annual report 2011 hm

7/28/2019 Annual Report 2011 HM

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annual report part

h&m in figures 2011

Blazer

39.95


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versace for H&M

Silk dress

129


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The Annual Accounts and Consolidated Accounts

5 Administration Report including proposed distribution of earnings

10 Group Income Statement

10 Group Statement of Comprehensive Income

11 Group Balance Sheet

12 Group Changes in Equity

13 Group Cash Flow Statement

14 Parent Company Income Statement

14 Parent Company Statement of Comprehensive Income

15 Parent Company Balance Sheet

16 Parent Company Changes in Equity

17 Parent Company Cash Flow Statement

18 Notes to the Financial Statements

32 Signing of the Annual Report

33 Auditors report

34Corporate Governance Report including informationabout the Board of Directors

46 Auditors Statement on the Corporate Governance Report

48 Five year summary

49 The H&M share

50 Financial information and contact details

The annual report on H&Ms operations in 2011 is in two parts:

part 1 is H&M in words and pictures 2011 and part 2 is H&M in fgures 2011

including the annual accounts and consolidated accounts.

part2H&M in fgures2011

H&M 2011 S page 3

Contents


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ADMINISTRATION REPORT

The Board o Directors and the Managing Director o H & MHennes & Mauritz AB (publ), 556042-7220, domiciled in Stock-holm, Sweden, hereby submit their annual report and consolidatedaccounts or the nancial year 1 December 2010 to 30 November2011, hereinater reerred to as the 2011 nancial year.

BUSINESSThe H&M Groups business consists mainly o sales o clothing,accessories, ootwear, cosmetics and home textiles to consumers.In addition to H&M and H&M Home, the H&M Group includesthe brands COS, Monki, Weekday and Cheap Monday.

H&Ms business concept is to oer ashion and quality at the bestprice. H&M is a design-driven innovative and responsible ashioncompany based on strong values that is growing all over the worldwhile maintaining quality, sustainability and high protability.

H&Ms principle or expansion is that every store shall have the bestcommercial location. The business is operated rom leased storepremises, through online and catalogue sales and on a ranchise basis.At the end o the nancial year H&M was present in 43 markets;eleven o these are operated on a ranchise basis. The total numbero stores at the end o the 2011 nancial year was 2,472 including70 ranchise stores, 45 COS stores, 52 Monki stores, 19 Weekdaystores and 4 Cheap Monday stores. Online and catalogue sales areoered in Sweden, Norway, Denmark, Finland, the Netherlands,Germany, Austria and the UK. The home textiles range, H&MHome, is sold via online and catalogue sales and also through storesin or example Stockholm, Helsinki, Copenhagen, London,Amsterdam, Oslo and Frankurt. Online sales or COS and Monkibegan in 18 countries in autumn 2011.

Focusing on the customer, H&Ms own designers work with

pattern designers and buyers to create a broad range that oersinspiring ashion or everyone. H&Ms design and buying depart-ment creates the collections centrally.

H&M does not own any actories but instead outsources prod-uct manuacturing to around 700 independent suppliers throughH&Ms local production oces in Asia and Europe. To guaranteethe quality o the products and that manuacturing takes placeunder good working conditions, H&M works in close cooperationwith the suppliers. The production oces are responsible or en-suring that orders are placed with the correct supplier, that theproducts are manuactured at the right price and are o good qual-ity, and that they are delivered at the right time. The productionoces also check that manuacturing takes place under goodworking conditions.

Tests, such as chemical and laundry tests, are carried out on a

continuous basis at the production oces and at external laborato-ries. The goods are subsequently transported to various distributioncentres primarily by sea and rail, but also by road and air. Fromthere the goods are distributed directly to the stores and/or toregional replenishment centres.

The best price is achieved by avoiding middlemen, buying theright product rom the right market, being cost-conscious in everypart o the organisation and having ecient distribution processes.

ENVIRONMENT AND CORPORATE SOCIAL RESPONSIBILITYH&M is one o the worlds leading ashion companies, and withthat comes responsibilities. H&Ms sustainability work is based on

a social and environmental commitment that puts H&M at theoreront o the global ashion industry. Trade between countriesis an important source o economic growth around the world. As aglobal retailer, H&M acts as a buyer and seller in many markets.H&M contributes to more than a million jobs or people around theworld, a large number o these in Asia.

H&M uses its size and infuence to exert a positive eect on socialdevelopment in these countries, thereby helping to achieve betterconditions or many people. H&M also makes eorts to reduce en-vironmental impact throughout the lie cycle o its clothing.

H&M endeavours to ensure that each o its suppliers employeesis guaranteed at least their statutory rights and that the supplierscomply with H&Ms Code o Conduct. Since the 1990s H&M hasbeen carrying on extensive work to improve working conditionsin suppliers actories. The company has around 80 auditors o its own

who check that the suppliers are meeting H&Ms environmentalrequirements and its high requirements regarding good workingconditions or the suppliers workorce. H&M is working to achieve long-term improvements or those employed by the suppliers thatproduce H&M products. This is done primarily via the Code oConduct, but also through activities such as training, projects, part-nerships, etc. that are aimed at improving working conditionsamong suppliers.

H&Ms sustainability strategy is to incorporate sustainabilitywork into day-to-day routines in every area o the companysoperations. This means that each o the Groups departments is it-sel responsible or environmental and social matters, while thecentral Sustainability department provides these departments withsupport on sustainability matters. One area currently in ocus isthe development o sustainable materials and production methods,

such as the use o organic cotton.H&Ms aim is or all cotton used in its product range to come

rom more sustainable sources by 2020 at latest, and its participa-tion in the Better Cotton Initiative (BCI) is the main means oachieving this aim. H&M is one o the driving orces behind theBCI and is a member o its steering committee. The aim o the BCIis to help improve cotton growing globally and make the growingo cotton environmentally, socially and economically sustainable.H&M was the worlds largest user o organic cotton in 2010.

H&Ms ull sustainability report is published at www.hm.com/csrannually and ollows the guidelines or sustainability reporting is-sued by the Global Reporting Initiative (GRI). H&Ms sustainabilitypolicy and product policy, Code o Conduct, Chemical Restrictions and Code o Ethics can all be ound in ull at www.hm.com.

EMPLOYEESH&Ms business shall be characterised by a undamental respect orthe individual. This applies to everything rom air pay, reasonableworking hours and reedom o association to the opportunity togrow and develop within the company. The companys values thespirit o H&M which have been in place since the days o H&Msounder, Erling Persson, are in part based on the ability o the em-ployees to use their common sense to take responsibility and usetheir initiative.

H&M has grown signicantly since its beginnings in 1947 and atthe end o the nancial year had more than 94,000 employees. Theaverage number o employees in the Group, converted to ull-time

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PARENT COMPANYThe parent company had external sales o SEK 24 m (6) duringthe 2011 nancial year. Prot ater nancial items amounted toSEK 16,451 m (14,868). Investments in xed assets amounted toSEK 119 m (100).

FINANCIAL POSITION AND CASH FLOWThe Groups total assets as o 30 November 2011 amounted toSEK 60,188 m (59,182), an increase o 2 percent compared with thesame date the previous year.

Current operations generated a positive cash fow o SEK 17,420 m (21,838). The cash fow was aected by, among other things, divi-dends o SEK -15,723 m (-13,239), investment in xed assets o SEK-5,174 m (-4,959) and changes in short-term nancial investmentswith a term o our to twelve months amounting to SEK -1,209 m

(-5,166). The Groups cash fow or the 2011 nancial year thusamounted to SEK -2,359 m (-1,530). Liquid unds and short-terminvestments amounted to SEK 21,277 m (24,858).

Stock-in-trade increased by 20 percent compared with the samedate the previous year and amounted to SEK 13,819 m (11,487). Thisis equivalent to 12.6 percent (10.6) o sales excluding VAT. Stock-in-trade accounted or 23.0 percent (19.4) o total assets.

The Groups equity/assets ratio was 73.3 percent (74.6) and thepercentage o risk-bearing capital was 74.9 percent (76.2).

Shareholders equity shared between the outstanding1,655,072,000 (1,655,072,000) shares as o 30 November 2011equalled SEK 26.65 (26.69).

LIQUIDITY MANAGEMENTIn 2011 the longest investment period was 12 months. The Group

does not use any derivative instruments in the interest-bearingsecurities market, nor does the Group trade in shares or similarinstruments. See also Note 2, Financial risks.

EVENTS AFTER THE CLOSING DATEEXPANSION AND FUTURE DEVELOPMENTH&M remains positive towards uture expansion and the Groupsbusiness opportunities.

H&Ms growth target remains to increase the number o stores by10-15 percent per year while maintaining high protability and, atthe same time, to increase sales within comparable units. For the 2012nancial year a net addition o around 275 new stores is planned.China, the US and the UK are expected to be the largest expansionmarkets or H&M in 2012. There are also still great opportunitiesor expansion in markets such as France, Italy and Germany.

The reurbishment o existing stores is expected to remain at thesame high level as in the 2011 nancial year.H&M will open its rst store in Soa, Bulgaria in March 2012.

H&M is continuing to expand in South East Asia, with a store openingin Kuala Lumpur in Malaysia during autumn 2012. In the autumnH&M will also open its rst store in Riga in Latvia. In additionto these new H&M countries, H&M plans to open in Mexico inautumn 2012. It will be the companys rst store in Latin America.Thailand will become a new ranchise market in cooperation withthe ranchisee J.S. Gill. The rst store is scheduled to open inautumn 2012 in Bangkok. The ranchise opening in Jakarta inIndonesia has been postponed until spring 2013.

In autumn 2012 H&M will start online sales in the US, the worldslargest online market.

Expansion continues or the Groups other brands COS, Monki,Weekday and Cheap Monday. COS, or example, will open its rststores in Hong Kong, Italy and Finland during spring 2012 andin Kuwait during autumn 2012. The opening in Kuwait will be incooperation with the ranchisee Alshaya. H&M Home will alsocontinue to expand.

GUIDELINES FOR REMUNERATION OF SENIOR EXECUTIVESAt the Annual General Meeting on 28 April 2011 a resolution onguidelines or remuneration o senior executives within H&M inaccordance with the Swedish Companies Act was approved. Theguidelines below are eective until the 2012 Annual General Meeting.

The term senior executives covers the Managing Director, othermembers o executive management, country managers and certainkey individuals. The number o individuals covered by the termsenior executives is currently around 40.

Compensation or senior executives is based on actors suchas work tasks, expertise, position, experience and perormance.Senior executives are compensated at what are considered by thecompany to be competitive market rates. Senior executives arealso entitled to the benets provided under the H&M IncentiveProgram.

H&M is present in more than 30 countries excluding ranchisemarkets and levels o compensation may thereore vary rom coun-try to country. Senior executives receive a xed salary, pensionbenets and other benets such as car benets. The largest portiono the remuneration consists o the xed salary. For inormation on

variable components, see the section below.In addition to the ITP plan, executive management and certain

key individuals are covered by either a dened benet or denedcontribution pension plan. The retirement age or these individualsvaries between 60 and 65 years. Members o executive managementand country managers who are employed by a subsidiary abroad arecovered by local pension arrangements and a dened contributionplan. The retirement age or these is in accordance with local retire-ment age rules. The cost o these commitments is partly covered byseparate insurance policies.

The period o notice or senior executives varies rom three totwelve months. No severance pay agreements exist within H&Mother than or the Managing Director.

PENSION TERMS ETc. FOR ThE MANAGING DIREcTOR

The retirement age or the Managing Director is 65. The ManagingDirector is covered by the ITP plan and a dened contribution plan. The total pension cost shall amount in total to 30 percent o theManaging Directors xed salary. The Managing Director is entitledto 12 months notice. In the event the company cancels the Manag-ing Directors employment contract, the Managing Director willalso receive severance pay o an extra years salary.

VARIAbLE REMUNERATIONThe Managing Director, country managers, certain senior execu-tives and certain key individuals are included in a bonus scheme.The size o the bonus per person is based on a certain percentage

H&M 2011 S page 7

ADMInIstRAtIon RePoRt


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o the increase in the dividend approved by the Annual GeneralMeeting and the ullment o targets in their respective areas oresponsibility. For the Managing Director, the bonus is based on0.3 percent o the dividend increase up to a maximum o SEK 0.9 m net ater tax. In the case o the Head o Sales the bonus is based on0.2 percent o the dividend increase, up to a maximum o SEK 0.6 mnet ater tax. For other personnel the gure is 0.1 percent o thedividend increase, with a maximum o SEK 0.3 m net ater tax. Netater tax means that income tax and social security costs are notincluded in the calculation. The bonuses that are paid out must beinvested entirely in shares in the company, which must be held orat least ve years. Since H&M is present in markets with varyingpersonal income tax rates, the net model has been chosen becauseit is considered air that the recipients in the dierent countriesshould be able to purchase the same number o H&M shares or the

amounts that are paid out.In individual cases other members o executive management,

key individuals and country managers may, at the discretion o theManaging Director and the Chairman o the Board, receive one-opayments up to a maximum o 30 percent o their xed yearly salary.

MIScELLANEOUSThe Board o Directors may deviate rom these guidelines in indi-vidual cases where there is a particular reason or doing so.

THE BOARDs PROPOSED GUIDELINES FOR REMUNERATION OFSENIOR EXECUTIVES FOR ADOPTION AT THE 2012 AGMThe Boards proposal or guidelines or adoption at the 2012 AGMis the same as the guidelines above.

ARTIcLES OF ASSOcIATION, ANNUAL GENERAL MEETINGAccording to H&Ms articles o association, H&Ms Board is toconsist o at least three but no more than twelve members electedby the AGM and no more than the same number o deputies. TheAnnual General Meeting decides the exact number o Board mem-bers, and which individuals are to be elected to the Board. Boardmembers are elected or the period until the end o the next AnnualGeneral Meeting. The Annual General Meeting also decides onamendments to the articles o association.

NUMBER OF SHARES ETC.The total number o shares in H&M is 1,655,072,000, o which194,400,000 are class A shares (ten votes per share) and1,460,672,000 are class B shares (one vote per share). Class A sharesare not listed. Class B shares are listed on the Stockholm stock

exchange, NASDAQ OMX Stockholm AB.Ramsbury Invest AB holds all 194,400,000 class A shares, whichrepresent 57.1 percent o the votes, as well as 393,049,043 class Bshares, which represent 11.5 percent o the votes. This means thatas o 30 November 2011, Ramsbury Invest AB represents 68.6 per-cent o the votes and 35.5 percent o the total number o shares.Ramsbury Invest AB is owned by Stean Persson and amily, andprimarily by Stean Persson. Karl-Johan Persson is also a share-holder in Ramsbury Invest AB.

In 2011 the shares that Stean Persson previously owned privately were transerred to Ramsbury Invest AB as a shareholder contribu-

tion, as a result o which Stean Persson has no private shareholdingin H&M as o 30 November 2011.

There are no restrictions on voting rights or authorisations to theBoard relating to the issue or acquisition o the companys own shares.

CORPORATE GOVERNANCE REPORTH&M has elected to present its corporate governance report asa separate document to the Annual Report in accordance withChapter 6 8 o the Swedish Annual Accounts Act.

RISKS AND UNCERTAINTIESA number o actors may aect the results and business o the H&MGroup. Most o these can be dealt with through internal routines,while some are infuenced more by external actors.

There are risks and uncertainties related to ashion, weather

conditions, macroeconomic changes, climate change, trade inter-ventions, external actors in production countries and oreign cur-rencies, but also in connection with expansion into new markets,the launch o new concepts and how the brand is managed.

FAShIONOperating in the ashion industry is a risk in itsel. Fashion hasa limited shel-lie, and there is always a risk that some part o thecollections will not be well received by customers.

Within each concept it is important to have the right volumesand achieve the right balance in the mix between ashion basics andthe latest trends. In summary, each collection must achieve the right combination o ashion and quality at the best price. To optimiseashion precision, the Group buys items on an ongoing basis through-out the season.

The purchasing patterns are relatively similar in the variousmarkets, although dierences do exist. The start o the season andthe duration o a season may, or example, vary rom country tocountry. Delivery dates and product volumes or the various coun-tries and stores are thereore adjusted accordingly.

WEAThERThe H&M Groups products are purchased in order to be sold instores on the basis o normal weather patterns. Deviations romnormal weather conditions may aect sales. This is particularlytrue at the transition between two seasons, such as the transitionrom summer to autumn.

NEGATIVE MAcROEcONOMIc chANGESThere is a risk that negative macroeconomic changes in one or more

countries will result in an economic downturn, which is likely tochange consumer purchasing behaviour. It is thereore important tobe aware o such changes which may aect the Groups business andto have a fexible buying model that can be adjusted to dierentmarket conditions.

EXTERNAL FAcTORS IN PRODUcTION cOUNTRIESUncertainties also exist concerning how external actors such asraw materials prices, transport costs and suppliers capacity willaect buying costs or the Groups products. The Group thereoreneeds to monitor such changes closely and have strategies in place

H&M 2011 S page 8



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to deal with fuctuations in external actors as advantageously aspossible or both the company and its customers.

cLIMATE chANGEThere is a risk that the H&M Groups business may be aected byuture regulation and increased costs, e.g. in the orm o emissionstrading and carbon taxes in H&Ms various sales markets. These can essentially be regarded as competition-neutral. The risks that mayarise as a result o climate change and natural disasters primarily inproduction countries can be considered very l imited bearing inmind H&Ms fexible business model, which can be adapted quicklyto changed circumstances.

TRADE INTERVENTIONBuying costs may be aected by decisions at a national level on ex-

port/import subsidies, customs duties, textile quotas, embargos, etc.The eects primarily impact customers and companies in individual markets. Global companies with operations in many countries areaected to a lesser extent and among global corporations trade in-terventions may be regarded as largely competition-neutral.

FOREIGN cURRENcIESMost o the Groups sales are made in euro and the most signicantcurrencies in which the Groups purchasing takes place are the USdollar and the euro. Fluctuation in the US dollar/euro exchangerate is the single largest transaction exposure or the Group. Tohedge fows o goods in oreign currencies and thereby reduce theeects o uture exchange rate fuctuations, the Groups fows ogoods and the corresponding infows rom the sales companies tothe central buying company H & M Hennes & Mauritz GBC AB

are hedged under orward contracts on an ongoing basis.In addition to the eects o transaction exposure, translation

eects also impact the Groups results due to changes in exchangerates between the local currencies o the various oreign salescompanies and the Swedish krona compared to the same period theprevious year. The underlying prot/loss in a market may be un-changed in the local currency, but when converted into SEK mayincrease i the Swedish krona has weakened or decrease i theSwedish krona has strengthened.

Translation eects also arise in respect o the Groups net assetson consolidation o the oreign sales companies balance sheets.No exchange rate hedging (known as equity hedging) is carried outor this risk.

For more inormation on currency hedging and nancial riskssee Note 2, Financial risks.

DIVIDEND POLICYH&Ms nancial goal is to enable the company to continue enjoyinggood growth and to be prepared to exploit uture business opportu-nities. It is essential that the companys expansion is able to proceedas in the past with a continued high degree o nancial strength andcontinued reedom o action.

On this basis the Board o Directors has established a dividendpolicy stating that the dividend should equal around hal o theprot ater taxes. In addition, the Board may propose the distribu-tion o any surplus liquidity.

The Board o Directors has decided to propose to the 2012 AnnualGeneral Meeting a dividend o SEK 9.50 per share (9.50), which isequivalent to 99 percent (84) o the Groups prot ater tax.

PROPOSED DISTRIBUTION OF EARNINGSAt the disposal o theAnnual General Meeting: SEK 16,749,725,843

The Board o Directors and theManaging Director propose adividend o SEK 9.50 per share SEK 15,723,184,000

To be carried orwardas retained earnings SEK 1,026,541,843

SEK 16,749,725,843

The Board o Directors is o the opinion that the proposed distribu-tion o earnings is justiable taking into consideration the nancialposition and uture reedom o action o the Group and the parentcompany, and observing the requirements that the nature andextent o the business, its risks and uture expansion plans imposeon the Groups and the parent companys equity and liquidity.

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GROUP INCOME STATEMENTSEK M

1 DEcEMbER 30 NOVEMbER 2011 2010

Sales including VAT 128,810 126,966

Sales excluding VAT, Note 3, 4 109,999 108,483

Cost o goods sold, Note 6, 8 -43,852 -40,214

GROSS PROFIT 66,147 68,269

Selling expenses, Note 6, 8 -42,517 -40,751

Administrative expenses, Note 6, 8, 9 -3,251 -2,859

OPERATING PROFIT 20,379 24,659

Interest income 568 356

Interest expense -5 -7PROFIT AFTER FINANCIAL ITEMS 20,942 25,008

Tax, Note 10 -5,121 -6,327

PROFIT FOR THE YEAR 15,821 18,681

All prot is attributable to the shareholders o the parent company H & M Hennes & Mauritz AB.

Earnings per share, SEK* 9.56 11.29

Number o shares, thousands* 1,655,072 1,655,072

* Beore and ater dilution. Number o shares has been adjusted or both years due to the 2-or-1 share split eected by H&M in 2010.

CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME

SEK M



Other comprehensive income

Translation dierences -35 -2,169

Change in hedging reserves -113 386

Tax attributable to change in hedging reserves 30 -100

OTHER COMPREHENSIVE INCOME -118 -1,883

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 15,703 16,798

All comprehensive prot or the year is attributable to the shareholderso the parent company H & M Hennes & Mauritz AB.

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GROUP BALANCE SHEETSEK M

30 NOVEMbER 2011 2010

ASSETS

FIXED ASSETS

Intangible xed assets

Brands, Note 11 302 349

Customer relations, Note 11 84 97

Leasehold rights, Note 11 585 688

Goodwill, Note 11 64 64

1,035 1,198

Tangible xed assets

Buildings and land, Note 12 804 656

Equipment, tools, xtures andttings, Note 12 16,589 14,813

17,393 15,469

Long-term receivables 608 518

Deerred tax receivables, Note 10 1,234 1,065

TOTAL FIXED ASSETS 20,270 18,250

CURRENT ASSETS

Stock-in-trade 13,819 11,487

Current receivables

Accounts receivable 2,337 2,258

Other receivables 1,375 1,453

Prepaid expenses, Note 13 1,110 876

4,822 4,587

Short-term investments, Note 14 6,958 8,167

Liquid unds, Note 15 14,319 16,691

TOTAL CURRENT ASSETS 39,918 40,932

TOTAL ASSETS 60,188 59,182

30 NOVEMbER 2011 2010

EQUITY AND LIABILITIES

EQUITY

Share capital, Note 17 207 207

Reserves -487 -369

Retained earnings 28,563 25,653

Prot or the year 15,821 18,681

TOTAL EQUITY 44,104 44,172

LIABILITIES

Long-term liabilities*

Provisions or pensions, Note 18 377 257

Deerred tax liabilities, Note 10 950 906

1,327 1,163

Current liabilities**

Accounts payable 4,307 3,965

Tax liabilities 1,851 2,304

Other liabilities 2,428 2,202

Accrued expenses and prepaidincome, Note 20 6,171 5,376

14,757 13,847

TOTAL LIABILITIES 16,084 15,010

TOTAL EQUITY AND LIABILITIES 60,188 59,182

Pledged assets and contingent liabilities

* Only provisions or pensions are interest-bearing.

** No current liabilities are interest-bearing.

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GROUP CHANGES IN EQUITYSEK M

Since there are no minority interests, all shareholders equity is attributable to the shareholders o the parent companyH & M Hennes & Mauritz AB.

ShARE cAPITALTRANSLATION

EFFEcTShEDGING

RESERVESRETAINEDEARNINGS

TOTALShAREhOLDERS

EQUITY

SHAREHOLDERS EQUITY, 1 DECEMBER 2010 207 -613 244 44,334 44,172

Adjustment o opening balance* -48 -48

Adjusted opening balance 207 -613 244 44,286 44,124



Translation dierences -35 -35

Change in hedging reserves

Reported in other comprehensive income -368 -368

Transer to income statement 255 255

Tax attributable to hedging reserves 30 30

Other comprehensive income -35 -83 -118

Total comprehensive income -35 -83 15,821 15,703

Dividend -15,723 -15,723

SHAREHOLDERS EQUITY, 30 NOVEMBER 2011 207 -648 161 44,384 44,104

* Adjustment o pension obligations related to prior years see Note 18.

ShARE cAPITALTRANSLATION

EFFEcTShEDGING


TOTALShAREhOLDERS

EQUITY

SHAREHOLDERS EQUITY, 1 DECEMBER 2009 207 1,556 -42 38,892 40,613



Translation dierences -2,169 -2,169

Change in hedging reserves

Reported in other comprehensive income 1,378 1,378

Transer to income statement -992 -992

Tax attributable to hedging reserves -100 -100

Other comprehensive income -2,169 286 -1,883

Total comprehensive income -2,169 286 18,681 16,798

Dividend -13,239 -13,239

SHAREHOLDERS EQUITY, 30 NOVEMBER 2010 207 -613 244 44,334 44,172

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GROUP CASH FLOW STATEMENTSEK M


Current operations

Prot ater nancial items* 20,942 25,008

Provisions or pensions 120 3

Depreciation 3,262 3,061

Tax paid -5,666 -5,451

Cash fow rom current operations beore changes in working capital 18,658 22,621

Cash fow rom changes in working capital

Current receivables -244 -778

Stock-in-trade -2,331 -1,557Current liabilities 1,337 1,552

CASH FLOW FROM CURRENT OPERATIONS 17,420 21,838

Investment activities

Investment in leasehold rights -71 -147

Investment in buildings and land -157 -209

Investment in equipment -4,946 -4,603

Adjustment o consideration/acquisition o subsidiaries -8

Change in short-term investments, 412 months 1,209 -5,166

Other investments -91 4

CASH FLOW FROM INVESTMENT ACTIVITIES -4,056 -10,129

Financing activities

Dividend -15,723 -13,239

CASH FLOW FROM FINANCING ACTIVITIES -15,723 -13,239

CASH FLOW FOR THE YEAR -2,359 -1,530

Liquid unds at beginning o the nancial year 16,691 19,024

Cash fow or the year -2,359 -1,530

Exchange rate eect -13 -803

Liquid unds at end o the nancial year** 14,319 16,691

* Interest paid or the Group amounts to SE K 5 m (7). Received i nterest or the Group amounts to SEK 568 m (356).

** Liquid unds and short-term investments at the end o the nancial year amounted to SEK 21,277 m (24,858).

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PARENT COMPANY INCOME STATEMENTSEK M

1 DEcEMbER - 30 NOVEMbER 2011 2010

External sales excluding VAT 24 6

Internal sales excluding VAT, Note 5 6,958 6,900

GROSS PROFIT 6,982 6,906

Selling expenses, Note 6, 8 -2,235 -2,240

Administrative expenses, Note 6, 8, 9 -2,671 -2,024

OPERATING PROFIT 2,076 2,642

Dividend rom subsidiaries 14,224 12,153

Interest income 151 73

Interest expense 0 0

PROFIT AFTER FINANCIAL ITEMS 16,451 14,868

Year-end appropriations, Note 22 -9 705

Tax, Note 10 -596 -912


PARENT COMPANY STATEMENT OFCOMPREHENSIVE INCOMESEK M




TOTAL COMPREHENSIVE INCOME FOR THE YEAR 15,846 14,661

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PARENT COMPANY CHANGES IN EQUITYSEK M

ShARE cAPITALRESTRIcTED


TOTALShAREhOLDERS

EQUITY

SHAREHOLDERS EQUITY, 1 DECEMBER 2010 207 88 16,626 16,921



Total comprehensive income 15,846 15,846

Dividend -15,723 -15,723

SHAREHOLDERS EQUITY, 30 NOVEMBER 2011 207 88 16,749 17,044

ShARE cAPITALRESTRIcTED


TOTALShAREhOLDERS

EQUITY

SHAREHOLDERS EQUITY, 1 DECEMBER 2009 207 88 15,299 15,594



Total comprehensive income 14,661 14,661

Group contributions provided -129 -129

Tax eect o group contributions provided 34 34

Dividend -13,239 -13,239

SHAREHOLDERS EQUITY, 30 NOVEMBER 2010 207 88 16,626 16,921

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PARENT COMPANY CASH FLOW STATEMENTSEK M


Current operations

Prot ater nancial items* 16,451 14,868

Provisions or pensions 17 12

Depreciation 95 97

Tax received/paid -523 114

Cash fow rom current operations beore changes in working capital 16,040 15,091

Cash fow rom changes in working capital

Current receivables -2,888 312

Current liabilities -6 176CASH FLOW FROM CURRENT OPERATIONS 13,146 15,579

Investment activities

Net investment in equipment -119 -100

Adjustment o consideration/acquisition o subsidiaries -10 -8

Change in short-term investments, 412 months 3,129 -5,166

Other investments 32 -487

CASH FLOW FROM INVESTMENT ACTIVITIES 3,032 -5,761

Financing activities

Dividend -15,723 -13,239

CASH FLOW FROM FINANCING ACTIVITIES -15,723 -13,239

CASH FLOW FOR THE YEAR 455 -3,421

Liquid unds at beginning o the nancial year 223 3,644

Cash fow or the year 455 -3,421

Liquid unds at end o the nancial year** 678 223

* Interest paid or the parent compa ny amounts to SEK 0 m (0). Received interest or the parent company amounts to SEK 151 m (73).

** Liquid unds and short-term investments at the end o the nancial year amounted to SEK 5,716 m (8,390).

H&M 2011 S page 17


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NOTES TO THEFINANCIAL STATEMENTS

cORPORATE INFORMATIONThe parent company H & M Hennes & Mauritz AB (publ) is a lim-ited company domiciled in Stockholm, Sweden. The parent com-panys corporate identity number is 556042-7220. The companysshare is listed on the Stockholm stock exchange, NASDAQ OMXStockholm AB. The Groups business consists mainly o sales oclothing, accessories, ootwear, cosmetics and home textiles to con-sumers. The companys nancial year is 1 December 30 November. The Annual Report was approved or publication by the Board oDirectors on 25 January 2012 and will be submitted to the AnnualGeneral Meeting or approval on 3 May 2012.

Ramsbury Invest ABs holding o shares in H & M Hennes &Mauritz AB represents around 35.5 percent o all shares andaround 68.6 percent o the total voting power. Ramsbury Invest AB(556423-5769) is thus ormally the parent company o H & M

Hennes & Mauritz AB.

1 ACCOUNTING PRINCIPLESbASIS FOR PREPARATION OF ThE AccOUNTSThe consolidated accounts have been prepared in accordance withthe International Financial Reporting Standards (IFRS) issued bythe International Accounting Standards Board (IASB) and the in-terpretations provided by the IFRS Interpretations Committee.Since the parent company is a company within the EU, only IFRSapproved by the EU are applied. The consolidated accounts alsocontain disclosures in accordance with the Swedish Financial Re-porting Boards recommendation RFR 1, Supplementary Account-ing Rules or Groups.

The nancial statements are based on historical acquisitioncosts, apart rom certain nancial instruments which are reported

at air value.The parent companys unctional currency is Swedish kronor,

which is also the reporting currency or the parent company andor the Group. Unless otherwise indicated, all amounts are reportedin millions o Swedish kronor (SEK m).

Parent companyIn the preparation o its nancial statements the parent companyhas applied the Swedish Financial Reporting Boards recommenda-tion RFR 2, Accounting or Legal Entities, the statements issuedby the Swedish Financial Reporting Board and the Swedish AnnualAccounts Act. The main deviation rom the Groups accountingprinciples is that the parent company does not apply IAS 39.

With eect rom the 2011/2012 nancial year group contribu-tions received by a parent company rom subsidiaries are to be re-

ported as nancial income, while group contributions that a parentcompany provides to subsidiaries are to be reported either againstparticipations in subsidiaries in other words, in the same way asshareholder contributions or as an expense, due to the link betweenreporting and taxation.

chANGES IN AccOUNTING PRINcIPLES AND DIScLOSURE REQUIREMENTSThe accounting principles and disclosure requirements applied or2010/2011 are the same as those applied in the previous year.

FUTURE AccOUNTING PRINcIPLES AND DIScLOSURE REQUIREMENTSA number o new standards, revisions and interpretations o existingstandards have been published but have not yet entered into orce.O these, only the standards below are expected to have any eecton the consolidated nancial statements.

IFRS 9, Financial Instruments: Recognition and Measurement(not yet adopted by the EU). This standard is part o a comprehen-sive revision o the current standard IAS 39. The standard reducesthe number o categories or measuring nancial assets, such thatthe primary categories or recognition o nancial assets and liabil-ities are at amortised cost (accrued acquisition cost) or at air valuethrough prot or loss. Certain investments in equity instrumentsmay be recognised at air value in the balance sheet and the change in value recognised directly in other comprehensive income, withno transer to prot or loss or the period on disposal. In addition,

new rules have been introduced or how changes in own creditspread are to be presented when liabilities are measured at airvalue. The standard will be supplemented with rules on write-downs, hedge accounting and derecognition in the balance sheet.IFRS 9 must be applied to annual reporting periods beginningon or ater 1 January 2015. The Group will assess the eects othe new standard once all parts o the standard are complete.

IFRS 10, Consolidated Financial Statements and amended IAS27, Separate Financial Statements (not yet adopted by the EU).This standard is to be applied to annual reporting periods begin-ning on or ater 1 January 2013. IFRS 10 supersedes the sectionin IAS 27 dealing with the preparation o consolidated nancialstatements. IAS 27 will continue to cover the treatment o subsid-iaries, joint ventures and associates in separate nancial statements.The rules concerning the preparation o consolidated nancial

statements remain unchanged. Instead, the amendment concernshow a company is to go about deciding whether it has a control-ling interest and thus whether a company is to be consolidated.The standard is to be applied retrospectively in accordance withIAS 8, with certain modications, including relie rom retro-spective consolidation where this is not practically possible. Thestandard is not expected to have any eect on the Group.

IFRS 12, Disclosure o Interests in Other Entities (not yet adoptedby the EU). This standard is to be applied to annual reportingperiods beginning on or ater 1 January 2013. Companies withinterests in subsidiaries, associates, joint arrangements and struc-tured entities are to disclose inormation concerning these inaccordance with IFRS 12. The objective o such disclosure is toenable users o nancial statements to assess any eects o theinterests on the nancial statements, as well as any risks associated

with the interests concerned. The standard is to be applied retro-spectively in accordance with IAS 8. The standard may possiblyresult in the Group disclosing additional inormation.

IAS 1, Presentation o Financial Statements changes to the pres-entation o other comprehensive income (not yet adopted by theEU). This standard is to be applied to annual reporting periodsbeginning on or ater 1 July 2012. The revision involves changesto the grouping o transactions reported under other comprehen-sive income. Items that are recognised in prot and loss are to berecognised separately rom those items that are not recognised inprot and loss. The proposal does not change the actual contento other comprehensive income, only the way it is presented.

H&M 2011 S page 18


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IAS 19, Employee Benets amended (not yet adopted by theEU). This standard is to be applied to annual reporting periodsbeginning on or ater 1 January 2013. The amendments involvesignicant changes relating to the recognition o dened benetpension plans, such as:

The option o allocating actuarial gains and losses to periods aspart o the corridor approach is eliminated; instead, these mustbe recognised immediately in other comprehensive income.Those items attributable to the earning o dened benet pensions,gains and losses arising on settlement o a pension liability and netnancing relating to the dened benet plan are all recognised inthe income statement.

The amendments include urther changes ocusing not on recog-nition o pensions, but rather on other orms o employee benets.Termination benets are to be recognised at the ollowing time

(whichever is the earlier): when the oer o the benet cannot bewithdrawn or in accordance with IAS 37 as part o restructuringo the business, or example.

In the case o the Swedish entities, the actuarial calculations willalso cover uture payments o special payroll tax and net yield tax.

The revised standard is to be applied retrospectively in accordance with IAS 8. The standard may be applied in advance.

Until now the Group has recognised actuarial gains and losses inthe income statement. Once the amended version o IAS 19 entersinto orce these will be recognised in other comprehensive income.

ESTIMATES, ASSUMPTIONS AND ASSESSMENTSThe preparation o the Annual Report and consolidated accountsrequires estimates and assumptions to be made, as well as judgmentsin the application o the accounting principles. These aect recorded

amounts or assets, liabilities, income, expenses and supplementaryinormation. The estimates and assumptions are based on historicalexperience, other relevant actors and expectations o the uture andare reviewed regularly. The actual outcome may thereore deviaterom the estimates and assumptions made. It is judged that, as at30 November 2011, there are no estimates or assumptions made inthe nancial statements that involve a signicant risk o any mate-rial adjustment to the values o assets and liabilities in the orth-coming nancial year.

cONSOLIDATED AccOUNTSGeneralThe consolidated accounts cover the parent company and its sub-sidiaries. Subsidiaries are included in the consolidated accountsrom the date o acquisition, which is the date on which the parent

company gains a controlling interest, and are included in the con-solidated accounts until such date as the controlling interest ends.The acquisition method is used in the preparation o the consolidatedaccounts. The net assets o acquired subsidiaries are determinedbased on an assessment o the air value o the assets, liabilities andcontingent liabilities at the time o acquisition. I the acquisition costo the subsidiarys shares exceeds the calculated value at the timeo acquisition o the net identiable assets o the acquired company,the dierence is reported as goodwill upon consolidation. I theacquisition cost is less than the nally established value o the netidentiable assets, the dierence is reported directly in the incomestatement. The minority interest in the case o acquisitions o less

than 100 percent is determined or each transaction either as a pro-portionate share o the air value o net identiable assets or at airvalue. The nancial reports or the parent company and the subsidi-aries included in the consolidated accounts cover the same periodand have been prepared in accordance with the accounting principlesthat apply to the Group. Intra-group income, expenses, receivablesand liabilities, as well as unrealised ga ins and losses, are eliminatedentirely in the preparation o the consolidated accounts.

Minority interestsIn 2008 H&M acquired 60 percent o the shares in FaBric Scandi-navien AB. At the time o this acquisition the parties reached anagreement giving H&M the opportunity/obligation to acquire theremaining shares within three to seven years. The calculated valueo the put options allocated to minority shareholders in connection

with the acquisition was reported in 2008/2009 as a provisionor an additional conditional consideration, and thus no minorityinterest was reported. The put option was exercised in November2010, when H&M acquired the remaining 40 percent o the shares.The dierence between the nal consideration and the provisionwas reported as a reduction in goodwill.

Translation o oreign subsidiariesAssets and liabilities in oreign subsidiaries are translated at the ex-change rate on the closing date, while the income statement is trans-lated at the average exchange rate or the nancial year. The trans-lation dierence arising rom this, and also as a result o the act that the net investment is translated at a dierent exchange rate at theend o the year than at the beginning o the year, is posted directlyto equity as a translation reserve, via the statement o comprehen-

sive income. On disposal o a oreign business the accumulated trans-lation dierences in the income statement are posted together withthe prot or loss on disposal. Accumulated translation dierencesrelating to oreign operations that are attributable to the period be-ore 1 December 2004 the date o adoption o IFRS have beenset at zero in accordance with the transitional rules in IFRS 1.

FOREIGN cURRENcYReceivables and liabilities in oreign currencies are converted at theexchange rate on the closing date. Exchange rate dierences arisingon translation are reported in the income statement with the excep-tion o exchange rate dierences in respect o loans, which are tobe regarded as net investment in a oreign business. Exchange ratedierences o this type are posted to equity as translation dierences via the statement o comprehensive income.

INcOMEThe Groups income is generated mainly by the sale o clothing andcosmetics to consumers. Sales revenue is reported less value-addedtax, returns and discounts as sales excluding VAT in the income state-ment. Income is reported in conjunction with sale/delivery to thecustomer. Franchise sales have two components: sales o goods toranchisees, which are reported on delivery o the goods, and ran-chise ees, which are reported when the ranchisee sells goods tothe consumer. The Groups income exhibits seasonal variations. Therst quarter o the nancial year is normally the weakest and thelast quarter the strongest. Interest income is reported as it is earned.

H&M 2011 S page 19


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MARKETINGAdvertising costs and other marketing activities are expensed ona continuous basis.

INTANGIbLE FIXED ASSETSIntangible xed assets with a nite useul lie are reported at acqui-sition cost less accumulated amortisation and any accumulatedwrite-downs. Amortisation is distributed linearly over the assetsexpected useul lie.

Development costs are capitalised to the extent that it is judgedthat the company will gain rom uture nancial benets and ithe acquisition cost can be reliably calculated. The reported valueincludes the direct costs o services and materials acquired, as wellas indirect costs attributable to the asset. Other development costs,as well as maintenance and training initiatives, are recognised as

expenses in the income statement as they arise.Goodwill is the amount by which the acquisition cost o the

subsidiarys shares exceeds the calculated value o the subsidiarysnet identiable assets upon acquisition. Goodwill on acquisitiono subsidiaries is reported as intangible assets. Intangible assets withan indenite useul lie, including goodwill, are tested or impair-ment annually or more oten i there is an indication o a declinein value. I the book value o the asset exceeds the recoverableamount (the higher o the net realisable value and the value in use),the necessary amount is written down. Any write-down is recog-nised in prot/loss.

TANGIbLE FIXED ASSETSCosts relating to intangible xed assets are reported in the balancesheet i it is likely that the company will gain rom uture nancial

benets associated with the asset and i the assets acquisition cost canbe reliably calculated. Other costs and costs relating to ongoing main-tenance and repair are reported as an expense in the period in whichthey arise. Tangible xed assets are reported at acquisition cost lessaccumulated depreciation and any accumulated write-downs.Depreciation is distributed linearly over the assets expected useullie. No depreciation is applied to land. The book value o tangiblexed assets is tested or impairment. I the assets book value ex-ceeds the recoverable amount (the higher o the net realisable valueand the value in use), the required amount is written down. Anywrite-down is recognised in prot/loss.

LEASINGLeasing agreements in which a substantial portion o the risks andbenets o ownership are retained by the lessor are classied as

operational leases. Financial leases exist when the nancial risks andbenets associated with the ownership o an object are essentiallytranserred rom the lessor to the lessee, regardless o whether thelegal ownership belongs to the lessor or the lessee. Assets held undernancial leases are reported as xed assets and uture paymentcommitments are reported as liabilities in the balance sheet. As othe closing date the Group had no nancial leases. Minimal leasingagreements relating to operational leases are recognised in the in-come statement as an expense and distributed linearly over the termo the agreement. The Groups main leases are rental agreementsor premises. Variable (sales-based) rents are recognised in the sameperiod as the corresponding sales.

FINANcIAL INSTRUMENTSFinancial instruments recognised in the balance sheet include onthe assets side liquid unds, accounts receivable, short-term invest-ments, long-term receivables and derivatives. On the liabilities sideare accounts payable and derivatives. Financial instruments are rec-ognised in the balance sheet when the Group becomes a party to the contractual terms o the instrument. Financial assets are removedrom the balance sheet when the contractual rights to the cash fowsrom the asset cease. Financial liabilities are removed rom the bal-ance sheet when the obligation is met, cancelled or ends.

Financial assets and liabilities at air value through prot or lossThis category consists o two sub-groups: nancial assets and liabil-ities held or trading, and other nancial assets and liabilities that thecompany initially chose to place in this category when they were rst

recognised. Assets and liabilities in this category are assessed contin-ually at air value, with changes in value recognised in prot/loss.No nancial assets or liabilities have been classied in this category.

Loans receivable and accounts receivableThis category primarily covers cash and bank balances as well asaccounts receivable. Cash and bank balances are valued at theaccrued acquisition cost. Accounts receivable have a short expectedterm and are recognised at the original invoiced amount withoutdiscount, with deductions or doubtul receivables.

Financial assets held to maturityFinancial assets held to maturity are assets with payment fows thatare xed or that can be established in advance and with a xed termwhich the Group has the express intention and capacity to hold

until maturity. Assets in this category are valued at accrued acquisi-tion cost, with the eective interest rate being used to calculate thevalue. As o the closing date, all o the Groups short-term invest-ments ell into this category.

Financial assets that may be soldThis category contains nancial assets that were either placed inthis category at the time o acquisition or have not been classiedin any other category. These are valued continually at air value,with changes in value recognised in equity as a air value reserve,via the statement o comprehensive income. No nancial assetshave been classied in this category.

Other nancial liabilitiesFinancial liabilities that are not held or trading are assessed at their

accrued acquisition value. Accounts payable all into this category.These have a short expected term and are recognised at the nominalamount with no discounting.

Reporting o derivatives used or hedging purposesAll derivatives are reported initially and continually at air value inthe balance sheet. The result o revaluation o derivatives used orhedging is reported as described in the section Derivatives andHedge Accounting.

H&M 2011 S page 20

notes to the fInAnCIAl stAteMents


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LIQUID FUNDSLiquid unds consist o cash and bank balances as well as short-terminvestments with a maximum term o three months rom the dateo acquisition. These investments carry no signicant risk o changesin value.

DERIVATIVES AND hEDGE AccOUNTINGThe Groups policy is or derivatives to be held or hedging purposes only. Derivatives comprise orward currency contracts used to hedge the risk o exchange rate fuctuation or internal and external fowso goods.

To meet the requirements o hedge accounting there must be aclear link to the hedged item. In addition, the hedge must eectively protect the hedged item, hedge documentation must have beenprepared and the eectiveness must be measurable.

In hedge accounting, derivatives are classied as cash fow hedgingor as air value hedging. In 2010 and 2011 all o the Groups deriva-tives were in the cash fow hedging category. How these hedgingtransactions are reported is described below.

Hedging o orecast currency ows cash ow hedgingDerivatives that hedge the orecast fow are reported in the balancesheet at air value. Changes in value are reported in equity as ahedging reserve, via the statement o comprehensive income, untilsuch time as the hedged fow is recognised in the income statement,at which time the hedging instruments accumulated changes invalue are transerred to the income statement where they then corre-spond to the prot/loss eects o the hedged transaction.

Hedging o contracted currency ows

When a hedging instrument is used to hedge air value, the hedgesare reported at air value in the balance sheet and, correspondingly,the contracted fow is also reported at air value with regard to thecurrency risk being hedged. Changes in the value o a derivativeare reported in the income statement together with changes in thevalue o the hedged item. Cash fow hedging may also be used orcontracted fows o goods.

STOcK-IN-TRADEStock-in-trade is valued at the lower o the acquisition cost and thenet realisable value. From the moment the goods are transerredrom the supplier to the transport service provider appointed byH&M, the goods are owned according to civil law by H&M andbecome part o H&Ms reported stock-in-trade. The net realisablevalue is the estimated market value less the calculated selling ex-

penses. Goods that have not yet arrived at a store are valued at theiractual acquisition cost including the estimated cost o customsduties and reight.

For stock in the stores the acquisition cost is determined by reduc-ing the selling price by the calculated gross margin (retail method).

h&M INcENTIVE PROGRAM (hIP)The costs o the incentive programme are recognised in accordancewith the rules on short-term prot-sharing and bonus schemes setout in IAS 19. The expense is recognised when the amount has beenestablished and an obligation exists.

PENSIONSH&M has several dierent plans or benets ater employment hasended. The plans are either dened benet or dened contributionplans. Dened contribution plans are reported as an expense in theperiod when the employee perorms the service to which the benet relates. Dened benet plans are assessed separately or the respec-tive plan based on the benets earned during the previous and cur-rent periods. The dened benet obligations less the air value omanaged assets are reported under the heading Provisions or pen-sions. Dened benet plans are primarily ound in Sweden. Pensionobligations are assessed annually with the help o independent actu-aries according to the so-called Projected Unit Credit Method. Theassessment is made using actuarial assumptions. These assumptionsinclude such things as the discount rate, anticipated salary andpension increases as well as the expected return on managed assets.

Changes in the actuarial assumptions and outcomes that deviaterom the assumptions give rise to actuarial gains or losses. Suchgains or losses are recognised in prots in the year they arise.

For salaried employees in Sweden, H&M applies the ITP planthrough an insurance policy with Alecta. According to the state-ment issued by the Swedish Financial Reporting Board (UFR 3),this is a dened benet plan that covers a number o employers.The plan will be reported as a dened contribution plan until thecompany gains access to the inormation allowing this plan to bereported according to the rules or dened benet plans.

Alectas surplus cannot be allocated to the insured employerand/or the insured employees. As o 30 September 2011, Alectasconsolidation ratio was 113 percent (134). The consolidation ratiois calculated as the air value o managed assets as a percentage othe obligations calculated in accordance with Alectas actuarial

assumptions. This calculation is not in line with IAS 19.

OThER PROVISIONSProvisions are reported in the balance sheet when there is an under-taking as a result o an event occurring and it is likely that an out-fow o resources will be required or the undertaking and whenthe amount can be reliably estimated.

INcOME TAXIncome taxes in the income statement represent current and deerred corporation tax payable by Swedish and oreign subsidiaries. Cur-rent tax is tax that will be paid or received in respect o the currentyear as well as adjustments to current tax attributable to previousperiods. The income tax rate in orce in each country is applied.

Deerred tax is calculated according to the balance sheet method

based on temporary dierences arising between reported and scalvalues o assets and liabilities. Deerred tax is calculated using thetax rates that are expected to apply in the period when the receiva-bles are deducted or the liabilities are settled, based on the tax rates(and the tax legislation) in orce on the closing date. Deerred taxreceivables are recognised or all temporary dierences unless theyrelate to goodwill or an asset or a liability in a transaction that is nota company acquisition and that, at the time o acquisition, aectsneither the reported nor taxable prot or loss or the period. Also,temporary dierences relating to investments in subsidiaries andassociated companies are taken into account only to the extent it islikely that the temporary dierence will be reversed in the oresee-

H&M 2011 S page 21



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able uture. Deerred tax receivables or temporary dierences andloss carry-orwards are recognised only to the extent it is likely thatthese will be able to be utilised.

The recorded values o deerred tax receivables are tested as oeach closing date and reduced where it is no longer deemed likelythat they will be able to be utilised.

cASh FLOW STATEMENTThe cash fow statement is prepared according to the indirect method.The reported cash fow covers only transactions involving payments in or out.

SEGMENT REPORTINGThe Groups business consists mainly o sales o clothing and cos-metics to consumers. Internal ollow-up is carried out by country.

In order to clearly present the inormation or dierent segments,the operations are divided into three geographical regions: theNordic Region, Euro Zone Countries excluding Finland, and theRest o the World. The parent company and subsidiaries with noexternal sales are reported in a separate Group-wide segment. Thesame accounting principles are applied to segment reporting as inthe consolidated accounts. Transactions between segments takeplace on normal commercial terms.

2 FINANCIAL RISKSThe Groups nancing and management o nancial risk is carriedout centrally within the Groups nance department in accordancewith a nancial policy established by the Board o Directors. Thenancial policy is the most important nancial control tool or thecompanys nancial activities and establishes the ramework within

which the company works. The Groups accounting principles ornancial instruments, including derivatives, are described in Note 1.

In the course o doing business the Group is exposed to riskassociated with nancial instruments, such as liquid unds, short-term investments, accounts receivable and accounts payable. TheGroup also executes transactions involving currency derivativesor the purpose o managing currency risk that arises in the courseo the Groups business.The risks relating to these instruments are primarily the ollowing:

interest risk associated with liquid unds and short-terminvestments;

currency risk associated with fows and nancial assetsin oreign currencies;

credit risk associated with nancial assets and derivative positions.

INTEREST RISKInterest risk is the risk that the value o a nancial instrument willvary due to changes in market interest rates and that changes inmarket interest rates may aect net prot. The Groups exposure torisk rom changes in interest rates relates to liquid unds and short-term investments. The original term o the investments is a maxi-mum o twelve months by the closing date. The nancial policypermits investments o up to two years. The Groups liquid undsand short-term investments as o the closing date amounted to SEK21,277 m (24,858). The short term means that the risk o changesin value is limited. An interest rate increase o 0.5 percentage unitson this amount would increase interest income by SEK 106 m (124).

A corresponding decrease in the interest rate would reduce interestincome by the same amount.

cURRENcY RISKCurrency risk is, among other things, the risk that the value onancial instruments or uture cash fows will vary due to changesin exchange rates.

Currency exposure associated with nancial instrumentsH&Ms currency risk associated with nancial instruments is mainlyrelated to nancial investments, accounts payable and derivatives.Most o the surplus liquidity is in Sweden and is invested in SEK,which reduces the Groups currency risk. The Groups accountspayable in oreign currencies are mainly handled in Sweden and areto a large extent hedged through orward contracts. Based on this,

a change in the value o the Swedish krona o 2 percent in relationto other currencies would result in an insignicant momentaryeect on prot related to the nancial instrument holdings as o theclosing date. A 2 percent strengthening o the Swedish krona wouldhave a positive eect on the hedge reserve in equity o aroundSEK 60 m (60) beore taking into account the tax eect.

The Groups exposure to outstanding derivative instruments isreported in Note 16.

The Groups operating result or the year was aected by ex-change rate dierences relating to fows o goods in the amount oSEK 154 m (-87).

Transaction exposure associated with commercial owsThe payment fows in the orm o payments in oreign currenciesor accounts receivable and payable expose the Group to currency

risk. To manage the currency risk relating to changes in exchangerates the Group hedges its currency risk within the ramework othe nancial policy. The currency risk exposure is dealt with atcentral level. Most o the Groups sales are made in euro, and theGroups most signicant purchase currencies are the US dollar andthe euro. Fluctuation in the US dollar/euro exchange rate is thesingle largest transaction exposure within the Group. To hedge thefows o goods in oreign currencies and thereby reduce the eectso uture exchange rate fuctuations, 100 percent o the Groupspurchases o goods and corresponding orecast infows rom thesales companies are hedged under orward contracts on an ongoingbasis. The average term o outstanding orward contracts is aroundour months. Since the sole purpose o this currency management isto reduce risk, only exposure in the fow o goods is hedged.

Translation exposure on consolidation o units outside SwedenIn addition to the eects o transaction exposure, the prots arealso aected by translation eects as a result o changes in exchangerates or the local currencies o the various oreign subsidiaries againstthe Swedish krona, compared to the same period the previous year.The underlying prot/loss in a market may be unchanged in thelocal currency, but when converted into SEK may increase i theSwedish krona has weakened or decrease i the Swedish krona hasstrengthened. Translation eects aect the Groups net assets onconsolidation o the oreign subsidiaries balance sheets (translationexposure in the balance sheet). No exchange rate hedging (equityhedging) is carried out or this r isk.

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cREDIT RISKInvestments are only permitted to be made in banks based in coun-tries with a minimum rating o AA- (according to Standard & Poorslong-term rating) and unds are only invested in banks with a mini-mum rating o A- (Standard & Poor) and A3 (Moodys). The nancepolicy stipulates or various ratings the maximum amount that maybe invested and the term or which it may be invested. Investmentsare only allowed in banks dened by Standard & Poors or Moodysas having systemic importance in the country where they are based.Under Standard & Poors rating model the bank shall have at leastmoderate systemic importance and under Moodys model the bankshall have at least one-notch uplit or systemic support. No ur-ther investments shall be made in countries or banks which have the minimum allowed long-term rating and a negative outlook. Maxi-mum credit exposure as o 30 November 2011 totalled SEK 24,678 m

(28,091), equivalent to the book value o liquid assets o SEK 14,319 m (16,691), short-term investments o SEK 6,958 m (8,167), accountsreceivable o SEK 2,337 m (2,258) and other SEK 1,064 m (975).Accounts receivable are divided between a large number o custom-ers with low amounts per customer. The average debt was aroundSEK 1,900 (2,100). Bad debts during the year rom accounts receiv-able were insignicant.

3 SEGMENT REPORTING

2011 2010

Nordic Region

External net sales 16,343 17,023

Operating prot 614 966

Operating margin, % 3.8 5.7

Assets excluding tax receivables 6,301 6,076

Liabilities excluding tax liabilities 1,496 1,562

Investments 344 393

Depreciation 303 276

Eurozone excluding Finland


Operating prot 1,486 3,011




Investments 1,796 1,988Depreciation 1,450 1,433

Rest o the World


Operating prot 2,989 2,038Operating margin, % 8.1 6.2



Investments 2,543 2,000Depreciation 1,274 1,141

2011 2010Group Functions

Net sales to other segments 59,778 58,641

Operating prot 15,290 18,644Operating margin, % 25.6 31.8


Liabilities excluding tax liabilities 5,121 4,327Investments 491 578Depreciation 235 211

Eliminations

Net sales to other segments -59,778 -58,641

Total


Operating prot 20,379 24,659




Investments 5,174 4,959

Depreciation 3,262 3,061

The parent company and subsidiaries with no external sales arereported in a separate Group-wide segment.

4 NET SALES BY COUNTRY

2011NO. OF STORES

30 NOV. 2011 2010NO. OF STORES

30 NOV. 2010

Sweden 6,704 173 6,742 168

Norway 4,322 104 4,690 101

Denmark 3,362 90 3,493 87

UK 7,921 213 7,337 192Switzerland 5,553 80 5,689 75

Germany 24,997 394 25,757 377

Netherlands 5,885 118 6,208 112

Belgium 2,609 66 2,765 64

Austria 4,002 66 4,389 66

Luxembourg 345 10 365 10

Finland 1,948 47 2,098 43

France 7,806 168 7,642 151

USA 9,209 233 8,490 208

Spain 4,968 132 5,257 122

Poland 2,255 89 2,199 76

Czech Republic 603 24 591 22

Portugal 732 23 778 21

Italy 3,667 87 3,610 72

Canada 2,491 58 2,442 55

Slovenia 420 12 477 11

Ireland 441 15 443 12

Hungary 397 20 310 15Slovakia 212 10 189 7

Greece 621 22 532 18

China 3,283 82 2,340 47

Japan 1,476 15 1,708 10

Russia 1,299 19 785 11

South Korea 373 6 232 2

Turkey 283 8 26 1

Romania 267 11

Croatia 215 6

Singapore 104 1

Franchise 1,229 70 899 50

Total 109,999 2,472 108,483 2,206

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5 ROYALTIES FROM GROUP COMPANIESThe parent companys internal sales consist o royalties rom Groupcompanies o SEK 6,958 m (6,900).

6 SALARIES, OTHER REMUNERATION ANDSOCIAL SECURITY COSTS

2011 Board, MD,executive

management,salary

Salary,other

employees

Socialsec. costs

total

o whichpens.total

o which pens.Board, MD,

executivemanagement

Sweden, parentcompany 79 607 358 127 31Subsidiaries 61 14,250 3,179 141 6

Group total 140 14,857 3,537 268 37

2010 Board, MD,

executivemanagement,

salary

Salary,other

employees

Socialsec. costs

total

o whichpens.total

o which pens.

Board, MD,executive

management

Sweden, parentcompany 64 477 268 94 12Subsidiaries 61 13,581 3,067 156 7

Group total 125 14,058 3,335 250 19

bOARD FEESBoard ees paid or the year as approved by the 2010 AGM amountedto SEK 4,250,000 (3,875,000). Board ees were paid as ollows:

SEKStean Persson, Chairman 1,425,000Mia Brunell Livors 375,000Anders Dahlvig 375,000

Lottie Knutson 375,000Sussi Kvart 450,000Bo Lundquist 500,000Melker Schrling 375,000Christian Sievert 375,000

The ees were paid as resolved at the 2010 Annual General Meeting.This means that the ees relate to the period until the next AGM isheld; that is, or the period 29 April 2010 to 28 April 2011. Theamounts were paid out ater the 2011 AGM.

As o the AGM on 28 April 2011 the Board consists o eight ordi-nary members elected by the AGM. There are also two employeerepresentatives with two deputies or these positions. Seven mem-bers o the Board are women, ve are men, and our o the 12 areemployed by the company.

REMUNERATION TO SENIOR EXEcUTIVESBased on the resolution regarding guidelines passed by the 2011AGM. See the Administration Report page 7.

REMUNERATION TO ThE MANAGING DIREcTORRemuneration to the Managing Director or the 2011 nancial yearin the orm o salary and benets amounted to SEK 13.9 m (11.2),which included a bonus o SEK 2.1 m (0.2). Pension benets or thecurrent Managing Director are covered by a dened contributionplan and by the ITP plan. The combined pension expenses shallamount in total to 30 percent o the Managing Directors xed sal-

ary. Pension expenses or the current Managing Director amountedto SEK 3.5 m (3.3). The retirement age or the Managing Directoris 65.

The Managing Director is entitled to a 12-month period onotice. In the event the company cancels his employment contract,the Managing Director will also receive severance pay o an extrayears salary. The Managing Directors terms o employment aredetermined by the Board o Directors.

Pension or the ormer Managing DirectorThe ormer Managing Director retired on 1 September 2009.The total pension commitments entered as liabilities, which arebased on the act that the ormer Managing Director will receive apension or the rst three years o his retirement equivalent to 65percent o his xed salary ollowed by a lielong pension equivalent

to 50 percent o the same salary, amount to SEK 158.6 m (144.2).The change in the years pension commitments entered as liabilitiesinclude actuarial losses o SEK 19.5 m (actuarial losses o SEK 1.7 m).Pension costs or the ormer Managing Director are included undero which pensions to Board, MD, executive management.

Remuneration to other members o the exective managementRemuneration to other members o the executive managementteam in the orm o salary and benets were paid in the amount oSEK 61.9 m (49.3), which included bonuses o SEK 7.3 m (0.8).Pension expenses relating to other members o the executive man-agement during the year amounted to SEK 14.6 m (8.8). The othermembers o the executive management are 16 (16) individuals,six o whom are women.

In addition to the Managing Director, the executive management

team consists o the heads o the ollowing unctions: Finance, Buy-ing, Production, Sales, Expansion, IR, Accounts, Marketing, HR,Communications, Sustainability, Security, Business Development,New Business, IT and Logistics. There are rules in place or theseindividuals with respect to supplements to retirement pension be-yond the ITP plan. The retirement age varies between 60 and 65.The cost o this commitment is partially covered by separate insur-ance policies.

In addition, bonuses amounting to SEK 6.1 m (3.9) were paid outto country managers. No severance pay agreements exist withinthe Group other than or the Managing Director as described above. The terms o employment or other members o the executivemanagement are determined by the Managing Director and theChairman o the Board.

h&M INcENTIVE PROGRAM (hIP)An extraordinary general meeting held on 20 October 2010resolved to introduce an incentive programme or all employeeso the H&M Group.

The programme was initiated by Stean Persson and amilythrough the donation o 4,040,404 H&M shares worth aroundSEK 1 billion to a Swedish oundation, Stitelsen H&M IncentiveProgram.

All employees o the H&M Group, regardless o their positionand salary level, are included in the programme according to thesame basic principle based on length o employment, either ull-time or part-time. The number o years that the employee has

H&M 2011 S page 24



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worked or the company are taken into account in the qualicationperiod, which is ve years unless local rules require otherwise. As ageneral rule, unds will begin to be paid out no earlier than the ageo 62. However, it will also be possible or payouts to be made aterten years o employment but no earlier than 2021.

Each year the oundation will normally receive a contributionrom the H&M Group corresponding to 10 percent o the increasein dividend compared with the previous years dividend, providedthis amounts to no more than 2 percent o the total dividend.There is a certain amount o fexibility as regards proposed contri-butions. One example o an exceptional situation is a year in whichthere is no increase in dividend. The Board may propose to theAGM that a contribution be made to the oundation nonetheless, inorder to reward employees. Another example might be a year inwhich the dividend increase is disproportionately high; in this case,

the previously mentioned cap o 2 percent o the total dividendcould be applied. The contribution represents a cost to the H&MGroup and does not aect the dividend resolution passed. It doesnot result in any dilution o existing shares. The contribution to theoundation is to be invested in H&M shares. H&M has no othercommitments beyond this.

In the consolidated accounts the costs o the incentive pro-gramme are recognised in accordance with the rules on short-termprot-sharing and bonus schemes set out in IAS 19. The expenseswill be recognised when the amount has been established and anobligation exists.

The rst units in the oundation were allocated to employees in2011 and were based on the 2010 earnings year. The rst contribu-tion by H&M to the oundation was also made in 2011. The contri-bution was based on the increase in dividend compared with the

previous years dividend. The contribution, which was made aterthe 2011 AGM, was SEK 248 m. The cost o the contribution wasexpensed in the second quarter o the 2011 nancial year.

7 AVERAGE NUMBER OF EMPLOYEES

2011Total Male %

2010Total Male %

Sweden 5,855 22 5,398 25

Norway 1,740 9 1,707 9

Denmark 1,397 8 1,522 7

UK 5,404 23 4,903 22

Switzerland 1,985 14 1,984 14

Germany 12,498 19 11,845 19

Netherlands 2,403 16 2,240 16

Belgium 1,836 25 1,632 22

Austria 1,906 9 1,921 10

Luxembourg 158 16 137 13Finland 817 7 913 7

France 5,137 24 4,381 26

USA 5,096 34 4,543 34

Spain 3,209 18 4,303 18

Poland 4,099 19 3,089 18

Czech Republic 388 10 312 12

Portugal 582 15 693 16

Italy 2,158 27 2,037 27

Canada 1,142 22 1,114 22

Slovenia 141 13 137 15

Ireland 258 18 241 24

Hungary 260 17 182 14

2011Total Male %

2010Total Male %

Slovakia 198 18 96 19

Greece 460 17 294 22

China 3,048 26 2,013 30

Japan 472 43 475 44

Russia 724 26 565 27

South Korea 286 29 143 28

Turkey 320 38 200 25

Romania 236 35 22 9

Croatia 124 13

Singapore 51 37 Other countries 486 67 398 71

Group total 64,874 21 59,440 21

8 DEPRECIATIONDepreciation has been calculated at 12 percent o the acquisitioncost o equipment and leasehold rights, and 20 percent or comput-er equipment and vehicles, based on their estimated useul lie.Depreciation on brands and customer relations relating to FaBricScandinavien AB is assessed at 10 percent o the acquisition cost.Buildings are depreciated at 3 percent o their acquisition cost.

No depreciation is applied to land values. Depreciation or theyear is reported in the income statement as ollows:

GROUP PARENT cOMPANY

2011 2010 2011 2010

Cost o goods sold 366 336 Selling expenses 2,698 2,540 Administrative expenses 198 185 95 97

Total 3,262 3,061 95 97

9 AUDIT FEESGROUP PARENT cOMPANY

2011 2010 2011 2010

Ernst & Young

Audit assignments 15.5 15.9 2.5 2.4Auditing other than auditassignments 1.3 1.1 0.1 0.1Tax consultancy 11.4 10.9 0.1 0.1

Other auditors

Audit assignments 3.3 3.2

Total 31.5 31.1 2.7 2.6

H&M 2011 S page 25



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10 TAX GROUP PARENT cOMPANY2011 2010 2011 2010

Tax expense (-) / ta x receivable (+):

Current tax

Tax expense or the period -5,281 -7,255 -600 -881Tax eect o groupcontributions provided -34Adjusted tax expense orprevious years 98

Total -5,183 -7,255 -600 -915

Deerred tax receivable (+)/ tax expense (-) in respect o

Temporary dierences i nstock-in-trade 188 -280 Loss carry-orward -47 47 Pension provisions 14 3 4 3

Tax allocation reserve 1,150 Intangible xed assets 16 26 Tangible xed assets -83 32 Other temporary dierences -26 -50

Total 62 928 4 3

Total -5,121 -6,327 -596 -912

Reconciliation between current taxrate and efective tax rate:

Expected tax expenseaccording to the Swedish taxrate o 26.3% -5,508 -6,577 -4,324 -4,096Eect o changed taxrate in Sweden 58 Dierence in oreign tax rates 425 288 Non-deductible/non-taxable -152 -166 -13 -13Other 16 70

Tax or previous years 98 Tax-ree dividend subsidiaries 3,741 3,196

Total -5,121 -6,327 -596 -912

Reported deerred taxreceivable relates to:

Pensions 108 87 63 59Tangible xed assets 14 Loss carry-orward in subsidiaries 47 Temporary dierences i nstock-in-trade 851 672 Hedging reserves 14 Other temporary dierences 247 259

Total 1,234 1,065 63 59

Reported deerred taxexpense relates to:

Intangible xed assets 100 116

Tangible xed assets 503 406Stock-in-trade 256 265Tax allocation reserve Hedging reserves 80 98

Other temporary dierences 11 21

Total 950 906

As o the closing date, the Group has no loss carry-orward otherthan the reported deerred taxes receivable.

11 INTANGIBLE FIXED ASSETS GROUP2011 2010

Brand*

Opening acquisition cost 470 470

Acquisitions during the year

Closing acquisition cost 470 470

Opening amortisation -121 -74Amortisation or the year -47 -47

Closing accumulated amortisation -168 -121

Closing book value 302 349

Customer relations*

Opening acquisition cost 131 131Acquisitions during the year

Closing acquisition cost 131 131

Opening amortisation -34 -21Amortisation or the year -13 -13



Leasehold rights

Opening acquisition cost 1,115 1,086Acquisitions during the year 71 147

Sales/disposals -99 -4Translation eects -13 -114

Closing acquisition cost 1,074 1,115

Opening amortisation -427 -342Sales/disposals 63 1Amortisation or the year -123 -130

Translation eects -2 44



Goodwill*

Opening book value 64 424Adjusted consideration/additional consideration -360


* Brands, customer relations and goodwill assets were added through the acquisition

in 2008 o the company FaBric Scandinavien AB, which is a cash-generating unit.

H&M acquired the remaining 40 percent o the shares in FaBric Scandinavien AB

at the end o November 2010. The consideration or the remaining 40 percent o

the shares was SEK 8 m. A provision o SEK 368 m had been made previously or an

additional consideration to the sellers as a result o the options. The dierence be-

tween the actual consideration and the provision was recognised as a SEK 360 m

reduction in goodwill.

A goodwill impairment test was carried out at the end o 2011. The impairment

test is based on a calculation o value in use. The value in use has been assessed based

on discounted cash fows according to orecasts or the next ten years and with an

annual growth rate o 2 percent (2) in subsequent years. A discount rate o 12 per-

cent (12) beore tax was used. The cash fows are based on H&Ms business plan. The

growth rate o 2 percent (2) is based on H&Ms assessment o the opportunities and

risks associated with the business. The discount rate is based on an average weighted

capital cost that is estimated to be on a par with the external requirements that the

market imposes or similar companies. No impairment was identied and H&M is

o the opinion that reasonable possible changes in the variables above would not

have such a signicant impact that the recovery amount would be reduced to a low-

er amount than the book value.

H&M 2011 S page 26



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12 BUILDINGS, LAND & EQUIPMENTGROUP PARENT cOMPANY

2011 2010 2011 2010

Buildings

Opening acquisition cost 781 629 105 105Acquisitions during the year 157 180 Sales/disposals Translation eects 21 -28

Closing acquisition cost 959 781 105 105

Opening depreciation -220 -207 -60 -57Sales/disposals Depreciation or the year -26 -18 -3 -3Translation eects -6 5

Closing accumulateddepreciation -252 -220 -63 -60

Closing book value 707 561 42 45

Land

Opening acquisition cost 95 70 3 3Acquisitions during the year 29 Sales/disposals Translation eects 2 -4

Closing book value 97 95 3 3

Equipment

Opening acquisition cost 24,632 23,576 756 736Acquisitions during the year 4,946 4,603 119 100Sales/disposals -1,518 -1,620 -175 -80Translation eects 25 -1,927

Closing acquisition cost 28,085 24,632 700 756

Opening depreciation -9,819 -9,257 -387 -373

Sales/disposals 1,404 1,508 175 80Depreciation or the year -3,053 -2,853 -92 -94Translation eects -28 783

Closing accumulateddepreciation -11,496 -9,819 -304 -387

Closing book value 16,589 14,813 396 369

The Group has no signicant leasing agreements other than therental agreements or rented premises entered into at normal mar-ket rates. Rental costs or the 2011 nancial year amounted toSEK 12,993 m (12,891), o which sales-based rent amounted toSEK 1,232 m (1,044).

Rent according to the Groups rental agreements (basic rent exclud-ing any sales-based rent) amounts to SEK m:

Rental commitments in next 12 months 9,942 (9,546)Rental commitments in next 25 years 28,085 (27,255)Rental commitments more than 5 years ahead 18,273 (17,878)

13 PREPAID EXPENSES

GROUP PARENT cOMPANY

2011 2010 2011 2010

Prepaid rent 769 701 7 7Other items 341 175 7 2

Total 1,110 876 14 9

14 SHORT-TERM INVESTMENTSGROUP PARENT cOMPANY

2011 2010 2011 2010

Short-term investments,412 months 6,958 8,167 5,038 8,167

Total 6,958 8,167 5,038 8,167

The balance sheet item includes interest-bearing investments, i.e. in-vestments in securities issued by banks or in short-term bank deposits.

Investments are made on market terms and the interest ratesare between 2.94 and 3.40 percent. The dierence in interest ratedepends mainly on the currency in which the unds are invested.

15 LIQUID FUNDSGROUP PARENT cOMPANY

2011 2010 2011 2010

Cash and bank balances 5,739 5,437 177 123Short-term investments,03 months 8,580 11,254 501 100

Total 14,319 16,691 678 223

Investments are made on market terms and the interest rates arebetween 0.10 and 3.10 percent. The dierence in interest ratedepends mainly on the currency in which the unds are invested.

16 FORWARD CONTRACTSThe table below shows the outstanding orward contracts as o the

closing date:

Currency pairBook value

a nd ai r v alue No mi na l a mou ntAverage remaining

term in months

SELL/bUY 2011 2010 2011 2010 2011 2010

NOK/SEK -2 10 371 428 4 4GBP/SEK -26 21 1,276 1,095 4 4DKK/SEK 0 8 415 360 4 4CHF/SEK 22 -2 626 650 3 4

EUR/SEK 3 167 8,669 7,525 4 4PLN/SEK 22 11 364 336 4 4USD/SEK -68 23 1,407 1,352 4 4CAD/SEK -4 2 307 298 4 4

JPY/SEK -7 6 128 365 3 3SEK/USD 365 48 9,441 8,419 2 2SEK/EUR 1 -13 1,099 1,036 2 2

Total 306 281 24,103 21,864

All changes in the value o derivatives are recognised initially viaother comprehensive income in equity. From other comprehensive

annual report 2011 hm

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