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Remuneration guidelines

The Extraordinary General Meeting that was held on 16 December 2020 resolved on the following guidelines for remuneration to senior executives.

Guidelines for remuneration to senior executives

Guidelines for remuneration to Nelly Group’s CEO and other members of the executive management (together the “Senior Executives”), and for Board members to the extent they receive remuneration outside of their assignments as Board members.

The guidelines shall apply to remuneration agreed, and amendments to remuneration already agreed, after adoption of the guidelines by the Extraordinary General Meeting on 16 December 2020. These guidelines do not apply to any remuneration decided by the General Meeting, such as ordinary Board remuneration and long-term share and share price-related incentive plans.

The guidelines’ promotion of the Nelly Group’s business strategy, long-term interests and sustainability

Nelly Group’s only operative subsidiary Nelly has one of the leading Nordic online fashion brands among young women. Nelly’s business model is based on a core of its own designs and labels and a complementary range of selected clothing and beauty products from 300 brands. Nelly shall continue to strengthen its own brands and constantly be at the forefront of digital marketing and sales. The company shall continue to inspire with selected trends and clothing for its target group.

A prerequisite for the successful implementation of Nelly Group’s business strategy and the safeguarding of the Group companies’ long-term interests, including their sustainability, is that Nelly Group is able to attract, motivate and retain senior executives in competition with comparable Nordic companies, primarily Nordic companies which are operating within e-commerce and retailing with consumer brands and products. These guidelines shall therefore enable for the Senior Executives to be offered a competitive total remuneration. At the same time, Nelly Group’s remuneration system shall be in line with and promote sound and effective risk management and counteract excessive risk-taking behavior.

The remuneration to the Senior Executives in Nelly Group shall both short-term and long-term reflect the individual’s performance and responsibilities and the results in Nelly Group, including in its subsidiary, and shall also link the Senior Executives’ interests and rewards with the shareholders’. Therefore, the remuneration to the Senior Executives shall be based on the pay for performance principle.

The Board considers that the possibility of variable remuneration and participation in any long-term incentive plans together with a well-balanced fixed remuneration provides the conditions for Nelly Group to be a competitive employer, while the design of and conditions for the variable remuneration support a responsible and sound risk management as well as the company’s growth strategy, long-term interests and sustainability.

Types of remuneration

The remuneration shall be on market terms and may consist of the following components:

– fixed cash salary,

– variable cash remuneration,

– the possibility of participating in long-term (i) share- and share price related incentive plans resolved upon by the General Meeting and / or (ii) cash-based incentive plans,

– pension benefits, and

– other customary benefits.

Fixed cash salary

The Senior Executives’ fixed cash salary is revised each year and shall be competitive and based on the individual’s competence, responsibilities and performance.

Variable cash remuneration

The Senior Executives’ variable cash remuneration shall be based on fulfilment of established targets relating to growth and value creation for their respective areas of responsibility and for Nelly Group. The outcome shall be linked to measurable targets (qualitative, quantitative, general and individual) which shall be measured over a year. The targets within the Senior Executives’ respective area of responsibility are defined to promote Nelly Group’s development both in the short-term and long-term, and thus promote Nelly Group’s business strategy and long-term interests, including the company’s sustainability. Variable cash remuneration may not exceed 100 per cent of the Senior Executive’s fixed annual salary.

Additional variable cash remuneration may be awarded in extraordinary circumstances, provided that such extraordinary arrangements are only made on an individual level and either for the purpose of recruiting or retaining executives, or as remuneration for extraordinary performances in addition to the individual’s ordinary tasks. Such remuneration may not exceed an amount corresponding to 100 per cent of the fixed annual cash salary. Any resolution on such remuneration shall be made by the Board based on a proposal from the Remuneration Committee.

The Board shall also consider to resolve that a part of the Senior Executives’ variable cash remuneration shall be invested in shares or share-price related instruments in Nelly Group.

Long-term share-related and cash-based incentive plans

The Senior Executives may be offered to participate in incentive plans which shall generally be share or share price-related and shall therefore not be covered by these guidelines, but may also be cash-based. Long-term share or share price-related incentive plans shall be designed to ensure the participants’ long-term commitment to the value growth in Nelly Group and align the Senior Executives’ interests with the shareholders.

Establishment of criteria for payment of cash variable remuneration and long-term cash-based incentive plans and claw-back rights in certain cases

When the measurement period for fulfilling the criteria for payment of variable cash remuneration and long-term cash-based incentive plans ends, the extent to which the criteria have been met shall be assessed/determined. The Remuneration Committee is responsible for the evaluation. With regard to financial criteria, the assessment shall be based on Nelly Group’s most recently published financial information. In the assessment, the Remuneration Committee shall ensure that there is a link between the remuneration and Nelly Group’s results. When determining the remuneration, the Remuneration Committee shall also take into account relevant circumstances relating to the environment, social conditions as well as corporate governance and anti-corruption (so-called ESG).

To ensure that performances on which the remuneration have been based are sustainable over time, Nelly Group shall have the right, pursuant to applicable law or contractual provisions, subject to any restrictions that may apply under law or contract, to in whole or in part reclaim remuneration other than fixed cash salary, pension and other customary benefits which have been paid on incorrect grounds, as a result of information which turns out to be apparently incorrect (”claw-back”).

Pensions and other customary benefits

Pension commitments are premium defined and are secured through premiums paid to insurance companies. The size of the pension premiums shall be in accordance with Nelly Group’s pension plan and shall in all material respects correspond to the provision levels that apply pursuant to the ITP 1 plan and thus have the limitations in relation to the fixed annual salary as stated therein. No provisions are made for salary components exceeding 60 income base amounts calculated on an annual basis. Variable cash remuneration shall, in general, not qualify for pension benefits. Under normal circumstances the retirement age is 65 years.

Other benefits shall be customary and facilitate that the senior executives can carry out their duties, for example a company car, company health care and health care insurance. Such benefits shall in aggregate not exceed 30 per cent of the fixed annual cash salary.

Notice of termination and severance pay

Upon termination of employment the notice period may not exceed 12 months. Fixed cash salary during the notice period and severance pay may not together exceed an amount corresponding to the fixed cash salary for 18 months for the CEO and 12 months for other senior executives. When the termination is initiated by the senior executive, the notice period may not exceed six months, without any right to severance pay.

Salary and employment conditions for employees

In the preparation of the Board’s proposal for these remuneration guidelines, salary and employment conditions for Nelly Group’s employees have been taken into account. The guidelines do not differ from the remuneration systems which are generally applied in Nelly Group for other employees. In other respects, the remuneration, the types of remuneration and the salary development for Senior Executives are considered to be in line with the salaries and employment conditions of other employees in Nelly Group. The development of the gap between the remuneration to the Senior Executives and remuneration to other employees will be presented in subsequent remuneration reports.

Remuneration to Board members

Board members in the parent company, elected at General Meetings, may in certain cases receive compensation for services performed within their respective areas of expertise, but which are outside of their Board duties in the parent company. Compensation for such services shall be paid on market terms and be approved by the Board.

The decision-making process

The Board has established a Remuneration Committee. The Committee’s tasks include preparing the Board’s decision to propose guidelines for remuneration to senior executives. The Board shall prepare a proposal for new guidelines at least every fourth year and submit it to the General Meeting. The guidelines shall be in force until new guidelines are adopted by the General Meeting.

The Remuneration Committee shall also monitor and evaluate plans for variable remuneration for the executive management, the application of these guidelines for remuneration to senior executives as well as the current remuneration structures and compensation levels in the company.

The members of the Remuneration Committee are independent of the company and its executive management. The Senior Executives do not participate in the Board’s processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.

Deviations from the guidelines

The Board may, if it considers that special circumstances are at hand and a deviation is necessary to serve the company’s long-term interests, including its sustainability, or to ensure the company’s financial position, deviate from the guidelines. In such a case the Board shall explain the reason for the deviation at the following Annual General Meeting.

Further information regarding remuneration to senior executives is presented in Nelly Group’s annual report for 2019.

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