2018 Annual Report Annual Report Wolters Kluwer 2018 Annual Report 4 2018 Annual Report Wolters Kluwer 2018 Annual Report 5 Table of Contents 6 Message from the CEO 129 Note 20 - Financial Assets 129 Note 21 - Tax Assets and Liabilities 8 Wolters Kluwer at a Glance in 2018 132 Note 22 - Inventories 133 Note 23 - Contract Assets and Liabilities 10 Report of the Executive Board 135 Note 24 - Other Receivables 10 Deliver Deep Impact 135 Note 25 - Cash and Cash Equivalents 16 Our Customers 136 Note 26 - Other Current Liabilities 20 Our Employees 136 Note 27 - Long-term Debt 24 Our Investors 139 Note 28 - Financial Risk Management 30 Our Society 147 Note 29 - Employee Benefits 34 Key Figures 156 Note 30 - Provisions 36 Operational and Financial Review 157 Note 31 - Capital and Reserves 47 2019 Full-Year Outlook 159 Note 32 - Share-based Payments 162 Note 33 - Related Party Transactions 48 Corporate Governance and Risk Management 162 Note 34 - Audit Fees 48 Corporate Governance 163 Note 35 - Commitments and Contingent Liabilities 54 Risk Management 164 Note 36 - Remuneration of the Executive Board 65 Statements by the Executive Board and Supervisory Board 66 Executive Board and Supervisory Board 166 Note 37 - Events after Balance Sheet Date 68 Report of the Supervisory Board 167 Company Financial Statements 68 Supervisory Board Report 72 Remuneration Report 170 Notes to the Company Financial Statements 170 Note 38 - Significant Accounting Policies 77 2018 Financial Statements 170 Note 39 - Financial Assets 171 Note 40 - Accounts Receivable 78 Consolidated Financial Statements 171 Note 41 - Cash and Cash Equivalents 172 Note 42 - Current Liabilities 85 Notes to the Consolidated Financial Statements 172 Note 43 - Long-term Debt to Subsidiaries 85 Note 1 - General and Basis of Preparation 172 Note 44 - Personnel Expenses 93 Note 2 - Significant Accounting Policies 173 Note 45 - Shareholders’ Equity 103 Note 3 - Accounting Estimates and Judgments 175 Note 46 - Commitments and 106 Note 4 - Benchmark Figures Contingent Liabilities 111 Note 5 - Segment Reporting 175 Note 47 - Details of Participating Interests 113 Note 6 - Earnings per Share 175 Note 48 - Profit Appropriation 114 Note 7 - Acquisitions and Divestments 176 Authorization for Issuance 118 Note 8 - Assets/Liabilities Classified as Held for Sale 177 Other Information on the Financial Statements 119 Note 9 - Sales Costs 177 Independent Auditor’s Report 119 Note 10 - General and Administrative Costs 119 Note 11 - Other Operating Income and (Expense) 184 Other Information 120 Note 12 - Personnel Expenses 184 Report of the Wolters Kluwer 120 Note 13 - Amortization, Impairments, and Preference Shares Foundation Depreciation 185 Additional Shareholder Information 121 Note 14 - Financing Results 186 5-Year Key Figures 122 Note 15 - Income Tax Expense 188 Glossary 123 Note 16 - Non-controlling Interests 189 Contact Information 124 Note 17 - Goodwill and Intangible Assets 127 Note 18 - Property, Plant, and Equipment 128 Note 19 - Investments in Equity-accounted Investees Wolters Kluwer 2018 Annual Report Message from the CEO 6 I look forward to a rich agenda ahead as we launch our new " 2019-2021 strategy Accelerating Our Value. Message from the CEO Our achievements in For the past 15 years, we have undertaken an 2018 are the result of ambitious transformational journey, each step along working alongside our the way has represented a different kind of customers and using development for us as an organization. We have advanced technologies transformed into a digital business and are now to address complex focused on becoming a global expert solutions problems in society. company. Our drive and knowledge of our customers, employees, and investors provide a strong foundation as we embark on our 2019-2021 strategy. Message from the CEO Wolters Kluwer 2018 Annual Report 7 In 2018, we delivered 4% organic growth and improved Cultivating innovation and co-creation operating margins and cash flow. Digital & services grew I am very proud of our portfolio adjustments and the 6% organically, representing 88% of total revenues. With innovative product development we have delivered. I am 2018 closed, our previous three-year strategy Growing Our particularly excited to see the array of solutions each of Value is complete. I would like to reflect on the progress our divisions are developing using advanced technologies we have made in bringing innovation-led value to our such as artificial intelligence, machine learning, and robotic customers and highlight the next phase of the company’s process automation. development with the launch of our strategy for 2019-2021: Accelerating Our Value. It’s an exciting time as Wolters As part of our 2016-2018 strategy, we expanded market Kluwer is leading the market with expert solutions which coverage and accelerated our development of global provide significant value to our customers. platforms and cloud-based integrated solutions. Investing in our culture and engaging employees in creative processes Growing Our Value in 2016-2018 has allowed us to anticipate the needs of clinicians, We have successfully executed on our most recent three- accountants, lawyers, and tax, finance, audit, compliance, year strategic plan. Our 2016-2018 strategy, Growing Our and regulatory professionals. We have taken information Value, aimed to improve our organic growth rate, increase and made it more actionable through intelligent solutions shareholders returns, and further enable the long-term and operational agility. Our goal for the future is to complete success of the company. Over the last three years, we have our vision of delivering a seamless digital experience for our expanded our role as a partner that supports customers in customers. their most critical workflows. Building on this momentum, we will continue to grow our expert solutions through Impact on society digital innovation and global expansion. 2018 was a year where we continued to witness the impact our expert solutions have on society. We empowered The acquisitions we have made in the last three years have professionals across industries to work more efficiently allowed us to extend into adjacent markets. CCH Tagetik, and confidently, equipping them with world-class workflow Enablon, and eVision are examples of platforms that tools. In 2019, we will continue to advance our deep domain strengthen our market-leading position. Through eVision, expertise through embedding our products in the customer acquired in October 2018, our position as a leader in both workflow while delivering actionable insight. The deep environmental, health & safety, and industrial operations impact of the work of all the professionals we serve helps risk management software is solidified. We will continue to to make the world more sustainable and supports societal prioritize strategic partnerships to penetrate new markets development. that support our strategic goals. Accelerating Our Value – Together In 2016-2018, we made progress against each of our In 2019, we embark on our new three-year strategy, strategic pillars and we are committed to continue creating Accelerating Our Value, designed to grow our expert value for our customers, employees, investors, and society solutions, advance our deep domain expertise, and drive overall. The immense dedication of our highly specialized operational agility. Working alongside our customers, we employees is one of our greatest strengths. Our employee will continue to apply advanced technologies to address engagement is very strong and our employees continue complex problems in society. I am excited and confident of to be optimistic about our future. The foundation of our the strong foundation we have built. shared values and strong leadership are key drivers of our engagement. As we continue to inspire and celebrate I would like to thank all our employees for their dedication collaborative product development through our many and commitment as we enter the next phase of the innovation programs, we also remain focused on providing company’s development. I would also like to thank our more opportunities for building skills and careers. external stakeholders and investors, all of whom have been vital in enabling us to create value. Nancy McKinstry CEO and Chairman of the Executive Board Wolters Kluwer Wolters Kluwer 2018 Annual Report 2018 at a Glance 8 Wolters Kluwer at a Glance in 2018 TRANSFORMATION DIGITAL & SERVICES Services print digital 88% expert solutions of total revenues, up 6% organically 2003 2014 2016 2018 OUR SERVING CUSTOMERS IN PORTFOLIO 180+ includes: UpToDate, Emmi, TeamMate, CCH countries. Operations Axcess, CT Corporation, OneSumX, in 40+ countries Enablon, and eVision. A RICH 182-YEAR 99% heritage of strong values, deep domain of our active employees knowledge, innovation, and a continuous completed the Annual focus on the customer Compliance Training DIVERSITY 18,600 43% 50% 67% employees worldwide female female female Supervisory Executive divisional Board Board CEOs 2018 at a Glance Wolters Kluwer 2018 Annual Report 9 2018 FINANCIAL HIGHLIGHTS €4.3 23.0% €762 billion adjusted operating million adjusted revenues profit margin free cash flow 4.3% 10.9% 78% organic return on recurring revenues, revenue growth invested capital up 5% organically WOLTERS KLUWER SHARES HAVE INCREASED 149% 2014-2018 8%-10% € of total revenues invested 60 in new and enhanced products 50 40 30 20 10 2014 2015 2016 2017 2018 Wolters Kluwer AEX (rebased) EURO STOXX Media (rebased) Wolters Kluwer