procedures describe how the requirements set out in the policy are met, and who needs to carry them out (‘how’ things should be done). Segregation of duties – the ‘Three Lines of Defence’ model The RMF sets out a clear Three Lines of Defence model which distinguishes the functional responsibilities of each line. All employees are responsible for understanding and managing risks within the context of their individual roles and responsibilities, as set out below: • first line comprises all employees engaged in the revenue generating and client-facing areas of the Group and all associated support functions, including Finance and Human Resources. The first line is responsible for identifying and managing the risks they generate, designing and testing the effectiveness of their controls and ensuring they meet their compliance obligations. • second line is comprised of the Risk and Compliance functions. The role of the second line is to establish the frameworks and policies to support the business in identifying and managing their risks as well as limits, under which first line activities shall be performed, consistent with the risk appetite of the Group. Risk also provides guidance, challenge and independent oversight of the first line. • third line of defence is Internal Audit, who are responsible for providing independent assurance over the effectiveness of the Group’s governance, risk management and control practices. LINK GROUP | Annual Report 2021 99 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Risk Appetite Risk appetite is defined as the level and type of risk the Group is willing and able to assume given its business strategy and obligations to stakeholders. It provides a basis for ongoing dialogue between management and Board with respect to the Group’s current and evolving risk profile, allowing strategic and financial decisions to be made on an informed basis. Risk appetite is approved by the Link Group Board. Board Committees Link Group Board Board Risk Committee Board Audit Committee Board Human Resources & Remuneration Committees Management Level Committees Link Group ELT Link Group Divisional Risk Committees (b) Risk Committees Various committees also fulfil important roles and responsibilities. Link Group’s divisional level risk committees consider risk matters relevant to their business, with escalation to the Board Risk Committee, whose Chairman, in turn, escalates to the Link Group Board, as required. In addition to supporting the Board in setting the risk appetite of the Group, the Board Risk Committee is responsible for: • reviewing the risk management and compliance frameworks and policies, and monitoring the effectiveness of their implementation; • monitoring the Group’s risk profile against the agreed appetite. Where actual performance differs from expectations, the actions taken by management are reviewed to ascertain that the committee is comfortable with them. Further, there are two other Board-level committees which oversee the implementation of key aspects of the RMF: Link Group Board Audit Committee: The Audit Committee receives and considers reports from the Risk Committee on the adequacy and effectiveness of the Company’s risk management, internal compliance and control systems and the process and evidence adopted to satisfy those conclusions. The Committee is also responsible for reviewing whether the Company has any material exposure to any economic, environmental and social sustainability risks and for reviewing and monitoring related party transactions and investments involving the Company and its directors. It should also be noted that the Internal Audit function has a direct reporting line to the Chair of the Audit Committee. Link Group Board Human Resources and Remuneration Committee: The Human Resources and Remuneration Committee is responsible for oversight of the human resources strategy and supporting policies and practices for the Company’s employees and directors and oversight of the policies and practices of the Company regarding the remuneration of directors and other senior executives and reviewing all components of the remuneration framework; this includes receiving information on risk management performance and proposals on risk adjustments to variable remuneration. 100 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Link Group’s risk culture Risk culture can be defined as the norms, attitudes and behaviours related to risk awareness, risk taking and risk management. This is reflected in how the Group identifies, escalates and manages risk matters. Link Group is committed to maintaining a robust risk culture in which: • Senior management expect, demonstrate and reward the right behaviours from a risk and control perspective; and • employees identify, manage and escalate risk and control matters, and meet their responsibilities around risk management. Specifically, all employees regardless of their positions, functions or locations must play their part in managing the Group’s risks. Employees are required to be familiar with risk requirements which are relevant to their responsibilities, know how to escalate actual or potential risk issues, and have an appropriate level of awareness of the risk management process as defined by the RMF. (c) Our Code of Conduct The Code of Conduct and Ethics builds on Link Group’s Purpose and Values and outlines the expectations of our people to do what is right, to comply with laws and policies and behave professionally. The Code applies to our employees, contractors and our Board members. All employees are required to undertake mandatory training on their obligations under the Code, at commencement of employment, and then on at least an annual basis. As part of the training, employees are required to attest to their compliance or disclose any breach of the Code at any time in the previous 12 months. Material breaches of the Code are reported to the Board. (d) Changes Relevant to the Group Risk Profile Link Group continues to focus on identifying and adopting global best practices to identify, assess, manage, and control risks across our businesses. The following changes have the ability to directly or indirectly influence the Group Risk Profile. • Successful commencement of Vivek Bhatia as new Link Group Managing Director and CEO • A number of new, highly experienced Senior Executive and Senior Leader appointments • Refreshed purpose to sharpen focus on core goals and stakeholders • Refreshed strategic priority to simplify, deliver and grow • Refreshed values – creating a link between purpose and strategic priorities by expressing the standards and behaviours expected from directors, senior executives and employees • Terminated acquisition of Pepper European Services (PES) • Simplified Business Unit structure with dissolution of Technology & Operations division • Reviewed, consolidated, and reduced the number of Group Policies • Reduced our geographical footprint through divestment of our Link Market Services business in South Africa, closure of our Manila office in the Philippines, and closure of our Beckenham office in the UK • Consolidating infrastructure and decommissioning aging technology assets as we execute on our cloud strategy • Expanded our technology and administration operations capabilities in Mumbai, India • Enhanced global treasury policy and treasury risk management The Directors and Management understand and continually reassess existing and emerging risks (both short-term and long-term) that may be applicable to the Link Group’s business, including Environment, Sustainability and Governance (ESG) risk. Link Group acknowledges the impacts that climate change could have on our business, that its impact may increase in future, and that it is increasing in significance for clients, investors and regulators globally. For more information about how we manage environmental, social, governance and climate-related risk, please refer to our Sustainability Report. Material existing and emerging risks to the Group’s future performance Some of the more material business risks faced by Link Group and how they are being managed are considered below in more detail. In addition, there are other generic risks inherent to all businesses, including Link Group’s, such as: • our exposure to the macro-economic environment, political and regulatory risk; • our systems, technology and operational quality; • ongoing impacts of the pandemic; and • our ability to attract and retain key personnel. Link Group considers these key risks in operating our businesses and actively manages them. LINK GROUP | Annual Report 2021 101 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) COVID-19 Risk Factor The COVID-19 pandemic event remained a source of great uncertainty in FY21 and continues to have profound global health, social and economic impacts. Link Group considers COVID-19 to be a material risk factor that has the potential to alter (positively or negatively) many of the other risks that Link Group faces. RISK CATEGORY DESCRIPTION OF THE RISK AND ITS IMPACT HOW WE RESPOND Information and Cyber security Description Link Group’s core products and services inherently involve appropriate management of information. Link Group’s ability to ensure the confidentiality, integrity and availability of information that it holds, may provide a competitive advantage or may be detrimental to Link Group, as it attempts to enable efficient and secure businesses. Link Group has in place a global information security management system aligned to the international best practice standard ISO27001, APRA CPS234 and the NIST cyber security resilience framework and invests over $10 million per annum in key controls. These include: • employing ‘privacy by design’ principles in the design, development and deployment of policies, processes, procedures, systems, infrastructure, products and services; The COVID-19 pandemic continued to be a source of increased Information and Cyber security risks as the majority of our people were required to work remotely and perpetrators focused their efforts on an expanding range of diverse avenues in an attempt to access data. • proactive management of identified vulnerabilities, with controls in place to prevent, detect, mitigate and report breaches, including privacy and data breach response plans and regulatory reporting mechanisms; Impact Clients expect Link Group to securely store and make use of accurate information irrespective of whether our people are working in our offices or remotely. Failure to meet these expectations may result in breach of confidence, contract or regulation, which may have a negative impact on Link Group’s reputation, financial performance and ability to achieve our strategic objectives. • implementation of new and/or updated information security controls in mitigation of known attack vectors; • monitoring of internal and external system traffic; • regular external penetration testing; • user access controls to restrict access to premises, information and systems; and • mandatory privacy and information security training to all staff at least annually. Link Group maintains close ties with the information and cyber security community and government authorities in a number of jurisdictions in which it operates. 102 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) RISK CATEGORY DESCRIPTION OF THE RISK AND ITS IMPACT HOW WE RESPOND Political and regulatory environment Link Group: • engages with government, regulatory authorities and industry; • actively monitors, assesses and manages the impacts of changes to laws, regulation and government policy; • designs processes, procedures and systems consistent with the stated policy principles within each jurisdiction; • works with clients to assist in preparation for, and mitigation of, the impact of change; and • has a diversified geographic and jurisdictional presence. Link Group’s businesses are supported by specialist Risk & Compliance professionals in each of the jurisdictions in which we operate. We are supported by internal and external legal counsel and expert third party advisors, as required. Link Group has a regulatory change framework in place to identify our clients’ regulatory requirements and, where feasible, develop and implement solutions to assist them. To manage legislative change in superannuation, including Protecting your Superannuation and the Early Release of Superannuation scheme, Link Group collaborates with clients and applies selected commercial contractual protections (e.g. volume clauses). Description Link Group’s businesses are influenced and affected by laws, regulations and government policy in each of the jurisdictions in which our clients operate. Political and/or regulatory change, and Link Group’s ability to comply with regulations, could enable or inhibit our business objectives. Impact Changes could affect the ability to achieve business objectives and financial performance. For example, by: • limiting or removing authority to operate; • changing how a business operates; and/or • altering resource requirements, operating efficiency and profitability. Changes may also provide an opportunity for Link Group to generate additional revenue streams by supporting its clients in their regulatory compliance obligations including the following. • • In Australia, legislative changes permitting early withdrawal from super funds has had and will continue to have a material ongoing impact on the numbers of members administered by Link Group. In Australia, the Protecting Your Superannuation Legislation continues to have a material impact on operating volumes, the number of members administered by Link Group and operating margins in the Retirement and Superannuation Solutions division. • Certain proposed regulatory changes in Australia and other jurisdictions in which Link Group operates provide opportunities to develop additional products and services for our clients. LINK GROUP | Annual Report 2021 103 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) RISK CATEGORY DESCRIPTION OF THE RISK AND ITS IMPACT HOW WE RESPOND Principal risk Description Link Group’s ability to comply with relevant obligations may result in regulatory and consumer exposures, contrary to our objectives to operate profitable, risk managed, compliant businesses. Impact Link Group primarily provides services to/for clients as an agent (where we are indirectly accountable), but also provides services to clients as principal (where we are directly liable). The Fund Solutions business acts as principal, primarily in Europe, and has direct regulatory obligations. Willingness to assume principal risk may provide a high barrier to entry, which could be a competitive advantage for Link Group. However, material failure by Link Group to discharge our principal obligations may negatively affect financial performance (compensation, pecuniary penalties, lost earnings) and reputation. It may also give rise to regulatory penalties or removal of authority to operate the relevant business. Link Group mitigates this risk through: • robust risk management and compliance frameworks focused on identifying, assessing, monitoring and controlling risk; • skilled and qualified staff; • documented processes and procedures; • assurance programs and Internal Audit function; • professional lines of insurance; • proactive engagement with regulators; • in the case of Fund Solutions, governance mechanisms and processes are in place to ensure its fiduciary obligations are being fulfilled; • at least annual compliance training for impacted staff; • effective internal complaints mechanism and dispute resolution systems to identify consumer concerns; • ensuring compensation is appropriate with the level of risk taken in services and products provided; and • a strong corporate governance structure and culture, including local legal entity boards with direct regulatory accountability as required. 104 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) RISK CATEGORY DESCRIPTION OF THE RISK AND ITS IMPACT HOW WE RESPOND Client base, retention and arrangements Description Link Group may experience greater or less success in attracting new clients, cross-selling products and services, retaining existing clients and scope of services on commercial terms and benefit from client merger activity than expected/desired. Some factors may include: • scope and quality of service; • • increased competition; industry consolidation; • business and regulatory environment; • strength of relationships; and/or • technological disruption and innovation. Impact The key industries in which Link Group operates are all competitive markets and are expected to remain competitive. This may affect organic growth capability and the scope and quality of products and services. It may also influence resourcing, margins and financial performance. Benefit realisation from acquisition, integration and transformation Description The benefits of investment, acquisition, integration, migration, relocation, consolidation or transformation in a timely and commercial manner could be less than or greater than expected. Some factors may include: • appropriateness of each plan; • accuracy of the calculation of expected benefits; • quality and efficiency of execution; • market conditions and client receptivity; and • unexpected intervening events. Impact The extent to which expected synergies and other benefits are realised can affect Link Group’s financial performance, organisational efficiency, allocation of resources and strategic plans. Link Group manages this risk through: • development of long-term relationships premised on strategic partnership; • competitive, diversified and integrated product and service offerings; • dedicated client relationship managers; • market and product benchmarking and evaluations; • reputation and brand equity; • management of contracted service delivery, including prompt rectification of issues; and • commercial contractual protections. Link Group actively monitors and invests in innovation and new technologies. It has invested over $400 million in delivering technology-driven solutions for our clients and continues to partner with industry leaders to expand the range of value-added services for clients to further enhance competitive advantage. Having successfully executed and integrated more than 40 business combinations over the past 15 years, Link Group has significant experience delivering on the expected benefits. This is achieved principally through: • established and robust processes encapsulating people, systems, products and clients; • partnering with organisations and employing people with appropriate skills, expertise, and experience to optimise each specific opportunity; • disciplined project governance controls; • initial strategic and financial analysis; • contingency factoring; • sound due diligence practices; and • contractual protections. LINK GROUP | Annual Report 2021 105 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) 8. OUTLOOK MACRO TAILWINDS • Growth in equities markets driving investment flows and shareholder numbers • Fund consolidation and demographics to fuel growth in superannuation/pensions • Increased regulatory oversight and cost pressures across various markets supporting outsourcing trends • Greater uptake of digital platforms to support scale, complexity and customer engagement FY2022 Low single digit revenue growth Investment in technology and people to drive growth and will result in Operating EBIT broadly in line with FY2021 • Global Transformation on target to achieve gross annualised savings of $75 million by June 2022 • Strong pipeline of opportunities with key RSS contract renewals completed • Strong balance sheet and operating cash flow supporting growth and capital management initiatives • Outcome of Woodford investigation expected to be known in FY2022 • Additional investment in data/cyber security, front-line operations and risk and regulatory functions FY2023 Focused technology investment and macro tailwinds expected to deliver stronger revenue growth relative to FY2022 Operational leverage delivering EBIT growth • RSS benefiting from fund consolidation, member growth and pipeline opportunities • CM benefiting from leadership positions, integrated service offering and positive market fundamentals • Improving macro conditions in UK/Europe supporting revenue growth in FS and BCM • Margin improvement through continued investment in technology and transformation activities 106 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) APPENDIX 1: NON-IFRS DEFINITIONS Link Group uses a number of non-IFRS financial measures in this OFR to evaluate the performance and profitability of the overall business. The principal non-IFRS financial measures that are referred to in this OFR are as follows. FY is financial year ended 30 June (in the applicable year). Recurring Revenue is revenue arising from contracted core administration servicing and registration services, corporate and trustee services, transfer agency, stakeholder engagement services, share registry services and shareholder management and analytics services that are unrelated to corporate actions. Recurring Revenue is expressed as a percentage of total revenue. Recurring Revenue is revenue the business expects to generate with a high level of consistency and certainty year-on-year. Recurring Revenue includes contracted revenue which is based on fixed fees per member, per client or shareholder. Clients are typically not committed to a certain total level of expenditure and as a result, fluctuations for each client can occur year-on-year depending on various factors, including number of member accounts in individual funds or the number of shareholders of corporate market clients. Non‑Recurring Revenue is revenue the business expects will not be earned on a consistent basis each year. Typically, this revenue is project related and can also be ad hoc in nature. Non-Recurring Revenue includes corporate actions (including print and mail), call centre, capitals markets investor relations analytics, investor relations web design, extraordinary general meetings, share sale fees, off-market transfers, employee share plan commissions and margin income revenue. Non-Recurring Revenue also includes fee for service (FFS) project revenue, product revenue, revenue for client funded FTE, share sale fees, share dealing fees, one-off and other variable fees. Gross Revenue is the aggregate segment revenue before elimination of intercompany revenue and recharges such as Technology and Innovation recharges for IT support, client-related project development and communications services on-charged to clients. Link Group management considers segmental Gross Revenue to be a useful measure of the activity of each segment. Operating EBITDA is earnings before interest, tax, depreciation and amortisation and Significant items. Management uses Operating EBITDA to evaluate the operating performance of the business and each operating segment prior to the impact of Significant items, the non-cash impact of depreciation and amortisation and interest and tax charges, which are significantly impacted by the historical capital structure and historical tax position of Link Group. Link Group also presents an Operating EBITDA margin which is Operating EBITDA divided by revenue, expressed as a percentage. Operating EBITDA margin for business segments is calculated as Operating EBITDA divided by segmental Gross Revenue, while Link Group Operating EBITDA margin is calculated as Operating EBITDA divided by revenue. Management uses Operating EBITDA to evaluate the cash generation potential of the business because it does not include Significant items or the non-cash charges for depreciation and amortisation. However, the Company believes that it should not be considered in isolation or as an alternative to net Operating free cash flow. EBITDA is earnings before interest, tax, depreciation and amortisation. Operating EBIT is earnings before interest, tax and Significant items. Link Group also presents an Operating EBIT margin which is Operating EBIT divided by revenue, expressed as a percentage. Operating EBIT margin for business segments is calculated as Operating EBIT divided by segmental Gross Revenue, while Link Group Operating EBIT margin is calculated as Operating EBIT divided by revenue. EBIT is earnings before interest and tax. LINK GROUP | Annual Report 2021 107 SECTION01 Directors’ Report OPERATING AND FINANCIAL REVIEW (CONTINUED) Operating NPATA is net profit after tax and after adding back tax affected Significant items and acquired amortisation. Acquired amortisation comprises the amortisation of client lists and the revaluation impact of acquired intangibles such as software assets, which were acquired as part of business combinations. Link Group management considers Operating NPATA to be a meaningful measure of after-tax profit as it excludes the impact of Significant items and the large amount of non-cash amortisation of acquired intangibles reflected in NPAT. This measure includes the tax effected amortisation expense relating to acquired software which is integral to the ongoing operating performance of the business. Link Group also presents Operating NPATA margin which is Operating NPATA divided by revenue, expressed as a percentage. Operating NPATA margin is a measure that Link Group management uses to evaluate the profitability of the overall business. Operating earnings per share is Operating NPATA divided by the weighted average number of ordinary shares outstanding for the period. Link Group management considers Operating earnings per share to be a meaningful measure of after-tax profit per share as it excludes the impact of Significant items and the large amount of non-cash amortisation of acquired intangibles reflected in basic earnings per share. This measure includes the tax effected amortisation expense relating to acquired software which is integral to the ongoing operating performance of the business. Significant items refer to items which are considered to have a material financial impact and are not part of the normal operations of the Group. Significant items are used in both profit and loss and cash flow presentation. These items typically relate to events that are considered to be ‘one-off’ and are not expected to re-occur. Significant items are broken down into; Business combination/acquisition & divestment costs, Global Transformation costs, and other one-offs costs. Net operating cash flow is Cash receipts in the course of operations less Cash payments in the course of operations. Although Link Group believes that these measures provide useful information about the financial performance of Link Group, they should be considered as supplemental to the information presented in accordance with Australian Accounting Standards and not as a replacement for them. Because these non-IFRS financial measures are not based on Australian Accounting Standards, they do not have standard definitions, and the way Link Group calculated these measures may differ from similarly titled measures used by other companies. 108 SECTION01 Directors’ Report REMUNERATION REPORT Introduction from the Chair of the Human Resources and Remuneration Committee Dear Shareholder, On behalf of the Board, I present the Remuneration Report for the financial year ended 30 June 2021. This Report has been prepared on a consistent basis to previous years for ease of reference. Our Remuneration Report received a vote in favour of 97.23% at the 2020 AGM. We have taken into account shareholder feedback in presenting the FY2021 remuneration outcomes. Our aim is to continue to align remuneration structures and decisions with sustainable shareholder value creation. Company Performance FY2021 was significantly impacted by the unprecedented challenges presented by the COVID-19 pandemic, CEO & Managing Director transition, takeover activity and the PEXA IPO. In this context, the Company achieved an Operating NPATA of $113 million and a dividend of $0.10 per share was paid. Remuneration Outcomes In FY2021, the remuneration measures foreshadowed in the FY2020 Remuneration Report were implemented and additional remuneration issues were addressed, principally in response to the COVID-19 pandemic. These are summarised below: • The outgoing Managing Director and Executive KMP were not awarded any Fixed Pay increases for FY2021; • The previously agreed annual 2.5% increase to Non-Executive Director fees for FY2019, FY2020 and FY2021 remained suspended for FY2021 and therefore there was no increase to the base Non-Executive Director fees for FY2021; • The Board and Executive KMP took a temporary fee and Fixed Pay reduction for up to six months commencing 1 May 2020 and in recognition of this temporary Fixed Pay reduction, Executive KMP (excluding the outgoing Managing Director and CEO & Managing Director) received Link Group shares or rights equivalent to the temporary Fixed Pay reduction amount. One half of the shares or rights will become available in December 2021, and the other half in December 2022; • To support retention of executives during a critical period and business continuity, Executive KMP (excluding the CEO & Managing Director) will participate in a ‘one off’ equity retention plan; • Following two years where Link Group has not paid any STI to Executive KMP, the level of Operating NPATA performance in FY2021 met the short term incentive (STI) gateway and STI payments will be made to Executive KMP to reward for company and individual performance; • The FY2019 grant did not vest as EPS and TSR performance hurdles were not met. We welcome your feedback on our FY2021 Remuneration Report. Yours sincerely, Sally Pitkin, AO Human Resources & Remuneration Committee Chair LINK GROUP | Annual Report 2021 109 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) ABOUT THIS REMUNERATION REPORT The Remuneration Report (Report) summarises the remuneration of Link Group’s KMP; namely Directors and Executive KMP that are named in this Report for the year ended 30 June 2021. This Report has been prepared in accordance with the requirements of section 300A of the Corporations Act 2001 and has been audited. 1. OVERVIEW OF THE EXECUTIVE KMP REMUNERATION APPROACH 1.1 Remuneration principles & philosophy Link Group applies the following principles when developing and implementing remuneration decisions. The decisions made about remuneration should: • support competitive market pay; • support the attraction and retention of capable and committed employees; • reinforce the alignment of behaviours and outcomes to Link Group values and strategic imperatives; • align remuneration with sustainable shareholder value creation and returns; • align remuneration with prudent risk taking and Link Group’s long-term financial soundness; • motivate individuals to pursue Link Group’s long-term growth and success; • demonstrate a clear relationship between Link Group’s overall performance and the performance of individuals; • support gender pay equity; and • comply with all relevant legal, tax and regulatory provisions. 110 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) 1.2 FY2021 remuneration framework Link Group’s remuneration framework is designed to reward Executive KMP for achievement of Link Group strategy and shareholder value creation. Figure 1 outlines the components of Executive KMP remuneration and their purpose. Figure 1: FY2021 Executive KMP remuneration framework FY2021 EXECUTIVE KMP REMUNERATION FRAMEWORK Fixed Remuneration Cash, superannuation, non‑monetary STI 50% received as Cash 50% deferred into Link shares (holding lock of 1 year for 50% of deferred STI and 2 years for remaining 50%) STI Performance rights convert to shares after 3 years (50% shares delivered) LTI 1 year holding lock (25% shares delivered) 2 year holding lock (25% shares delivered) Year 1 Year 2 Year 3 Year 4 Year 5 FY2021 EXECUTIVE KMP REMUNERATION COMPONENTS Fixed Variable “at risk” Fixed remuneration Short‑term incentive (STI) Long‑term incentive (LTI) Market competitive, to attract and retain key talent to Link Group. PURPOSE AND ALIGNMENT To drive achievement of the short-term financial, strategic and operational objectives as agreed by the Board. To support alignment to creation of sustainable shareholder value through deferral. To reward and incentivise Executive KMP to drive the sustainable creation of shareholder value, within Link Group’s prudent risk management framework. VALUE TO INDIVIDUAL DETERMINED BY Fixed remuneration is targeted around the median of the market. The market is defined around similar listed companies (based on revenue, comparable industries, and business size) in the country where the Executive is based. Fixed remuneration may deviate from the market median depending on individual alignment to corporate values, experience, capabilities, performance, and location. Operating NPATA gateway determines capacity to pay. Awards based on Link Group and business unit financial performance and individual performance against specified KPIs. KPIs include financial and pre-financial targets. Board discretion to moderate award for factors such as alignment to corporate values and prudent risk taking. Stretch STI up to 150% of target based on stretch Operating NPATA targets. Vesting is based on achievement of: Operating earnings per share (EPS) performance against targets (75% of opportunity). Total shareholder return (TSR) relative to constituents of a S&P/ASX index (25% of opportunity). LINK GROUP | Annual Report 2021 111 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) EXECUTIVE KMP REMUNERATION IN FY2021 What changes to executive remuneration have been made in FY2021 and why? The Board reviewed FY2021 remuneration for the Executive KMP in the context of the scale, complexity and geographical reach of Link Group, and market benchmarking data. As foreshadowed in the FY2020 Remuneration Report, no Executive KMP received a Fixed Pay increase in FY2021. As a result of the COVID-19 pandemic, the outgoing Managing Director and Executive KMP accepted a temporary Fixed Pay reduction for up to six months of 50% and 20% respectively concluding on 31 October 2021. Executive KMP (excluding the outgoing Managing Director and the current CEO & Managing Director) received a grant of restricted shares or share rights to recognise their contribution to agreeing to this temporary pay reduction and to support their retention. The award value at grant for Executive KMP is equivalent to the actual Fixed Pay reduction and is subject to a service condition with 50% being delivered one year after being awarded and the remaining 50% after two years. The number of restricted shares granted is based on the value available to each participant divided by the five trading day volume weighted average market price (VWAMP) for Link Group shares from the date of the announcement of Link Group’s full year results. How is Link Group’s performance reflected in FY2021 remuneration outcomes? In FY2021 the Operating NPATA gateway on the STI was achieved and therefore Executive KMP will receive a STI payment for FY2021. The FY2019 LTI grant was tested at the end of FY2021, resulting in no vesting of the relative TSR component and no vesting of the EPS component, as the performance hurdles were not achieved. The Board considered the impact of the equity investment in Property Exchange Australia (PEXA) against the transaction principles and determined that no adjustments would be made to FY2021 LTI targets or the number of PSRs on issue. In addition, it was agreed that the acquired amortisation, net of tax, be added back to the NPATA contribution from PEXA in determining the Operating NPATA for Link Group and that the fair value gain be excluded. In respect of the sale of the CPCS business, given that CPCS was sold in FY2020, the Board determined that any CPCS contribution be excluded from the base year target for the FY2021 PSRs granted in calendar year 2019. The impact of transactions is considered on a case by case basis in line with agreed transaction principles outlined in Section 3.1. Further detail on performance outcomes is provided in Section 2.2. Fixed remuneration generally includes base salary, superannuation and may include non-monetary benefits. Fixed remuneration is targeted around the median of the market. The market is defined as companies of similar size and/or industry in the country in which the Executive is based. Consideration is generally given to listed companies with market capitalisation 50% to 200% of Link Group’s 12-month average market capitalisation. In markets where listed company data is not disclosed, market surveys are used and roles are compared against companies with revenue between 50% to 200% of Link Group’s annualised revenue. Fixed remuneration is generally reviewed against the market annually, however, there is no guaranteed annual increase. How is fixed remuneration determined and how is it positioned relative to the market? 112 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) EXECUTIVE KMP REMUNERATION IN FY2021 What proportion of target remuneration is ‘at risk’ and why is it considered appropriate for the business? Generally, target total remuneration is positioned between the median and 75th percentile of the market. A significant portion of Executive KMP remuneration is ‘at risk’ subject to both short and long-term performance hurdles. The ‘at risk’ components directly align executive pay with our strategic imperatives and shareholder value creation. The proportion of total target remuneration ‘at risk’ for Executive KMP ranges from 55% to 73%. Is clawback available on ‘at‑risk’ remuneration? The Board has the discretion to determine that a portion or all of an employee’s unvested or vested STI and LTI awards be forfeited if, in the Board’s opinion, adverse circumstances affecting the performance, reputation or risk profile of Link Group have come to the Board’s attention which, had they been known at the time when the STI or LTI was made, would have caused the Board to make a different award or no award. What was the target remuneration mix for each executive KMP for FY2021? EXECUTIVE KMP Continuing Executive KMP TOTAL FIXED REMUNERATION % TARGET STI % LTI GRANT % TOTAL VARIABLE REMUNERATION % Vivek Bhatia Chris Addenbrooke Antoinette Dunne Paul Gardiner Andrew MacLachlan Dee McGrath Former Executive KMP John McMurtrie Robbie Hughes Lysa McKenna Susan Ring 29% 35% 45% 40% 40% 45% 30% 28% 44% 36% 28% 35% 33% 30% 30% 33% 30% 28% 33% 36% 43% 30% 22% 30% 30% 22% 40% 45% 22% 27% 71% 65% 55% 60% 60% 55% 70% 73% 55% 63% What are the performance measures (including gateway) on the STI plan and how do they align with the business strategy? An Operating NPATA gateway must be met before any STI is awarded. The Board determines an annual Operating NPATA target, taking into consideration our longer-term growth strategy. The Operating NPATA target for FY2021 was $78.1 million. Operating NPATA, which reflects the underlying earnings of the business and excludes the impact of non-cash acquired amortisation and the after-tax impact of one off significant items, is a key measure of success for our business and part of our growth strategy. Including Operating NPATA as a gateway supports affordability of the plan in a given year. Payments made under the STI plan are subject to the achievement of a balanced scorecard of individual measures comprising both financial and pre-financial measures aligned to our strategic imperatives. Measures vary by role and across financial years but broadly fall under the categories of Business, Financial & Strategy, Customer & Stakeholder, People & Leadership and Operational Excellence. Further detail is included in Section 2.2. The Board has discretion to moderate payment for factors such as alignment to corporate values, compliance and prudent risk taking. LINK GROUP | Annual Report 2021 113 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) EXECUTIVE KMP REMUNERATION IN FY2021 What is the target and maximum STI opportunity each Executive KMP can earn under the STI plan? What percentage of STI is deferred and for how long? How is the LTI aligned to the business strategy? The target STI opportunity for Executive KMP represents an opportunity to earn, on average, around 32% of total target remuneration. Target STI ranges from 75% to 100% of fixed remuneration. Executive KMP have the opportunity to earn up to 150% of their target STI where the Operating NPATA is 110% of budget. This represents the maximum STI. Fifty percent of any STI awarded to the Executive KMP, including the CEO & Managing Director, will be deferred into Link shares or rights. The deferred shares or rights are subject to a holding lock, one half of which are deliverable after one year and the remainder after two years. The LTI Plan measures performance over a three-year period against Operating EPS targets (75%) and relative TSR performance targets (25%), with no re-testing. The Operating EPS measure aligns to the purpose of the Plan to support our growth strategy and has strong alignment to sustainable shareholder value. Our key focus is on delivering sustainable earnings growth to our shareholders. The use of Operating EPS as a performance measure is further reinforced by Link’s growth strategy being underpinned by a disciplined approach to acquisition as well as organic growth in our existing businesses. This strategy requires dealing effectively with the inherent complexity in managing the acquisition pipeline and the need to integrate well and achieve synergies. Link Group acknowledges that TSR performance relative to a basket of constituents is important to some investors. However, in the absence of a sizeable group of comparable industry peers, we also acknowledge that comparison to a broad group of S&P/ASX index constituents can give arbitrary results that are not reflective of the Company’s performance. The lower weighting to TSR is reflective of this issue. One-half of any vested award is available to the participant at the end of the performance period. The remaining vested award is subject to an additional holding lock, of which 50% is available after a further year and 50% after two years. The Board has determined that the combination of the three-year vesting period and subsequent two-year holding lock provides participants alignment to Link Group’s long-term growth strategy. The relative TSR component of the LTI granted in FY2021 is measured against 58 constituents of the S&P/ASX 100, excluding materials, utilities, industrials and energy companies. The Board retains discretion to make adjustments for any unintended remuneration outcomes arising from a relative TSR measure. Further detail is included in Section 3.1. How are EPS targets determined? The Operating EPS targets in relation to LTI grants are set with reference to the Group’s growth strategy. The macroeconomic environment, market and industry peer practice and stakeholder expectations are also considered. The target range set provides appropriate stretch to executives and achievement provides strong returns to shareholders. For the purpose of the LTI, Operating EPS is calculated by dividing the Group’s Operating NPATA by the undiluted weighted average number of shares on issue throughout the Performance Period. Operating NPATA reflects the underlying earnings of the business and excludes the impact of non-cash acquired amortisation and the after-tax impact of one off significant items. The Board has discretion to include or exclude items from the calculations. A reconciliation of the Operating NPATA to statutory NPAT is set out in Figure 2 of the Operating and Financial Review. 114 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) EXECUTIVE KMP REMUNERATION IN FY2021 What are the minimum shareholding requirements for Executive KMP? Have Executive KMP met the requirements? What changes to Executive KMP remuneration will be made in FY2022? Executive KMP are required to hold a minimum shareholding of one year’s fixed remuneration within five years of the date they are appointed as a KMP. Deferred STI and vested LTI subject to a holding lock count towards this requirement. All Executive KMP with five or more years in an Executive KMP role are in compliance with the minimum shareholding requirement. See Table 12 for further detail. The Board reviewed remuneration for the Executive KMP in the context of the scale, complexity and geographical reach of Link Group, and market benchmarking data. As a result, Vivek Bhatia and Dee McGrath’s Fixed Pay will increase to $1,400,000 and $670,000 respectively effective 1 October 2021. There will be no change to the STI and LTI target percentages with the actual amounts reflecting the Fixed Pay change. No other Executive KMP will receive a Fixed Pay increase in FY2022. Several Executive KMP will receive or have received an equity grant as part of a retention scheme to retain key talent during a critical period for the Company where the CEO & Managing Director transitioned and the Company dealt with an unsolicited takeover bid. Paul Gardiner was awarded a retention grant of 99,005 Link Group shares that will become available in October 2022. Dee McGrath, Andrew MacLachlan and Chris Addenbrooke will be granted Link Group share rights in FY2022 equivalent to approximately 50% of their FY2021 Fixed Pay. The grant will be subject to a service condition with 50% being delivered one year after being awarded and the remaining 50% two years after being awarded. NON‑EXECUTIVE DIRECTOR REMUNERATION IN FY2021 AND FY2022 Were there any changes to Non‑Executive Director remuneration in FY2021? Non-Executive Director (NED) base fees were last adjusted in FY2019. NED base fees were increased by 2.5% from 1 July 2018 as part of a three-year program to increase fees by 2.5% in FY2019, FY2020 and FY2021. The fee increase was suspended in FY2020 and FY2021. The Chair fee reflects a single payment, with no additional fees paid to the Chair for Committee work. There were no changes to the NED fee pool in FY2021. What changes to Non‑ Executive Director remuneration will be made in FY2022? What are the minimum shareholding requirements for Non‑Executive Directors? Have Non‑Executive Directors met the requirements? The previously suspended NED fee increases of 2.5% for both FY2020 and FY2021 will be reinstated for FY2022 resulting in a 5% increase in base NED fees. There will be no changes to Committee fees. There will be no changes to the fee pool. NEDs are required to hold a minimum shareholding of one time the NED annual base fee (not including Committee membership or the higher fee for the Committee Chair) within three years after the date of their appointment. All NEDs are in compliance with the minimum shareholding requirement. LINK GROUP | Annual Report 2021 115 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) 2. SUMMARY INFORMATION 2.1 Key Management Personnel The names and titles of KMP are set out below. There have been no other changes to KMP following the end of the financial year. NAME POSITION STATUS TERM AS KMP Non‑Executive Directors Michael Carapiet Independent Chair and Non-Executive Director Full year Glen Boreham, AM Independent Non-Executive Director Andrew (Andy) Green, CBE Independent Non-Executive Director Peeyush Gupta, AM Independent Non-Executive Director Anne McDonald Independent Non-Executive Director Sally Pitkin, AO Independent Non-Executive Director Fiona Trafford‑Walker Independent Non-Executive Director Continuing Executive KMP Full year Full year Full year Full year Full year Full year Vivek Bhatia Chief Executive Officer & Managing Director Part year Commenced 2 November 2020 Chris Addenbrooke Chief Executive Officer, Link Fund Solutions Full year Antoinette Dunne Chief Executive Officer, Banking and Credit Management Paul Gardiner 1 Chief Executive Officer, Corporate Markets Andrew MacLachlan Chief Financial Officer Dee McGrath Chief Executive Officer, Retirement & Superannuation Solutions Part year Commenced 1 June 2021 Full year Full year Full year Former Executive KMP John McMurtrie, AM Executive Director and Managing Director Part year Ceased 1 November 2020 Robbie Hughes Chief Executive Officer, Banking and Credit Management Part year Ceased 4 March 2021 Lysa McKenna Co-Chief Executive Officer, Corporate Markets Part year Ceased 2 May 2021 Susan Ring Co-Chief Executive Officer, Corporate Markets Part year Ceased 2 May 2021 1 Paul Gardiner’s role changed from Chief Technology and Operations Officer to Chief Executive Officer, Corporate Markets from 3 May 2021. 116 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) 2.2 FY2021 Overview – alignment between performance and Executive KMP remuneration In FY2021, our Executive KMP remuneration consisted of fixed remuneration, short-term incentives (STIs) and a grant of Performance Share Rights (PSRs) under the LTI Plan. The short and long-term incentive plans align remuneration outcomes to Link Group’s strategic objectives, and reward superior business performance and sustainable shareholder value creation. Given the Operating NPATA STI gateway was achieved, STIs were paid to certain Executive KMP in FY2021. In addition to the above remuneration elements, the continuing Executive KMP presently hold an estimated 0.3% of Link Group’s issued share capital. Tables 1, 2 and 3 provide further detail of our performance against our strategic goals in FY2021, and table 4 details Company performance over five years. For FY2021, Executive KMP performance has been contextualised by the financial performance and leadership demonstrated during the COVID-19 pandemic, transaction activity and Managing Director succession. Table 1: KPI Performance of Executive KMP MEASURE OUTCOME DESCRIPTION Company Financial Performance Above target Link Group reported Operating NPATA was $113 million in FY2021. The Operating NPATA gateway of $78.1 million was met in FY2021. Strong cash conversion of 114%. Divisional Financial Performance At target Retirement & Superannuation Solutions, Funds Solutions and Corporate Markets performed above their target Operating EBIT budget with Technology and Operations and Banking & Credit Management performing below. Strategy At target Progress has been made against the three priorities of simplifying the organisation, delivering on our commitments and growing the business. Achievements include: • Effective management of transaction activities including non-binding indicative takeover bids from a PEP/Carlyle Consortium and SS&C. • PEXA IPO launched with Link Group retaining a 42.8% holding with a value of $1.4bn based on the IPO opening price. In addition, Link Group received proceeds of $180m which is being used to strengthen the balance sheet. • Implementation of the new global operating model and organisation structure. • Decision not to proceed with Pepper European Servicing (PES) acquisition. • Acquisition of Casa4Funds in Luxembourg (subject to regulatory approval), growing the company’s footprint in the region. LINK GROUP | Annual Report 2021 117 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) MEASURE OUTCOME DESCRIPTION Customer and Stakeholder At target Retaining existing clients as well as business development through new clients and new services are key drivers of Link Group’s growth strategy. Key highlights included: • Retaining major clients across all businesses including key contract renewals in R&SS; • Undertaking the first R&SS client satisfaction survey to help determine initiatives to continuously improve client delivery; • Delivering over 500 virtual AGMs for clients in Australia, New Zealand, the United Kingdom (UK) and Germany and winning the Financial Standard MAX award for our virtual meeting product; • Winning 60 IPOs across Australia and the UK; • Completing the rollout of the digital platform for our largest Funds Solutions client in the UK; • Continued growth of our Netherlands business and mortgage servicing capability across Ireland and the Netherlands; and • Continuing global development of Link Group’s brand. Key governance objectives were achieved in FY2021 including meeting all required reporting deadlines, quarterly risk management reporting and execution of the Link Group corporate governance framework to drive good corporate governance in how we operate to create sustainable value for shareholders. People and Leadership At target Link Group recognises its people are paramount to the ongoing success of the business. In FY2021: • the wellbeing of our employees was addressed effectively, particularly in response to the COVID-19 pandemic, with the extension of our Employee Assistance Program to India, the provision of a range of wellbeing tools and information through our Wellness Hub and the roll out of mental health webinars; • voluntary turnover was 18%; • progress was made against diversity targets with balanced gender participation achieved at management and ELT level however gender diversity within the Senior Leader level remained below target. A Link Group Diversity & Inclusion (D&I) Committee (chaired by the CEO&MD) and employee D&I working groups were established; • CEO & Managing Director succession and leadership changes were effectively managed; • Link Group’s approach to blended working was determined with a pilot conducted across three locations ahead of a global rollout in FY22; • Link Group’s first global employee engagement survey was conducted; • Link Group’s values were refreshed and launched; • A global recognition program ‘Appreciate’ was launched to recognise employees living Link Group’s values; and • Link Academy programs were enhanced with additional on-line training solutions provided to all employees. 118 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) MEASURE OUTCOME DESCRIPTION Operational Excellence At target Rapid response to COVID-19 pandemic included continuity of service to clients with approximately 90% of employees able to work remotely. The global transformation program continued to progress with annualised savings in excess of $42 million achieved to date. Implementation of the hub strategy in Leeds and Mumbai has continued. As at 30 June 2021, around 640 FTEs were in place in the Mumbai hub. Continued rollout of productivity and workflow automation systems and tools across various business units to improve efficiency and accuracy. Table 2: FY2021 Performance Assessment Summary CONTINUING EXECUTIVE KMP Vivek Bhatia GATEWAY MET COMPANY FINANCIAL Exceeded DIVISIONAL FINANCIAL N/A STRATEGY Exceeded Chris Addenbrooke Exceeded Exceeded Antoinette Dunne N/A N/A Paul Gardiner Exceeded Largely Met Andrew MacLachlan Exceeded N/A Dee McGrath Exceeded Exceeded Met N/A Met Met Met CUSTOMER AND STAKEHOLDER PEOPLE AND LEADERSHIP OPERATIONAL EXCELLENCE Met Met N/A Met Met Met Exceeded Met N/A Met Met Met Met Met N/A Met Met Met Outcomes are included for continuing KMP. As Antoinette Dunne became KMP from 1 June 2021, an assessment of her performance as KMP is not provided. Table 3: STI amounts awarded STI TARGET ($)1 STI MAXIMUM ($) TOTAL STI PAYABLE ($) STI ACHIEVED (% OF TARGET) STI ACHIEVED (% OF MAXIMUM) % OF MAXIMUM FORFEITED STI TO BE PAID IN CASH ($) Continuing Executive KMP Vivek Bhatia 2 1,300,000 1,950,000 1,885,000 Chris Addenbrooke 3 464,732 697,098 525,349 Antoinette Dunne 3 29,597 44,396 28,710 Paul Gardiner 502,500 753,750 505,000 Andrew MacLachlan 450,000 675,000 575,000 Dee McGrath 468,750 703,125 563,000 Former Executive KMP John McMurtrie 1,100,000 1,650,000 Robbie Hughes 3 444,515 666,772 – – Lysa McKenna 250,000 375,000 270,833 Susan Ring 3 329,108 493,663 287,779 145% 113% 97% 100% 128% 120% – – 108% 87% 97% 75% 65% 67% 85% 80% – – 72% 58% 3% 25% 35% 33% 15% 20% 100% 100% 28% 42% 942,500 262,675 14,355 252,500 287,500 281,500 – – 135,417 287,779 Vivek Bhatia’s STI Target and payment represents a full year value. 1 STI Targets for Antoinette Dunne, Lysa McKenna and Susan Ring represent a pro-rata amount for their period as Executive KMP. 2 3 Robbie Hughes and Antoinette Dunne are based in Ireland and are remunerated in EUR. Chris Addenbrooke and Susan Ring are based in the UK and accordingly are remunerated in GBP. Susan Ring’s STI will be paid in cash. Their STI Targets have been converted to AUD using the prevailing exchange rates that were used to prepare the financial statements for FY2021. LINK GROUP | Annual Report 2021 119 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) Table 4 outlines the financial performance of Link Group. Table 4: Five-year performance of Link Group 2021 2020 1 2019 1 2018 2017 EPS Operating EBIT Operating NPATA Net Profit (loss) after tax Change in share price to 30 June (cents) (30.75) (19.67) ($millions) ($millions) ($millions) ($) 141.4 113.2 179.7 137.6 (162.7) (102.5) 0.94 10.00 (0.90) 19.00 60.71 291.5 196.9 324.1 (2.33) 20.50 27.86 294.1 203.2 139.8 (0.57) 20.50 22.59 184.1 123.8 85.2 0.03 14.00 Declared Dividends (cents per share) FY2019 LTI Grant Outcome The Omnibus Equity Plan measures performance over a three-year period against Operating EPS targets (75%) and relative TSR performance targets (25%). FY2019 EPS Grant Outcome EPS PSRs are subject to a compound annual growth rate in Operating EPS of between a threshold target of 7% and a stretch target of 12%. Table 5: FY2019 EPS Grant Outcome Operating NPATA Weighted average number of ordinary shares Operating EPS 2021 2018 CAGR % ($millions) (millions) (cents) 113.18 203.24 531.2 21.3 494.9 41.1 -19.6% Using the vesting scale outlined in section 3.1, 0% of the PSR’s subject to the EPS hurdle vested in FY2021. The Board considered the impact of various transactions using the agreed transactions principles and, in regards to the major transactions during the performance period, decided not to make any adjustment to the FY2019 targets for the equity investment in PEXA, the LAS acquisition and the disposal of the CPCS business. FY2019 TSR Grant Outcome TSR takes into account the change in Link Group’s share price over the relevant performance period, as well as the dividends paid (dividends are assumed to be reinvested in Link Group shares). Over the performance period, Link Group was ranked in the 17th percentile within the peer group. Using the vesting scale outlined in section 3.1, no PSR’s subject to the TSR hurdle vested in FY2021. 1 FY2020 and FY2019 have been restated as disclosed in the Financial Statements for the year ended 30 June 2021. 120 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) Actual Remuneration Received Table 6 shows the actual cash remuneration paid to Executive KMP during FY2021 and FY2020 and deferred payments received. The table below does not include the accounting value of equity that was expensed, but not realised, under the LTI. Table 6: Actual remuneration received in FY2021 and FY2020 1,2 FIXED REMUNERATION ($) STI PAID 3 ($) DEFERRED STI REALISED ($) LTI REALISED ($) TERMINATION BENEFITS ($) TOTAL REMUNERATION ($) YEAR Continuing Executive KMP Vivek Bhatia Chris Addenbrooke Antoinette Dunne Paul Gardiner 2021 2020 2021 2020 2021 2020 2021 2020 Andrew MacLachlan 2021 Dee McGrath 4 Former Executive KMP John McMurtrie Robbie Hughes Lysa McKenna Susan Ring 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 907,359 N/A 456,429 – N/A – 497,799 237,474 51,338 N/A 625,333 626,664 580,015 551,553 611,836 598,735 224,209 1,005,886 323,677 – N/A – – – – – – – – – 448,485 231,975 318,645 176,165 296,892 188,403 – – – – – N/A – – – – – – – – – – – – – – – – – – – N/A – – – N/A – 165,182 – 97,342 100,963 137,603 – 553,784 – – – – – – N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 907,359 N/A 456,429 735,273 51,338 N/A 625,333 791,846 580,015 648,895 712,799 736,338 224,209 1,559,670 323,677 680,460 318,645 176,165 296,892 188,403 1 Remuneration for KMP is included from the date they are designated as KMP until they cease as KMP. Vivek Bhatia commenced as Executive KMP on 1 November 2020 and Antoinette Dunne on 1 June 2021. Lysa McKenna and Susan Ring were KMP from 1 January 2020 to 2 May 2021. 2 Chris Addenbrooke and Susan Ring are based in the UK and accordingly are remunerated in GBP. Antoinette Dunne and Robbie Hughes are based in Ireland and remunerated in EUR. Remuneration has been converted to AUD using the prevailing exchange rates that were used to prepare the financial statements for FY2021. 3 Chris Addenbrooke was eligible to participate in a retention bonus of GBP 379,500 (gross). Robbie Hughes was eligible to participate in a retention bonus of EUR 422,400 (gross). Both were payable in 3 equal payments in April 2018, April 2019 and April 2020 and the amounts reflected under 2020 represented the final tranche of this incentive. 4 Dee McGrath was issued with 65,325 shares on commencement. The amount included under LTI Realised reflects 25,453 restricted shares in FY2020 and 19,774 in FY21 which were released from a holding lock. The remainder of the shares are held under a holding lock. LINK GROUP | Annual Report 2021 121 SECTION01 Directors’ Report . 2 2 . n o i t c e S n i 6 l e b a T n i i d e v e c e r n o i t a r e n u m e r l a u t c a e h t n i d e t n e s e r p n o i t a m r o n f i e h t m o r f s r e f f i l i d y g n d r o c c a d n a s d r a d n a t S g n i t n u o c c A n a i l a r t s u A e h t h t i w e c n a d r o c c a n o i t a r e n u m e r y r o t u t a t s P M K e v i t u c e x E l : 7 e b a T n i d e r a p e r p n e e b s a h l 7 e b a T n i d e t n e s e r p n o i t a m r o n f i e h T . 0 2 0 2 Y F r o f n o i t a m r o n f i e v i t a r a p m o c d n a 1 2 0 2 Y F r o f P M K e v i t u c e x E r o f n o i t a r e n u m e r e h t s t n e s e r p 7 e b a T l l e b a t n o i t a r e n u m e r y r o t u t a t s P M K e v i t u c e x E 3 . 2 % 0 3 A / N % 8 % 1 1 % 2 A / N % 9 1 % 3 1 % 8 % 2 1 % 4 1 % 8 3 F O % A S A S R S P F O E U L A V N O T I ‑ A R E N U M E R S T N E M Y A P D E S A B Y T U Q E I S T I F E N E B S T I F E N E B S T I F E N E B M R E T ‑ T R O H S R E H T O ‑ G N O L M R E T T N E M ‑ T S O P ‑ Y O L P M E ‑ U M E R F O % I N O T A R E N O T D E T A L E R E C N A M R O F R E P L $ A T O T 2 $ I T S D E R R E F E D I Y T U Q E T $ N A R G I L A C E P S I $ T L N O T A I I ‑ N M R E T S $ T I F E N E B E $ V A E L G N O L I E C V R E S ‑ R E P U S I N O T A U N N A R E H T O S $ T I F E N E B S $ T I F E N E B 1 $ I T S Y R A L A S S $ E E F D N A R A E Y E M A N % 6 3 A / N % 1 3 % 1 1 % 0 2 A / N % 2 2 % 0 % 0 % 9 2 % 0 % 6 2 4 3 6 , 0 5 6 , 2 – A / N A / N – A / N 3 7 3 , 1 9 7 – A / N A / N 0 0 3 , 6 4 8 1 2 2 , 4 9 6 A / N 4 1 2 , 1 7 1 0 8 , 0 7 7 1 5 2 , 5 6 1 , 1 0 9 2 , 1 0 0 , 1 6 4 9 , 9 9 6 8 8 6 , 7 8 0 , 1 7 8 3 , 5 0 0 , 1 – – – A / N – – – – – – 6 6 1 , 5 2 9 2 5 , 6 6 – A / N 0 2 1 , 2 A / N 7 6 0 , 4 7 6 9 2 , 1 0 4 3 , 6 3 5 7 5 , 6 2 2 – 0 2 6 , 8 9 2 4 5 , 2 3 0 2 7 , 7 7 – 7 0 4 , 7 8 9 9 8 , 3 3 7 9 4 , 9 4 1 – 0 6 1 , 7 7 3 – – – A / N – – – – – – 7 8 7 A / N – – – A / N 4 9 0 , 2 1 7 1 1 , 2 1 0 4 8 , 0 1 2 8 0 , 3 2 5 6 1 , 2 – A / N 3 6 4 , 4 1 4 9 2 , 1 2 1 4 5 , 5 3 7 9 , 1 A / N 4 9 6 , 1 2 3 0 0 , 1 2 0 0 0 , 5 2 0 0 0 , 5 2 4 9 6 , 1 2 3 0 0 , 1 2 A / N 5 1 6 , 8 1 0 5 , 5 3 3 8 3 , 4 7 A / N 5 0 1 , 2 9 0 4 , 2 1 7 9 3 , 2 1 3 7 6 , 2 1 4 0 9 , 2 1 1 9 7 , 8 9 8 4 , 8 0 0 5 , 2 4 9 6 9 8 , 2 9 8 A / N A / N 5 7 6 , 2 6 2 5 3 1 , 5 3 4 A / N 8 5 1 , 9 7 5 5 3 , 4 1 A / N 2 7 0 , 1 6 4 5 6 3 , 9 4 0 0 5 , 2 5 2 9 3 6 , 3 0 6 – 4 6 6 , 6 2 6 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 3 P M K e v i t u c e x E 4 a i t a h B k e v i V e k o o r b n e d d A s i r h C e n n u D e t t e n i o t n A 5 r e n i d r a G l u a P 0 0 5 , 7 8 2 5 1 0 , 5 5 5 1 2 0 2 n a l h c a L c a M w e r d n A – 3 5 5 , 1 5 5 0 0 5 , 1 8 2 2 4 1 , 0 9 5 – 5 3 7 , 8 9 5 0 2 0 2 1 2 0 2 0 2 0 2 6 h t a r G c M e e D i e c v r e s d e u n i t n o c o t j t c e b u s t s e v l l i w % 0 5 , 2 2 0 2 Y F f o d n e e h t t a i e c v r e s d e u n i t n o c o t j t c e b u s t s e v l l i w % 0 5 . k c o l i g n d o h l a d n a s n o i t i d n o c i e c v r e s o t j t c e b u s e r a 1 2 0 2 Y F f o t c e p s e r n i d e d r a w a s e r a h s I T S d e r r e f e D . 0 2 0 2 Y F o t n o i t a e r l n i I i T S y n a p m o C a d e v e c e r P M K e v i t u c e x E o N . 2 2 0 2 Y F m o r f e c n e m m o c l l i w I T S d e r r e f e D e s e h t r o f e u a v l g n i t n u o c c a e h T . 3 2 0 2 Y F f o d n e e h t t a n e e b s a h n o i t a r e n u m e R . R U E n i d e t a r e n u m e r d n a d n a e r I l n i d e s a b e r a i s e h g u H e b b o R d n a e n n u D e t t e n o t n A i . P B G n i d e t a r e n u m e r e r a i l y g n d r o c c a d n a K U e h t n i d e s a b e r a i g n R n a s u S d n a e k o o r b n e d d A s i r h C . k c o l i g n d o h l a d n a s n o i t i d n o c i e c v r e s o t j t c e b u s e r a s e r a h s e h T . t n e m e c n e m m o c n o o t d e u s s i s e r a h s d e t c i r t s e r s e d u c n l i h t a r G c M e e D r o f I T L n i d e d u c n l i t n u o m a e h T . s n o i t i d n o c i e c v r e s o t j t c e b u s e r a s e r a h s f o y r e v i l e D . t n e m e c n e m m o c n o d e u s s i s e r a h s d e t c i r t s e r s e d u c n l i a i t a h B k e v V r o i f I T L n i d e d u c n l i t n u o m a e h T . s n o i t i d n o c i e c v r e s o t j t c e b u s s i s e r a h s f o y r e v i l e D . 1 2 0 2 Y F g n i r u d d e u s s i s e r a h s d e t c i r t s e r s e d u c n l i i r e n d r a G l u a P r o f I T L n i d e d u c n l i t n u o m a e h T . 1 2 0 2 Y F r o f s t n e m e t a t s l i a c n a n fi e h t e r a p e r p o t d e s u e r e w t a h t s e t a r e g n a h c x e g n i l i a v e r p e h t i g n s u D U A o t d e t r e v n o c 1 2 3 4 5 6 ) I D E U N T N O C ( I T R O P E R N O T A R E N U M E R 122 SECTION01 Directors’ Report F O % A S A S R S P F O E U L A V N O T I ‑ A R E N U M E R % 1 2 % 5 3 % 9 1 % 6 % 5 1 % 7 % 9 1 % 6 1 % 0 2 % 3 0 7 – % 0 % 0 % 0 % 0 1 % 6 2 % 0 % 0 % 5 4 % 9 2 % 3 3 1 5 , 8 2 0 8 6 , 0 4 3 , 1 9 6 1 , 9 4 5 9 4 9 , 4 7 7 6 3 8 , 5 1 5 0 8 2 , 1 3 2 5 0 0 , 4 4 6 0 6 8 , 4 4 2 0 0 9 , 9 5 5 , 8 4 2 1 , 2 6 7 , 5 – – – – – – – – – – – – 5 7 9 , 0 8 2 ) 0 7 3 , 0 0 2 ( 3 7 4 , 4 1 3 1 4 , 7 8 1 – 0 9 9 , 3 4 1 6 9 4 , 5 1 4 8 7 , 9 2 – 9 5 1 , 4 3 6 7 2 , 5 1 0 0 6 , 2 4 – 2 2 1 , 6 4 2 1 3 , 5 7 1 7 1 4 , 2 7 3 , 1 – 0 0 5 , 2 4 1 , 1 – – – – – – – – – – – – – 0 8 8 , 9 1 – – 6 1 0 , 6 5 9 8 , 3 2 0 9 , 1 3 4 7 9 , 8 5 S T N E M Y A P D E S A B Y T U Q E I S T I F E N E B S T I F E N E B S T I F E N E B M R E T ‑ T R O H S R E H T O ‑ G N O L M R E T T N E M ‑ T S O P ‑ Y O L P M E ‑ U M E R F O % I N O T A R E N O T D E T A L E R E C N A M R O F R E P L $ A T O T 2 $ I T S D E R R E F E D I Y T U Q E T $ N A R G I L A C E P S I $ T L N O T A I I ‑ N M R E T S $ T I F E N E B E $ V A E L G N O L I E C V R E S ‑ R E P U S I N O T A U N N A R E H T O S $ T I F E N E B S $ T I F E N E B 1 $ I T S Y R A L A S S $ E E F D N A R A E Y E M A N ) I D E U N T N O C ( I T R O P E R N O T A R E N U M E R 1 3 2 , 7 3 0 0 , 1 2 1 9 8 , 1 4 3 7 2 , 7 6 9 7 0 , 8 1 1 0 5 , 0 1 5 4 8 , 4 1 8 1 4 , 9 4 7 6 , 4 6 3 9 , 2 1 6 0 6 , 3 2 6 7 8 , 7 3 8 7 4 , 0 1 0 6 5 , 6 8 5 4 , 1 7 1 9 – – – 5 2 3 , 7 7 7 1 4 , 5 3 1 6 6 5 , 0 0 3 – 5 6 1 , 6 7 1 9 7 7 , 7 8 2 7 4 0 , 2 8 2 – 3 0 4 , 8 8 1 6 8 7 , 1 8 2 5 8 4 , 8 4 4 6 8 8 , 5 0 0 , 1 0 2 0 2 8 7 9 , 6 1 2 1 2 0 2 3 M A e i r t r u M c M n h o J P M K e b o t d e s a e c t a h t s e v i t u c e x E 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 1 2 0 2 0 2 0 2 s e h g u H e i b b o R a n n e K c M a s y L i g n R n a s u S 2 4 7 , 0 8 1 2 6 4 , 6 6 1 3 8 4 , 6 5 1 3 6 9 , 6 5 0 , 4 0 2 0 2 4 6 1 , 8 8 1 0 1 3 , 0 2 1 6 2 2 , 4 6 4 , 2 9 6 5 , 7 0 2 , 4 1 2 0 2 l a t o T a d n a s n o i t i d n o c i e c v r e s o t j t c e b u s e r a 1 2 0 2 Y F f o t c e p s e r n i d e d r a w a s e r a h s I T S d e r r e f e D . 0 2 0 2 Y F o t n o i t a e r l n i I i T S y n a p m o C a d e v e c e r P M K e v i t u c e x E o N 1 2 3 LINK GROUP | Annual Report 2021 123 i e c v r e s d e u n i t n o c o t j t c e b u s t s e v l l i w % 0 5 , 2 2 0 2 Y F f o d n e e h t t a i e c v r e s d e u n i t n o c o t j t c e b u s t s e v l l i w % 0 5 . k c o l i g n d o h l . e u a v l e v i t a g e n a n i d e t l u s e r i s h t , e s a c s ’ e i r t r u M c M n h o J n I . t s e v i t o n d d t a h t s t n a r g I T L r a e y r o i r p f o l a s r e v e r s e d u c n l i I T L n i d e d u c n l i t n u o m a e h T . 2 2 0 2 Y F m o r f e c n e m m o c l l i w I T S d e r r e f e D e s e h t r o f e u a v l g n i t n u o c c a e h T . 3 2 0 2 Y F f o d n e e h t t a SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) 3. DETAILED REMUNERATION INFORMATION 3.1 Detail of Executive KMP remuneration framework Table 8 outlines the detail of the FY2021 STI and LTI arrangements. Table 8: FY2021 approach STI Opportunity Any STI awarded is subject to the achievement of annual targets. The target STI opportunity for Executive KMP represents an opportunity to earn on average around 32% of total target remuneration. Target STI ranges from 75% to 100% of fixed remuneration. Executive KMP have the opportunity to earn up to 150% of their target STI where the Operating NPATA is 110% of budget. This represents the maximum STI. A sliding scale applies between 100% and 110% achievement of the Operating NPATA target to determine the STI pool accrual. The actual STI pool as well as the quantum of an individual KMP’s STI is performance based and subject to Board discretion. 50% of any STI paid is delivered as cash with the remaining 50% awarded in the form of Link Group shares with a holding lock of up to two years. Gateway A minimum level of Operating NPATA must be achieved before any STI is paid. This level is set by the Board annually once the Budget is approved. In FY2021, the STI Gateway Operating NPATA target for Executive KMP was $78.1 million. This gateway was not adjusted for any COVID-19 impact. As the STI gateway target was met, Executive KMP were eligible to receive a STI payment in FY2021. Performance measures Allocation of the STI is by achievement of a balanced scorecard of relevant corporate, business unit (where relevant) and individual measures aligned to our strategic objectives comprising a combination of Operating NPATA, business Operating EBIT and individual strategic goals. Goals vary by role and across financial years but broadly fall under the categories of Company Financial Performance, Strategic Priorities, Divisional Financial Performance, Customer & Stakeholder, People & Leadership and Operational Excellence. In providing a final assessment of performance against goals, the Board may use its discretion as detailed below. For FY2021, the weighting of financial (Operating NPATA and Operating EBIT) to pre-financial goals (Strategic and Operational goals) was 55%/45% for the CEO & Managing Director and 60%/40% for other Executive KMP. Further detail is provided in Section 2.2. STI Deferral In FY2021, deferral of 50% of any earned STI into equity is mandated for Executive KMPs. Deferral is into Link Group shares which are subject to a holding lock for a period of up to two years. 124 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) STI Board Discretion In reviewing the final assessment of annual performance against KPIs and STI awarded, the Board may in its discretion take into consideration: • company, business unit and individual performance; • external market factors; • alignment to Link Group’s core values and behaviours; • internal and external stakeholder relationship management; • prudent risk taking; and • the impact of circumstances, either positive or negative, that arise through the year such as an acquisition or disposal event, fraud, information security or privacy breach, reputational damage, client wins or losses, and any other events it deems relevant. The Board endeavours to apply discretion fairly and consistently and considers the use of discretion in the awards of STI to Executive KMP based on: • Link Group and relevant Business Unit performance; • • results of individual ELT performance reviews which are based on weighted KPIs set at the commencement of the year, and includes an assessment in relation to behaviours and risk management; and input from the Risk Committee Chair and Chief Risk Officer on risk and compliance factors including: – deliberate and/or repeated inadvertent breaches of laws, regulations, or group policies; – failure to obtain pre-approval for trading in Link Group shares; – mandatory training completion rate; – high or critical risk incidents and/or audit items remaining open for more than six (6) months and with no action plan to address them; – upheld employee grievances or whistleblowing matters and any disciplinary actions; and – qualitative assessment on embedding a culture of good risk management. Clawback The Board has the discretion to determine that a portion or all of an employee’s unvested or vested short-term incentive (STI) and long-term incentive (LTI) awards be forfeited if, in the Board’s opinion, adverse circumstances affecting the performance, reputation or risk profile of Link Group have come to the Board’s attention which circumstances, had they been known at the time when the STI or LTI was made, would have caused the Board to make a different award or no award. No Board discretion in relation to clawback was applied in FY2021. Termination The Board has the discretion to determine the treatment of deferred STI in the event an Executive KMP ceases employment during the vesting period. LINK GROUP | Annual Report 2021 125 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) LTI – OMNIBUS EQUITY PLAN Award vehicle Awards are delivered in the form of PSRs. No dividends are paid during the performance period. Participants are entitled to receive dividends and to exercise voting rights attaching to those shares post-vesting while the shares are subject to the holding lock. A cash-settled alternative (through the issue of indeterminate rights) is included in the Omnibus Equity Plan. Opportunity The maximum grant value of LTI opportunities represents 22% to 45% of the total target remuneration package for continuing Executive KMP, or 50% to 150% of fixed remuneration. The number of performance rights granted is determined based on the opportunity available to each participant divided by the five trading day VWAMP for Link Group shares from the date of announcement of Link Group’s full year results. Performance measures The following performance measures apply for FY2021 grants under the LTI: • Operating EPS (75%) – EPS is calculated by dividing Link Group’s Operating NPATA by the undiluted weighted average number of shares on issue throughout the performance period. The Board has discretion to include or exclude items from the calculations. Franking credits are excluded from the calculations. Operating NPATA is a measure consistently used internally and by which both Management and the market tracks Link Group’s performance. Operating NPATA reflects the underlying earnings of the business and excludes the impact of non-cash acquired amortisation as well as the after tax impact of one off significant items. While an internal measure, it receives assurance at each level within the business. The use of Operating EPS as a performance measure reinforces Link’s growth strategy which is underpinned by a disciplined approach to acquisitions as well as organic growth in our existing businesses. This strategy requires dealing effectively with the inherent complexity in managing an acquisitions pipeline and the need to integrate well and achieve synergies. PSRs are subject to a compound annual growth rate in EPS of between a threshold target of 5% and a stretch target of 10%. This target range provides appropriate stretch to executives, is competitive against the ranges set by industry peers and achievement should result in strong returns to shareholders. Our key focus is on delivering earnings growth to our shareholders. The Operating EPS measure strongly supports the aim of the LTI principles in supporting our growth strategy. • TSR (25%) – relative to the constituents of the S&P/ASX 100, excluding materials, utilities, industrials and energy companies. Our starting comparator group, before consideration of any corporate actions during the vesting period, is 55 companies for the FY2021 grant. TSR takes into account the change in Link Group’s share price over the relevant performance period, as well as the dividends paid (dividends are assumed to be reinvested in Link Group shares). Link Group acknowledges that TSR performance relative to a basket of constituents is important to some investors. However, in the absence of a sizeable group of comparable industry peers, we also acknowledge that comparison to a broad S&P/ASX index constituents group can give arbitrary results that are not reflective of the Company’s performance. The lower weighting on TSR is reflective of this. 126 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) LTI – OMNIBUS EQUITY PLAN Vesting schedule The vesting schedule for the EPS portion is as follows: EPS PERFORMANCE OUTCOME Compound annual growth rate of less than 5% Compound annual growth rate of 5% Compound annual growth rate between 5% and 10% PERCENTAGE OF PERFORMANCE RIGHTS THAT WILL VEST 0% 50% Pro-rata between 50% and 100% Compound annual growth rate of 10% or more 100% The vesting schedule for the TSR portion is as follows: LINK GROUP’S RELATIVE TSR RANKING Link Group ranks below the 50th percentile Link Group ranks at the 50th percentile Link Group ranks between the 50th and 75th percentile PERCENTAGE OF PERFORMANCE RIGHTS THAT WILL VEST 0% 50% Pro-rata between 50% (at 50th percentile) and 100% (at 75th percentile) Link Group ranks at or above the 75th percentile 100% Transaction impact As a framework for assessing the treatment of transactions, the Board uses a number of principles against which to assess the impact of a transaction on the LTI: 1. preserve the value of the awards held by employees; 2. reward for the success of the transaction; 3. maintain the level of stretch expected when the original targets were set; 4. be consistent with general market/shareholder expectations; and 5. maintain the integrity of each year’s remuneration as awarded. Each transaction is assessed against these criteria on a case by case basis. Performance period and holding lock Performance is measured over a three-year period. Awards lapse at the end of three years to the extent performance measures are not met. There is no retesting of awards. One-half of any vested award is available to the participant at the end of the performance period. A holding lock applies to the remaining 50%; one-half of which is then available after a further one and two years respectively. Shares are delivered upon PSRs vesting and are held by a trustee while the holding lock applies. Clawback Under the Omnibus Equity Plan, the Board has the discretion to determine that a portion or all of an employee’s unvested or vested short-term incentive (STI) and long-term incentive (LTI) awards be forfeited if, in the Board’s opinion, adverse circumstances affecting the performance, reputation or risk profile of Link Group have come to the Board’s attention which circumstances, had they been known at the time when the STI or LTI was made, would have caused the Board to make a different award or no award. Termination In the event of a cessation of employment for a ‘qualifying reason’ (for example, death, serious injury, disability or illness, genuine retirement or retrenchment), equity will be retained ‘on-foot’ and will be tested against performance hurdles at the original vesting date alongside other participants, having regard to the portion of the performance period served, unless otherwise determined by the Board. LINK GROUP | Annual Report 2021 127 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) LTI – OMNIBUS EQUITY PLAN Change of control The Board has the discretion to vest outstanding awards taking into account the portion of the vesting period and performance against hurdles at the time of the change of control and any replacement equity offered by third parties. There is no acceleration of awards in respect of a potential change of control. Treatment of dividends Participants are not eligible to receive dividends on PSRs until rights are vested and converted into shares. Dividends apply to shares subject to a holding lock. Hedging policy Executive KMP are not permitted to hedge unvested award nor awards subject to a holding lock. Minimum Shareholding Requirement Executive KMP are required to hold a minimum of one year’s annual fixed remuneration within five years of the date that they are appointed as a KMP. Deferred STI and vested LTI subject to a holding lock count towards this requirement. 3.2 Key terms of employment contracts The key employment terms for the Executive KMP are summarised in Table 9. All Executive KMP have continuing contracts. Table 9: Employment terms Continuing Executive KMP Vivek Bhatia Chris Addenbrooke Antoinette Dunne Paul Gardiner Andrew MacLachlan Dee McGrath All employment contracts contain: ANNUAL LEAVE ENTITLEMENT NOTICE PERIOD COMPANY AND EMPLOYEE 20 days 25 days 27 days 20 days 20 days 20 days 12 months 12 months 6 months 12 months 12 months 6 months • total remuneration packages (including mandatory superannuation or pension contributions), plus car parking and any related FBT liability (where applicable) as a discretionary benefit that can be removed at any time; and • express provisions protecting Link Group’s confidential information and intellectual property; and post-employment restrictions covering non-competition, non-solicitation of clients and non-poaching of employees for a maximum of 12 months. Under the terms of all employment contracts, either party is entitled to terminate employment by giving written notice in accordance with the relevant contract notice period. Link Group may, at its election, make a payment in lieu of that notice based on the Executive KMP’s base remuneration package. Link Group may also terminate employment immediately and without further payment where the employee commits serious misconduct and on other similar grounds. Any termination payments are paid within applicable legislative requirements. 128 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) 3.3 Non-Executive Director fees and statutory remuneration table Non-Executive Director fee policy The pool for payment of Non-Executive Directors’ (NED) fees is capped by the Company at $2 million per annum. NED fees are set with reference to relevant market data. The Board reviews fees annually and seeks benchmarking data using the same comparator groups used for the Executive KMP, being Australian-listed companies of similar size and/or industry. Consideration is given to S&P/ASX 200 entities with market capitalisation 50% to 200% of Link Group’s 12-month average market capitalisation and specific peer companies. The Board also reviews NED remuneration with reference to the scale, complexity and geographical reach of Link Group. NEDs receive an annual fee for Board membership and for service as the Chair or a Member of Board Committees. The Chair of the Board does not receive any fees for serving as a Member of Board Committees and NEDs do not receive fees for serving on the Nominations Committee. NEDs are eligible to receive a travel allowance for overseas board meetings. In FY2021, only UK-based Andy Green received a travel allowance for his return trips to Australia. NEDs do not participate in any variable or incentive plans and do not receive retirement benefits other than superannuation. Following a review of the committee structures, the audit and risk responsibilities were separated to enable a greater focus on risk management. The committee structures and fees effective from 1 December 2019 are detailed in Table 10. Table 10: Non-Executive Director fees 1, 2 Base fees Committee Risk Committee Audit Committee Human Resources and Remuneration Committee Technology and Transformation Committee 3 Nomination Committee 2021 2020 CHAIR FEE $ MEMBER FEE $ CHAIR FEE $ MEMBER FEE $ 365,600 168,100 365,600 168,100 32,000 32,000 32,000 32,000 – 16,000 16,000 16,000 16,000 – 32,000 32,000 32,000 32,000 – 16,000 16,000 16,000 16,000 – 1 Amounts are exclusive of GST and inclusive of any required superannuation payments (where applicable). 2 Amounts are full fees, prior to any temporary reduction applied as a result of COVID-19 measures. 3 The Technology and Transformation Committee was previously named the Technology and Operations Committee. LINK GROUP | Annual Report 2021 129 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) Fees paid to NEDs during FY2021 and FY2020 were: Table 11: Statutory remuneration for Non-Executive Directors NAME Michael Carapiet Glen Boreham, AM Andrew (Andy) Green, CBE 2 Peeyush Gupta, AM Anne McDonald Sally Pitkin, AO Fiona Trafford‑Walker Total YEAR 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 FEES 1 $ 388,716 336,797 252,124 206,834 261,820 277,241 170,557 171,298 203,096 171,298 235,996 209,022 202,203 209,824 SUPERANNUATION BENEFITS $ – – – – – – 16,203 16,273 17,286 16,273 – – – – TOTAL $ 388,716 336,797 252,124 206,834 261,820 277,241 186,760 187,571 220,382 187,571 235,996 209,022 202,203 209,824 1,714,512 1,582,314 33,489 32,546 1,748,001 1,614,860 Minimum shareholding requirements The Board has adopted a Minimum Shareholding Policy to assist in aligning the interests of all Directors with our shareholders. Each NED must hold a minimum number of shares, equivalent to one times the NED annual base fee (not including Committee membership or the higher fee for the Committee Chair). The minimum shareholding requirement must be met within three years after the date of their appointment. At the time of publication of this Report, all NEDs with three or more years’ service are in compliance with the minimum shareholding requirements. 1 NEDs who participated in Special Purpose Committees relating to the unsolicited, conditional, non-binding indicative offers for the shares in Link Group and the maximisation of the value of Link Group’s investment in PEXA were paid Special Exertion Fees. There were 24 meetings in total and the fee for Michael Carapiet was $84,050; for Glen Boreham $50,430, and for Sally Pitkin, Anne McDonald, and Andy Green $33,620. 2 Andy Green is based in the UK and accordingly is remunerated in GBP. His annual fee for serving as a Director of the Company is £102,500. In addition, he receives a travel allowance of £5,575 for each return trip to Australia to attend Board meetings. 130 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) 3.4 Remuneration governance The Human Resources and Remuneration Committee (the Committee) assists the Board with oversight of Link Group’s human resources and remuneration strategies and supporting policies and practices for our employees and NEDs and monitoring the implementation and effectiveness of the strategy, policies and practices. Figure 3 outlines the relationship between the Board, Committee, Management and external advisors. The Committee comprises independent NEDs appointed by the Board. Figure 3 BOARD • Oversees Non-Executive Director and Executive KMP remuneration and remuneration policies; • With assistance of the Human Resources and Remuneration Committee (HRRC): – Monitors performance of the Managing Director and Senior Executives; and – Reviews alignment of remuneration polices with the Company’s purpose, values, strategic objectives and risk appetite; and • Reviews and approves recommendations from HRRC. HUMAN RESOURCES AND REMUNERATION COMMITTEE Is responsible for reviewing: • Alignment of remuneration policies and practices with the human resources strategy, the company’s purpose, values, strategic objectives and risk appetite; • Attraction and retention of capable and committed employees and Directors; and • Alignment of Executive KMP remuneration to sustainable shareholder returns, and Link Group’s strategic and operational imperatives. THE COMMITTEE: • Makes recommendations to the Board on Link Group’s remuneration strategy and framework; • Makes recommendations on NED remuneration; • Makes recommendations to the Board on Executive KMP KPIs, performance and remuneration; • Reviews and recommends to the Board Executive KMPs’ terms of employment; and • Considers recommendations from Management. EXTERNAL ADVISORS • Provide independent advice to the Committee and/ or Management on remuneration market data, market practice and other remuneration related matters; and • Provide independent advice to the Committee on Management proposals. RISK COMMITTEE MANAGEMENT • Confirm people and culture related risks are regularly monitored and controls are reviewed and integrated into the Company’s Risk Management Framework; and • Provide a risk related perspective on policies and frameworks for Executive KMP remuneration and awarding of Executive KMP incentives. Makes recommendations to the Committee on Link Group’s remuneration strategy and framework. During FY2021, no remuneration recommendations were provided by any external advisors. LINK GROUP | Annual Report 2021 131 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) 3.5 Additional required disclosures Table 12 outlines the grant of PSRs for Continuing Executive KMP in FY2021. Table 12: FY2021 Grant of PSRs to Continuing Executive KMP TOTAL NUMBER OF PSRS AS AT 1 JULY 2020 PSRS GRANTED IN FY2021 GRANT DATE FAIR VALUE OF PSRS GRANTED IN FY2021 EPS TSR TOTAL NUMBER OF PSRS VESTED DURING THE YEAR TOTAL NUMBER OF PSRS FORFEITED/ LAPSED OR EXPIRED DURING THE YEAR EXERCISE PRICE FOR PSRS GRANTED IN FY2021 TOTAL NUMBER OF PSRS AS AT 30 JUNE 2021 Continuing Executive KMP Vivek Bhatia N/A 482,649 30 Nov 2020 Chris Addenbrooke 172,516 97,480 30 Nov 2020 Antoinette Dunne 1 25,786 22,276 30 Nov 2020 Paul Gardiner 215,184 124,375 30 Nov 2020 Andrew MacLachlan 153,488 111,380 30 Nov 2020 Dee McGrath 57,317 77,347 30 Nov 2020 Nil Nil Nil Nil Nil Nil 4.35 4.35 4.35 4.35 4.35 4.35 2.51 2.51 2.51 2.51 2.51 2.51 – – – – – – – 49,776 – 59,145 26,286 – 482,649 220,220 48,062 280,414 238,582 134,664 All PSRs granted during FY2021 vest over a service period covering 1 July 2020 to 30 June 2023. Table 13 details the shares or rights allocated as part of the Special Equity Grant. Table 13: Equity Granted under the Special Equity Grant program 2 SPECIAL EQUITY GRANTED IN FY2021 INSTRUMENT GRANT DATE EXERCISE PRICE FOR SPECIAL EQUITY GRANTED IN FY2021 TOTAL NUMBER OF SPECIAL EQUITY DELIVERED DURING THE YEAR TOTAL NUMBER OF SPECIAL EQUITY AS AT 30 JUNE 2021 Continuing Executive KMP Vivek Bhatia N/A N/A N/A N/A N/A N/A Chris Addenbrooke 11,484 Restricted Shares 1 Dec 2020 Antoinette Dunne 6,772 Share Rights 1 Dec 2020 Paul Gardiner Andrew MacLachlan Dee McGrath 16,583 14,850 15,469 Restricted Shares Restricted Shares Restricted Shares 1 Dec 2020 1 Dec 2020 1 Dec 2020 Executives that ceased to be KMP John McMurtrie, AM N/A N/A N/A Robbie Hughes 11,558 Share Rights 1 Dec 2020 Lysa McKenna Susan Ring 9,900 9,759 Restricted Shares Restricted Shares 1 Dec 2020 1 Dec 2020 Nil Nil Nil Nil Nil N/A Nil Nil Nil – – – – – N/A – – – 11,484 6,772 16,583 14,850 15,469 N/A 11,558 9,900 9,759 1 Antoinette Dunne began as KMP from 1 June 2021 and the PSRs showing reflect allocations prior to this time. 2 Fifty percent of the special Equity Grant award will be delivered on 1 December 2021 and the other 50% on 1 December 2022. 132 SECTION01 Directors’ Report REMUNERATION REPORT (CONTINUED) Movements in shareholdings The movement during the reporting period in the number of ordinary shares in Link Administration Holdings Limited held, directly, indirectly or beneficially, by each NED and Executive KMP, including their related parties, is set out in Table 14. Table 14: Shareholding movement and minimum shareholding status Michael Carapiet Glen Boreham, AM Andrew (Andy) Green, CBE Peeyush Gupta, AM Anne McDonald Sally Pitkin, AO Fiona Trafford‑Walker Vivek Bhatia Chris Addenbrooke Antoinette Dunne Paul Gardiner Andrew MacLachlan Dee McGrath BALANCE AT 1 JULY 2020 1 1,967,160 120,521 26,030 46,728 32,871 85,517 31,173 N/A 48,041 N/A 778,058 96,132 65,325 FORMER EXECUTIVE KMP John McMurtrie, AM 14,157,665 Robbie Hughes Lysa McKenna Susan Ring 49,850 11,822 – RECEIVED ON EXERCISE OF OPTIONS/ RIGHTS PURCHASED/ ACQUIRED DISPOSED BALANCE AT 30 JUNE 2021 1 MINIMUM SHAREHOLD‑ ING STATUS 2 – – – – – – – – – – – – – – – – – 2,199 – 853 278 0 569 279,457 11,484 N/A 115,588 14,850 15,469 – – 9,900 9,759 – – – – – – – – – – – – – – 1,967,160 122,720 26,030 47,581 33,149 85,517 31,742 279,457 59,525 0 893,646 110,982 80,794 N/A N/A N/A N/A Met Met Met Met Met Met Met N/A N/A N/A Met Met N/A N/A N/A N/A N/A Loans to Key Management Personnel and their related parties There were no loans to Executive KMP during the year. Other transactions with Key Management Personnel A number of Link Group’s NEDs are directors of other entities, which will, from time to time, transact with Link Group. The terms and conditions of the transactions with these entities were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel-related entities on an arm’s length basis. Those transactions are the provision of Link Group services to companies of which some of the NEDs were directors, such as registry services. From time to time, Directors of Link Group, or their related entities, may purchase services from Link Group. These purchases are on the same terms and conditions as those entered into by other Link Group employees or clients and are engaged on an arm’s length basis. These services relate to some NEDs being members of superannuation funds to which Link Group provides services. Executives who were not KMP at the start or end of the financial year have their respective share opening or closing holdings shown as N/A. 1 2 Current KMP who have not met the threshold and are not yet required to meet the threshold are shown as N/A. LINK GROUP | Annual Report 2021 133 SECTION01 Directors’ Report OTHER INFORMATION Significant Changes in State of Affairs PEP/Carlyle and SS&C conditional, non-binding indicative proposals On 12 October 2020, and as updated on 26 October 2020, Link Group announced it had received a conditional, non-binding indicative proposal from a consortium comprising Pacific Equity Partners (PEP), Carlyle Group (Carlyle) and their affiliates (the Consortium) to acquire 100% of the shares in Link Group. On 7 December 2020, and as updated on 10 December 2020, Link Group announced it had received a conditional, non-binding indicative proposal from SS&C Technology Holdings (SS&C) to acquire 100% of the shares in Link Group. The Directors considered that the proposals did not represent compelling value for Link Group shareholders at that time. Link Group provided due diligence information on a non-exclusive basis to assist the parties to develop a proposal capable of being recommended to Link Group shareholders. Link Group announced on 4 January 2021 that it had received a letter from SS&C stating it had withdrawn its proposal. Link Group announced on 28 April 2021 that it had received a letter from the Consortium stating it had withdrawn its proposal. Termination of Proposed Acquisition of Pepper European Servicing On 31 January 2020, Link Group announced it had entered into a binding agreement to acquire Pepper European Servicing (PES) from Pepper Group for an upfront consideration of $277 million, subject to mandatory regulatory approvals and commercial conditions. On 1 February 2021, Link Group announced that it had exercised its contractual right to terminate the agreement and not proceed with the acquisition of PES, as the mandatory regulatory approvals and commercial conditions had not been satisfied by the long stop date. PEXA Initial Public Offering On 30 June 2021, Link Group’s ownership in PEXA Group Limited (PEXA, formerly Torrens Group Holdings) decreased from 44.2% to 42.8% as a result of a series of equity transactions that led to PEXA Group Limited’s shares commencing trading on the Australian Securities Exchange (ASX) on 1 July 2021. Link Group received net proceeds of $179.4 million as a result of the transaction, and will continue to account for PEXA as an equity-accounted investee in the basis Link Group has significant influence over PEXA. Other changes in state of affairs Link Group repaid $102.0 million of its AUD non-amortising loan facility and £45.3 million of its multi-currency non-amortising loan facility during the financial year. All other terms and conditions of the facilities remain substantially the same and are disclosed in Note 18 to the financial statements. On 26 August 2020, the Directors resolved to cease the on-market share buy-back announced to the ASX on 29 August 2019. In total, Link Group bought back and cancelled 3,622,175 shares for a total consideration of $19.4 million. On 1 November 2020, John McMurtrie retired as Managing Director of Link Group, and was succeeded by Vivek Bhatia as Managing Director and Chief Executive Officer. In the opinion of the Directors, aside from the matters described above, there were no other significant changes in the state of the affairs of the Company or Link Group that occurred during the financial year ended 30 June 2021. Events Subsequent to Reporting Date Casa4Funds acquisition On 18 December 2020, Link Group entered into a binding agreement to acquire 100% of Casa4Funds S.A. (Casa4Funds) for a cash free, debt free consideration of €10 million. Casa4Funds, headquartered in Luxembourg, is one of the oldest European independent third-party UCITS Management Companies and Alternative Investment Fund Managers (AIFM). As at 30 June 2021, the acquisition was subject to mandatory regulatory approvals and completed on 4 August 2021. 134 SECTION01 Directors’ Report OTHER INFORMATION (CONTINUED) On-market share buy-back On 26 August 2021, Link Group announced its intention to undertake an on-market buy-back of its shares up to a maximum cost of $150.0 million. Link Group reserves the right to vary, suspend or terminate the buy-back at any time. Post balance date debt repayments Link Group made the following debt repayments subsequent to reporting date: • On 7 July 2021, Link Group repaid $45 million of its AUD non-amortising loan facility; • On 12 July 2021, Link Group repaid £3.3 million of its GBP non-amortising loan facility; • On 12 July 2021, Link Group repaid $75 million of its AUD non-amortising loan facility; and • On 28 July 2021, Link Group repaid $30 million of its AUD non-amortising loan facility. On 5 July 2021, Link Group terminated $275 million of the AUD non-amortising term loan facility early in accordance with the Syndicated Facility Agreement. Impact of COVID-19 on post balance date trading Whilst the Directors note the ongoing COVID-19 pandemic continues to impact global markets, including jurisdictions that Link Group operates in, Link Group has shown resilience and has been proactive in response to these challenges. The future impact of the COVID-19 pandemic remains uncertain. Other than the matters described above, in the opinion of the Directors, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of Link Group, the results of those operations, or the state of affairs of Link Group, in future financial years. Likely Developments Further information about the likely developments in the operations of Link Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to Link Group. Environmental Regulation Link Group’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation. The Board believes Link Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to Link Group. Indemnification and Insurance The Company has agreed to indemnify, to the extent permitted by the Corporations Act 2001, each Director and officer in respect of certain losses and liabilities (including all reasonable legal expenses) which the Director or officer may incur as a result of, or by reason of being a Director or officer of Link Group or a related body corporate. The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. In accordance with the provisions of the Corporations Act 2001, the Company has a Directors’ and officers’ liability policy which covers all Directors and officers of Link Administration Holdings Limited and its Controlled Entities. The terms of the policy specifically prohibit disclosure of details of the amount of the insurance cover and the premium paid. During the financial year, the Company has not paid any premium in respect of a contract to insure the auditor of the Company or any of the auditor’s related entities. Corporate Governance The Board implements high standards of corporate governance, taking into account the Company’s size, structure and nature of its operations. Link Group’s Corporate Governance Statement reports against the Fourth Edition of the ASX Corporate Governance Council’s Principles and Recommendations. The Corporate Governance Statement is approved by the Board and the most current version is available on the Link Group website at www.linkgroup.com. LINK GROUP | Annual Report 2021 135 SECTION01 Directors’ Report OTHER INFORMATION (CONTINUED) Rounding Off The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, and in accordance with that Instrument amounts in the financial statements and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. Non-audit services During the year KPMG, Link Group’s auditor, performed certain other services in addition to the audit of the financial statements amounting to $793,624 (2020: $675,918). The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Audit Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services were subject to the corporate governance procedures adopted by Link Group and have been reviewed by the Risk and Audit Committees to ensure they do not impact the integrity and objectivity of the auditor; • The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for Link Group, acting as an advocate for Link Group or jointly sharing risks and rewards; and Details of the amounts paid to KPMG for audit and non-audit services provided during the year are disclosed in Note 30 to the financial statements. The Lead Auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 137 and forms part of the Directors’ Report for the financial year ended 30 June 2021. Signed in accordance with a resolution of the Board of Directors. Dated 26 August 2021 at Sydney. Michael Carapiet Chair Vivek Bhatia Chief Executive Officer & Managing Director 136 SECTION01 Directors’ Report LEAD AUDITOR’S INDEPENDENCE DECLARATION Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Link Administration Holdings Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Link Administration Holdings Limited for the financial year ended 30 June 2021 there have been: no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. i. ii. KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG Eileen Hoggett Partner Sydney 26 August 2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 60 LINK GROUP | Annual Report 2021 137 SECTION01 Directors’ Report CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 30 June 2021 Revenue – contracts with clients Expenses: Employee expenses Occupancy expenses IT costs Administrative and general expenses Acquisition and capital management related expenses Depreciation expense Intangibles amortisation expense Contract fulfilment cost amortisation expenses Gain/(loss) on financial assets held at fair value through profit and loss Share of profit/(loss) of equity-accounted investees, net of tax Profit on disposal of subsidiaries Impairment expense Finance income Finance costs Net finance costs Profit/(loss) before tax Tax expense Profit/(loss) for the year Other comprehensive income Items that will not be reclassified to profit or loss: Defined benefit re-measurement Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences for foreign operations Other comprehensive income, net of tax Total comprehensive income for the year NOTE 2021 $’000 2020 RESTATED 1 $’000 6 1,160,340 1,230,401 (614,349) (599,171) (20,118) (28,432) (116,944) (118,417) 7 (179,310) (224,611) 15 16 21 5 26 16 19 (21,651) (13,455) (952,372) (984,086) (53,740) (55,397) (102,687) (110,133) (7,193) (6,738) (163,620) (172,268) 3,607 1,942 15,347 (23,179) (14) 48 (182,779) (107,751) 8,866 (32,840) (23,974) (141,509) 9(a) (21,195) 2,009 (35,190) (33,181) (90,030) (12,493) (162,704) (102,523) (111) (12) (7,006) (7,117) (2,279) (2,291) (169,821) (104,814) The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the financial statements. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. 138 SECTION02 Financial Statements CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the financial year ended 30 June 2021 (continued) Profit attributable to: Owners of the Company Non-controlling interest Profit/(loss) for the year Total comprehensive income attributable to: Owners of the Company Non-controlling interest Total comprehensive income for the year EARNINGS PER SHARE Basic earnings per share Diluted earnings per share NOTE 2021 $’000 2020 RESTATED 1 $’000 (163,352) (104,621) 648 2,098 (162,704) (102,523) (170,493) (106,704) 672 1,890 (169,821) (104,814) CENTS PER SHARE CENTS PER SHARE 1 8 8 (30.75) (30.35) (19.67) (19.55) The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the financial statements. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. LINK GROUP | Annual Report 2021 139 SECTION02 Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2021 Current assets Cash and cash equivalents Trade and other receivables Derivative financial assets Other assets Current tax assets Fund assets Assets held for sale Total current assets Non-current assets Trade and other receivables Investments Derivative financial assets Equity-accounted investments Plant and equipment Intangible assets Deferred tax assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Interest bearing loans and borrowings Provisions Employee benefits Current tax liabilities Fund liabilities Liabilities held for sale Total current liabilities Non-current liabilities Trade and other payables Interest-bearing loans and borrowings Provisions Employee benefits Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity attributable to equity holders of the parent Non-controlling interest Total equity 30 JUNE 2021 $’000 30 JUNE 2020 RESTATED 1 $’000 1 JULY 2019 RESTATED 1 $’000 NOTE 10 12 10 21 5 15 16 9(d) 11 18 13 14 12 11 18 13 14 9(d) 22 23 24 395,024 235,388 273 36,458 7,290 864,901 – 1,539,334 1,651 103,502 – 535,247 215,711 1,798,436 65,275 17,612 2,737,434 4,276,768 340,595 30,952 14,147 49,910 31,909 860,746 – 1,328,259 7,379 1,036,961 37,940 5,892 120,742 1,208,914 2,537,173 1,739,595 1,917,748 (11,172) (167,815) 1,738,761 834 1,739,595 264,092 238,937 363 33,849 18,459 616,982 5,931 1,178,613 5,251 93,198 330 705,259 250,429 2,042,245 56,472 21,686 3,174,870 4,353,483 275,154 35,945 18,391 38,650 4,870 614,883 1,794 989,687 8,583 1,226,952 48,074 5,450 142,492 1,431,551 2,421,238 1,932,245 1,889,733 16,669 21,237 1,927,639 4,606 1,932,245 560,176 244,830 – 37,318 234 985,900 – 1,828,458 3,490 51,349 – 705,273 268,932 2,188,936 51,976 18,121 3,288,077 5,116,535 261,328 30,038 14,765 44,670 7,773 985,633 – 1,344,207 29,244 1,393,515 39,915 5,286 147,411 1,615,371 2,959,578 2,156,957 1,909,140 15,256 229,338 2,153,734 3,223 2,156,957 The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. 140 SECTION02 Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY as at 30 June 2021 SHARE CAPITAL $’000 RESERVES $’000 RETAINED EARNINGS $’000 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT $’000 NON- CONTROLLING INTEREST $’000 TOTAL EQUITY $’000 Balance at 30 June 2020 1 1,889,733 16,669 21,237 1,927,639 4,606 1,932,245 Net loss after tax Defined benefit remeasurement Foreign currency translation differences, net of tax Total other comprehensive income, net of income tax Total comprehensive income Transfer from retained earnings to reserves Transactions with shareholders Dividends declared during the year Equity settled share-based payments Treasury shares acquired Disposal of subsidiaries with non-controlling interest Transactions with non- controlling interest without a change in control Issue of share capital, net of costs of raising capital and tax Total contributions by and distributions to owners – – – – – – – – – – – – (163,352) (163,352) 648 (162,704) (111) (7,030) (7,141) – – – (111) (7,030) (7,141) – 24 24 (111) (7,006) (7,117) (7,141) (163,352) (170,493) 672 (169,821) 29,070 (29,070) – – – (42,657) – (42,657) (304) (42,961) 10,414 (18,490) 2,026 1,402 – – 11,816 (18,490) – – 11,816 (18,490) 2,026 (1,133) 893 (1,063) 1,968 905 (3,007) (2,102) 28,015 – – 28,015 – 28,015 28,015 (49,770) 3,370 (18,385) (4,444) (22,829) Balance at 30 June 2021 1,917,748 (11,172) (167,815) 1,738,761 834 1,739,595 The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. LINK GROUP | Annual Report 2021 141 SECTION02 Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY as at 30 June 2021 (continued) SHARE CAPITAL $’000 RESERVES $’000 RETAINED EARNINGS $’000 TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT $’000 NON- CONTROLLING INTEREST $’000 TOTAL EQUITY $’000 1,909,140 15,256 223,739 2,148,135 3,223 2,151,358 – – 5,599 5,599 – 5,599 1,909,140 15,256 229,338 2,153,734 (104,621) (104,621) (12) 3,223 2,098 – 2,156,957 (102,523) (12) – (12) (2,071) (2,083) – – – (2,071) (208) (2,279) (2,083) (208) (2,291) (2,083) (104,621) (106,704) 1,890 (104,814) 104,173 (104,173) – – – (101,248) 5 (101,243) (507) (101,750) 967 (396) 688 – – 1,655 (396) (19,407) – – – 1,655 (396) (19,407) (19,407) – – – – – – – – – – Balance at 30 June 2019 – As reported Prior period restatement (refer Note 3) Balance at 30 June 2019 – Restated 1 Net loss after tax 1 Defined benefit remeasurement Foreign currency translation differences, net of tax Total other comprehensive income, net of income tax Total comprehensive income 1 Transfer from retained earnings to reserves Transactions with shareholders Dividends declared during the year Equity settled share-based payments Treasury shares acquired Buy-back and cancellation of share capital, net of costs Total contributions by and distributions to owners (19,407) (100,677) 693 (119,391) (507) (119,898) Balance at 30 June 2020 1 1,889,733 16,669 21,237 1,927,639 4,606 1,932,245 The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. 142 SECTION02 Financial Statements CONSOLIDATED STATEMENT OF CASH FLOWS for the financial year ended 30 June 2021 Cash flows from operating activities Cash receipts in the course of operations Cash payments in the course of operations Cash payments for global transformation, acquisition/divestment and other one-off costs Interest received Dividends received Borrowing costs paid Income taxes paid NOTE 2021 $’000 2020 $’000 1,290,851 1,369,711 (997,928) (1,051,088) 292,923 318,623 (36,334) (51,718) 2,693 458 (30,719) (14,100) 1,700 386 (34,700) (44,683) Net cash provided by operating activities 17(a) 214,921 189,608 Cash flows from investing activities Payments for plant and equipment Payments for software Proceeds from disposal of subsidiaries, net of cash disposed Proceeds from loan repayments Acquisition of subsidiary, net of cash acquired Proceeds from/(payments for) derivatives Payments for investments Proceeds from investments Sub-lease receipts Payment of indemnified liabilities Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Payment of borrowing transaction costs Repayment of lease liabilities Payment for buy-back of shares Payment for purchase of treasury shares Dividends paid to owners of the Company Dividends paid to non-controlling interest Net cash (used in)/provided by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effect of exchange rate fluctuations on cash held Cash and cash equivalents reclassified as held for sale Cash and cash equivalents at the end of the financial year (15,219) (25,868) 20,315 200,000 (7,072) 475 (33,147) (74,134) – – (5,634) (633) (4,993) (69,560) 1,278 936 – 1,509 263 (12,926) 169,852 (194,262) 11,960 308,557 (195,057) (437,615) – (34,852) – (432) (721) (29,848) (19,407) (396) (32,695) (101,243) (304) (507) (251,380) (281,180) 133,393 264,092 (2,461) – (285,834) 560,176 (8,283) (1,967) 395,024 264,092 The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements. LINK GROUP | Annual Report 2021 143 SECTION02 Financial Statements PREPARATION OF THIS REPORT 1. GENERAL INFORMATION Link Administration Holdings Limited (the “Company”) is a company incorporated and domiciled in Australia. The Company’s registered office and principal place of business is Level 12, 680 George Street, Sydney NSW 2000, Australia. The consolidated financial statements of Link Group as at and for the year ended 30 June 2021 comprise the Company and its subsidiaries and Link Group’s interest in associates. Link Group is a for-profit entity. Link Group’s purpose is connecting people with their assets – safely, securely and responsibly. Link Group administers financial ownership data and drives user engagement, analysis and insight through technology. We deliver complete solutions for companies, large asset owners and trustees across the globe. Our commitment to market-leading client solutions is underpinned by our investment in people, processes and technology. 2. BASIS OF PREPARATION (a) Statement of compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on a going concern basis. Notwithstanding the net loss after tax, Link Group showed resilience in response to the challenges brought on by the COVID-19 pandemic across all global markets. During this period, Link Group maintained a focus on safeguarding the well-being of employees, as well as ensuring continuity of service for clients. Link Group’s response was aided by several factors including, but not limited to: • Continued investment in new technology and products to enable better servicing of our clients; • A resilient earnings profile supporting operating cash flow, with approximately 85% of revenue recurring in nature; • Additional initiatives were implemented to reduce costs and support operating cash flow; • A strong liquidity position supported by cash reserves and committed, undrawn credit facilities; and • Debt serviceability and leverage remained comfortably within existing bank covenants. The Directors of the Company consider it probable that Link Group will continue to fulfil all obligations as and when they fall due for the foreseeable future and accordingly consider that Link Group’s financial statements should be prepared on a going concern basis. The consolidated financial statements were approved by the Board of Directors on 26 August 2021. (b) Basis of measurement The financial statements have been prepared on the historical cost basis except for financial instruments designated at fair value through profit or loss, which are measured at fair value. (c) Functional and presentation currency These consolidated financial statements are presented in Australian Dollars, which is the Company’s functional currency. Link Group’s accounting policies applied in translating the results and financial position of subsidiaries which have a functional currency other than Australian Dollars into the presentation currency are described in Note 2(e). 144 SECTION03 Notes to the Financial Statements PREPARATION OF THIS REPORT (CONTINUED) (d) Use of estimates and judgements Preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the following notes to the financial statements: • Note 9(e) Utilisation of tax losses; • Note 13 Provisions; • Note 16 Key assumptions in impairment testing for cash generating units (CGUs) containing goodwill; • Note 21 Fair value of level 3 financial instruments; • Note 25 Share-based payments; and • Note 26 Business combinations. Whilst COVID-19 has not had an impact on any of Link Group’s accounting policies, the impact of COVID-19 has been considered in applying Link Group’s accounting policies including where management has made judgements, estimates and assumptions. To the extent relevant, the impact of COVID-19 has been considered and disclosed throughout the notes to the consolidated financial statements, including: • Note 10 Assumptions within our expected credit losses on trade and other receivables; • Note 16 Impact on cash flows forecasts used for impairment testing for CGUs containing goodwill; and • Note 21 Impact on the fair value assessment of Level 3 investments. (e) Foreign currency Foreign currency transactions Transactions, assets and liabilities in foreign currencies are translated to the respective functional currencies of Link Group entities using the following applicable exchange rate: FOREIGN CURRENCY AMOUNT APPLICABLE EXCHANGE RATE Transactions Monetary assets and liability Date of transaction Reporting date Non-monetary assets and liability measured at fair value Date fair value is determined Foreign currency differences arising on translation are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated to Australian dollars at the following applicable exchange rates: FOREIGN CURRENCY AMOUNT Asset and liabilities Income and expenses APPLICABLE EXCHANGE RATE Reporting date Date of transaction On consolidation, foreign exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income and presented in equity in the Foreign Currency Translation Reserve. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and presented in equity in the Foreign Currency Translation Reserve. LINK GROUP | Annual Report 2021 145 SECTION03 Notes to the Financial Statements PREPARATION OF THIS REPORT (CONTINUED) (f) Rounding off The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, and in accordance with that Instrument all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated. (g) Changes in accounting policies The principal accounting policies adopted by Link Group are consistent with those of the previous financial year. Software-as-a-Service (SaaS) cloud computing arrangements In April 2021, the IFRS Interpretations Committee (IFRIC) issued a decision clarifying its interpretation of how current accounting standards apply to configuration and customisation costs incurred when implementing a Software-as-a-Service cloud computing arrangement. Link Group reviewed its accounting policies in light of the IFRIC decision and confirms its existing accounting policies comply with the IFRIC’s decision. Link Group’s accounting policies in relation to Software-as-a-Service cloud computing arrangements are as follows: • Costs incurred to acquire Software-as-a-Service cloud computing arrangements are expensed when incurred; • Distinct configuration and customisation costs incurred when implementing Software-as-a-Service cloud computing arrangements are capitalised as an intangible asset where they meet the recognition requirements of AASB 138 Intangible Assets; and • Any remaining configuration and customisation costs incurred when implementing Software-as-a-Service cloud computing arrangements are expensed when the services are received. 146 SECTION03 Notes to the Financial Statements PREPARATION OF THIS REPORT (CONTINUED) 3. RESTATEMENT OF PRIOR PERIOD (a) Nature of prior period restatement During the year ended 30 June 2021, Link Group was made aware of material restatements to the financial statements of its equity-accounted investment, PEXA Group Limited (PEXA, formerly Torrens Group Holdings Pty Ltd), for the years ended 30 June 2019 and 30 June 2020. The restatements arose upon a reissue of PEXA’s audited financial statements on 21 May 2021 and relate to PEXA recognising a deferred tax asset arising from unutilised tax losses, which had previously been unrecognised. The restatements had a material impact in Link Group’s share of loss of equity-accounted investees, and related tax effect accounting. (b) Effect of prior period restatement The corrections to PEXA’s audited financial statements have been incorporated by Link Group restating each of the financial statement line items in the prior periods. The following tables summarise the impact on the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2020 and the Consolidated Statement of Financial Position as at 1 July 2019 and 30 June 2020: CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 Share of loss of equity-accounted investees, net of tax Loss before tax Tax expense Loss for the year Total comprehensive income EARNINGS PER SHARE Basic earnings per share Diluted-earnings per share AS PREVIOUSLY REPORTED $’000 (11,385) (101,401) (12,497) (113,898) (113,898) CORRECTION $’000 AS RESTATED $’000 11,371 11,371 4 11,375 11,375 (14) (90,030) (12,493) (102,523) (102,523) CENTS PER SHARE CENTS PER SHARE CENTS PER SHARE (21.81) (21.67) 2.14 2.12 (19.67) (19.55) CONSOLIDATED STATEMENT OF FINANCIAL POSITION Total current assets AS PREVIOUSLY REPORTED $’000 1,178,613 AS AT 30 JUNE 2020 AS AT 1 JULY 2019 CORRECTION $’000 AS RESTATED $’000 AS PREVIOUSLY REPORTED $’000 CORRECTION $’000 AS RESTATED $’000 – 1,178,613 1,828,458 – 1,828,458 Equity-accounted investments 691,228 14,031 705,259 702,613 Total non-current assets Total assets Total current liabilities Deferred tax liabilities 3,160,839 4,339,452 989,687 145,435 14,031 3,174,870 3,285,417 14,031 4,353,483 5,113,875 2,660 2,660 2,660 705,273 3,288,077 5,116,535 – 989,687 1,344,207 – 1,344,207 (2,943) 142,492 150,350 (2,939) 147,411 Total non-current liabilities 1,434,494 (2,943) 1,431,551 1,618,310 (2,939) 1,615,371 (2,943) 2,421,238 2,962,517 (2,939) 2,959,578 Total liabilities Net assets Retained earnings Total equity attributable to equity holders of the parent Total equity 2,424,181 1,915,271 16,974 1,932,245 2,151,358 4,263 16,974 21,237 223,739 1,910,665 1,915,271 16,974 1,927,639 2,148,135 16,974 1,932,245 2,151,358 5,599 5,599 5,599 5,599 2,156,957 229,338 2,153,734 2,156,957 LINK GROUP | Annual Report 2021 147 SECTION03 Notes to the Financial Statements OPERATING RESULTS 4. OPERATING SEGMENTS (a) Reportable segments As announced to the ASX, as part of its “Simplify, Deliver, Grow” strategy, Link Group realigned its global operating model and organisation structure during the financial year ended 30 June 2021 to best achieve its strategic priorities. The Technology & Operations (“T&O”) segment has been dissolved and reorganisation along global business lines with clearly defined shared services, together with the removal of margins from technology charges, provides greater transparency of performance within each segment. Some of the principles underpinning the realigned global operating model and structure include: • A simplified organisation structure and segment reporting (making Link Group easier to understand); • Undiluted accountability for end to end global business unit performance; • • Improved client and stakeholder engagement and service delivery; Increased process integration; • Enhanced decision making, bringing Link Group closer to the clients; and • Enhanced ability to accelerate growth (organically and inorganically). As a result, Link Group now has four reportable segments together with its strategic investment in PEXA Group Limited (refer to Note 5). Each of the segments offers different products and services and is managed separately because they require different technology and business strategies to service their respective markets and comply with relevant legislative and other requirements. Financial information for each division is provided regularly to Link Group’s Chief Executive Officer & Managing Director (the chief operating decision maker). The following summary describes the operations in each of Link Group’s reportable segments. • Retirement & Superannuation Solutions (“RSS”) – provides core member and employer administration services, combined with a full range of value-added services including an integrated clearing house, financial planning and advice, direct investment options and trustee services. • Corporate Markets (“CM”) – provides a uniquely integrated range of corporate markets capabilities including shareholder management and analytics, stakeholder engagement, share and unit registry, employee share plans, company secretarial support, as well as various specialist offerings such as insolvency solutions. • Banking & Credit Management (“BCM”) – provides loan origination and servicing, debt work-out, compliance and regulatory oversight services to a range of clients including retail banks, investment banks, private equity funds and other investors. • Fund Solutions (“FS”) – provides authorised fund manager/management company, third-party administration and transfer agency services to asset managers and a variety of investment funds. As required by Australian Accounting Standards, comparative information has been restated to align to the new reportable segments. Revenues from external clients, revenues from transactions with other segments, measure of profit or loss (Operating EBIT), impairment expense and total assets are presented below for each reportable segment. 148 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2021 RSS $’000 CM $’000 BCM $’000 FS $’000 TOTAL REPORTABLE SEGMENTS $’000 HEAD OFFICE $’000 TOTAL LINK GROUP $’000 Segment revenue 506,905 364,938 141,053 170,456 1,183,352 Inter-segment eliminations (2,033) (20,908) (67) (4) (23,012) Revenues from external clients 504,872 344,030 140,986 170,452 1,160,340 – – – 1,183,352 (23,012) 1,160,340 Operating EBIT 96,045 54,230 (12,112) 15,722 153,885 (12,436) 141,449 Impairment expense – – (182,779) – (182,779) – (182,779) Total assets at 30 June 2021 617,849 898,133 174,753 1,505,453 3,196,188 1,080,580 4,276,768 FOR THE YEAR ENDED 30 JUNE 2020 – RESTATED 1 RSS $’000 CM $’000 BCM $’000 FS $’000 TOTAL REPORTABLE SEGMENTS $’000 HEAD OFFICE $’000 TOTAL LINK GROUP $’000 Segment revenue 529,441 387,056 165,656 172,971 1,255,124 Inter-segment eliminations (1,292) (23,317) – (114) (24,723) Revenues from external clients 528,149 363,739 165,656 172,857 1,230,401 – – – 1,255,124 (24,723) 1,230,401 Operating EBIT 96,272 71,923 6,685 20,327 195,207 (15,488) 179,719 Impairment expense – (107,751) – – (107,751) – (107,751) Total assets at 30 June 2020 2 661,064 948,719 391,290 1,240,206 3,241,279 1,112,204 4,353,483 1 Comparative information has been restated to align to the new reportable segments. 2 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. LINK GROUP | Annual Report 2021 149 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) (b) Reconciliation of reportable segments A reconciliation of information provided on reportable segment measures of profit or loss to the consolidated net profit after tax is provided below. Operating EBIT Significant items/One-off costs: • Global transformation costs • Business combination/acquisition & divestment costs • Other one-off costs Total significant items Depreciation expense – non-operating Intangibles amortisation expense – non-operating Intangibles amortisation expense – acquisition related Gain/(loss) on financial assets held at fair value through profit and loss Share of profit of equity-accounted investees (excluding acquired amortisation), net of tax Share of acquired amortisation of equity-accounted investees, net of tax Profit on disposal of subsidiaries Impairment expense Finance income Finance expense (Loss)/profit before tax Income tax expense Net (loss)/profit after tax (c) Geographic information 2021 $’000 2020 1 $’000 141,449 179,719 (27,153) (21,470) – (48,623) (1,507) (88) (46,883) 3,607 19,433 (17,491) 15,347 (31,321) (13,566) (2,592) (47,479) (5,188) (71) (52,934) (23,179) 17,509 (17,523) 48 (182,779) (107,751) 8,866 (32,840) (141,509) (21,195) 2,009 (35,190) (90,030) (12,493) (162,704) (102,523) Link Group had total revenue and non-current assets attributed to the following geographic locations. Australia and New Zealand United Kingdom and Channel Islands Ireland Other countries REVENUE NON-CURRENT ASSETS 2021 $’000 2020 $’000 2021 $’000 2020 1 $’000 660,111 305,009 115,007 80,213 682,433 1,432,299 1,642,791 326,916 1,065,103 1,277,574 134,203 86,849 22,114 47,490 41,765 48,709 1,160,340 1,230,401 2,567,006 3,010,839 In presenting the geographic information, revenue and non-current assets are allocated based on the country in which the legal entity is domiciled. Non-current assets allocated by country include plant and equipment, intangible assets, equity-accounted investments and other assets. (d) Major clients Link Group had one (2020: one) major client in the RSS segment, which generated revenues of $131.4 million (2020: $129.0 million). Segment reporting Segment results that are reported to Link Group’s Chief Executive Officer & Managing Director (the chief operating decision maker) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. 150 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) 5. EQUITY-ACCOUNTED INVESTMENTS Equity accounted investments are those over which Link Group has significant influence, but not control. Set out below are the equity-accounted investments of Link Group as at 30 June 2021. EQUITY-ACCOUNTED INVESTMENTS PEXA Group Limited PLACE OF BUSINESS Australia % OWNERSHIP INTEREST 2021 % OWNERSHIP INTEREST 2020 2021 $’000 2020 1 $’000 42.8 44.2 535,247 705,259 On 30 June 2021, Link Group’s ownership in PEXA Group Limited (PEXA, formerly Torrens Group Holdings) decreased from 44.2% to 42.8% as a result of a series of equity transactions that lead to PEXA Group Limited’s shares commencing trading on the Australian Securities Exchange (ASX) on 1 July 2021. Link Group will continue to account for PEXA as an equity-accounted investee on the basis Link Group has significant influence over PEXA. (a) Summarised financial information for equity-accounted investments The following table summarises the financial information of PEXA Group Limited (PEXA, formerly Torrens Group Holdings) as included in its own consolidated financial statements, adjusted for fair value adjustments at acquisition and differences in accounting policies. The table also reconciles the summarised financial information to the carrying amount of Link Group’s interest in PEXA. PEXA SUMMARY BALANCE SHEET AS AT 30 JUNE 2021 Cash and cash equivalents Other current assets Non-current assets Shareholder loans payable Other current liabilities Non-current liabilities Net Assets Link Group’s share of net assets (42.8%, 2020: 44.2%) Link Group’s share of PEXA IPO funds raised on 1 July 2021 Carrying value of equity-accounted investment 2021 $’000 51,517 33,130 2020 1 $’000 70,417 23,016 1,528,469 1,569,223 (192,982) (55,417) (332,925) – (35,233) (30,999) 1,031,792 1,596,424 441,250 705,259 93,997 – 535,247 705,259 Fair value of Link Group’s investment based on PEXA ASX close price 2 1,300,553 n/a 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. 2 PEXA Group Limited’s close price on 1 July 2021, being the date PEXA Group Limited was admitted to the Australian Securities Exchange. LINK GROUP | Annual Report 2021 151 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) PEXA SUMMARY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 Revenue Depreciation expense Intangibles amortisation expense – non-acquisition related Intangibles amortisation expense – acquisition related Net finance (expense)/income Income tax expense Profit/(loss) for the year Other comprehensive income for the year Total comprehensive income for the year Link Group’s share of comprehensive income (44.2%) 2 Elimination of shareholder loan interest Link Group’s share of comprehensive income (b) Reconciliation of movements in carrying values Carrying value at beginning of the year Share of profit/(loss) of equity-accounted investees, net of tax Share of other comprehensive income Return of capital from equity-accounted investee, converted to shareholder loan Shareholder loan converted to additional shares in equity-accounted investee Additional shares in equity-accounted investee acquired in IPO Elimination of shareholder loan interest Carrying value at the end of the year 2021 $’000 2020 1 $’000 221,046 155,587 (2,381) (7,067) (56,560) (36,495) (3,695) (11,787) – (11,787) (5,207) 7,149 1,942 (2,364) (3,363) (56,664) 2,501 8,736 (30) – (30) (14) – (14) 2021 $’000 2020 1 $’000 705,259 705,273 1,942 – (419,460) 234,024 20,631 (7,149) (14) – – – – – 535,247 705,259 On 30 July 2020, PEXA’s board returned capital to shareholders by drawing down on shareholder loans, of which Link Group’s share was $419.5 million. As part of PEXA’s IPO transaction, on 30 June 2021 PEXA made a $200.0 million cash payment to partially repay Link Group’s shareholder loan, with Link Group’s remaining $234.0 million loan outstanding converting to shares in PEXA at the IPO price of $17.13 per share. Link Group accounted for its $20.6 million cash contribution to PEXA’s IPO on 1 July 2021 as a payable as at 30 June 2021 given Link Group was legally obligated under the IPO underwriting agreement, and a reliable estimate of the obligation was known following PEXA’s bookbuild process in late June 2021. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. 2 Refer to Note 3. Link Group’s interest in PEXA Group Limited reduced from 44.2% to 42.8% on 30 June 2021, hence Link Group’s share of comprehensive income was 44.2% of the full year ended 30 June 2021. 152 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) 6. REVENUE Revenue Revenue is recognised as performance obligations are satisfied over time. Clients obtain control of services as they are delivered, and revenue is recognised over time as those services are provided. Invoices are generally issued on a monthly basis and are payable within 7 to 30 days. As such, there is not considered to be any significant financing component within each contract. Where Link Group has a right to consideration from a client in an amount that corresponds directly with the value of performance completed to date (for example, a service contract billed for a fixed amount for each hour of service provided), Link Group recognises revenue in the amount to which it has a right to invoice the client. Link Group may also recognise revenue derived at a point in time, generally when Link Group’s performance obligation is linked to a particular event. Revenue is recognised when Link Group has an unconditional right to payment under the terms of the contract. Contract fulfilment costs Costs directly related to a contract that generate or enhance Link Group’s resources to satisfy performance obligations in the future, and that are expected to be recovered, are recognised as an asset. Contract fulfilment costs are amortised on a straight-line basis over the expected life of the contract. Any recoveries of those contract fulfilment costs from client are classified as contract liabilities and amortised over the same period where they do not relate to a separate performance obligation. LINK GROUP | Annual Report 2021 153 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) (a) Disaggregation of revenue Revenue has been disaggregated by primary geographic location. The tables below also include a reconciliation of the disaggregated revenue with Link Group’s reportable segments. FOR THE YEAR ENDED 30 JUNE 2021 RSS $’000 CM $’000 BCM $’000 FS $’000 Geographic location TOTAL REPORTABLE SEGMENTS $’000 INTER- SEGMENT ELIMINATIONS $’000 TOTAL LINK GROUP $’000 Australia and New Zealand 501,458 160,667 – 19,710 681,835 (21,724) 660,111 United Kingdom and Channel Islands Ireland Other countries Revenues from contracts with clients 5,447 143,885 28,823 127,886 – – 5,405 54,981 87,026 25,204 22,576 284 306,041 115,007 80,469 (1,032) 305,009 – 115,007 (256) 80,213 506,905 364,938 141,053 170,456 1,183,352 (23,012) 1,160,340 FOR THE YEAR ENDED 30 JUNE 2020 – RESTATED 1 RSS $’000 CM $’000 BCM $’000 FS $’000 Geographic location TOTAL REPORTABLE SEGMENTS $’000 INTER- SEGMENT ELIMINATIONS $’000 TOTAL LINK GROUP $’000 Australia and New Zealand 527,528 158,945 – 18,282 704,755 (22,322) 682,433 United Kingdom and Channel Islands Ireland Other countries Revenues from contracts with clients (b) Contract balances 1,913 163,758 32,194 130,297 – – 4,380 105,435 24,388 59,973 28,027 4 328,162 134,203 88,004 (1,246) 326,916 – 134,203 (1,155) 86,849 529,441 387,056 165,656 172,971 1,255,124 (24,723) 1,230,401 The following table provides information about contract assets and contract liabilities from contracts with clients. Contract assets (included in trade and other receivables) Contract liabilities – current (included in trade and other payables) Contract liabilities – non-current (included in trade and other payables) 2021 $’000 – 2020 $’000 – (31,278) (28,400) (6,135) (7,688) (37,413) (36,088) Contract assets primarily relate to Link Group’s rights to consideration for work completed but not billed at the reporting date. Contract assets are transferred to trade receivables when Link Group’s contractual entitlement to the consideration becomes unconditional. This usually occurs when Link Group has a contractual right to issue an invoice to the client. Contract liabilities primarily relate to consideration received in advance from client for services for which revenue is recognised over time. 1 Comparative information has been restated to align to the new reportable segments. 154 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) (c) Unsatisfied performance obligations The following table shows unsatisfied performance obligations resulting from client contracts. Aggregate amount of revenue allocated to client contracts that are partially or fully unsatisfied as at year end, which will be recognised on a straight-line basis consistent with the length of each client contract. 2021 $’000 2020 $’000 1,396,076 1,349,952 Link Group expects that approximately 35% of revenue allocated to the unsatisfied contracts as at 30 June 2021 (2020: 36%) will be recognised during the next financial year. The majority of the remaining 59% (2020: 64%) will be recognised as revenue between 1 July 2022 and 30 June 2026 (2020: 1 July 2021 and 30 June 2025). As permitted under AASB 15, revenue allocated to unsatisfied performance obligations is not disclosed for contracts that are for periods of one year or less. Unsatisfied performance obligations also exclude client contracts entered into subsequent to 30 June 2021 or any future contract renewals that may occur. 7. ADMINISTRATIVE AND GENERAL EXPENSES Costs recharged to clients Professional & consulting expenses Office expenses Insurance costs Travel expense Other expenses 2021 $’000 (70,091) (42,091) (7,407) (19,853) (806) 2020 $’000 (88,919) (52,079) (12,236) (15,878) (8,574) (39,062) (46,925) (179,310) (224,611) LINK GROUP | Annual Report 2021 155 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) 8. EARNINGS PER SHARE (a) Basic earnings per share Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Ordinary shares on issue have been adjusted for the bonus element of new shares issued at a discount to market value during the year. Profit/(loss) for the year attributable to owners of the Company Weighted average number of ordinary shares (basic) Issued ordinary shares at the beginning of the financial year Effect of allotments, issuances and buybacks Effect of treasury shares acquired Effect of bonus entitlement offer on ordinary shares Weighted average number of ordinary shares (basic) (b) Diluted earnings per share 2021 $’000 2020 1 $’000 (163,352) (104,621) NUMBER OF SHARES 2 ’000 NUMBER OF SHARES 1 ’000 530,266 533,576 3,157 (2,223) 17 (2,082) 234 33 531,217 531,761 Diluted earnings per share is determined by adjusting the profit and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, which comprise Performance Share Rights (PSRs) granted to employees. Dilutive securities have been adjusted for the bonus element of new shares issued at a discount to market value during the year. Profit/(loss) for the year attributable to owners of the Company Weighted average number of ordinary shares (diluted) Basic weighted average number of ordinary shares Effect of dilutive PSRs Effect of bonus entitlement offer on dilutive PSRs Weighted average number of ordinary shares (diluted) Basic earnings per share (cents) Diluted earnings per share (cents) 2021 $’000 2020 1 $’000 (163,352) (104,621) NUMBER OF SHARES 1 ’000 NUMBER OF SHARES 1 ’000 531,217 531,761 7,085 – 3,463 1 538,302 535,225 (30.75) (30.35) (19.67) (19.55) 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. 2 Refer to Note 3. The weighted average number of ordinary shares used in the Basic and Diluted earnings per share calculation for the current and comparative year were adjusted retrospectively in accordance with AASB 133 Earnings per Share following the issue of new shares at a discount to market value during the year. When new shares are issued at a discount to market value (“bonus element”), there is a resulting theoretical dilution of existing ordinary shares on issue, leading to a decrease in basic and diluted earnings per share. 156 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) 9. TAXATION (a) Income tax expense Current tax expense Current year Adjustment for prior years Deferred tax (expense)/benefit Origination and reversal of temporary differences Adjustment for prior years Tax expense Profit/(loss) before income tax Prima facie income tax expense calculated at 30% on operating profit from ordinary activities: Effect of tax rates in foreign jurisdictions Non-deductible expenses Non-assessable income Recognition of previously unrecognised tax losses Effect of change in UK tax rates (Under)/over provision of tax in respect of prior years Income tax expense Movement in temporary differences Utilisation of recognised tax losses 2021 $’000 2020 1 $’000 (51,422) (22,635) (863) (405) (52,285) (23,040) 31,586 (496) 31,090 (21,195) 13,886 (3,339) 10,547 (12,493) (141,509) (90,030) 42,453 (24,468) (40,655) 10,204 2,730 (10,100) (1,359) (21,195) (31,586) – 27,009 (9,199) (30,327) 3,066 702 – (3,744) (12,493) (13,886) 2,507 Income tax payable on current year profits (52,781) (23,872) (b) Effective tax rates for Australian and overseas operations PROFIT/ (LOSS) BEFORE TAX $’000 63,087 (204,596) (141,509) 2021 INCOME TAX EXPENSE $’000 (6,382) (14,813) (21,195) EFFECTIVE TAX RATE 10.1% PROFIT/ (LOSS) BEFORE TAX $’000 46,842 (7.2%) (136,872) (15.0%) (90,030) 2020 1 INCOME TAX EXPENSE $’000 (10,275) (2,218) (12,493) EFFECTIVE TAX RATE 21.9% (1.6%) (13.9%) Australian operations Overseas operations Link Group 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. LINK GROUP | Annual Report 2021 157 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) The effective tax rate for the year ended 30 June 2021 for Link Group was impacted by the following material factors: • Loss before tax of $173.1 million related to goodwill impairment expense (Note 16), which did not give rise to an income tax benefit for overseas operations; • Loss before tax of $17.1 million relating to the fair value of Link Group’s investment in Leveris Limited (Note 21(a)) which did not give rise to an income tax benefit for overseas operations; • Income tax expense of $10.1 million relating to the change in future United Kingdom tax rate from 19% to 25% with effect from 1 April 2023; and • Profit before tax of $15.3 million related to sale of subsidiaries (Note 26), which did not give rise to an income tax expense for Australian operations. After adjusting for the above factors, Australian operations had an effective tax rate of 26.2%, overseas operations had an effective tax rate of 41.2%, and Link Group had an effective tax rate of 30.8%. (c) Tax recognised in other comprehensive income and equity Foreign Currency Translation Reserve BEFORE TAX $’000 (7,542) (7,542) 2021 TAX EXPENSE $’000 NET OF TAX $’000 BEFORE TAX $’000 2020 TAX BENEFIT $’000 (536) (536) (7,006) (7,006) (2,452) (2,452) 173 173 NET OF TAX $’000 (2,279) (2,279) (d) Deferred tax assets/(liabilities) Deferred tax asset: Provisions & accruals Other Tax losses Deferred tax liability: Intangible assets Plant, equipment & software Other 2021 $’000 2020 1 $’000 37,294 20,793 7,188 65,275 31,359 16,231 8,882 56,472 (65,808) (73,826) (4,476) (7,606) (50,458) (61,060) (120,742) (142,492) 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. 158 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) Deferred tax asset: Provisions & Accruals Other Tax losses Deferred tax liability: Intangible assets Plant, equipment & software Other Deferred tax asset: Provisions & Accruals Other Tax losses Deferred tax liability: Intangible assets Plant, equipment & software Other BALANCE AT 1 JULY 2020 1 $’000 ACQUIRED IN BUSINESS COMBINATION $’000 RECOGNISED IN PROFIT OR LOSS $’000 RECOGNISED IN OCI $’000 BALANCE AT 30 JUNE 2021 $’000 31,359 16,231 8,882 56,472 (73,826) (7,606) (61,060) (142,492) – – – – – – – – 5,858 4,554 (1,932) 8,480 8,721 3,130 10,758 22,609 77 8 238 323 37,294 20,793 7,188 65,275 (703) (65,808) – (156) (859) (4,476) (50,458) (120,742) BALANCE AT 1 JULY 2019 1 $’000 ACQUIRED IN BUSINESS COMBINATION $’000 RECOGNISED IN PROFIT OR LOSS 1 $’000 RECOGNISED IN OCI $’000 BALANCE AT 30 JUNE 2020 1 $’000 31,041 15,479 5,456 51,976 (74,193) (11,504) (61,714) (147,411) – – – – (1,306) – – (1,306) 373 (327) 4,073 4,119 2,171 3,819 439 6,429 (55) 1,079 (647) 377 31,359 16,231 8,882 56,472 (498) (73,826) 79 215 (7,606) (61,060) (204) (142,492) (e) Unrecognised tax losses As at 30 June 2021, Link Group had carried forward tax losses unrecognised for deferred tax purposes available to offset against taxable income in future years in the following jurisdictions: • Australian tax losses of $177.0 million (2020: $193.0 million); • European tax losses of $14.7 million (2020: $6.3 million); and • Other jurisdiction tax losses of $0.6 million (2020: $0.6 million). The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these losses because it is not probable that conditions will permit their utilisation in the foreseeable future. Significant accounting estimate and judgement Judgement is required in determining whether it is probable future conditions will permit utilisation of carried forward tax losses. Deferred tax assets in respect of Link Group’s carried forward tax losses have not been recognised to the extent it is not probable that conditions will permit their utilisation in the foreseeable future. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. LINK GROUP | Annual Report 2021 159 SECTION03 Notes to the Financial Statements OPERATING RESULTS (CONTINUED) (f) Franking credits Amount of franking credits available to shareholders for subsequent financial years 2021 $’000 3,526 2020 $’000 3,065 The ability to use the franking credits is dependent on the ability to declare dividends. The Company seeks to maintain a surplus franking credit balance at 30 June each year by considering the amount of current year income tax related payments when determining the franking of dividends. Current tax Current tax is the expected tax payable or receivable on the taxable income for the current year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: • • the initial recognition of goodwill; the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and • differences relating to investments in subsidiaries and jointly controlled entities to the extent it is probable that they will not reverse in the foreseeable future. The measurement of deferred tax reflects the tax consequences that would follow the manner in which Link Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Offsetting deferred tax balances Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Tax consolidation or grouping Australia The Company and its wholly-owned Australian subsidiaries are part of a tax consolidated group. As a consequence, all members of the tax-consolidated group are taxed as a single entity. The head entity within the tax consolidated group is Link Administration Holdings Limited. Members of the Australian tax-consolidated group have entered into a tax sharing agreement that requires wholly-owned subsidiaries to make contributions to the head entity for current tax liabilities. Under the tax funding agreement, the subsidiaries reimburse the Company for their portion of Link Group’s current tax liability and recognise this payment as an inter-entity payable/receivable in their financial statements. The Company reimburses the subsidiaries for any deferred tax asset arising from unused tax losses and/or tax credits. Overseas The Company also has wholly-owned subsidiaries in the following foreign jurisdictions which have made the following elections with the relevant local taxation authority: • United Kingdom and Jersey subsidiaries have elected to apply tax grouping rules to share tax losses and/or tax payments in the United Kingdom and Jersey; and • Other countries subsidiaries have elected to form a tax group (or adopt fiscal unity) in relevant European countries. 160 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES 10. TRADE AND OTHER RECEIVABLES Current Trade receivables Less: Expected credit losses Investment management debtors Contract assets Other receivables Non-current Other receivables 2021 $’000 2020 $’000 151,452 167,966 (3,555) (5,008) 147,897 78,297 – 9,194 162,958 67,130 – 8,849 235,388 238,937 1,651 1,651 5,251 5,251 Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised costs less provision for doubtful debts. Trade receivables are generally due after 7 to 30 days. Link Group has no significant concentration of credit risk. Trade and other receivables are spread across a large number of different clients. As at 30 June 2021, management have assessed the expected credit losses for trade and other receivables. A provision for credit losses has been made for the expected non-recoverable trade receivable amounts arising from services provided. As at 30 June 2021, the expected credit losses relating to recoverability of trade and other receivables have been assessed in the context of the COVID-19 pandemic and its impact on the economic conditions of the industries in which Link Group’s clients operate. Investment management debtors consist of amounts due from authorised funds, receivable by Link Fund Solutions Limited (the Authorised Corporate Director) in respect of managing these authorised funds. 11. TRADE AND OTHER PAYABLES Current Trade creditors Investment management creditors Deferred consideration Accrued operational expenses Contract liabilities IT related creditors Indemnified payables PEXA IPO contribution payable Other creditors and accruals 2021 $’000 2020 $’000 50,405 38,518 135,859 102,096 1,109 45,041 31,278 15,175 4,712 20,631 36,385 340,595 8,173 54,611 28,400 14,913 3,942 – 24,501 275,154 LINK GROUP | Annual Report 2021 161 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) Non-current Contract liabilities Other creditors 2021 $’000 2020 $’000 6,135 1,244 7,379 7,688 895 8,583 Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost. Investment management creditors consist of amounts due to authorised funds, payable by Link Fund Solutions Limited (the Authorised Corporate Director) in respect of managing these authorised funds. 12. FUND ASSETS AND LIABILITIES Fund assets Fund receivables Fund liabilities Fund payables 2021 $’000 2020 $’000 864,901 864,901 616,982 616,982 (860,746) (614,883) (860,746) (614,883) Fund assets and liabilities These balances relate to investors’ purchase or redemption of units in authorised funds of which Link Fund Solutions Limited (Link Asset Services’ collective investment scheme administration business) is the Authorised Corporate Director. Link Fund Solutions Limited acts in the role of principal in the transactions, and the balances are due to and from the investors and investment funds. As at 30 June 2021, $4.2 million ($864.9 million assets net of $860.7 million liabilities) of net cash was due from investors and investment funds. The net receivable position arose because Link Fund Solutions Limited was yet to receive settlement from some investors and/or funds. The majority of funds need to be settled within a 4-day settlement period. 13. PROVISIONS Current Provisions Non-current Provisions 162 2021 $’000 2020 $’000 14,147 18,391 37,940 48,074 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) A reconciliation of the carrying amount of each material class of provisions is set out below: Balance at 1 July 2020 Provisions made during the year Provisions used during the year Provisions reversed during the year Foreign exchange translation difference Balance at 30 June 2021 Current Non-current CLAIMS $’000 INTEGRATION $’000 ONEROUS CONTRACTS $’000 41,671 7,540 (8,807) (4,534) 309 36,179 8,153 28,026 4,639 858 (1,747) (1,118) (136) 2,496 858 1,638 6,253 991 (2,746) (112) 116 4,502 1,303 3,199 OTHER $’000 13,902 312 (2,927) (2,418) 41 8,910 3,833 5,077 TOTAL $’000 66,465 9,701 (16,227) (8,182) 330 52,087 14,147 37,940 Significant accounting estimate and judgement Judgement is required in determining the expected outflow of economic benefits required to settle provisions. Provisions are based on expected obligations at reporting date under current legal and contractual requirements and using estimates based on past experience. Provisions A provision is recognised if, as a result of a past event, Link Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is treated as a finance expense. Claims: Link Group recognises a provision for claims arising from processing errors and other corporate events associated with the handling of administration activities for and on behalf of clients and investors. Provisions are measured at the cost that Link Group expects to incur in settling the claim. The provision also includes an estimate of claims that have been incurred but are not yet reported. Integration: The integration provision includes restructuring costs. The restructuring provision is based on estimates of the future costs associated with redundancies. The provision calculation includes assumptions around the timing and costs of redundancies. A provision for restructuring is recognised when Link Group has approved a detailed and formal restructuring plan and the restructuring either has commenced or has been announced publicly. Future operating costs are not included in the provision. Onerous contracts: A provision for onerous contracts is recognised when the expected benefits to be derived by Link Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, Link Group recognises any impairment loss on the assets associated with that contract. Other: Other provisions are for contractual obligations relating make-good obligations and remediation costs. Make good provisions relate to Link Group’s future obligation to remove fixtures and fittings or reinstate leaseholds back to original condition. Remediation cost provisions relate to contractual obligations under client contracts to remediate errors on claims. LINK GROUP | Annual Report 2021 163 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) 14. EMPLOYEE BENEFITS Current Employee entitlements Non-current Employee entitlements 2021 $’000 2020 $’000 49,910 38,650 5,892 5,450 Long-term employee benefits Link Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs. That benefit is discounted to determine its present value and the fair value of any related assets is deducted. Short-term employee benefits Liabilities for employee benefits for wages, salaries, and annual leave represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that Link Group wholly expects to pay as at the reporting date including related on-costs (where applicable). 15. PLANT AND EQUIPMENT Cost Balance at 1 July 2020 Acquisitions through business combinations Additions Effects of movements in exchange rates Disposals/write offs Balance at 30 June 2021 Depreciation and impairment losses Balance at 1 July 2020 Depreciation charge for the year Effects of movements in exchange rates Disposals/write offs Balance at 30 June 2021 PLANT & EQUIPMENT $’000 FIXTURES AND FITTINGS $’000 RIGHT- OF-USE $’000 TOTAL $’000 88,370 86,724 271,286 446,380 17 11,317 283 – – 17 2,657 14,828 28,802 (64) 564 783 (4,903) (11,661) (34,691) (51,255) 95,084 77,656 251,987 424,727 (58,323) (12,896) 284 4,795 (37,108) (100,520) (195,951) (7,362) (33,482) (53,740) 248 8,264 (341) 191 27,425 40,484 (66,140) (35,958) (106,918) (209,016) Carrying amount at 30 June 2021 28,944 41,698 145,069 215,711 164 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) Cost Balance at 1 July 2019 PLANT & EQUIPMENT $’000 FIXTURES AND FITTINGS $’000 RIGHT- OF-USE $’000 TOTAL $’000 81,355 73,198 263,326 417,879 Acquisitions through business combinations 16 50 – 66 Additions Effects of movements in exchange rates Transfers to assets held for sale Disposals/write offs Balance at 30 June 2020 Depreciation and impairment losses Balance at 1 July 2019 Depreciation charge for the year Effects of movements in exchange rates Transfers to assets held for sale Disposals/write offs Balance at 30 June 2020 Carrying amount at 30 June 2020 10,508 15,853 13,548 39,909 (1,088) (1,802) (619) 88,370 (48,623) (12,358) 543 1,496 619 (58,323) 30,047 (482) (216) (1,679) 86,724 (31,111) (7,998) 157 165 1,679 (2,532) (1,142) (1,914) (4,102) (3,160) (4,212) 271,286 446,380 (69,213) (35,041) (148,947) (55,397) 1,281 539 1,914 1,981 2,200 4,212 (37,108) (100,520) (195,951) 49,616 170,766 250,429 Recognition and measurement Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. The expected useful life and the depreciation methods are listed below: ITEM Office equipment Fixture and fitting Leased plant and equipment USEFUL LIFE 3–8 years 2–10 years 3–10 years Right-of-use assets Non-cancellable lease period DEPRECIATION METHOD Straight-line Straight-line Straight-line Straight-line Depreciation methods, useful lives and residual values are reassessed at the reporting date. LINK GROUP | Annual Report 2021 165 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) 16. INTANGIBLE ASSETS GOODWILL $’000 CLIENT RELATION- SHIPS $’000 SOFTWARE $’000 BRAND NAMES $’000 TOTAL $’000 Cost Balance at 1 July 2020 1,559,260 510,285 678,386 4,520 2,752,451 Acquisitions through business combinations Additions Effects of movements in exchange rates Disposals/Assets written off Balance at 30 June 2021 Amortisation and impairment losses Balance at 1 July 2020 Amortisation charge Impairment expense Effects of movements in exchange rates Disposals/Assets written off Balance at 30 June 2021 653 – 8,128 – – 3,653 – 26,834 205 – (12,269) (22,402) – – 73 – 653 26,834 12,059 (34,671) 1,568,041 501,669 683,023 4,593 2,757,326 (109,667) (209,333) (388,150) (3,056) (710,206) – (39,687) (62,694) (306) (102,687) (173,112) 632 – – (615) (9,667) 2,246 12,269 22,288 – (182,779) (38) – 2,225 34,557 (282,147) (237,366) (435,977) (3,400) (958,890) Carrying amount at 30 June 2021 1,285,894 264,303 247,046 1,193 1,798,436 GOODWILL $’000 CLIENT RELATION- SHIPS $’000 SOFTWARE $’000 BRAND NAMES $’000 TOTAL $’000 Cost Balance at 1 July 2019 1,565,738 505,834 613,177 4,543 2,689,292 Acquisitions through business combinations Additions Effects of movements in exchange rates Transfers to assets held for sale Disposals/Assets written off Balance at 30 June 2020 Amortisation and impairment losses Balance at 1 July 2019 Amortisation charge Impairment expense Effects of movements in exchange rates Transfers to assets held for sale Disposals/Assets written off Balance at 30 June 2020 – – (5,998) (480) – 6,872 – (2,421) – – – 73,131 (3,321) (866) (3,735) – – 6,872 73,131 (23) (11,763) – – (1,346) (3,735) 1,559,260 510,285 678,386 4,520 2,752,451 (2,512) (167,313) (327,801) (2,730) (500,356) – (43,659) (66,126) (348) (107,751) 596 – – – 1,639 – – – 1,310 732 3,735 – 22 – – (110,133) (107,751) 3,567 732 3,735 (109,667) (209,333) (388,150) (3,056) (710,206) Carrying amount at 30 June 2020 1,449,593 300,952 290,236 1,464 2,042,245 166 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) An impairment expense of $9.7 million was recognised in relation to specific software assets within the Banking & Credit Management CGU considered to be not recoverable. The impairment expense on specific assets was recognised prior to CGU impairment testing. Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the cost of the acquisition over Link Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Subsequent to initial measurement, goodwill is measured at cost less accumulated impairment losses. Client relationships Client relationships acquired in business combinations are recognised initially at fair value and are subsequently amortised according to the expected useful life of these relationships. Software Link Group capitalises in-house developed software that meets business and client needs and enables operational efficiencies to be achieved. Development expenditure is capitalised only if development costs are directly attributable, can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and Link Group intends to, and has sufficient resources to, complete development and to use or sell the asset. Other software development costs are expensed as incurred. Brand Names Brand names acquired in business combinations are recognised initially at fair value and are subsequently amortised according to the expected useful life of the brand name. Amortisation Amortisation is charged on a straight-line basis over the estimated useful lives of intangible assets, except when another systematic basis measuring the pattern in which the economic benefits of a software asset are consumed can be reliably measured. In such cases, amortisation is charged on that systematic basis over the estimated useful life of that asset. The estimated useful lives for the current and comparative periods are as follows: ITEM Software Client relationships Brand Names USEFUL LIFE 2–5 years 3–20 years 5–10 years AMORTISATION METHOD Straight-line Straight-line Straight-line (a) Impairment testing for CGUs containing goodwill During the year ended 30 June 2021, Link Group revised its Operating Segments (refer Note 4). For the purposes of impairment testing, goodwill is allocated to Link Group’s cash-generated units (“CGUs”). Each of Link Group’s Operating Segments is considered a CGU. The aggregate carrying amounts of goodwill allocated to each CGU are as follows: LINK GROUP | Annual Report 2021 167 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) CGUS FOR THE YEAR ENDED 30 JUNE Retirement & Superannuation Solutions (RSS) Corporate Markets (CM) Banking & Credit Management (BCM) Fund Solutions (FS) Retirement & Superannuation Solutions Corporate Markets APAC Corporate Markets EMEA Banking & Credit Management Fund Solutions Technology & Operations Total goodwill 2021 $’000 306,243 511,950 82,743 384,958 n/a n/a n/a n/a n/a n/a 2020 $’000 n/a n/a n/a n/a 279,266 254,494 221,519 246,394 354,103 93,817 1,285,894 1,449,593 The carrying amounts of Link Group’s goodwill and intangible assets are tested annually for impairment. For the purposes of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The goodwill and any other intangible assets with indefinite lives acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs that are expected to benefit from the synergies of the combination. An impairment loss is recognised in profit and loss if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The recoverable amounts of CGUs were determined through value in use calculations. The value in use calculations applied a post-tax discounted cash flow model, based on five-year cash flow forecasts endorsed by the Board and an appropriate terminal value. Management has considered the economic conditions and uncertainty due to the COVID-19 pandemic when determining the cash flow forecasts. The forecast assumptions are based on the information available as at 30 June 2021. While operations across Link Group have been impacted to varying degrees during the financial year, Link Group has, in the main, remained resilient to date. IMPAIRMENT TESTING RESULTS BY CGU FOR THE YEAR ENDED 30 JUNE 2021 Value in use (recoverable amount) Carrying amount Impairment headroom RSS $’000 CM $’000 2,018,749 1,162,111 547,631 1,471,118 811,046 351,065 BCM $’000 139,491 139,491 FS $’000 751,423 515,979 – 235,444 Cash flows after the fifth year were projected at growth rates of: CGUS FOR THE YEAR ENDED Retirement & Superannuation Solutions Corporate Markets Banking & Credit Management Fund Solutions Retirement & Superannuation Solutions Corporate Markets APAC Corporate Markets EMEA Banking & Credit Management Fund Solutions Technology & Operations 168 2021 2.4% 2.3% 2.0% 2.1% n/a n/a n/a n/a n/a n/a 2020 n/a n/a n/a n/a 2.5% 2.7% 2.0% 2.0% 2.1% 2.4% SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) The value in use calculations employed a range of pre-tax discount rates from 8.43% to 9.13% (2020: 8.47% to 10.06%). These rates relate to the risks in the respective segments and countries in which they operate. The discount rate used reflects management’s estimate of the time value of money and Link Group’s weighted average cost of capital (WACC), which is calculated separately for each CGU. Banking & Credit Management (BCM) CGU impairment An impairment expense of $173.1 million was recognised in relation to the BCM CGU as a result of the value in use calculations. The value in use of the BCM CGU, determined as $139.5 million using a pre-tax discount rate of 9.13% (2020: no comparative under prior year CGU structure) has reduced following a reduction in forecast cash flows. The BCM CGU has forecast reduced cash flows due to continuation of its loan portfolio run-off, and reduction in new business pipeline due to the COVID-19 pandemic, coupled with a relatively fixed cost base. A return to growth for the BCM CGU is forecast for the 2023 financial year following improving macro conditions in the United Kingdom and Europe. The impairment expense has been allocated against goodwill. Sensitivity analysis The carrying amount of the Banking & Credit Management CGU has been impaired to its value in use. Any adverse change to the following key assumptions would result in the carrying amount exceeding the value in use: • discount rate; • five-year cash flow forecast; and/or • terminal growth rate. Management considered the following reasonably possible changes in the key assumptions, leaving all other assumptions unchanged. The sensitivity analysis presented is prepared on the basis that the reasonably possible change in each key assumption would not have a consequential impact on other assumptions. The associated impact on the impairment assessment is presented in the table below. Discount rate +0.5% Discount rate -0.5% Five-year cash flow forecast +5% Five-year cash flow forecast -5% Terminal growth rate +0.5% Terminal growth rate -0.5% BCM $’000 (10,814) 12,476 6,975 (6,975) 9,991 (8,676) Management is of the opinion that the above reasonably possible changes in the key assumptions on which the recoverable amount of Link Group’s other CGUs are based would not cause their carrying amounts to exceed their value in use. Significant accounting estimate and judgement Judgement is required in estimating recoverable amounts of cash generating units (CGUs) to which intangible assets with an indefinite useful life (goodwill) are allocated. All key assumptions applied in value in use calculation were determined using the past experiences of Link Group and an assessment of current economic conditions. Where possible, assumptions were validated against external sources of information. LINK GROUP | Annual Report 2021 169 SECTION03 Notes to the Financial Statements OPERATING ASSETS AND LIABILITIES (CONTINUED) 17. NOTES TO THE STATEMENT OF CASH FLOWS (a) Reconciliation of net profit after tax to net cash inflow from operating activities Net profit/(loss) after income tax Add/(less) non-cash items Depreciation expense Intangibles amortisation expense Contract fulfilment costs amortisation expense Loss/(gain) on financial assets held at fair value through profit & loss Share of loss of equity-accounted investees, net of tax Profit on disposal of subsidiaries Impairment expense Equity-settled share-based payment expense Unrealised foreign exchange loss/(gain) Unwinding discount on provisions and deferred consideration Borrowing cost amortisation Loss on disposal/write off of plant and equipment 2021 $’000 2020 1 $’000 (162,704) (102,523) 53,740 102,687 7,193 (3,607) (1,942) (15,347) 55,397 110,133 6,738 23,179 14 (48) 182,779 107,751 11,816 100 91 1,471 (1,152) 1,655 (1,269) 427 1,520 – Net cash inflow from operating activities before changes in assets and liabilities 175,125 202,974 Change in operating assets and liabilities Change in trade and other receivables Change in other assets Change in fund assets and fund liabilities Change in trade and other payables Change in employee benefits Change in provisions Change in current and deferred tax balances Net cash inflow from operating activities 1,806 (6,957) (838) 41,768 11,762 (14,840) 4,886 (8,397) (790) 19,125 (5,809) 9,809 7,095 (32,190) 214,921 189,608 (b) Reconciliation of movement in liabilities to cash flows arising from financing activities NON-CASH 30 JUNE 2020 $’000 FINANCING CASH FLOWS $’000 BORROWING COST AMORTISATION $’000 OTHER NON- FINANCING ACTIVITIES $’000 FOREIGN EXCHANGE MOVEMENT $’000 30 JUNE 2021 $’000 Interest-bearing loans and borrowings – Current Interest-bearing loans and borrowings – Non-current Total liabilities from financing activities 35,945 (4,829) – (15) (149) 30,952 1,226,952 (213,139) 1,471 11,056 10,621 1,036,961 1,262,897 (217,968) 1,471 11,041 10,472 1,067,913 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. 170 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT 18. INTEREST BEARING LOANS AND BORROWINGS Current Lease liabilities Non-current Lease liabilities Loans FINANCING ARRANGEMENTS Total facilities available: Non-amortising term loan facility Working capital facility Non-amortising term loan facility Working capital facility Facilities utilised at reporting date: Non-amortising term loan facility Working capital facility Non-amortising term loan facility Working capital facility Facilities not utilised at reporting date Non-amortising term loan facility Working capital facility Non-amortising term loan facility Working capital facility 2021 $’000 2020 $’000 30,952 30,952 35,945 35,945 188,653 215,301 848,308 1,011,651 1,036,961 1,226,952 FACILITY NOTIONAL CURRENCY INTEREST RATE AT 30 JUNE 2021 (P.A.) 2021 $’000 2020 $’000 AUD 1.8% – 2.2% 550,000 AUD 1.7% – 1.8% GBP GBP AUD AUD GBP GBP 1.7% 1.7% 1.8% 1.7% 1.7% 1.7% 30,000 856,511 36,839 550,000 30,000 832,438 35,804 1,473,350 1,448,242 158,000 305,000 11,520 691,620 186 12,903 709,452 190 861,326 1,027,545 AUD 0.7% – 0.9% 392,000 245,000 AUD GBP GBP 0.7% 0.7% 0.7% 18,480 164,891 36,653 612,024 17,097 122,986 35,614 420,697 Facilities utilised at reporting date includes $11.7 million (2020: $13.1 million) of guarantees provided to external parties, which have not been drawn down. Refer to Note 20. Link Group repaid $102.0 million of its AUD non-amortising loan facility and £45.3 million of its multi-currency non-amortising loan facility during the financial year. As at 30 June 2021, the terms of the facilities under the Syndicated Loan Agreement were as follows: • $275 million of the AUD non-amortising term loan facility available to 25 January 2024; • $275 million of the AUD non-amortising term loan facility available to 25 January 2024; • $30 million AUD working capital facility to 25 January 2024; • £465 million GBP non-amortising term loan facility available to 2 November 2022; and • £20 million working capital facility available to 2 November 2022. On 5 July 2021, Link Group terminated $275 million of the AUD non-amortising term loan facility early in accordance with the Syndicated Facility Agreement. LINK GROUP | Annual Report 2021 171 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) 19. FINANCE COSTS Loan interest expense Lease liabilities interest expense Amortisation of capitalised borrowing costs Foreign exchange gain/(loss) Other 20. CONTINGENT LIABILITIES 2021 $’000 (21,833) (9,374) (1,471) (96) (66) 2020 $’000 (23,283) (10,467) (1,520) 521 (441) (32,840) (35,190) Link Group has granted bank guarantees, letters of credit and performance guarantees in the favour of: TYPE/COUNTERPARTY BENEFICIARY REASON 2021 $’000 2020 $’000 Bank guarantee – Westpac Pacific Custodians Pty Limited Regulatory financial licence 10,000 10,000 Letter of credit – Westpac STRATE Limited Regulatory financial licence Letter of credit – Westpac Railway Pension Nominees Limited Property lease Bank guarantee – Westpac ASX Settlement & Transfer Corp Contractual obligation Bank guarantee – Westpac GESB Superannuation Contractual obligation Contractual obligation – – 500 1,000 20 753 630 500 1,000 20 Letter of credit – Westpac Bank guarantee – HSBC Australian Securities & Investments Commission Kryalos Societa di Gestione del Risparmio S.p.A Property lease 186 190 Australian Financial Services Licence (AFSL) Performance Bond A Guarantee for $10 million (2020: $10 million) is held with Westpac on behalf of a subsidiary of Link Group, Pacific Custodians Pty Limited, as a requirement of the subsidiary’s Australian Financial Services Licence (AFSL) requirements (AFSL Performance Bond). LF Equity Income Fund (previously known as LF Woodford Equity Income Fund) From time to time, Link Fund Solutions (LFS) receives enquiries, complaints or claims from investors or third parties in relation to the funds for which it acts, or has acted, as authorised corporate director (ACD) (in relation to authorised funds) or operator (in relation to unregulated funds). As disclosed on 18 June 2019, the Financial Conduct Authority (FCA) notified LFS that it was commencing an investigation into LFS as ACD to the LF Woodford Equity Income Fund, now known as the LF Equity Income Fund (Fund). As the FCA investigation is an ongoing and confidential process, Link Group cannot speculate or make any further comment on it. As at the date of these consolidated financial statements there has been no enquiry, complaint or claim received by LFS regarding its role in relation to any funds, including the Fund, which should be disclosed as a contingent liability in these consolidated financial statements. LFS continues to act in the best interests of investors in the Fund as the orderly wind-up of the Fund progresses. 172 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) 21. INVESTMENT AND FINANCIAL RISK MANAGEMENT (a) Investments Listed equity securities – at fair value through profit or loss Unlisted investments – at fair value through profit or loss 2021 $’000 4,105 99,397 103,502 2020 $’000 2,907 90,291 93,198 The equity securities have been designated at fair value through profit or loss because they are managed on a fair value basis and their performance is actively monitored. Link Group continues to account for its 12.3% (2020: 17.4%) ownership interest in Smart Pension Limited (Smart) within unlisted investments at fair value, with gains or losses recognised through profit or loss given Link Group does not have significant influence over Smart. During the year, Link Group made an additional £2.5 million ($4.6 million) investment in Smart. As at 30 June 2021, the investment had a fair value of $92.5 million (2020: $66.2 million) after accounting for foreign exchange fluctuations. Link Group continues to account for its 13.1% (2020: 13.1%) ownership interest in Leveris Limited (Leveris) within unlisted investments at fair value, with gains or losses recognised through profit or loss given Link Group does not have significant influence over Leveris. As at 30 June 2021, the investment had a fair value of $nil (2020: $16.7 million) after Link Group wrote off its investment following the Board of Directors of Leveris resolving to cease trading and proceed with a non-court liquidation. (b) Financial Risk Management Overview Link Group has exposure to the following risks arising from financial instruments: • credit risk; • liquidity risk; and • market risk. Risk Management Framework The Company’s Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Link Group has established risk management policies that identify and analyse the risks faced by Link Group, set appropriate risk limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly. Credit Risk Credit risk is the risk of financial loss to Link Group if a client or counterparty to a financial instrument fails to meet its contractual obligations. The carrying amount of financial assets less any provisions for impairment represents Link Group’s maximum credit exposure. Link Group’s exposure to credit risk arises predominantly through its cash and cash equivalents, trade and other receivables, and fund assets. • Cash and cash equivalent amounts as well as transactions involving derivative financial instruments are all held or maintained by banks and financial institutions with high credit ratings. Link Group monitors counterparty credit exposure on a daily basis to ensure compliance with pre-determined credit limits to minimise credit risk. • Trade Receivables are monitored in line with Link Group’s credit policy. The credit quality of clients is assessed by taking into account their financial position, past experience and other relevant factors. Based on the above process, Link Group considers that all unimpaired trade and other receivables are collectible in full. • Fund assets relate to investors’ purchase or redemption of units in investment funds of which Link Fund Solutions Limited (Link Group’s collective investment scheme administration business) is an Authorised Corporate Director. Link Group has a limited exposure to credit risk as fund assets and fund liabilities are usually settled within four business days. Link Group has rights regarding net settlement, enabling uncollectable balances to be recovered, refer to Note 12. LINK GROUP | Annual Report 2021 173 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) The maximum exposure to credit risk for trade and other receivables at the end of the reporting period was as follows: Neither past due nor impaired Past due 1–30 days Past due 31–60 days Past due over 61 days 2021 $’000 217,149 9,920 4,667 3,734 2020 $’000 211,880 14,082 6,538 6,437 235,388 238,937 Movements in the allowance for impairment in respect of trade and other receivables during the year are disclosed in Note 10. Liquidity Risk Liquidity risk is the risk that Link Group will encounter difficulties in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Link Group manages its liquidity risk by maintaining adequate cash reserves and available committed credit lines combined with continuous monitoring of actual and forecast cash flows on a short, medium and long term basis. See Note 18 for details of Link Group’s unused facilities at year end. Remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments were as follows. The amounts include both interest and principal cash flows undiscounted and based on contractual maturity (without reference to the repricing schedule) and therefore the totals will differ from those disclosed in the statement of financial position. The interest repayments are based on forward interest rates and as such these amounts could vary, however it is not expected that they will do so significantly from the amounts stated below. CARRYING AMOUNT $’000 TOTAL $’000 < 1 YEAR $’000 1–2 YEARS $’000 2–5 YEARS $’000 > 5 YEARS $’000 30 June 2021 Non-interest bearing Trade and other payables Fund liabilities Interest bearing 347,974 860,746 347,974 860,746 340,595 860,746 4,067 2,720 – – 592 – Loans and borrowings 1,067,913 1,125,828 52,202 Total non-derivative liabilities 2,276,633 2,334,548 1,253,543 733,474 737,541 254,458 257,178 85,694 86,286 30 June 2020 Non-interest bearing Trade and other payables Fund liabilities Interest bearing 283,737 614,883 283,737 614,883 275,154 614,883 3,603 – 4,341 – 639 – Loans and borrowings 1,262,897 1,374,752 Total non-derivative liabilities 2,161,517 2,273,372 69,705 959,742 64,809 1,129,068 68,412 1,133,409 111,170 111,809 The Company and a number of the subsidiaries are guarantors to Link Group’s loans and borrowings. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect Link Group’s income or carrying value of its holdings of financial instruments as at the year end. Foreign currency risk Foreign currency risk is the risk that the carrying value or future cash flows associate with a financial instrument will fluctuate because of changes in foreign exchange rates. 174 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) (a) Specific foreign currency items On 2 November 2017, Link Group drew down from its £465 million non-amortising term loan facility (refer Note 18), and Link Group designated the term loan facility as a hedge of the net investment in its UK subsidiaries. The term loan facility has subsequently been partially repaid, the drawn amount of £351.1 million had a fair value and carrying amount at 30 June 2021 of $646.6 million (2020: $709.5 million). A foreign exchange loss of $18.3 million (2020: gain of $13.6 million) on translation of the term loan facility to AUD at the end of the financial year is recognised in other comprehensive income and accumulated in the foreign currency translation reserve on consolidation. The hedge was considered 100% effective throughout the year. (b) Other foreign currency items In addition to the specific items mentioned above, entities within Link Group typically enter into transactions and recognise assets and liabilities that are denominated in their functional currency. Whilst a number of entities within Link Group hold financial instruments in a currency which is not their local functional currency, these balances are not considered material and do not expose Link Group to significant foreign currency risk. Link Group is exposed to foreign currency risk when net investments in foreign subsidiaries are translated to Link Group’s reporting currency, the Australian Dollar (AUD). The effects of any exchange rate movements in respect of the net investment in foreign subsidiaries are recognised in the foreign currency translation reserve on consolidation. Sensitivity testing was performed by flexing the value of the AUD against foreign currencies to which Link Group is exposed by 10% (2020: 10%). The assumed 10% change was chosen based on historical and reasonably possible movements of official exchange rates. AUD +10%/GBP AUD -10%/GBP AUD +10%/EUR AUD -10%/EUR AUD +10%/Other currencies AUD -10%/Other currencies PROFIT/(LOSS) AFTER TAX NET ASSETS 2021 $’000 6,959 (6,959) 15,120 (15,120) (367) 367 2020 $’000 10,182 (10,182) 4,562 (4,562) (167) 167 2021 $’000 (29,034) 29,013 (18,271) 18,271 (7,176) 7,219 2020 $’000 (26,508) 26,507 (32,990) 32,990 (6,483) 6,497 Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial instruments. Link Group is exposed to interest rate risk attaching specifically to Link Group’s financial assets and liabilities as well as through the maintenance of paying agent and escrow bank accounts administered on behalf of clients. Link Group’s primary financial assets impacted by changes in variable interest rates include cash and cash equivalents. Link Group’s primary financial liabilities impacted by interest rate movements include interest bearing loans and borrowings. A sensitivity analysis was performed to assess the impact interest rates have on Link Group’s statement of financial performance, including the impact of hedging and escrow bank accounts. Sensitivity testing was performed by increasing interest rates by 0.5% (2020: 0.5%) as at reporting date which would result in a favourable impact on Link Group’s loss/ profit before tax of $4.5 million (2020: favourable impact of $1.7 million). A decrease of 0.5% (2020: 0.5%) would have an adverse impact on Link Group’s profit before tax of $0.1 million (2020: adverse impact of $0.2 million). The assumed 0.5% (2020: 0.5%) change was chosen based on historical and reasonably possible movements of official interest rates. The method of calculation has not changed from the prior period. Price risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Link Group’s exposure to price risk arises primarily from the listed and unlisted equity securities it holds, which have been designated at fair value through profit or loss. A 5% increase/(decrease) (2020: 5%) in the fair value of Link Group’s listed and unlisted investments would increase/(decrease) Link Group’s profit before tax by $5.2 million (2020: $4.7 million). The assumed 5% change was chosen based on historical and reasonably possible movements in equity markets. LINK GROUP | Annual Report 2021 175 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) (c) Capital management The Board’s policy is to maintain a capital base to provide confidence to shareholders and other stakeholders and to sustain future development of the business. Capital consists of total equity less amounts accumulated in equity in relation to dividend reserves and other reserves. Link Group monitors the ratio of net financial indebtedness to operating earnings in accordance with the terms of its Syndicated Loan Agreement. Net debt is calculated as interest bearing liabilities less cash and cash equivalents. Link Group also monitors the interest cover ratio, which is calculated by dividing operating earnings by interest expense. (d) Fair value of financial instruments The following table details Link Group’s fair value amounts of financial instruments categorised by the following levels. • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). 30 June 2021 Assets Derivative financial assets Listed investments designated at fair value through profit and loss Unlisted equity securities designated at fair value through profit and loss 30 June 2020 Assets Derivative financial assets Listed investments designated at fair value through profit and loss Unlisted equity securities designated at fair value through profit and loss LEVEL 1 $’000 LEVEL 2 $’000 LEVEL 3 $’000 TOTAL $’000 – 4,105 – 4,105 – 2,907 – 2,907 273 – 767 1,040 693 – 1,631 2,324 – – 273 4,105 98,630 98,630 99,397 103,775 – – 88,660 88,660 693 2,907 90,291 93,891 There have been no assets transferred between levels during the year (2020: none). Level 1 investments consist of financial instruments traded in active markets and are valued based on quoted market prices at the end of the reporting period. Level 2 investments consist of unlisted managed investment schemes and derivative financial instruments. Unlisted managed investment schemes are valued based on daily quoted unit redemption prices derived using observable market data. Derivative financial instruments are valued using quoted forward exchange rates at the reporting date and present value calculations based on high credit quality yield curves in the respective currencies. Level 3 investments include unlisted investments held by Link Group, the valuation for which is deemed to have one or more significant inputs which are not based on observable market data. Significant increases or decreases in future cash flows would increase or decrease, respectively, the fair value of the investments. 176 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) Reconciliation of movements in level 3 investments Opening level 3 investments at the beginning of the financial year Acquisitions Fair value gain/(loss) recognised in profit or loss Foreign currency retranslation Closing level 3 investments at the end of the financial year 2021 $’000 2020 $’000 88,660 5,054 2,384 2,532 98,630 45,176 69,983 (22,996) (3,503) 88,660 Significant accounting estimate and judgement Judgement is required in measuring level 3 investments at fair value. All key assumptions applied in fair value measurements were determined using the past experiences of Link Group and management. Where possible, assumptions were validated against external sources of information such as independent arms-length transactions, or independent expert valuations. The following table sets out the carrying amount and fair value of financial assets and financial liabilities: FAIR VALUE VS CARRYING AMOUNTS 2021 2020 Assets Financial assets measured at fair value through profit and loss Derivative financial assets Investments Financial assets measured at amortised cost Cash and cash equivalents Trade and other receivables Fund assets Liabilities FAIR VALUE $’000 CARRYING AMOUNT $’000 FAIR VALUE $’000 CARRYING AMOUNT $’000 273 273 103,502 103,502 693 93,198 693 93,198 395,024 237,039 864,901 395,024 237,039 864,901 264,092 244,188 616,982 264,092 244,188 616,982 1,600,739 1,600,739 1,213,902 1,213,902 Financial liabilities measured at amortised cost Trade and other payables 347,974 347,974 283,737 283,737 Interest bearing loans and borrowings 1,067,913 1,067,913 1,262,897 1,262,897 Fund liabilities 860,746 860,746 614,883 614,883 2,276,633 2,276,633 2,161,517 2,161,517 The fair values of interest bearing loans and borrowings are not materially different to their carrying amounts since the interest payable on those borrowings is floating at current market rates. Financial instruments – Recognition/derecognition A financial instrument is recognised when Link Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if Link Group’s contractual rights to the cash flows from the financial assets expire or if Link Group transfers the financial asset to another party without retaining control or substantially all the risks and rewards of the asset. Financial liabilities are derecognised if Link Group’s obligations specified in the contract expire or are discharged or cancelled. LINK GROUP | Annual Report 2021 177 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) Measurement Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, financial instruments are measured as described below. Financial assets measured at fair value through profit or loss Financial instruments at fair value through profit or loss are measured at fair value, with changes recognised in the statement of comprehensive income under “gains or losses on financial assets held at fair value through profit and loss”. Financial assets measured at amortised cost Other financial instruments are subsequently measured at amortised cost using the effective interest method, less any impairment losses. Trade and other payables and interest-bearing loans and borrowings are classified as financial liabilities. Trade and other receivables and cash and cash equivalents are classified as financial assets. Cash and cash equivalents comprise cash balances and call deposits. Impairment A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. Any impairment losses are recognised in profit or loss. 22. CONTRIBUTED EQUITY Issued and paid-up capital Balance at the beginning of the year Equity issued under share-based payment arrangements (refer Note 25) Equity issued under dividend reinvestment plan Equity bought back and cancelled Equity raising and share buy-back costs, net of tax Balance at the end of the year Number of shares issued: Balance at the beginning of the year Equity issued under share-based payment arrangements (refer Note 25) Equity issued under dividend reinvestment plan Equity bought back and cancelled Balance at the end of the year 2021 $’000 2020 $’000 1,889,733 1,909,140 18,058 9,957 – – – – (19,387) (20) 1,917,748 1,889,733 2021 ‘000 2020 ‘000 530,328 533,951 3,680 2,218 – – – (3,623) 536,226 530,328 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognised as a deduction from equity, net of any related income tax benefit. Ordinary shares The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. The Link Group Dividend Reinvestment Plan (DRP) operates in respect of dividends declared by Link Group from time to time and allows shareholders to reinvest some or all of their dividend in new shares rather than receiving their dividend as a cash payment. 178 SECTION03 Notes to the Financial Statements 9 6 6 , 6 1 ) 3 3 7 9 2 1 ( , ) 3 5 3 1 ( , ) 2 5 5 , 2 1 ( 0 0 0 , 5 3 2 1 4 , 7 1 1 ) 0 2 3 ( 0 0 0 ’ $ L A T O T 0 0 0 ’ $ I D A P S T I F O R P E V R E S E R - E R P N O T I I I S U Q C A 0 0 0 ’ $ D E N F E D I T I F E N E B E V R E S E R 0 0 0 ’ $ E V R E S E R N O T I I I S U Q C A 0 0 0 ’ $ E V R E S E R I N G E R O F Y C N E R R U C I N O T A L S N A R T 0 0 0 ’ $ - I R T S D I E L B A T U B S T I F O R P E V R E S E R 0 0 0 ’ $ E R A H S E V R E S E R Y R U S A E R T ) 0 3 0 , 7 ( – ) 1 4 1 7 ( , 0 7 0 , 9 2 ) 7 5 6 , 2 4 ( 4 1 4 , 0 1 ) 0 9 4 , 8 1 ( 6 2 0 , 2 ) 3 6 0 1 ( , ) 2 7 1 1 1 ( , 0 0 0 ’ $ L A T O T 6 5 2 5 1 , ) 3 8 0 2 , ( , 3 7 1 4 0 1 7 6 9 ) 8 4 2 1 0 1 , ( ) 6 9 3 ( – – – – – – – – – – – – – ) 1 1 1 ( ) 3 3 7 9 2 1 ( , ) 4 6 4 1 ( , 0 0 0 ’ $ I D A P S T I F O R P E V R E S E R - E R P N O T I I I S U Q C A 0 0 0 ’ $ D E N F E D I T I F E N E B E V R E S E R – – – – – ) 3 3 7 9 2 1 , ( ) 2 1 ( ) 1 4 3 1 , ( – – – – ) 3 5 3 1 , ( – – – – – – – – – – ) 3 6 0 1 ( , ) 9 1 5 , 3 1 ( 0 0 0 ’ $ E V R E S E R N O T I I I S U Q C A ) 2 5 5 2 1 , ( – – – – – 6 9 0 3 9 , 1 9 6 6 6 1 , ) 3 3 7 9 2 1 , ( ) 2 5 5 2 1 , ( 0 0 0 , 5 3 2 1 4 , 7 1 1 ) 0 2 3 ( ) I D E U N T N O C ( I T N E M E G A N A M K S R D N A G N C N A N F I I – – – 0 0 0 ’ $ E R A H S - N E P M O C I N O T A S E V R E S E R 5 1 2 , 8 e v r e s e r 0 0 9 , 9 2 5 2 8 , 3 0 1 ) 3 6 5 , 8 1 ( 2 8 3 , 8 1 – – – – 0 7 0 , 9 2 ) 7 5 6 , 2 4 ( – – – – – 7 4 2 ) 0 9 4 , 8 1 ( – – – 7 6 1 , 0 1 s t n e m y a p d e s a b - e r a h s d e l t t e s y t i u q E l s t fi o r p e b a t u b i r t s d m o r f i l d e r a c e d s d n e d v D i i l s r e d o h e r a h s h t i w s n o i t c a s n a r T s e v r e s e r o t i s g n n r a e d e n a t e r i m o r f r e f s n a r T t s e r e t n i g n i l l o r t n o c - n o n h t i w s e i r a d s b u s i i f o l a s o p s D i t u o h t i w t s e r e t n i g n i l l o r t n o c - n o n h t i w s n o i t c a s n a r T 1 2 0 2 e n u J 0 3 t a e c n a l a B l o r t n o c n i e g n a h c a d e r i u q c a s e r a h s y r u s a e r T , E R U T C U R T S L A T P A C I S E V R E S E R . 3 2 e m o c n i e v i s n e h e r p m o c r e h t O 0 2 0 2 y l u J 1 t a e c n a l a B I D E T A D L O S N O C – – – – ) 1 7 0 , 2 ( 1 7 0 , 7 3 0 0 0 ’ $ E V R E S E R I N G E R O F Y C N E R R U C I N O T A L S N A R T 0 0 0 ’ $ - I R T S D I E L B A T U B S T I F O R P E V R E S E R 7 8 4 , 4 1 1 – 3 7 1 , 4 0 1 – – ) 8 4 2 , 1 0 1 ( ) 8 9 6 , 2 ( 0 0 0 ’ $ E R A H S E V R E S E R Y R U S A E R T – – – 4 7 7 , 2 ) 6 9 3 ( 0 0 0 ’ $ E R A H S - N E P M O C I N O T A S E V R E S E R 2 2 0 , 0 1 – – – ) 7 0 8 , 1 ( – 5 1 2 , 8 e v r e s e r l s t fi o r p e b a t u b i r t s d m o r f i l d e r a c e d s d n e d v D i i l s r e d o h e r a h s h t i w s n o i t c a s n a r T s t n e m y a p d e s a b - e r a h s d e l t t e s y t i u q E 0 2 0 2 e n u J 0 3 t a e c n a l a B d e r i u q c a s e r a h s y r u s a e r T s e v r e s e r o t i s g n n r a e d e n a t e r i m o r f r e f s n a r T e m o c n i e v i s n e h e r p m o c r e h t O 9 1 0 2 y l u J 1 t a e c n a l a B I D E T A D L O S N O C LINK GROUP | Annual Report 2021 179 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) Share compensation reserve The reserve for own shares represents the cost of ordinary shares held by an equity compensation plan that will be issued to settle entitlements under share-based payment plans. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Treasury share reserve The treasury share reserve comprises the cost of the Company’s shares held by Link Group. Treasury shares are carried at cost and held for the purposes of the settling share-based payment arrangements at a future date, refer Note 25. At 30 June 2021, Link Group held 3,802,952 (2020: 62,582) of the Company’s shares. Distributable profits reserve The distributable profits reserve is available to enable the payment of future dividends. Foreign currency translation reserve The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of Link Group. Where Link Group hedges foreign currency risk on net investments in foreign subsidiaries, foreign exchange gains/losses on translation of the hedging instrument are recognised in other comprehensive income and accumulated in the foreign currency translation reserve on consolidation. Acquisition reserve The acquisition reserve represents the purchase of non-controlling interests where there is no change in control. The accounting standards prescribe that the value of such acquisitions should be accounted for as equity transactions instead of accounting for them as an adjustment to goodwill. Defined benefit reserve The defined benefit reserve represents the re-measurement of the net defined benefit liability and comprises the actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest). Pre-acquisition profits paid reserve The pre-acquisition profits paid reserve represents dividends paid on consolidation from pre and post-acquisition profits in a prior period. Dividends Dividend cents per share Franking percentage Total dividend ($’000) Record date Payment date 2021 INTERIM 2020 FINAL 2020 INTERIM 2019 FINAL 4.5 60% 24,073 3.5 50% 18,561 04.03.2021 09.04.2021 02.09.2020 25.09.2020 6.5 100% 34,504 05.03.2020 09.04.2020 12.5 100% 66,744 05.09.2019 10.10.2019 Dividends are recognised as a liability in the period in which they are declared. The final 2021 dividend has not been declared at the reporting date and therefore is not reflected in the consolidated financial statements. On 26 August 2021, the Directors approved a final dividend of $29,492,439, which equates to 5.5 cents per share, franked at 100% in respect of the financial year ended 30 June 2021. The record date for determining entitlements to the final dividend is 1 September 2021. Payment of the final dividend will occur on 20 October 2021. 180 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) 24. RETAINED EARNINGS Retained earnings at the beginning of the financial year 1 Net profit attributable to equity holders Transfer from retained earnings to distributable profits reserve Gain on settlement of dividend reinvestment plan recognised in retained earnings Gain on settlement of equity settled share-based payments recognised in retained earnings Transactions with non-controlling interest without a change in control Retained earnings at the end of the year 25. SHARE-BASED PAYMENT ARRANGEMENTS 2021 $’000 2020 1 $’000 21,237 229,338 (163,352) (104,621) (29,070) (104,173) – 1,402 1,968 5 688 – (167,815) 21,237 The fair value of the share-based payments is determined at grant/service commencement date and is recognised as an expense, with a corresponding increase in reserves, over the vesting period. The amount expensed is adjusted based on the related service and non-market performance conditions which are expected to be met, resulting in the amount recognised being based on the number of awards that meet the related service and non-market performance conditions at the vesting date. The impact of any changes to the estimates of non-market vesting conditions are adjusted each reporting period to reflect the most current expectation of vesting. (a) Description of share-based payment arrangements At 30 June 2021, Link Group had the following shared-based payment arrangements. Omnibus equity plan The Omnibus equity plan (OEP) entitles Executive KMPs, Senior Executives and Senior Leaders to receive Performance Share Rights (PSRs) which, subject to the satisfaction of service-based conditions and performance hurdles, will, if vested, allow participants to receive fully paid ordinary shares in the Company. During the financial year and in accordance with the OEP, LTI PSRs were granted to Executive KMPs, Senior Executives and Senior Leaders on 30 November 2020. The PSRs are divided into two tranches of 75% and 25% and subject to testing against an operating earnings-per-share (EPS) target and relative total shareholder return (relative TSR) respectively. The terms and conditions of the PSRs granted during the financial year ended 30 June 2021 were as follows. GRANT DATE/ EMPLOYEES ENTITLED LTI issued to Executive KMPs, Senior Executives and Senior Leaders on 30 November 2020 NUMBER OF PSRs 2,485,578 LTI issued to Senior Executive on 15 February 2021 18,563 VESTING CONDITIONS CONTRACTUAL LIFE OF PSRs 75% against an EPS target and 25% against relative TSR for the three-year performance period commencing 1 July 2020. 75% against an EPS target and 25% against relative TSR for the three-year performance period commencing 1 July 2020. Seven years, with last exercise occurring September 2027 (unless the PSRs lapse earlier in accordance with the terms of the invitation). Seven years, with last exercise occurring September 2027 (unless the PSRs lapse earlier in accordance with the terms of the invitation). The number of PSRs issued to each participant was calculated with reference to the 5-day Volume Weighted Average Price (VWAP) following the release of the 2020 full year results and accounted for at fair value in accordance with accounting standards from grant date. 1 Prior period comparative information has been restated in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Refer to Note 3. LINK GROUP | Annual Report 2021 181 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) The expense recognised in the consolidated statement of profit or loss and other comprehensive income in relation to the LTI PSRs during the year ended 30 June 2021 was $1.8 million (2020: $1.2 million). Special equity grant On 1 December 2020, the Board, at its discretion, offered restricted shares (RSs) or share rights (SRs) under the Omnibus equity plan (OEP) as compensation to employees who participated in the voluntary temporary pay reduction. The restricted shares or share rights entitle participants to receive fully paid ordinary shares in the Company subject to continued employment for a one or two year service period. The terms and conditions of special equity granted during the financial year ended 30 June 2021 were as follows. GRANT DATE Restricted shares issued 1 December 2020 Share rights issued 1 December 2020 Restricted shares issued 1 December 2020 Share rights issued 1 December 2020 NUMBER OF RSs/SRs VESTING CONDITIONS 2,763,466 Subject to continued employment, vesting on 30 November 2021. 463,963 Subject to continued employment, vesting on 30 November 2021. 392,793 Subject to continued employment, vesting on 30 November 2022. 56,778 Subject to continued employment, vesting on 30 November 2022. The expense recognised in the consolidated statement of profit or loss and other comprehensive income in relation to the special equity grant during the financial year ended 30 June 2021 was $9.4 million (2020: $Nil). (b) Measurement of grant date fair values Significant accounting estimate and judgement Judgement is required in determining the fair value of PSRs, which was determined at grant date based upon an independent valuation. The amount expensed is adjusted based on the related service and non-market performance conditions which are expected to be met. 182 SECTION03 Notes to the Financial Statements CAPITAL STRUCTURE, FINANCING AND RISK MANAGEMENT (CONTINUED) The following inputs were used in the measurement of the fair values at grant date of the LTI PSRs issued during the year ended 30 June 2021: Fair value at grant date: i. EPS tranche at grant date ii. TSR tranche fair value at grant date Share price at grant date Exercise price Expected volatility (weighted average volatility) PSR life (expected weighted average life) Holding lock discount: i. 1 year ii. 2 years Expected dividends Risk-free interest rate (based on government bonds) 30 NOVEMBER 2020 $4.35 $2.51 $4.90 – 32.5% 3 years 7.5% 10% 2.73% 0.12% The fair value of services received in return for LTI PSRs is based on the fair value of LTI PSRs granted, measured using a Monte Carlo valuation model. Expected volatility is estimated taking into account historic average share price volatility of the Company and certain other ASX listed companies. The fair value of services received in return for special equity grant restricted shares or share rights is based on the market price of Link Group’s ordinary shares at grant date, being $4.92. (c) Reconciliation of share rights The number of share rights on issue during the financial year ended 30 June 2021 was as follows: On issue at beginning of the year Granted during the year Lapsed during the year Vested during the year On issue at the end of the year LTI PSRs SEG SRs STI DEFERRAL PSRs 2021 ‘000 4,112 2,504 (1,111) – 5,505 2020 ‘000 3,116 1,758 (409) (353) 4,112 2021 ‘000 – 521 (49) (3) 469 2020 ‘000 2021 ‘000 2020 ‘000 – – – – – 6 – – (6) – 6 – – – 6 LINK GROUP | Annual Report 2021 183 SECTION03 Notes to the Financial Statements GROUP STRUCTURE 26. BUSINESS COMBINATIONS In addition to organic growth, Link Group seeks to grow through acquisitions and leverage the existing systems, skill sets and processes to improve client satisfaction and obtain synergies to drive positive returns for shareholders. All business combinations are accounted for by applying the acquisition method. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. Link Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as at the acquisition date. Consideration transferred includes the fair values of the assets, liabilities and contingent liabilities, including liabilities incurred by Link Group to the previous owners of the acquiree and equity interests issued by Link Group. Consideration transferred also includes the fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced mandatorily in the Business Combination. Significant accounting estimate and judgement Judgement is required in measuring the fair value of identifiable assets acquired and liabilities assumed for each acquisition. All key assumptions applied in fair value measurements were determined using the past experiences of Link Group and management. Where possible, assumptions were validated against external sources of information. Acquisitions On 31 July 2020, Link Group acquired 100% of Universal Capital Securities Private Limited for INR 32.1 million ($0.6 million). On 5 March 2021, Link Group acquired 100% of SKDC Consultants Limited for INR 50.9 million ($0.9 million). On 18 September 2020, Link Group acquired the remaining 25% interest, taking its interest to 100%, in TSR Darashaw Consultants Private Limited for INR 333.0 million ($6.2 million). Given Link Group already owned 75% of TSR Darashaw Consultants Private Limited, this was not a business combination and was accounted for as a transaction with non-controlling interests in accordance with AASB 10 Consolidated Financial Statements. These share registry acquisitions in India add scale to the existing Link Intime business and provide the opportunity to obtain cost synergies from integration. Provisional acquisition accounting The fair values of the following assets and liabilities have been recognised on a provisional basis as at 30 June 2021, whereby the accounting balances for the acquisition may be revised in accordance with AASB 3 Business Combinations: • • intangible assets (excluding goodwill), predominantly client relationships, have been determined provisionally pending completion of fair value calculations; and the fair value of net identifiable assets acquired may be impacted by the completion of the newly acquired subsidiaries 30 June 2021 financial statement audits and tax returns. Where new information obtained within one year of the acquisition about the facts and circumstances that existed at the date of acquisition identifies adjustments to the above amounts, or any additional provisions that existed at the date of acquisition, the accounting for the acquisition will be revised. 184 SECTION03 Notes to the Financial Statements GROUP STRUCTURE (CONTINUED) Prior year provisional acquisition accounting The fair values of the assets and liabilities acquired in the Link Pension Administration Limited business combination were recognised on a provisional basis as at 30 June 2020. No new information was obtained about the facts and circumstances that existed at the date of the acquisitions, meaning no adjustments to any amounts recognised or the accounting for the acquisitions were required. The measurement period for these business combinations is now closed. Disposal of subsidiaries On 2 November 2020, Link Group completed the sale of its 74.9% interest in Link Market Services South Africa (Pty) Limited (LMSSA) to JSE Limited for a cash free, debt free consideration of ZAR 224.5 million ($19.5 million). The subsidiaries over which Link Group relinquished control due to the sale transaction were: • Link Market Services South Africa (Pty) Limited; • Link Investor Services Pty Limited; and • Pacific Custodians (Nominees) (RF) Pty Limited. LMSSA’s assets and liabilities associated with the sale were presented as a disposal group held for sale as at 30 June 2020. The results of the disposed subsidiaries are included in Link Group’s consolidated statement of profit or loss and other comprehensive income up until the date of relinquishment of control on 2 November 2020. On the date of relinquishment of control, Link Group derecognised the assets and liabilities of the disposed subsidiaries and recognised a profit before tax on disposal of $15.3 million in accordance with AASB 10 Consolidated Financial Statements. 27. CONTROLLED ENTITIES SUBSIDIARIES Australia and New Zealand Link Administration Pty Limited Link Digital Solutions Pty Limited Link Market Services Group Pty Limited Link Market Services Holdings Pty Limited Link Market Services Limited Pacific Custodians Pty Limited Link MS Services Pty Limited Link Share Plans Pty Limited Orient Capital Pty Limited Corporate File Pty Limited Open Briefing Pty Limited Australian Administration Services Pty Limited AAS Superannuation Services Pty Limited Link Group Technology Pty Limited Atune Financial Solutions Pty Limited Primary Superannuation Services Pty Limited The Superannuation Clearing House Pty Limited Complete Corporate Solutions Pty Limited Company Matters Pty Ltd The Australian Superannuation Group (WA) Pty Ltd Link DigiCom Pty Limited COUNTRY OF INCORPORATION % OWNERSHIP INTEREST CONSOLIDATED 2021 % OWNERSHIP INTEREST CONSOLIDATED 2020 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 LINK GROUP | Annual Report 2021 185 SECTION03 Notes to the Financial Statements GROUP STRUCTURE (CONTINUED) SUBSIDIARIES Link Business Services Pty Ltd Link Administration Services Pty Limited Link Advice Pty Limited Link Super Pty Limited P.S.I Superannuation Management Pty Limited Empirics Marketing Pty Limited FuturePlus Financial Services Pty Limited Link Property Holdings Pty Limited Link Property Pty Limited Link Administration RSS Pty Limited (formerly FuturePlus Legal Services Pty Limited) Accrued Holdings Pty Limited Synchronised Software Pty Limited Link Administration Support Services Pty Limited Superpartners Pty Limited Link Administration Resource Services Pty Limited Link Fund Solutions Pty Limited Adviser Network Pty Limited Link Land Registry Services Pty Limited WO Nominees A/C Non Taxable Pty Limited WO Nominees A/C Company Pty Limited WO Nominees A/C Fund Pty Limited Link Administration Holdings Employee Share Trust 1 Link Market Services (New Zealand) Limited Pacific Custodians (New Zealand) Limited United Kingdom and Channel Islands Link Group Administration Limited Link Group Service Company Limited D.F. King Ltd Orient Capital Limited Link Group Corporate Director Limited Link Group Corporate Secretary Limited Asset Checker Limited Crown Northcorp Limited Jessop Fund Managers Limited LFI (Nominees) Limited Link Alternative Fund Administrators Limited Link Asset Services (Holdings) Limited COUNTRY OF INCORPORATION % OWNERSHIP INTEREST CONSOLIDATED 2021 % OWNERSHIP INTEREST CONSOLIDATED 2020 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom 100 100 100 100 100 51.3 100 100 100 100 51.3 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 51.3 100 100 100 100 51.3 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 50 100 100 100 100 100 1 Link Group has determined it controls the employee share trust that administers its share-based payment arrangements (refer Note 25), despite having no ownership interest in the entity. 186 SECTION03 Notes to the Financial Statements GROUP STRUCTURE (CONTINUED) SUBSIDIARIES BCMGlobal London Limited (formerly Link Asset Services (London) Limited) BCMGlobal (UK) Limited (formerly Link Asset Services (UK) Limited) Link Company Matters Limited LF Solutions Holdings Limited (formerly Link Financial Group Limited) Link Financial Investments Limited Link Fund Administrators Limited Link Fund Solutions Limited Link Market Services Limited Link Market Services Trustees (Nominees) Limited Link Market Services Trustees Limited BCMGlobal Mortgage Services Limited (formerly Link Mortgage Services Limited) Link Share Plan Services Limited Link Treasury Services Limited Northern Registrars Limited (dissolved 8 December 2020) Personal Pension Management Ltd (dissolved 8 December 2020) Rooftop Mortgages Limited Sinclair Henderson Fund Administration Limited Stentiford Close Registrars Limited (dissolved 8 December 2020) Link Pension Administration Limited Financial Administrators (Guernsey) Limited (dissolved 24 February 2021) Link Market Services (Guernsey) Limited Link Nominees 1 Limited (dissolved 24 February 2021) Link Nominees 2 Limited (dissolved 24 February 2021) Link Market Services (Jersey) Limited Link Market Services (Isle of Man) Limited Europe Link Market Services GmbH Link Market Services (Frankfurt) GmbH Link Asset Services GmbH Orient Capital GmbH BCMGlobal ASI Limited (formerly Link ASI Limited) Link CTI Limited COUNTRY OF INCORPORATION % OWNERSHIP INTEREST CONSOLIDATED 2021 % OWNERSHIP INTEREST CONSOLIDATED 2020 United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom Guernsey Guernsey Guernsey Guernsey Jersey Isle of Man Germany Germany Germany Germany Ireland Ireland 100 100 100 100 100 100 100 100 100 100 100 100 100 – – 100 100 – 100 – 100 – – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 LINK GROUP | Annual Report 2021 187 SECTION03 Notes to the Financial Statements COUNTRY OF INCORPORATION % OWNERSHIP INTEREST CONSOLIDATED 2021 % OWNERSHIP INTEREST CONSOLIDATED 2020 GROUP STRUCTURE (CONTINUED) SUBSIDIARIES Link Fund Administrators (Ireland) Ltd Link Fund Manager Solutions (Ireland) Limited Link IRG (BC) Limited Link Registrars Limited Link Group Administration Pty Limited Link Group Service Company Pty Limited Link Fund Solutions (Luxembourg) S.A. Link Asset Services B.V. BCMGlobal Netherlands B.V. (formerly Link Asset Services (Netherlands) B.V.) FlexFront B.V. Link Asset Services (France) SAS Other countries Link Investor Services Pty Limited (disposed 2 November 2020) Link Market Services South Africa (Pty) Limited (disposed 2 November 2020) Pacific Custodians (Nominees) (RF) Pty Limited (disposed 2 November 2020) Link Intime India Private Limited Sharex Dynamic (India) Pvt Ltd (merged into Link Intime India Private Limited) TSR Darashaw Consultants Private Limited Universal Capital Securities Private Limited (acquired 31 July 2020) SKDC Consultants Limited (acquired 5 March 2021) Link Administration Services Private Limited Ireland Ireland Ireland Ireland Ireland Ireland Luxembourg Netherlands Netherlands Netherlands France South Africa South Africa South Africa India India India India India India 100 100 100 100 100 100 100 100 100 100 100 – – – 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 74.9 74.9 74.9 100 100 75 – – 100 100 100 PNG Registries Pty Limited Link Market Services (Hong Kong) Pty Limited Papua New Guinea Hong Kong Subsidiaries are entities controlled by the Company. Control exists when Link Group has the power to govern the financial and operating policies of an entity to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed on acquisition when necessary to align them with the policies adopted by Link Group. 188 SECTION03 Notes to the Financial Statements GROUP STRUCTURE (CONTINUED) 28. PARENT ENTITY DISCLOSURES In accordance with the Corporations Act 2001, these consolidated financial statements present the results of the consolidated entity only. As at, and throughout, the financial year ended 30 June 2021 the ultimate parent entity of Link Group was Link Administration Holdings Limited. Result of parent entity Profit for the year Other comprehensive income Total comprehensive income for the year Financial position of parent entity at year end Current assets Total assets Current liabilities Total liabilities Total equity of the parent entity comprising of: Contributed equity Share compensation reserve Distributable profits reserve Accumulated losses Total equity 2021 $’000 2020 $’000 29,070 104,173 – – 29,070 104,173 23,297 13,689 2,000,524 1,947,268 27,345 27,345 109 109 1,917,748 1,889,733 18,382 103,848 (66,799) 8,215 117,412 (68,201) 1,973,179 1,947,159 The parent entity has a deficiency of net current assets of $4.0 million (2020: net current assets of $13.5 million), primarily due to the $24.5 million income tax payable (2020: $10.3 million income tax receivable) it carries as head of the Link Administration Holdings tax consolidated group. The current tax asset/liability is funded by other members of the tax consolidated group, shown as inter-company receivables in non-current assets. Link Group has $211.1 million (2020: $188.9 million) net current assets and $395.0 million (2020: $264.1 million) cash and cash equivalents as at 30 June 2021. Other than those disclosed in Note 20, the parent entity has no contingent liabilities, contractual commitments or guarantees with third parties as at 30 June 2021 (2020: none). LINK GROUP | Annual Report 2021 189 SECTION03 Notes to the Financial Statements OTHER DISCLOSURES 29. RELATED PARTIES Key Management Personnel compensation The aggregate Key Management Personnel (“KMP”) compensation comprised the following: Short term employee benefits Post-employment benefits Other long-term benefits Share-based payments Termination benefits 30. AUDITOR’S REMUNERATION Audit of the financial statements Auditor of the Company – KPMG Australia Other network firms – KPMG international Assurance related services Auditor of the Company – KPMG Australia Other network firms – KPMG international Other services Auditor of the Company – KPMG Australia Other network firms – KPMG international 2021 $ 2020 $ 8,506,617 5,962,222 221,653 213,288 31,902 58,974 1,547,729 1,142,500 – – 10,307,901 7,376,984 2021 $ 2020 $ 1,016,582 941,091 1,429,293 1,105,481 575,624 280,826 604,629 311,794 580,350 213,274 415,000 260,918 4,095,949 3,638,913 “Other services” includes accounting and other services provided during the financial year. The Auditor’s remuneration relating to entities acquired in a business combination during the financial year is disclosed only in respect of the period those entities were controlled by Link Group. 190 SECTION03 Notes to the Financial Statements 31. SUBSEQUENT EVENTS Casa4Funds acquisition On 18 December 2020, Link Group entered into a binding agreement to acquire 100% of Casa4Funds S.A. (Casa4Funds) for a cash free, debt free consideration of €10 million. Casa4Funds, headquartered in Luxembourg, is one of the oldest European independent third-party UCITS Management Companies and Alternative Investment Fund Managers (AIFM). As at 30 June 2021, the acquisition was subject to mandatory regulatory approvals and completed on 4 August 2021. On-market share buy-back On 26 August 2021, Link Group announced its intention to undertake an on-market buy-back of its shares up to a maximum cost of $150.0 million. Link Group reserves the right to vary, suspend or terminate the buy-back at any time. Post balance date debt repayments Link Group made the following debt repayments subsequent to reporting date: • On 7 July 2021, Link Group repaid $45 million of its AUD non-amortising loan facility; • On 12 July 2021, Link Group repaid £3.3 million of its GBP non-amortising loan facility; • On 12 July 2021, Link Group repaid $75 million of its AUD non-amortising loan facility; and • On 28 July 2021, Link Group repaid $30 million of its AUD non-amortising loan facility. On 5 July 2021, Link Group terminated $275 million of the AUD non-amortising term loan facility early in accordance with the Syndicated Facility Agreement. Impact of COVID-19 on post balance date trading Whilst the Directors note the ongoing COVID-19 pandemic continues to impact global markets and business operations, including jurisdictions that Link Group operates in, Link Group has shown resilience and has been proactive in response to these challenges. The future impact of the COVID-19 pandemic remains uncertain. Other than the matters described above, in the opinion of the Directors, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of Link Group, the results of those operations, or the state of affairs of Link Group, in future financial years. 32. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED There are no new standards, amendments to standards and interpretations effective for annual periods beginning on or after 1 July 2021 that have been applied in preparing these consolidated financial statements. No new standards are expected to be relevant to Link Group, and Link Group does not intend to adopt any standards early. LINK GROUP | Annual Report 2021 191 SECTION03 Notes to the Financial Statements 1. In the opinion of the Directors of Link Administration Holdings Limited (the Company): (a) the consolidated financial statements and notes that are set out on pages 138 to 191 and the Remuneration Report on pages 109 to 133 in the Directors’ Report are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of Link Group’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and the Chief Financial Officer for the financial year ended 30 June 2021. 3. The Directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. Signed in accordance with a resolution of the Directors. Michael Carapiet Chair Vivek Bhatia Chief Executive Officer & Managing Director Dated 26 August 2021 at Sydney. 192 SECTION04 Directors’ Declaration Independent Auditor’s Report To the shareholders of Link Administration Holdings Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Link Administration Holdings Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: giving a true and fair view of the Link Group’s financial position as at 30 June 2021 and of its financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion The Financial Report comprises: Consolidated statement of financial position as at 30 June 2021; Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; Notes including a summary of significant accounting policies; and Directors’ Declaration. Link Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of Link Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Emphasis of matter We draw attention to Note 3 to the financial statements, which describes the restatement of comparative information related to the Group’s equity accounted investee. Our report is not modified in respect of this matter. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 114 LINK GROUP | Annual Report 2021 193 SECTION05 Independent Auditor’s Report Key Audit Matters The Key Audit Matters we identified are: Valuation of goodwill Revenue Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. VVaalluuaattiioonn ooff ggooooddwwiillll (($$11,,228866mm)) aanndd rreeccooggnniittiioonn ooff iimmppaaiirrmmeenntt cchhaarrggee (($$117733..11mm)) Refer to Note 16 to the Financial Report The key audit matter How the matter was addressed in our audit Link Group’s annual testing of goodwill for impairment is a Key Audit Matter due to: the size of the goodwill balance (being 30% of total assets); and the forward-looking assumptions Link Group applied in its value in use models, including: forecast cash flows, growth rates and terminal growth rates which are influenced by duration, renewal and key terms of major client contracts, competitive market conditions; estimating the projected cash flow forecast into the future is inherently subjective and susceptible to differences in outcome; Link Group also operates across different geographies with varying market pressures which increases the risk of inaccurate forecast; and discount rates, which are subjective in nature and vary according to the specific conditions and environment of Cash Generating Units (CGUs). Our procedures included: Considering the appropriateness of the value in use method applied by Link Group to perform the annual test of goodwill for impairment against the requirements of the Accounting Standards; Testing the integrity of the value in use models used, including the determination of carrying values and the accuracy of the underlying calculations; In light of the recent changes to Link Group’s operating model, assessing Link Group’s determination of its CGUs, we analysed how independent cash inflows of Link Group were generated, against the requirements of the Accounting Standards; Assessing the historical accuracy of Link Group’s forecasts by comparing to actual results, to use in our evaluation of forecasts incorporated in the value in use model; Checking the consistency of the forecast cash flows assumptions, for alignment to Link Group’s approved FY22 – FY26 budget and our inquiries with Link Group; Performing sensitivity analysis of key assumptions, in particular discount rates, forecast growth rates and terminal growth rates, to identify those assumptions at a higher risk of bias or inconsistency in application; 115 194 SECTION05 Independent Auditor’s Report At 30 June Link Group recognised an impairment charge of $173.1m in relation to the Banking and Credit Management CGU. This drives additional audit effort given the sensitivity to changes in cashflow assumptions. During the year ended 30 June 2021 Link Group realigned its operating and organisation structure, requiring consideration of the allocation of goodwill to the CGUs, based on Link Group’s management and monitoring of the business. RReevveennuuee (($$11,,116600..33mm)) Refer to Note 6 to the Financial Report Working with our valuation specialists we used our knowledge of Link Group and its industry to independently develop a discount rate range considered comparable using publicly available market data for comparable entities. We involved valuation specialists to supplement our senior audit team members in assessing this Key Audit Matter; and Assessing the disclosures in the financial report, including those detailing the impairment charge for the year, using our understanding of the information obtained from our testing and against the requirements of the Accounting Standards. The key audit matter How the matter was addressed in our audit Revenue is a Key Audit Matter due to: Our procedures included: its significance to Link Group results; and the significant audit effort required as a result of the various streams of revenue derived from diverse services and products offered to customers. This includes revenue earned in multiple geographical locations under each of the reporting segments. Link Group generates revenue across its four operating segments from a variety of services and products offerings. Significant revenue streams include fees from the: provision of administration services to superannuation funds; provision of services to corporates; loan origination and servicing, debt work- out, compliance and regulatory oversight services to retail banks, investment banks, private equity funds and other investors; and provision of management, third-party administration and transfer agency services to investment funds. Obtaining an understanding of processes and testing key controls for significant revenue streams across the four business units. This included walking through the process with Link Group’s respective business and finance teams to check our understanding of the procedures and related controls; Testing of Link Group’s controls for the review and manual approval of key calculations and invoices for significant revenue streams; Using statistical sampling across key revenue streams and checking Link Group’s recorded revenue to customer invoices, signed customer contracts and bank statements; Selecting a sample of invoices across the various revenue streams raised prior to, and post, year-end. We checked the timing of revenue recorded against the details of the service description on the invoice; and Developing an expectation for contract- based revenue for the significant revenue streams and comparing this with the 116 LINK GROUP | Annual Report 2021 195 SECTION05 Independent Auditor’s Report recorded contract revenue for the current year. We based this on prior year contract revenue and average fee changes sourced from a sample of signed customer contracts and adjusted our expectation for changes in member numbers throughout the year, which were checked to customer invoices. Other Information Other Information is financial and non-financial information in Link Group’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report, Operating and Financial Review and Remuneration Report. The Messages from the Chair and Managing Director, Sustainability Report and Additional Shareholder Information are expected to be made available to us after the date of the Auditor's Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and assessing Link Group’s and the Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate Link Group and the Company or to cease operations or have no realistic alternative but to do so. 196 117 SECTION05 Independent Auditor’s Report Auditor’s responsibilities for the audit of the Financial Report Our objective is: to obtain reasonable assurance about whether the Financial Report as a whole is 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 Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Link Administration Holdings Limited for the year ended 30 June 2021, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 109 to 133 of the Directors’ report for the year ended 30 June 2021. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Eileen Hoggett Partner Sydney 26 August 2021 Brendan Twining Partner 118 LINK GROUP | Annual Report 2021 197 SECTION05 Independent Auditor’s Report Additional information required by the Australian Securities Exchange (ASX) and not shown elsewhere in this report is as follows. The information is current at 24 August 2021 unless specified otherwise. DISTRIBUTION OF SHAREHOLDERS RANGE 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 1 NO. OF HOLDERS % OF HOLDERS SECURITIES % OF ISSUED CAPITAL ORDINARY SHARES 134 2,529 4,089 13,222 8,587 0.47 8.85 14.32 46.29 30.07 410,300,368 56,273,916 30,197,980 35,201,026 4,252,882 Total 28,561 100 536,226,172 1 514 shareholders hold less than a marketable parcel of shares at a share price value of $5.11 (closing price on ASX on 24 August 2021). There are no other classes of quoted equity securities on issue. TOP TWENTY SHAREHOLDERS (UNGROUPED) RANK NAME 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED BNP PARIBAS NOMS PTY LTD MUTUAL TRUST PTY LTD BOSTON & BAXTER PTY LTD BNP PARIBAS NOMINEES PTY LTD JOHN MENZIES MCMURTRIE BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD PACIFIC CUSTODIANS PTY LIMITED NETWEALTH INVESTMENTS LIMITED CS THIRD NOMINEES PTY LIMITED WILLIAM JOHN HAWKINS HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED CUSTODIAL SERVICES LIMITED BOND STREET CUSTODIANS LIMITED BNP PARIBAS NOMINEES PTY LTD WARBONT NOMINEES PTY LTD NUMBER OF ORDINARY SHARES 127,570,762 87,808,014 61,908,940 28,731,516 9,316,477 8,500,000 8,274,750 6,125,689 4,602,687 4,545,180 4,116,373 3,178,387 3,044,618 2,913,643 2,764,026 2,217,595 2,102,339 1,891,696 1,537,000 1,493,085 76.52 10.49 5.63 6.56 0.79 0.01 100 % 23.79 16.38 11.55 5.36 1.74 1.59 1.54 1.14 0.86 0.85 0.77 0.59 0.57 0.54 0.52 0.41 0.39 0.35 0.29 0.28 Total Balance of register Grand total 198 372,642,777 163,583,395 536,226,172 69.49 30.51 100.00 Additional Shareholder Information SUBSTANTIAL SHAREHOLDERS NAME Yarra Capital Management Ltd Yarra Funds Management Ltd and related entities ON-MARKET BUY BACK NUMBER OF SHARES 36,389,911 40,914,900 % OF INTEREST 6.7863% 7.6483% DATE OF LAST SUBSTANTIAL SHAREHOLDER NOTIFICATION 14 April 2021 7 December 2020 On 26 August 2021, Link Group announced its intention to undertake an on-market buy-back of its shares up to a maximum cost of $150.0 million. Link Group reserves the right to vary, suspend or terminate the buy-back at any time. VOTING RIGHTS Each holder of ordinary shares is entitled to one vote per share (on a poll) or one vote (on a show of hands) at shareholder meetings. UNQUOTED EQUITY SECURITIES Link Administration Holdings Limited has 5,974,023 unquoted equity securities issued under an employee incentive scheme. There are 445 holders of unquoted equity securities. SECURITIES SUBJECT TO VOLUNTARY ESCROW Link Administration Holdings Limited has no securities subject to voluntary escrow. SECURITIES PURCHASED ON-MARKET FOR THE PURPOSES OF EMPLOYEE INCENTIVE SCHEME During FY2021, a total of 109,894 ordinary shares were acquired on-market for the purposes of Link Group employee equity plans and the average price per share purchased was $3.9237. STOCK EXCHANGE LISTING Link Administration Holdings Limited securities are only listed on the ASX under the symbol LNK. ANNUAL GENERAL MEETING Link Administration Holdings Limited 2021 Annual General Meeting will be held on Tuesday, 23 November 2021. LINK GROUP | Annual Report 2021 199 Additional Shareholder Information Financial performance ($m) Revenue Operating EBITDA Operating EBITDA margins % Profit before tax NPAT (statutory) NPATA Operating NPATA Other Financial Performance Information Recurring Revenue % Revenue APAC % Revenue EMEA % % of Gross Revenue – Retirement and Superannuation Solutions % of Gross Revenue – Corporate Markets % of Gross Revenue – Banking and Credit Management % of Gross Revenue – Fund Solutions % of Gross Revenue – Corporate & Private Client Services Financial position ($m) Assets Liabilities Net assets Net (debt)/cash 2 Total Equity Share information Market capitalisation ($m) Ordinary shares at period end (million shares) Total dividends per share (cents per share) Interim dividend per share (cents per share) Final dividend per share (cents per share) Total dividends ($m) Total dividend franking % Share price – 30 June closing ($) Ratios Dividend payout ratio (Total Dividends/NPATA 3) Net operating cash flow conversion % Total leverage ratio 4 Operational metrics Total FTE (period end) FY2021 1 FY2020 1 FY2019 1 1,160.3 256.6 22.1% (141.5) (162.7) (108.8) 113.2 84.6% 59.7% 40.3% 42.8% 30.8% 11.9% 14.4% 0.0% 4,276.8 2,537.2 1,739.6 454.6 1,739.6 2,703 536.2 10.0 4.5 5.5 53.6 82.0% 5.04 75.0% 114% 1.8 1,230.4 1,403.5 293.8 23.9% (90.0) (102.5) (42.9) 137.6 82.9% 57.8% 42.2% 42.2% 30.8% 13.2% 13.8% 0.0% 4,353.5 2,421.2 1,932.2 750.4 1,932.2 2,174 530.3 10.0 6.5 3.5 53.1 82.5% 4.10 60.3% 108% 2.7 394.6 28.1% 416.5 323.7 374.2 196.9 80.0% 52.9% 47.1% 39.5% 27.4% 11.8% 11.4% 9.9% 5,116.5 2,959.6 2,157.0 596.9 2,157.0 2,670 534.0 20.5 8.0 12.5 109.3 100.0% 5.00 76.0% 97% 1.9 7,069.0 6,964.0 6,709.0 1 FY2019 comparative information has been restated following the initial application of AASB 16 Leases. FY2019 and FY2020 reflect realigned business units. FY2019, FY2020 & FY2021 have been restated as a result of revised tax accounting within PEXA. 2 Debt (excludes right-of-use lease liabilities). 3 For the calculation of the dividend payout ratio, NPATA adjusted to exclude the impact of the following one-off items: FY2019 – PEXA fair value gain $124.6m & gain on disposal of CPCS $105.7m/FY2020 – Impairment expense $107.8m & Leveris investment fair value adjustment $23.1m/FY2021 – Impairment expense $182.8m, Leveris investment fair value adjustment $17.1m & Smart Pension fair value gain $19.7m. Total leverage ratio calculated in accordance with Link Group’s debt agreement. 4 200 Three-Year Summary AUSTRALIAN COMPANY NUMBER 120 964 098 COMPANY SECRETARY Sarah Turner REGISTERED OFFICE AND PRINCIPAL ADMINISTRATIVE OFFICE (LINK GROUP’S REGISTER OF SECURITIES IS HELD AT THE REGISTERED OFFICE) Address: Level 12, 680 George Street Sydney NSW 2000 Australia Telephone Number: +61 2 8280 7100 Web: www.linkgroup.com Design Communication and Production by ARMSTRONG Armstrong.Studio Corporate Information l i n kg ro u p.c o m Link Group Level 12, 680 George Street Sydney NSW 2000 Australia www.linkgroup.com Link Administration Holdings Ltd ABN 27 120 964 098