23 Nov

Preliminary Final Report

Technology One Limited ABN 84 010 487 180 Appendix 4E and Annual Financial Report for the year ended 30 September 20 2 1 2 Technology One Limited ABN 84 010 487 180 Annual Fina ncial Report - 30 September 20 2 1 Contents Results for announcement to the market ................................ ................................ ................................ ................... 3 Directors' report ................................ ................................ ................................ ................................ ......................... 5 Auditors Independence Declaration ................................ ................................ ................................ ......................... 17 Remuneration report (audited) ................................ ................................ ................................ ................................ . 18 Financial Statements ................................ ................................ ................................ ................................ ............... 51 Consolidated income statement ................................ ................................ ................................ ...................... 51 Consolidated statement of comprehensive income ................................ ................................ ...................... 52 Consolidated statement of financial position ................................ ................................ ................................ 53 Consolidated statement of changes in equity ................................ ................................ ................................ 54 Consolidated statement of cash flows ................................ ................................ ................................ ........... 55 Notes to the consolidated financial statements ................................ ................................ ............................. 56 Independent Auditors Report ................................ ................................ ................................ ................................ . 104 Technology One Limited Appendix 4E 30 September 202 1 3 Appendix 4E Results for announcement to the market For the year ended 30 September 2021 (compared to the year ended 30 September 2020) 2021 2020 $'000 $'000 Revenue from ordinary activities Up 4% to 312,012 299,018 Profit from ordinary activities after tax attributable to members Up 15% to 72,691 62,945 Net profit for the period attributable to members Up 15% to 72,691 62,945 Dividends Amounts per security Franked amount per security Cents Cents Current period Interim dividend 3.82 2.29 Final dividend 10.09 6.05 Prior period Interim dividend 3.47 2.08 Final dividend 9.41 5.65 The record date for determining entitlements to the final dividend for the year ended 30 September 2021 is 3 December 20 2 1 . There will be no c onduit foreign income paid on the final dividend. The payment date for the final dividend is 1 7 December 20 2 1 . Profit for the ordinary activities after tax attributable to members Breakdown of the revenue figures above 2021 2020 $'000 $'000 Revenue - SaaS and continuing business Up 9% to 293,553 269,774 Revenue - Legacy licence business Down 38% to 17,742 28,493 Other income Down 5% to 717 751 Revenue from ordinary activities 312,012 299,018 2021 2020 Cents Cents Basic EPS 22.64 19.75 Diluted EPS 22.52 19.61 Weighted average number of ordinary shares outstanding during the period used in the calculation of the Basic EPS 321,074,997 318,659,285 NTA Backing 2021 2020 Cents Cents Net tangible asset backing per ordinary share 7.11 9.93 Technology One Limited Appendix 4E 30 September 202 1 4 Compliance statement The report is based on the consolidated financial report which has been audited. Refer to the attached f ull financial report for all other disclosures in respect of the A ppendix 4E. Signed: A drian Di Marco Executive Chairman Brisbane 2 3 November 20 2 1 5 Directors' report Your Directors present their report on the consolidated entity (referred to hereafter as the Company) consisting of Technology One Limited and the entities it controlled at the end of, or during, the year ended 30 September 2021 . DIRECTORS The following persons were Directors of Technology One Limited during the financial year and up to the date of this report: Adrian Di Marco B Sc, MAICD, FACS Appointed 8 December 1999. Experience and expertise Mr Di Marco founded TechnologyOne in 1987, t o undertake deep research to build configurable ERP software based on new and emerging technologies, that did not require customisation at the code level. Mr Di Marco has over 35 years’ experience in the software industry. He has been responsible for all o perational aspects of TechnologyOne, as well as the strategic direction of the company. Mr Di Marco has played a major role in promoting the Australian IT industry and is a past Director of the Australian Informat ion Industry Association, the industry’s p eak body. He has been a director of numerous IT companies. Mr Di Marco is an active investor and supporter of Venture Capital and start - ups both here in Australia and overseas. He has also been actively involved in charitable organisations and is a past Director of the Royal Children’s Hospital Foundation Board. Having established the TechnologyOne foundation, he has in recent years also established the DiMarco Family foundation to support children causes. Mr Di Marco has received extensive recognition for his contribution and pioneering work for the IT industry. He remains a major shareholder of TechnologyOne. Special responsibilities Board Chair and Chief Strategy and Innovation Officer. Interests in shares and options 17, 3 78,500 ordinary shares in Technology One Limited held beneficially through Masterbah Pty Ltd. 6,000 ordinary shares in Technology One Limited held on behalf of family members . In addition, a relationship deed exists between Masterbah Pty Ltd and JL Mactaggart Ho ldings Pty Ltd ( founding shareholders) – Masterbah Pty Ltd exercises voting rights only in respect of 26 ,872,500 securities and an escrow arrangement applies to 14,000,000 of those securities. There are no other beneficial rights incumbent on these shares other than voting rights. Ron McLean Appointed 8 December 1999. Experience and expertise Mr McLean has more than 40 years’ experience in the enterprise software industry including holding Senior Executive and Managing Director roles in several internati onal and Australian software companies. His involvement in the enterprise software industry has included leading and managing software development, consulting and sales and marketing teams. Mr McLean joined the Board as a Non - Executive Director in 1992 w as appointed as the General Manager in 1994, Chief Operating Officer in 1999 and was promoted to Chief Executive Officer of Operations in 2003. Mr McLean retired from this role at TechnologyOne on 15 July 2004 and remains a Non - Executive Director. Special responsibilities Member of the Remuneration Committee (from 1 June 2020). Interests in shares and options 69,737 ordinary shares in Technology One Limited held beneficially through RONMAC Investments Pty Ltd. John Mactaggart FAICD Appointed 8 Dec ember 1999. Experience and expertise Mr Mactaggart’s experience spans industries such as agriculture, agri - tech, manufacturing and software. He co - founded the 6 Australian Association of Angel Investors Limited, is a co - founder of Brisbane Angels and was the Australian representative of the World Business Angels Association. Mr Mactaggart played an integral role in the creation, funding, and development of TechnologyOne and remains a major shareholder. Mr Mactaggart has been a Fellow of the Australian Inst itute of Company Directors since 1991. Interests in shares and options 26,872,500 ordinary shares in Technology One Limited held beneficially through JL Mactaggart Holdings Pty Ltd. 30,000 ordinary shares in Technology One Limited held via the Jontra trust . Richard Anstey FAICD, FAIM Appointed 2 December 2005. Experience and expertise Mr Anstey's career has spanned over 40 years. His first company, Tangent Group Pty Ltd, established a strong reputation for the development of software products and strategic management consultancy for the banking and finance sector. With the sale of Tangent, he then co - founded lnQbator/iQFunds in 2000, an early stage investment group focussed upon the technology, telecommunications and life sciences sectors. Th rough iQFunds and personally, Rick has co - invested in more than 30 companies with the support of Commonwealth Government programs, Venture Capital Funds and both corporate and personal investors. While being an active Non - Executive Director of his investme nts, Rick has added value wherever appropriate to maximise shareholder value and has also been actively involved in the trade sale of seven companies to organisations in the US, Europe and Australia. Mr Anstey is a Board member of Queensland University of Technology - Entrepreneurship (a university - wide initiative with global collaborations, turning ideas into reality), a Fellow of the Australian Institute of Company Directors and a Fellow of the Australian Institute of Management. Mr Anstey now continues hi s career in venture capital and corporate advisory roles as a founder of iQ360 Pty Ltd. Special responsibilities Chair of the Nomination and Governance Committee. Interests in shares and options 30,000 ordinary shares in Technology One Limited held beneficially through the Anstey super fund . Jane Andrews GAICD, PhD Appointed 22 February 2016. Experience and expertise Dr Jane Andrews joined the Board in 2016, bringing more than 15 years leadership experience in research and innovation - based organisations. As a founder and investor in numerous innovative companies, Dr Andrews has extensive experience in corporate strategy, entrepreneurship, commercialisation, innovation, research and development. Dr Andrews is a Graduate of the Australian Institute of Company Directors, holds a PhD in Life Sciences, a Bachelor of Science (First Class Honours) and a Graduate Diploma in Applied Finance and Investment. Special responsibilities Chair of the Remuneration Committee, member of Audi t and Risk Committee and Nomination and Governance Committee. Interests in shares and options 30,600 ordinary shares held in Technology One Limite d. Sharon Doyle B Laws (Hons), B IT (Dist), G Dip Bus Admin, GAICD Appointed 28 Feb ruary 2018. Experience and expertise Ms Doyle is the Executive Chair and majority owner of corporate advisory firm, InterFinancial Corporate Finance Limited. She has successfully navigated technology companies through the challenges of steep global growth curves, with a strong understanding of the dynamics in Software as a Service (SaaS). Ms Doyle’s leadership of InterFinancial has seen her develop a core practice providing strategic advice for technology and other IP - rich, high - growth companies. She also has extensiv e international experience managing merger, acquisition and private equity processes across the technology industry. 7 Ms Doyle was previously Vice President at Mincom, one of Australia’s most successful enterprise software companies. Ms Doyle is a Non - Exe cutive Director at Auto & General. She holds a Bachelor of Laws (Hons) and Bachelor of Information Technology (Dist.) from the Queensland University of Technology, as well as a Graduate Diploma of Business Administration from the University of Queensland. She is a qualified member of the Australian Institute of Company Directors. Special responsibilities Member of the Audit and Risk Committee and Nomination and Governance Committee . Interests in shares and options 18,280 ordinary shares in Technology One Limited . Clifford Rosenberg B Bus Sc (Hons), M Sc (Hons) Appointed 27 February 2019 . Experience and expertise Mr Rosenberg has more than 20 years’ experience leading change and innovation in technology and media companies. As the former Managing Director of LinkedIn for Australia, NZ and South - East Asia, Mr. Rosenberg started the Australian office in 2009 and oversaw the expansion of LinkedIn in Australia from 1 million members in 2009 to more than 8 million membe rs in 2017. Previously, he was Managing Director at Yahoo! Australia and New Zealand, and prior to that role he was the founder and Managing Director of iTouch Australia NZ where he grew the Australian office to one of the largest mobile content and applic ation providers in Australia. Mr Rosenberg has more than seven years’ experience on the boards of publicly listed companies. His directorships include Nearmap (ASX: NEA), A2B Australia Limited (ASX:A2B) and Bidcorp (JSE: BID). Cliff was also a Non - Executi ve Director with Dimmi (online reservations company bought by Tripadvisor.com in May 2015). He holds a Bachelor of Business Science (Hons) from the University of Cape Town and a Masters of Science (Hons) from the Universitat Ben Gurion Ba - Negev. Special r esponsibilities Member of Remuneration Committee Interests in shares and options 27, 5 3 3 ordinary shares held in Technology One Limited held beneficially through Clifro Pty Ltd ATF Clif f ro Trust. Peter Ball B Bus, CA Appointed 2 March 2020 . Experience and expertise Mr Ball is a Chartered Accountant who has enjoyed a long career in the professional services sector spanning nearly 40 years, initially in audit both nationally and internationally, with the last 30 years in management consulting. Peter was a Partner with KPMG for some 25 years providing a range of professional services and advice to both public and private sector organisations. He has also held senior roles with KPMG including the national leader of KPMG's Strategic Planning and E conomic Development service line and more recently as national partner responsible for the finance and operations for KPMG's Government Advisory Practice. Most of Peter's work involves providing strategic, economic, commercial and business improvement advice to enable organisations to make fully informed business decisions. During his management consulting career Peter has worked across a number of industrie s including tourism and leisure, gaming and wagering, arts and sports, and state and local governments. Peter has an entrepreneurial spirit and has been involved with a number of start - ups across a range of sectors including property, education, gaming a nd the pharmaceutical sector. He is also actively involved in the community/not for profit sector having been a Director of Alzheimer's Queensland for the past 10 years. S pecial responsibilities Chair of the Audit & Risk Committee. Interests in shares and options 21,900 ordinary shares held in Technology One Limited held beneficially through the Noosa Hill S uper F und. Pat O’Sullivan CA, MAICD Appointed 2 March 2021. Experience and expertise Mr O’Sullivan is a Chartered Accountant and has worked across a wide range of industries both as an executive and non - 8 executive director. His last executive role was the Chief Operating Officer and Finance Director of Nine Entertainment Co Pty Limited, a position he held from February 2006 until June 20 12 and prior to that he was the Chief Financial Officer of Optus for five years. He is currently Chairman of carsales.com and SiteMinder, Deputy Chair of Calvary Health and a non - executive director of Afterpay. He is chairman of the Audit and Risk Committ ees at both Afterpay and Calvary Health and he is also a member of their Remuneration and Nomination Committees. His previous ASX non - executive director roles include iiNet, iSelect, APN Outdoor, iSentia and Marley Spoon. Pat is a member of The Institute of Chartered Accountants in Ireland and Australia. He is a graduate of the Harvard Business School’s Advanced Management Program. Special responsibilities Board Deputy Chair & Lead Independent Director and m ember of Audit & Risk Committee Interests in shares and options 15,509 ordinary shares held in Technology One Limited. COMPANY SECRETARIES Stephen Kennedy B Bus, FGIA Appointed 13 April 2017. Mr Kennedy was appointed Company Secretary on 13 April 2017 and has been employed with TechnologyOne since January 2017. Paul Jobbins B Bus (ACA) , CA, G DipAppFin , MAppFin, GAICD Appointed 16 December 2019 . Mr Jobbins is the TechnologyOne Chief Financial Officer and EVP - Corporate Services and was appointed as Company Secretary on 16 December 2019. Meetings of Directors The numbers of meetings of the Company's Board of Directors and of each Board Committee held during the year ended 30 September 2021 , and the numbers of meetings attended by each Director were: Full meetings of directors (Board) Audit and Risk Committee Nomination and Governance Committee Remuneration Committee A Di Marco 11 - - - R McLean 11 - - 3 J Mactaggart 10 (11) - - - K Blinco 5 (5) 4 (4) - - R Anstey 10 (11) - 4 - J Andrews 11 6 4 3 S Doyle 11 6 4 - C Rosenberg 11 - - 3 P Ball 11 6 - - P O’Sullivan 6 (6) 1 (1) - - Where a Director did not attend all meetings of the Board or relevant committee, the number of meetings for which the Director was eligible to attend is shown in brackets. In sections where there is a dash, the Director was not a member of that committ ee. 9 PRINCIPAL ACTIVITIES The principal activity of Technology One Limited (the Company) during the financial year was the development, marketing, sales, implementation and support of fully integrated enterprise business software solutions, including: • Techn ology One Enterprise Asset Management • Technology One Financials • Technology One Human Resource and Payroll • Technology One Enterprise Budgeting • Technology One Supply Chain • Technology One Property and Rating • Technology One Student Management • Tec hnology One Business Intelligence • Technology One Enterprise Content Management • Technology One Performance Planning • Technology One Spatial • Technology One Enterprise Cash Receipting • Technology One Stakeholder Management • Technology One Business Process Managemen t • Technology One Timetabling and Scheduling (Syllabus Plus) DIVIDENDS Dividends paid to members during the financial year were as follows: Ordinary Shares 2021 2020 $'000 $'000 Final dividend for the year ended 30 September 2020 of 9.41 Cents (2019 - 8.78 Cents) per fully paid share paid in December 2020 (2019 - December 2019) 60% franked (2019 - 75%) based on tax paid at 30% 30,225 27,930 Interim dividend for the year ended 30 September 2021 of 3.82 Cents (2020 - 3.47 Cents) per fully paid share paid in June 2021 (2020 - June 2020) 60% franked (2020 - 60%) based on tax paid at 30% 12,279 11,058 Total dividends paid 42,504 38,988 10 REVIEW OF OPERATIONS On behalf of Technology One Limited (TechnologyOne) we are pleased to announce our twelfth consecutive year of record profit, record revenues, and record SaaS fees. Our Global SaaS ERP solution is transforming our customers’ business and makes life simple for them. Profit Before Tax up 19% - Our Profit Before Tax was up 19% which was at the top end of guidance, underpinned by the continuing fast growth of the TechnologyOne Global SaaS ERP solution. TechnologyOne SaaS ARR up 43% organically - The TechnologyOne Global SaaS ERP solution is growing rapidly with SaaS annual recurring revenue (ARR) of $192.3m, up 43%. End of On-Premise business by October 2024 - During the year we achieved a watershed milestone and announced the end of our On-Premise business by October 2024 which will further drive our SaaS business. $500m+ ARR by FY26 - With our fast-growing SaaS business and the announcement of the end of our On-Premise business, we are on track to hit our target of $500m+ ARR by FY26. Given the current ARR is $257.5m, this is an additional $242.5m of Annual Recurring Revenue in the next 5 years. Revenue from SaaS & Continuing Business was up 9%. This is our future state business. By FY24 we expect our total business to be growing by 15+% per annum. These points are discussed later in more detail. Results Summary Continuing strong performance TechnologyOne has consistently delivered strong results since listing on the ASX in 1999. Our ability to deliver these results for 20+ years is due to our clear vision, strategy, culture and our significant investment in R&D. We see continuing strong growth in the future and expect to double in size again in the next five years. TechnologyOne SaaS ARR grows 43% organically The TechnologyOne Global SaaS ERP solution is growing rapidly with SaaS ARR of $192.3m, up 43%. This growth is all organic and includes no acquisitions. We added approximately 100 enterprise customers this year to our Global SaaS ERP solution and we now have 637 large scale enterprise customers, with hundreds of thousands of users, making it the largest single instance SaaS ERP offering in Australia. Our Global SaaS ERP solution is delivering a compelling value proposition for our customers providing them any device, any time access from anywhere around the globe as well as a simple and cost-effective way to run their enterprise. This is allowing • Profit Before Tax of $97.8m, up 19% 1 • Revenue from our SaaS and Continuing Business of $293.6m, up 9% • SaaS Annual Recurring Revenue (ARR) 2,5 of $192.3m, up 43% • Total Annual Recurring Revenue (ARR) 2,5 of $257.5m, up 16% • Total Revenue 3 of $312.0m, up 4% • Expenses of $214.2m, down 1% • Cash Flow Generation 4,5 of $63.9m, up 12% • Cash and Cash Equivalents of $142.9m, up 14% • Total Dividend of 13.91cps, up 8% • R&D investment 5 of $77.0m before capitalisation, up 13%, which is 24% of revenue 1 Profit Before Tax of $97.8m was up 14% on FY20 Underlying Profit Before Tax 2 ARR represents future contracted annual revenue at year end. 3 Includes other income of $0.7m 4 Cash Flow Generation is cash flow from operating activities less capitalised development costs, capitalised commission costs and lease payments. 5 This is a non - IFRS financial measure and is unaudited 11 our customers to innovate and meet the challenges ahead with greater agility and speed, without having to worry about underlying technologies. We take care of all of this, making life simple for them. This year we continued to win new, large enterprise customers from our competitors. 30+ organisations replaced our competitors’ systems, including systems from Oracle, SAP, Microsoft, Tribal and Workday . TechnologyOne cont inued to dominate in the Local Government sector, where we closed 20 major deals with $ 2 5 m + in total contract value. We have more than 300 council customers in APA C . In the Higher Education sector, we closed 10 major deals with $ 3 0m + in total contract value, cementing our position as the dominant provider to the APAC Higher Education sector. End of On - P remise During the year we announced the end of our On - Premise business by October 2024. This watershed milestone gives our remainin g On - Premise customers ample time to make the transition to our Global SaaS ERP solution . TechnologyOne has made the transition to our SaaS solution for our On - Premise customers simple and seamless . T hey can move to SaaS in weeks not years like those usin g our competitors’ products . We expe ct 9 0 +% of all our remaining O n - P remise customers to move to our SaaS solution, driving the growth of our SaaS business. By transitioning to SaaS our O n - P remise customers will unlock the significant benefits that our SaaS customers already receive including: • Two release s automatically available e ach year providing new functionality, • Eight active data centres, • D efence in depth security with the highest levels of cyber security certification, • A lways on the latest release, • A lways on the latest technology, • A ll products and modules available so that our customers can take on additional products without friction ; and • Save 30%+ on their total cost of ownership . From here they can easily move to our next generation product, Ci Anywhere ( C i A ) and take advantage of new technologies such as Artificial Intelligence and our new Digital Experience Platform (DXP) which we are in process of developing . On track to hit $500m+ ARR by FY26 O ur SaaS business continues to grow quickly . T he quality of this revenue stream is exceptionally high, given its recurring contractual nature, combined with our very low churn rate of ~ 1%. C ombined with our announcement of the end of our On - Premise business , this is driving our Annual Recurring R even ue growth. O ur Total ARR is $257.5m, up 16 %. We are on track to hit our target of $500m+ ARR by FY26. Given the current ARR is $257.5m, this is an additional $242.5m of annual recurring revenue in the next 5 years. Our ARR stands at 90% of Total Revenu e 1 which means the majority of our revenue is locked - in at the start of the financial year . This positions us well to achieve strong continuing growth in the new year. 1 Excludes consulting revenue as it flows from business wins and is b ased on opening ARR of $221.9m. Our Future State Business, is expected to grow at 15%+ per annum in the next few years , with the cessation of our On - Premise business Total Revenue was up 4%, but this is not a true indication of our growth, as it includes our Legacy Licence business, which we are aggressively reducing, as we grow our SaaS business. As planned o ur Legacy L icence business was down 38% ($10.8m) , as we continue to build our SaaS business and walk away from traditional ‘ O n P remise’ licences . If we remove the Legacy L icence business from both FY 21 and FY2 0 , our R evenue from SaaS and Continuing Business , which is a key measure of the strength of our business , has grown 9%. We ex pect by FY24 our Total Revenue will be growing by 15%+ per annum with the cessation of our On - Premise business. 12 UK delivers P rofit B efore T ax of $1.6m, versus breakeven in the prior year The UK regionalisation of our Global SaaS ERP solution is nearing completion, and we have seen our UK business continue to grow, with SaaS ARR of $9.0m up 2 0 %. We delivered a profit of $1.6 m illion versus a break even result last year and we see significant opportunities in the coming years . Consulting P rofit B e fore T ax of $15.6m, up 14% Our Consulting d ivision delivered P rofit B efore T ax of $15.6 m illion , up 14% through continued improvement in culture, systems and processes and disciplined use of our solution implementation methodology . The turnaround of the U K C onsulting division continued during the year, with efficiency improving to deliver a profit of $1m versus a breakeven result last year . The total C onsulting division’s P rofit B efore T ax margin has improved from 7% in 2017 to 24% in 2021 . Our Application Managed Services business for existing customers is moving to recurring revenue with $19.7 million now locked in as recurring revenue 2 . 2 Not included in our Total ARR. Investment in R&D up 13% TechnologyOne invested $77.0 million in R&D thi s year, up 13% . This was significantly higher than our normal benchmark of R&D growth of 8%, as we took the opportunity to accelerate R&D into a number of new and exciting areas. We continue d to invest in new exciting ideas and innovation s including our new Digital Experience Platform (DXP) for Local Government and Higher Education. The first phase of our L ocal Government DXP was shipped in 2021 . Customer feedback has been excellent and our DXP will set the new standar d for ERP. This year we elevated our Federal Government customers to a new cyber security level as we delivered our Global SaaS ERP solution with IRAP Protected certification. We continue to invest millions of dollars and set the bar higher each year as w e deliver the most trusted SaaS solution to our customers. It is not feasible for individual organisations to keep up with incr easing costs and complexity of cyber security unless they have adopted a SaaS first strategy. Our R&D is also focused on extendi ng the functionality and capabilities of our Global SaaS ERP solution. Our R&D program continues to be at the leading edge of our industry as we embrace new technologies, new concepts and new paradigms. We expect R&D growth over the next few years to return back to the benchmark growth of 8% or less. Acquisition of Scienti a In September we acquired Scientia Resource Management Limited (Scientia), a United Kingdom company servicing the higher education sector. The impact on our FY21 profit was insignificant . This acquisition forms part of our strategic focus to deliver t he deepest functionality for Higher Education and it will accelerate our growth and competitive position in the UK as well as have significant benefits in the Australian Higher Education market . Scientia’s market leading product Syllabus Plus provides miss ion critical advanced academic timetabling and resource scheduling for over 150 leading u niversities across the United Kingdom, and Australia. The acquisition further expands our Global SaaS ERP solution for Higher Education . The integration of the Scientia’s advanced academic timetabling and resource scheduling capabilities, combined with our market leading Student Management, HR & Payroll, Enterprise Asset Management and Finance capabilities, will provide smarter decision - making for customer s , eli minating underutilisation of space and resources that is paramount for Higher Education across the globe in a post - COVID world. This is our first international acquisition and demonstrates our deep commitment to both Higher Education and the UK market . Th e unique IP and market - leading functionality of Syllabus Plus supports our vision of delivering enterprise software that is incredibly easy to use and that substantially enhances our customers’ experience in the Higher Education sector. We are excited abou t the opportunities this will bring to both our UK and Australian customers in the coming years. Strong b alance s heet and c ashflows TechnologyOne continues to have a strong balance sheet with net assets of $190.2 million, up 34% and cash and cash equival ents of $142.9 million, up 14% after making the initial payment for the Scientia acquisition of $11.6 million. Cash Flow Generation was once again strong at $63.9 million for the full year, versus a Net Profit After Tax of $72.7 million. TechnologyOne cont inues its long history of strong cash flow generation which we expect to progressively grow to match Net Profit After Tax in FY24. 13 Profit Before Tax margin increases to 31% Profit Before Tax margin increased to 31% compared to 28% for the prior year. We see margins continuing to improve to 35%+ in the coming years driven by the significant economies of scale from our single instance multi-tenanted Global SaaS ERP solution. We are on track to double the size of our business once again in the next five years. Executive remuneration TechnologyOne remains focused on delivering strong growth and our current remuneration structure positions us well to continue to achieve this both in the short and long-term, as well as ensuring alignment across our Executive KMP. At a time when many businesses have struggled during the pandemic, TechnologyOne has delivered exceptional growth as follows: organic SaaS ARR growth of 43%, Net Profit Before Tax growth of 19%, the UK achieving profit of $1.6 million and Consulting profit growth of 14%. There is clear alignment between the performance of the business and executive remuneration. FY21 total executive KMP remuneration grew by 12%, while the company’s Profit Before Tax grew by 19%. Environment, Social, Governance (ESG) TechnologyOne is committed to its ESG obligations, beyond just regulatory requirements. Last year, TechnologyOne became officially Carbon Neutral and this year is our first year benchmarking and reporting under the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). While the TechnologyOne operations do not have a material impact on the environment, we acknowledge that it is the changing attitude of many that will have a material impact on reducing climate change. Please refer to the Company’s website at: https://www.technologyonecorp.com/company/investors/corporate- governance for our Sustainability Report and Corporate Governance Statement. Corporate Governance - Board renewal Given TechnologyOne is such a significant R&D and innovation-led business, coupled with our long track record of profitable growth, we have taken a cautious and measured approach to the renewal of our Board, to ensure a smooth transition. We have made good progress again this year with the appointment of a new and highly experienced independent director, Mr Pat O’Sullivan, who holds a number of directorships for ASX-listed technology companies. Mr Pat O’Sullivan has been appointed Lead Independent Director and Deputy Chair. We now have a majority of independent directors. TechnologyOne Foundation The TechnologyOne Foundation defines who we are as a company and is an important driver of our culture and values. We are committed to making a difference to underprivileged and at-risk youths, by empowering them to transform their lives and create their own pathways of success. We believe that it is through youth that we can have the greatest impact on the future. We have an ambitious goal of lifting 500,000 children and their families out of poverty, which we are on track to achieve. An important part of the TechnologyOne Foundation is supporting great Australians doing great work, both locally and internationally, which includes the Fred Hollows Foundation, School of St Jude, Opportunity International, Solar Buddy and St James College. The Foundation will continue to grow with TechnologyOne through our commitment to the 1% pledge – which includes 1% profit, 1% product and 1% time. This represents a $2m + commitment each year. The Foundation will continue to shape the DNA of our company and staff. Our people and culture Our people solve incredibly complex business problems for our customers and have delivered our massively broad and deep Global SaaS ERP. We compete and win against the world’s largest multinational software companies, who have R&D teams with tens of thousands of staff. We continue to invest in our people and culture initiatives, including our award-winning programs such as O-week, graduate program, Buddy program, Hack Days, Town Halls and regional days, to highlight a few. We also recognise those team members who live our values and demonstrate the TechnologyOne Way through our annual MARVEL awards. During the year we were able to hold a Company Kick Off, which was a whole-of-company event for team members to hear from our leaders about the future of our products and services, and to reconnect with each other after COVID-19 lockdowns. 14 TechnologyOne conducts a continual eNPS survey to measure each team and to build our strong and unique culture . All of these initiatives ha ve resulted in TechnologyOne being once again independently recognized as an employer of choice . MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR On 2 3 November 2021 , the Directors of Technology One Limited declared a final dividend on ordinary shares in respect of the 202 1 financial year. The total amount of the dividend is $3 2 , 454 , 363 and is 60% franked. No other matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations or the state of affairs of the Company or economic ent ity in subsequent financial years. LIKELY DEVELOPMENTS Refer to the Review of Operations section above. INDEMNIFICATION AND INSURANCE OF OFFICERS Insurance and indemnity arrangements concerning officers of the Company were renewed or continued during the year ended 30 September 20 2 1 . An indemnity agreement is in pl ace between TechnologyOne and each of the Directors of the Company named earlier in this report and with each full - time Executive officer and secretary of the Company. Under the agreement, the Company has indemnified those officers against any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities. TechnologyOne paid an insurance premium in respect of a contract insuring each of the Directors of the Company named earlier in this report and each full - time Executive officer and secretary of the Company, against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law. NON - AUDIT SERVICES Non - audit services provided by the Company’ s auditor, Ernst & Young, in the current financial period and prior financial year included taxation advice and other advisory services . The Directors are satisfied that the provision of non - audit services is compatible with the general standard of indepen dence for auditors imposed by the Corporations Act. During the year , the following fees were paid or payable for non - audit services provided by the auditor of the Company and its related practices: 202 1 $ 20 20 $ Ernst & Young: Taxation advice and other advisory services 170,131 148,290 Total remuneration 170,131 148,290 AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 1 7 . ROUNDING OF AMOUNTS The Company is of a kind referred to in Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the Directors' report and financial report. Amounts in the Directors' report and financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 15 ENVIRONMENTAL REGULATION TechnologyOne has assessed the recommendations of the Task Force on Climate - related Financial Disclosures (TCFD) . The outcome of the assessment is discussed in the section below . TechnologyOne’s Climate change position While the TechnologyOne operations do not have a material impact on the environment, we acknowledge that it is the changing attitude of many that will have a material impact on reducing climate change . Climate change is both an environmental and economic issue. TechnologyOne accept the science of climat e change and are committed to contributing to the decarbonisation of the Australian/Global economy. Given the growing economic and social importance of the IT sector and its integral role in the decarbonisation of the economy, public disclosures on transit ion and climate - related risks and opportunities are fundamental. We acknowledge climate change as a risk that may impact our operational and financial performance. Therefore, TechnologyOne seeks to fulfil the recommendations of the (TCFD). To support our first TCFD disclosure, we’ve completed a high - level review of our practices and the current alignment of disclosures with the TCFD recommendations. Our approach included benchmarking , using high level risk assessment and management review and identificatio n of potential climate - related risks and opportunities. We understand, as we begin our journey to better assess and integrate climate - related risk that this is a dynamic process, requiring evolution and iteration. This initial, high level review has identified a range of opportunities to further develop and str engthen our approach to climate change risks in future going forward. Climate Governance TechnologyOne’s broader focus on environmental, social and governance factors (ESG) is overseen by the Nomination & Governance Committee. The responsibility for imple menting ESG sits with each B usiness D ivision, facilitated by our Group Company Secretary and Head of Compliance and Risk. TechnologyOne’s Board of Directors will ensure that climate - related risks are incorporated into the C ompany’s strategy and risk manag ement framework. Climate Strategy To further understand the impact that climate change could have on our business we performed a high - level qualitative assessment of the impact of 2°C and 4°C global warming scenarios on our current business model. Under the 2°C scenario our key risks include reputational and legal risks associated with a lack of climate risk disclosure, as well as financial risks due to energy use and carbon pricing. Under the 4°C scenario key aspects of the risks relate to physical dam age, network disruptions, missed sales opportunities and health impacts on our staff. Climate Risk Management We aim to ensure that our risk management process is dynamic and that the top climate change risks and emerging risks, as they evolve, are identi fied, managed, and incorporated into our existing risk management processes. TechnologyOne aims to develop actions and procedures that seek to prevent and reduce climate - related risks, notably our strategy aims to reduce our greenhouse gas emissions (GHG) and decarbonise our activities. Our GHG decarbonisation strategy involves three phases: Phase 1: measure (understand the key emission sources) Phase 2: manage and minimise (reduce energy consumption and associated carbon emissions where practicable) Phase 3: offset (all or a proportion of our carbon emissions) Climate Metrics and targets TechnologyOne conducted a greenhouse gas assessment in accordance with the GHG Protocol: A Corporate Accounting and Reporting Standard and Corporate Val ue Chain. TechnologyOne’s total emissions for FY21 amounted to 5,513.3 tonnes of carbon dioxide equivalent, with Scope 3 emissions being the key contributor ( 87 % of net GHG). Our carbon footprint from combined third - party services and utilities is a significant contribution to our overall emissions. We aim to use any arising opportunities to reduce our emissions (e.g. COVID - 19 resulted in a significant advancement in video - conferencing making it possible to reduce our GHG emissions as sociate with air travel). TechnologyOne is proud to say it is carbon neutral for the second year running and has achieved an 18% reduction in greenhouse gas emissions. Refer to published Sustainability Report for further TCFD related information. 16 SHARE OPTIONS Unissued shares As at the date of this report, there were 4,303,812 unissued ordinary shares under options ( 4,303,812 at the reporting date). Refer to note 3 3 for further details of the options outstanding. Option holders do not have any right, b y virtue of the option, to participate in any share issue of the company. Shares issued on the exercise of options During the year, employees and Executives have exercised options to acquire 2,268,446 fully paid ordinary shares in Technology One Limited at a weighted average exercise price of $ 4.67 . Refer to note 3 3 for further details of the options exercised during t he year. CORPORATE GOVERNANCE STATEMENT The most recent Corporate Governance Statement can be located at the Group’s Website (www.technologyonecorp.com). This report is made in accordance with a resolution of Directors. Ad rian Di Marco Executive Chairman Brisbane 2 3 November 20 2 1 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Auditor’s Independence Declaration to the Directors of Technology One Limited As lead auditor for the audit of the financial report of Technology One Limited for the financial year ended 30 September 2021, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Technology One Limited and the entities it controlled during the financial year Ernst & Young Alison de Groot Partner 23 November 2021 Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 18 Remuneration report (audited) Introduction from the Chair of the Remuneration Committee Dear Shareholders, On behalf of TechnologyOne’s Remuneration Committee (the Committee), I am pleased to present our Remuneration Report for the year ended 30 September 2021 . The intention of this report is to describe the linkage between our strategic initiatives, remuneration principles and remuneration framework and how these in turn, drive shareholder returns. The primary objec tive of the Committee is to ensure that we align Key Management Personnel (KMP) financial rewards with shareholder interests and our business strategy, whilst ensuring that we attract and retain exceptional Executives, Directors and Employees who are colle ctively responsible for delivering long - term profitable growth and sustainable shareholder returns. This report provides a: • Summary of i ncentive outcomes and alignment to Company performance • Response to First Strike • Remuneration framework changes during FY21 Summary of incentive outcomes and alignment to Company performance This report demonstrates a clear alignment between executive remuneration and shareholder value creation. As COVID - 19 continues the company delivere d exceptional results as f ollows: • SaaS ARR growth of 43 % • consulting profit growth of 14 % • the UK achieving profit of $1 .6 m • net profit after tax growth o f 1 5 %. In summary: • Total Executive KMP remuneration, grew by 1 2 % year on year . This is below the Company’s 1 9 % growth in net profit before tax (NPBT) . • Fixed Remuneration for Executive KMP was not increased in FY21. • Short Term Incentive (STI) outcomes across our Executive KMP was up 1 8 % in line with growth in reported NPBT of 1 9 %. STIs have been consistently calculated on Executive NPBT across FY20 and FY21. Executive NPBT has always been the basis for STI calculation. • Deferred STI earned and deferred was up 18% in line with growth in reported NPBT of 19%. • Our Long - Term Incentive (LTI) plan resulted in 9 9 % of ‘at risk’ LTI vesting for our Executive KMP. The Board set challenging LTI targets , which drive superior performance and long - term shareholder wealth creation. • The B oard considered whether any discretion on incentive outcomes was warranted during FY21 and concluded that there was no reason to adjust remuneration outcomes as they aligned to shareholder experience and B oard expectations of performance given market conditions. It is important to note KMP rem uneration in FY20 was calculated on reported NPBT, rather than underlying NPBT, which is the same as FY21. When comparing growth in STI and Total Remuneration to growth of the results, reported NPBT should be used not underlying NPBT Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 19 Response to F irst Strike At the AGM on 22 nd of February 2021, whilst the majority of votes were cast in favour (61.7%) of the adoption of the 2020 Remuneration Report, there were 38.3% of votes cast against, constituting a ‘first strike’ under the Corporations Act 2001 . Proxy adviser and shareholder feedback indicated this was as a result of the Board apply ing di scretion to allow for full vesting of a portion of KMP LTI that related to FY20 performance . The B oard exercised discretion for options tranches with a FY20 test , given exceptional performance of the KMP during previously unforeseen circumstances, (i.e. th e global COVID pandemic ). It is important to note the LTI targets were set before COVID, and were both unrealistic and unfair under these circumstances, and so the B oard exercised discretion to rectify the situation. It should be noted the company delivere d record revenue (up 4%), record profit (up 8%) and record SaaS ARR growth (up 3 2 %) in FY20 . It should also be noted this was the first time, in 33 years, the C ompany had ever exercised Board discretion. There has been no Board discretion exercised in FY21. In FY21 we have also undertaken a detailed review of our E xecutive R emuneration F ramework , in collaboration with an independent executive remuneration advisor, and engaged with shareholders and proxy advisors to understand and address any ongoing concerns . Changes in FY21 The review of our remuneration framework and remuneration report disclosures resulted in the following changes for FY21: • Improved readability of the Remuneration Report based on suggestions from proxy advisors and shareholders • Clarifying that the Malus provision (previously disclosed as ‘claw back’) for the Deferred STI and LTI involves the Remuneration Committee considering whether or not the Executive KMP has upheld expectations (e.g, as per our code of conduct) and if there are any irregularities or unintended outcomes that would affect the vesting of an award. • C larifying that the Retention Bonus is actually an STI deferral component. This is a long-term deferral to ensure alignment with expectations of shareholders and to encourage staff retention. It has been renamed to be Deferred STI and is disclosed separately throughout the Report. • Disclosing progress against our mandatory shareholding requirement for Non-Executive Directors. TechnologyOne remains focused on delivering its growth promises and we believe that our current remuneration structure positions us well to continue providing our shareholders with strong returns, both in the short and long - term, as well as ensuring alignm ent across our Executive KMP. We will continue to have ongoing dialogue with proxy advisors and our shareholders to evolve our framework as well as its presentation in the remuneration report. Jane Andrews Chair, Remuneration Committee Brisbane 2 3 N ovember 2021 Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 20 Remuneration Report (Audited) The remuneration report contains the following sections. Remuneration report (audited) 1. About this report 21 2. Remuneration governance 22 3. Exe cutive remuneration at TechnologyOne - strategy, principles, and target mix 22 4. How Executive remuneration is structured 27 5. Key questions 32 6. Relationship between remuneration and Company performance 34 7. Detail of current year Executive remuneration and p erformance 35 8 Non - executive Director fees 43 9 Service agreements for the Executive KMP 44 10 Detail of Executive remuneration for FY21 44 11 Statutory Remuneration 45 12 Additional statutory disclosures 47 Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 21 1. About this report 1.1 Basis for preparation of FY2 1 Remuneration Report The information in this Remuneration R eport has been prepared based on the requirements of the Corporations Act 2001 and applicable accounting standards. The Remuneration Report is designed to provide shareholders with a clear and detailed understanding of TechnologyOne’s remuneration framewo rk, and the link between our remuneration policies and Company performance. The Remuneration Report details the remuneration framework for TechnologyOne’s Key Management Personnel (KMP). For the purpose of this report, KMP are defined as those persons hav ing authority and responsibility for planning, directing and controlling the major activities of TechnologyOne, directly or indirectly, including any Director (whether Executive or otherwise). This report has been audited. 1.2 People covered by the Remunera tion Report The Remuneration Report discloses the remuneration arrangements and outcomes for those individuals who we have determined to meet the definition of KMP under AASB 124 Related Party Disclosures . The below table summarises each KMP, their positi on and term as KMP. The table below shows all the personnel covered by the Remuneration Report. Non - executive Directors Name Position Status Ron McLean Independent Director Remuneration Committee Full year John Mactaggart Non - independent Director Major shareholder Full year Richard Anstey Independent Director Nomination and Governance Committee Chair Full year Dr Jane Andrews Independent Director Remuneration Committee Chair Audit and Risk Committee Nomination and Governance Committee Full year Sharon Doyle Independent Director Audit and Risk Committee Nomination and Governance Committee Full year Clifford Rosenberg Independent Director Remuneration Committee Full year Peter Ball Independent Director Audit and Risk Committee Chair Full year Pat O’ Sullivan Deputy Chair and Lead Independent Director Audit & Risk Committee Appointed 2 March 2021 Kevin Blinco Independent Director Audit and Risk Committee Resigned 23 February 2021 Executive Director Name Position Status Adrian Di Marco Executive Chair Chief Strategy and Innovation Officer Major shareholder Full year Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 22 Executive KMP Name Position Status Edward Chung Chief Executive Officer Full year Stuart MacDonald Chief Operating Officer Full year Paul Jobbins Chief Financial Officer Full year 2. Remuneration governance The Remuneration Committee is responsible for developing the remuneration framework for TechnologyOne Executives and making recommendations related to remuneration to the Board. The Committee develops the remuneration philosophy and policies for Board approval. The responsibilities of the Committee are outlined in their Charter, which is reviewed annually by the Board. The key responsibilities of the Committee include: • Advising the Board on TechnologyOne’s policy for Executive and Director remuneration • Making recommendations to the Board on the remuneration arrangements for Executives and Directors to ensure they are a ligned with TechnologyOne’s vision and are set competitively to the market • Approving KMP terms of employment In making recommendations to the Board, the Committee reviews the appropriateness of the nature and amount of remuneration to Executives and Directors on an annual basis. Prior to the award or vesting of any deferred remuneration including deferred Short Term Incentives ( STI ) and Long Term Incentives ( LTI ) , the Committee will consider whether there are any irregularities or other factors th at would affect the payment or vesting of that award. This is a formal agenda item for the Remuneration Committee . During the year the C ommittee engaged an external advisor to review the R emuneration R eport. No remuneration recommendations as defined unde r the Corporations Act (2001) Sect 9B w ere provided. 3. Executive R emuneration at TechnologyOne - strategy, principles, and target mix 3 .1 Our remuneration strategy and principles At TechnologyOne, our remuneration strategy is aligned with our vision of “transforming business, making life simple”. The Board believes that in order to deliver on our vision and build long - term shareholder growth, TechnologyOne must have a remuneration framework that allows it to compete for talent both locally and globally in a highly competitive and fast - moving environment and against companies such as Oracle , SAP and Workday , as well as other Australian software companies. The remuneration principles that underpin our remuneration strategy and framework are: • Attract, retain and motivate skilled Directors and Executives in leadership positions • Provide remuneration which is appropriate and competitive both internally and against comparable companies (o ur peers) • Align Executives’ financial rewards with shareholder interests and our business strategy • Achieve outstanding shareholder wealth creation • Articulate clearly to Executives the direct link between individual and group performance, and individual financial reward • Reward superior performance, while managing risks • Provide flexibility to meet changing needs and emerging competitive market practices • Commitment to diversity, reflecting a fair and equitable remuneration framework • Commitment to simplicity Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 23 Our Executive remuneration framework aligns with common practice s for ASX200 companies , with adaptations to meet the demands of the enterprise software market. Relative to our ASX - listed peers, our Executives receive: • Relatively low fixed remuneration to enable a greater emphasis on performance • Relatively large at - risk S TI portion aligning E xecutives to current year performance • Deferred STI component t o help further drive long - term shareholder wealth and ensure that we retain high performing Executives • LTI linked to long - term strategy, targets, and shareholder wealth creation The winning of new business, driving continued profit growth in the current year is the key to our long - term success, and it is for this reason our STI as a percentage of the total remuneration is significantly higher than our ASX - listed peers. At the same time, the fixed remuneration for our Executives is comparatively low compared to our ASX - listed peers. The significant weighting towards the STI encourages our Executives to drive new business and financial performance in the current year, which creates Annual Recurring Revenue (ARR) 1 for future years, and therefore long - term success and shareholder wealth. TechnologyOne Executives are exposed to the long - term outcomes of the business through the Deferred STI and a larger LTI component than our ASX - listed peers. The talent pool in Australia for Executives with large scale enterprise software companies is highly competitive. Therefore, it is important to ensure that our remuneration framework is appropriately structured for the enterprise software market. We believe that our remuneration structure offers the necessary flexibility and incentive to ensure that we attract and retain talented Executives who understand the industry and, in turn, drive shareholder value. 1 ARR is not an IFRS measure and is unaudited, it represents future contracted annual revenue at year end . Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 24 3 .2 Overview of remuneration framework The remuneration arrangements of our Executives are made up of both fixed and at - risk remuneration (STI and LTI), as follows: Fixed Remuneration Short - term incentive (STI) Deferred Short - term incentive (STI) Long - term incentive (LTI) Nature Base salary plus superannuation. Defined as payments contingent on a one year performance period. An amount equal to 25% of the annual STI earned in the year is deferred ( i.e. 20% of total STI) and paid at the conclusion of the two - year period following the end of the financial year . Defined as payments contingent on performance over more than one year . Options and performance rights are subject to meeting performance targets tested over three years Form Cash Cash Cash Equity Purpose To provide a competitive salary based on market benchmarking from the Remuneration Committee. Drives outstanding performance in the short - term which in turn translates to long - term shareholder wealth. Deferral enables risk management via M alus P rovision and encourages retention. Creates a focus on long - term performance, with alignment to long - ter m shareholder wealth creation. Performance targets N/A Percentage of applicable Executive Net Profit Before Tax ( N PBT) Percentage of STI awarded. - Relative TSR (25%) - EPS growth (75%) Performance period N/A Annual. Deferred STI is accrued over a three - year period - comprising the annual performance perio d in which it is determined and a defer ral period of two years of service. The Deferred STI component is subject to a Malus Provision in that there must be no irregularities or other factors that would affect the payment of that award. Three years. The LTI component is subject to a M alus P rovision in that there must be no irregularities or other factors that would affect the vesting of the award. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 25 Target remuneration mix Target remuneration mix at the beginning of the contract for the CEO (Table 1), and other Executive KMP (Table 3) is represented below , based on target STI achievement and maximum LTI achievement. Over time, the remuneration mix is expected to change due to a larger increase in STI relative to other remuneration components. The below represents the target contract remuneration mix for the CEO at the beginning of a contract (Table 1 ) and demonstrates how remuneration mix changes over time (Table 2) . Table 1 Table 2 The below represents the target contracted remuneration mix for other Executive KMP at the beginning of a contract (Table 3) and demonstrates how remunera tion mix changes over time (Table 4). Table 3 Table 4 While the STI is the largest component of remuneration, Deferred STI encourages executives to have a sustainable long term mindset when approaching profit generation and when this compone nt is summed with the LTI component, the long term elements of variable remuneration work well in conjunction with the short term elements. 33% 27% 7% 33% Target CEO remuneration mix (start of contract target) Fixed STI-current Deferred STI LTI 27% 41% 9% 23% CEO remuneration mix FY21 Fixed STI-current¹ Deferred STI LTI 33% 27% 7% 33% Target Executive KMP remuneration mix (start of contract target) Fixed STI-current Deferred STI LTI 30% 39% 8% 23% Executive KMP remuneration mix FY21 Fixed STI-current¹ Deferred STI LTI Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 26 We have reported separately the remuneration mix for our Executive Chair (Table 5). The Executive Chair was offered an LTI of $400,000 which he declined as he has in previous years. The Remuneration Committee recognises that Mr DiMarco’s total remuneration is substantially below that of comparable companies. The Remuneration Committee acknowledges that Mr Di Marco’s significant shareholding in TechnologyOne provides the benefits that the LTI aims to achieve. Table 5 Table 6 1 The g rowth in STI - current as a proportion of overall remuneration seen in the graphs above arises due to the STI award being uncapped on both the upside and the downside. Refer to section 4.2 for more details on the STI - current. 34% 33% 33% Target Executive Chairman remuneration mix Fixed STI LTI 29% 71% 0% Executive Chairman remuneration mix FY21 Fixed STI¹ LTI (declined) Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 27 4. How Executive R emuneration is structured 4 .1 Fixed remuneration Fixed remuneration comprises base salary and superannuation . F ixed remuneration was not increased for FY21 . 4 .2 Short - term incentive Executives participate in an STI plan which is based on Executive NPBT 1 . Key features of the STI plan are detailed in the table below: Feature Description Opportunity The value of the STI is based on a percentage of applicable Executive Net Profit Before Tax 1 . The percentage is determined at the outset of the executive’s contract and remains fixed for the contract period for each Executive KMP. Refer to sectio n 7.5 belo w for each Executive’s agreed percentage. STI awarded is uncapped to encourage over - achievement , drive performance in the current year and the creation of long - term shareholder wealth. Given expected growth in NPBT over time, the longer the executive stay s with TechnologyOne, the greater the weighting of the STI component of total remuneration in comparison to the fixed and LTI components , which typically only increase by CPI on an annual basis. An illustrative example of how this works over time in practice has been presented following this table. This effect encourages retention of outperformers by increasing their earning potential the l onger they stay with the C ompany, w hich aligns them with shareholders Award vehicle Cash Performance measures The STI is based on a percentage of applicable Executive Net Profit Before Tax 1 . This effectively aligns the target incentive with shareholder return since share price has trended with the increase in earnings . TechnologyOne’s use of STIs differs from most other organisations in that it utilises only one performance measure in determining STI awards. This is to create focus and clar ity for Executives whilst also providing transparency for shareholders as to how STI awards are determined. The Board and Remuneration Committee continue to monitor STI performance measures so as to ensure that they best align with the Company’s commitment to providing shareholder wealth. As a SaaS company, NPBT is critical to driving long term shareholder wealth. This is because t he winning of new business, driv es NPBT g rowth in the current year . This winning of new business translates to growth in annual recurring revenue (ARR) 2 in a SaaS company , which results in contracted returns for the business in the future. Therefore, although the KMP are rewarded in the short term for increases in profit ability, the Company and shareholders continue to reap the benefits of that increase in profitability for the foreseeable future . STI cap An important element of the success of our STI has been that it is uncapped so the greater the results in the current financial year, the greater the STI. This not only encourages over performance in the current financial year for the C ompany i t has a dram atic flow on effect in future years through the greater recurring revenues for the Company. The uncapped STI also helps retain Executives over the long - term because the more they succeed, the more financial incentive there is to stay with us and continue t o work hard to achieve it each year, and the greater benefit to our shareholders through an ever - increasing recurring revenue base. Market value is contingent on high and sustained annual growth. Likewise, if the Company under - performs (e.g. loss of customers) or the results in a year are lower (e.g. impairment) , there is a significant financial impact to Executives as their STI forms a significant portion of their total remuneration. Just as the STI is uncapped on the upside, it is also unca pped on the downside. Given that the Executive’s fixed remuneration is significantly lower than our ASX - listed peers, under - performance has a significant, negative impact on their total remuneration. This ensures that Executive awards are aligned with shar eholder returns. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 28 The STI framework aligns performance with remuneration outcomes encouraging over performance and penalising under performance. Malus/Clawback The ability to apply M alus P rovision or clawback to Deferred STI exist s in the unlikely event that business outcomes differ materially from expected or if there are any irregularities or other factors that would or have affect the payment of that award. Termination On termination, the Executive foregoes any further STI payments which would have otherwise been available for the remainder of the financial year under their STI plan. 1 Executive Net Profit Before Tax is calculated based on company profit before tax and before the Executive STI is deducted. For the Executive Chair the Executive Net Profit Before Tax is based on company profit before tax before the Chair’s STI is deducted . 2 ARR is not an IFRS measure and is unaudited, it represents future contracted annual revenue at year end . TechnologyOne Executives have an STI set at the start of their contract which is typically 33% of their total targeted remuneration. As noted above, this percentage of their total remuneration will increase with the E xecutive’s tenure. The best way to consider the mechanics of the TechnologyOne STI is by way of the following worked example. Worked example Consider a candidate who can command a remuneration package of $900,000 in the open market. The TechnologyOne STI opportunity is determined as follows : STI target Commences at 75% to 100% of fixed remuneration (as established during contract negotiations). $300,000 is used as the initial STI target. If we assume that NPBT of the Group , applies for this employee and the forecast NPBT is $40m , (a 15% increase on the prior year) then contract STI will be $300,000/$40m (or 0.75% of profit) Assuming an ambitious profit target increase of 15% per annum and actual profit increases of 12% per annum and CPI of 1% per annum, the following illustrates the operation of the STI. Year Fixed P rofit target ($m) Actual profit ($m) STI % STI target (STI % x profit target ($)) Actual STI (STI % x actual profit ($)) 1 300,000 40.00 38.96 0.75% 300,000 292,200 2 303,000 44.80 43.64 0.75% 336,030 327,264 3 306,030 50.18 48.87 0.75% 376,354 366,536 4 .3. Deferred STI Feature Description Opportunity TechnologyOne introduced a Deferred STI in the FY19 year. An amount equal to 25% of the annual STI earned in the year under review is deferred (i.e. 20% of total STI) and paid at the conclusion of the two - year period following the end of the financial year. Award vehicle Cash Cap For the same reasons outlined in section 4 .2 for the STI, this Deferred STI is also uncapped on both the upside and the downside . Deferral period and service requirements The award will only be paid at the conclusion of the two - year period following the e nd of financial year, on the condition that the Executive KMP remains employed with the Company for the entire deferral period. Malus /Clawback The Deferred STI component is subject to a malus/clawback provision in that there must be no irregularities or o ther factors that would or have affect ed the payment of that award. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 29 The following provides a worked example to illustrate the operation of the Deferred STI . Amounts recognised for Deferred STI As can be seen from the table below, the Deferred STI expense is recognised over a three - year period, being the year on award plus the two years of deferral. Amounts recognised for Deferred STI FY STI Measure STI % Financial result ($m) STI - received immediately ($) Deferred STI % Deferred STI Year 1 Year 2 Year 3 Year 4 Year 5 1 NPBT 0.75% 38.96 292,200 25% 73,050 24,350 24,350 24,350 - - 2 NPBT 0.75% 43.64 327,264 25% 81,816 - 27,272 27,272 27,272 - 3 NPBT 0.75% 48.87 366,536 25% 91,634 - - 30,545 30,545 30,545 24,350 51,622 82,167 57,817 30,545 T he total value of the Deferred STI award is retained and will only be paid at the conclusion of the two - year period following the end of the financial year . The Deferred STI component is subject to a M alus P rovision in that there must be no irregularities or other factors that would affect the payment of that award . For accounting purposes, the expense in relation to this award is recognised over the total three - year deferral period. The Deferred STI was introduced for the first time in FY19. The value included for FY19 represent ed one third of the FY19 award value. The value included for FY20 include d one third of the FY19 award value plus one third of the FY20 award value. T he value included for FY21 includes one third of the FY19 award value plus one third of the FY20 award value plus one third of the FY21 award value. 4 . 4 Long - term incentives (LTI) LTI remuneration for TechnologyOne Executives is made up of a share - based remuneration element . 4 . 4 .1 Share based remuneration TechnologyOne Executives are eligible to participate in an LTI plan. The LTI plan is designed to provide participants with th e incentive to deliver substantial consistent growth in shareholder value: Feature Description Opportunity The value of the total number of LTI options and/or rights issued each year (a grant) to an Executive is typically set at 75% to 100% of fixed remuneration and is determined during contract negotiation when an Executive is hired. Award vehicle Each LTI entitles the Executive the right to purchase one Technolog yOne share in the future at an agreed strike price, subject to meeting specified performance targets. The executive has a choice between options or zero price options (performance rights). Performance period For LTI grants issued during FY20 and onwards, performance is measured at the end of a three - year performance period only (i.e. no annually tested LTI measures). The test performed will be average annual growth over the three - year performance period. This is consistent with best practice and further aligns our LTI plan with the creation of long - term shareholder wealth. For LTI grants issued prior to the end of FY19, performance is measured over a three - year performance period with individual and Company tar gets tested annually or at the conclusion of the three - year performance period. The performance period commences at the beginning of the fiscal year of the grant date and extends for three years to a vesting date. The number of options and/or rights in the grant are split into tranches based on the weighting of each performance measure. For performance measures with a three - year target, the relevant tranche vests at the end of the three - year period in accordance with the vesting schedule provided below. For performance measures with an annual target, 1/3 of the relevant tranche is tested in accordance with annual performance, however, the LTI will not vest until the end of the overall three - year performance period. For accounting purposes, the expense is recognised in accord ance with AASB 2 Share Based Payments over the three - year period Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 30 Performance measures Performance measures for the most recent LTI grants are - 25% of the options vest based on Relative Total Shareholder Return (rTSR) against the constituents of the ASX All Technology ( XTX ) index - 75% of the options vest based on EPS Growth Vesting schedule For each performance target there is a mid and stretch target. Mid hurdles have been calculated s o that if they are achieved, this will create substantial shareholder wealth. Performance Metric Growth <5% 5%<= Growth > 15% Growth >= 15% EPS growth 0% vest 50% vest at 5% growth with linear vesting (50% to 100%) up to 15% growth 100% vest Performance Metric Percentile < 50% >=50% <75% Percentile>= 75% Relative TSR 1 0% vest 50% vest at 50% relative TSR with linear vesting (50% to 100%) up to 75% relative TSR 100% vest T he number of options that vest at the end of the relevant performance period is determined as follows: • Number of LTIs earned per three - year performance target = Number of LTIs available for that target x percentage earned x individual performance factor 2 • Number of LTIs earned per yearly performance target = 1/3 x number of LTIs available for that target x percentage earned x individual performance factor 2 1 Relative TSR targets are determined with reference to our peer group. Our peer group is defined as those constituent companies making up the ASX All Technology Index (XTX). 2 The individual performance factor is typically 100% unless Malus P rovision is applied . Allocation methodology The LTI is allocated based on the cost of the option which is calculated with the strike price being the volume weighted avera ge price (VWAP) over the 10 days prior to the grant date with no discount for the likelihood of performance conditions being met. Fair value methodology The fair value of the LTI related to EPS growth is calculated using the binomial method and the fair value of the LTI related to TSR is calculated using the monte carlo method, in accordance with AASB 2 Share - based payment . Board discretion In situations where the Vesting Conditions are affected by factors beyond the control of the employee (e.g. global pandemic, trade restrictions, war, large - scale natural disasters, profit windfalls or unforeseen tailwinds), the Board has discretion to incr ease or decrease the number of LTI options and/or rights vesting. The Board retains sole discretion to determine the amount and form of any award that may vest (if any) to prevent any unintended outcomes, or in the event of a corporate restructuring or c apital event . For any single performance metric, the Board also has discretion to apply an Individual Performance Factor (IPF) to adjust the number that vest to take into consideration exceptional performance or contribution by an employee. The Board has the authority to increase the number of options vesting for a ny particular performance metric by up to 200% . The extent of this discretion is capped such that the total number of LTI instruments that vest will never exceed the maximum LTI opportunity, rep resented by the total number of LTI options and/or rights offered for all performance targets for an executive in that year . Change of control The Board has discretion to determine the extent to which LTIs vest based on the period elapsed since the start of the performance period and the performance at the time of any change of control event. Cessation of employment Awards lapse unless the Board determines otherwise, in which case it considers performance of the individual over the relevant period up to the date of cessation of employment. Expiry At the end of the applicable performance period, any LTIs that have ve sted will expire 5 years after vesting. Re - testing We do not revise or re - test our LTIs over the relevant performance period. Malus The LTI component is subject to a Malus P rovision in that there must be no irregularities or other factors that Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 31 The following provides a worked example to illustrate the operation of the LTI Feature Description Award vehicle Options Vesting period 3 years LTI grant value $300,000 LTI metrics and weighting EPS (75% weighting) and relative TSR (25% weighting) Fair value of share option at grant date $1.50 Share price at grant date $7.65 Exercise price $7.39 Assumed growth in share price over the vesting period 30% Amounts recognised for LTI FY LTI metrics Weighting Grant number Fair value Share price at grant Exercise price per share Year 1 Year 2 Year 3 1 EPS growth % 75% 150,000 225,000 7.65 7.39 52,500 67,500 105,000 2 Relative TSR 25% 50,000 75,000 7.65 7.39 17,500 22,500 35,000 200,000 300,000 70,000 90,000 140,000 For the Year 1 tranche of LTIs , the fair value is $ 300,000 , recognised over 3 y ear s , as shown above. The proportion recognised increases from y ea r 1 to y ea r 3 as the likel ihood of vesting increase s. For the purposes of this worked example, we have assumed that the fair value of options granted with each metric is the same. would affect the vesting of the award. Under the M alus P rovision the Board has the ability to vary the LTI as appropriate e.g. reduce, forfeit, defer for longer period . Margin loans Di rectors and Executives are not permitted to use TechnologyOne securities as security for margin loans. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 32 5. Key questions Key questions TechnologyOne approach Why does our remuneration framework have such a high weighting towards variable remuneration? Our Executive R emuneration F ramework aligns with many common practice s for ASX200 companies but has been adapted to meet the demands of the enterprise s oftware market. Relative to our ASX - listed peers, our Executives receive: • Relatively low fixed remuneration to enable a greater emphasis on performance • Relatively large at - risk short - term incentive (STI) portion aligning E xecutives to current year performance • Deferred STI component t o help further drive long - term shareholder wealth and ensure that we retain high performing Executives • Long - term incentives (LTI) linked to long - term strategy, targets, and shareholder wealth creation The winning of new business, driving continued profit growth in the current year is the key to our long - term success, and it is for this reason our STI as a percentage of the total remuneration is significantly higher than our ASX - listed peers. At the same time, the fixe d remuneration for our Executives is comparatively low compared to our ASX - listed peers. The significant weighting towards the STI encourages our Executives to drive new business and financial performance in the current year, which creates Annual Recurring Revenue (ARR) 1 for future years, and therefore long - term success and shareholder wealth. TechnologyOne Executives are exposed to the long - term outcomes of the business through the Deferred STI and a large long - term incentive (LTI) component . The talent pool in Australia for Executives with large scale enterprise software companies is highly competitive. Therefore, it is important to ensure that our remuneration framework is appropriately structured for the enterprise software market. We believe th at our remuneration structure offers the necessary flexibility and incentive to ensure that we attract and retain talented Executives who understand the industry and, in turn, drive shareholder value. Why is the KMP LTI based on EPS growth and Relative TSR? In FY19, earnings per share (EPS) growth and relative total shareholder return (TSR) were introduced to replace historical LTI measures, which included net profit after tax (NPAT) growth. The rationale for the selection of th ese two measures is as follows: • EPS growth: Ensures that our Executives are remunerated in line with growth in shareholder wealth over the long term. • Relative TSR: Ensures that our Executives are remunerated in line with the Company’s creation of sharehol der wealth relative to our peers over the long term. The introduction of these two new measures ensures we have LTI targets which are more directly aligned with trends in shareholder wealth over the long term . There is debate among proxy advisors about the use of TSR as an LTI metric, with some for and some against. Relative TSR may not be particularly useful as an incentive on its own, as management have little direct influence over outcomes, however, when combined with the EPS growth metric (which has been given a higher weighting) we feel it results in a very effective LTI for our Executive KMP . The combination of these metrics ensures that Executives are aligned with shareholder wealth creation (EPS growth) and also ensur ing that performance is bette r than that of our peers (rTSR). Is our STI plan sufficiently challenging with only one performance measure? The winning of new business, driving continued profit growth is the key to our long - term success. Having Executives focus solely on net profit be fore tax (NPBT) ensures there is clear line of sight for Executives and transparency for shareholders as to how STI awards are determined. The setting of NPBT as the measure (rather than components contributing to NPBT) give executives the flexibility to b e agile and choose appropriate strategies based on the market environment and arising opportunities to meet their targets. NPBT incorporates the outcomes of the key drivers of our business including winning new annual recurring revenue through new and existing customers, customer retention, expense management and margin expansion. Wh at is the rationale for An important element of the success of our STI has been that it is uncapped on the up side Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 33 having an uncapped STI? and downside. The greater the results in the current financial year, the greater the STI. This not only encourages over performance in the current financial year for the C ompany, it has a significant flow on effect in future years through the greater annual recurring revenues for the C ompany. The uncapped STI also helps retain E xecutives over the long - term, because the more they succeed, the more financial incentive there is to stay with us and continue to work hard to achieve each year, and the greater benef it to our shareholders through an ever - increasing recurring revenue base. Likewise, if the Company under - performs (e.g. loss of customers) or the results in a year are lower (e.g. impairment) , there is a significant financial impact to Executives as thei r STI forms a significant portion of their total remuneration. Just as the STI is uncapped on the upside, it is also uncapped on the downside. Given that the Executive’s fixed remuneration percentage is significantly lower than our ASX - listed peers, under - performance has a significant, negative impact on their total remuneration. This performance measure is well - aligned with the interests of shareholders, as NPBT outcomes above target, rewards shareholders as well as executives. Poor performance also “ penalises ” executives as well as shareholders. Why did we introduce a Deferred STI A Deferred STI was introduced in FY19 where an amount equal to 25% of the STI earned in the year under review is awarded and deferred for a period of two years ( i.e., 20% of total STI). The award is only paid out to the Executive if they remain in employment with the Compa ny for the entire deferral period. This deferral: - Assists in retain ing high performing Executive KMP - H elp s further drive long - term shareholder wealth via executive skin in the game, fostering a long term mind set among executives - Provides o pportuni ty to forfeit the award. Prior to its award or vesting, the Remuneration Committee will consider whether there are any irregularities or other factors that would affect the payment or vesting of that award. 1 ARR is not an IFRS measure and is unaudited, it represents future contracted annual revenue at year end Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 34 6. Relationship between remuneration and Company performance 6 .1 TechnologyOne’s five - year performance The below table sets out information showing the creation of shareholder wealth fo r the years ended 30 September 201 7 to 30 September 2021 . Profits and dividends have grown over the last five years, and growth in the fair value of executives has not exceeded growth in profits over the period . 2017¹ 2018 ¹ 2019 2020 2021 Actual profit before tax reported ($’000) 58,019 66,528 76,389 82,470 97,843 Profit before tax growth 9% 15% 15% 8% 19% Total dividend including special (cps) 10.18 11.02 11.93 12.88 13.91 Earnings per share (basic) 14.20 16.14 18.43 19.75 22.64 EPS growth 7% 14% 14% 8% 15% Share price at start of period 5.94 5.02 5.58 7.18 7.94 Share price at end of period 5.02 5.58 7.18 7.94 11.36 Annual Total Shareholder Return (TSR) (14%) 13% 31% 12% 45% 3 - year TSR 78% 39% 35% 58% 97 % LTI vesting as a % of maximum 100% 76% 72% 98% 99% 1 Accounting for revenue for these periods remains under AASB 118. They were not restated in this table for AASB 15 Profits have grown strongly and sustainably over the last five years, as have earnings per share and dividends , all while transforming from perpetual licenses to a SaaS model. The results indicate substantial growth in shareholder value and, since TechnologyOne executive remuneration is strongly linked to C ompany profit performance , has seen executives rewarded for their achievements. As can be seen from the table s above, the Executives’ remuneration framework has successfully driven performance and the creation of shareholder wealth over the lo nger term. In addition, Executives’ remuneration has been in alignment with overall Company performance. The graphs below set out information regarding TechnologyOne’s performance, earnings and movement in shareholder wealth over the past five financial years up to and including FY21. Note, figures for 2018 and prior years represent reported result s which have not been restated for changes in accounting policies or accounting standard s . The first graph below shows our average Executives’ STI has grown by 1 1 % which is below the Company’s Net Profit Before Tax (NPBT) profit growth of 13% over the last 5 years . Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 35 The second graph below shows that the average Executives’ remuneration has been growing at less than the Company’s NPBT 7. Detail of current year Executive remuneration and performance This section describes remuneration outcomes for each executive based on performance in FY21 using statutory accounting fair value . 7.1 Fixed remuneration Fixed Remuneration includes base salary and superannuation paid in line with the remuneration strategy and principles described in section 3.1 above. $395 k $445 k $568 k $621 k $736 k $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $200 $300 $400 $500 $600 $700 $800 2017 2018 2019 2020 2021 NPBT ($M's) Avg. STI ($000's) Financial Year Average STI vs. NPBT Average STI NPBT $1M $1.1M $1.2M $1.3M $1.5M $10 $30 $50 $70 $90 $110 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 2017 2018 2019 2020 2021 NPBT ($M's) Avg. REM ($000's) Financial Year Average REM vs. NPBT Average REM NPBT Average STI has grown by 11% which is at a slower rate than the 13% growth in re ported NPBT over the last 5 years Our STI structure is working as it drives short - term performance, which in turn creates a strong long - term recurring revenue base. In the long - term, this creates continuing financial success and substantial shareholder w ealth for Technology One. Average Executive remuneration has grown by 11% which is at a slower rate than 13% growth in reported NPBT over the last 5 years. N PBT has grown faster than our average Executive remuneration which demonstrates how effective our remuneration structure is at driving long - term shareholder wealth. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 36 7.2 Short term incentive The short - term incentives for Executives for FY21 were in line with the remuneration framework described in section 4.2 above. The following tables in section 7.5 show the amounts achieved in FY21 based on each executive’s agreed percentage of net profit before tax. Executive Net Profit Before Tax is calculated based on C ompany profit before tax and before the Executive STIs are deducted. For the Executive Chair the Executive Net Profit Before Tax is based on C ompany profit before tax before Chair’s STI is deducted . 7.3 Deferred short term incentive The Deferred STI achieve d by Executives for FY21 were in line with the remuneration framework described in section 4.3 above. The following tables in section 7.5 show the statutory accounting fair value of the amounts recognised in FY2 1. 7.4 Long - term incentive The l ong - term incentives granted to E xecutives for FY21 were in line with the remuneration framework described in section 4.4.1 above. Refer to section 7.7 below for specific details of the grants for FY21 . The following tables in section 7.5 show the statutory ac counting fair value of the amounts recognised and instruments forfeited in FY21. Refer section 7.6 for details of the share options and Executive Performance Rights (EPRs) vested in FY21. 9 9 % of instruments vested during the year. . Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 37 7.5 Detail of Executive remuneration and performance Name Adrian Di Marco Position Executive Chair and Chief Strategy and Innovation Officer 2021 2020 Variance Notes $ $ % Fixed remuneration Base salary 339,056 341,556 The base salary represents the amount earned for the role of Chief Strategy and Innovation Officer. Chairman's fees 141,000 141,000 The Chair's fees are benchmarked every 3 years in line with the Group's peers. Superannuation 27,500 25,000 Total fixed remuneration 507,556 507,556 0.0% STI STI - profit ¹ 99,092,373 83,523,578 18.6% STI % 1.26% 1.26% Total STI 1,248,564 1,052,397 18.6% The STI relates to the role of Chief Strategy and Innovation Officer. Growth in STI is consistent with growth in NPBT, the primary measure of STI. Total Deferred STI - - 0.0% The Executive Chair has a substantial shareholding so a Deferred STI is not required. LTI Fair value of options recognised - - Fair value of options forfeited - - Fair value of EPRs recognised - - Fair value of EPRs forfeited - - Total LTI - - The Executive Chair has a substantial shareholding so has declined an LTI. Total remuneration 1,756,120 1,559,953 12.6% Total remuneration has grown by 1 2.6 %, less than reported net profit before tax growth of 19%. 1 Refer to section 7.2 above for the description of the net profit before tax used to calculate the STI. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 38 Name Edward Chung Position Chief Executive Officer 2021 2020 Variance Notes $ $ % Fixed remuneration Base salary 505,568 508,068 Directors’ fees - - Superannuation 27,500 25,000 Total fixed remuneration 533,068 533,068 0.0% STI STI - profit ¹ 102,318,557 86,515,918 18.3% STI % 0.78% 0.78% Total STI 798,085 674,824 18.3% Growth in STI is consistent with growth in NPBT, the primary measure of STI. Total Deferred STI 174,678 108,171 61.5% Deferred STI (refer to section 4.3) was introduced in FY19 for the first time. FY21 amount includes one third of the FY19 award plus one third of the FY20 award plus one third of the FY21 award. The growth shown is primarily due to the timing of accountin g recognition and does not represent growth in remuneration awarded or realised. LTI Fair value of options recognised 382,895 339,328 The value included for FY21 includes one third of the FY19 LTI fair value plus one third of the FY20 LTI fair value plus one third of the FY21 LTI fair value. Fair value of options forfeited - - The FV for the forfeitures noted in 12.1 was adjusted for in FY19 when the annual test was performed. Fair value of EPRs recognised - - Fair value of EPRs forfeited - - Fair value of options recognised (old scheme) 58,471 116,057 The final tranche of share options vested and were exercised during the year. Total LTI 441,366 455,385 ( 3.1% ) Total remuneration 1,947,197 1,771,448 9.9% Total remuneration has grown by 9.9 %, less than reported net profit before tax growth of 19%. 1 Refer to section 7.2 above for the description of the net profit before tax used to calculate the STI. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 39 Name Stuart Mac Donald Position Chief Operating Office r 2021 2020 Variance Notes $ $ % Fixed remuneration Base salary 421,117 421,944 Directors’ fees - - Superannuation 25,827 25,000 Total fixed remuneration 446,944 446,944 0.0% STI STI - profit ¹ 102,318,557 86,515,918 18.3% STI % 0.533% 0.533% Total STI 545,358 461,130 18.3% Growth in STI is consistent with growth in NPBT, the primary measure of STI. Total Deferred STI 119,164 73,717 61.7% Deferred STI (refer to section 4.3) was introduced in FY19 for the first time. FY21 amount includes one third of the FY19 award plus one third of the FY20 award plus one third of the FY21 award. The growth shown is primarily due to the timing of accountin g recognition and does not represent growth in remuneration awarded or realised. LTI Fair value of options recognised 139,132 235,508 Fair value of options forfeited - Fair value of EPRs recognised 110,862 69,404 Fair value of EPRs forfeited - The FV for the forfeitures noted in 12.1 was adjusted for in FY19 when the annual test was performed. Total LTI 249,994 304,912 ( 18.0% ) Total remuneration 1,361,460 1,286,703 5.8% Total remuneration has grown by 5.8 %, less than reported net profit before tax growth of 19%. 1 Refer to section 7.2 above for the description of the net profit before tax used to calculate the STI. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 40 Name Paul Jobbins Position Chief Financial Officer 2021 2020 Variance Notes $ $ % Fixed remuneration Base salary 221,764 222,250 Directors’ fees - - Superannuation 25,486 25,000 Total fixed remuneration 247,250 247,250 0.0% STI STI - profit ¹ 102,318,557 86,515,918 18.3% STI % 0.343% 0.343% Total STI 350,953 296,750 18.3% Growth in STI is consistent with growth in NPBT, the primary measure of STI. Total Deferred STI 74,944 45,698 64.0% Deferred STI (refer to section 4.3) was introduced in FY19 for the first time. FY21 amount includes one third of the FY19 award plus one third of the FY20 award plus one third of the FY21 award. The growth shown is primarily due to the timing of accountin g recognition and does not represent growth in remuneration awarded or realised. LTI Fair value of options recognised 283,269 174,487 The value included for FY21 includes one third of the FY19 LTI fair value plus one third of the FY20 LTI fair value plus one third of the FY21 LTI fair value. As Mr Jobbins commenced employment during FY19 the value included in the table for FY20 represents one third of the FY19 fair value plus one third of the FY20 LTI fair value only. The growth shown i s primarily due to the timing of accounting recognition and does not represent growth in remuneration awarded or realised. Fair value of options forfeited - - The FV for the forfeitures noted in 12.1 was adjusted for in FY19 when the annual test was performed. Fair value of EPRs recognised - - Fair value of EPRs forfeited - - Total LTI 283,269 174,487 62.3% Total remuneration 956,416 764,185 25.2% Total remuneration has grown by 25 .2 %. As Mr Jobbins commenced employment during FY19, the growth shown is primarily due to the timing of accounting recognition for LTI fair value (increasing over the three - year performance period) and does not represent growth in remuneration awarded or realised. 1 Refer to section 7.2 above for the description of the net profit before tax used to calculate the STI. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 41 7.6 Options and EPRs that became eligible to vest during FY21 During the year, Edward Chung, Stuart MacDonald and Paul Jobbins completed a three - year performance period relating to the LTI instruments granted to them in FY19 and vest ing in FY21 . 100 % of the Relative TSR options became eligible to vest and 9 9 % of the EPS options, resulting in 9 9 % of total LTI vest ing. A summary of the targets set and performance against each target and options which have vested and are available to be exercised has been set out below: Edward Chung: Grant year Performance measure Option or EPR Number of LTIs available for target Testing Testing year Target Performance measure achieved Number due to forfeit LTIs vested % LTI vested FY19 Relative TSR Option 43,766 3 year FY21 75% percentile 76% - 43,766 100% E PS Growth Option 43,766 Annual FY19 > 15% 14% 2,188 41,578 95% Option 43,766 Annual FY20 > 15% 8% ¹ - 43,766 100% Option 43,766 Annual FY21 > 15% 15% - 43,766 100% 175,064 172,876 99% Stuart MacDonald: Grant year Performance measure Option or EPR Number of LTIs available for target Testing Testing year Target Performance measure achieved Number due to forfeit LTIs vested % LTI vested FY19 Relative TSR EPR 11,722 3 year FY21 75% percentile 76% - 11,722 100% EPS Growth EPR 11,721 Annual FY19 > 15% 14% 586 11,135 95% EPR 11,721 Annual FY20 > 15% 8% ¹ - 11,721 100% EPR 11,721 Annual FY21 > 15% 15% - 11,721 100% 46,885 46,299 99% Paul Jobbins: Grant year Performance measure Option or EPR Number of LTIs available for target Testing Testing year Target Performance measure achieved Number due to forfeit LTIs vested % LTI vested FY19 Relative TSR Option 53,864 3 year FY21 75% percentile 76% - 53,864 100% EPS Growth Option 53,864 Annual FY19 > 15% 14% 2,693 51,171 95% Option 53,864 Annual FY20 > 15% 8% ¹ - 53,864 100% Option 53,864 Annual FY21 > 15% 15% - 53,864 100% 215,456 212,763 99% 1 As disclosed in sections 3.2 and 3.4 of the FY20 Remuneration Report, the Board exercised discretion for option tranches with a FY20 test for EPS Growth , given exceptional performance of the KMP during previously unforeseen circumstances, (i.e. the global COVID pandemic). It is important to note the LTI targets were set before COVID, and were both unrealistic and unfair under these ci rcumstances, and so the board exercised discretion to rectify the situation. It should be noted the company delivered record revenue (up 4%), record profit (up 8%) and record SaaS ARR growth (up 32%) in FY20. It should also be noted this was the first time, in 33 years, the company had ever exercised Board discretion . This was an historical decision made for FY20 testing , and w as not repeated for the testing of FY21 tranches . Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 42 7.7 Options/EPRs that have been granted in FY 20 and FY2 1 and not yet vested Edward Chung Grant year Performance measure Number of LTIs available for target Testing Testing year Target Performance measure achieved LTIs due to vest FY20 Relative TSR 66,160 3 year FY22 75% percentile To be tested at the end of FY22 EPS Growth 198,479 3 year FY22 > 15% To be tested at the end of FY22 FY21 Relative TSR 63,730 3 year FY23 75% percentile To be tested at the end of FY23 EPS Growth 191,189 3 year FY23 > 15% To be tested at the end of FY23 Stuart MacDonald Grant year Performance measure Number of LTIs available for target Testing Testing year Target Performance measure achieved LTIs due to vest FY20 Relative TSR 41,849 3 year FY22 75% percentile To be tested at the end of FY22 EPS Growth 125,547 3 year FY22 > 15% To be tested at the end of FY22 FY21 Relative TSR 38,113 3 year FY23 75% percentile To be tested at the end of FY23 EPS Growth 114,339 3 year FY23 > 15% To be tested at the end of FY23 Paul Jobbins Grant year Performance measure Number of LTIs available for target Testing Testing year Target Performance measure achieved LTIs due to vest FY20 Relative TSR 36,629 3 year FY22 75% percentile To be tested at the end of FY22 EPS Growth 109,887 3 year FY22 > 15% To be tested at the end of FY22 FY21 Relative TSR 33,359 3 year FY23 75% percentile To be tested at the end of FY23 EPS Growth 100,077 3 year FY23 > 15% To be tested at the end of FY23 Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 43 8 Non - executive Director fees Determination of Non - executive Director fees In FY21, Board fees remain at $141,000 per Director, including statutory superannuation contributions. This was not increase d for FY21 . No additional fees are paid in respect of committee attendance. Directors’ Fees are normally reviewed every three years by an in dependent consultant and the setting of fees is to be consistent with comparable companies by market capitalisation . Fee increases between independent reviews are capped at CPI. Aggregate fee pool The total amount of Directors’ fees is capped at a maxim um pool that is approved by shareholders. The current fee pool is capped at $1,500,000, which was approved by shareholders at the Annual General Meeting on 26 February 2019 . Non - executive Directors receive aggregate fees to recognise both their contribution to the work of the Board and the associated committees that they serve. Non - executive Directors do not receive any performance - related remuneration. FY22 aggregate fee pool and Non - Executive Director fees It is proposed that the current fee pool remain unchanged for FY22, capped at $1,500,000. Non - executive Director fees are set to increase in line with CPI, as per Board policy. Director shareholdings Directors are required to hold a minimum shareholding of one year’s Directors’ fees (pre - tax) in TechnologyOne shares. Directors are required to rectify any short fall within a 12 - month period. New Directors are allowed 36 months to meet this requirement. 2021 Balance at the end of the year % of Mandatory Shareholding Requirement Directors of Technology One Limited A Di Marco 17,378,500 100% R McLean 69,737 100% J Mactaggart 26,902,500 100% R Anstey 30,000 100% Dr J Andrews 30,600 100% S Doyle 18,280 100% C Rosenberg 27,533 100% P Ball 21,900 100% P O’Sullivan 15,509 87% The Board in total holds 44,494,559 shares representing 14% of the total shareholding of the Company. Individual holdings are as shown above . All D irectors are compliant with the mandatory shareholding requirement except for Pat O’Sullivan, who has until 2024 to meet the requirement. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 44 9 Service agreements for the Executive KMP Remuneration and other terms and conditions of employment for Ex ecutive KMP are formalised in service agreements which are reviewed each year. All Executive KMP service agreements are rolling contracts which cease following notice of termination by either employee or employer. The following table presents some of the key contractual arrangements for the Executive KMP: KMP Contract term Termination notice by either party Post - employment restraint Executive Chair Ongoing 3 months 12 months CEO Ongoing 6 months 12 months Other Executive KMP Ongoing 12 weeks 12 months If a service agreement is terminated , payment in lieu of notice that is not worked may be provided, in addition to any statutory entitlements. No other additional termination or post - employment benefits are provided on termination of employment. R efer to sections 4 . 3 and 4 . 4 respectively for treatment of STIs and LTIs on cessation of employment. The Executive Chair’s fixed remuneration package is established to compensate him for executing the role of Chair and also for that of Chief Strategy and Innovation Officer (as tabled below). In FY2 1 , the Chairman’s fixed remuneration consists of: Role Fixed remuneration Chairman 141,000 Chief Strategy and Innovation Officer 366,556 Total fixed remuneration 507,556 The Executive Chair also receives an STI component for his role as Chief Strategy and Innovation Officer. As the Chair is also an Executive, the remuneration for performing the Chair role (exclusive of Directors’ fees) is not included in the Non - Executive Director Fee Pool. 10 Detail of Executive remuneration for FY21 The remuneration package for Executives, including the Executive Chair, for FY21 comprises the amounts outlined in the follow ing tables. There is no maximum or minimum STI for Executives as the Company wants to ensure a strong focus on performance in the current year. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 45 11 Statutory Remuneration The information in the table below is based on the statutory accounting fair value of remuneration earned for each KMP and do es not represent the value offered or realised. Short - term employee benefits Post employment benefits Deferred STI Long - term incentives Name Fixed remuneration Directors’ fees Superannuation Total fixed remuneration Short - term Incentive Termination benefits Deferred STI Value of share options Value of performance rights Total % growth on prior year excl LTI % growth on prior year incl LTI $ $ $ $ $ $ $ $ $ $ Non - Executive Directors R McLean (Non - executive Director 2021 - 128,767 12,233 141,000 - - - - - 141,000 0% 0% 2020 - 128,767 12,233 141,000 - - - - - 141,000 J Mact aggart (Non - executive Director) 2021 - 128,767 12,233 141,000 - - - - - 141,000 0% 0% 2020 - 128,767 12,233 141,000 - - - - - 141,000 K Blinco (Non - executive Director)¹ 2021 - 53,653 5,097 58,750 - - - - - 58,750 - 58% - 58% 2020 - 128,767 12,233 141,000 - - - - - 141,000 R Anst ey (Non - executive Director) 2021 - 128,767 12,233 141,000 - - - - - 141,000 0% 0% 2020 - 128,767 12,233 141,000 - - - - - 141,000 Dr J A ndrews (Non - executive Director 2021 - 128,767 12,233 141,000 - - - - - 141,000 0% 0% 2020 - 128,767 12,233 141,000 - - - - - 141,000 S Doyle (Non - Executive Director) 2021 - 128,767 12,233 141,000 - - - - - 141,000 0% 0% 2020 - 128,767 12,233 141,000 - - - - - 141,000 C Rose nberg (Non - Executive Director) 2021 - 128,767 12,233 141,000 - - - - - 141,000 0% 0% 2020 - 128,767 12,233 141,000 - - - - - 141,000 P Ball (Non - Executive Director) 2021 - 128,767 12,233 141,000 - - - - - 141,000 71% 71% 2020 - 75,114 7,136 82,250 - - - - - 82,250 Pat O' Sullivan² 2021 - 75,114 7,136 82,250 - - - - - 82,250 N/A N/A 2020 - - - - - - - - - - Execut ives A Di Marco (Executive Chairman) ³ 2021 339,056 141,000 27,500 507,556 1,248,564 - - - - 1,756,120 13% 13% 2020 341,556 141,000 25,000 507,556 1,052,397 - - - - 1,559,953 E Chun g (Chief Executive Officer)4 2021 505,568 - 27,500 533,068 798,085 - 174,678 441,366 - 1,947,197 14% 10% 2020 508,068 - 25,000 533,068 674,824 - 108,171 455,385 - 1,771,448 S MacD onald (Chief Operating Officer)5 2021 421,117 - 25,827 446,944 545,358 - 119,164 139,132 110,862 1,361,460 13% 6% 2020 421,944 - 25,000 446,944 461,130 - 73,717 235,508 69,404 1,286,703 P Jobbins(Chief Financial Officer)6 2021 221,764 - 25,486 247,250 350,953 - 74,944 283,269 - 956,416 14% 25% 2020 222,250 - 25,000 247,250 296,750 - 45,698 174,487 - 764,185 Total Executive KMP 2021 1,487,505 141,000 106,313 1,734,818 2,942,960 - 368,786 863,767 110,862 6,021,193 13% 12% 2020 1,493,818 141,000 100,000 1,734,818 2,485,101 - 227,586 865,380 69,404 5,382,289 2021 1,487,505 1,096,023 197,040 2,780,568 2,942,960 - 368,786 863,767 110,862 7,066,943 10% 10% Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 46 Total (Non - Executive Directors and Executive KMP) 2020 1,493,818 1,117,484 192,766 2,804,068 2,485,101 - 227,586 865,380 69,404 6,451,539 1 Mr Kevin Blinco resigned 23 February 2021. 2 Mr Pat O’ Sullivan was appointed on 2 March 2021. 3 Mr Di Marco was again offered an LTI of $400K which he declined in the 202 0 /202 1 year, as he has in previous years. The Remuneration Committee acknowledges that Mr Di Marco’s existing significant shareholding in TechnologyOne provides the benefits that the LTI aims to achieve. Mr Di Marco’s STI is calculated as 1.26% of Group NPBT. Mr Di Marco’s remuneration grew by 13% on the prior year, du e to his STI being up 1 9 % in line with company profit. 4 Mr Chung’s remuneration grew by 1 0 % on the prior year. Growth in remuneration other than LTI was 1 4 %. Mr Chung’s STI is calculated as 0.78% of Executive NPBT, his STI is up 1 8 %, in line with the increase in Executive NPBT. 5 Mr MacDonald’s remuneration grew by 6 % on the prior year, Growth in remuneration other than LTI was 13 %. Mr Macdonald’s STI is calculated as 0.533% of Executive NPBT, his STI is up 1 8 %, in line with the increase in Executive NPBT. 5 Mr Jobbins’s remuner ation grew by 25 % on the prior year. Growth in remuneration other than LTI was 1 4 %. Mr Jobbins’s STI is calculated as 0.343% of Executive NPBT, his STI is up 1 8 %, in line with the increase in Executive NPBT. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 47 12 Additional statutory disclosures 1 2 .1 Long - term incentive scheme In 2016, TechnologyOne replaced its previous Executive Option Plan (EOP) with an LTI plan aligned to market, shareholder and Executive requirements. Options and EPRs issued under the new plan are outlined in the tables below. Options 2021 Name Opening balance of share options Number of options granted during the period Number of options exercised during the period Number of options forfeited during the vesting period* Closing balance of share options Vested and exercisable Unvested Edward Chung 842,461 254,917 (402,758) (2,188) 692,432 172,876 519,556 Stuart MacDonald 539,229 152,450 (371,833) - 319,846 - 319,846 Paul Jobbins 361,972 133,434 - (2,693) 492,713 212,763 279,950 Executive Performance Rights 2021 Name Opening balance of EPRs Number of EPRs granted during the period Number of EPRs exercised during the period Number of EPRs forfeited during the vesting period* Closing balance of EPRs Vested and exercisable Unvested Edward Chung - - - - - - - Stuart MacDonald 46,885 - - (586) 46,299 46,299 - Paul Jobbins - - - - - - - *Options and EPRs forfeited during the vesting period, are due to non - achievement of performance targets set by the Board. The Board is focused on ensuring that management remuneration and shareholder value are aligned by setting performance targets that create long - term shareholder wealth. For details of grants under the previous EOP plan, please refer to section 12.3. 12.2 Fair value of options granted in FY2 1 Name Number of options granted during the period ¹ Weighted average fair value per options issued during the period ² Grant date Exercise price Vesting date Expiry Date Fair value of grant Edward Chung 254,917 1.77 22/01/2021 7.85 22/01/2024 22/01/2026 451,505 Stuart MacDonald 152,450 1.77 22/01/2021 7.85 22/01/2024 22/01/2026 270,017 Paul Jobbins 133,434 1.77 22/01/2021 7.85 22/01/2024 22/01/2026 236,336 1 LTIs are offered to Executive KMP as either options (with an exercise price) or EPRs (executive performance rights issued at market price). 2 The assessed fair value at grant date of options granted to the individuals is recognised over the period from g rant date to vesting date. The amount is included in the remuneration tables above. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 48 The model inputs for options granted to Executives are as follows: (a) Options are granted for no consideration. Each tranche vests at the end of the three - year period, s ubject to meeting performance hurdles. (b) Dividend yield – 1.6% (c) Expected volatility – 3 3.54 % (d) Risk - free interest rate – 0.1 % (e) Price of shares on grant date – $ 8.07 (f) Fair value of options – $ 1.77 The performance measures for LTI grants made in FY2 1 are presented below. The performance targets, set out below, are such that they are all considered to be challenging targets that, if met, will drive significant shareholder wealth creation. Performance M etrics Performance period Tes ting Weighting (all KMP) EPS growth 3 years 3 years 75% Relative TSR 1 3 years 3 years 25% The performance targets to be achieved by the Executives are set out below: Performance Metric Growth <5% 5%<= Growth < 15% Growth >= 15% EPS growth 0% vest 50% vest at 5% growth with linear vesting (50% to 100%) up to 15% growth 100% vest Performance Metric Percentile < 50 >=50 <75 Percentile>= 75 Relative TSR 1 0% vest 50% vest at 50 th percentile for relative TSR with linear vesting (50% to 100%) up to 75 th percentile for relative TSR 100% vest 1 Relative TSR targets are determined with reference to our peer group. Our peer group is defined as those constituent companie s making up the ASX All Techno logy Index (XTX). 1 2 . 3 Quarantined Executive Option Plan (EOP) (now superseded) Previously, TechnologyOne had contracts with executives which needed to be honoured. These pre - existing contracts were quarantined and as existing Executive Contracts come to an end, they will be renegotiated so that the LTI is based on the 2016 LTI plan going forward. All new appointments of Executives to the Company will be under the 2016 LTI plan. For the sake of disclosure, details of the now obsolete and quarantined EOP are provided below. Under the EOP, options were issued with a strike price set typically at a 0% to 25 % discount on the volume weighted average price for the 10 days prior to the grant date. The discount could be forfeited prior to vesting at the Board's discretion based on the performance of the Executive. The option could also be withheld by the Executive Chairman for unsatisfactory performance. Share options were granted to Executives by the Board based on the option plan approve d by the Board. The options vest if and when the Executive satisfies the period of service contained in each option grant. The contractual life of each option varies between two and five years. There are no cash settlement alternatives. Options granted under this plan carry no dividend or voting rights. Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 49 When exercisable, each option is convertible into one ordinary TechnologyOne share. Further information is set out in note 31 to the financial statements. Edward Chung is the only current Executive KMP with LTIs issued under this plan. The final tranche of share options issued under this quarantined plan vested and were exercised during the year. 2021 Name Balance at start of the year Granted as compensation Exercised Forfeited Balance at the end of the year Vested and exercisable Unvested Edward Chung 167,000 - (167,000) - - - - 1 2 . 4 Equity instruments held by Key Management Personnel The number of shares in the Group held during the financial year by each Director and Senior Executive of Technology One Limited, including their personally related parties, are set out below. There were no shares granted during the reporting period as com pensation. 2021 Balance at the start of year Purchased during the year Sale during the year Balance at the end of the year Directors of Technology One Limited A Di Marco 20,378,500 - (3,000,000) 17,378,500 R McLean 69,737 - - 69,737 J Mactaggart 30,902,500 - (4,000,000) 26,902,500 K Blinco 200,000 - (200,000) - R Anstey 25,500 4,500 - 30,000 Dr J Andrews 30,600 - - 30,600 S Doyle 18,280 - - 18,280 C Rosenberg 27,533 - - 27,533 P Ball 18,000 3,900 - 21,900 P O' Sullivan - 15,509 - 15,509 2021 Balance at the start of year Received during the year Sale during the year Balance at the end of the year Senior Executives of the Group E Chung 733,000 569,826 (402,758) 900,068 S MacDonald - 371,901 (316,833) 55,068 P Jobbins - 68 - 68 Technology One Limited Remuneration report (audited) 30 September 2021 (continued) 50 2020 Balance at the start of year Purchased during the year Sale during the year Balance at the end of the year Directors of Technology One Limited A Di Marco 27,378,500 - (7,000,000) 20,378,500 R McLean 111,000 - (41,263) 69,737 J Mactaggart 38,902,500 - (8,000,000) 30,902,500 K Blinco 200,000 - - 200,000 R Anstey 25,500 - - 25,500 Dr J Andrews 30,600 - - 30,600 S Doyle 12,375 5,905 - 18,280 C Rosenberg 27,533 - - 27,533 P Ball 9,000 9,000 18,000 2020 Balance at the start of year Received during the year on the exercise of options Sale during the year Balance at the end of the year Senior Executives of the Group E Chung 566,000 167,000 - 733,000 S MacDonald - 271,137 (271,137) - P Jobbins - - - - 1 2 . 5 Loans to Key Management Personnel There have been no loans to Directors or Executives during the financial year (20 20 - nil). 1 2 . 6 Other transactions with Key Management Personnel During the year there were no transactions with the Key Management Personnel. This report is made in accordance with a resolution of Directors. Technology One Limited Consolidated income statement For the year ended 30 September 202 1 51 Financial Statements Consolidat ed income statement Notes 30 - Sep - 21 30 - Sep - 20 $'000 $'000 Revenue - SaaS and continuing business 293,553 269,774 Revenue - Legacy licence business 17,742 28,493 Revenue from contracts with customers 5 311,295 298,267 Variable costs (19,444) (19,130) Variable customer SaaS costs (21,934) (19,479) Total variable costs (41,378) (38,609) Occupancy costs 6 (1,942) (3,259) Corporate costs (13,190) (18,312) Depreciation and amortisation 6 (25,832) (18,638) Computer and communication costs (8,850) (8,019) Marketing costs (7,890) (5,296) Employee costs 6 (110,381) (119,615) Share - based payments 6 (3,213) (3,305) Finance expense 6 (1,493) (1,495) Total operating costs (172,791) (177,939) Other income 5( a) 717 751 Profit before income tax 97,843 82,470 Income tax expense 7 (25,152) (19,525) Profit for the year 72,691 62,945 Cents Cents Basic earnings per share 32 22.64 19.75 Diluted earnings per share 32 22.52 19.61 The above consolidated income statement should be read in conjunction with the accompanying notes Technology One Limited Consolidated statement of comprehensive income For the year ended 30 September 202 1 52 Consolidated statement of comprehensive income 30 - Sep - 21 30 - Sep - 20 $'000 $'000 Profit for the year (from previous page) 72,691 62,945 Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations (178) 286 Other comprehensive income for the year, net of tax (178) 286 Total comprehensive income for the year 72,513 63,231 The above consolidated statement of comprehensive income should be read in conjunct ion with the accompanying notes Technology One Limited Consolidated statement of financial position As at 30 September 2021 53 Consolidated s tatement of financial position Notes 30 - Sep - 21 30 - Sep - 20 ASSETS $'000 $'000 Current assets Cash and cash equivalents 8 142,853 125,244 Prepayments 13,429 10,851 Trade and other receivables 9 50,580 37,396 Contract assets 10 22,709 22,051 Other current assets 11 238 397 Current tax assets - 8,077 Contract acquisition costs 13 5,001 2,956 Total current assets 234,810 206,972 Non - current assets Property, plant and equipment 12 7,279 8,969 Right - of - use assets 20 20,971 23,786 Intangible assets 13 61,696 37,986 Capitalised development 13 90,985 62,556 Deferred tax assets 14 26,349 28,605 Contract assets 10 2,962 - Contract acquisition costs 13 9,676 7,035 Total non - current assets 219,918 168,937 Total assets 454,728 375,909 LIABILITIES Current liabilities Trade and other payables 15 36,567 37,123 Provisions 17 21,219 20,548 Contingent consideration 18 3,842 - Deferred revenue 16 160,015 144,148 Current tax liabilities 2,677 - Lease liability 20 3,342 2,148 Total current liabilities 227,662 203,967 Non - current liabilities Provisions 19 2,067 2,430 Contingent consideration 18 7,576 - Other non - current liabilities 120 147 Lease liability 20 27,069 27,197 Total non - current liabilities 36,832 29,774 Total liabilities 264,494 233,741 Net assets 190,234 142,168 EQUITY Contributed equity 22 51,645 40,551 Other reserves 23 72,717 63,524 Retained Earnings 65,872 38,093 Total equity 190,234 142,168 The above consoli da ted statement of financial position should be read in conjunction with the accompanying notes Technology One Limited Consolidated statement of changes in equity For the year ended 30 September 20 2 1 54 Consolidated s tatement of changes in equity Note Contributed equity Retained earnings Dividend reserve FOREX reserve Share option reserve Total equity $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 October 2020 40,551 38,093 30,046 2,136 31,342 142,168 Profit for the period - 72,691 - - - 72,691 Exchange differences on translation of reserves - - - (178) - (178) Total comprehensive income for the period - 72,691 - (178) - 72,513 Dividends Paid 24 - - (42,504) - - (42,504) Transfer to dividends reserve - (44,912) 44,912 - - - Exercise of share options 22 11,094 - - - - 11,094 Share based payments 33 - - - - 3,213 3,213 Tax impact of share trust - - - - 3,750 3,750 11,094 (44,912) 2,408 - 6,963 (24,447) Balance at 30 September 2021 51,645 65,872 32,454 1,958 38,305 190,234 Balance at 1 October 2019 35,302 16,078 27,905 1,850 25,722 106,857 AASB 16 opening adjustment - 199 - - - 199 Adjusted opening balance 35,302 16,277 27,905 1,850 25,722 107,056 Profit for the period - 62,945 - - - 62,945 Exchange differences on translation of reserves - - - 286 - 286 - Total comprehensive income for the period - 62,945 - 286 - 63,231 Dividends Paid 24 - - (38,988) - - (38,988) Transfer to dividends reserve - (41,129) 41,129 - - - Exercise of share options 22 5,249 - - - - 5,249 Share based payments 33 - - - - 3,305 3,305 Tax impact of share trust - - - - 2,315 2,315 5,249 (41,129) 2,141 - 5,620 (28,119) Balance at 30 September 2020 40,551 38,093 30,046 2,136 31,342 142,168 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Technology One Limited Consolidated statement of cash flows For the year ended 30 September 2021 55 Consolidated s tatement of cash flows Notes 30 - Sep - 21 30 - Sep - 20 $'000 $'000 Cash flows from operating activities Receipts from customers (inclusive of GST) 341,812 340,405 Payments to suppliers and employees (inclusive of GST) (217,795) (222,036) Interest received 225 353 Net income taxes paid (7,762) (13,716) Interest paid 20 (1,493) (1,495) Net cash inflow / (outflow) from operating activities 31 114,987 103,511 Cash flows from investing activities Payment for business acquisition (11,585) (223) Payments for property, plant and equipment (1,658) (1,979) Payments for development expenditures and intangibles (51,269) (42,859) Net cash inflow / (outflow) from investing activities (64,512) (45,061) Cash flows from financing activities Proceeds from exercise of share options 10,595 5,248 Principal repayments of lease liabilities 20 (957) (4,512) Dividends paid to shareholders 24 (42,504) (38,988) Net cash inflow / (outflow) from financing activities (32,866) (38,252) Net increase / (decrease) in cash and cash equivalents 17,609 20,198 Cash and cash equivalents at the beginning of the financial year 125,244 105,046 Cash and cash equivalents at the end of year 8 142,853 125,244 T he above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Technology One Limited Notes to the consolidated financial statements 56 Notes to the consolidated financial statements 1 Summary of significant accounting policies The financial report of Technol ogy One Limited (the Company) for the year ended 30 September 2021 was authorised for issue in accordance with a resolution of Directors on 23 November 2021. Technology One Limited (the Company) is a company limited by shares incorporated in Australia who se shares are publicly traded on the Australian Securities Exchange. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Technology One Limited and its subsidiaries. The nature of the operations and principal activities of th e Group are described in the Directors' report. (a) Basis o f preparation The financial report is a general - purpose financial report prepared by a for profit entity, which has been prepared in accordance with the requirements of the Corporations Act 2001 , Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unl ess otherwise stated. The accounting policies adopted are consistent with those of the previous financial year except where a change has been required due to the implementation of a new accounting standard. Certain comparative items have been reclassified in the financial statements to align with the 30 September 2021 year end disclosur es . (i) Compliance with IFRS This financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. (ii) New accounting standards and interpretations The accounting policies a dopted are consistent with those of the previous financial year. Any new or amended standards that became applicable for the first time for the 30 September 2021 year end did not result in a change to the Group’s accounting policies or require retrospectiv e adjustments. (i) I ssued but not yet effective No new standards that will have a material impact to the Group have been issued that are not in effect for the Group . (ii) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and e stimates are significant to the financial statements, are disclosed in note 3. (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Technology One Limited ('Company' or 'parent entity') as at 30 September 2021 and the results of all subsidiaries for the year then ended. Technology One Li mited and its subsidiaries together are referred to in this financial report as the 'Group' or the 'Consolidated entity'. Technology On e Limited Notes to the consolidated financial statements (continued) 57 Intercompany transactions, balances and unrealised gains on transactions between companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ens ure consistency with the policies adopted by the Group. (ii) Employee Share Trust The Group has formed a trust to administer the Group's employee share scheme. This trust is consolidated, as the substance of the relationship is that the trust is control led by the Group. At 30 September 2021, the Group had 6 6 , 897 treasury shares (2020: 61,173). Treasury shares are shares in the Group that are held by the Employee Share Trust for the purpose of issuing shares under the TechnologyOne employee share scheme. (iii) Business combination and goodwill Business combinations are accounted for using the acquisition method under AAS B 3 Business Combinations . The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non - controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non - controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition - related costs are expensed a s incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification a nd designation in accordance with the contractual terms, economic circumstanc es and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisit ion date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of AASB 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accord ance with AASB 9. Other contingent consideration that is not within the scope of AASB 9 is measured at fair value at e ach reporting date with changes in fair value recognised in profit or loss. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non - controlling interests and any previou s interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re - assesses whether it has correctly identified all of the a ssets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an exce ss of the fair value of net assets acquired over the aggregate co nsideration transferred, then the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash - generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been a llocated to a cash - generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is inclu ded in the carrying amount of the operation when determining the gain or loss on disposal. Goodw ill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash - generating unit retained. (c) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group's operations are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Australian dollars, which is Technology One Limited's functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation a t year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income Technology On e Limited Notes to the consolidated financial statements (continued) 58 statement. (iii) Group companies The results and financial position of foreign operations (none of which has the currency of a hyp erinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities for each statement of financial position presented are translated at the clo sing rate at the date of that statement of financial position • Income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in whic h case income and expenses are translated at the dates of the transactions) • All resulting exchange differences are recognised in other comprehensive income. (d) Revenue recognition The Group has the following key revenue categories: 1. SaaS Fees 2. Annual Licence F ees 3. Consulting Services 4. Initial Licence Fees The accounting policies for each of these categories has been set out below: Revenue categories 1. SaaS Fees Revenue from term SaaS contracts are recognised on a daily basis over the term of the contract. Included within this category is revenue from contracts for annual SaaS licences as well as Platform services associated with initial licence fees. The Group considers that SaaS licence contracts represent a right to access the Group’s licenced intellectual property and as such the performance obligation is fulfilled over the contract term. Payment terms in respect of SaaS Fees are typically annual within 14 to 30 days of invoice. Invoiced amounts are reflected in trade and other receivables un til paid . Unsatisfied performance obligations in respect of SaaS Fees received or receivable are recognised as deferred revenue in the consolidated statement of financial position. Refer to note 16 for details of deferred revenue . Costs incurred in obtaining the customer contract are expensed, unless they are incremental to obtaining the contract and the Group expects to recover those costs. Costs that meet the criteria for capitalisation will be amortised over the life of the contr act that they relate to. The Group has identified certain commission costs as meeting the criteria of directly related contract c osts. These costs are capitalised in the month in which they are incurred and amortised over an average contract term of 5 year s. The movement in the year and the closing balance of this asset is disclosed within note 13 as ‘contract acquisition costs’. This balance is presented as ‘contract acquisition costs’ in the statement of financial position. 2. Annual L icence F ees Revenue f rom A nnual Licence Fees are recognised on a daily basis over the term of the contract. The Group considers that the performance obligation in respect of these services is satisfied over time. Payment terms in respect of Annual Licence Fees are typically a nnual within 14 to 30 days of invoice. Invoiced amounts are reflected in trade and other receivables until paid. Unsatisfied performance obligations in respect of Annual Licence F ees are disclosed as deferred revenue in the consolidated statement of finan cial position . Refer to note 16 for details of deferred revenue . 3. Consulting Services Consulting services includes services for licenced software and project services revenue. Revenue from these services is recognised as services are rendered, typically in accordance with the achievement of contract milestones and/or hours expended. Technology On e Limited Notes to the consolidated financial statements (continued) 59 4. Initial licen c e fees Initial Licence Fees includes both perpetual licence fees and subscription term licences and are recognised on provision of the software. The Group considers that such contracts represent a right to use the Group’s licenced intellectual property and as such the performance obligation is fulfilled at the point in time at which the customer receive s the licence key. Payment terms in respect of Initial Licence Fees are typically within 14 to 30 days of invoice. Invoiced amounts are reflecte d in trade and other receivables. Perpetual licence fees are typically invoiced upfront on signing the contrac t but subscription term licences are billed annually throughout the subscription period. As the performance obligation is satisfied at a point in time (i.e. at contract delivery ), there are no unsatisfied performance obligations in respect of Initial Lic ence Fees. The Group considers the effects of variable consideration, reviews the contracts to identify if a significant financing compo nent exists and considers the standalone pricing of the initial licence fees when allocating the transaction price of t he contract to the performance obligation . Associated contract balances Under AASB 15, the timing of revenue recognition, customer invoicing and cash collections results in the recognition of trade and other receivables, contract asset and deferred revenue (contr act liability) on the Group’s Consolidated statement of financial position. At 30 September 2021, the statement of financial position shows a current liability balance of $2 2 8 m ( 30 September 202 0 : $20 4 m) which is largely attributable to the deferred revenue balance in current liabilities. As deferred revenue represents payments received or receivable in advance from customers for SaaS Fees and Annual Licence Fees which will be recognised in future periods, and not a future cash outflow, this balance does not impact the Group’s ability to meet its short - term obligations a s and when they fall due. Revenue Groups disclosed in the consolidated income statement The Group has the following revenue groups : 1. Revenue – SaaS and continuing business The Group defines continuing business as those revenue streams that form part of the growth strategy. Namely this includes SaaS, Annual Licence Fees and consulting services. 2. Revenue – Legacy licence business The legacy licence fee business encompasses the sale of initial licences which will continue to decline as our customers transition to SaaS, growing the SaaS and continuing business revenue. Included within this revenue group is Annual Licence Fees recognised from the date the associated initial licence is delivered until the end of the first financial year post si gning. (e) Income tax The income tax expense or benefit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attribut able to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group's subsidiaries operate an d generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpre tation. It establishes provisions where appropriate on the basis of amounts expe cted to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases o f assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is n ot accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combin ation that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax as sets are recognised for deductible temporary differences and unused tax losses only if it is probable that future Technology On e Limited Notes to the consolidated financial statements (continued) 60 taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised f or temporary differences between the carrying amount and tax bases of investments in foreign operations where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in t he foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and lia bilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and t ax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. The carrying amount of deferred income tax assets is reviewe d at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at th e reporting date. Technology One Limited and its wholly - owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities a re set off in the consolidated financial statements. The head entity, Technology One Limited, and the controlled entities in the tax consolidated group account for their own curr ent and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand - alone taxpayer in its own right. The Group has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred ta x amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112. The Group created an Employee Share Trust during 2009 which allows an employee on the exercise of an option to hold the share in the Trust. As per AASB 112, on granting the option, the Group now records a deferred tax asset on the expected value of the share. If the amount of the tax deduction (or estimated future tax deduction) exceeds the amount of the related cumula tive remuneration expense, the diffe rence is recognised directly in equity. When the employee exercises the option, the tax effect difference be tween the actual market value and what was recorded as a deferred tax asset is recognised in equity. AASB Interpretation 23 Uncertainty over Income Tax Treatments clarifies how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. This does not ha ve a material impact on the Group. (f) Segment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regu larly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Operating segments have been identified ba sed on the information provided to the chief operating decision maker - being the Chief Executive Officer. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. Technology On e Limited Notes to the consolidated financial statements (continued) 61 (g) Leases AASB 16 Leases sets out the principles for the recognition, measurement, presentation and di sclosure of leases and requires lessees to recognise most leases on the balance sheet. The Group’s lease portfolio primarily consists of property leases. Lease terms are negotiated on an individual basis and cont ain a range of different terms and conditions. Lease contracts may contain both lease and non - lease components. The Group allocat es the consideration in the contract to the lease and non - lease components based on their relative stand - alone prices. Lease liability The lease liability is initially measured at the present value of outstanding lease payments (including those to be made under reasonably certain extension options). The payments used in this calculation include the following: • fixed payments (including in - substance fixed payments), less any lease incentives receivable • variable lease payment that are based on an index o r a rate, initially measured using the index or rate as at the commencement date • amounts expected to be payable by the group under residual value guarantees • the exercise price of a purchase option if the group is reasonably certain to exercise that option, and • payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. The lease payments above are discounted using the interest rate implicit in the lease if that rate is readily determinable. T his is not the case for the Group’s current leases. When the interest rate implicit in the lease is not readily determinable AASB 16 requires the use of the incremental borrowing rate to calculate the present value of the lease payments. This rate is the rate of interest that a lessee would have to pay to borrow the funds necessary to purchase the right of use asset, over a similar term and with a similar security, in similar economic environment. The most appropriate rate to use as a starting point in determining the in cremental borrowing rate would be the interest rate incurred on existing borrowings. However, the Group does not have any existing borrowings. In the absence of this the Group uses the swap curve with a corresponding rating as the starting point in determi ning the incremental borrowing rate. In line with the accounting standard the Group adjusts the swap curve rate for the term of the leases, the value of the leases and the creditworthiness of the Group. Once the lease liability has been recognised on the balance sheet the periodic lease repayments are allocated between an interest and a principal element. The interest is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the li ability. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Right - of - use asset The right - of - use asset is initially calculated as bei ng equal to the lease liability and then adjusted for the following: • Lease payments made on or before the commencement date less any incentives received • Any initial direct costs, and • An estimate of restoration costs. This right - of - use asset is then depreciated on a straight - line basis over the calculated lease term. Right - of - use assets are also subject to impairment testing under AASB 136 Impairment of assets. Short term and low value assets The Group applies the short - term lease recognition exe mption to its short - term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). Payments associated with short - term leases and all leases of low - value assets are recognised o n a straight - line basis as an expense in profit or loss. Technology On e Limited Notes to the consolidated financial statements (continued) 62 (h) Variable costs The components to variable costs are made up of : - Costs incurred in obtaining a n initial licence fee contract as well as incentives on achievement of KPIs . These are expensed as incurred. - Costs incurred in fulfilling the contract with a customer are capitalised if the requirements in AASB 15 are fulfilled and are then amortised in line with the satisfaction of th e related performance obligation. The expense is recognised within the Depreciation and Amortisation line of the Consolidated Statement of Profit or Loss . (i) Variable customer SaaS costs Variable customer SaaS costs relate to costs incurred in providing our customers with access to our SaaS Platform. These costs are expense d as incurred. (j) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually fo r impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are teste d for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amou nt is the higher of an asset's fair value less costs to sell and value - in - use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largel y independent of the c ash inflows from other assets or groups of assets (cash - generating units). Non - financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period . (k) Financial assets and liabilities Financial instruments recognised in the statement of financial position include; cash and cash equivalents, trade and other receivables, contract assets, trade payables and contingent consideration. (i) Classification The Group classifies its financial assets and financial liabilities into the following measurement categories; • those to be measured at amortised cost (using the effective interest method) and; • those to be measured at fair value with changes through the profit or loss (FVPL). Classification into these categories is based on an assessment of the Groups’ business model for managing its financial instruments and the contractual terms of the cash f lows. (ii) Measurement Amortised cost Under this method the financial instrument is measured at the amount recogni s ed at initial recognition minus principal repayments. Further adjustments to the carrying value of the financial instrument will arise if there is a modification to the contractual cash flows creating a gain/loss in the measurement or if there is no longer a reasonable expectation of recovery of a financial asset resulting in a write off. FVPL The financial instrument is measured at fair value. Changes in fair value are recogni s ed in profit and loss as they arise. (iii) Impairment The Group recognises impairment losses on its financial assets carried at amortised cost using an expected credit losses (ECL) model in line with AASB 9 Financial Instrum ents . The ECL model essentially aims to calculate the A ssets ’ credit risk. It involves consideration of scenarios that would lead to default, calculating the shortfall between what is contractually due and what w ould be received under each scenario and the n multiplying the shortfall/loss by the probability of the default situation occurring. The Group has elected to apply the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected credit loss allowance for all trade re ceivables and contract assets. The Group has also made use of the practical expedient available for calculating expected credit losses for short term receivables. This practical expedient involves using a “provision matrix” to calculate the loss allowance. This matrix is based on historical default rates over the expected life of the Technology On e Limited Notes to the consolidated financial statements (continued) 63 trade receivables and it is adjusted for forward - looking estimates. A 6 - month historical default rate is applied to the trade receivables balance to calculate the expected credit loss. This appears as a provision against the trade receivables balance. Movements in this provision are recognised as an expense in the consolid ated income statement to the extent that the related revenue has been recognised in the consolidated income statement. If a receivable balance is identified as being unrecoverable it is written off against the allowance for expected credit losses. (l) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits hel d at call with financial institutions, other short - term, highly liquid investments with original maturit ies of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Cash and cash equivalents are presented in the consolidated statement of cash flows, net of outstanding bank overdrafts. (m) Trade and other receivables Trade and other receivables are recognised initially at transaction price which is deemed to be fair value and subsequently measured at amortised cost using the effective interest method. Tr ade receivables are typically due for settlement within 14 to 30 days. The Group uses the simplified approach to measuring expected credit losses. The movement in the expected credit loss is recognised in the income statement within corporate expenses. (n) Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight - line basis over the e stimated useful economic lives of the assets as follows: Office furniture and equipment 3 - 11 years Computer software 3 - 4 years Motor vehicles 4 - 5 years The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1( j )). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Comprehensive Income . (o) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in in tangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or chang es in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains an d losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash - generating units for the purpose of impairment testing. The allocation is made to those cash - generating units or group s of cash - generating units that are expected to benefit from the business combination in which the goodwill arose (note 4). (ii) Intellectual property/source code Intangible assets acquired separately are capitalised at cost, and if acquired as a result of a business combination, capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to all classes of intangib le assets. The useful lives of the intangible asset s are assessed to be either finite or indefinite. Where amortisation is charged on Technology On e Limited Notes to the consolidated financial statements (continued) 64 intangible assets with finite lives, this expense is taken to the Income Statement through the 'depreciation and amortisation expense' line item. Intangible assets with fini te lives are tested for impairment where an indicator of impairment exists. Useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Intellectual Property/Source Code is amortised on a straight line basis over 3 - 8 years. Gains or losses arising from the de - recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income when the intangible asset is derecognised. (iii) Software development Research expenditure is recognised as an expense as incurred. Research costs are largely made up of employee labour which is included in employee costs in the consolidated income statement. Development expenditure is only capitalised if the recognition req uirements within AASB 138 ha ve been fulfilled and a n economic benefit of more than 12 months is expected. Costs that are directly associated with the development of this software (largely CiAnywhere products) are recognised as an intangible asset where t he following criteria are met: (a) The technical feasibility of completing the intangible asset so that it will be available for use or sale; (b) Intention to complete the intangible asset and use or sell it; (c) Ability to use or sell the intangible asset; (d) How the i ntangible asset will generate probable economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internall y, the usefulness of t he intangible asset; (e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset and (f) Ability to measure reliably the expenditure attributable to the intangible asset during its d evelopment. As a SaaS company, access is provided to our products via a SaaS platform over a prolonged term. The technical feasibility of our products can be established through pre - defined project roadmaps. TechnologyOne follows a robust process to ensu re the accuracy of the amounts capitalised on the balance sheet. The costs include d in the balance are costs of personnel and other directly attributable costs incurred in the development of software. The process for determining what constitutes capitalisa ble spend under AASB 138 involves detailed analysis of all timesheet data available in regard to projects that employees have worked on during the year and other directly attributable costs in respec t of software development spend. Capitalised software de velopment costs are recognised as an intangible asset and amortised over their estimated useful lives, which is considered to be from three to seven years. Software development costs are capitalised as “under development” until the products to which the co sts relate become available for use. At the point in which the products become available for use, the costs are transferred from “under development” to “in use” and amortised from that point (refer to categorisation in note 13) . Development costs previousl y recognised as expenses are not recognised as assets in a subsequent period. (p) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (q) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is pro bable that an outflow of resources will be r equired to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the pr esent obligation at the end of the reporting period. The discount rate used to determine the present value is a pre - tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the pr ovision due to the passage of time is recognised as interest expense. Technology On e Limited Notes to the consolidated financial statements (continued) 65 (r) Employee benefit (i) Short - term obligations Liabilities for wages and salaries, including non - monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' service s up t o the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for sick leave, which are non - vesting, are recognised when the leave is taken and measured at the rates paid or payable. ( ii) Deferred STI An amount equal to 25% of the annual STI earned by Executive KMP in the year is deferred and paid at the conclusion of the two - year period following the end of the financial year. It is accrued over a three - year period - throughout the annual performance perio d in which it is determined and a defer ral period of two years of service. (ii i ) Long service leave The liability for long service leave is recognised in the provision for employee benefits and is measured as the present valu e of expected future payments to be made in respect of services provided by employees up to the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (i v ) Share - based payments The Group provides benefits to certain employees in the form of share - based payment transactions, whereby employees render services in exchange for rights over shares. The costs of share - based payment transactions with employees are measured by reference to the fair value of the equity instruments at the date at which they are granted. Refer to note 3 3 . The cost of share - based payments i s recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). I f options or rights do not vest at the end of the performance period due to the service condition or non - market condition not being met , the corresponding expense will be reversed. (s) Contributed equity Ordinary shares are classified as equity. Issued and paid up capital is recognised at the fair value of the consideration received. Any transaction costs arising on th e issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (t) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing: • The profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares • By the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • The after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares • The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares . Technology On e Limited Notes to the consolidated financial statements (continued) 66 (u) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. (v) Goods and services tax (GST) and equivalent overseas value added taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or a s part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. 2. Financial Risk Management Financial instruments recogni s ed in the statement of financial position include; cash and cash equivalents, trade and other receivables, lease liabilities and trade payables . It is, and has been throughout the period under revie w, the Group ’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group ’s financial assets and liabilities are interest rate risk, foreign currency risk and credit risk. The Board reviews and agrees policie s for managing each of these risks and they are summarised below. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of meas urement and the basis on which income and expenses are recognise d, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the Financial Statements. T he Group holds the following financial instruments: (a) Interest rate risk The Group ’s cash and investment assets are exposed to movements in depo sit and variable interest rates. The Group does not hedge this exposure. Interest rate risk on cash is not considered to be material. 2021 2020 $'000 $'000 Financial assets Cash and cash equivalents 142,853 125,244 Trade and other receivables 50,580 37,396 193,433 162,640 Financial liabilities Trade and other payables 25,149 37,123 Contingent consideration 11,418 - Lease liability 30,411 29,345 66,978 66,468 (b) Foreign currency risk As a result of operations in New Zealand, Malaysia, Papua New Guinea and the United Kingdom and sales contracts denominated in United States dollars, the Group 's statement of financial position can be affected by movements in the exchange rates applicable to th ese geographical locations and currencies. The Group does not hedge this risk. The Group ’s exposure to foreign currency changes is not significant. Technology On e Limited Notes to the consolidated financial statements (continued) 67 At balance date, the Group had the following exposures in Australian dollar equivalents of amounts to foreign currencies which are not effectively hedged: 2021 2021 2020 2020 USD PGK USD PGK $'000 $'000 $'000 $'000 Trade receivables - - - 1,650 (c) Credit risk The Group is exposed to credit risk from its operating activities (primarily trade and other receivables and contract assets) and from its financing activities, including deposits with banks and financial institutions. To manage this risk t he Group trades only with recognised, creditworthy third parties. It is the Group 's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitor ed on an ongoing basis with t he result that the Group 's expected credit loss is not significant. Information on credit risk exposures is contained in Note 9. Technology On e Limited Notes to the consolidated financial statements (continued) 68 (d) Liquidity risk Liquidity risk arises from the financial liabilities of the Group and the Group ’ s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due . The below table represents the financial assets under note 2 (c) and the liquidity risk of financial liabilities referred to in note 2(d). Less than 12 months Between 1 and 5 years Over 5 years Total contractual cash flows $'000 $'000 $'000 $'000 At 30 September 2021 Financial assets Cash and cash equivalents 142,853 - - 142,853 Trade and other receivables 50,580 - - 50,580 Total 193,433 - - 193,433 Financial liabilities Trade and other payables 25,149 - - 25,149 Contingent consideration 3,842 7,576 - 11,418 Lease liabilities 4,800 29,297 173 34,270 Total 33,791 36,873 173 70,837 Net inflow / (outflow) 159,642 (36,873) (173) 122,596 At 30 September 2020 Financial assets Cash and cash equivalents 125,244 - - 125,244 Trade and other receivables 37,396 - - 37,396 Total 162,640 - - 162,640 Financial liabilities Trade and other payables 37,123 - - 37,123 Lease liabilities 2,341 28,508 3,566 34,415 Total 39,464 28,508 3,566 71,538 Net inflow / (outflow) 123,176 (28,508) (3,566) 91,102 (e) Fair value measurements Contingent consideration is classified as Level 3. The balance of contingent consideration is recogni s ed as contingent consideration in the Consolidated Statement of Financial Position, and i t is split between a current and non - current portion . The release of the contingent consideration that does not represent payment is recognised within the other income line of the consolidated income statement. Technology On e Limited Notes to the consolidated financial statements (continued) 69 Contingent consideration 2021 $'000 Opening balance at 1 October 2020 - Amounts added for Scientia (note 25) 11,418 Payments made - Closing balance at 30 September 2021 11,418 Contingent consideration 2020 $'000 Opening balance at 1 October 2019 223 Payments (DMS and JRA) (223) Reduction in contingent consideration (JRA) - Closing balance at 30 September 2020 - The carrying value of trade and other receivables, contract assets and trade payables are assumed to approximate their fair value due to their short - term nature or the effect of discounting on non - current financial assets not being significant. (f) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The current risk management structure of the Group i s to use all equity funding . The equity funded position of the Group is managed by the Board through dividends, new shares and share buy backs as well as the issue of new equity where considered appropriate to fund business acquisitions. Technology On e Limited Notes to the consolidated financial statements (continued) 70 3. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will , by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Imp airment of goodwill and other assets The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1( o )(i). The recoverable amounts of cash - generating units have been determined based on val ue - in - use calculations. These calculations require the use of assumptions. Refer to note 1 3 for details of these assumptions and the potential impact of changes to the assumptions. All other assets are reviewed for indicators or object evidence of impairm ent. If indicators or objective evidence exists, the recoverable amount is reviewed. (ii) Share - based payments The Group provides benefits to certain employees in the form of share - based payment transactions, whereby employees render services in exchange for rights over shares. The costs of share - based payment transactions with employees are measured by reference to the fai r value of the equity instruments at the date at which they are granted. Refer to note 3 3 . The cost of share - based payments is recognised , together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). In the event t hat the rights over shares do not vest at the end of the performance period, the expense relating to the unvested rights is reversed. No expense is recognised for awards that d o not ultimately vest due to not meeting the non - market conditions or service co nditions . (iii) Revenue contracts Initial licence fee contracts entered into by the Group require judgement in the identification and separation of the contrac t components related to software licence fees, Annual Licence Fees and platform services. The Group a ssesses each customer contract individually and revenue is assigned to each component based upon the stand alone fair value of the component releva nt to the total contract value. (iv) Capitalisation of development costs The Group capitalises costs related to software development. Software development costs are recognised upon meeting the criteria set out in note 1( o )(iii). The carrying value of these costs are regularly reviewed for impairment. Software development costs are amortised over a period of three to seven years. (v) COVID - 19 Management have considered the potential impact of COVID - 19 in performing the Group’s impairment assessments and in establishing the expected credit loss on financial assets. No adjustments were made to the Group’s assets as a result of thes e additional as sessments. At a time when many businesses have struggled during the pandemic, TechnologyOne has continued to perform strongly. There has been no impact to the Group’s balance sheet. TechnologyOne has not received any JobKeeper government support. (vi) Legal Provision Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliab le estimate can be made of the amount of the obligation. The group recognises legal provisions based on the probability and management’s best estimate of the outcome of the claim. Technology On e Limited Notes to the consolidated financial statements (continued) 71 (vii) Contingent consideration Contingent consideration has be en recognised at the present value of anticipated costs for future contingent earn out considerations resulting from the acquisitions made by the Group. In estimating the liability, it was assumed that the maximu m earn out amount will be payable based on c urrent operating projections. Further details are available at note 25. Technology On e Limited Notes to the consolidated financial statements (continued) 72 4. Segment information (a) Description of segments The Group ’s chief operating decision maker, being the Chief Executive Officer, makes financial decisions and allocates resources based on the information received from the Group’s internal management system. Sales are attributed to an operating segment based on the type of product or service provided to the customer. Segment information is prepared in conformity with the accounting policies of the Group as discussed in note 1 and the Accounting Standard AASB 8 Operating Segments . The Group ’s reportable segments a re: • Software – consists of Sales and Marketing, R&D, SaaS platform. • Consulting – responsible for services in relation to our software . • Corporate – includes all corporate functions. Intersegment revenues/expenses are where one operating segment has been charged for the use of another's expertise. Royalties are a mechanism whereby each segment pays or receives funding for their contribution to the ongoing success of TechnologyOne . For example, Software pays Corporate for the use of corporate services. The chief operating decision maker views each s egment’s performance based on revenue post royalties and profit before tax. No reporting or reviews are made of segment assets, liabilities and cash flows and as such this is not measured or reported by segment . (b) Segment information provided to the Chief Operating Decision Maker (CODM) 2021 Software Consulting Corporate Total $'000 $'000 $'000 $'000 Revenue from contracts with customers SaaS fees* 151,052 - - 151,052 Annual licence fees* 78,965 - - 78,965 Consulting services* - 64,508 - 64,508 Initial licence fees ** 16,770 - - 16,770 Other income 462 - 255 717 Intersegment revenue (281) 304 ( 23) - Net royalty (56,893) ( 6,547) 63,440 - Total revenue 190,075 58,265 63,672 312,012 Expenses Total external expenses (126,666) ( 42,657) ( 44,846) (214,169) Profit before tax 63,409 15,608 18,826 97,843 Income tax expense (25,152) Profit for the year 72,691 Total assets 454,728 Total liabilities 264,494 Total depreciation and amortisation (25,832) *Recognised over time / as services are rendered **Recognised at a point in time Technology On e Limited Notes to the consolidated financial statements (continued) 73 2020 Software Consulting Corporate Total $'000 $'000 $'000 $'000 Revenue from contracts with customers SaaS fees* 106,171 - - 106,171 Annual licence fees* 102,272 - - 102,272 Consulting services* - 62,482 - 62,482 Initial licence fees ** 27,342 - - 27,342 Other income 384 - 367 751 Intersegment revenue (2,038) 2,208 (170) - Net royalty (53,819) (6,642) 60,461 - Total revenue 180,312 58,048 60,658 299,018 Expenses Total external expenses (127,681) (44,393) (44,474) (216,548) Profit before tax 52,631 13,655 16,184 82,470 Income tax expense (19,525) Profit for the year 62,945 Total assets 375,909 Total liabilities 233,741 Total depreciation and amortisation (18,638) *Recognised over time / as services are rendered **Recognised at a point in time (c) Other segment information (i) Segment revenue 2021 2020 $'000 $'000 Australia 260,564 250,586 New Zealand and Asia Pacific* 38,609 36,533 APAC total 299,173 287,119 United Kingdom 12,839 11,899 Total segment revenues from sales to external customers 312,012 299,018 Technology On e Limited Notes to the consolidated financial statements (continued) 74 (ii) Segment assets 2021 2020 $'000 $'000 Australia 380,116 319,750 New Zealand and Asia Pacific* 14,754 19,834 APAC total 394,870 339,584 United Kingdom 33,509 7,720 Total segment assets 428,379 347,304 All significant non - current assets are located in Australia. Segment assets are presented net of deferred tax. * Asia Pacific includes Malaysia and South Pacific (iii) Major customers The Group has a number of customers to which it provides both products and services, none of which contribute greater than 10% of external revenue . Technology On e Limited Notes to the consolidated financial statements (continued) 75 5. Revenue 2021 2020 $'000 $'000 Revenue from contracts with customers SaaS fees* 151,052 106,171 Annual licence fees* 77,993 101,121 Consulting services* 64,508 62,482 Revenue - SaaS and continuing business 293,553 269,774 Initial licence fees ** 16,770 27,342 Annual licence fees associated with initial licence fees*¹ 972 1,151 Revenue - Legacy licence business 17,742 28,493 Total revenue from contracts with customers 311,295 298,267 *Recognised over time / as services are rendered **Recognised at a point in time 1 This represents revenue on Annual Licence Fees recognised from the date the associated initial licence is delivered until the end of th e first financial year post delivery . 5.(a) Other income 2021 2020 Other income $'000 $'000 Foreign exchange gains / (losses) (9) (3) Interest received 225 353 Other 501 401 Total other income 717 751 Total revenue 312,012 299,018 Technology On e Limited Notes to the consolidated financial statements (continued) 76 6. Expenses 2021 2020 $'000 $'000 Profit before income tax includes the following specific expenses: Depreciation Plant and equipment 3,331 3,905 Total depreciation 3,331 3,905 Amortisation Other intangible amortisation 443 346 Contract acquisition costs amortisation 3,639 2,493 Capitalised development amortisation 13,429 6,103 Amortisation of right - of - use assets 4,990 5,791 Total amortisation 22,501 14,733 Total depreciation and amortisation 25,832 18,638 Wages and salaries 83,722 91,622 Defined contribution plan expense 9,480 9,919 Payroll tax 7,593 6,366 Provision for employee benefits 1,045 1,701 Other 8,541 10,007 Total employee costs 110,381 119,615 Share - based payments 3,213 3,305 Occupancy costs 1,942 3,259 Finance expense 1,493 1,495 Profit and loss movement in expected credit loss 267 34 Foreign exchange (gain) / loss (21) 509 (Gain) / Loss on sale of property, plant and equipment (13) (38) In addition to the employee benefits expens e disclosed above, ‘Variable costs’ in the consolidated income statement includes $ 17.3 m (20 20 : $ 1 8.6 m ) relating to employee costs, ‘ Contract acquisition costs’ in the consolidated statement of f inancial p osition includes $ 8 . 3 m in current year employee benefits (20 20 : $ 4.9 m ) and ‘ Capitalised development’ includes $ 36 . 1 m in current year employee benefits (20 20 : $ 3 2 . 3 m ). Technology On e Limited Notes to the consolidated financial statements (continued) 77 7. Income tax expenses (a) Income tax expense 2021 2020 $'000 $'000 Current tax 17,760 12,045 Relating to origination and reversal of temporary differences 7,315 8,680 Adjustments for tax expense of prior periods 77 (1,200) 25,152 19,525 Deferred income tax expense / (revenue) included in income tax expense comprises: (Increase) / decrease in deferred tax assets (4, 492 ) (6,575) Increase / (decrease) in deferred tax liabilities 10,500 10,960 Adjustments for deferred taxes of prior periods 1,307 4,295 7,315 8,680 (b) Numerical reconciliation of income tax expense to prima facie tax payable 2021 2020 $'000 $'000 Profit from continuing operations before income tax expense 97,843 82,470 Tax at the Australian tax rate of 30% (2020 - 30%) 29,353 24,741 Adjustments for current tax of prior periods 77 (1,200) Research and development tax concession (4,235) (4,131) Expenditure not allowable for income tax purposes (43) 115 Income tax expense 25,152 19,525 (c) Amounts recognised directly in equity 2021 2020 $'000 $'000 Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity: Net deferred tax - debited (credited) directly to equity (3, 750 ) (2,315) Technology On e Limited Notes to the consolidated financial statements (continued) 78 8. Current assets - Cash and cash equivalents 2021 2020 $'000 $'000 Cash and cash equivalents 142,853 125,244 The Group has a secured $2 million interchangeable facility which is transferable between an Overdraft, Fixed Rate Commercial Bill and Variable Rate Commercial Bill to assist with working capital requirements. The facility is unused at 30 September 2021 . Cash at bank ear ns interest at floating rates based on daily bank deposit rates. Money market accounts at call are made for varying periods of between one day and three months, depending on immediate cash requirements of the Group , and earn interest at the respective mon ey market deposit rates. Given the short - term nature of these accounts t he fair value of cash assets at 30 September are their carrying values. 9. Current assets – Trade and other receivables 2021 2020 $'000 $'000 Trade and other receivables 51,410 40,320 Allowance for expected credit losses (1,337) (2,885) Sundry receivables 507 (39) 50,580 37,396 (i) Trade and other receivables are non - interest bearing and are on 14 to 30 day terms. No interest is charged on trade and other receivables. Included in the trade and other receivable balance are debtors with a carrying amount of $ 4 . 3 m (20 20 - $ 7.6 m ) which are past due at the reporting date for which the consolidated entity has no t specifically provided as there has not been a significant change in credit quality and the consolidated entity believes that the amounts are still considered recoverable. The consolidated entity does not hold any collateral over these balances, however i s able to withdraw future support and software licence use rights if concerns arise relating to the recoverability of an outstanding customer balance. . (a) Allowance for expected credit losses Movements in the provision for impairment of receivables are as follows 2021 2020 $'000 $'000 Opening balance - 1 October 2,885 1,135 Increase/(decrease) in expected credit loss allowance 780 2,885 Amounts reversed/written off (2,328) (1,135) Closing balance - 30 September 1,337 2,885 In determining the recoverability of a trade and other receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Technology On e Limited Notes to the consolidated financial statements (continued) 79 Age Trade Debtors Expected credit loss Trade Debtors Expected credit loss 2021 2021 2020 2020 $’000 $’000 $’000 $’000 0 – 30 days 43,602 ( 480) 30,051 ( 456) 31 – 60 days 4,354 ( 48) 5,915 ( 90) 61 – 90 days 759 ( 8) 715 ( 11) 91+ days 2,695 ( 801) 3,369 ( 2,328) Total 51,410 ( 1,337) 40,050 ( 2,885) 10. Contract asset 2021 2020 $'000 $'000 Contract assets 22,918 22,283 Contract assets - non current 2,962 - Allowance for expected credit losses (209) (232) 25,671 22,051 The above contract asset balance represents revenue recognised for contract s with customers which has not been invoiced at the end of the financial year , in line with customer contracts . Expected credit loss for contract assets Movements in the provision for impairment of contract assets are as follows: 2021 2020 $'000 $'000 Opening balance - 1 October 232 115 Increase/(decrease) in expected credit loss allowance recognised in profit and loss during the year (2 3 ) 117 Unused amounts reversed - - Closing balance - 30 September 209 232 11. Current assets – Other current assets 2021 2020 $'000 $'000 Deposits receivable 238 397 238 397 Technology On e Limited Notes to the consolidated financial statements (continued) 80 12. Non - current assets – Property, plant and equipment Office furniture & equipment Other Total $'000 $'000 $'000 Year ended 30 September 2021 Opening net book amount 8,823 146 8,969 Additions 1,525 - 1,525 Disposals (17) - (17) Depreciation charge (3,239) (92) (3,331) Make good movement - 119 119 Exchange difference 14 - 14 Closing net book amount 7,106 173 7,279 At 30 September 2021 Cost 42,898 4,770 47,668 Accumulated depreciation (35,673) (4,716) (40,389) Net book amount 7,225 54 7,279 Year ended 30 September 2020 Opening net book amount 10,659 241 10,900 Additions 2,008 22 2,030 Disposals (51) - (51) Depreciation charge (3,788) (117) (3,905) Make good movement - (14) (14) Exchange difference 9 - 9 Closing net book amount 8,837 132 8,969 At 30 September 2020 Cost 41,510 4,769 46,279 Accumulated depreciation (32,687) (4,623) (37,310) Net book amount 8,823 146 8,969 Technology On e Limited Notes to the consolidated financial statements (continued) 81 13. Non - current assets – Intangible assets Goodwill Intellectual property/ source code Customer contracts Contract acquisition costs¹ Software under development Software - in use Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 Year ended 30 September 2021 Opening net book amount 33,250 4,023 713 9,991 26,983 35,573 110,533 Additions 22,996 1,141 - 8,370 41,858 - 74,365 Transfers to software - in use - - - - (38,546) 38,546 - Amortisation charge - (388) (55) (3,639) - (13,429) (17,511) Impairment - - - - - - - Exchange difference - 16 - (45) - - (29) Closing net book amount 56,246 4,792 658 14,677 30,295 60,690 167,358 At 30 September 2021 Cost 62,999 12,331 1,100 23,808 30,295 80,777 211,310 Accumulated amortisation - (4,862) (442) (9,131) - (20,087) (34,522) Accumulated impairment (6,753) (2,677) - - - - (9,430) Net book amount 56,246 4,792 658 14,677 30,295 60,690 167,358 Year ended 30 September 2020 Opening net book amount 33,250 3,503 768 7,519 23,825 7,765 76,630 Additions - 819 - 4,972 37,069 - 42,860 Transfers to software - in use - - - - (33,911) 33,911 - Amortisation charge - (291) (55) (2,493) - (6,103) (8,942) Impairment - - - - - - - Exchange difference - (8) - (7) - - (15) Closing net book amount 33,250 4,023 713 9,991 26,983 35,573 110,533 At 30 September 2020 Cost 40,003 11,174 1,100 15,483 26,983 42,231 136,974 Accumulated amortisation - (4,474) (387) (5,492) - (6,658) (17,011) Accumulated impairment (6,753) (2,677) - - - - (9,430) Net book amount 33,250 4,023 713 9,991 26,983 35,573 110,533 1 Balance of contract acquisition costs is split between current portion of $ 5.0 m and non - current portion of $ 9.7 m (20 20 : current $2. 9 m; non - current $ 7.0 m). Technology On e Limited Notes to the consolidated financial statements (continued) 82 13 . Non - current assets – Intangible assets (continued) (a) Impairment tests for goodwill Goodwill and indefinite life intangibles are allocated to the Group's Software and Consulting cash generating units (CGUs) which are also operating and reportable segm ents for impairment testing purposes. A segment - level summary of the goodwill and indefinite life intangible assets allocation is presented below. Software Consulting Corporate Total $'000 $'000 $'000 $'000 2021 Goodwill 46,63 8 9,608 - 56,24 6 Indefinite life intangibles 1,362 660 - 2,022 48,00 0 10,268 - 58,26 8 2020 Goodwill 23,643 9,608 - 33,251 Indefinite life intangibles 1,362 660 - 2,022 25,005 10,268 - 35,273 The recoverable amounts have been determined based on a value in use calculation using cash flow projections based on financi al budgets approved by senior management covering a five year period, as there is no active market against which to compare the fai r value of the unit. In the current year, there is a new CGU as a result of the acquisition. This increased Goodwill by $22.9m. This CGU has not b een tested for impairment as at 30 September 2021 due to being acquired near balance sheet date and the alloc ation of goodwill remaining provisional. Refer to note 25 for further details The key assumptions used for all CGUs in value in use calculations for 30 September 2021 and 20 20 are: • Budgeted profit • Growth rates - based on long - term historical trends for each segment • The discount rate applied to cash flow projections is 15% pre - tax (20 20 - 15%) • Terminal growth rates - these have been set at 2% (20 20 - 2 %) Technology On e Limited Notes to the consolidated financial statements (continued) 83 14. Non - current assets – Deferred tax assets 2021 2020 $'000 $'000 The balance comprises temporary differences attributable to: Employee benefits 5,179 4,958 Provisions - other 2,131 1,089 Accrued expenses 524 2,204 Intangibles 558 753 Copyright - software 39 245 Lease liability (net) 2,864 1,718 Employee share trust 4,927 3,536 Deferred revenue 45,877 40,762 Other 1,642 232 63,741 55,497 Set - off of deferred tax liabilities pursuant to set - off provisions (note 21) (37,392) (26,892) Net deferred tax assets 26,349 28,605 Net deferred tax assets expected to be recovered within 12 months 44,059 13,779 Net deferred tax assets expected to be recovered after more than 12 months ( 17,710) 14,826 26,349 28,605 2021 2020 $'000 $'000 Movements: Opening balance at 1 October 55,497 48,085 Credited / (charged) to the consolidated income statement 4, 492 6,575 Credited / (charged) to equity 3, 750 837 Offset from deferred tax liabilities (37,392) (26,892) Closing balance at 30 September 26,349 28,605 Technology On e Limited Notes to the consolidated financial statements (continued) 84 15. Current liabilities – Trade and other payables 2021 2020 $'000 $'000 Trade payables 29,445 29,315 Sundry creditors 7,021 7,249 Directors fees 101 559 36,567 37,123 Trade payables and sundry creditors are non - interest bearing and are normally settled on 30 day terms. No interest is payable on outstanding balances. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. 16. Current liabilities – Deferred Revenue 2021 2020 $'000 $'000 Carrying amount at 1 October 144,148 147,558 Carrying amount at 30 September 160,015 144,148 Revenue recognised from the opening balance 142,411 145,359 Deferred Revenue represents payments received or receivable in advance from customers for SaaS F ees and Annual Licence Fees which will be recognised as revenue in future periods, generally over the next 12 months. These amounts are a contract liability und er AASB15. These amounts do not result in a future cash outflow . T he operating costs to deliver the services are not significant. 17. Current liabilities – Provisions 2021 2020 $'000 $'000 Make good provision 148 569 Other provisions ¹ 5,444 5,416 Annual leave 8,305 8,030 Long service leave 7,322 6,533 21,219 20,548 1 On 2 October 2020, the Federal Court issued a judgement against TechnologyOne in a civil employment case. As a result of the judgement, the Group’s provision was increased to $5.2m as at 30 September 2020. The company lodged an appeal to the Full Federal C ourt on 27 October 2020. The company won its appeal, with the original judgement being overturned in August 2021, and a retrial being ordered. The Group has retained the full value of the provision at 30 September 2021 ($5.2m) based on management’s best e stimate pending the results of the retrial . Technology On e Limited Notes to the consolidated financial statements (continued) 85 18. Contingent Consideration 2021 2020 Contingent consideration $'000 $'000 Contingent consideration 3,842 - Contingent consideration - non - current 7,576 - Total 11,418 - Refer to note 25 - Business Combinations for details of the acquisition. 19. Non - current liabilities – Provisions 2021 2020 $'000 $'000 Long service leave 1,924 2,285 Make good provision 143 145 2,067 2,430 (a) Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below: The non - current provisions have been discounted using a pre - tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Annual leave Long service leave Make good Service level commitment Legal provision Contingent consideration Total ($'000) ($'000) ($'000) ($'000) ($'000) ($'000) ($'000) 2021 Carrying amount at 1 October 2020 8,030 8,817 714 217 5,200 - 22,978 Additional provisions recognised 3,110 1,919 142 39 21 11,418 16,649 Amount release d during the year (2,835) (1,488) (566) (34) - - (4,923) Carrying amount at 30 September 2021 8,305 9,248 290 222 5,221 11,418 34,704 Technology On e Limited Notes to the consolidated financial statements (continued) 86 20. Leases Right - of - use assets Property Equipment Total $'000 $'000 $'000 Year ended 30 September 2021 Opening net book amount 23,723 63 23,786 Additions 2,041 51 2,092 Modifications during the year 41 - 41 Disposals - - - Depreciation charge (4,933) (57) (4,990) Exchange difference 42 - 42 Closing net book amount 20,914 57 20,971 At 30 September 2021 Cost 31,593 159 31,752 Accumulated depreciation (10,679) (102) (10,781) Net book amount 20,914 57 20,971 Lease liability Property Equipment Total $'000 $'000 $'000 Year ended 30 September 2021 Opening liability 29,284 61 29,345 New leases entered into during the year 2,041 51 2,092 Modifications during the year (111) - (111) Payments (2,347) (49) (2,396) Interest expense 1,438 1 1,439 Exchange difference 42 - 42 Closing liability 30,347 64 30,411 The following are amounts recognised in profit or loss under AASB 16: 2021 2020 $'000 $'000 Amortisation on right - of - use assets 4,990 5,791 Interest expense on lease liabilities 1,439 1,454 Expense related to short - term leases (included in occupancy costs) 25 599 Total amount recognised in profit or loss 6,454 7,844 Cashflow for leases 2021 2020 $'000 $'000 Total cash outflow as a lessee ¹ 2,421 6,564 2,421 6,564 Technology On e Limited Notes to the consolidated financial statements (continued) 87 1 Reduction in lease payments year on year is largely due to a rental rebate on the Group’s HQ lease. This rebate significantly reduces base rent payable between 1 July 2020 and 1 April 2022. The rent rebate applied in FY21 was $4.8m (FY20 $867k). Right - o f - use assets Property Equipment Total $'000 $'000 $'000 Year ended 30 September 2020 Opening net book amount 28,578 108 28,686 Additions 1,206 - 1,206 Modifications during the year (324) - (324) Disposals - - - Depreciation charge (5,746) (45) (5,791) Exchange difference 9 - 9 Closing net book amount 23,723 63 23,786 At 30 September 2020 Cost 29,469 108 29,577 Accumulated depreciation (5,746) (45) (5,791) Net book amount 23,723 63 23,786 Lease liability Property Equipment Total $'000 $'000 $'000 Year ended 30 September 2020 Opening liability 32,709 108 32,817 New leases entered into during the year 1,351 - 1,351 Modifications during the year (324) - (324) Payments (5,916) (49) (5,965) Interest expense 1,452 2 1,454 Exchange difference 12 - 12 Closing liability 29,284 61 29,345 Technology On e Limited Notes to the consolidated financial statements (continued) 88 21. Non - current liabilities – Deferred tax liabilities 2021 2020 $'000 $'000 The balance comprises temporary differences attributable to: Contract assets (5,222) (4,269) Accelerated depreciation for tax purposes (851) (1,323) Prepayments (24) (28) Capitalised development (27,271) (18,767) Contract acquisition costs (4,024) (2,505) Total deferred tax liabilities (37,392) (26,892) Set - off of deferred tax liabilities pursuant to set - off provisions (note 14) 37,392 26,892 Net deferred tax liabilities - - Movements: Opening balance at 1 October (26,892) (15,932) Charged/(credited) to the Consolidated income statement (10,500) (10,960) Offset to deferred tax assets 37,392 26,892 Closing balance at 30 September - - 22. Contributed Equity Share capit al 2021 2020 2021 2020 Shares Shares $'000 $'000 Ordinary shares Fully paid 321,648,793 319,295,458 51,645 40,551 Movements in ordinary share capital (a) Employee Share Option Plan Date Details Number of shares $'000 1 - Oct - 20 Opening balance 319,295,458 40,551 Exercise of options 2,282,537 10,595 Share grant to employees 70,798 499 30 - Sep - 21 Closing balance 321,648,793 51,645 1 - Oct - 19 Opening balance 317,827,581 35,302 Exercise of options 1,467,877 5,249 30 - Sep - 20 Closing balance 319,295,458 40,551 Information relating to the TechnologyO n e Employee Share Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 3 3 . Technology On e Limited Notes to the consolidated financial statements (continued) 89 23. Reserves (a) Other reserves 2021 2020 $'000 $'000 Share - based payments 38,305 31,342 Foreign currency translation 1,958 2,136 Dividend reserve 32,454 30,046 72,717 63,524 (b) Nature and purpose of other reserves (i) Share - based payments The reserve is used to record the value of equity benefits provided to employees, through share - based payment transactions and associated tax benefits. (ii) Foreign currency translation Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1(c) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the income stateme nt when the net investment is disposed of. (iii) Dividend reserve The reserve recor ds retained earnings set aside for the payment of future dividends. 24. Dividends 2021 2020 $'000 $'000 Final dividend for the year ended 30 September 2020 of 9.41 Cents (2019 - 8.78 Cents) per fully paid share paid in December 2020 (2019 - December 2019) 60% franked (2019 - 75%) based on tax paid at 30% 30,225 27,930 Interim dividend for the year ended 30 September 2021 of 3.82 Cents (2020 - 3.47 Cents) per fully paid share paid in June 2021 (2020 - June 2020) 60% franked (2020 - 60%) based on tax paid at 30% 12,279 11,058 Total dividends paid 42,504 38,988 (a) Dividends policy TechnologyOne’s goal is, to the extent possible, to increase dividends paid by 8% to 10% per annum. Technology On e Limited Notes to the consolidated financial statements (continued) 90 (b) Dividends not recognised at the end of the reporting period 2021 2020 $'000 $'000 Final In addition to the above dividends, since year end the directors have recommended the payment of a final dividend of 10.09 cents per fully paid ordinary share (2020 - 9.41 cents) 60% franked (2020 - 60%) based on tax paid at 30% (2020 - 30%). The aggregate amount of proposed dividend expected to be paid out o f retained earnings, but not recognised as a liability at year end 32,454 30,046 32,454 30,046 (c) Franked Dividends The franked portions of the final dividends recommended after 30 September 2020 will be franked out of existing franking cred its or out of franking credits arising from the payment of income tax in the year ended 30 September 2021. 2021 2020 $'000 $'000 Franking account balance as at the end of the financial year at 30% (2020: 30%) (1,391) 3,044 Franking credits that will arise from the payments of income tax payable as at the end of the financial year 3,324 519 1,933 3,563 Technology On e Limited Notes to the consolidated financial statements (continued) 91 2 4 . Dividends (continued) The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for: (A) franking credits that will arise from the payment of the amount of the provision for income tax (B) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date The impact on the franking account of the dividend recommended by the D irectors since the end of the reporting date, but not recognised as a liability at the reporting date, will be a reduction in the franking account of $ 8,345,408 (20 20 - $ 7, 730,209 ). 25. Business Combinations On 15 September 2021, Technology One UK Limited acquired 100% of the issued shares and voting rights in Scientia Resource Management Limited (Scientia). The Scientia acquisition forms part of the strategic focus to deliver further functionality fo r Higher Education software solution and it will accelerate the growth and competitive position in the UK as well as have significant benefits in the Australian Higher Education market. Scientia’s product, Syllabus Plus, provides advanced academic timetabling and resource scheduling for over 150 leading universities across the United Kingdom and Australia. The initi al accounting of the assets and liabilities acquired is incomplete and provisional as the information is not available in par t due to the business being in administration prior to it being acquired. The fair value of the acquisition was determined to be $2 2.9m (12.2m GBP) and has been initially recorded to goodwill as there is limited information for the purchase price allocation prior to t he financial statements being issued. The initial cash paym ent of $11.5m (6.1m GBP) on 2 5 August 2021 included payments to extinguish the list of liabilities of Scientia at the time of acquisition as well as payments to shareholders. The sales and purchase agreement outlined earn out clauses including: • The first earn out clause of $3.8m (2 .1m GBP) is consideration for the acquisition and is earned through future performance hurdles on net profit before tax (NPBT) and annual recurring revenue (ARR) as of 31 December 2021. The company has considered the future contingent payment to be a level 3 financial liability. The fair value of the earn out considering the time value discount is $3.8m. • The second earn out clause of $7.6m (4.1m GBP) is consideration for the acquisition and is earned through future performance hurdles on NPBT and ARR as of 31 December 2022. The company has considered the future contingent payment to be a level 3 financial liability. The fair value of the earn out considering the time value discount is $7.4m. Further payments to the major shareholder may be due subject to th e achievement of certain future NPBT and ARR targets between 31 December 2022 and 31 December 2024. These payments would be accrued if deemed to be earned and probable. As of 30 September 2021, there has been no provision recorded. There were $0.5m of ac quisition costs incurred during the year ended 30 September 2021. The revenue and profit and loss for Scientia was insignificant for the 15 days of consolidation. Given the business was in administration prior to the acquisition it is i mpracticable to dete rmine what the revenue or profit and loss would be for the full year based on historical results as they are not reflective t he business performance. Technology On e Limited Notes to the consolidated financial statements (continued) 92 26. Key management personnel disclosures (a) Key management personnel disclosures 2021 2020 $ $ Short - term employee benefits 5,733,291 5,289,169 Deferred STI 368,786 227,586 Share - based payments 974,629 934,784 7,076,706 6,451,539 ( b) Equity instrument disclosures relating to key management personnel Details of options provided as remuneration to KMP and shares issued on the exercise of such, together with terms and conditi ons can be found in the remuneration report. 27. Remuneration of auditors During the year, the following fees were paid or payable for services provided by the auditor of the consolidated entity: (a) Ernst & Young ( Australia ) 2021 2020 $ $ Fees to Ernst and Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities 728,603 801,795 Fees for assurance services that are required by legislation - - Fees for other assurance and agreed - upon - procedure services 212,816 174,440 Fees for other services 170,131 148,290 Total remuneration of Ernst & Young Australia 1,111,550 1,124,525 The relative ratio of other services to audit and assurance services was 1 5 % (20 20 1 3 %) . 28. Contingencies TechnologyOne is a global business and from time to time in the ordinary course of business it receives enquiries from various regulators and government bodies. TechnologyOne cooperates fully with all enquiries and these enquiries do not require disclosure in their ini tial state, however should the Group become aware that an enquiry is developing further or if any regulator or government action is taken against the group, appropriate disclosure is made in accordance with the relevant accounting standards. As a global business, from time to time TechnologyOne is also subject to various claims and litigation from third parties during the ordinary course of its business. The Directors of TechnologyOne have given consideration to such matters which are or may be subject t o claims or litigation at year end and, unless specific provisions have been made, are of the opinion that no material contin gent liability for such claims of litigation exists. The group had no material contingent assets or liabilities . Guarantees At 30 September 2021 , the Group had $ 3, 694,124 (20 20 - $ 3,397,831 ) in outstanding bank performance guarantees. The total available guarantee facility is $ 7,000,000 (20 20 - $ 6,650,000 ). The Group also had unused foreign currency dealing limits of $ 1, 199,814 (20 2 0 - $ 1, 606,393 ). The parent entity, Technology One Limited, continues to support its subsidiaries in their operations, by way of financial sup port. Technology On e Limited Notes to the consolidated financial statements (continued) 93 29. Related party transactions (a) Ultimate controlling entity The ultimate controlling entity of the c onsolidated entity is Technology One Limited, a company incorporated in Australia. (b) Transactions with related parties The parent entity entered into the following transactions during the year with related parties in the wholly owned group: • Loans were advanced and repayments received on short - term intercompany accounts. • Marketing support and management fees were charged to wholly owned controlled enti ties. • Dividends were paid from Technology One New Zealand Limited to the parent entity during the year These transactions were undertaken on commercial terms and conditions. No allowance for expected credit loss has been recogni s ed for amounts due to and receivable from related parties. The ownership interest in related parties in the wholly owned group is set out in note 30 . 30. Controlled entities The consolidated financial sta tements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b): The parent entity is Technology One Limited, a public company, limited by shares and is domiciled in Br isbane, Australia and whose shares are traded on the Australian Securities Exchange. All entities operate in the software industry in their geographical locations. The Registered office is located at: Technology One HQ Level 11, 540 Wickham Street, Fortitude Valley, Qld, 4006 Name of entity Country of incorporation Class of shares Equity holding 20 2 1 % 20 20 % Technology One Corporation Sdn Bhd Malaysia Ordinary 100 100 Technology One New Zealand Ltd New Zealand Ordinary 100 100 Technology One UK Limited England Ordinary 100 100 Avand Pty Ltd Australia Ordinary 100 100 Desktop Mapping Systems Pty Ltd (DMS) Australia Ordinary 100 100 Digital Mapping Solutions NZ Limited (DMS) New Zealand Ordinary 100 100 Boldridge Pty Ltd Australia Ordinary 100 100 Icon Solution Unit Trust (ICON) Australia Ordinary 100 100 Icon Strategic Solutions Pty Ltd Australia Ordinary 100 `100 Jeff Roorda and Associates Pty Ltd (JRA) Australia Ordinary 100 100 Scientia Resource Management Limited (UK) England Ordinary 100 0 Technology On e Limited Notes to the consolidated financial statements (continued) 94 31. Reconciliation of profit after income tax to net cash inflow from operating activities 2021 2020 $'000 $'000 Profit for the year 72,691 62,945 Depreciation and amortisation 25,832 18,638 Non - cash employee benefits expense - share - based payments 3,213 3,305 Finance costs 1,493 1,495 Net (gain) / loss on sale of non - current assets (21) (38) Movement in ECL through profit or loss 267 34 (increase)/decrease in trade and other receivables and contract assets (16,804) 14,192 (increase)/decrease in prepayments and other current assets (2,578) 1,959 (increase)/decrease in tax assets and liabilities 13,010 3,548 Increase / (decrease) in trade creditors (556) (3,967) Increase / (decrease) in provisions 308 1,983 Increase / (decrease) in lease liabilities 2,265 2,827 Increase / (decrease) in deferred revenue 15,867 (3,410) Net cash inflow / (outflow) from operating activities 114,987 103,511 Technology On e Limited Notes to the consolidated financial statements (continued) 95 32. Earnings per share (a) Basic earnings per sha re 2021 2020 Cents Cents Basic earnings per share (cents per share) 22.64 19.75 Diluted earnings per share (cents per share) 22.52 19.61 Profit used for calculating basic and diluted earnings per share ($'000) 72,691 62,945 (b) Weighted average number of shares used as denominator 2021 2020 Number Number Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 321,074,997 318,659,285 Adjustments for calculation of diluted earnings per share: Options 1,667,676 2,295,131 Weighted average number of ordinary and potential ordinary shares used as the denominator in calculating diluted earnings per share 322,742,673 320,954,416 There are no potentially dilutive share instruments not included in the calculation of diluted earnings per share. There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these fi nancial statements. 33. Share - based payments (a) Emplo yee option plan Options are granted to employees at the discretion of the Board based on the option plan approved by the Board. TechnologyOne issues options with up to 25% discount on the volume weighted average price for the 10 days prior to the grant date . The period available between vesting date and expiry date of each option is five years. There are no cash settlement alternat ives. Each option entitles the holder to purchase one share. O ptions granted as part of remuneration are based on values determined using the Black - Scholes option pricing model. Set out below are summaries of options granted under the plan: Technology On e Limited Notes to the consolidated financial statements (continued) 96 3 3 . Share - based payments (continued) Issue date Expiry date Exercise price Balance at start of the period Issued during the year Exercised during the period Forfeited during the period Balance at end of the period Vested & exercisable at end of the period Number Number Number Number Number Number 2021 - - - - - - 30/03/2021 30/11/2028 5.8850 - 11,064 - - 11,064 - 22/01/2021 30/11/2028 5.8850 - 644,990 - (32,788) 612,202 - 22/01/2021 30/11/2028 7.8467 - 540,801 - - 540,801 - 22/01/2021 30/11/2027 5.8850 - 116,938 - (7,654) 109,284 - 1/07/2020 1/10/2027 1.8914 50,000 - - - 50,000 - 1/10/2019 1/10/2027 - 1,691 - - (1,691 ) - - 1/10/2019 1/10/2027 7.3854 578,551 - - - 578,551 - 1/10/2019 1/10/2027 5.5391 913,938 - - (109,170 ) 804,768 - 1/10/2018 1/10/2026 4.1122 988,325 - - (89,246 ) 899,079 - 1/10/2018 1/10/2026 5.4829 390,520 - - - 390,520 - 1/10/2018 1/07/2026 1.5862 12,500 - (12,500) - - - 1/10/2018 1/10/2025 4.1166 313,582 - (290,783 ) - 22,799 22,799 30/04/2018 1/10/2025 4.9952 100,101 - (100,101) - - - 1/10/2018 1/07/2025 0.8633 29,250 - (12,500) - 16,750 16,750 1/10/2018 1/07/2025 1.5862 12,500 - (12,500 ) - - - 1/10/2018 1/07/2025 1.8914 50,000 - - - 50,000 50,000 1/10/2017 1/10/2025 5.1456 1,565,170 - (1,410,064 ) (63,092 ) 92,014 92,014 1/10/2017 1/10/2024 5.1456 50,000 - (50,000 ) - - - 1/10/2017 1/10/2025 5.7474 11,177 - - - 11,177 11,177 1/07/2018 1/07/2026 1.3388 167,000 - (167,000) - - - 1/07/2018 1/10/2026 4.1122 22,853 - - - 22,853 - 1/07/2017 1/07/2024 0.8633 16,650 - - - 16,650 16,650 23/05/2017 1/10/2024 5.6046 155,482 - (155,482) - - - 10/03/2017 1/10/2024 5.6027 22,516 - (22,516 ) - - - 1/10/2016 1/10/2024 5.7474 17,000 - (17,000 ) - - - Technology On e Limited Notes to the consolidated financial statements (continued) 97 1 /07/2016 1 /07/2023 0.8633 16,650 - ( 1,350) - 15,300 15,300 1/ 07/2015 1 /07/2022 0.8633 16,650 - (16,650) - - - 25 /08/2010 25 /08/2023 0.3450 30,000 - - - 30,000 30,000 25/08/2011 25 /08/2024 0.3450 30,000 - - - 30,000 30,000 Total 5,562,106 1,313,793 ( 2,268,446) ( 303,641) 4,303,812 284,690 Weighted average exercise price $ 4.93 $ 6.69 $ 4.67 $ 5.05 $ 5.6 $ 2.77 Technology On e Limited Notes to the consolidated financial statements (continued) 98 3 3 . Share - based payments (continu ed) Issue date Expiry date Exercise price Balance at start of the period Issued during the year Exercised during the period Forfeited during the period Balance at end of the period Vested & exercisable at end of the period Number Number Number Number Number Number 2020 1/10/2019 1/10/2027 - - 1,691 - - 1,691 - 1/10/2019 1/10/2027 7.3854 - 578,551 - - 578,551 - 1/10/2019 1/10/2027 5.5391 - 913,938 - - 913,938 - 1/10/2018 1/10/2026 4.1122 1,003,568 - - (15,243) 988,325 - 1/10/2018 1/10/2026 5.4829 390,520 - - - 390,520 - 1/10/2018 1/07/2026 1.5862 12,500 - - - 12,500 - 1/10/2018 1/07/2026 1.8914 50,000 - (50,000) - - - 1/10/2018 1/10/2025 4.1166 313,582 - - - 313,582 - 1/10/2018 1/07/2025 1.0313 176,667 - (151,667) (25,000) - - 1/10/2018 1/10/2025 4.9952 100,101 - - - 100,101 - 1/10/2018 1/07/2025 0.8633 250,250 - (221,000) - 29,250 29,250 1/10/2018 1/07/2025 1.5862 12,500 - - - 12,500 12,500 1/10/2018 1/07/2025 1.8914 50,000 - - - 50,000 50,000 1/10/2017 1/10/2025 5.1456 1,593,113 - - (27,943) 1,565,170 - 1/10/2017 1/10/2024 5.1456 50,000 - - - 50,000 - 1/10/2017 1/10/2025 5.7474 11,177 - - - 11,177 - 1/07/2018 1/07/2026 1.3388 167,000 - - - 167,000 - 1/07/2018 1/07/2025 1.3388 167,000 - (167,000) - - - 1/07/2018 1/10/2026 4.1122 22,853 - - - 22,853 - 1/07/2017 1/07/2024 0.8633 29,150 - (12,500) - 16,650 16,650 23/05/2017 1/10/2024 5.6046 247,373 - (45,516) (46,375) 155,482 155,482 7/04/2017 30/09/2024 - 978 - (978) - - - 10/03/2017 1/10/2024 5.6027 22,516 - - - 22,516 22,516 14/02/2017 1/10/2024 5.0688 50,000 - (50,000) - - - 7/02/2017 1/10/2024 5.2334 50,000 - (50,000) - - - Technology On e Limited Notes to the consolidated financial statements (continued) 99 1/10/2016 1/10/2024 5.7474 762,737 10,000 (657,788) (97,949) 17,000 17,000 1/10/2016 1/10/2024 - 10,000 - (10,000) - - - 1/07/2016 1/07/2023 0.8633 29,150 - (12,500) - 16,650 16,650 1/07/2015 1/07/2022 0.8633 16,650 - - - 16,650 16,650 25/08/2009 25/08/2022 0.3450 30,000 - (30,000) - - - 25/08/2010 25/08/2023 0.3450 30,000 - - - 30,000 30,000 25/08/2011 25/08/2024 0.3450 30,000 - - - 30,000 30,000 Total 5,679,385 1,554,180 (1,458,949) (212,510) 5,562,106 396,698 Weighted average exercise price $4.27 $6.10 $3.6 $4.97 $4.93 $3.27 Technology On e Limited Notes to the consolidated financial statements (continued) 100 3 3 . Share - based payments (continued) At September 20 2 1 a total of 4, 303,812 options (20 20 – 5, 562,106 ) were offered to employees. The weighted average share price at the date of exercise of options exercised during the year ended 30 September 2021 was $ 4.67 (20 20 - $ 3.60 ). The weighted average remaining contractual life of share options outstanding at the end of the period was 6 yea rs (20 20 - 6. 0 years). Fair value of options granted The fair value of the equity - settled options is measured at the reporting date taking into account the terms and conditions upon which the instruments were granted. The fair value of options granted during the year was between $ 1. 77 and $ 2.66 (2 020 - $ 1. 93 - $3.39 ). The model inputs for options granted during the year ended 30 September 2021 included : (I) Dividend yield of 1.6 % (20 20 – 1.6 %) (II) Expected volatility 33.54 % (20 20 : 29.5 %) (III) Risk - free interest rate 0.01 % (20 20 0.62 – 1.89 %) (IV) Expected life of option 3.3 years (20 20 – 3.3 years) (V) Option exercise price between $ 7. 85 and $ 5. 8 8 (20 20 - $ 7.39 - $5. 54 ) (VI) Weighted average share price at grant date was $ 7. 85 (20 20 - $ 7.39 ) The expected volatility reflects the assumption that the historical volatility of the Group ’ s share price over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome. (b) Executive p erformance r ights After further market consultation, the Group made the decision to return to issuing options or EPRs. Please refer to section 3 of the remuneration report for further information. (c) Expenses arising from share - based payment transactions Total expenses arising from share - based payment transactions recognised during the year as part of employee benefit expense were as follows: 202 1 $'000 2020 $'000 Options issued under employee option plan: Vested 3, 404 3,355 Forfeited ( 192 ) (50) Total share - based payment expense 3, 212 3,305 Technology On e Limited Notes to the consolidated financial statements (continued) 101 34. Parent entity financial information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: 2021 2020 $'000 $'000 Balance sheet Current assets 212,771 181,777 Non - current assets 225,836 197,068 Total assets 438,607 378,845 Current liabilities 198,267 178,175 Non - current liabilities 32,602 37,086 Total liabilities 230,869 215,261 Shareholders' equity Contributed equity 51,645 40,551 Dividend reserve 32,454 30,046 Share option reserve 38,305 31,342 Retaining earnings 85,283 62,278 207,687 164,217 Profit or loss before tax for the year 92,260 75,787 Total comprehensive income 92,260 75,787 At 30 September 2021 , the statement of financial position shows a current liability balance of $ 198 m ( 30 September 2020 : $17 8 m) which is largely attributable to the Deferred Revenue balance in current liabilities. As Deferred Revenue represents payments received or receivable in advance from customers for SaaS Fees and Annual Licence Fees which will be recognised in future periods, and not a future cash outflow, this balance does not impact the Group’s ability to meet its short - term o bligations as and when they fall due. (b) Guarantees entered into by the parent entity At 30 September 2021, the Group had $3,694,124 (2020 - $3,397,831) in outstanding bank performance guarantees. The total available guarantee facility is $7,000,000 ( 2020 - $6,650,000). The Group also had unused foreign currency dealing limits of $1,199,814 (2020 - $1,606,393). The parent entity, Technology One Limited, continues to support its subsidiaries in their operations, by way of financial sup port. (c) Contingent liabilities of the parent entity At 30 September 2021 and 30 September 2020 , the Parent had no contingent liabilities. Technology On e Limited Notes to the consolidated financial statements (continued) 102 35. Events after the reporting period On 23 November 202 1 , the D irectors of Technology One Limited declared a final dividend on ordinary shares in respect of the 20 2 1 financial year. The total amount of the dividend is $ 3 2,454,363 and is 60 % franked. No other matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group , the results of those operations or the state of affairs of the Group or economic entity in subsequent financial years. 103 In accordance with a resolution of the D irectors of Technology One Limited, I state that: In the opinion of the Directors: (a) the financial statements and notes set out on pages 5 1 to 102 are in accordance with the Corporations Act 2001 , including: (i) giving a true and fair view of the consolidated entity's financial position as at 30 September 2021 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1(a); and (c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; and (d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the reporting year ended 30 September 2021. On behalf of the Board of Directors Adrian Di Marco Director Brisbane 2 3 November 20 2 1 Technology One Limited Directors' declaration 30 September 2021 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Independent auditor’s report to the members of Technology One Limited Report on the audit of the financial report Opinion We have audited the financial report of Technology One Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 September 2021, the consolidated income statement, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001 , including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 September 2021 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001 . Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. 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 the Group in accordance with the auditor independence requirements of 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 also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Measurement and recognition of revenue and associated assets and liabilities Why significant How our audit addressed the key audit matter The Group has the following key revenue streams: ? SaaS fees; ? Annual licence fees; ? Initial licence fees; and ? Consulting services The Group contracts with its customers using written contracts which often include a number of products and services (separately identifiable components). Revenue recognition for these contracts was considered to be a key audit matter due to the complexity of contracts and the judgement required to allocate revenue amongst the respective performance obligations. Note 1(d) to the financial statements details the Group’s revenue streams and the associated accounting policies. Revenue is disclosed in Note 5, associated assets in Note 9 and Note 10 and associated liabilities in Note 16. Our audit procedures included the following: ? For a sample of signed customer contracts, we obtained the supporting documentation and assessed management’s judgement on whether the revenue has been recorded appropriately. The assessment included whether there were contract modifications and the impact of any delayed payment terms. ? The testing of the signed customer contracts (including contract modifications and conversion of initial licences to SaaS arrangements) considered: ? The determination of stand-alone price for separately identifiable components; ? The allocation of the transaction price to identified performance obligations, separated into the different revenue streams, and; ? The timing of revenue recognition based on the satisfaction of performance obligations. ? For a sample of consulting service contracts, (time and materials) we assessed the Group’s controls associated with the recording of consulting days delivered and the application of contracted fee rates to these days. ? For deferred revenue (contract liabilities) and contract assets, we tested a sample of balances at year end that included: ? Agreeing the amounts recorded to invoice and payment (where received); ? Reperforming the recognition of revenue based on the satisfaction of performance obligations; and ? Recalculating the amount of the contract asset or contract liability balance at year end. ? Assessed the adequacy of the financial report disclosures included in the financial statements. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Capitalisation of software development costs Why significant How our audit addressed the key audit matter As set out in Note 13 to the financial statements the Group capitalises costs related to the development of software products. Software development is core to the Company’s operations and requires judgement as to whether it meets the capitalisation criteria of AASB 138 Intangible Assets. The carrying value of the capitalised assets (Software under development and software-in use) totalled $90.99m as disclosed in Note 13. The capitalisation of software development costs was a key audit matter due to the significant management judgements, including: ? Whether the costs incurred relate to research costs, which are required to be expensed or development costs that are eligible for capitalisation; ? The assessment of the useful life of the asset and the timing of amortisation; ? The assessment of future economic benefits and indications of impairment of the capitalised software development costs. We performed the following procedures in respect of the development costs capitalised: ? Assessed the Group’s policy of capitalisation of software development costs for compliance with Australian Accounting Standards. ? Held inquiries with Project Directors and other project team members, to understand development activities undertaken and the feasibility of completion. ? For a sample of capitalised software development costs, we tested whether additions were appropriately supported to payroll records or third party documentation and attributed to development activities. ? Considered the appropriateness of the amortisation period for the capitalised software development costs and the timing of amortisation. ? Assessed the completeness of the Group’s indicators of impairment of capitalised software development costs. ? Assessed the adequacy of the financial report disclosures included in the financial statements. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2021 annual report other than the financial report and our auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not express 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 and, in doing so, 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. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are 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 the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ? Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ? Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ? Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ? Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ? Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ? Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the Directors’ Report for the year ended 30 September 2021. In our opinion, the Remuneration Report of Technology One Limited for the year ended 30 September 2021, complies with section 300A of the Corporations Act 2001 . Responsibilities 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 responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Alison de Groot Partner Brisbane 23 November 2021 Jennifer Barker Partner Brisbane 23 November 2021

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