H&M- FASHION AND QUALITY AT THE BEST PRICE

I. OVERVIEW

The company:
H&M Hennes & Mauritz is a Swedish multinational retail-clothing company, known
for its fast-fashion clothing for men, women, teenagers and children.
H&M exists in 57 countries with over 3,500 stores and as of 2015 employed around
132,000 people. The first store was opened on the high street of Vsters, Sweden in
1947. It had 2,325 stores at the end of 2011, 2,629 stores at the end of August
2013 and opened its 3,000th store in September 2014 in Chengdu, China. It is ranked
the second largest global clothing retailer, just behind Spain-based Inditex (parent
company of Zara), and leads over the third largest global clothing retailer, United
States based Gap Inc.
The design team in the company's Sweden office controls the steps of production, from
merchandise planning to establishing specifications, and production is outsourced to
approximately 800 factories in Europe and Asia. These facilities are used for
horizontal division of labor, rather than being integrated.

Business concept:
H&M offers a broad and varied range that allows customers to find their own personal
style. The collections are created with H&M's broad clientele in mind and the aim is to
satisfy many different tastes and requirements. The range includes everything from
modern basics to high fashion reflecting the very latest international trends. The
collections are supplemented by matching accessories, nightwear, underwear and
cosmetics.
To H&M, design, quality and sustainability are not a question of price: They always
offer inspiring fashion with unbeatable value for money.
Quality is a central topic, from initial idea to final product. It is their aim to always
exceed our customers expectations on quality.
An important element of their strong offering is that H&M should be the more
sustainable choice. Considerable resources are devoted to increasing sustainability.
H&M does not own factories, but instead buys products from independent suppliers

that are close long-term partners of H&M. They work to bring about long-term
improvement for people and the environment in the supply chain, the garment
lifecycle and the communities in which they are active.
II, FINANCIAL PERFOMANCE

Full-year report (1 December 2013 30 November 2014)

Well-received collections for all brands in the H&M Group resulted in good sales
and increased market share. The H&M Groups sales including VAT increased in local
currencies by 14 percent during the financial year. Converted into SEK, sales
excluding VAT amounted to SEK 151,419 m (128,562), an increase of 18 percent.
Gross profit increased by 17 percent to SEK 89,052 m (76,025), which corresponds
to a gross margin of 58.8 percent (59.1).
Profit after financial items increased by more than SEK 3.4 billion to SEK 25,895 m
(22,448), an increase of 15 percent.
The Groups profit after tax increased to SEK 19,976 m (17,093), corresponding to
SEK 12.07 (10.33) per share, an increase of 17 percent.
The strong result for 2014 has led to SEK 303 m being allocated to the H&M
Incentive Program (HIP). The allocation to HIP in 2013 amounted to SEK 31 m. HIP
is for all employees regardless of role, salary and whether they work part-time or fulltime. The allocation to HIP was expensed in the fourth quarter. The significant
difference in HIP allocations between 2014 and 2013 make it an item affecting
comparability both in the full-year results for 2014 and in the fourth quarter of 2014.
Strong expansion during the year with a total net addition of 379 (356) new stores.
The largest expansion markets were China and the US. At the end of the financial year
the number of stores amounted to 3,511 stores in 55 markets.
More than 16,000 (12,000) new jobs were created in the H&M Group in 2014. The
number of employees amounted to more than 132,000 (116,000) at the end of the year.

Comments by Karl-Johan Persson, CEO

2014 has been a very good year for H&M. Over the full year we increased our sales
by 14 percent in local currencies and by 18 percent in Swedish kronor, to SEK 176.6

billion including VAT. Profit for the year after tax, before the allocation to HIP,
increased by 18 percent to over SEK 20 billion. Well-received collections for all our
brands and continued strong expansion both in stores and online have helped increase
our market share and have further strengthened our position in the market. We created
16,000 new jobs within the H&M Group in 2014 and now have more than 132,000
employees. Our employees and the H&M spirit our shared values are the key to
our success, and the good financial results for the year mean that SEK 303 m has been
allocated into the H&M Incentive Program (HIP). HIP is for all employees in the
H&M Group and aims to acknowledge the employees daily and long-term
commitment. As always, we worked on continuous improvements during the year in
order to be a leader in everything we do and the preferred choice for our customers.
We have made many long-term investments in IT, online sales, new brands and in
broadening the product range. Additionally, our extensive sustainability work is a
further example of how we give customers added value. Our customers should always
know that when they shop with us, the product has been produced with the greatest
possible consideration for people and the environment. While we are continuing our
long-term investments, at the same time we can see our investments in areas such as
online starting to bear fruit. This year we opened our online store in four new large
markets: France, Italy, Spain and China. These openings, combined with further
improvements in our online store, have naturally contributed to the years good sales
development. We will therefore be rolling out H&Ms online store to nine new markets
in 2015: Belgium, Bulgaria, the Czech Republic, Hungary, Poland, Portugal, Romania,
Slovakia and Switzerland. In 2014 we opened a net addition of 379 new stores which
is more than one store a day. And in 2015 we will be opening even more stores; in
total, we plan a net addition of around 400 new stores. New markets planned for 2015
are Taiwan, Peru, Macau, South Africa and India. The greatest expansion will take
place in existing markets where there is still great potential to grow further. The most
new stores will open in China and the US, but also in other large markets such as
Poland and Germany. COS and & Other Stories plan to open even more stores this
year than in 2014. Early in 2014 we successfully launched H&M Sport, and in the
autumn our expanded shoe range was gradually launched in selected H&M stores and
online. As a further step in broadening H&Ms product range, in autumn 2015 we will

start the launch of H&M Beauty a new and broad concept for make-up, body care
and hair care with high quality value-for-money products in a specially produced
design that we have great belief in. H&M Beauty, which will replace our current
ownbrand cosmetics, will be launched already this year in approximately 900 H&M
stores in around 40 markets as well as in our online markets. We have another exciting
year ahead of us, with new opportunities and challenges. 2015 has got off to a good
start, with strong sales in both December and January. Although the increasingly
expensive US dollar will affect our sourcing costs, we will make sure that we always
have the best customer offering in each individual market in terms of fashion, quality,
price and sustainability, which form the basis of our business idea.
Full year 2014

Full year 2013

176,620

150,090

151,419

128,562

Operating profit, SEK m

25,583

22,090

Operating margin %

16.9

17.2

Profit after financial items

25,895

22,448

Tax
Profit after tax, SEK m

-5,919
19,976

-5,355
17,093

Earnings per share, SEK

12.07

10.33

Dividend per share, SEK

9.75

9.50

Sales including VAT, SEK

m
Sales excluding VAT, SEK
m

Sales
Well-received collections for all brands and continued strong expansion led to
increased sales and continued market share gains for the H&M Group in a fashion
retail market that in many markets was still characterised by a challenging
macroeconomic situation and also by unusually warm autumn weather.

Sales including VAT converted into SEK increased by 17 percent to SEK 49,656 m
(42,610) in the fourth quarter. Sales including VAT increased in the financial year by
18 percent and amounted to SEK 176,620 m (150,090). Sales excluding VAT increased
by 17 percent to SEK 42,644 m (36,495) in the fourth quarter and by 18 percent to
SEK 151,419 m (128,562) during the financial year 2014. Sales including VAT in local
currencies increased by 11 percent in the fourth quarter and by 14 percent during the
financial year 2014.

Stock-in-trade amounted to SEK 19,403 m (16,695), an increase of 16 percent in SEK

and 14 percent in local currencies compared to the same time the previous year. The
increase in the stock-in-trade is mainly due to the store and online expansion. The level
and the composition of the stock-in-trade as of 30 November 2014 are deemed to be
good. The stock-in-trade amounted to 12.8 percent (13.0) of sales excluding VAT and
25.7 percent (25.4) of total assets.
Tax
The H&M Groups final tax rate for the financial year 2013/2014 was 22.9 percent
(23.9). The final outcome of the tax rate depends on the results of the Groups various
companies and the corporate tax rates in each country. The H&M Groups tax rate is
expected to be approximately 22.5 23.5 percent for the financial year of 2014/2015.
However, in the first three quarters of 2015 an estimated tax rate of 23.5 percent will
be used.

Employees
The average number of employees in the Group, converted into full-time positions,
was 93,351 (81,099), of which 7,489 (6,868) are employed in Sweden.

Parent company
The parent companys external sales amounted to SEK 47 m (35) in the financial year.
Profit after financial items amounted to SEK 16,248 m (16,998). Investments in fixed
assets amounted to SEK 274 m (161). previous year. Sales in January 2015 are
expected to increase by 14 percent in local currencies compared to the same month last
year.
III, Ownership structure
At the end of the financial year H&M had 204,754 shareholders. The total number of
shares in H&M is 1,655,072,000 (the market price of each share is SEK 319,4), of
which 194,400,000 are class A shares (ten votes per share) and 1,460,672,000 are
class B shares (one vote per share).
Shareholders include person, families and organizations. There are 10 largest

shareholders of H&M.

NAME

NUMBER OF

% OF TOTAL

% OF VOTING

SHARES

SHARES

SHARES

Stefan Persson and family

623,849,332*

37.69

69.71

Lottie Tham and family

88,080,400

5.32

2.59

ALECTA PENSIONSFRSKRING

67,650,000

4.09

1.99

Swedbank Robur fonder

37,568,801

2.27

1.1

AMF - Frskring och Fonder

32,006,420

1.93

0.94

CLEARSTREAM BANKING S.A.,

28,928,396

1.75

0.85

JPM CHASE NA

21,900,665

1.32

0.64

HANDELSBANKEN FONDER AB RE

17,696,104

1.07

0.52

FJRDE AP-FONDEN

15,041,653

0.91

0.44

SEB Investment Management

13,630,627

0.82

0.4

W8IMY

JPMEL

H&Ms largest shareholder is Stefan Persson and family, who via Ramsbury
Invest AB hold all the class A shares, which represent 57.1 percent of the
votes, This means that as of 30 Novem- ber 2014, Stefan Persson and family
via Ramsbury Invest AB repre- sent 68.6 percent of the votes and 35.5 percent
of the total number of shares. Ramsbury Invest AB is thus the parent company of
H & M Hennes & Mauritz AB.
According to the brand performance taken on 31st DEC 2014, the brand value of H&M
is $14,715m; the enterprise value is $65,812m.

IV, BOARD OF DIRECTORS

Board meetings
During the financial year H&M normally holds six regular Board meetings, one of
which is the statutory Board meeting. Extraordinary Board meetings are held when the
need arises. The Board consists of eight ordinary members elected by the Annual
General Meeting. There are also two employee representatives, with two deputies for
these positions. Seven members of the Board are women and five are men; four of the
twelve are employed by the company. The Board is assisted by a secretary who is not a
member of the Board.
The Board meetings begin with a discussion of the company s financial situation,
with costs and sales as the main focus. The Board goes through the various financial
reports and the Annual Report and verifies these before they are published. The Board
meetings also discuss matters such as overall strategy, expansion and dividend policy.
The Managing Director attends meetings of the Board in order to report on the
operational work within the Group and ensures that the Board is given relevant and
objective information on which to base its decisions.
Attendance at the Board meetings is very good and the members participate in all

discussions. Accounting matters are dealt with in detail within the Auditing Committee
and reported back to the Board.

Board of directors

Stefan Persson
Chairman of the Board
Born

Year Selected

Primary occupation

1947

1979

Chairman of the board

Other significant board assignments: Member of the Association of MSAB and board
assignments in family-owned companies.
Education: Stockholm University & Lund University, 19691973.
Work experience:
1967-1982

Country Manager for H&M in the UK and responsible for H&Ms

expansion abroad

1982-1998

Managing Director and Chief Executive Officer of H&M

1998

Chairman of the Board of H&M

Shareholding:
0
Shares held by related parties:
194,400,000 A-shares as well as 393,049,043 B-shares owned through Ramsbury
Invest AB.
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance:

No
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance:
No

Anders Dahlvig
Board member and member of the Auditing Committee
Born

Year selected

Primary occupation

1957

2010

Board assignments

Other significant board assignments: Chairman of the New Wave Group. Member of
the Board of Kingfisher plc, Oriflame SA, Axel Johnson AB, Resurs Bank AB and Pret
A Manger.
Education:
Bachelor of Science degree in Business Administration, Lund University 1980
Masters of Arts degree in Economics, University of California Santa Barbara, 1982
Work experience:
1983-1993

Various roles within IKEA in Sweden, Germany, Switzerland and

Belgium

1993-1997

Managing Director of IKEA UK

1997-1999

Vice President of IKEA Europe

1999-2009

CEO and President of the IKEA Group

Shareholding
17,510
Shares held by related parties
0
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes

Lottie Knutson
Board member
Born

Year selected

1964

2006

Primary occupation
Writer and advisor within digital marketing, change and
crisis management.

Other significant board assignments: Member of the Board of Stena Line Holding BV,
Cloetta AB, Swedavia, STS Alpresor and Wise Group AB.
Education:
Universit de Paris III, Diplme de Culture Francaise, 1985-1986. Theatre history,
Stockholm University, 1989, The Department of Journalism at Stockholm University,
1987-1989.
Work experience
1988-1989

Journalist, Svenska Dagbladet

1989-1995

The communications department at SAS Group

1995-1996

PR consultant, Johansson & Co

1996-1998

PR- and communications responsible consultant, Bates Sweden

1998-1999

Communications consultant, JKL

1999-2014

Marketing Director at Fritidsresor Group for the Nordic countries

Shareholding
1,400
Shares held by related parties
0
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes

Sussi Kvart
Board member and member of the Auditing Committee
Born

Year selected

1956

1998

Primary occupation
Consulting, with a focus on strategic business advice,
corporate governance and board procedures.

Other significant board assignments

Chairman of Kvinvest AB, member of the boards of Apoteket AB and DGC One AB.
Education
Bachelor of Laws, Lund University 1980.
Work experience
19811983

Mlndals District Court, clerk of a district court

19831989

Lagerlf (now Linklaters) law firm, as lawyer from 1986

19891991

Political expert, riksdagen (Swedish parliament), parliamentary office

of the Swedish Liberal Party

19911993

Political expert, Swedish Cabinet Office

19931999

Company solicitor, LM Ericsson

19972001

Member of the Aktiebolagskommittn (Swedish Companies Act

Committee)

20002001

Working as a solicitor and with business development at LM Ericsson,

Corporate Marketing and Strategic Business Development

2002

Shareholding

Sussi Kvart AB

4,400
Shares held by related parties
1,700
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes

Lena Patriksson Keller

Board member
Born

Year selected

Primary occupation

1969

2014

Executive Chairman at branding and communications agency

Patriksson Communication AB

Other significant board assignments

Member of the boards of WESC and Elite Hotels. Chairman of the board of ASFB, the
industry organisation Association of Swedish Fashion Brands.

Education
Design and Marketing at Parsons School of Design in New York and at the American
University in London.
Work experience
19931996 Buying & Product Development at H&M
19961998 Global Communications Manager, J.Lindeberg
1999

CEO and later Executive Chairman, Patriksson Communication AB

Shareholding
0
Shares held by related parties
700 shares are owned by Lena Patriksson Kellers private company Verdani Holding
AB. 9,450 shares are owned by husband and children.
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes

Melker Schrling
Board member

Born

Year selected

1947

1998

Primary occupation
Founder and owner of MSAB.

Other significant board assignments

Chairman of MSAB, AarhusKarlshamn AB, Hexagon AB, Hexpol AB and Securitas
AB.
Education
M.Sc. Business and Economics from the School of Business, Economics and Law,
Gothenburg University 1970.
Work experience
19701975

LM Ericsson, Mexico

19751979

ABB Flkt, Stockholm

19791983

Managing Director, Essef Service, Stockholm

19841987

Managing Director, Crawford Door, Lund

19871992

Managing Director and Chief Executive Officer, Securitas AB,

Stockholm

19931997

Managing Director and Chief Executive Officer, Skanska AB,

Stockholm

Shareholding
0
Shares held by related parties
228,000 *
* Shares owned through Melker Schrling AB
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes

Independent of major shareholders in the company as defined by the Swedish Code of

Corporate Governance
Yes

Christian Sievert
Board member and Chairman of the Auditing Committee
Born

Year selected

1969

2010

Primary occupation
CEO investment company AB Max Sievert

Other significant board assignments

Member of the board of AB Segulah, AB Max Sievert and AB Anders Lfberg.
Education
MSc in Business Administration, School of Economics, Stockholm 1994
Work experience
1994-1997

Bain & Company, consultant, Stockholm and San Francisco, USA

1997-2003

Investment Manager and Partner, Segulah

2003-2013

CEO/Managing Partner of Segulah

2013-2014

Partner Segulah

2014-

CEO investment company AB Max Sievert

Shareholding*
56,000
Shares held by related parties
4,000 shares are owned by Christian Sieverts company Whitechris Industri AB, 600
shares owned by spouse.
* Additional information: In addition to Christian Sieverts shareholding shown above,
Christian Sievert holds 5,000 H&M shares via a pension plan.
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
No*
* Christian Sievert is not considered independent of Ramsbury Invest AB since
Ramsbury.

Niklas Zennstrm
Board member
Born Year

Primary occupation

selected
1966 2014

CEO of venture capital company Atomico, which focuses on fastgrowing tech companies, and involved in Zennstrm Philanthropies,
which supports organisations particularly associated with climate
change, social entrepreneurship, the Baltic Sea environment and
human rights.

Other significant board assignments

Member of the boards of Atomico, Zennstrm Philanthropies, Rovio, Fon and Fab.
Education
Dual degrees in Business Administration and Engineering Physics from Uppsala
University.
Work experience
1991

Product Manager, Tele2 AB, Stockholm

1994
1994

Director of Access Network, Unisource Voice Services AB, Stockholm

1996
1996

Director of Internet Services, Tele2 Danmark A/S, Copenhagen

1997
1997

Director of Internet Services, Tele2 Europe ASA,

2000

Luxembourg/Amsterdam

2000

CEO and founder, Kazaa, Amsterdam

2002
2001

CEO and founder, Joltid, Amsterdam

2003
2002

CEO and founder, Skype, London

2007
2007

CEO and founder, Atomico, London

Shareholding
72,700 shares

Shares held by related parties

0 shares
Independent of the company and the company management as defined by the Swedish
Code of Corporate Governance
Yes
Independent of major shareholders in the company as defined by the Swedish Code of
Corporate Governance
Yes

Margareta Welinder
Employee representative
Born

Year selected

1962

2007

Shareholding
0
Shares held by related parties
0

Ingrid Godin
Employee representative
Born

Year selected

1959

2012

Shareholding
0
Shares held by related parties
60

Rita Hansson
Deputy employee representative
Born

Year selected

1951

2014

Shareholding
300
Shares held by related parties
0

Alexandra Rosenqvist
Deputy employee representative
Born

Year selected

1976

2015

Shareholding
0
Shares held by related parties
0
V, ANNUAL GENERAL MEETING 2015
H&Ms Annual Meeting 2015 was held at Victoriahallen, Stockholm International
Fairs in Stockholm on Wednesday 29 April, at 3 p.m. 1,721 shareholders were
represented at the meeting, representing 82.3 percent of the votes and 64.7 percent of
the capital.
The main resolutions passed were the following:
The lawyer Sven Unger was elected as chairman of the meeting (75.3 percent
of the votes in H& M Hennes & Mauritz AB).
Balance sheets and income statements for the parent company and for the group
were adopted.
A dividend to shareholders of SEK 9.75 per share was approved. May 4, 2015
was decided as record date. With this record day, Euroclear Sweden AB is
expected to pay the dividend on 7 May 2015. To be guaranteed dividend

payment, the H&M shares must have been purchased no later than 29 April
2015. Ex-dividend day is 30 April 2015.
The board members and the CEO were discharged from liability for the
2013/2014 financial year.
The number of board members elected by the meeting to serve until the next
AGM was set at eight, with no deputies.
Anders Dahlvig, Lottie Knutson, Sussi Kvart, Lena Patriksson Keller, Stefan
Persson, Melker Schrling, Christian Sievert and Niklas Zennstrm were reelected by the meeting. . Stefan Persson was re-elected as chairman of the board.
The nomination committee proposes that the board fees for each member
elected by the general meeting are distributed as follows: chairman of the board
SEK 1,550,000; members SEK 550,000; members of the auditing committee an
extra SEK 125,000; and the chairman of the auditing committee an extra SEK
175,000. If the meeting approves the nomination committees proposal for the
composition of the board, and if the number of members of the auditing
committee remains as before, the total fees will be SEK 5,825,000, which is an
increase of SEK 300,000.
The proposed principles for the nomination committee were approved and
members of the nomination committee were elected.
The proposed guidelines for remuneration to senior executives were approved.
VI, AUDITORS
Auditors
At the 2013 AGM, the accounting firm Ernst & Young AB was elected as
auditor of H&M for a four-year period, i.e. until the end of the 2017 AGM.
Authorised public accountant sa Lundvall from Ernst & Young holds the main
responsibility for the audit.
Ernst & Young Global Limited (known as EY) is a multinational professional
services firm headquartered in London, United Kingdom. It is one of the "Big
Four" audit firms and is the third largest professional services firm in the world
by aggregated revenue in 2014, after Deloitte and PwC. Ernst & Young AB is a
member of a global network used for auditing assignments for most of the
groups companies and meets H&Ms requirements with respect to competence

and geographical coverage.

sa Lundvall is an authorized public accountant of Ernst & Young from 1994,
after she graduated civil economist course at Stockholm University in Sweden.
She conducts auditing assignments for companies such as ATG, Apoteket, DGC
One, Systemair and Systembolaget.
H&M also buys other consulting services from other accounting firms.
Mission
It is the responsibility of the auditors to review the companys Annual Report
and accounts, as well as the administration of the company by the Board of
Directors and the Managing Director on behalf of the shareholders.
EY presents the auditors statement on the corporate governance report to the
Annual General Meeting of H & M Hennes & Mauritz AB (publ), corporate
identity number 556042-7220.
EY attends the auditing committee meetings and reports on the auditing
assignments. The meetings are also attended by CFO Jyrki Tervonen and chief
accountant Anders Jonasson, among others. Accounting and auditing matters
are prepared within the auditing committee and reported to the board. At each
board meeting the chairman of the auditing committee reports on the main
points discussed at the latest meeting of the auditing committee.
Auditing fees
The fees invoiced by the auditors over the past two financial years are as
follows:
Auditing fees (SEK m)
Ernst &Young:
Audit assignments
Auditing other than audit
assignments
Tax consultancy
Other consultancy
Other Auditors:
Audit assignments

Total

Group
2014

2013

24.1
2.7

20.8
2.4

14.1
1.1

13.2
0.9

4.0
46.0

3.6
40.9

Parent company
2014
2013
3.3
0.6
0.4
4.3

3.3
0.4
0.1
3.8

VII. REMUNERATION 2014

The Annual General Meeting on 29 April 2014 decided on the following guidelines for
remuneration to senior executives.
The Board considers it of the utmost importance that senior executives are paid
competitive, attractive remuneration at a market level, as regards both fixed and
variable compensation, based on responsibilities and performance. The Boards
proposed remuneration is in the best interests of the company and its shareholders
from a growth perspective, since it helps motivate and retain talented and committed
senior executives.
The Board has thus divided the guidelines for remuneration of senior executives into
two parts: general guidelines and supplementary guidelines.
General guidelines
The term "senior executives" covers the Chief Executive Officer, other members of
executive management, country managers and certain key individuals. The number of
individuals covered by the term senior executives is currently around 50.
Compensation for senior executives is based on factors such as work tasks, expertise,
position, experience and performance. Senior executives are compensated at what are
considered by the company to be competitive market rates. Senior executives are also
entitled to the benefits provided under the H&M Incentive Program.
H&M is present in more than 40 countries excluding franchise markets and levels of
compensation may therefore vary from country to country. Senior executives receive a
fixed salary, pension benefits and other benefits such as car benefits. The largest
portion of the remuneration consists of the fixed salary. For information on variable
components, see the section below.
The period of notice for senior executives varies from three to twelve months. No
severance pay agreements exist within H&M other than for the Chief Executive
Officer.

Pension terms etc. for the Chief Executive Officer

The retirement age for the Chief Executive Officer is 65. The Chief Executive Officer
is covered by the ITP plan and a defined contribution plan. The total pension cost shall
amount in total to 30 percent of the Chief Executive Officers fixed salary. The Chief
Executive Officer is entitled to 12 months notice. In the event that the company
cancels the Chief Executive Officers employment contract, the Chief Executive
Officer will also receive severance pay of an extra years salary.
Variable remuneration
The Chief Executive Officer, country managers, certain senior executives and certain
key individuals are included in a bonus scheme. The size of the bonus per person is
based on the fulfilment of targets in their respective areas of responsibility. The result
is linked to the measurable profit targets (qualitative, quantitative, general, individual)
set in advance within their respective areas of responsibility. These targets also include
measurable targets for sustainability. The targets within each area of responsibility are
aimed at promoting H&Ms development in both the short and the long term.
For the Chief Executive Officer the maximum bonus is SEK 0.9 m net after tax. For
other senior executives the maximum bonus is SEK 0.3 m net after tax. Net after tax
means that income tax and social security costs are not included in the calculation. The
bonuses that are paid out must be invested entirely in shares in the company, which
must be held for at least five years. Since H&M is present in markets with varying
personal income tax rates, the net model has been chosen because it is considered fair
that the recipients in the different countries should be able to purchase the same
number of H&M shares for the amounts that are paid out.
In individual cases other members of executive management, key individuals and
country managers may, at the discretion of the Chief Executive Officer and the
Chairman of the Board, receive one-off payments up to a maximum of 30 percent of
their fixed yearly salary

Supplementary guidelines
In addition to the general guidelines, the Board has prepared supplementary guidelines
for certain managers, which are primarily aimed at executive management but also at
certain other key individuals. The Chief Executive Officer is not, however, included in
the supplementary guidelines. Overall, around a third of the senior executives who are
covered by the above mentioned general guidelines are also covered by the
supplementary guidelines.
The supplementary guidelines are based on a stay on board principle, which means
that the remuneration linked to the supplementary guidelines is conditional upon the
senior executive remaining employed within the H&M Group for at least five years.
Provided that the 2014 AGM approves the programme, the five-year rule applies from
and including May 2014 up to and including May 2019.
Cash remuneration in 2019
Provided that the stay on board principle is fulfilled, the senior executives covered
by the supplementary guidelines are entitled to a cash payment after five years.
At individual level, the cash payment may vary between SEK 0.5 m and SEK 5 m net
after tax; the exact distribution per individual will be decided by the CEO and the
Chairman of the Board.