H+H International A/S : Statutory corporate governance statement for 2023

Corporate Governance Statement 2023

H+H International A/S

CVR-no: 49 61 98 12  |  LEI: 3800GJODT6FV8QM841  |  Lautrupsgade 7, 5th Floor. 2100 Copenhagen Ø

H+HCorporate Governance Statement 2023

Statutory report on corporate governance for 2023, cf. section 107b of the Danish Financial Statements Act

This report forms part of the management's review in the annual report for 2023 for H+H International A/S. The sections below about governance structure and about financial controls and risk management structure are covered by the statement on management's review as part of the independent auditors' report in H+H International A/S's annual report for 2023, whereas the other information in this corporate governance report is not covered by the auditors' report in H+H International A/S's annual report for 2023. Since H+H International A/S is a listed company, the part of this report that concerns H+H's position to the Danish Recommendations on Corporate Governance is also issued pursuant to NASDAQ's Nordic Main Market Rulebook for Issuer of Shares.

General Meeting

Board of Directors

Nomination Committee

Statutory report on corporate

Corporate governance structure

H+H International A/S is a Danish limited liability company with a two-tier management structure in which the Board of Directors and the Executive Board are separate and no members may at the same time hold membership of both. H+H International A/S is the ultimate parent company of the H+H Group.

General meeting

The general meeting is held at least once a year, and all shareholders registered in the share register may participate, submit proposals and vote and speak at the general meetings. The members of the Board of Directors are elected by the general meeting, except for board members being employee

Audit Committee

Remuneration Committee

Executive Board

governance

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H+HCorporate Governance Statement 2023

representatives, if any, since they are elected by the employees.

Board of Directors

The Board of Directors of H+H International A/S is governed by the company's Articles of Association, the Companies Act and other EU or Danish legislation. The Board of Directors is responsible for the overall management of and strategic direction for the Group, including:

• strategy planning
• appointing members of the Executive Board
• overseeing the Executive Board's manage- ment and execution of strategy initiatives, activities within finance, sustainability, IT, HR, ERM, compliance etc.
• reviewing the financial position and capital resources to ensure that these are adequate.

Board committees

Audit Committee

The main areas of responsibility for the Audit Committee are to:

• evaluate the financial and sustainability reporting , including the data and metrics used in the sustainability reporting, review accounting policies and other financial policies, accounting estimates etc., including impairment testing, investments and divest- ments, tax and revenue;

• review and monitor the Group's risk manage- ment, internal controls, and business integ- rity matters;
• monitor the Group's internal audit function, if any, and whistleblower system; and
• monitor and consider the relationship with the independent financial auditor and sustainability auditor, review the audit process and the auditor's long-form audit report, and make a recommendation to the Board of Directors on which auditors to nominate for approval at general meetings.

Nomination Committee

The main areas of responsibility for the Nomination Committee are to:

• propose and help manage the annual board evaluation and evaluation of the Executive Board, including the size, structure, and composition of the Board of Directors and the Executive Board; and
• recommend nomination of members to the Board of Directors and recommend engage- ment or termination of members of the Executive Board.

Remuneration Committee

The main areas of responsibility for the Remuneration Committee are to:

• annually evaluate the company's remunera- tion policy for the Board of Directors and the Executive Board and oversee drafting of the Remuneration Report; and
• evaluate and recommend the remuneration of the Board of Directors and the Executive Board as well as each regional managing director, and develop and annually review the group incentive programs (STIP and LTIP).

Executive Board

The Executive Board currently consists of two members, i.e. the CEO and the CFO. The Executive Board is responsible for the day-to-day management, including:

• developing and implementing strategic initi- atives and policies to execute on the strategy decided by the Board of Directors;
• developing the organisational structure;
• monitoring of the performance, both finan- cially and non-financially;

• evaluating and executing on investments, acquisitions, and divestments;
• regularly assessing the capital structure and liquidity to ensure that the these are adequate; and
• establishing procedures for financial and sustainability accounting, IT, compliance, ERM, internal controls etc.

Statutory report on corporate governance

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H+HCorporate Governance Statement 2023

Financial controls and risk	reporting. The Audit Committee assists the	Risk management
management structure	Board of Directors in its responsibilities in this	The Board of Directors evaluates the risk
	respect by researching and preparing various	management processes on a continuous basis
General governance	matters which are then presented to the Board	to ensure that the risk profile, risk processes
H+H International A/S's Board of Directors	of Directors for information and decision.	and risk awareness are appropriate. Respon-
and Executive Board are ultimately responsible		sibility for the ERM effectiveness has been
for the Group's risk management and internal	Enterprise risk management structure	delegated to the Chief Financial Officer.
control environment in relation to financial and	The Enterprise Risk Management (ERM)
non-financial reporting, including compliance	structure below the Board of Director level is	The ERM processes in H+H ensure a dynamic
with relevant legislation and other regula-	organised as three lines of defence (see figure	process, involving the identification of risks,
tions in relation to financial and sustainability	below).
Three Lines of Defence

an assessment of probability and the potential impact on business performance, reputation, and people. The aim is to mitigate identified key risks to an acceptable level through appropriate ERM processes, but also to take advantage of identified opportunities.

ERM considerations are integrated into the Group strategy and regional strategies to help safeguard the long-term targets of H+H.

Statutory

1

2

3

ERM Community

ERM Committee

Audit Committee

Comprises Group and Subsidiary business representatives, ensuring a balanced and complete bottom- up process. Subsidiary management and Group functional heads conduct an annual risk review, in which all identified key risks are described, discussed, and evaluated. They are individually and collectively responsible for ensuring that mitigating actions are implemented to reduce the identified risks to an appropriate level as well as assessing the effectiveness of implemented mitigating actions.

Communicating and ensuring risk compliance

Comprises Group management-team members and is responsible for communicating and ensuring risk compliance as well as evaluating the ERM processes. The Committee develops the overall risk strategies and scope for the ERM processes and reviews their effectiveness. The Committee also reports on assessed risks, effectiveness, and mitigating actions to the Audit Committee.

Oversees develop-

ments of ERM

Oversees the development of the ERM system, the ongoing reporting on assessed risks, and the mitigating actions taken. Responsible for monitoring the overall status of ERM governance (i.e., its performance and relevance).

Ensure awareness of ERM and policies and procedures

Review and			Identify Risks
Report			1
	7			2
			ERM
Monitor	6	system	3	Quantify and
eectiveness	allocate
of risk					responsibility
strategies		5	4		of risks

	Identify
Execute risk	strategies for
strategies	managing
	risks

report on corporate governance

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H+HCorporate Governance Statement 2023

Financial control environment

The Board of Directors and the Audit Committee assess H+H's organisational structure and staffing in key areas at least once a year. The aim is a well-defined organisational structure, unambiguous reporting lines, delegated authorities and documentation, and appropriate segregation of duties ("the four-eye principle").

The Audit Committee and ultimately the Board of Directors consider whether there is a need for an internal audit function at least once a year. Given that H+H's existing control procedures and the regular reporting on control activities to the Audit Committee are deemed satisfactory, neither the Audit Committee nor the Board of Directors currently sees any need to set up an internal audit function at H+H International A/S.

The Board of Directors or the Executive Board establishes and approves group-wide policies, procedures and controls in relation to the financial and sustainability reporting process, e.g. the H+H Accounting Manual, Internal Control Policy, Financial Risk Management Poliy and Treasury Policy, which prescribe processes, internal control measures, segregation of duties, reconciliation, approval, author- isation, accounting practices, internal and external reporting etc. The Executive Board

has entrusted Group Finance with the responsibility of acting as the central controlling function for the Group, and in this role Group Finance monitors and checks compliance with group policies, procedures etc. in the regions on a continuous basis. The Executive Board regularly reports to the Audit Committee and/or the Board of Directors on any material findings.

Risk evaluation

The Audit Committee and the Executive Board carry out an overall assessment of the risks related to the reporting processes at least once a year. As part of their risk assessment, the Board of Directors, the Audit Committee and the Executive Board continuously consider the risks and the measures that need to be taken with a view to mitigating or eliminating such risks. Based on the outcome of the risk assess- ment, revisions to the relevant policies and manuals are considered and implemented.

Control activities, including monitoring

The definition of the specific control activities is based on the risk assessment at any given time. Group Finance ensures that the reporting processes etc. set out in the various H+H policies are implemented and monitored. This ensures a uniform make-up and structure of the Group's internal controls.

The aim of H+H's control activities is to ensure that the policies, manuals and other procedures defined by the Board of Directors and/ or the Executive Board are adhered to. These activities also helps ensure that any errors, deviations and omissions are prevented, detected and corrected. H+H regularly implements new reporting processes as well as controls intended to assist in further mitigating the risks.

The control activities are carried out pursuant to certain set requirements in respect of frequency and documentation, obtaining assurance of e.g., the existence of the assets claimed in the reporting, reconciliation and the financial analysis to be performed. The scope and frequency of the control measures applied with respect to each region depend on the risk assessment and the subsequent risk rating made on an ongoing basis in respect of each region.

Any weaknesses, lack of control, breach of group policies etc. or other material deviations identified during the control activities are reported by Group Finance to the Executive Board. Group Finance prepares a report describing the findings made for each control visit in a region, and the material findings are comprised in a report discussed with the Audit Committee. Depending on whether the find-

ings are critical or touch on matters of prin- ciple, the findings are ultimately conveyed to the Board of Directors for their information and consideration. In addition to Group Finance's reports for each control visit, H+H International A/S's external auditor reports in the audit book to the Board of Directors on any material weaknesses identified in the Group's internal control systems in relation to the financial reporting process. Less important issues are communicated directly to the Executive Board. When weaknesses or faults in the control system are detected, the Audit Committee oversees whether the Executive Board reacts effectively and whether agreed actions to strengthen risk management and internal controls in relation to the reporting process are implemented according to plan.

Statutory report on corporate governance

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H+HCorporate Governance Statement 2023

Danish Recommendations on Corporate Governance

The following symbols are used to describe compliance and non-compliance:

  Compliance

Non-compliance

				Description of compliance or explanation of non-compliance
Recommendation	Compliance	and what is done instead
1. Interaction with the company's shareholders, investors and other stakeholders
1.1. Dialogue with shareholders, investors and other stakeholders
1.1.1. The Committee recommends that the management through ongoing dialogue and interaction ensures				H+H provides information to shareholders and other stakeholders by publication of
that shareholders, investors and other stakeholders gain the relevant insight into the company's affairs, and				financial reports and other information required for listed companies. H+H has an
that the board of directors obtains the possibility of hearing and including their views in its work.				IR organisation that organise and participate in various investor meetings. Publicly
				available telephone conferences are also held in continuation with the disclosure of
				each financial report, and after this the IR organisation arranges and participates in
				different meetings with shareholders, potential investors, analysts and other interested
				parties. The Board of Directors is regularly informed about relevant input and opinions
				received by the IR organisation to ensure the Board can consider such considerations
				in their decision making and communication.
1.1.2. The Committee recommends that the company adopts policies on the company's relationships with				H+H's relation to its stakeholders are anchored in H+H's Purpose and Promises. The
its shareholders, investors and if relevant other stakeholders in order to ensure that the various interests are				shareholder-specific relations are defined in H+H's Articles of Association, and the
included in the company's considerations and that such policies are made available on the company's website.				ongoing relations with shareholders, investors and analysts are described in H+H's
				Investor Relations Policy. Relations and conduct towards all stakeholders are described
				in H+H's Code of Conduct and towards suppliers in H+H's Code of Conduct for
				Suppliers. All documents are available on www.HplusH.com.
1.1.3. The Committee recommends that the company publishes quarterly reports.				Nothing additional to report.

Danish Recommendations on Corporate Governance

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H+HCorporate Governance Statement 2023

				Description of compliance or explanation of non-compliance
Recommendation	Compliance	and what is done instead
1.2. The general meeting
1.2.1. The Committee recommends that the board of directors organises the company's general meeting				It is possible to vote at or attend general meetings by proxy, and it is possible to raise
in a manner that allows shareholders, who are unable to attend the meeting in person or are represented by				questions to management prior to the general meetings. General meetings are being
proxy at the general meeting, to vote and raise questions to the management prior to or at the general meeting.				webcast live on the H+H shareholder portal, and the webcast as well as the full minutes
The Committee recommends that the board of directors ensures that shareholders can observe the general				for the general meeting are published on H+H's website after the general meeting.
meeting via webcast or other digital transmission.
1.2.2. The Committee recommends that proxies and postal votes to be used at the general meeting enable				Nothing additional to report.
the shareholders to consider each individual item on the agenda.
1.3. Takeover bids

Danish

1.3.1. The Committee recommends that the company has a procedure in place in the event of takeover bids, containing a "road map" covering matters for the board of directors to consider in the event of a takeover bid, or if the board of directors obtains reasonable grounds to suspect that a takeover bid may be submitted. In addition, it is recommended that it appears from the procedure that the board of directors abstains from countering any takeover bids by taking actions that seek to prevent the shareholders from deciding on the takeover bid, without the approval of the general meeting.

Nothing additional to report.

Recommendations on

1.4. Corporate Social Responsibility

1.4.1. The Committee recommends that the board of directors adopts a policy for the company's corporate				The Board has approved an ESG policy for corporate social responsibility that is
social responsibility, including social responsibility and sustainability, and that the policy is available in the				available at H+H's website, as is H+H's Code of Conduct for Suppliers helping to ensure
management commentary and/or on the company's website. The Committee recommends that the board of				proper sustainable conduct in line with H+H's sustainability policy by H+H's suppliers.
directors ensures compliance with the policy.				H+H also reports on sustainability on an annual basis and from the annual report for
				2023 the sustainability report is an integrated part of the annual report.
				H+H's focus on sustainability performance is underlined by the fact that both the short-
				term and the long-termshare-based incentive program includes 1-2 KPI targets related
				to sustainability performance.
1.4.2. The Committee recommends that the board of directors adopts a tax policy to be made available on				Nothing additional to report.
the company's website.

Corporate Governance

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H+HCorporate Governance Statement 2023

Recommendation

Compliance

Description of compliance or explanation of non-compliance and what is done instead

2. The duties and responsibilities of the board of directors 2.1. Overall tasks and responsibilities

2.1.1. The Committee recommends that the board of directors in support of the company's statutory objects				H+H's business model and its Purpose and Promises are described in the annual	Danish
according to its articles of association and the long-term value creation considers the company's purpose				report. The purpose and values described therein are the foundation of H+H's being,
and ensures and promotes a good culture and sound values in the company. The company should provide an				culture and ultimately H+H's value-creation.
account thereof in the management commentary and/or on the company's website.
2.1.2. The Committee recommends that the board of directors at least once a year discusses and on a regular				The Board is informed on a monthly basis on the execution of the strategy and the	Recommendations
creation in the interest of the company as well as the shareholders. The Committee recommends that the				support the strategy execution.
basis follows up on the company's overall strategic targets in order to ensure the value creation in the company.				strategy itself is reviewed at least annually at a two-day strategy seminar dedicated
				to strategy development and review, strategy actions, and the achievement in respect
				of strategy execution and the strategy-relatedlong-term targets for value creation
				announced. The strategy, strategy action points and announced long-term targets are
				continuously reconsidered when unforeseen material opportunities or risks occur.
2.1.3. The Committee recommends that the board of directors on a continuously basis takes steps to				The Board continuously evaluates the company's capital structure, share structure and
examine whether the company's share and capital structure supports the strategy and the long-term value				capital resources to ensure appropriate and sufficient	funding to fulfill liabilities and
company gives an account thereof in the management commentary.						on
				The management's review in the annual report always includes an account of this,
				Corporate
				including board or general meeting decisions made and actions taken during the
				financial year such as share buy-back programs and cancellation of shares or payment
				of dividend.
2.1.4. The Committee recommends that the board of directors prepares and on an annual basis reviews				Nothing additional to report.
guidelines for the executive management, including requirements in respect of the reporting to the board of						Governance
directors.

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H+HCorporate Governance Statement 2023

					Description of compliance or explanation of non-compliance
Recommendation	Compliance	and what is done instead
2.2. Members of the board of directors
2.2.1. The Committee recommends that the board of directors, in addition to a chairperson, appoints a vice				Nothing additional to report.
chairperson, who can step in if the chairperson is absent and who can generally act as the chairperson's close
sparring partner.
2.2.2. The Committee recommends that the chairperson in cooperation with the individual members of the				The board members' experiences and specific qualifications are evaluated together
board of directors ensures that the members up-date and supplement their knowledge of relevant matters, and				with the Board's collective competences as part of the annual board evaluation, and
that the members' special knowledge and qualifications are applied in the best possible manner.				the Chair together with the rest of the Board are very conscious of utilising each
					board member's specific competences for considerations or tasks that match such
					competences.
2.2.3. The Committee recommends that if the board of directors, in exceptional cases, requests a member				None of the board members performed such special duties for H+H during 2023.
of the board of directors to take on special duties for the company, for instance, for a short period to take part				Should the situation occur, the Board will follow the recommendation and issue a
in the daily management of the company, the board of directors should approve this in order to ensure that the				company announcement describing which daily management duties that are being
board of directors maintains its independent overall management and control function. It is recommended that				performed and by who from the Board.
the company publishes any decision on allowing a member of the board of directors to take part in the daily
management, including the expected duration thereof.
3.	The composition, organisation and evaluation of the board of directors
3.1.	Composition

Danish Recommendations on Corporate

3.1.1. The Committee recommends that the board of directors on an annual basis reviews and in the management commentary and/or on the company's website states

• which qualifications the board of directors should possess, collectively and individually, in order to perform its duties in the best possible manner, and

• the composition of and diversity on the board of directors.

The considerations on the optimal collective competence profile for the Board and the general individual qualities required for a board member are part of the annual board evaluation and held up against the actual composition and diversity of the members of the Board in order to assess if there are material gaps that should be filled by changing the composition of the Board The competence profile of the Board together with the actual board diversity of the current board members are described in the annual report.

Governance

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H+HCorporate Governance Statement 2023

				Description of compliance or explanation of non-compliance
Recommendation	Compliance	and what is done instead
3.1.2. The Committee recommends that the board of directors on an annual basis discusses the company's				H+H has a group diversity policy available on H+H's website. The policy supports H+H's
activities in order to ensure relevant diversity at the different management levels of the company and adopts a				efforts to have a culture that is inclusive and values diversity and provides equal access
diversity policy, which is included in the management commentary and/or available on the company's website.				to opportunities. The Board and the Executive Board regularly consider the diversity of
				the Executive Board, Group Management and regional management as well as among
				the successors, in particular when changes are made.
					Danish
3.1.3. The Committee recommends that candidates for the board of directors are recruited based on				Based on the annual board evaluation arranged by the Nomination Committee and
a thorough process approved by the board of directors. The Committee recommends that in assessing				the conclusions of the board evaluation, including the candidate profiles in case the
candidates for the board of directors - in addition to individual competencies and qualifications - the need for				evaluation concludes that the board compositions shall change, relevant member(s)
continuity, renewal and diversity is also considered.				of the Nomination Committee together with other board members that have special	Recommendations
				competences and experience that is relevant for the recruitment carry out the
				recruitment process together with an external headhunter.
				The need for renewal as well as continuity is part of the normal annual board evaluation
				and therefore being considered when the Board decides if it wants to seek changes to
				its composition.
3.1.4. The Committee recommends that the notice convening general meetings, where election of members				Nothing additional to report.
to the board of directors is on the agenda - in addition to the statutory items - also includes a description of the
proposed candidates'					on
• qualifications,
				Corporate
• other managerial duties in commercial undertakings, including board committees,
• demanding organisational assignments and
• independence.
3.1.5. The Committee recommends that members to the board of directors elected by the general meeting				Nothing additional to report.
stand for election every year at the annual general meeting, and that the members are nominated and elected					Governance
individually.

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