Burberry Poncho Cape Jacket 70 X 25 Reversible Grey Haymarket Check Equestrian Knight Logo Please see photos for detailed condition. My items are priced with a low opening bid so I can sell more items, build my store and gain positive feedback. So, I am dependent on your happiness for my success :) All items are shipped with a TRACKING NUMBER with UPS so that you know where your item is at all times! Shipping Rates: $29.99 CAD for US and Canada with tracking number, $69.99 CAD for International (Outside of Canada and U.S.) with tracking number. Shipped with UPS, with 5-day service, so it gets to you quick. So no need to worry about delays with Canada Post and USPS. I am Canadian, born and bred, operating from a Canadian address, shipping mostly with UPS to avoid delays with Canada Post and USPS, not someone using this as a front for an Asian operation and sending you items from China that arrive a couple of months afterwards all beat up, smeared with virus after cruising through the world, or coated with harsh chemicals fresh from a Chinese factory, even if they claim they are sending it to you from Canada. I've had 18 positive feedbacks for items I sold in the last 6 months and 29 this year. Not to mention more sales from people that didn't bother leaving feedback. See my feedback here: https://www.ebay.ca/fdbk/feedback_profile/ca-raymond and please see my other items. If you are happy with your item, please leave me positive feedback :) CA-Raymond Thank your for your support!!! All items are guaranteed. Be sure to add me to your favorites list. Burberry Group plc is a British luxury fashion house established in 1856 by Thomas Burberry and headquartered in London, England.[5] It currently designs and distributes ready to wear, including trench coats (for which it is most famous), leather accessories, and footwear. HistoryEarly years, 19th centuryBurberry was founded in 1856 when 21-year-old Thomas Burberry, a former draper's apprentice, opened his own store in Basingstoke, Hampshire, England.[6] By 1870, the business had established itself by focusing on the development of outdoors attire.[6] In 1879, Burberry introduced gabardine to his brand, a hardwearing, water-resistant yet breathable fabric, in which the yarn is waterproofed before weaving.[7] In 1891, Burberry opened a shop in the Haymarket, London.[6] 20th century Burberry checkIn 1901, the Burberry Equestrian Knight logo was developed containing the Latin word "Prorsum", meaning "forwards", and it was registered as a trademark in 1909.[6] In 1911, the company became the outfitters for Roald Amundsen,[6] the first man to reach the South Pole, and Ernest Shackleton, who led a 1914 expedition to cross Antarctica. A Burberry gabardine jacket was worn by George Mallory on his attempt on Mount Everest in 1924.[8] Adapted to meet the needs of military personnel, the "trench coat"[6] was born during the First World War; it was worn by British officers in the trenches.[9] After the war, it became popular with civilians.[10] The Burberry check has been in use since at least the 1920s, primarily as a lining in its trench coats.[6] Burberry also specially designed aviation garments. In 1937, A. E. Clouston and Betty Kirby-Green broke the world record for the fastest return flight from London to Cape Town in The Burberry airplane that was sponsored by the brand.[11] Burberry was an independent family-controlled company until 1955, when Great Universal Stores (GUS) assumed ownership.[12] Influences and rise to prominenceDuring the 1970s and 1980s, Burberry signed agreements with worldwide manufacturers to produce goods complementary to the existing British collection, such as suits, trousers, shirts, sportswear and accessories, for men, women, and children. These products, designed under the strict control of headquarters in London, were produced and distributed through independent retail stores worldwide as well as through the Burberry stores, and contributed to the growth of the brand in sales and profits through to the late 90s, although the full extent of sales was not apparent in the parent company accounts since much was done through licensed agreements. The company had signed Lord Lichfield as photographer, Lord (Leonard) Wolfson was Chairman and Stanley Peacock OBE Managing Director.[13] In 1997, GUS director Victor Barnett became chairman of Burberry, hiring Rose Marie Bravo to execute a corporate reorganization and restoration of the brand as a luxury fashion house.[14][15] Barnett led the company up to its successful IPO in 2001.[16] 21st centuryIn May 2001, Christopher Bailey joined Burberry as creative director.[17][18] Bailey was the chief creative officer from 2014, as well as chief executive (CEO) from 2014 until November 2017.[19][20] Bailey stepped down as chief creative officer in March 2018 and had departed the brand completely by the end of 2018.[21] The "Equestrian Knight" logo (1999–2018)Between 2001 and 2005, Burberry became associated with "chav" and football hooligan culture. This change in the brand reputation was attributed to lower priced products, the proliferation of counterfeit goods adopting Burberry's trademark check pattern, and adoption by celebrities prominently identified with "chav" culture. The association with football hooliganism led to the wearing of Burberry check garments being banned at some venues.[22] Burberry Group plc was initially floated on the London Stock Exchange in July 2002. GUS divested its remaining interest in Burberry in December 2005.[23][24] In 2005, Sanyo-shokai was the Burberry ready-to-wear licence holder in Japan, with retail value of €435 million.[25] In 2006, Rose Marie Bravo, who as chief executive had led Burberry to mass market success through licensing, retired.[26] She was replaced by another American, Angela Ahrendts,[27] who joined from Liz Claiborne in January 2006, and took up the position of CEO on 1 July 2006. Ahrendts and Bailey successfully turned around the then chav-like reputation that the brand had acquired at the end of Bravo's tenure and the cheapening effect of the brand's omnipresence, by removing the brand's check-pattern from all but 10% of the company's products, taking the fragrance and beauty product licenses back in-house and buying out the Spanish franchise that was worth 20% of group revenues.[28][17][29][30] Burberry Chicago flagship store on the Magnificent Mile, built in 2012Burberry first sold on line in the US, then in the UK in October 2006, and in the rest of the EU in 2007.[31] 2010sIt was reported in 2012 that Ahrendts was the highest paid CEO in the UK, making £16.9m.[32] In October 2013, it was announced that Ahrendts would take up the position of Senior Vice President of retail and online at Apple, Inc. from April 2014, and would be replaced as CEO by Bailey.[33][34] During her tenure, sales increased to over £2 billion, and the market capitalization more than tripled to £7 billion.[35] Burberry promotes its British connection; according to The Guardian, a British national daily newspaper, as of July 2012, Burberry maintained two production facilities in Great Britain, one in Castleford producing raincoats, and one in Keighley.[36] In spring 2014, Bailey became CEO of Burberry and retained the role of chief creative officer.[34] His basic salary was £1.1m, with total compensation of up to £10m a year depending on sales targets being met.[37] In July 2016, it was announced that Celine boss Marco Gobbetti would become CEO of Burberry plc, while Bailey became the Creative Director with the title of President.[38][39] In 2016, the label launched its "Mr Burberry" fragrance.[40] Cape by Bailey at The Met's exhibit, Camp: Notes on FashionIn early May 2017, the store announced it was moving 300 employees from London to Leeds. In July 2017, Gobbetti replaced Bailey as CEO.[40] In March 2018, Burberry named Riccardo Tisci, creative director at Givenchy from 2005 to 2007, as the brand's chief creative officer.[41] He said: "I am honoured and delighted to be joining Burberry as its new chief creative officer and reuniting with Marco Gobbetti. I have an enormous respect for Burberry’s British heritage and global appeal and I am excited about the potential of this exceptional brand."[42] A few months later, Tisci presented a new logo and monogram for the brand, designed by the English graphic designer Peter Saville.[43][44] The interlocking TB monogram, which pays homage to founder Thomas Burberry, debuted in 2018.[45]In April 2018, it was announced that Sir John Peace would be stepping down as chairman of the board and would be replaced by as chairman by Gerry Murphy.[46][47] Murphy said: "Burberry is a unique British brand that I have admired for a long time and I am looking forward to working with Marco Gobbetti and the Board to guide the company through its next phase of growth."[48] Murphy had served as CEO of Kingfisher plc, as well as being current chairman of Tate and Lyle and The Blackstone Group International Partners LLP.[49] Peace's departure marked a change in leadership for the group, with Gobetti and Ahrends having left in the previous years.[50][51] In May 2018, it was reported that Burberry had filed a lawsuit against Target Corporation, claiming that Target had copied its check print designs and was seeking an amount of $2 million, in addition to its legal costs.[52][53] In July 2018, it was reported that in the previous five years Burberry had destroyed unsold clothes, accessories, and perfume worth over £90m in order to protect its brand and prevent the items being stolen or sold cheaply. While a representative of Greenpeace criticised the decision, Burberry claimed that the energy generated from burning its products was captured, making it environmentally friendly.[54][55][56] According to Burberry's annual report, by the end of the financial year 2018, the company had destroyed goods worth £28.6m, an increase on the £26.9m from its financial year 2017.[57] In September 2018, Burberry reported that it would stop the practice of burning unsold goods, with immediate effect. Burberry also announced it would stop using real fur in its products, and would phase out existing fur items.[58] In February 2019, Burberry apologized for showcasing a hoodie with a noose around the neck in its show at the London Fashion Week. Burberry said it had removed the item from its collection, after criticism from one of its own models led to an online backlash.[59] In February 2020 Burberry was forced to close 24 of its 64 Chinese mainla 2020sIn 2021, Burberry announced that it would become a "climate positive" company by 2040.[61][62][63][64] The fashion brand also announced that it would commit to a new target to reduce supply chain emissions (i.e. assets not owned or controlled by the reporting organisation) by 46% by 2030, an increase from an earlier pledge of a 30% reduction.[65][66] In March 2021, Burberry was the first luxury brand to be targeted in China as part of the backlash regarding sanctions against the alleged human rights abuses in Xinjiang.[67] Brand ambassador and Actress Zhou Dongyu terminated her contract with Burberry.[68] In April 2022, after the departure of Marco Gobbetti, the Versace boss Jonathan Akeroyd took over Burberry as the next chief executive in a deal including a £6m golden hello to cover the loss of bonus and share awards for leaving his previous position.[69][70] In July, 2022, Burberry announced the famous Thai artist Bright Vachirawit as their first Global Brand Ambassador from the South Asia-Pacific Region.[71][72][73][74][75][76] Later in 2022, the company's chief operating and financial officer announced a ban on the use of exotic skins—such as alligator and snake—in its collections.[77][78][79] In September 2022, Burberry announced designer Daniel Lee, former creative director of Bottega Veneta,[80] as Riccardo Tisci's replacement as the company's chief creative officer.[81][82][83][84] In February 2023 a new logo and branding was introduced: this brought back the Equestrian Knight logo.[85][86] The advertising campaign features famous British models and musicians such as Shygirl, Liberty Ross, Skepta and more.[87][88][89][90][91][92][86] In April 2023, Burberry added rapper Kano to the "British Burberry revolution".[93][94][95][96] That phrase itself is part of the company's new culture introduced by Lee since February 2023.[97] The new direction was phrased as "a modern take on British luxury".[98][99] In Popular CultureOn 29 March 2023, a Burberry tote was used in an episode from Succession. According to Google, viewers have searched for the 'Burberry tote bag'.[100] [101] [102] Google searches for Burberry and the tote rose by more than 310 per cent after the episode aired.[103][104] References "Fashion house Burberry appoints Gerry Murphy as chairman". Financial Times. 13 April 2018. Retrieved 5 May 2023. WW, FashionNetwork com. "Versace's Jonathan Akeroyd is new Burberry CEO". FashionNetwork.com. Retrieved 2 May 2023. Scott, Fiona Sinclair (21 February 2023). "Burberry's Daniel Lee makes his big debut at London Fashion Week". CNN. "Annual Report 2022" (PDF). Burberry. Retrieved 13 February 2023. "Burberry: The History and Heritage of the Iconic Luxury Brand". Luxity. 9 October 2019. Retrieved 25 February 2022. "Burberry History". Burberryplc.com. Archived from the original on 22 June 2015. Retrieved 4 January 2011. Chastain, Sue (4 December 1985). "Trenchant coat cuffs may fray and buttons may pop but a true believer won't abandon his Burberry". Chicago Tribune. p. 40. 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"Top paid CEO in UK is an American woman". CNN Money. Retrieved 11 June 2013. Broeke, Teo van den (17 February 2018). "Christopher Bailey: A life at Burberry". British GQ. Retrieved 1 May 2023. Marfil, Lorelei (8 April 2014). "Angela Ahrendts Named Honorary DBE". Women's Wear Daily. Retrieved 8 April 2014. Andrew Roberts (15 October 2013). "Burberry Designer Bailey to Become CEO as Ahrendts Goes to Apple". Bloomberg. Retrieved 15 October 2013. Carole Cadwalladr (16 July 2012). "The hypocrisy of Burberry's 'Made in Britain' appeal". The Guardian. Retrieved 15 March 2015. "Burberry shareholders vote against remuneration report". BBC News. 11 July 2014. Retrieved 12 July 2014. Conlon, Scarlett (20 January 2017). "Burberry CEO to join the company this month". Vogue India. Retrieved 1 May 2023. Paton, Elizabeth (11 July 2016). "Burberry C.E.O. to Step Down, Ending Dual-Role Experiment at Helm". The New York Times. Retrieved 11 July 2016. Vandevelde, Mark (18 May 2017). "Burberry sales rise as Bailey bows out as chief executive". Financial Times. United Kingdom. Retrieved 18 May 2017. "The history of Burberry: A Timeline". Haute History. Retrieved 25 February 2022. Newbold, Alice. "Burberry Announces Riccardo Tisci As Chief Creative Officer". British Vogue. Retrieved 8 March 2018. "Riccardo Tisci Unveils New Burberry Logo And It's Drawing An Unexpected Comparison". Nylon. 2 August 2018. Retrieved 2 May 2023. Sebra, Matt (2 August 2018). "Burberry Has a New Logo". GQ. Retrieved 6 October 2018. "Burberry Has A New Logo and Monogram". Harper's BAZAAR. 2 August 2018. Retrieved 6 October 2018. Media, Insider (13 April 2018). "Burberry names chairman designate to succeed Sir John Peace | Yorkshire Business News". Insider Media Ltd. Retrieved 1 May 2023. Jahshan, Elias (22 June 2017). "Burberry chairman Sir John Peace to step down - Retail Gazette - retail news, features & analysis". www.retailgazette.co.uk. "Tate & Lyle's Gerry Murphy is Burberry 's new chairman". London Business News | Londonlovesbusiness.com. 13 April 2018. Retrieved 2 May 2023. "Burberry appoints Tate & Lyle's Murphy as new chairman". Financial Times. 13 April 2018. Retrieved 2 May 2023. Butler, Sarah (13 April 2018). "Burberry hires former Kingfisher boss Gerry Murphy as chairman". The Guardian. ISSN 0261-3077. Retrieved 29 December 2018. "Burberry Appoints New Chairman". The Business of Fashion. 13 April 2018. Retrieved 1 May 2023. Hanbury, Mary (9 May 2018). "Target is being sued by Burberry, and it reveals one of the biggest problems facing the clothing industry". Business Insider. Retrieved 31 May 2018. UK, FashionNetwork com. "Burberry sues Target for copying its check pattern". FashionNetwork.com. Retrieved 5 May 2023. Kollewe, Julia (6 September 2018). "Burberry to stop burning unsold items after green criticism". The Guardian. Retrieved 2 May 2023. Paton, Elizabeth (6 September 2018). "Burberry to Stop Burning Clothing and Other Goods It Can't Sell". The New York Times. Retrieved 2 May 2023. Morris, Ben (19 July 2018). "Burberry burns luxury goods worth millions". BBC News. Retrieved 19 July 2018. Handley, Lucy (6 September 2018). "British fashion house Burberry to stop burning unsold items". CNBC. Retrieved 6 September 2018. "Burberry stops burning unsold goods". BBC News. 6 September 2018. Retrieved 6 September 2018. "'Suicide isn't fashion': Burberry apologizes for hoodie with noose around the neck". CNN.com. 19 February 2019. "Burberry Says Viral Epidemic Devastates China Sales". Bloomberg.com. 7 February 2020. Retrieved 7 September 2020. Davis, Jessica (11 June 2021). "Burberry to be climate positive by 2040". Harper's BAZAAR. Retrieved 16 June 2021. Staff, M. W. (11 June 2021). "Burberry Aims To Be Climate Positive By 2040". Man's World India. Retrieved 1 May 2023. "Can fashion be climate positive? Burberry commits to finding out". Vogue Business. 10 June 2021. Retrieved 1 May 2023. "Burberry plans to be climate positive by 2040 – here's how". Vogue France (in French). 11 June 2021. Retrieved 1 May 2023. Keating, Cecilia (14 June 2021). "'Going further': Burberry vows to be 'climate positive' by 2040". Business Green. Retrieved 16 June 2021. "'Nature-Based Solutions': Burberry Promises To Slash Emissions By 46% By 2030 & Be Climate Positive By 2040 - Green Queen". www.greenqueen.com.hk. Retrieved 1 May 2023. Togoh, Isabel (26 March 2021). "As Burberry Faces Backlash In China Over Xinjiang Cotton, Other Luxury Brands Could Face Boycott". Forbes. Retrieved 26 March 2021. Fletcher, Richard. "Burberry hit by Chinese boycott". The Times. ISSN 0140-0460. Retrieved 26 March 2021. "Jonathan Akeroyd BoF 500 The People Shaping the Global Fashion Industry". www.businessoffashion.com. Retrieved 2 May 2023. "Burberry Posts Strong Growth in H1 as Jonathan Akeroyd Sets Out Strategy". Footwear News. 17 November 2022. Retrieved 2 May 2023. "Style File: Bright Vachirawit Chivaaree, Thai Actor & Burberry Ambassador". Vogue Hong Kong. Retrieved 2 May 2023. "Bright Vachirawit Dominates Social Media With His Attendance to Burberry's SS23 Show". EnVi Media. 26 September 2022. Retrieved 24 May 2023. admin (3 November 2022). "Bright Vachirawit is a Thai celebrity with the most influence in the fashion world". Thai Update. Retrieved 26 April 2023. Tso, Gloria Christine (15 May 2023). "Bright Vachirawit Chivaaree On The Living Legacy Of F4 Thailand's Thyme". Harper's Bazaar Singapore. Retrieved 15 May 2023. admin (12 April 2023). "Bright Vachirawit and Yaya Urassaya Are On The Top 30 Influencers With The Highest EMV (Earned Media Value) During Fashion Week Fall Winter 2023". Thai Update. Retrieved 13 April 2023. "Bright Vachirawit And The Liberating Power Of The Seaside At Burberry Spring/Summer 2023". Harper's Bazaar Singapore. Retrieved 1 May 2023. Sachkova, Margarita (18 May 2022). "Big News: Burberry Bans Exotic Skins!". PETA UK. Retrieved 1 May 2023. "Burberry Bans Exotic Skins". The Business of Fashion. 18 May 2022. Retrieved 1 May 2023. Glover, Simon (20 May 2022). "Burberry announces ban on exotic skins". Ecotextile News. Retrieved 31 October 2022. Phelps, Nicole (28 September 2022). "Riccardo Tisci Is Out at Burberry, and Daniel Lee Has Been Hired to Replace Him". Vogue. Retrieved 31 October 2022. "Burberry Names Daniel Lee Chief Creative Officer". The Business of Fashion. 28 September 2022. Retrieved 28 September 2022. Nadhirah, Lyana (22 February 2023). "Bright Vachirawit, Jun Ji-Hyun Tampil Bergaya Dengan Burberry!". EH!. Retrieved 26 April 2023. Zhang, Tianwei (26 September 2022). "Bright, Simone Ashley, Kanye West, Milly Alcock, and Gillian Anderson Gather for Burberry Show". WWD. Retrieved 26 April 2023. Zhang, Tianwei (21 February 2023). "Bright, Son Heung-Min and Jun Ji-Hyun Wear Trenchcoats to Daniel Lee's Burberry Debut". WWD. Retrieved 26 April 2023. "Burberry unveils "archive-inspired" charging knight logo". Dezeen. 7 February 2023. Retrieved 8 February 2023. "Burberry's New Logo Breaks From Modern Tradition". Esquire. 6 February 2023. Retrieved 29 March 2023. "Shygirl, John Glacier and a swan front Daniel Lee's first Burberry campaign". Dazed. 6 February 2023. Retrieved 2 May 2023. Wright, Georgia (6 February 2023). "In pictures: Burberry unveils refreshed brand image under Daniel Lee - Retail Gazette". www.retailgazette.co.uk. Retrieved 2 May 2023. Cripps, Amie (7 February 2023). "Raheem Sterling and Skepta Feature in Burberry's Latest Campaign". VERSUS. Retrieved 2 May 2023. "Here's a First Look at Daniel Lee's Burberry". GQ. 6 February 2023. Retrieved 8 February 2023. Street, Chloe (6 February 2023). "Daniel Lee debuts his new look Burberry featuring Shygirl and Skepta". Evening Standard. Retrieved 2 May 2023. "How singer and rapper Shygirl became the fashion muse of today". Vogue India. 23 April 2021. Retrieved 2 May 2023. IN, FashionNetwork com. "Kano joins line-up of British stars fronting Burberry marketing". FashionNetwork.com. Retrieved 2 May 2023. "Kano Hits East London In Latest Burberry Campaign by Daniel Lee". Hypebeast. 17 April 2023. Retrieved 2 May 2023. Letonja, Timotej (24 April 2023). "Exploring the Intersection of Rap and Fashion: Daniel Lee's Latest Burberry Collection Featuring Kano". Numéro Netherlands. Retrieved 2 May 2023. Willson, Tayler (17 April 2023). "Kano's A Burberry Boy Now". HIGHSNOBIETY. WW, FashionNetwork com. "Launchmetrics AW23 report: Dior and Burberry are big hits, but what else made an impact?". FashionNetwork.com. Retrieved 26 April 2023. Willson, Tayler (20 February 2023). "WELCOME TO DANIEL LEE'S VERY BRITISH BURBERRY". HIGHSNOBIETY. "Inside Daniel Lee's brand new vision for Burberry". Lifestyle Asia Kuala Lumpur. 7 February 2023. Retrieved 20 April 2023. "The Burberry Tote Bag Is The Breakout Star Of 'Succession' Season Four". Grazia. Retrieved 1 May 2023. "'Succession' Season Premiere Drives 310 Percent Search Interest Spike for Burberry Handbags After Viral 'Ludicrously Capacious' Scene". WWD. 29 March 2023. Retrieved 1 May 2023. Segarra, Edward. "'Succession' fans can't get enough of 'monstrous' Burberry bag cameo: 'It deserves an Emmy'". USA TODAY. Retrieved 1 May 2023. "The Burberry tote is actually rising in popularity after that 'Succession' episode". Harper's BAZAAR. 29 March 2023. Retrieved 29 March 2023. Stevenson, Gabi. "A $2,900 Burberry tote was deemed 'ludicrously capacious' by a character on 'Succession.' Fans can't get enough of the memes — and the bag itself". Insider. Retrieved 29 March 2023. "戰馬回歸、狐狸與天鵝為何獨具意義？關於Burberry Logo演變故事：創新不是抹滅，而是延伸百年經典元素！". GQ Taiwan (in Chinese). 7 February 2023. Retrieved 2 May 2023. "Burberry Has Changed Its Iconic Logo for the First Time in 20 Years | Fortune". Retrieved 2 May 2023. Admin, Joe-LMW. "Burberry Logo and Its History | LogoMyWay". Retrieved 2 May 2023. "Burberry Logo and symbol, meaning, history, PNG, brand". 1000logos.net. Retrieved 2 May 2023. "Burberry Logo, symbol, meaning, history, PNG, brand". Retrieved 2 May 2023. "Daniel Lee breathes new creativity and life at Burberry". L'Officiel Malaysia | Fashion, Beauty, Lifestyle, Arts & Culture. Retrieved 2 May 2023. "Inside Daniel Lee's brand new vision for Burberry". Lifestyle Asia Kuala Lumpur. 7 February 2023. Retrieved 2 May 2023. Maoui, Zak. "Burberry's big return to British eccentricity". British GQ. Retrieved 2 May 2023.External links Selected royal warrant holders of the British Royal FamilyBy Appointment toKing Charles ...Coat of arms of His Majesty the King Coat of arms of His Majesty the King in Scotland Badge of His Royal Highness The Prince of WalesBy Appointment toQueen Elizabeth Strategic ReportIntroductionThis is Burberry’s Strategic Report for the financial year ending 31 March 2016.The Report sets out information on the Burberry brand, business operations, strategy,culture and its activities aimed at driving positive environmental and social impact.The following messages from Sir John Peace and Christopher Bailey highlightBurberry’s performance during the year and the outlook for the Company.The Burberry brand remains strong.Sir John PeaceChairmanin a 53% pay-out ratio based on adjusted earnings pershare, in line with our plan. Having reached our dividendpay-out target, we are now moving to a progressivedividend policy and, as such, plan to hold the 2016/17dividend per share at least in line with 2015/16. This reflectsthe Board’s confidence in the future growth of the business.Over the past five years, Burberry has returned around£640m to shareholders. Our capital allocation frameworkprioritises the investment needs of the business and regulardividend payments and then considers additional returnsto shareholders, balancing capital efficiency with financialflexibility in what is a cyclical sector. Balancing thesefactors, we are commencing a share buyback programmeof up to £150m starting in 2016/17. Future returns willbe kept under regular review reflecting these factors.This underlines our commitment to increasing shareholderreturns over time, which remains a key priority forthe Board.Future strategyThe Burberry brand has never been stronger. We haveauthentic, distinctive products with enormous futurepotential. Burberry remains a growth business, butfollowing many years of out performance and investmentin the brand and in the business, we are experiencingfundamental change in our industry and our consumer.To stay ahead of these changes, we have been acceleratingour productivity and efficiency agenda, particularly lookingat our ways of working. We have also been addressing howto optimise future organic revenue growth opportunitiesand have identified significant growth opportunities acrossour existing channels, products and regions. The Boardfirmly believes that these initiatives will also create futurevalue for our shareholders.A great deal has been achieved over the past 12 monthsunder Christopher Bailey’s leadership in very challengingmarket conditions. This includes strengthening the seniormanagement team by bringing in people with differentexperience and backgrounds throughout the year.This report sets out further detail on the progress madeduring the year across all our core strategies and theGroup’s future plans.2015/16 has been a watershed year for the luxurysector – marked by a challenging global environmentwith the slowdown of the Chinese economy, increasedgeopolitical concerns in the Middle East and Russia,uncertainty in the Eurozone, currency volatility and asignificant fall in commodity prices. All of these combinedtogether to have a negative impact on the performanceof the luxury sector as a whole, as demand slowedsharply in many of our key markets such as Hong Kongand Macau. These factors have also weighed heavily oninvestor sentiment and recent share price performance.The luxury sector will continue to be affected by thesefactors in the short term, but the Board remains confidentof the Group’s compelling opportunities in the longer term.Financial performanceSet against this challenging environment, Burberryhas delivered 2015/16 revenues of £2.5bn and adjustedprofit before tax of £421m (down 8% and 10% underlyingrespectively), in part impacted by a £19m decreasein licensing profit due to the planned expiry of ourJapanese licences.The Group ended the year with a strong cash balance of£660m, and consequently the Board has recommendeda 5% increase in the full year dividend to 37.0p, resulting10Strategic Report – IntroductionChairman’sLetterPeople and payThe successful execution of our strategy over thecoming years will rely on the commitment and dedicationof our staff, many of whom are highly sought after byour competitors. It is therefore important that we paycompetitively while maintaining the discipline of onlyrewarding performance.Our overall approach to incentive structures for all staff,including senior management, is based on performance –so when the business does not perform as well, this hasan impact on what we pay to our staff. And when the shareprice falls as it has in the past year, this has a substantialimpact on historical share awards.Therefore:· no pay rises this year for executive directors orsenior management;· no annual bonus will be paid to executive directorsin view of the stretching nature of performance targetsset at the beginning of the financial year; and· previous awards granted under the Co-InvestmentPlan and Restricted Share Plan awarded in 2013 willnot now vest.Further information is set out in the Directors’Remuneration Report on pages 83 to 105.Board and Committee changesThe composition of the Board has evolved significantlyover the past three years with the appointment of fournew non-executive directors and further changes plannedover the coming year.David Tyler stepped down from the Board on 31 December2015, and I would like to thank David for his immensecontribution to Burberry since its IPO in 2002.The Board also keeps under review the compositionof its Committees and tenure of the Committee Chairs.Following a review during the year, the Board has appointedJeremy Darroch as Chair of the Audit Committee andFabiola Arredondo as Chair of the RemunerationCommittee, with effect from 1 August 2016. I wouldlike to thank Philip Bowman and Ian Carter for theircommitment as previous Chairs of these importantCommittees over a number of years.Evolving away from the past practice of all non-executivedirectors sitting on all Committees, membership in thefuture will be changed to comprise different non-executiveson each Committee.Governance and diversityAs Chairman, I am committed to Burberry seeking tooperate to the highest standards of corporate governance.The work of the Board and its Committees during the yearalong with the assessment of its performance is set outin the Corporate Governance Report on pages 68 to 82.This work included considering, with management,Burberry’s plans for the future, which will be an importantarea of continuing focus for the Board in the coming yearas we execute on our strategic and operational initiatives.Burberry continues to support diversity in all its formsacross the organisation including the Board. While allBoard appointments are made on merit, the Boardcontinues to believe in the importance of a diverse Boardand has always had strong gender diversity amongstits membership, including at executive level. The Boardwill continue to monitor diversity and take such stepsas it considers appropriate to maintain its position asa meritocratic and diverse business.Looking aheadLooking ahead to 2016/17, we are planning on the basisthat the challenging macro-economic environment willcontinue to impact the luxury sector.Against this background, we are accelerating ourproductivity and efficiency initiatives to mitigatethe impact of these challenges and will focus evenmore intensely on optimising our future revenuegrowth opportunities.Finally, I would like to thank all of our people and theBoard for their hard work and commitment to Burberry,and to thank you, our shareholders, for your supportover the past 12 months.11Strategic Report – IntroductionChristopher BaileyChief Creative and Chief Executive Officerholding the FY 2017 dividend at least in line with FY2016. In addition, we plan to commence a share buybackprogramme of up to £150m starting in FY 2017. Both theseactions reflect our confidence in the growth prospects forthe business, and our commitment to balancing financialefficiency and flexibility.Our headline financial performance masks some morepositive aspects that give confidence for the future. Withinretail, while comparable sales decreased by 1% overallthey were up 3% when excluding the significantly impactedmarkets of Hong Kong and Macau. Improved conversionglobally reflected an intense focus on driving retail disciplinesin the face of deteriorating store traffic. And we werepleased that digital again grew in all regions, reflectingour sustained focus on, and investment in, this channel.More broadly, continued progress within our four keythemes of Brand First, Famous for Product, CustomerCentric and Productive & Responsible demonstrates theunderlying health of our business – even in difficult times.Brand firstAt the heart of this is our emphasis on – and investmentin – our brand, which continued to resonate strongly withcustomers around the world.A key highlight in the year was our announcement inNovember that we will move to one Burberry label during2016, phasing out our Prorsum, London and Brit lineswhile retaining our breadth of price points and attitudes –from casual to high fashion. Together with our ongoingstreamlining of assortments, this is an important step inensuring an ever-more coherent brand expression globally,while making the shopping experience simpler and moreintuitive for our customer, better reflecting the way theyshop and think about the brand today.Another key milestone in our pursuit of greater brandconsistency was the full launch of the global collectionin Japan, marking the end of a 35-year licence and thelast major step in the structural integration of our globalbusiness over the past decade. With excellent earlymomentum and significant headroom for growth,we see real potential over the coming years in this,the second-largest luxury market in the world.With growth of 1-2%, from 7% just two years ago, sectorperformance was impacted by a number of factors, fromslowing Chinese consumption and a sluggish Eurozone, togeopolitical tensions and volatile financial markets. And wesaw some significant changes in the geographic dynamicsof luxury consumption, not least the shifts in Chinesetourist flows that so dramatically impacted Hong Kong –one of the most profitable luxury markets in the world.Given the shape of Burberry’s global footprint, thesenegative trends had a disproportionate impact on ourbusiness during the year, and this was reflected in ouroverall financial performance. However, our global teamsworked hard to mitigate declines in traffic across ourmajor markets, as we focused on what we could controlin a very difficult environment. And, near-term dynamicsaside, we continued to make good operational andstrategic progress from sound foundations.Performance summaryRevenue for the year was £2.5bn, down 1% underlying,and adjusted profit before tax was down 10% underlyingto £421m, in part impacted by a £19m decrease in licensingprofit relating to the planned expiry of our Japaneselicences. Net cash increased by £108m to £660m, andwe increased the full year dividend by 5% to 37p, a 53%payout. Having met our payout target of 50%, we willnow move to a progressive dividend policy going forward,2015/16 was a challenging year for the luxury industry.12Strategic Report – IntroductionChief Creative and ChiefExecutive Officer’s LetterBuilding on last year’s intense focus on Burberry’s uniqueBritish heritage, we continued to celebrate and develop ourdistinctive brand story, both on and offline. This includedthe introduction of new customer events that highlight thecraftsmanship behind our iconic products with live in-storedemonstrations; the extension of our ‘Art of the Trench’initiative to the creative communities of the Middle Eastand Seoul; and our ‘London in Los Angeles’ event whichmarked the opening of our new Rodeo Drive flagship with arunway show featuring the Queen’s Grenadier Guards, as wecontinue to elevate our brand positioning in the US market.In all brand activity we maintained our focus on digitalengagement, developing richer and more personalisedexperiences for our customers, and we saw recordengagement with our content online. Partnerships withcreative innovation leaders globally played an importantrole here, and we collaborated with companies includingApple, Google, DreamWorks, Snapchat, LINE, Kakao andWeChat during the year. Finally, we regained our leadingposition in the prestigious annual L2 Digital IQ: Fashionindex in a year that saw our social media following increaseby almost a third, to over 40 million people globally.Famous for productAlongside this commitment to the concept of Brand First,our enhanced emphasis on being Famous for Productgained momentum through a twin focus on our iconicUK-made products and fashion innovation.Following the re-launch of our heritage trench offer last year,our cashmere scarf moved to the fore with the launch of theScarf Bar in stores and online. Offering our classic checkscarf in over 30 colours and with extended monogrammingservices, this drove strong results over the year. We alsosaw outperformance from ponchos as we continued togrow this emerging business following 2014’s runwaysuccess, as well as a continued focus on heritage trenches,supported by new colours, fabrications and the introductionof monogramming.Further underpinning our commitment to the Britishprovenance of key iconic products, we announced inNovember a £50m initial investment in a new trench coatweaving and manufacturing facility, to be located in Leeds,Yorkshire. The new facility will bring increased capacityand greater efficiency, securing the future productionof the trench and offering scope to develop and produceother products in the future.Elsewhere in product, our accessories business recordedsome notable successes in bags during the year, reflectinga more focused approach to core replenishment andfashion styles, and supported by dedicated marketing andservice strategies worldwide. Standout performers wereour Banner bag, now our most successful style followingits introduction just last year, and the monogrammablerunway rucksack, which enjoyed an exceptional editorialand customer response following the September runwayshow. Both styles contributed to outperformance fromaccessories over the year.Meanwhile, our Beauty business continued to build, alwayswith a strong link back to fashion. Following its launch inSeptember 2014, we cemented My Burberry as the corepillar in our women’s fragrance business through theintroduction of further products and a continued marketingfocus, while making preparations for the April 2016 launchof Mr. Burberry, our most significant men’s fragrance todate. Mirroring My Burberry’s alignment with our broaderheritage relaunch, Mr. Burberry will provide a platform tofocus attention on our menswear business overall. Withthe announcement of several major partnerships in theyear, including Shiseido and Sephora, and numerousindustry awards for our key products, we remain excitedabout the brand’s potential in the beauty category.Customer centricWithin our third theme, Customer Centric, we made furtherprogress in developing and enhancing our retail practicesto meet the needs of a fast-evolving customer in anincreasingly digital world.In an environment of reduced store traffic globally, wemaintained our focus on driving loyalty and conversionthrough great service, underpinned by our ongoinginvestment in data and insight. We also enlarged ourBurberry Private Client teams and expanded the coverageof our Customer Value Management tool to provide a morepersonalised service to more of our customers globally.Both drove strong results in the year.Consistent with our broader focus on merging thephysical and digital, we made further investments toensure our customers have a seamless experience ofthe brand, wherever and however they shop. This includedthe expansion of our single pool of inventory to increaseavailable options to customers in all of our 44 onlinemarkets, following its introduction in China last year; thecontinued enhancement of our relaunched mobile platform,which drove a threefold increase in mobile penetration yearon-year; the introduction of new payment options includingChina Union Pay and Apple pay; and preparations for thelaunch in April 2016 of our new China website, which willdramatically improve site performance in one of the world’smost significant online markets.13Strategic Report – IntroductionFinally, in February we announced our plans to reshapeour runway show calendar with twice-yearly presentations,bringing womenswear and menswear together and makingthe full collection available for purchase in-store and onlineimmediately following the show. Beginning in September2016, this new approach reframes long-establishedindustry norms through a customer lens, allowing thosewho purchase our products to have them when they wantthem – not when the traditional fashion calendar dictatesthey can.Productive and responsibleUnder our fourth theme of Productive and Responsible,we again sharpened our focus on productivity duringthe year – not least given the testing external context.While realising our true potential here is a multi-yearprogramme of work, we saw progress across its keydimensions: in retail, where an intense focus on conversiondrove continued improvement globally; in product, wherewe drove a further reduction in assortments and whereembedding lean disciplines in our internal supply chainresulted in a lead time reduction of 75% and a productivityimprovement of more than 15%; and in processes,where we completed the first phase of our core IT systemupgrade and began to see immediate improvements in theresponsiveness of decision making across the business.Alongside this focus on productivity, we redoubled effortsto drive efficiency throughout the organisation. In thenear-term, this included realising significant savings ondiscretionary spending to mitigate trading challenges, butwe are also planning to embed longer-term improvementsthrough a significant evolution of our ways of working,the implementation of which will begin in 2016/17.We also enhanced our commitment to greater sustainabilityacross our global operations. Linked to our broaderemphasis on culture, a key dimension of this was human –with notable achievements in the year including becominga Principal Partner to the UK Living Wage Foundationand the launch of our Burberry Apprentices scheme,with participants joining our retail, internal manufacturingand distribution teams in the UK ahead of a rollout tothe wider business over the coming years. In addition,we were proud to support OUTstanding and Open ForBusiness, two organisations dedicated to highlightingthe positive business case for equality of opportunity andthe promotion of LGBT communities within the workforce.In the environmental space, we made further advancesin ensuring sustainable practices in our supply chain andextended our Ethical Trading Programme to cover key rawmaterial, beauty and leather suppliers. In recognition of theprogress we have made in the field of sustainability,we were proud to be named to the Dow JonesSustainability Indices for the first time.Looking aheadWhile the scale and duration of current trading challengesis unclear, the outlook for the luxury sector as a wholeis subdued. In this context, we will continue to responddynamically to near-term realities as they unfold. However,as a growth business, we will always keep near-termresponsiveness in balance with the longer-term horizon.And we see many opportunities ahead. We are on the pathto becoming a more productive business, but we havefurther to go and more benefits to realise, not least in retail.We have authentic, distinctive products, with significantfuture potential to unlock through greater focus and clarityin our assortments and marketing. We have tremendousbrand momentum and positioning globally, but still withscope for greater consistency – including in some of ourkey markets. And we have a real competitive advantagein our digital mindset as we enter an increasinglyomnichannel world.This is an important moment in Burberry’s evolution.Following many years of outperformance and a multi-yearprogramme of investment in the brand and the business,we are experiencing fundamental change in the industryand our consumer. And just as we have done in the past,we want to stay ahead of this change and unlock its potential.So we begin 2016/17 with an intense focus on howwe position ourselves for success in the coming years.As set out in the coming pages, we have consideredin detail what we need to amplify and evolve – strategicallyand operationally – to secure the next phase of our growth,and to be the company we want to be in a changingworld. Through a programme of new initiatives to enhanceproductivity and efficiency across product, retail andprocesses, we are confident that Burberry will againoutperform the sector in this new context over the comingyears. And we will become a more effective organisationin the process, because we will have to think differentlyand work differently to capture the significant revenueand cost opportunities we have identified. This will bringchange and challenge, but it will also energise our wholeorganisation anew around the extraordinary global potentialof a 160-year-old British company uniquely placed forthe future.We are excited for this next phase.14Strategic Report – Introduction 16Senior Leadership Team pictured left to right:Back row:Stephen Gilbert Senior Vice President, ArchitectureSimona Cattaneo Senior Vice President, BeautyFabrizio Fabbro Senior Vice President, Creative OperationsMatt McEvoy Chief of Strategy and New Business DevelopmentFumbi Chima Chief Information OfficerRoberto Canevari Chief Supply Chain OfficerSteve Sacks Chief Customer OfficerPaul Price Chief Merchandising OfficerSarah Manley Chief Marketing OfficerPascal Perrier Chief Executive Officer, Asia PacificLuc Goidadin Chief Design OfficerFront row:Andrew Maag Chief Executive Officer, EMEIA and AmericasJohn Smith Chief Operating OfficerCarol Fairweather Chief Financial OfficerChristopher Bailey Chief Creative and Chief Executive OfficerGreg Stogdon Senior Vice President, Creative MediaDonald Kohler President, AmericasLeanne Wood Chief People and Corporate Affairs Officer17Strategic ReportBurberry groupoverview19Strategic ReportBurberry is a global British luxury brand with a heritage of design, innovationand craftsmanship. The following pages set out the Company’s business andoperating models and information relating to its sales channels, regionalpresence, products and the external market in which it operates. Founded in 1856, Burberry is a global luxury brand with a distinctive Britishidentity. Since then, the brand has built a reputation for design, innovationand craftsmanship. With the invention of gabardine by Thomas Burberrymore than 130 years ago, outerwear has been at the core of the business andremains so today – best expressed through the iconic Burberry trench coat.Four key themes underpin the Company’s strategic agenda, shaping andconnecting its global activities. These key themes are set out below.Customer-centricThe customer is central to the Company’s activities.Burberry aims to be sector-leading in understanding,engaging and serving its customers, both onlineand offline.· A culture of continuous improvement in the design andexecution of customer-facing initiatives and services.· Online and in-store innovations which work togetherto create a seamless experience wherever customersencounter the brand.Brand firstThe business is led by the brand, with decisions takenin its best long-term interests.· Authentic British heritage with rich cultural andhistorical associations.· Craftsmanship, innovation, design and creativityare key characteristics.· Broad global appeal across genders and generations.· Global engagement driven by innovative creativecontent and experiences, supported by digital, socialand traditional media.Famous for productBurberry is committed to the creation of authentic anddistinctive products and continuous innovation in designand manufacturing.· Globally recognised iconic products, including theBritish-made heritage trench coat and cashmere scarf.· Product divisions are Womens, Mens and Childrensapparel, Accessories, and Beauty (which includesfragrance and make-up).Productive and responsibleMore productive and efficient ways of working are apriority across the organisation, together with ensuringa culture of responsibility.· Committed to sustainable business practices.· Driving efficiency and productivity across theorganisation through the effective use of technologyand resources.· A team-orientated approach, empowering a highlyconnected organisation.The Company designs, develops, makes and sells productsunder the Burberry brand. Product design and developmentare centred in Burberry’s London headquarters. Fabrics andother materials are bought from, and finished productsmanufactured at, both Company-owned facilities in the UKand through an external supplier network, predominantlylocated in Europe. Creative and marketing content andprogrammes are developed internally to engage andconnect the brand and its products with consumers.Burberry products are sold globally through its storesand online at Burberry.com, as well as through third-partywholesale customers, both offline and online. In a fewselected areas, Burberry uses the product and distributionexpertise of licensing partners. These activities areexecuted by a global team of almost 11,000 employees.21Strategic Report – Burberry Group OverviewBUSINESS MODEL: A DISTINCTIVEGLOBAL LUXURY BRAND* Europe, Middle East, India and Africa.22Strategic Report – Burberry Group Overview The business is structured by channel, region andproduct division, supported by corporate functions.OperatingmodelFunctionRegionChannelProductDesign andCreative MediaPeople, Operations, Information Technology, Finance, Corporate AffairsAccessories, Womens, Mens, Children, BeautyAsia Pacific, EMEIA*,AmericasRetail (online and offline),Wholesale, LicensingProduct Development and Sourcing, Supply Chain,Merchandising and PlanningMarketing, Architecture,Customer InsightBusiness ModelDesign Develop Make SellBurberry sells its products through retail (online and offline) andwholesale channels. For 2015/16, retail accounted for 73% of revenueand wholesale for 25%. Burberry also has licensing agreements globally,leveraging the local and technical expertise of its licence partners.Retail£1,838m+1%Licensing£42m-33%Wholesale£635m-2%Revenue by channelGrowth is presented underlying and is calculated at constant exchange ratesLicensingIncludes income from Burberry’s licensees,approximately 60% from Japan with thebalance from global product licences(eyewear and watches) and the Europeanwholesale childrens licence· Underlying revenue was down 33%· £24m of royalty income from Japan· Global product licences (watches*and eyewear) delivered double-digitpercentage increaseThe Japan licences expired during the year.For information on plans for Burberry in Japansee ‘Unlock Market Opportunity’ on page 40.* The Watches licence will not be renewedin December 2017.WholesaleIncludes sales to department stores, multibrand specialty accounts, travel retail andfranchisees who operate 62 Burberry stores,and Beauty to around 80 distributors globally· Revenue down 2% underlying. ExcludingBeauty, down 6% underlying· Beauty wholesale revenue of £191m,up 8% underlyingRetailIncludes 215 mainline stores, 214 concessionswithin department stores, digital commerceand 58 outlets· 1% underlying growth· Comparable sales down 1% but up3% excluding Hong Kong and Macau· 18 mainline store openings, includingin flagship cities such as Tokyo, Seouland New York23Strategic Report – Burberry Group OverviewChannelmixBurberry operates in three regions. For 2015/16, Asia Pacificrepresented 38% of retail/wholesale revenue, Europe, Middle East,India and Africa (‘EMEIA’) 35% and Americas 27%.Americas· Revenue down 2% underlying· Retail accounted for nearly 70% of revenue· Comparable sales unchanged year-on-year· Digital as a percentage of retail sales in theAmericas was more than twice the globalaverage and showed good growthEMEIA· Revenue up 5% underlying· Retail accounted for two-thirds of revenue· Comparable sales increased by a midsingle-digit percentage· About half of mainline retail sales weremade to travelling luxury customersAsia Pacific· Revenue down 2% underlying· Retail accounted for over 85% of revenue· Comparable sales declined by a midsingle-digit percentage· Hong Kong was impacted by a significantlylower footfallAsia Pacific£933mMainline stores: 63Concession stores: 143EMEIA£879mMainline stores: 75Concession stores: 62Americas£661mMainline stores: 77Concession stores: 9Retail/wholesale revenue by destinationGrowth is presented underlying and is calculated at constant exchange ratesregionalmix24Strategic Report – Burberry Group OverviewRetail/wholesale revenue by productGrowth is presented underlying and is calculated at constant exchange ratesChildrens£91m+15%Beauty£203m+8%Accessories£902m+1%Womens£729m-2%Mens£548m-2%Burberry has a diversified product offering across apparel, accessoriesand beauty. For 2015/16, accessories represented 36% of retail/wholesalerevenue, womens 30%, mens 22%, childrens 4% and Beauty 8%.productmixChildrens· 15% underlying revenue growth· Helped by the transition of Europeanchildrenswear to direct operation,following the licence expiry· Taken direct control of ten childrenswearstores in JapanBeauty· 8% underlying revenue growth· Building pillar fragrance of My Burberrywith brand extensions· Successful launch of new male fragrancepillar, Mr. Burberry, in April 2016Womens· Revenue declined by 2% underlying· Outerwear hit by unseasonably warmweather. Lightweight cashmeretrench coats outperformed· New fashion category, dresses, sawgood growthMens· Revenue down 2% underlying· Outerwear is about 40% of menswearAccessories· 1% underlying revenue growth· Launched the Scarf Bar (both onlineand in-store) in September 2015· Scarves in mainline retail outperformedother accessories· The new season runway rucksack sawgood growth25Strategic Report – Burberry Group OverviewMacro environmentEconomicIn the 2015 calendar year, the global economy grewby 3.1%, a slight deceleration versus 2014. Notable factorsover the year were the slowdown of the Chinese economy,increased geopolitical concerns in the Middle Eastand Russia, and uncertainty in the Eurozone. In addition,commodity prices fell significantly during the year, notablyoil, leading to low inflation in EMEIA and the US.Across the major economies, the US grew by 2.4%, withrobust domestic consumer spending buoyed by highemployment rates, partially offset by lower exports dueto the strength of the dollar. In Asia, China’s economy grewby 6.9%, a continued deceleration from 7.3% in 2014 andthe slowest growth in 25 years, driven by weaker investmentand manufacturing activity and turbulence in the Chinesestock market. Hong Kong was more stable with GDPgrowth of 2.4% in line with 2014, with resilient domesticdemand but declining exports. The Japanese economyreturned to growth at 0.5% for the year, however, trendswere uneven with growth moderating after a strong startto the year. Korea GDP growth was lower in 2015 at 2.6%compared with 3.3% in 2014 impacted by the MERSepidemic. The Eurozone improved to 1.6% with risinggrowth rates in Spain, Italy and France but a slightslowdown in Germany. In the UK GDP growth fell to 2.2% in2015 from 2.9% in 2014. Across key developing markets,growth continued to be weak most notably in Russia andBrazil. The Middle East economy also slowed due todepressed oil prices.Socioeconomic and environmentalThe year was marked by a number of socioeconomicand environmental events including the migrant crisis inthe Eurozone, geopolitical concerns in the Middle East,the terrorist attacks in Paris and Brussels, MERS epidemicin Korea and the El Niño weather phenomenon which made2015 one of the warmest years on record.Luxury sector*MarketsThis challenging global backdrop had a significant impacton the performance of the luxury sector. At constantexchange rates, sector sales grew 1 to 2%, a slowdownversus the 3% growth experienced in 2014. The keydrivers of sector growth were Japan and Europe,which grew at 9% and 5% at constant exchange ratesrespectively. The performance of these markets offsetdecelerating growth in Mainland China** and the rest ofAsia, and flat growth in the Americas. In Japan, the weakYen fuelled inbound tourism mainly from China, with visitorsfavouring Japan over Hong Kong. It was a similar storyin Europe where strong Chinese tourist flows, attractedby the weak Euro, drove luxury consumption in Germany,France and Italy, alongside recovering local demand in thesemarkets. The UK was robust but negatively impacted by astrong GBP. Eastern Europe was weak, notably in Russiadue to the volatile macro environment.26Strategic Report – Burberry Group OverviewMARKETOVERVIEWMainland China experienced a second year of declines,driven mainly by unfavourable price differentials comparedwith other global markets and decreasing local consumerconfidence impacted by the turbulent Chinese stockmarket. Despite the slowdown in Mainland China, theChinese travelling consumer continued to drive luxurygrowth globally. Hong Kong, one of the most profitableluxury markets in the world, was down 25%, a significantdeceleration from 2014, due to its decreasing popularityas a travelling destination for Chinese tourists. South Koreagrew by 4% at constant exchange rates with a strong firsthalf of the year driven by Chinese tourism partially offsetby MERS in the third-quarter. Finally, the US marketunderperformed, driven by soft local demand and thestrengthening US dollar, which impacted tourist flows.In addition, the behaviours and preferences of luxurycustomers continued to evolve as they seek moreexperiences, newness, and story telling, as well asincreased service-driven personalised contact in atime-efficient way.ChannelsGlobally, the retail channel continued to outperformwholesale, and now accounts for 34% of luxuryconsumption. This channel grew by low single-digitpercentage driven by like-for-like store sales as spacegrowth decelerated with a slowdown in store openingsfor the second consecutive year. Digital commerceremained the fastest growing channel, up 22% at constantexchange rates, moderating slightly from the 30% growthexperienced in the prior year. Key drivers of this digitalcommerce growth included the emergence of directshopping on social platforms and the continued momentumof mobile commerce. Travel retail continued to outperformthe sector and grew by 18%, driven by increasingpassenger flows and infrastructure improvementsexpanding and enhancing the retail space available.Wholesale continued to decline, driven by the ongoingrationalisation across the channel.ProductsFor the sector, accessories was the fastest growingproduct category, at 3% growth, with strong momentumfrom shoes and leather goods. The apparel category grewby 2%, with similar trends across both mens and womens.Within mens, the outerwear and cashmere categoriesoutperformed, however, outerwear in Q4 was significantlyimpacted by the unseasonably warm weather. Withinwomens, denim and outerwear were the key growthdrivers. Beauty grew by 1% driven by increasingChinese and Middle Eastern demand.OutlookIndustry analysts forecast that the luxury sector willgrow by low single-digit percentage in the medium termat constant exchange rates, driven by the continuedgrowth of the Chinese consumer. Japan is expected toremain strong with both tourists and locals driving luxuryconsumption. The outlook in Hong Kong continues to beuncertain. Long term, the luxury market should benefit fromevolving global demographics, continued urbanisation,increased centralisation of wealth in global destinationkey cities, improving macro and socio-economic trends,strong luxury consumer travel flows and the continuedincreasing penetration of digital commerce.Note:References are to calendar years, unless otherwise stated.* Bain & Company and Fondazione Altagamma 2015Luxury Goods Worldwide Market Report (October 2015).** Mainland China excludes Hong Kong, Taiwan and Macau.27Strategic Report – Burberry Group OverviewStrategic Report29Strategic ReportCore StrategiesAgainst a challenging macro-environment, Burberry has focused ondelivering against its strategies during the year and has identifiedsignificant growth opportunities for the future across its existingchannels, products and regions. Burberry’s future plans and strategicprogress are set out on the following pages.30Strategic Report – Core StrategiesDriving future growthand productivityThe external environment for the luxury sector hasremained challenging and underlying cost inflationpressures persist (see Market Overview on page 26).In this context, Burberry has been acceleratingits productivity and efficiency agenda, especiallylooking at its ways of working. Burberry has also beenaddressing how to optimise future organic revenuegrowth opportunities and the resulting investment plans.The Burberry brand is strong, driven by a blend ofheritage and innovation, expressed through its iconicproducts and fashion newness. Looking ahead, thereis opportunity to enhance this existing brand strengththrough greater consistency and clarity across customergroups and markets.Burberry has identified significant growth opportunitiesacross its existing channels, products and regions.Central to this are plans to enhance growth and toimprove productivity in the following areas:· Product;· Retail, including targeting omni-channel excellence;and· Process, including changing the Group’s waysof working.The key output from this work is summarised below.Product: clear opportunity in productGreat product is the foundation of Burberry’s growth andproductivity goals. Burberry has a broad product offer, withstrength in both heritage and fashion, across genders andage groups. However, the assortment is generally widerthan its peers and there is an opportunity to simplify this togive greater visibility to fashion and newness, while tailoringit more effectively for local needs. To address this, Burberryis introducing end-to-end category management for keyproducts. Following the successful re-launch of Burberry’sheritage trench coat and cashmere scarves, the next areaof focus is bags, where Burberry is under-penetratedcompared to its peers. In 2016/17, the collection will bere-invented around a new pillar and shape strategy, withmarketing targeted around the Patchwork and Banner bagsand the Rucksack, ahead of major new product launchesin 2017/18. Burberry will employ a phased approach toother core product categories.Retail: driving retail productivity online and offlineBurberry’s business model has evolved from licensing,to wholesale to retail, which now accounts for 73% ofGroup revenue. There is a significant opportunity toimprove Burberry’s end-to-end retail disciplines as partof a broader push towards omni-channel excellence as thenext stage of its evolution. This includes a greater focus onlocal customers with the aim of driving loyalty by leveragingBurberry’s customer insight capabilities, with investmentprioritised in selected cities. Improving sales densities,conversion and customer retention will be among thekey measures of success.Priority retail initiatives will include the following.· Retail excellence – The implementation of a major retailexcellence programme centred on all aspects of serviceand training, customer cultivation and retention, in-storeoperations and targeted product offering. In 2016/17,this will include increased investment in training, thedevelopment of an improved digital selling tool for salesassociates and the aim to increase by 20% the numberof private client sales associates.· Extending digital prowess into e-commerce leadership –While Burberry is recognised as a digital leader in theluxury sector, it plans to ensure that digital remains theclear point of differentiation for Burberry with scope tobe even more ambitious commercially. The focus will beon continuing to grow Burberry.com through increasingconversion, particularly mobile, driving penetration ofe-commerce, particularly in Asia, while integrating andimproving customer experiences across online andoffline. Burberry will also actively grow with third-partydigital players. In 2016/17, this will include the re-launch ofBurberry.com (improving content and functionality), theintroduction of a customer app and further investmentin localisation of sites in Asia.Burberry has identified significant growth opportunitiesacross its existing channels, products and regions.31Strategic Report – Core StrategiesProcess: improving efficiency through changesin ways of workingTo capitalise on the opportunities set out above Burberryplans to change its ways of working, its processes andcost base. Burberry has undertaken an in-depth review ofits operating model, including benchmarking, to ensure thatthe organisation is fit to deliver its ambitious plans and canfund growth. In this regard Burberry will do the following.· Reduce complexity and inefficiency bysimplifying processes.· Improve both global consistency and local insight,by removing duplication across Group functionsand between the regions and corporate centre.· Prioritise investment behind the biggestgrowth opportunities.Financial ambition to FY 2019Looking forward, Burberry believes that these initiativeswill enable Burberry to again outperform sector growthin the £200bn global luxury market, creating furthershareholder value.It is expected that these product and retail initiativeswill deliver strong organic growth, with outperformanceaccelerating over time including the following.· Improvements in mainline retail productivity which areexpected to drive about half the revenue growth overthe three-year period.· E-commerce initiatives which are expected to accountfor about another third of revenue growth.· The continued improvement of the quality of Burberry’sbusiness, further rationalising traditional wholesaledistribution while growing with key partners andreducing the weight of outlet stores.· To drive this outperformance, Burberry will invest about£10m in FY 2017 and then about £20m – £25m per annumfor the next two years in retail, digital and enhancingcritical capabilities.Burberry has also identified a programme of actions todeliver at least £100m of annualised cost savings byFY 2019. This is equivalent to about 10% of the Group’soperating expenses excluding fixed rent and depreciation.· Broadly half of the cost savings are expected to comefrom significant changes in the Group’s ways of working,by reducing complexity, simplifying processes andeliminating duplication.· The plan is to deliver around £20m of cost savingsin FY 2017.· The associated one-off costs, which are largely cash, areexpected to total about £60m across the first two years.Assuming these ambitious targets for growth are met,Burberry will also start to rebuild the charge for newperformance-related pay, at a cost of about £20m, inaddition to the existing charge of about £20m in FY 2017.Strategic progress during 2015/16Progress on the Group’s core strategies during 2015/16is set out in the following pages.32Strategic Report – Core StrategiesKey performanceindicatorsThe Company assesses its performance against a wide range of measures.These key performance indicators (KPIs) help management measureprogress against the Company’s core strategies.Financial measuresThe Board believes it is important to ensure alignment between executive management’s strategic focus and the long-terminterests of shareholders. Certain elements of executive remuneration are based on performance against the followingmeasures: revenue growth, adjusted PBT growth and adjusted retail/wholesale return on invested capital, which are linkedto core strategies as shown. For details of the Group’s remuneration policy, see pages 83 to 105.Revenue growth*This measures the appeal of the Burberry brandto customers, however its products are sold.For more detail on the Company’s revenueperformance see pages 50 to 55.Strategic linkAll core strategiesRevenue in FY 2016 declinedby 1% at constant exchangerates, with retail revenue up1%. Wholesale declined by2% underlying while Licensingdeclined by 33% underlying,both in line with guidance.Adjusted PBT growth*#Adjusted PBT growth is a key measureused by investors to assess the underlyingperformance of the Company.Strategic linkAll core strategiesAdjusted PBT in FY 2016reached £421m, down10% at constant exchangerates. Retail/wholesaleoperating profit at constantexchange rates was down8% and licensing down29% underlying.Adjusted retail/wholesale return oninvested capital (‘ROIC’)~Adjusted retail/wholesale ROIC measuresthe efficient use of capital to deliver attractivereturns on incremental investment, which isimportant given the Group’s investment innew projects. It is calculated as the post-taxadjusted operating profit divided by averageoperating assets over the period for theretail/wholesale segment.Strategic linkAll core strategiesAdjusted retail/wholesaleROIC in FY 2016 was14.8% impacted by declinein operating profit andongoing investment inthe business includingthe evolution of the retailstore portfolio.KPI Performance Measure20162014201320122,515 -1%£m Underlyinggrowth2,523 +11%2,330 +17%1,9991,857+8%+23%Retail Wholesale Licensing20152016201420132012£m Underlyinggrowth2015421 -10%456 +7%*461 +8%*428376+13%*+24%*2016201420132012%2015+14.8+17.9+19.6+19.0+20.033Strategic Report – Core StrategiesNote:For definition of underlying growth see page 50.* At constant exchange rates.# For definition of Adjusted see page 50. ~ For a reconciliation of Return on Invested Capital see the Five Year Summary.† For details of Adjusted retail/wholesale operating margin see page 53.‡ For details of Adjusted diluted EPS growth see page 50.KPI Performance MeasureComparable sales growthThis measures the growth in productivity ofexisting stores. It is calculated as the annualpercentage increase in sales from retail storesthat have been open for more than 12 months,adjusted for closures and refurbishmentsand includes all digital revenue.Strategic linkOptimise Channels,Pursue Operational ExcellenceComparable sales in FY 2016were down 1%, with a midsingle-digit percentageincrease from EMEIA,unchanged in Americas andmid single-digit percentagedecline in Asia Pacific.Adjusted retail/wholesaleoperating margin#†This measures how the business balancesoperational leverage and disciplined costcontrol, with thoughtful investment for futuregrowth, building the long-term value ofthe brand.Strategic linkOptimise Channels,Pursue Operational ExcellenceOperating margin in FY 2016was 15.4%, reflecting amodest benefit from grossmargin expansion, offset bya mid single-digit percentageunderlying increase inoperating expenses.Adjusted diluted EPS growth#‡Growth in EPS reflects the increase inprofitability of the business and is a keyvaluation metric for Burberry’s shareholders.Strategic linkAll core strategiesAdjusted diluted EPS inFY 2016 was 69.9p, down 9%,reflecting a reduction in Groupprofit and a higher tax rate.Non-financial measuresNon-financial measures have a useful role alongside financial measures to inform decision making and to evaluate Groupperformance. Burberry is evolving the way it evaluates performance in areas such as people, corporate responsibility andcustomers, and will aim to disclose non-financial measures in the future. For detail on Burberry’s efforts to drive positivesocial and environmental impact globally see pages 44 to 46, and for progress against 2017 environmental targets,see page 108.-1+9+12+5+1420162015201420132012%2016201420132012%201515.416.317.517.816.469.9 -9%76.9 +2%75.4 +8%70.061.6+14%+26%Pence Reportedgrowth20162014201320122015As a ‘young, old’ company Burberry has always embracedinnovation and responded to new technologies andopportunities while staying true to its 160 year old heritage.This way of thinking underpins how Burberry connectswith its customers globally, whether through its runwayshows, marketing innovations, campaign talent or music,using digital and customer insight to enhance customerexperiences. In the year, Burberry continued to focus onthe brand, which further resonated strongly with customersaround the world, placing Burberry among the top fiveluxury brands globally for unaided awareness.Key focus areas during 2015/16:Unified Burberry labelTo provide customers with a more consistent brandexperience and to reinforce its distinct British identity,Burberry announced plans to unify its Prorsum, Londonand Brit collections under a new single ‘Burberry’ label.The transition is being phased in during 2016/17.The move to a single Burberry label reflects the wayluxury customers shop, blending formal and informalstyles and designs into one wardrobe.Runway ShowsBurberry runway shows continued to inspire with criticallyacclaimed collections, innovative digital partnerships andlive musical performances. The global reach of the showswas further extended with live-streaming on new digitalchannels. Over the year, show content received over700 million views across ten global platforms.· In September, Burberry followers on Snapchat were ableto see a preview of the womenswear collection the daybefore the official runway show. Looks from the collectionwere shared live as finishing touches were being madein Burberry’s headquarters in London, generating 200million views on Snapchat.· Burberry also launched on the Korean social mediaplatform Kakao for the September womenswear showand offered Korean audiences the chance to purchaserunway inspired beauty sets immediately after the show.· Music remained central to the expression of the brand,with live performances at Burberry shows featuringemerging British talent. In September, Burberry becamethe first global luxury brand to launch a dedicatedchannel on Apple Music.· In January, Burberry became the first luxury brand tostream its fashion show live on Apple TV by giving theplatform access to its menswear show.· In February, Burberry announced changes to its runwaycalendar. From September 2016, we will move fromfour runway shows a year to two. These shows will bein September and February in London, will combine boththe womenswear and menswear collections, and beseasonless, designed with a global audience in mind,as about a third of Burberry’s stores are now in warm/hotclimates. The runway collections which are about5% of Burberry’s retail revenue, will be available topurchase in-store and online directly following theshow, responding to customers’ desire for newnessand immediacy.Celebrating HeritageOver the year, Burberry celebrated its heritage ofcraftsmanship and innovation in key flagship marketswith city-wide events and extensive marketing andsocial media campaigns.· In October, Burberry launched a new format for theopenings of the new Shinjuku and Seoul stores withlive demonstrations of the craft skills involved in themaking of the brand’s most iconic products.· Through its digital platform Art of the Trench, Burberrycelebrated the creative communities in a number of keyflagship markets. During the year, Burberry launchedArt of the Trench Middle East and Art of the TrenchSeoul. Since its launch in 2010, the Art of the Trenchplatform has been viewed over 28 million times globally.· The brand’s global flagship store, 121 Regent Street,was extended to feature an exclusive area dedicatedto gifting and Thomas’s, a British café. Personalisationis a key focus in the new gifting space with in-storemonogramming services offered.Speak to consumers with one equally authentic and inspiringbrand voice, wherever they encounter the brand.34Strategic Report – Core StrategiesINSPIRE WITHTHE BRANDMarketing InnovationBurberry’s digital mindset is a fundamental andintegral part of the brand and way of thinking acrossthe organisation. Burberry again finished the year asone of the most followed luxury platforms on social media,with a 30% increase in followers for the year reaching over40 million across all the brand’s social platforms.Festive· Burberry launched its global festive campaign withthe ‘Burberry Festive Film’, paying tribute to theBAFTA-winning British film, Billy Elliot, and featuringa cast of actors, musician and models. The Festivefilm was viewed over 37 million times across YouTube,Facebook, LINE and Youku.· The distribution of the Burberry Book of Gifts wasalso expanded with the introduction of two physicalformats, an online version, increased store distributionand partner outreach, leading to a threefold increasein circulation year-on-year.Campaigns· Burberry became the first brand to shoot and publishits advertising campaign live through Snapchat.The campaign was shot in October by Mario Testino,providing viewers with unprecedented access to thecreative process behind a campaign.· In February, Burberry was the first brand to shootits advertising campaign live on Instagram. The latestcampaign for the Brit fragrance collection wasphotographed and published live by Brooklyn Beckhamthroughout the day as part of his takeover of Burberry’sInstagram account. The content was also shared acrossBurberry’s Twitter, Sina Weibo, Facebook, Google+,LINE, WeChat and Kakao accounts.Technology partnerships· To generate further excitement and connect audienceswith the Festive campaign, Burberry partnered withGoogle, creating an interactive film experience usingreal-time video technology. ‘The Burberry Booth’ enabledcustomers to star in the ‘Burberry Festive Film’ alongsidethe cast members in a personalised edit which wasshareable on YouTube, via Twitter or by email.· As the first luxury brand to partner with DreamWorksAnimation’s newly formed technology company NOVA,Burberry launched an interactive marketing campaignfeaturing new 3D visualisation technology. Burberryprovided audiences with the opportunity to personaliseand engage with computer-generated versions of itsiconic heritage scarf on the largest digital screen inPiccadilly Circus, London.External recognitionBurberry was recognised externally for both itscreative, digital and commercial leadership in thesector. Key accolades include the following:· Ranked first in L2’s 2015 Digital IQ: Fashion.· Creative Campaign of the year at the 2015 BritishFashion Awards.· Listed in Interbrand ‘Top 100 Global Brands’ forthe seventh consecutive year, and ranked as thestrongest UK luxury brand globally.35Strategic Report – Core StrategiesBurberry celebrates its British heritage of craftsmanshipand innovation in everything it does, from the British-madeheritage trench coats and cashmere scarves to the runwaycollections. Burberry’s focus on accessories in recent yearshas contributed to the growth of this product category,which will be an important future growth driver.During the year, Burberry reinforced its strong positionin cashmere with the introduction of the Scarf Bar andlightweight cashmere trench coats. Heritage remaineda key focus, and new product launches in the large leathergoods category were well received by customers.Key focus areas during 2015/16:Outerwear· Following the successful Heritage relaunch last year,Burberry introduced new colours and lengths to theBritish-made heritage trench coat range, together witha new monogramming offer. Lightweight cashmeretrench coats were also introduced in 14 colours.Scarf Bar· Celebrating the British-made icon, the Scarf Bar initiativewas launched both online and in-store in September.The service offers over 30 colours across both signatureand lightweight cashmere fabrications, all available formonogramming online and in-store via iPads. The launchwas supported with new visual merchandising in-storeand online, and a dedicated personalised marketingstrategy, including online scarf styling tutorials. In mainlineretail, scarves outperformed other accessories, postingdouble-digit percentage sales growth.Fashion· Burberry responded to demand for women’s fashionproduct with dresses and ponchos delivering stronggrowth for the year.· The launch of the monogrammable runway rucksack,which featured in the September womenswear show,was an immediate success and sold out on RunwayMade to Order within 24 hours of the show, generatinga waiting list globally.· The replenishment of best-sellers, such as the Bannerbag, further drove growth in the category and Burberryintroduced new shapes for large and small leather goods,including the Bucket bag and Barrow bag.BeautyContinuously linking Beauty and fashion, Burberrydeveloped increasingly personalised and interactiveways to engage customers globally. Beauty delivered8% underlying growth in the year.· Beauty distribution was expanded through globalpartnerships with Sephora in 13 markets and withShiseido in Japan. Burberry make-up launched onSephora.com in August and was subsequently rolledout to an initial 39 Sephora stores and six onlineplatforms. The global launch included online Beautytutorials viewed over 1.5 million times to date, engagingnew audiences on one of the most important globalbeauty platforms.· Three Burberry Beauty Box counters were opened inJapan with Shiseido, and a new stand-alone BurberryBeauty store opened in Hong Kong.· Burberry continued to focus on building fragrancepillars with product extensions such as the My BurberryEau de Toilette. Momentum in the category was furthersupported with the April 2016 launch of Mr. Burberry,a new fragrance, with the first advertising campaign byOscar and Turner Prize winning director Steve McQueen.The marketing campaign also highlights mens tailoringand outerwear.· During the year, Burberry won a number of prestigiousBeauty awards including the following:– FiFi D’Or Award for Best Female Fragrance(My Burberry) – France.– Marie Claire Prix du Parfum France (My Burberry) –Marie Claire France.Reinforce Burberry’s outerwear leadership while continuing to realisethe brand’s potential across all apparel and accessory categories.36Strategic Report – Core StrategiesREALISE PRODUCTPOTENTIAL37Optimise all routes to market, both online and offline, owned and third-party,with a clear emphasis on enhancing retail productivity and service.38Strategic Report – Core StrategiesOPTIMISECHANNELSDuring the year as customer traffic to stores softened,Burberry intensified its focus on driving performance inits retail stores through increasing loyalty and conversion,enhancing the service offering and more effectivelyleveraging customer data.Key focus areas during 2015/16:Driving retail productivityWith the customer at the centre of all activity, Burberrycontinued to focus on improving service and productivityonline and in-store. Comparable sales were down -1%, asthe business invested in customer insight to drive productand service initiatives, helping an increase in conversion.· To better understand and connect with the core luxurycustomer, the use of data and analytics was furtherembedded throughout the organisation. The customerdatabase increased by 10% in the year.· The Customer Value Management (‘CVM’) programme– a loyalty and retention tool enabling more targeted,relevant and personalised contact with key customers– was extended to just under 400 stores globally,contributing to increased conversion.· The Burberry Private Client (‘BPC’) teams grew by 30%to provide an enhanced service to more customersglobally, and increased the number of BPC appointmentsin the year.· Data and analytics were leveraged to inform marketingdecisions and refine merchandising activities, helpingto ensure that Burberry provides a compelling productassortment offering.Investing in digitalBurberry’s digital first approach runs throughout theorganisation. Focusing on offering a seamless andpersonalised experience wherever customers encounterthe brand, Burberry refined how online and in-storeinnovations worked together. Digital outperformedduring the year, delivering strong growth in all regions.· Burberry.com was the fastest growing retail channel,servicing over 40 countries in 11 languages.· To further improve the user experience, Burberrycontinued to invest in Burberry.com. The improvedmobile platform launched last year and deliveredstrong growth for the year.· Burberry increased the availability of stock in all44 online countries by rolling out the single poolof inventory model in EMEIA and the US followinga successful implementation in China. This providedcustomers and store associates with full visibilityof all stock within the country, and improved productavailability online and in-store, and meaningfullyreduced delivery times, enhancing the customershopping experience.· To complement Burberry.com, Burberry continuedto partner with third-party digital leaders, to providean authentic, consistent brand experience and toenable Burberry products to reach a wider audience.Burberry launched an online presence on over18 different platforms for both fashion and beauty,with existing wholesale partners as well as puredigital and social commerce players.Store investmentBurberry focused on strengthening its store networkthrough openings in key locations, as well asthe optimisation of the existing portfolio throughrelocations, renovations and some closures.· Burberry opened 18 mainline stores and closed 17during the year. Openings included stores in Dubai,London, Moscow, New York, Seoul and Tokyo.Wholesale· Burberry continued to elevate its department storepresence, with over 175 dedicated spaces at yearend in US department stores.· Burberry continued to elevate distribution in EMEIA,while growing with key accounts.· The EMEIA Childrenswear licence expired inDecember and Burberry began servicing thosewholesale customers directly. 40Strategic Report – Core StrategiesUnlock marketopportunityFully realise Burberry’s opportunities among key consumer groupsand geographic markets – developed, young and newly opened.Burberry is continually evolving its footprint and positioningin both developed and younger markets. Future opportunitiesfor the brand in China and Japan are an important part of this,along with other areas of geographic focus including the travelretail strategy and continued elevation of the business in the US.Key focus areas for 2015/16:Engaging the Chinese luxury consumerBurberry continued to focus on engaging and improving theservice offering to the Chinese luxury customer both in Chinaand while shopping abroad, helping to drive brand recognitionand desirability consistent with core luxury peers. In MainlandChina, which accounts for about half of the retail spend ofBurberry’s Chinese customers, growth for the year wasweighted towards the second half. Conversion improved asBurberry invested in sales associate training to improveservice in-store.· Consistent with the luxury sector trend, comparative salesin the Hong Kong market decreased by over 20% in the yearas footfall continued to decline. However, all stores in thisimportant market remained profitable as Burberry focusedon ongoing initiatives to drive conversion, marketing,product and customer service, while evolving the storeportfolio and controlling costs.· Burberry continued to evolve and elevate its store portfolioin China, to ensure the best representation of the brand.Closing a net five stores in the year, the portfolio currentlyconsists of 63 stores. Looking ahead to 2016/17, Burberryis planning about a net three store openings in China, withsquare footage remaining broadly flat, with a particularfocus on Beijing, Burberry’s largest market in China.· To celebrate Lunar New Year and Golden Week, Burberrylaunched festive campaigns and bespoke productassortments in China, key tourist destinations and onBurberry.com. The campaigns were supported by socialmedia initiatives, including an exclusive WeChat messagingexperience that resulted in the highest level of contentengagement on the platform for a Burberry campaign to date.Transforming Japan2015/16 was a significant year for Burberry in Japan with theexpiry of the Burberry Japanese licences in June. Burberryopened its sixth free-standing store in Shinjuku, Tokyo and afurther seven department store concessions, bringing the totalto six stores and 30 concessions including ten childrenswearconcessions. The business serves a predominantly domesticluxury customer base and doubled its retail revenue in theyear off a small base.· From September, the global collection became the onlyBurberry branded product available in the mainline channelacross Japan, through the directly operated stores,concessions and Burberry.com. This was complementedby Burberry Beauty, distributed by Shiseido.· Burberry built strong brand awareness and digitalengagement in Japan through targeted marketing,PR and digital activity. Burberry continued to developits partnership with LINE, the country’s leading socialplatform, offering users access to real-time content suchas the livestreaming of shows and key brand moments.In September, Burberry was the first luxury brand tolaunch on LINE Mall, LINE’s shopping channel.· Burberry began its new Beauty distribution partnershipwith Shiseido in Japan. Burberry Beauty was introducedin September with the opening of the first three BurberryBeauty Box counters in department stores in Tokyo andOsaka. Shiseido will continue to open additional countersin Japan, helping to build the Beauty business and expandthe brand momentum in this market.Elevating Americas presenceBurberry continued to elevate the brand across its distributionchannels and leveraged the strong digital opportunities inthis market.· In the US, Burberry invested in elevating its retail footprintin the key New York city market.· Burberry reinforced its department store presence in therapidly developing Canadian luxury market, supportedby new space in Toronto and Vancouver.Advancing Travel retailThe travel retail channel remained a key focus for Burberryas global tourist travel continues to grow.· Burberry continued to expand its footprint in key airports,opening a new retail store in Dubai, and wholesale storesin Paris CDG and Amsterdam.· Marketing initiatives continued to target travelling luxurycustomers in key transport hubs and global touristdestinations.Building young marketsBurberry continued to build its presence in early stagegrowth markets.· Burberry moved to direct operations in Russia and Bahrain,opening three mainline stores in Moscow and one inBahrain and closing the franchise stores in these markets.An additional franchise store was opened in South Africa. 42Strategic Report – Core StrategiesPURSUE OPERATIONALEXCELLENCEDrive greater efficiency and productivity through the business.Burberry’s productivity agenda is focused on opportunitiesin product, retail and processes. This continues to be a keypriority for the next phase of growth, as Burberry leveragesthe investments made in recent years.Key focus areas during 2015/16:Supply chain· In November 2015, as part of its commitment to UKmanufacturing, Burberry announced plans to relocate itsexisting manufacturing to a new facility in Leeds in 2019.The proposal represents an initial investment of over£50 million in the heart of Yorkshire. The proposed sitewill allow Burberry to continue to produce its most iconicproduct, the heritage trench coat, in Yorkshire wherethe brand has been manufacturing for over half a century.The new facility will offer increased capacity and moresustainable and efficient ways of manufacturing, andthe potential to develop and produce other productsat the site.· Key investments made in product engineering andsustainable manufacturing continued to drive greaterend-to-end control of the Burberry supply chain.· Burberry continued investing in sustainability acrossthe supply chain, evolving its sourcing model to reflecta transparent and collaborative approach, and positioningBurberry as a recognised leader in the industry.· Burberry has been on a journey to embed LEANdisciplines across the internal supply chain to shortenlead times, and increase the value delivery for customers.Burberry drove LEAN implementation in the UK’s internalmanufacturing sites, delivering 15% productivityimprovements and 75% lead-time reduction.Planning· In the year, Burberry fully implemented the global productbuying and allocation activities with the roll-out of a storeprofiling initiate to provide a more customer-centricproduct range by store. This was incorporated into the‘Brand Buy’ to provide greater product consistencyacross Burberry’s retail stores based on key designinspiration, optimising product assortments and coreproduct replenishment whilst also allowing a degreeof flexibility to reflect local customer needs.· Burberry also further evolved its inventory managementand commercial analysis processes to optimise retailexecution, driving nearly a 10% reduction in assortments.Leveraging technology· The first phase of the upgrade to Burberry’s coreIT systems was completed. The real-time, faster indatabase processing will enable enhanced and moreresponsive decision-making throughout the business.Organisational efficiency· Decisive action during the year resulted in around£25 million of savings against planned spend, fromareas including travel, hiring and other expenses. Inaddition to these tactical measures, Burberry continuedto strategically assess all dimensions of its cost basefor the future.· The unification of Burberry’s Prorsum, London andBrit collections under a new single Burberry label wasa significant move to reduce complexity for customersand internally. The single collection will be introducedinto Burberry’s own stores and those of Burberry’swholesale customers worldwide by the end of thecalendar year 2016. This move will offer customersa more consistent and intuitive experience acrossexisting product assortments, while reducing internalcomplexity across product and processes. 44Strategic Report – Core StrategiesBUILD OURCULTUREBuild and nurture a culture that strengthensour brand through its purpose and values, globally.As the Burberry business continues to evolve in anever-changing environment, building and nurturingits authentic culture is ever more important. Guidedby its core values – Protect, Explore, Inspire – Burberryis dedicated to fostering a distinct culture with a globalteam mindset and a pioneering spirit, underpinned bya commitment to responsibility.Alongside a continued focus on engaging andcultivating our talent, this year saw enhanced emphasison sustainability and the pursuit of positive social andenvironmental change. Burberry will be establishingKey Performance Indicators for the Build our Culturestrategy in the future.Key focus areas for 2015/16 included:Nurturing and rewarding talentBurberry believes that its people are fundamental tothe success of its business. The Company continued tofocus on nurturing and rewarding teams, fostering a cultureof recognition to support high performance and retentionof talent.· With a focus on cultivating high potential talent, theBurberry Leadership Council contributed to the growthand strength of the Company’s globally connectednetwork of leaders through dedicated training, mentoringand networking opportunities. Since 2012, the Councilhas supported the development of about 250 employees.· To support the development of talent in merchandisingand planning, Burberry recruited graduates fromkey universities to participate in an 18-monthtrainee programme.· Exceptional employee performance across retail, offices,manufacturing and distribution was recognised throughthe annual Burberry Icon Awards. Live streamed on theCompany’s internal communications platform for thefirst time, the events brought employees together globallyin celebration of contributions to the brand, businessand culture.· Burberry was listed by LinkedIn as the 12th most soughtafter employer in the United Kingdom and 29th in Europe,Middle East and Africa.Connecting and engaging teams globallyBurberry enhanced communications and ways of working,building stronger connections amongst global teams,and increasing engagement.· Burberry explored new digital ways to connect teamsand share information in real-time, hosting its firstdigital annual strategic offsite. Replacing previouslyheld regional conferences, the Company leveragedtechnology to connect different areas of the businessmore effectively and engage employees globally.· ‘Chat Live’ video broadcasts featuring ChristopherBailey and members of the Senior Leadership Teamtook place each month. With over 50,000 viewsglobally, the interactive question and answer broadcastsincreased employee connectivity and engagementaround the brand.· Burberry continued to enhance communications withretail teams, implementing a weekly global Retail Updateto streamline and consolidate key information.· Enhancing connectivity with internal manufacturing teams,the Company implemented interactive engagementmethods with employees, to regularly gather andincorporate feedback on development plans for itsnew trench coat manufacturing and weaving facility.45Strategic Report – Core StrategiesPromoting fair and responsible employment practicesBurberry is committed to supporting diversity and equalopportunities within the Company, as well as improvingemployment practices and working conditions atmanufacturing sites.· Burberry employees span 34 countries, representingover 112 different nationalities and with an age range of16 to 74 years. As at 31 March 2016, of a global employeepopulation of 10,613, approximately 67% (7,164) werefemale and 33% (3,449) male, with women occupying40% of senior management roles.· Supporting the importance of diversity in business andsociety, Burberry proudly became a corporate memberof OUTstanding, a not-for-profit professional networkfor lesbian, gay, bisexual and transgender executivesin the UK.· The Company’s trading activities are guided by itsResponsible Business Principles, which are underpinnedby the United Nations Universal Declaration of HumanRights, the Fundamental Conventions of the InternationalLabour Organization and the Ethical Trading Initiative BaseCode. Targets to promote and build fair and responsibleemployment practices have been set and integrated intothe performance objectives of the Company’s sourcingteams as well as at an individual level.· Burberry became a Principal Partner of The Living WageFoundation, increasing its support for the initiative asit grows and develops.· In order to reach and benefit more workers, theCompany’s Ethical Trading Programme – comprisingof announced and unannounced audits, monitoringand improvement programmes – was extended tocover key raw material, Beauty, fragrance, make-upand leather suppliers.· Results of the 2015/16 audit programme showed anoverall positive shift in ethical trading performanceby the Company’s apparel and non-apparel vendors.For more information, please see www.burberryplc.com.· Improvement programmes have been implementedacross the supply chain to support factories in buildingstronger human resource management systems, increaseindividual productivity, reduce working hours and sustainand enhance unique knowledge, skills and expertise.Where access to grievance mechanisms was a particularchallenge, confidential non-governmental organisationrun hotlines were introduced, providing almost 20,000workers across 33 factories with confidential support.Investing in our communitiesBurberry remains committed to supporting the communitieswhere its employees live and work by giving financial support,employee time and in-kind donations, with a particular focuson helping young people achieve their potential.· Burberry continued to donate 1% of Group AdjustedProfit Before Tax* (£4.2 million in 2015/16) to charitablecauses, for example supporting innovative youth charitiesthrough the Burberry Foundation (UK registered charitynumber 1154468) and nurturing emerging creative talentthrough the Burberry Design Scholarship at the RoyalCollege of Art and an apprenticeship programme at theBritish Fashion Council.· The Company launched ‘Burberry Apprentices’ witha vision to support the development of young peopleglobally through apprenticeships and work-basedtraining opportunities. The first phase saw participantsjoin retail, internal manufacturing and distributionteams in the UK.· The Company encouraged employees to take partin impactful community projects during workinghours, believing that volunteering strengthens teams,enhances workplace skills and contributes to motivationand fulfilment. Activities included career inspirationevents, employability workshops, long-term mentoringprogrammes and community revitalisation projects.In total, 2,300 employees in 74 cities dedicatednearly 12,000 hours.· In-kind donations ranged from one-off gifts ofnon-trademark fabric and materials to assist youngpeople enrolled in creative courses, to donationsof business clothing supporting over 1,000 peopleenrolled in employability programmes.* For definition of Adjusted Profit Before Tax see note 2 of theFinancial Statements.46Strategic Report – Core StrategiesDriving environmental sustainabilityBurberry is strongly committed to reducing itsenvironmental impact globally through its supply chainand internal operations. Following an independent baselineassessment of the Company in 2012, key targets weredeveloped to reduce environmental impacts arising frommaterials, energy, water, chemicals and waste. For furtherdetail of these targets and progress made to date, seepages 108 and 109.· Cotton, leather and cashmere are three of theCompany’s key raw materials, representing around30% of its greenhouse gas (‘GHG’) emissions. Burberryfocused on improving the traceability and sourcing ofthese materials, partnering closely with supply chainand industry stakeholders. Key steps included joiningthe Better Cotton Initiative to promote sustainablecotton farming beyond Burberry’s farmer engagementprogramme in Peru, spearheading an initiative to engagekey industry stakeholders in sustainable grasslandmanagement in cashmere farming communitiesin Mongolia, and actively promoting environmentalbest practice and innovation at leather tanneries.· To drive further environmental improvements in itssupply chain, Burberry increased efforts to engage over100 of its manufacturing partners and benchmark theirenvironmental performance. In addition, 20 key partnerswere supported to identify and manage their resourceconsumption. The Company also continued to workwith its partners to eliminate the release of chemicalsthat may have an adverse environmental impact byimproving chemical management practices in thesupply chain and supporting extensive research intonew technology.· Recognising that waste plays a key role in resourcedepletion and climate change, Burberry is prioritisingthe reduction and repurposing of waste. Examplesinclude recycling pre-consumer textile waste into newyarns in Italy, repurposing damaged garment waste intoinsulation and using textile waste for home furnishingsin the UK. Additionally, over 85% of construction wastefrom major projects globally was recycled.· Committed to improving its operational efficiencies,Burberry has taken a holistic approach to energymanagement. For example, all new builds and modernconcept refurbishments are fitted with LED lighting.37% of electricity is generated on site or sourced throughgreen tariffs. Burberry distribution centres achieved anabsolute energy reduction of 17% from 2014/15 levelsand energy reductions have been realised at over75 retail locations.External recognitionBurberry was recognised externally for its sustainabilityperformance and desirability as an employer.Key accolades included the following:· Included in the 2015 Dow Jones Sustainability Indices(‘DJSI’) for the first time, Burberry was listed as one of thetop performing companies in the world for sustainabilityin the ‘Consumer Durables & Apparel’ sector.· Recognised in RobecoSAM’s 2016 SustainabilityYearbook as ‘Industry Mover, Bronze Class’ in theTextiles, Apparel and Luxury Goods category, forhaving achieved the largest proportional improvementin its sustainability performance.47Strategic Report – Core StrategiesStrategic Report49PerformanceStrategic ReportThe following pages set out the highlights of the Group financial performanceduring the year to 31 March 2016 and the outlook for the coming financialyear. The principal risks facing the Group during the year, including thenature and extent of these risks, are also set out in this section.Total revenue(2015: £2,523m)£2,515mYear-end net cash(2015: £552m)£660mAdjusted diluted EPS(2015: 76.9p)69.9pAdjusted profit before tax(2015: £456m)£421mCapital expenditure(2015: £156m)£138mFull year dividend per share(2015: 35.2p)37.0pYear to 31 March % change£ million 2016 2015 reported FX underlyingRevenue 2,514.7 2,523.2 – (1)Cost of sales (752.0) (757.7) 1Gross margin 1,762.7 1,765.5 –Operating expenses# (1,344.9) (1,310.3) (3)Adjusted operating profit 417.8 455.2 (8) (11)Net finance credit# 2.8 0.6 –Adjusted profit before taxation 420.6 455.8 (8) (10)Adjusting items (5.0) (11.2)Profit before taxation 415.6 444.6 (7)Taxation (101.0) (103.5)Non-controlling interest (5.1) (4.8)Attributable profit 309.5 336.3Adjusted EPS (pence)~ 69.9 76.9 (9)EPS (pence)~ 69.4 75.1 (8)Weighted average number of ordinary shares (millions)~ 446.1 447.8Underlying performance is presented as, in the opinion of the Directors, it provides additional understanding of the ongoing performance of the Group. Underlyingperformance is calculated before adjusting items and removes the effect of changes in exchange rates compared to the prior period. This takes into account boththe impact of the movement in exchange rates on the translation of overseas subsidiaries’ results and on foreign currency procurement and sales through theGroup’s UK supply chain.Adjusted measures exclude adjusting items. Details of adjusting items are contained in note 6 of the financial statements.# Excludes adjusting items, which are:– A charge of £14.9m in reported operating expenses being the amortisation of the fragrance and beauty licence intangible asset (2015: £14.9m).– Put option liability finance income of £9.9m in reported net finance income relating to the third party 15% economic interest in the Chinese business(2015: income of £3.7m).~ EPS is presented on a diluted basis.50Strategic Report – PerformanceGroup FinancialReviewRetail73% of revenue (2015: 71%); with 215 mainline stores,214 concessions within department stores, digitalcommerce and 58 outlets.· Retail sales up 1% underlying.· Comparable sales down 1% (H1: up 1%; H2: down 2%)but up 3% excluding Hong Kong and Macau.· New space contributed the balance of growth at 2%.· Digital grew in all regions.Following a strong first quarter of the year (with comparablesales growth of 6%), the luxury sector became morechallenging during the balance of the year, although withdifferent regional trends as explained below. In mainlineglobally, footfall in store continued to decline, only partlyoffset by improved conversion and modest growth inaverage selling price.Digital outperformed during the year, with growth in allthree regions. Following investment in Burberry’s mobileplatform in late 2014, mobile accounted for half of digitaltraffic in the year. Conversion increased in both mobileand desktop facilitated by the roll out of the single poolof inventory model, payment and checkout improvementsand ongoing website optimisation projects.Accessories outperformed apparel in mainline duringthe year. This was underpinned by a strong performancefrom the Scarf Bar initiative and associated marketing.New fashion categories such as ponchos, dresses andthe runway rucksack also saw good growth.Asia PacificWith retail accounting for over 85% of revenue in theregion, Asia Pacific saw a mid single-digit percentagedecline in comparable sales during the year.Hong Kong, which accounted for 9% of our globalretail/wholesale revenue, remained a challenging marketthroughout the period affected by significantly lowerfootfall. An intense focus on the local customer coupledwith cost reduction initiatives ensured that all stores inHong Kong remained profitable. Excluding Hong Kongand Macau, Asia Pacific delivered a low to mid single-digitpercentage increase in comparable sales.Mainland China and Korea both showed positivecomparable growth during the year, improving in thesecond half. Japan performed strongly off a small baseand is now over 2% of group retail/wholesale revenue.During the year, Burberry opened seven mainline storesand closed seven, while opening 20 concessions andclosing 20. Flagship stores were opened in Seoul, Koreaand Shinjuku, Tokyo, an additional 17 concessions wereopened in Japan, while the store portfolio was furtherupgraded in mainland China and Korea.Europe, Middle East, India and Africa (EMEIA)Retail accounted for two-thirds of EMEIA revenue.Comparable sales for the year increased by a midsingle-digit percentage, although slowing progressivelythroughout the year. The United Kingdom and the MiddleEast, which together accounted for over 40% of EMEIA’stotal retail revenue, were difficult across the period forboth domestic and travelling luxury customers. ContinentalEurope delivered double-digit percentage comparablegrowth in the first three quarters of the year but declined inthe fourth quarter, as tourist spend, especially by Chinesetravellers reduced. This was partly offset by continuedgrowth from domestic customers.Revenue analysisRevenue by channelYear to 31 March % change£ million 2016 2015 reported FX underlyingRetail 1,837.7 1,807.4 2 1Wholesale 634.6 648.1 (2) (2)Licensing 42.4 67.7 (37) (33)Revenue 2,514.7 2,523.2 – (1)51Strategic Report – PerformanceDuring the year, Burberry opened 13 mainline stores andconcessions and closed 11, led by investment in the MiddleEast and Russia, both markets with long-term growthopportunities. In April 2016, Burberry took full economiccontrol of its business in the Middle East, with a paymentin FY 2017 of approximately £16m, plus some deferredpayment through to 2023.AmericasComparable sales in the Americas were unchangedyear-on-year, with retail accounting for nearly 70% ofregional revenue. Together, Canada, Brazil and Mexico,which contributed over 15% of Americas total retailrevenue, delivered double-digit percentage comparablegrowth during the year, as customers shopped in theirhome markets. In the US, domestic demand was uneventhroughout the period and tourist spend was weak. Digitalas a percentage of sales in the Americas was more thantwice the global average and showed good growth.The store portfolio in the Americas was relatively stableduring the year, with two mainline openings and threeclosures and our first concession opening in Mexicobringing the total number of stores in that country to five.Wholesale25% of revenue (2015: 26%); generated from sales ofapparel and accessories to department stores, multi-brandspecialty accounts, franchise stores and travel retail;as well as Beauty to over 80 distributors worldwide.· Wholesale revenue down 2% underlying.– Excluding Beauty, down 6% underlying.– Beauty up 8% underlying.· 62 franchise stores globally at 31 March 2016,a net decrease of five during the year.The regional comments below exclude Beauty.Asia PacificAsia Pacific is the Group’s smallest wholesale region –accounting for about 20% of the Group total. Underlyingrevenue was down by a double-digit percentage in boththe first and second halves, reflecting cautious orderingfrom travel retail customers.Europe, Middle East, India and AfricaEMEIA accounts for about 45% of Group wholesalerevenue, selling to over 500 customers throughout theregion. Revenue for the year was broadly unchangedreflecting continued account rationalisation, offset bygrowth from existing strategic accounts, higher in-seasonorders and the benefit from the transition of childrenswearin Europe to direct operation, following the licence expiryin December 2015.AmericasWholesale in the Americas accounts for about 35% ofGroup wholesale revenue (equivalent to about 7% ofGroup retail/wholesale revenue). Revenue was down bya mid single-digit percentage in the year, largely reflectinga more difficult consumer environment for departmentstore customers in the United States, leading tocautious ordering.BeautyBeauty wholesale revenue of £191m grew by 8%underlying, driven in part by the sell-in of Mr. Burberry,our new male fragrance pillar, which launched in April2016. Make-up doubled year-on-year off a small base,boosted by our partnership with Sephora globally, bothin-store and online.Licensing2% of revenue (2015: 3%); of which nearly 60%is from Japan, with the balance mainly from globalproduct licences (eyewear and watches).· Licensing revenue down 33% underlying, slightlybetter than guidance.· Decline due to planned expiry of JapaneseBurberry licences.Licensing revenue from Japan declined, as planned, from£53m in FY 2015 to £24m in FY 2016. This included incomefrom the original licences, which expired in June 2015 andthe first income from the new Crestbridge label licence,partly offset by a £3m adverse foreign exchange impact.Revenue from the Group’s global product licencesincreased by a double-digit percentage during the year,including some phasing benefits. As part of our focus oncore categories, and as already announced in January,our watch licence will not be renewed in December 2017.52Strategic Report – PerformanceAdjusted retail/wholesale operating profit was £381m inFY 2016, down 8% underlying and down 5% at reportedFX, which included a £14m positive impact from exchangerate movements. Operating margin was 15.4% or 14.9%at constant exchange rates.Gross margin was 69.6% up 40 basis points. This reflectsa 70 basis point benefit from exchange rates, partly offsetby a 30 basis point underlying decline.Compared to FY 2015 operating expenses of £1,299m,there was a mid single-digit percentage underlying increasein FY 2016.· With over half of the increase from net new space.· And the balance from inflation and some investmentin marketing and IT.· It also includes savings of over £25m compared toplan as management took swift action during theyear to tightly manage discretionary costs, includingheadcount and travel and expenses.In addition:· The performance-related pay charge was about£65m lower year-on-year as the business did notachieve its targets.· There was a £35m increase in the charge relatingto store impairments and onerous leases to £45m,reflecting more challenging conditions in certain markets.Licensing operating profitYear to 31 March % change£ million 2016 2015 reported FXRevenue 42.4 67.7 (37)Cost of sales – – –Gross margin 42.4 67.7 (37)Gross margin 100% 100%Operating expenses (5.5) (11.7) 53Operating profit 36.9 56.0 (34)Operating margin 87.0% 82.7%Licensing revenue decreased by 33% underlying, down37% at reported FX, primarily reflecting the expiry ofthe Japanese Burberry licences. With lower allocatedoperating expenses, licensing profit was £36.9m, down29% underlying (down 34% at reported FX including anadverse exchange rate impact of £3m).Operating profit analysisAdjusted operating profitYear to 31 March % change£ million 2016 2015 reported FX underlyingRetail/wholesale 380.9 399.2 (5) (8)Licensing 36.9 56.0 (34) (29)Adjusted operating profit 417.8 455.2 (8) (11)Adjusted operating margin 16.6% 18.0%Adjusted retail/wholesale operating profit decreased by 8% underlying. With the Japanese Burberry licences expiringas planned, total adjusted operating profit declined by 11% underlying.Adjusted retail/wholesale operating profitYear to 31 March % change£ million 2016 2015 reported FXRevenue 2,472.3 2,455.5 1Cost of sales (752.0) (757.7) 1Gross margin 1,720.3 1,697.8 1Gross margin 69.6% 69.2%Operating expenses (1,339.4) (1,298.6) (3)Adjusted operating profit 380.9 399.2 (5)Operating expenses as % of revenue 54.2% 52.9%Adjusted operating margin 15.4% 16.3%53Strategic Report – PerformanceAdjusting itemsYear to 31 March£ million 2016 2015Amortisation of fragrance and beautylicence intangible (14.9) (14.9)China put option liability finance income 9.9 3.7(5.0) (11.2)The charge of £14.9m relates to the amortisation of thefragrance and beauty licence intangible asset of £70.9m,which was recognised in FY 2013. This asset is beingamortised on a straight line basis over the period1 April 2013 to 31 December 2017.The China put option liability finance income of £9.9mrelates to fair value movements, including the discountunwind, on the put option liability over the non-controllinginterest in the acquired Chinese business.TaxationThe tax rate on adjusted profit in FY 2016 was 24.7%(2015: 23.4%), higher than guided due to a change in thetransfer pricing approach by an overseas tax authority.After taking into account tax on adjusting items, the taxcharge of £101m (2015: £104m) resulted in an effectivetax rate on reported profit of 24.3% (2015: 23.3%).Total tax contributionThe Group makes a significant economic contribution tothe countries where it operates through taxation, eitherborne by the Group or collected on behalf of and paidto the relevant tax authorities. In FY 2016, the total taxesborne and collected by the Group in the UK and overseasamounted to £385.3m. In the UK, where the Group isheadquartered and has significant operations, Burberrypaid business taxes of £84.4m and collected a further£27.8m of taxes on behalf of the UK Exchequer. For furtherinformation see www.burberryplc.com.Net cashCash generated from operating activities in FY 2016 was£503m (2015: £568m). Reflecting lower than expectedrevenue growth in the second half, inventory was £487m,up 10% at constant exchange rates, with most of theincrease being current season. Capital expenditure wasbelow guidance at £138m (2015: £156m), reflecting somephasing and tight control over project spend. Other majoroutflows were dividends of £158m and tax of £95m.Net cash at 31 March 2016 was £660m, an increase of£108m year-on-year. Lease-adjusted net debt was £416mat 31 March 2016, an increase of £46m year-on-year.This is defined as five times minimum lease payments lessnet cash, with minimum lease payments now excludingexpenses relating to onerous lease provisions.OutlookRetail In FY 2017, net new space is expected to contributelow single-digit percentage growth to total retail revenue.Around 15 mainline store openings are planned, with asimilar number of closures.Wholesale Burberry expects total wholesale revenue atconstant exchange rates in the six months to 30 September2016 to be down by around 10% on the same period lastyear (H1 2015: £305m). This reflects significantly tighterinventory control by US wholesale customers, continuedcautious ordering in other regions and the elevation ofBeauty distribution in key markets.FX impact on retail/wholesale adjusted profit In FY 2017,if exchange rates remain at current levels, we expect FY2017 reported adjusted retail/wholesale profit to benefit byabout £50m compared to FY 2016 rates. This comparesto an expected benefit of about £60m at the time of theSecond Half Trading Update based on 31 March 2016effective rates.Licensing Total licensing revenue for FY 2017 is plannedto be down by about £20m at constant exchange rates(FY 2016: £42m), primarily reflecting the expiry of theJapanese Burberry licences.54Strategic Report – PerformanceFY 2017 adjusted PBT Since the Second Half TradingUpdate in April 2016.· The external environment has remained challengingand underlying cost inflation pressures persist.· The benefit from exchange rates is about £10m lower.· Burberry expects to deliver around £20m of cost savingsand invest about £10m.· Burberry is planning on a new performance-related paycharge of about £20m in addition to the existing chargeof about £20m.In addition, to deliver the savings, about £20-30m of oneoff costs in FY 2017 are expected, which will be excludedfrom adjusted profit.Tax rate The tax rate on adjusted profit for FY 2017is currently expected to be about 24%.Capital expenditure Spend of about £150m is plannedin FY 2017.Capital structure In FY 2017 and beyond, Burberry nowintends to move to a progressive dividend policy and,as such, plans to hold the FY 2017 dividend per shareat least in line with FY 2016.Beyond this, Burberry has reviewed its:· Future cash generation, reflecting its growth, productivityand investment plans, taking into consideration thecurrent challenging external environment.· Relevant financial parameters, both historical andprojected, including net cash, lease-adjusted net debtand measures covering balance sheet strength andfixed charge cover.Balancing these factors, Burberry is commencing a sharebuyback programme of up to £150m starting in FY 2017.Additional capital returns to shareholders will be kept underregular review reflecting the factors discussed above.Store portfolioDirectly-operated storesStores Concessions Outlets TotalFranchise Dedicated resources will be put in place to manage change.Regular Senior Leadership Team review of the programmeimplementation to allow for open discussion of emergingrisks and control requirements.Progress of the delivery of the programme will be subjectto regular review by the Board. The Board also approvesthe Group’s strategies, its three-year plan and annual budget.Change in level of riskIncreased riskStrategic linkAll core strategies58Strategic Report – PerformanceRisk Business impact MitigationFailure to realign theorganisational resourcecapability to deliverthe productivity andefficiency agenda.The implementation of the productivityand efficiency agenda means that attractingand retaining the right skills to meet evolvingpriorities is critical. Insufficient capabilityand capacity in senior management andinsufficient employees with the right skillswill limit the Group’s ability to executethe Group’s strategies and other changesas planned.The period of change may result in a loss ofkey individuals or the inability to recruit andretain individuals with the relevant talent andexperience could disrupt the operation of thebusiness and adversely impact the Group’sability to deliver its strategies.There will be a particular focus on people throughout theprogramme, recognising the need for appropriate capabilityto be built across the organisation.Clearly defined people strategy, based on organisationalcapability requirements, culture and engagement, equalityand wellbeing, talent development, training and rewardand recognition.The Nomination Committee and the Senior LeadershipTeam regularly review key talent and resource risks.Clear and open engagement with employees to promotean environment of trust and honesty.Competitive incentive arrangements currently exist, withspecific initiatives in place designed to retain key individuals.Recruitment is ongoing and talent review and successionplanning programmes are in place and are regularly reviewedChange in level of risk and updated.Increased riskStrategic linkAll Core StrategiesSustained breaches ofthe Group’s intellectualproperty rights andunauthorised sale ofBurberry products.Trade marks and other intellectual property(‘IP’) rights are fundamentally important to theGroup’s reputation, success and competitiveposition. Unauthorised use of these, aswell as the unauthorised sale of Burberryproducts and distribution of counterfeitproducts, damages the Burberry brandimage and profits.The Group’s global Brand Protection team is responsible forthe Group’s brand protection efforts globally, including in thedigital environment. Given the Group’s emphasis on digitalinnovation the team places a particular focus on this area.Where infringements are identified these are addressedthrough a mixture of criminal and civil legal action and negotiatedsettlement. IP rights are driven largely by national laws whichafford varying degrees of protection and enforcement prioritiesdepending on the country.Change in level of riskNo material changeStrategic linkInspire with the Brand, Realise Product Potential,Optimise Channels, Unlock Market OpportunityChinese consumerspending patternssignificantly changeadversely impactingthe Group’s revenues.A significant proportion of the Group’ssales are to Chinese consumers globally.Consequently, any change to Chineseconsumer tastes or the economic, regulatory,social and/or political environment in Chinacould adversely impact this consumer’sdisposable income, confidence and travel,which could impact the Group’s revenueand profits.The global reach of the Group helps to mitigate reliance onparticular consumers. In addition, the Group continues to focuson engaging with the Chinese luxury consumer, both in Chinaand while travelling abroad. The Group has commenced itstransition of its global business in Japan.Change in level of riskNo material changeStrategic linkInspire with the Brand, Optimise Channels,Unlock Market Opportunity,Pursue Operational ExcellenceVolatility in foreignexchange rates couldhave a significantimpact on the Group’sreported results.The Group operates on a global basis andearns revenues, incurs costs and makesinvestments in a number of currencies.The Group’s financial results are reported inSterling. The majority of reported revenuesare earned in non-Sterling currencies, witha significant proportion of costs in Sterling.Therefore, changes in exchange rates canimpact the Group’s revenues, margins,profits and cash flows.The Group seeks to hedge anticipated foreign currencytransactional cash flows using financial instruments. These aremainly in the Group’s centralised supply chain and wholesaleand Beauty businesses. The Group does not hedge intra-groupforeign currency transactions at present. The Group monitors thedesirability of hedging the net assets of non-Sterling subsidiarieswhen translated into Sterling for reporting purposes, but theGroup has not entered into any material transactions for thispurpose in the current or previous year.Change in level of riskIncreased riskStrategic linkAll Core Strategies59Strategic Report – PerformanceRisk Business impact MitigationMajor incidents suchas natural catastrophes,global pandemics orterrorist attacks affectingone or more of theGroup’s key locationscould significantlyimpact its operations.A major incident at a key location couldsignificantly impact business operations,with the impact clearly varying dependingon the location and its nature. The impactof the loss of a distribution hub would clearlydiffer from a global pandemic, but bothwould impact revenue and profits.Business continuity plans are in place to mitigate operationalrisks, but cannot ensure the uninterrupted operation of thebusiness, particularly in the short term. The regional spreadof the Group’s key distribution hubs also helps to mitigate risk.There is a Group incident management framework in place thataddresses the reporting and management of major incidents,and this is tested each year using third-party specialists in thisfield. Tailored plans have also been produced for a numberof high-impact events. These plans are regularly reviewedChange in level of risk and updated.No material changeStrategic linkAll Core StrategiesThe Group’s operationsare subject to a broadspectrum of regulatoryrequirements in thevarious jurisdictionsin which the Groupoperates. The paceof change andthe consistency ofapplication of legislationcan vary significantlyacross thesejurisdictions, particularlyin an environmentwhere public sectordebt is often high andtax revenues are falling.Failure to comply with these requirementscould leave the Group open to civil and/orcriminal legal challenge, significant penaltiesand reputational damage.The Group monitors and seeks to continuously improveits processes to gain assurance that its licensees, suppliers,franchisees, distributors and agents comply with the Group’scontractual terms and conditions, its ethical and businesspolicies and relevant legislation.Specialist teams at corporate and regional level, supportedby third-party specialists where required, are responsiblefor ensuring employees are aware of regulations relevantto their roles.Assurance processes are in place to monitor compliance ina number of key risk areas, with results being reported to themanagement Risk Committee and Board Audit Committee.Change in level of riskNo material changeStrategic linkAll Core StrategiesFailure by the Group orassociated third partiesto act in accordancewith ethical andenvironmental standards.A failure to act appropriately could resultin penalties, adverse press coverage andreputational damage with a resulting dropin sales and profit.A number of initiatives are in place, led by the CorporateResponsibility function. These include the continuingactivities set out in the Build our Culture section on pages44 to 46.Change in level of riskNo material changeStrategic linkInspire with the BrandOver-relianceon key vendors.The Group relies on a number of vendorsin key product categories. Failure of thesebusinesses to deliver products or serviceswould have a significant impact onbusiness operations.The Group continues to evolve its supply chain organisationaldesign to develop its manufacturing base to reducedependence on key vendors.Change in level of riskNo material changeStrategic linkInspire with the Brand, Realise Product Potential60Strategic Report – PerformanceRisk Business impact MitigationThe Group’s ITsystems and operationalinfrastructure are criticalto its operation andthe delivery of productsand services to itsconsumers. Increasingly,technology is evolving tostream major events andto communicate throughsocial media.A failure in these systems or a denial ofservice could have a significant impacton the Group’s operations and reputation.The Group also relies on a small number ofvendors of specialist digital and IT services.The Group’s IT systems and infrastructure received substantialAudit Committee focus during the year.A number of controls to maintain the integrity and efficiencyof the Group’s IT systems are in place, including recovery planswhich would be implemented in the event of a major failure.The IT disaster recovery plans are tested on a regular basis.IT security is continually reviewed and updated and third-partyIT security specialists are used to regularly test these controls.The Group has continued to strengthen its internal digital andIT teams and continues to facilitate knowledge transfer tointernal resources.Change in level of riskNo material changeStrategic linkAll Core StrategiesThe Group operates ina number of emergingmarkets which aretypically more volatilethan developed markets,and are subject tochanging economic,regulatory, social andpolitical developmentsthat are beyond theGroup’s control.Infrastructure andservices also tend tobe less developed.Seizure of assets or staff. Business associatepractice that is inconsistent with the Group’sethical standards and the UK regulatoryenvironment. Increased operational costsdue to country-specific processes drivenby the operating or regulatory environment.The Group uses the services of professional consultants toadvise on legal and regulatory issues when entering new markets,to undertake due diligence and to monitor ongoing developments.Where appropriate, the Group seeks to work with franchiseesor partners who compensate for its relative lack of experiencein a number of these markets.Change in level of riskNo material changeStrategic linkInspire with the Brand, Optimise Channels,Unlock Market Opportunity,Pursue Operational Excellence61Strategic Report – Performance Board andGovernance64 Board of Directors68 Corporate Governance Report83 Directors’ Remuneration Report106 Directors’ ReportChairmanSir John Peace (67)†ChairmanSir John Peace became Chairman of the Board in June2002 and is also Chairman of the Nomination Committee.He is Chairman of Standard Chartered PLC. Previously hewas Chairman of Experian plc from 2006 to 2014 and GroupChief Executive of GUS plc from 2000 to 2006. Sir Johnis Lord-Lieutenant of Nottinghamshire and was knightedin 2011 for services to business and the voluntary sector.Executive directorsChristopher Bailey (45)Chief Creative and Chief Executive OfficerChristopher Bailey became Chief Creative and ChiefExecutive Officer in May 2014, having previously servedas Chief Creative Officer since 2009. Christopher joined asDesign Director in May 2001. Prior to working at Burberry,Christopher was the Senior Designer of Womenswearat Gucci in Milan from 1996 to 2001. From 1994 to 1996he was the Womenswear Designer at Donna Karan.Carol Fairweather (55)Chief Financial OfficerCarol Fairweather became Chief Financial Officer in July2013, having joined Burberry in June 2006. She previouslyheld the position of Senior Vice President, Group Finance.Prior to joining Burberry, Carol was Director of Financeat News International Limited from 1997 to 2005 and UKRegional Controller at Shandwick plc from 1991 to 1997.John Smith (58)Chief Operating OfficerJohn Smith became Chief Operating Officer in March2013, having previously been a non-executive directorfrom December 2009. John was Chief Executive of BBCWorldwide from 2004 to 2012. John joined the BBC in1989, where he held the positions of Chief OperatingOfficer, Director of Finance, Property & Business Affairsand Finance Director. He previously served as a nonexecutive director of Severn Trent plc and Vickers PLC,and on the Accounting Standards Board from 2001 to 2004.Non-executive directorsFabiola Arredondo (49)*†‡Non-executive directorFabiola Arredondo was appointed as a non-executivedirector in March 2015. Fabiola is currently the ManagingPartner of Siempre Holdings, a private investment firmbased in Connecticut, US. She is also a non-executivedirector of Rodale Inc., NPR Inc. (National Public Radio),and a trustee of Sesame Workshop. Prior to SiempreHoldings, Fabiola held senior operating roles at Yahoo!Inc, the BBC and Bertelsmann AG. She has also previouslyserved as a non-executive director of Experian plc,Saks Incorporated, Intelsat Inc., BOC Group plc,and Bankinter S.A.Philip Bowman (63)*†‡Senior Independent DirectorPhilip Bowman was appointed as a non-executive directorin June 2002 and is the Senior Independent Director andChairman of the Audit Committee. Philip was Chief Executiveof Smiths Group plc from 2007 to 2015, and previously heldthe positions of Chief Executive at Scottish Power plc andChief Executive at Allied Domecq plc. His earlier careerincluded five years as a director of Bass plc. He waspreviously Chairman of Liberty plc and Coral Eurobet plcand a non-executive director of Scottish & Newcastle plcand British Sky Broadcasting Group plc.Ian Carter (54)*†‡Non-executive directorIan Carter was appointed as a non-executive directorin April 2007 and is Chairman of the RemunerationCommittee. He is President of Hilton Worldwide GlobalDevelopment and Chairman of Del Frisco’s RestaurantGroup, Inc. Previously, Ian was CEO of Hilton InternationalCompany and Executive Vice President of Hilton HotelsCorporation, and a director of Hilton Group plc untilthe acquisition of Hilton International by Hilton HotelsCorporation in February 2006. He previously served asan Officer and President of Black & Decker Corporationbetween 2001 and 2004.64Board and Governance – Board of DirectorsBoard ofDirectorsJeremy Darroch (53)*†‡Non-executive directorJeremy Darroch was appointed as a non-executive directorin February 2014. He is Chief Executive Officer of Sky plc,a position he has held since 2007, having joined the companyas Chief Financial Officer in 2004. Prior to Sky, Jeremy wasGroup Finance Director of DSG International plc (formerlyDixons Group plc) and spent 12 years at Procter & Gamblein a variety of roles in the UK and Europe. Jeremy alsopreviously served as a non-executive director and Chairmanof the Audit Committee of Marks and Spencer Group plc.Stephanie George (59)*†‡Non-executive directorStephanie George was appointed as a non-executivedirector in March 2006. She is an adviser to PenskeMedia Corporation and was recently Vice Chairman ofFairchild Fashion Media Inc (parent of Women’s WearDaily). Stephanie also sits on the Board of Lincoln Center.Previously, Stephanie was Executive Vice President andChief Marketing Officer at Time Inc. and spent 12 yearsat Fairchild Publications.Matthew Key (53)*†‡Non-executive directorMatthew Key was appointed as a non-executive directorin September 2013. Matthew is a non-executive directorof Orbit Showtime Network, a leading multi-platform payTV network in the Middle East and North Africa. Matthewis also a member of the European Advisory Board ofSamsung Electronics. Previously, he was Chairman andChief Executive Officer of Telefónica Digital, the globalinnovation arm of Telefónica. He also previously servedas Chairman and CEO of Telefónica Europe plc (formerlyO2 plc), Chief Executive Officer and Chief Financial Officerof O2 UK, and Chief Financial Officer for Vodafone UK.Prior to this, he held various financial positions at Kingfisherplc, Coca-Cola & Schweppes Beverages Limited andGrand Metropolitan Plc. Matthew is also Chairman ofthe Dallaglio Foundation, which is a charity focusedon disengaged youth.Dame Carolyn McCall (54)*†‡Non-executive directorDame Carolyn McCall was appointed as a non-executivedirector in September 2014. Dame Carolyn is Chief Executiveof easyJet plc, a position she has held since July 2010.Prior to easyJet, she held a number of roles at GuardianMedia Group plc including Chief Executive from 2006 to2010. She has also previously served as a non-executivedirector of Lloyds TSB, Tesco PLC and New Look plc.Dame Carolyn was awarded the OBE for services to womenin business in June 2008 and a Damehood for servicesto the aviation industry in January 2016. In January 2014,Prime Minister David Cameron appointed her a UKBusiness Ambassador.Key to membership of committees* Audit Committee† Nomination Committee‡ Remuneration Committee65Board and Governance – Board of DirectorsBack row:Ian Carter, Carol Fairweather, Matthew Key, John Smith, Philip Bowman, Dame Carolyn McCallFront row:Jeremy Darroch, Stephanie George, Sir John Peace, Christopher Bailey, Fabiola Arredondo Dear Shareholder,This has been a watershed year for the luxury sector,marked by a challenging global environment and theexpectation that these challenges will continue. In thiscontext, Burberry has been accelerating its productivityand efficiency agenda, especially looking at its ways ofworking, and has identified significant growth opportunitiesacross its existing channels, products and regions asdescribed earlier in this report.As a Board we have spent a significant amount of timeduring the year considering all aspects of this productivityand efficiency agenda with management, and this willcontinue to be an important area of focus for the Boardin the coming year. The Board remains confident of theGroup’s compelling opportunities in the longer termand that these initiatives will create future value forour shareholders.Board and Committee composition has continued to bea particular focus of the Board during the year as theBoard continues to execute against its succession plan.The composition of the Board has evolved significantlyover the past three years with the appointment of four newnon-executive directors and further changes are plannedover the coming year.David Tyler stepped down from the Board on 31 December2015, and on behalf of the Board I would like to thankDavid for his immense contribution to Burberry since itsIPO in 2002.The Board also keeps under review the composition of itsCommittees and the tenure of Committee Chairs. Followinga review during the year, the Board has appointed JeremyDarroch as Chair of the Audit Committee and FabiolaArredondo as Chair of the Remuneration Committee,each with effect from 1 August 2016. I would like to thankPhilip Bowman and Ian Carter for their commitment asprevious Chairs of these important Committees over anumber of years.The Board has also determined that the composition ofthe Committees should evolve over time away from thepast practice of all non-executive directors sitting on allCommittees. A variation in Committee membership willenable a fresh perspective and reflects the increased timecommitment and focus required from Committee membersdue the expansion of the Group over the past few years andthe increasing complexity of the remit of the Committees.Burberry continues to support diversity in all its formsacross the organisation including the Board. While all Boardappointments are made on merit, the Board continues tobelieve in the importance of a diverse Board andhas always had strong gender diversity amongst itsmembership, including at executive level. The Boardwill continue to monitor diversity and take such stepsas it considers appropriate to maintain its position as ameritocratic and diverse business.It is also important to have an open and ongoing dialoguewith our shareholders and other stakeholders. During theyear a combination of myself, individual non-executiveand executive directors and other members of seniormanagement participated in around 280 meetings withinvestors, including with the Group’s 25 largest investors.With the expectation that the year ahead will continue to beimpacted by a challenging external environment, the Boardwill continue to work with management as we execute onour strategic and operational initiatives. The work of theBoard and its Committees during the year along with theassessment of its performance, is set out in this report.Sir John PeaceChairmanGovernanceThe Board is collectively responsible for promoting Burberry’slong‑term success, for setting its strategic aims and ensuringa framework of prudent and effective controls.This report sets out the Board’s approach and work duringthe financial year 2015/16 and, together with the Directors’Remuneration Report on pages 83 to 105, includes detailsof how the Company has applied and complied with theprinciples and provisions of the UK Corporate GovernanceCode (the ‘Code’). The directors consider that the Companyhas complied with the provisions of the Code throughoutthe year.Our BoardThe Board currently consists of 11 members – theChairman, the Chief Creative and Chief Executive Officer,the Chief Operating Officer, the Chief Financial Officer andseven independent non-executive directors. A list of directorsand their biographies is set out on pages 64 and 65.The Chairman, Sir John Peace, has led the Boardas Chairman since 2002. The Chairman is responsiblefor leading and managing the business of the Board andensuring its overall effectiveness and governance.He also ensures the effective communication betweenthe Board, management and with shareholders and theGroup’s wider stakeholders.68Board and Governance – Corporate Governance ReportCorporateGovernance reportThe Chairman works collaboratively with the Chief Creativeand Chief Executive Officer, Christopher Bailey, in settingthe Board agenda and ensuring that any actions agreed bythe Board are effectively implemented.During the year, the Chairman maintained regular contactand met with the Senior Independent Director and othernon-executive directors outside of formal Board meetings.The Chairman also met with the non-executive directorswithout the executive directors being present.The Chairman is also responsible to shareholders for theCompany’s performance and has regular discussions withthe Company’s main institutional shareholders. The majorcommitments of the Chairman are detailed in his biographyon page 64.The Senior Independent Director, Philip Bowman,supports the Chairman in his role and leads the nonexecutive directors in the oversight of the Chairman.The Senior Independent Director is also available as anadditional point of contact for shareholders.The Non-executive directors provide strong experience,an independent perspective and constructive challengeand monitor the performance and delivery of the strategywithin the risk parameters set by the Board.The Chief Creative and Chief Executive Officer,Christopher Bailey, is responsible for the management ofthe business, developing the Group’s strategic direction forconsideration and approval by the Board and implementingthe agreed strategy. The Chief Creative and Chief ExecutiveOfficer is assisted by members of his Senior LeadershipTeam who meet regularly. Members of the SeniorLeadership Team are identified on page 16.The Company Secretary, Catherine Sukmonowski, actsas Secretary to the Board and all the Board’s Committeesand is responsible for supporting the Chairman in thedelivery of the corporate governance agenda.Role of the BoardIt is the responsibility of the Board to support management in itsstrategic aims to enable the Company to continue to perform successfullyand sustainably for our shareholders and wider stakeholders.The Board is ultimately responsible for promoting thelong-term success of the Group. The Board leads andprovides direction for management by setting strategy andoverseeing its implementation by management. The Boardis also responsible for oversight of the Group’s systemsof governance, internal control and risk management.Specific key decisions and matters have been reservedfor approval by the Board. These include decisions on theGroup’s strategy, the annual budget and operating plans,major capital expenditure and transactions, financialresults, the dividend, the approval of Group’s risk appetiteand other governance issues. The matters reserved for theBoard’s decision are available on the Company’s websiteat www.burberryplc.com.Role of the Board CommitteesThe Board is supported in its activities by a numberof committees including the following principalcommittees: Audit Committee; Nomination Committee;and Remuneration Committee. The terms of referenceof each of the principal committees can be viewed onthe Company’s website at www.burberryplc.com.The Committees can engage third-party consultants andindependent professional advisers and can call upon otherresources of the Group to assist them in discharging theirrespective responsibilities.In addition to the relevant committee members and theCompany Secretary, external advisers and, on occasion,other directors and members of the senior managementteam attend committee meetings but only at the invitationof the Chair of the relevant Committee.Set out on pages 77 to 81 are reports from the Audit andNomination Committees. The report of the RemunerationCommittee is set out on pages 83 to 105.AuditCommitteeChief Creative andChief ExecutiveOfficerRiskCommitteeSeniorLeadership TeamGlobal EthicsCommitteeBoardRemunerationCommitteeNominationCommitteeGlobal Health andSafety Committee69Board and Governance – Corporate Governance ReportStrategy andBusiness FocusCC & CEO’s regular updates on current trading, the business and operations.Annual strategy session (two days) and the acceleration of the Group’s productivity and efficiency agenda.Received briefings on key areas of the business, the external economic environment and the luxury sector.Consideration of the Group’s capital structure, balance sheet strategy and returns to shareholders.Year-end review of the business/sector outlook and consideration of the 2016/17 budget in the contextof the three-year plan.Oversight and Risk Review of the interim and preliminary results announcements, Annual Report and Accounts.Review of risk assessments, internal control framework, business controls and consideration of risk appetite.Consideration of the Group’s viability statement and the viability assessment and stress testing underpinningthe statement.Strategic risks and impact on the three-year plan.Review of audit plan for the year, reappointment of auditors and non-audit fees.Review of the Group’s ongoing business process transformation programme aimed at simplifying the Group’soperating processes including the upgrades of the Group’s IT systems.Review of IT general controls and cyber security plans and activities.Consideration of the internal audit of Group Treasury, various treasury matters and amendments to theTreasury Policy.Consideration of Group tax matters including the Group’s approach to tax risk.Governance andEngagementConsideration of new UK Corporate Governance Code requirements relating to the Group’s internal control andrisk management arrangements and new requirement to report on the Group’s longer-term solvency and viability.Consideration of the UK Corporate Governance Code and other regulatory requirements for the Annual Report.Preparation for, and review of Notice of AGM.Discussed regular updates from Investor Relations on share price, performance metrics, register activity andinvestor and analyst sentiment.Engaged with investors throughout the year and responded to retail shareholder questions at the AGM.Considered progress against the Board Succession Plan, Committee roles and composition.Assessed the outcome of the Board/Committee effectiveness review.Consideration of director indemnification and Director’s and Officer’s insurance renewal.Consideration of director conflicts of interest.People, cultureand valuesIn depth review of ways of working as part of the Group’s productivity and efficiency agenda.CC & CEO’s regular updates on key brand moments and culture.Consideration of regular updates from the management Ethics Committee.Consideration of the Group’s charitable activities, including the Burberry Foundation.Board effectivenessThe culture of the Board is open, transparent and collegiate.The Chairman demonstrates leadership and encourages openand transparent style around the Board table.Highlights of Board activities during 2015/16During the financial year the Board held six scheduledmeetings, including an in-depth two-day session onstrategy. In addition, individual Board members spent timevisiting the Group’s business in its key regions of AsiaPacific, EMEIA and the Americas and various operatingfacilities in the UK. Between meetings, directors spend asignificant amount of time on Board and Committee relatedmatters. The Board considers that it met sufficiently oftento enable the directors to discharge their duties effectively.The Board and Committee agendas were shaped to ensurethat discussion was focused on the Group’s strategicpriorities and key monitoring activities, as well as reviewsof significant issues arising during the year. The Group’songoing financial and strategic performance is reviewed atevery meeting and the Chief Creative and Chief ExecutiveOfficer, the Chief Operating Officer and the Chief FinancialOfficer comment on current trading, the market, products,key brand moments and Group culture.In addition, to allow for opportunities for the Board to engagewith senior management to discuss key elements of thebusiness, individual Board members are offered meetingswith senior management, and a number of Board dinnerswere held during the year.The table below gives the highlights of how the Board andits Committees spent their time during the 2015/16 financialyear (but it is not an exhaustive list of topics covered).Further information on the Group’s strategic focus duringthe year is set out in the Core Strategies section startingon page 30. The more detailed work of the Committeesis set out in this report.70Board and Governance – Corporate Governance ReportEvaluating our performance in 2015/16The Board undertakes a formal review of its performanceand that of its Committees each financial year, and isrequired to conduct an external evaluation once everythree years. As last year’s review was conducted externallyby Dr Tracy Long of Boardroom Review, this year’s reviewof the Board’s and Committees’ effectiveness was facilitatedinternally by the Company Secretary.The review parameters were informed by the insightsand agreed actions arising from the workshop discussionfacilitated by Dr Long last year, key themes which had arisenfrom Board discussions during the year and the impact ofthe continuing uncertain external environment. Each ofthe directors was encouraged to express their views onany area of Board and Committee effectiveness and inparticular, were asked to consider the following matters.· Particularly with the changing Board composition,whether there were effective opportunities forengagement with the Group’s strategy and knowledgeof the business.· Whether there had been appropriate focus on theidentified strategic challenges for the Group andwhat future areas of priority focus should be.· What would assist the Board/Committees in workingmore effectively in the coming year.Written feedback from the review was obtained fromeach director and the Chairman subsequently spoketo each director individually to ascertain any furtherviews and to discuss individual roles and performance(see ‘Directors’ performance’ on page 72). A report ofthe key themes and recommended actions arising fromthis review was considered.The overall view from the feedback was that the Boardoperated in a very collegial way and added real value.The Board appointments over the last few years hadstrengthened the Board’s capability and provided afresh perspective to Board discussions. There had beena good balance of Board focus on the priority strategyareas as well as a deepening of the non-executive directors’understanding of the operational and strategic aspects of theGroup’s business. The rapidly changing external environmentfor the luxury sector was an important factor and so futureareas of strategic focus would need to be reflective ofthis. It was important to continue to progress the Board’ssuccession plan with the aim of continuing to strengthenBoard membership to support the Group’s future ambitions.Below is a summary of the key themes and recommendations/actions identified from the 2015/16 review and progressagainst the actions arising from last year’s review.Key Themes 2015/16 Review 2014/15 ReviewViews Actions Progress against prior year actionsBoardcompositionand ongoingNED supportThe recent appointments to the Boardhad strengthened the Board’s capabilityand enabled a fresh perspective.‘Deep dives’ into the business andstrategy should continue.Continuing the Board succession planwas important. With the rapidly changingexternal environment for the luxurysector, new Board appointments shouldbe made with a view to supporting theGroup’s future ambitions.Specific areas for further ‘deep dives’into the business and competitivelandscape were identified. Theseareas would be woven into the Boardagendas and other opportunitiesfor visits and discussions duringthe coming year.The Board succession plan wouldcontinue with the aim of appointingadditional new non-executivedirectors in the coming year. Thedesired characteristics for any newappointments would be factoredinto the individual search profilesand selection process.Action: Enhance non-executives’engagement with strategy and knowledgeof the Company.There had been an effective focus ondeepening the understanding of theoperational and strategic aspects of thebusiness for the NEDs. This had includedan in-depth two-day session on strategyand Board agenda items which focusedon specific areas of the business and theluxury sector. In addition, individual Boardmembers spent time visiting the Group’sbusiness in its key regions of Asia Pacific,EMEIA and the Americas and variousoperating facilities in the UK.Board/CommitteefocusThe Board needed to understand thedynamics for the rapidly changingexternal environment for the luxurysector and the Board’s strategic focusshould reflect this. Specific areas offuture Board focus were identified.These specific areas of Board focuswould be woven into the Boardagendas during the coming year.Action: Future Board focus wouldcontinue to be on the strategicchallenges of managing growth, theuncertain external environment andshareholder engagement.A good balance of Board focus had beenachieved in these areas during the year.Board/CommitteeeffectivenessThe Board/Committees operated ina very collegial way and added real value.Individual director input was encouraged,listened to and reflected on.Management’s style was open andinteractive, agendas were good andthe meetings were well run. It would begood to structure the timing of meetingsso to allow more time for discussionand debate.The approach to Board meetingagendas, papers and timingswould be reviewed to ensurethat the directors’ time togetherwas maximised.Action: Continue to enhance nonexecutives’ knowledge and involvement.See above: Board compositionand ongoing NED support actions.71Board and Governance – Corporate Governance ReportTime allocationEach of the non-executive directors has a letter ofappointment which sets out the terms and conditionsof his or her directorship. The Chairman and the nonexecutive directors are expected to devote such time asis necessary for the proper performance of their duties.This is expected to be approximately 20 days each yearfor basic duties. The Chairman and Senior IndependentDirector are expected to spend additional time over andabove this to discharge their added responsibilities.External directorshipsThe Board’s executive directors are permitted to hold onlyone non-executive directorship of a FTSE 100 company.Details of the directors’ other directorships can be foundin their biographies on pages 64 and 65.Board and Committee composition and successionThe non-executive directors are drawn from a wide rangeof industries and backgrounds, including mobile, digital,technology, media, retail, financial services, consumertravel, hotels and hospitality, marketing, accountancyand general management expertise. They have extensiveexperience of complex organisations with global reach,including experience of the Group’s key markets of Europe,the Americas and Asia, reflecting the Group’s strategy.Their varied yet relevant experience brings a diversityof perspective and useful insight to Board discussionsand important support to the management team. Thebiographical details of the current directors can be foundon pages 64 and 65.Directors’ performanceThe Chairman held discussions with each of thedirectors to discuss their individual performance and toraise any top-of-mind issues they may have including inrelation to any matters relating to the Board/Committeeeffectiveness review. This assessment is used as thebasis for recommending the re-election of directorsby shareholders.The Board continued to focus on building on itsrelevant skills and competencies for the future underits succession plan. The composition of the Board hasevolved significantly over the past three years with theappointment of four new non-executive directors and anew executive team, albeit comprised of executives withmany years of experience at the Company. During the yearDavid Tyler stepped down from the Board on 31 December2015. The Board would like to thank David for his immensecontribution to Burberry over the years since its IPO in2002. The Board plans to continue to execute against itssuccession plan and it is anticipated that there will befurther changes to the Board in the coming year.As part of its succession planning the Board also keepsunder review the composition of its Committees and thetenure of the Committee Chairs to ensure that these rolesare refreshed from time to time. Following this review andon the recommendation of the Nomination Committee,the Board has appointed Jeremy Darroch as Chair of theAudit Committee and Fabiola Arredondo as Chair of theRemuneration Committee, each with effect from 1 August2016. The Board would like to thank Philip Bowman andIan Carter for their commitment as previous Chairs ofthese important Committees.The Board has also determined that the composition ofits Committees should evolve over time away from thepast practice of all non-executive directors sitting on allCommittees. A variation in Committee membership willenable a fresh perspective and reflects the increased timeChairman’s performanceThe Senior Independent Director met with the nonexecutive directors, without the Chairman present,to review the Chairman’s performance. The results ofthis review were then discussed with the Chairman.The feedback was that the Chairman does an excellentjob. Particularly, he encourages an open and transparentstyle around the Board table, is actively engaged in thekey strategic issues facing the business and facilitatesBoard focus on the key issues.The table below gives details of directors’ attendance at Board and Committee meetings during the year ended 31 March 2016.Board Audit Nomination RemunerationSir John Peace 6/6 – 3/3 –Christopher Bailey 6/6 – – –Fabiola Arredondo 6/6 3/3 3/3 3/3Philip Bowman 6/6 3/3 3/3 3/3Ian Carter 6/6 3/3 3/3 3/3Jeremy Darroch 6/6 3/3 3/3 3/3Carol Fairweather 6/6 – – –Stephanie George 6/6 3/3 3/3 3/3Matthew Key 6/6 3/3 3/3 3/3Dame Carolyn McCall 6/6 3/3 3/3 3/3John Smith 6/6 – – –David Tyler 1 4/6 2/3 1/3 2/31 David Tyler stepped down from the Board and its Committees on 31 December 2015.72Board and Governance – Corporate Governance Reportcommitment and focus required from Committee membersdue to the expansion of the Group over the past fewyears, and the increasing complexity of the remit of theCommittees in terms of regulatory and other requirements.To ensure that the appropriate linkage remains, all nonexecutive directors will continue to receive papers relatingto all Committee meetings and will be invited to attendCommittee meetings whenever they wish.All new Board appointments are based on merit,keeping in mind the Board composition principles.These principles are to:· maintain current core competencies;· add new competencies which reflect the evolutionof the Group’s business;· ensure compatibility with Burberry’s culture andvalues; and· promote diversity, including in terms of gender.Please see the Report from the Nomination Committee onpage 81 for more information on the appointment process.Diversity and inclusionMaleFemaleBoard succession planning is focused on ensuring theright mix of skills and experience for the Board. The Boardbelieves in the importance of diverse Board membership,including in relation to gender, and has consistentlyexceeded the goal set out by Lord Davies on diversityin Britain’s boardrooms of a minimum of 25% femalerepresentation of FTSE 100 boards, since the publicationof his report.Currently, four out of our eleven Board members are female(including our Chief Financial Officer) comprising 36% ofour Board membership. The Board will continue to monitordiversity and take such steps as it considers appropriateto maintain Burberry’s position as a meritocratic anddiverse business.The Board believes that it is critical that women are ableto succeed at all levels of the organisation. Currently, ofa total workforce of 10,613, approximately 67% (7,164)is female and approximately 40% of senior managementis female.More broadly, diversity is at the heart of Group culturewhich is characterised by a meritocratic and collaborativeethos. At our London headquarters, 60 differentnationalities are represented.The Company continues to focus on evolving its strategiesfor recruiting and developing key talent within the businessin a way which promotes the Group’s cultural values anddiverse and meritocratic environment. See the Build ourCulture section on pages 44 to 46.Board tenure0 – 5 years5 – 10 years10 years or aboveThe balance of tenure of service of the directors is setout in the Board tenure diagram. At the time of the 2016Annual General Meeting, Sir John Peace and PhilipBowman will have served on the Board for 14 years,Stephanie George will have been on the Board for tenyears and Ian Carter will have served for nine years.The performance of Philip Bowman, Stephanie George andIan Carter has been subject to a rigorous review, includingwith regard to their independence. Their in-depth knowledgeof the Group combined with the consistency they providethrough their continued service, remains invaluable toensure a smooth transition of the Board and its Committees.Each of these individuals continues to demonstratethe attributes of an independent non-executive director,including contributing to constructive challenge and debateat meetings, and there was no evidence that their tenurehas impacted on their independence.The Board is satisfied that all of its non-executive directorsbring robust independent oversight and continue toremain independent.Information flow and professional developmentThe Chairman works closely with the Company Secretaryin the planning of the agendas and schedule of Board andCommittee meetings and in ensuring that information ismade available to Board members on a timely basis andis of a quality appropriate to enable the Board to effectivelydischarge its duties.As set out in the table ‘Highlights of Board activities during2015/16’ on page 70, the Board is kept up to date on legal,regulatory, compliance and governance matters throughadvice and regular papers from the Company Secretaryand other advisers.73Board and Governance – Corporate Governance ReportThe Company Secretary assists the Chairman in designingand facilitating a tailored induction programme for newdirectors and their ongoing training. Each newly appointeddirector receives a formal and tailored induction programmeto enable them to function effectively as quickly as possible,while building a deep understanding of the business andthe Group’s markets. Each induction typically consists ofmeetings with both executive and non-executive directors,briefings from senior managers across the Group on keybusiness areas and operations, the luxury market, strategy,the corporate functions, and the Burberry brand and culture.In addition, non-executive directors are provided withopportunities to visit key stores, markets and facilities.This includes visits to the Group’s various operating facilitiesin the UK. The Chairman considers the training needs ofindividual directors on an ongoing basis.The Board has direct access to the advice and services ofthe Company Secretary and the appointment and removalof the Company Secretary is a matter reserved for the Boardas a whole. Directors may also obtain, in the furtherance oftheir duties, independent professional advice, if necessary,at the Group’s expense.Re-election of directorsAt the Annual General Meeting in 2015, all continuingdirectors offered themselves for re-election. Each directorwas re-elected and no director received less than 96%in favour of the votes cast. At the Annual General Meetingin 2016, all of the directors will again retire and all will offerthemselves for re-election or, in the case of the newlyappointed directors, for election.The Board believes that each of the directors standingfor re-election or election are effective and, accordingly,the Board recommends that shareholders approve theresolutions to be proposed at the 2016 Annual GeneralMeeting relating to the re-election or election ofthe directors.Managing conflicts of interestAll directors have a duty under the Companies Act 2006 toavoid a situation in which they have, or could have, a director indirect conflict of interest or possible conflict of interestwith the Company and the Group.Under the Group’s Articles of Association, the Board hasthe authority to approve situational conflicts of interestand has adopted procedures to manage and, whereappropriate, to approve such conflicts. Authorisationsgranted by the Board are recorded by the CompanySecretary in a register and are noted by the Board atits next meeting.A review of situational conflicts which have been authorisedis undertaken by the Board annually. Following the lastreview, the Board concluded that the conflicts had beenappropriately authorised, no circumstances existed whichwould necessitate that any prior authorisation be revokedor amended, and the authorisation process continued tooperate effectively.Engagement with shareholdersThe Board recognises the importance of regular openand constructive dialogue with shareholders and otherstakeholders, not just ahead of the Annual GeneralMeeting, but throughout the year.The Investor Relations team participated in around480 investor meetings and events during the year.A combination of the Chairman, individual non-executivedirectors, executive directors and other members of seniormanagement participated in around 280 of these meetings.This engagement included presentations to institutionalshareholders and analysts following the release of theGroup’s interim and full year results (which are availableon the Group’s website at www.burberryplc.com), as wellas meetings with the Group’s 25 largest investors. Topicsdiscussed included (but were not limited to) luxury sectorgrowth dynamics, the Group’s performance and strategy,productivity and efficiency agenda, performance relatedpay and the transition of the business to direct operationin Japan.The Group’s Investor Relations and Company Secretariatdepartments act as the centre for ongoing communicationwith shareholders, investors and analysts. The Boardreceives regular updates on the views of the Group’s majorshareholders and stakeholders from this engagementor direct contacts.The Group also conducts a regular independent investoraudit of its major investors through Makinson Cowell, acapital markets advisory firm, to gauge investor perception.The investor audit findings are discussed with the Board.Evaluation of internal controlsThe Board is ultimately responsible for the Group’s systemof internal controls and risk management, and it dischargesits duties in this area by:· determining the nature and extent of the principal risksit is willing to accept in achieving the Group’s strategicobjectives (the Board’s risk appetite); and· challenging management’s implementation of effectivesystems of risk identification, assessment and mitigation.The Audit Committee has been delegated the responsibilityfor reviewing the effectiveness of the Group’s internalcontrols and risk management arrangements. Ongoingreview of these controls is provided through internalgovernance processes and the work of the Group functionsas overseen by executive management particularly, thework of Group Risk and Internal Audit and the managementRisk Committee. Further assurance is provided by thereviews conducted by the external auditor. Regular reportson these activities are provided to the Audit Committeeas reflected in the standing items on the Audit Committeeagenda, with further objective reporting provided by theexternal auditors.74Board and Governance – Corporate Governance ReportThe Board, through the Audit Committee, has conducteda robust assessment of the Group’s principal risks and theGroup’s internal control framework and has considered theeffectiveness of the system of internal controls in operationacross the Group for the year covered by the Annual Reportand Accounts and up to the date of its approval by theBoard. This covered the material controls includingfinancial, operational and compliance controls and riskmanagement arrangements. The system of internal controlsis designed to manage rather than eliminate the risk of notachieving business objectives, and can only providereasonable and not absolute assurance against materialmisstatement or loss.The process followed by the Board, through the AuditCommittee, in reviewing regularly the system of internalcontrols and risk management arrangements accords withthe Guidance on Risk Management, Internal Control andRelated Financial and Business Reporting issued by theFinancial Reporting Council (‘FRC’). It also accords withthe provisions of the UK Corporate Governance Code.Control environmentThe Group’s business model is based primarily on a centraldesign, supply chain and distribution operation to supplyproducts to global markets via retail (including digital) andwholesale channels. This is reflected in the internal controlframework which includes centralised direction, resourceallocation, oversight and risk management of the keyactivities of marketing, inventory management, brand andtechnology development. The Group also has establishedprocedures for the delegation of authorities to ensurethat approval for matters that are considered significantis provided at an appropriate level, either because oftheir value or their materiality to the Group. In addition,the Group has policies and procedures in place that aredesigned to support risk management across the Group.These include policies relating to treasury, the conductof employees and third parties with which the Groupconducts business including prohibiting bribery andcorruption. These authorities, policies and proceduresare kept under regular review.The Group operates a ‘three lines of defence’ modelwhich helps to achieve effective risk management andinternal control across the organisation. This comprisesthe following:· the first line of defence: management owns and managesrisk and is also responsible for implementing correctiveactions to address process and control deficiencies;· the second line of defence: to help ensure the firstline is properly designed, established and operatingappropriately, management has also established variousrisk management and compliance functions to help buildand/or monitor the first line of defence. These include(but are not limited to) functions such as Group Risk,Financial Governance, Health and Safety, Asset andProfit Protection and Business Continuity; and· the third line of defence: Internal Audit provides theAudit Committee and management with independent andobjective assurance on the effectiveness of governance,risk management and internal controls including themanner in which the first and second lines of defenceachieve risk management and control objectives.Risk managementThe Group has an integrated approach to risk managementand internal controls to ensure that its review of risk is usedto inform the internal audit process and the design ofinternal controls.A detailed three-year strategic plan and annual budgetprocess provides the principal metrics against which theperformance of the Group is measured. The strategic planand budget are agreed with the Board together with definedperformance targets and risks. The plan and the principalrisks for delivering the strategy also form part of theBoard’s annual review of Group strategy. The plan and theassessment of the impact of the principal risks on the plan,forms the basis of the Board’s assessment of the viability ofthe Group as required by the Code. The executive directorsalso meet with senior management on a regular basis todiscuss performance, operational and budget issues toidentify any emerging risks to achieving the budget andstrategic plan.The Vice President – Group Risk Officer, who reportsto the Chief Operating Officer, is responsible for ensuringthat the Board’s requirements relating to risk managementframeworks are met. This includes the design andfacilitation of the risk assessment process, the risk appetiteframework and providing oversight of key business changeprocesses. As part of the Board’s consideration of theprincipal risks facing the Group, the Vice President – GroupRisk Officer facilitates a risk assessment process in eachkey business area and global support function to reviewthe principal risks facing its operations and to record therelevant controls and any actions in place to further mitigatethe risks. The materiality of the risk is measured based onfinancial and non-financial criteria, and the probability ofthe risk arising is also mapped. The detailed assessmentsare then consolidated to provide input into the Group riskassessment which is discussed and agreed by managementat the Risk Committee prior to review by the Board.The management Risk Committee meets at least threetimes per year and reports any key findings to the AuditCommittee. The Risk Committee evaluates risk throughreports made to it by Risk, Internal Audit and otherassurance teams and management committees. TheCommittee benefits from cross-functional attendanceencompassing senior management of key areas suchas IT, Finance, Legal, Brand Protection, CorporateResponsibility, Human Resources, Supply Chain, Assetand Profit Protection, and Health and Safety. The RiskCommittee is chaired by the Chief Operating Officer andits members include the Chief Financial Officer, the Chief75Board and Governance – Corporate Governance ReportPeople & Corporate Affairs Officer, the General Counsel,the Company Secretary, the Vice President – Group RiskOfficer, the Vice President of Internal Audit and othermembers of senior management. Key findings of theRisk Committee are reported to the Audit Committee.Further details on the Group’s risk management approachand its management and mitigation of each Principal riskis set out in the Principal Risks section on pages 56 to 61.Following the new requirement of the Code to report onthe Group’s longer-term solvency and viability, the Group’sviability statement is set out on page 57.Internal auditAll Internal Audit activity is conducted by the Internal Auditteam under the leadership of the Vice President of InternalAudit, who reports to the Chief Financial Officer but hasan independent reporting line to the Chairman of the AuditCommittee. Internal Audit adopts a risk-based approachto developing the annual audit plan which involvesundertaking a ‘mapping’ exercise between the PrincipalRisks, the potential impact on the achievement ofthe Group’s strategic objectives if those risks were tomaterialise and the extent to which other sources ofassurance exist and can be relied upon to mitigate thePrincipal Risks. The output of this, together with a numberof other factors, helps to identify areas of focus for theannual audit plan. Internal Audit stays abreast of anychanges to the Group’s risk profile on an ongoing basisand will reflect this through changes to the audit planas necessary during the year. Any proposed changesto the plan are discussed with the Chief Operating Officerand the Chief Financial Officer and reported to theAudit Committee.Ongoing visibility of the internal control environment isprovided through Internal Audit reports to managementand the Audit Committee. These reports are graded toreflect an overall assessment of the control environmentunder review, the significance of any control weaknessesidentified, and also include any remedial actions whichhave been identified and agreed with management.Reports are also provided on the status of anyopen actions.Financial reportingManagement is responsible for establishing andmaintaining adequate internal controls over financialreporting. These controls are designed to providereasonable assurance regarding the reliability of financialreporting and the preparation of financial statementsfor external reporting purposes.The Group has comprehensive planning, budgeting,forecasting and monthly reporting processes in place.A summary of the Group’s financial results supportedby commentary and performance measures is providedto the Board each month.In relation to the preparation of the Group financialstatements, the controls in place include:· a centre of expertise responsible for reviewing newdevelopments in reporting requirements and standardsto ensure that these are reflected in Group accountingpolicies; and· a global finance structure consisting of employeeswith the appropriate expertise to ensure that Grouppolicies and procedures are correctly applied.Effective management and control of the financestructure is achieved through the finance leadershipteam, consisting of key finance employees from theregions and London headquarters.The reporting process is supported by transactional andconsolidation finance systems. Reviews of controls arecarried out by senior finance management. The resultsof these reviews are considered by the Board as part ofits monitoring of the performance of controls aroundfinancial reporting.The Audit Committee reviews the application of financialreporting standards and any significant accountingjudgements made by management. These mattersare also discussed with the external auditor.Fair, balanced and understandableThe Annual Report and Accounts taken as a whole, isrequired to be fair, balanced and understandable andprovide the information necessary for shareholders toassess the Group’s position and performance, businessmodel and strategy. The Board is satisfied that it has metthis obligation. A summary of the directors’ responsibilitiesfor the financial statements is set out on page 114. Thereport of the Auditors on page 115 includes a statementby the auditors concerning their reporting responsibilities.CMA Order 2014 statement of complianceThe Audit Committee confirms that during 2015/16 theCompany has complied with the mandatory audit processesand audit committee responsibilities provisions of theCompetition and Markets Authority Statutory AuditServices Order 2014, as outlined in this report whichdescribes the work of the Audit Committee in dischargingits responsibilities.76Board and Governance – Corporate Governance ReportReport of the Audit CommitteeDear Shareholder,The role of the Audit Committee is to monitor the integrity offinancial information and to provide assurance to the Boardthat the Group’s internal controls and risk managementsystems are appropriate and regularly reviewed, togetherwith overseeing the work of the external auditors, approvingtheir remuneration and recommending their appointment.In addition to the disclosure requirements relating to auditcommittees under the UK Corporate Governance Code(‘Code’), the Committee’s report sets out the areas ofsignificant and particular focus for the Committee overthe course of the year.During the year the Committee continued to focus on theusual review of the Group’s financial results and ensuringthe ongoing effectiveness of the Group’s internal control andrisk management systems. The usual work of the Committeeis set out in the table on page 78. Some of the more in depthareas of focus for the Committee during the year includedthe following matters.· The Committee monitored the Group’s ongoing processtransformation programme aimed at simplifying theGroup’s operating processes including significantupgrades of the Group’s IT systems. As a result,opportunities for improvement within the IT controlframework were identified. Following from this, theCommittee considered management’s review of theGroup’s information technology governance and controlframeworks, including the progress on areas identifiedfor improvement. This included a review of the IT functionand refreshed IT strategy by the newly appointed ChiefInformation Officer, as well as a number of targetedreviews by Internal Audit. The output of these reviewshighlighted the need for enhanced risk awarenesswithin the IT function, improved alignment betweenIT and business strategies and improved programmemanagement of major transformation and changeinitiatives. Resources have now been deployed toaddress these recommendations.· With the heightened global technology and informationsecurity risks becoming an increasingly significant issuefor companies, the Committee spent a significant amountof time on the Group’s progress in this area. In particular,the Committee reviewed the ongoing progress ofthe Group’s Cyber Security Programme in light ofrecommendations of an externally commissioned CyberSecurity Risk Assessment and follow up independentreview conducted during the year, to ensure that theGroup continued to appropriately prioritise its focus andresources towards this critical area of risk. A new seniorposition of Chief Information Security Officer was filledshortly after the financial year-end.· The new requirements introduced by the Code requiredadditional focus from the Committee during the year toensure the Group’s compliance with these requirements.In this regard the Committee considered the Group’sinternal control and risk management arrangements andmonitoring practices to ensure that these accord withthese new enhanced requirements (see pages 74 and 75).· Another new requirement of the Code is the reporton a company’s longer-term solvency and viability andas such, the Committee considered the developmentand recommendation to the Board of a new viabilitystatement for the Group (as set out on page 57). TheCommittee considered the assurance work conductedby management which underpins the statement andconsidered that three years was an appropriatetimeframe on which to base an assessment of thelong-term viability of the Group on the basis that italigns with the regular business planning period. TheCommittee also reviewed the outcome of the stresstesting performed by management and recommendedthat the Directors confirm that they have a reasonableexpectation that the Group would be able to continuein operation and meet its liabilities as they fall due overthe three-year period of assessment.The Committee also considered the significant mattersset out in the table on page 79. Where these significantmatters related to the financial statements for the year, theCommittee requested papers from management setting outtheir approach, the key estimates and judgements appliedand management’s recommendation. The Committeereviewed and challenged these papers, together with thefindings of the external auditors, in order to conclude on theappropriateness of the treatment in the financial statements.The Committee has a constructive and open relationshipwith management and the auditors and I thank them onbehalf of the Committee for their assistance during the year.As I will be stepping down as Chair of the Committee from1 August 2016 this will be my last report. Jeremy Darrochwho has been a member of the Committee since February2014, will succeed me as Chair. Jeremy has extensiveexecutive finance and general management experienceand I wish him every success in his new role.Philip BowmanChairman, Audit Committee77Board and Governance – Corporate Governance ReportKey Committee rolesand responsibilities Usual business conducted during 2015/16Financial Reports:The integrity of the Group’sfinancial statements andformal announcements ofthe Group’s performance.· Review of the Annual Report and Accounts, annual financial statements, preliminary announcement,and interim announcement. On behalf of the Board the consideration of whether the processes andprocedures in place ensure that the Annual Report and Accounts, taken as a whole, is fair, balancedand understandable and provides the information necessary for shareholders to assess the Group’sposition and performance, business model and strategy.· Assessment of the Group’s viability and the appropriateness of the going concern basis for reporting.· Consideration of the report of the external auditors on the financial statements for the year, and onthe year end audit.· Ensuring compliance with relevant regulations for financial reporting and the Code.Risks and Internal Controls:The Group’s internal financial,operational and compliancecontrols and risk identificationand management systems. Reviewof Group policies for identifyingand assessing risks andarrangements for employeesto raise concerns (in confidence)about possible improprieties.· Review of the Group’s statement in the Corporate Governance Report on internal controls andrisk management.· Review of financial and operational control frameworks.· Review of IT and cyber security control frameworks.· Review of business risk assessments.· Treasury Policy review and compliance.· Risk Committee and Ethics Committee updates.· Health and safety reviews.· Whistleblowing reports.· Anti-Bribery and Corruption Policy compliance.Internal Audit:Review of the annual internal auditprogramme and the consideration offindings of any internal investigationsand management’s response.Review of effectiveness of theinternal audit function.· Consideration of the result of internal audits and management responses to the findings.· Approval of the internal audit plan for 2016/17.External Auditors:Recommending the appointmentof external auditors, approving theirremuneration and overseeing theirwork. Policies on the engagement ofthe external auditors for the supplyof non-audit services.· Review and approval of the proposed audit fee and terms of engagement for the Group’s externalauditors, PricewaterhouseCoopers LLP (‘PwC’), for the 2015/16 financial year (see below).· Review and approval of the audit plan for the year presented by the Group’s auditors. Considerationof the key areas of risk and the audit approach applied to these areas, the proposed areas of coverageof the audit, changes of scope and areas of risk in the current year plan and the resource plan.· Review of all non-audit services provided by the Group’s auditors during the period and the feesrelating to the services provided (see page 80).Audit Committee membershipThe following directors served as members of theCommittee during the year ending 31 March 2016:Members Appointment datePhilip Bowman (Chairman) 21 June 2002Fabiola Arredondo 10 March 2015Ian Carter 18 May 2007Jeremy Darroch 5 February 2014Stephanie George 19 May 2006Matthew Key 26 September 2013Dame Carolyn McCall 1 September 2014David Tyler1 21 June 20021 David Tyler stepped down from the Committee on 31 December 2015.The Audit Committee met three times during the year. Theattendance record of Committee members is recorded inthe table on page 72. In addition to the scheduled meetingsthe Chairman of the Committee meets separately withrepresentatives of the Auditor, the Chief Financial Officer,the Vice President – Financial Controller, the Vice President– Internal Audit and the Vice President – Group Risk Officeron a regular basis, including prior to each meeting. Inaddition, he meets with other members of managementon an ad hoc basis as required to fulfil his duties.Regular attendees at Committee meetings include: theChairman of the Board, the Chief Financial Officer, theChief Operating Officer, the Chief People and CorporateAffairs Officer, the Company Secretary, the Vice President– Group Risk Officer, the Vice President – Internal Audit, theSenior Vice President – Group Finance, the Vice President– Group Financial Controller, the Senior Vice President –Group Tax, the General Counsel and the representativesof the external auditors.The Board is satisfied that Philip Bowman, as Chairman,has recent and relevant financial experience and thatall other Committee members have past employmentexperience in either finance or accounting roles or broadexperience and knowledge of financial reporting and/orinternational businesses. Details of their experience canbe found in their biographies on pages 64 and 65.Role of the CommitteeThe main roles and responsibilities of the Audit Committeeare set out in written terms of reference, which are availableon the Company’s website at www.burberryplc.com. TheCommittee reviews its terms of reference annually. In lightof its key responsibilities, the Committee considered thefollowing items of usual business during the financial yearas set out in the table below.78Board and Governance – Corporate Governance ReportSignificant mattersThe significant matters considered by the Committee during the year are set out below.Significant matters for theyear ended 31 March 2016 How the Audit Committee addressed these mattersThe calculation of the fair value of the putoption over the non-controlling interest inthe Group’s business in China.The Committee reviewed and challenged the appropriateness of the key inputs used in thecalculation of the fair value of this option. The Committee also considered the sensitivity ofthe fair value to reasonable changes in inputs and disclosures made in relation to the valuation,including disclosure of the potential impact of the call option being exercised ahead of the putoption on the liability arising. Further details of the valuation of the put option, which is valuedat £45.8m at the year end, are set out in note 19 of the financial statements. The Committeeconcluded that the fair value of the put option, the disclosure of the valuation methodologyand of the impact of the judgements applied were appropriate in the financial statementsfor the year.Impairment assessment of intangible assets. The Committee considered management’s assessment of the recoverability of the intangibleasset relating to the termination of the fragrance and beauty relationship. Given the materialityof this asset, the Committee requested management to update the valuation to reflect latestprojected sales and margins, at each balance sheet date. The reasonableness of theseprojections was considered, taking into account the current performance of the businessand the headroom in the valuation over book value. No impairment in this intangible assetwas recorded during the year. Further details of the intangible asset are provided in note12 of the financial statements.Impairment assessment of property, plantand equipment and onerous lease provisions.The Committee considered management’s assessment of the recoverability of the carryingvalue of retail assets held in property, plant and equipment, and, where applicable, thepotential need for provisions relating to onerous lease contracts. The Committee consideredthe approach applied by management to review for potential indicators of impairment andthe assumptions applied in this review. Due to the more challenging trading conditions inthe luxury sector during the year, the Committee requested that management modify theapproach, so that more retail assets were subject to a detail impairment assessment. Whereimpairments were identified, the Committee considered the reasons for the impairment andmanagement’s quantification of the impairment. Due to the magnitude of the impairmentcharge recorded in the year, the Committee reviewed management’s assumptions forimpairment assessments in detail and challenged the rationale for all significant elementsof the charge. The Committee also challenged the way that any impairment charge isdisclosed in the Annual Report, given the increased materiality of the figure.The recoverability of the cost of inventory andthe resulting amount of provisioning required.The Committee considered the Group’s current provisioning policy, the historic loss ratesincurred on inventory held at the balance sheet date and the nature and condition of currentinventory. Due to the more challenging trading conditions in the luxury sector during the year,the Committee requested management to review the assumptions applied in estimatingthe recoverable value of the inventory. The Committee concluded the carrying value of theinventory was appropriate. The Committee also reviewed management’s evolution of theirprovisioning methodology for Beauty inventory, which had been requested by the Committeein the previous year, and concluded that the evolution in methodology was appropriate.Movements in inventory provisioning are set out in note 16 of the financial statements.Income and deferred taxes. The Senior Vice President – Group Tax, who reports to the Committee at each meeting,presented a detailed update of the Group’s tax strategy, developments relating to discussionswith tax authorities and the status of ongoing tax audits. The Committee reviewed andchallenged the appropriateness of assumptions and judgements applied in order to estimatethe amount of assets and liabilities to be recognised in relation to uncertain income tax anddeferred tax positions. The Committee concluded that the assets and liabilities recognisedand disclosures contained in the financial statements for the period were appropriate. Detailsof movements in tax balances are set out in notes 9 and 14 of the financial statements andfurther disclosure of tax contingent liabilities is given in note 29.Fair, balanced and understandable reporting. The Committee considered the Annual Report and Interim Report, on behalf of the Board, toensure that they were fair, balanced and understandable, in accordance with requirements ofthe UK Corporate Governance Code. As part of this review, the Committee reviewed the reportfrom the Strategic Report Drafting Team, highlighting key considerations. The Committeeconsidered comments arising from the review of accounts by the executive directors.Other matters. At the May and November meetings, the Committee also considered management’s paperson the following subjects:· assessment of the carrying value of goodwill;· impairment assessments of trade receivables; and· consideration of the potential impact of supplier rebates, which concluded that amountsreceived from supplier rebates did not have a material impact on the Group results.79Board and Governance – Corporate Governance ReportExternal auditorsThe Committee oversees the work undertaken byPricewaterhouseCoopers LLP (‘PwC’). During the yearthe Committee met with the external auditors withoutmembers of management being present.Appointment and feesThe Committee has primary responsibility for making arecommendation on the appointment, reappointment andremoval of the external auditors. The Committee assesseson an annual basis the qualifications, expertise, resourcesand independence of the external auditors and theeffectiveness of the previous audit process. Over thecourse of the year, the Committee has reviewed theaudit process and the quality and experience of theaudit partners engaged in the audit. The Committee alsoreviewed the proposed audit fee and terms of engagementfor the 2015/16 financial year. Details of the fees paid tothe external auditors during the financial year can be foundin note 7 in the financial statements.PricewaterhouseCoopers LLP have remained in place asauditors since prior to the IPO of the Company in 2002.They were reappointed with a new lead audit partnerfollowing a formal tender process undertaken by the Groupfor the 2010/11 financial year. As the external auditors arerequired to rotate the audit engagement partner every fiveyears, a new engagement partner Paul Cragg commencedhis appointment from this 2015/16 financial year. As a resultof the UK’s implementation of the EU’s mandatory firmrotation requirements, the Company is required to replacePwC with another firm of auditors no later than for thefinancial year commencing 1 April 2020.During the year, the Committee approved thereappointment, remuneration and terms of engagementof PricewaterhouseCoopers LLP as the Group’s externalauditor. The Committee recommended to the Board thatit proposes to shareholders that PricewaterhouseCoopersLLP be reappointed as the Group’s external auditors atthe Group’s forthcoming Annual General Meeting.Non-audit servicesThe Committee recognises that the independence ofthe external auditors is an essential part of the auditframework and the assurance that it provides. TheCommittee has adopted a policy which sets out aframework for determining whether it is appropriateto engage the Group’s auditors for non-audit services.Key considerations set out in the policy includewhether the services:· are naturally tangential to the audit and which theauditors are best placed to provide;· cannot be regarded as naturally tangential to theaudit, but where the external auditors are in a positionto provide the best service to the Group due to theirprevious experience, network within and knowledge ofthe Group, or market leadership in a particular area; and· represent a real threat to the perceived or actualindependence of the audit team.Under the policy, the auditors may provide non-auditservices that do not prejudice their independence, subjectto prior approval as set out in the policy. Proposed feesabove £250,000 must be approved by the Chairmanof the Audit Committee, and fees must be activity basedand not success related. Fees paid to the external auditorsfor non-audit services in any given financial year cannotexceed 70% of the average of the Group audit feesreceived over the last three years. This is monitored jointlyby Internal Audit and the external auditors on an ongoingbasis and prior to any additional non-audit servicesbeing approved. At the half year and year end, the AuditCommittee reviews all non-audit services provided bythe auditors during the period and the fees relating tosuch services.During the year, the Group spent £412,000 on non-auditservices provided by PricewaterhouseCoopers LLP (being21% of the average of Group audit fees received over thelast three years). Further details can be found in note 7.80Board and Governance – Corporate Governance ReportReport of the Nomination CommitteeDear Shareholder,The role of the Nomination Committee is the following.· To review the balance and composition of the Board andits Committees, ensuring that they remain appropriate.· To be responsible for overseeing the Board’s successionplanning requirements in light of the Group’s strategyand the Group’s position on diversity and inclusion. Thisincludes the identification and assessment of potentialBoard candidates and making recommendations to theBoard for its approval.· To keep under review the leadership needs of, andsuccession planning for, the Group in relation to bothits executive directors and other senior executives. Thisincludes the consideration of recommendations madeby the Chief Creative and Chief Executive Officer forchanges to the executive membership of the Board.Highlights of the Committee’s activities during the yearincluded the following.· The ongoing focus on the Board succession planto continue to evolve the Board’s relevant skills andcompetencies for the future. (See Board successionon page 72 and Diversity and inclusion on page 73).· The consideration of the composition of the BoardCommittees and Committee Chair roles.· The consideration of the findings of the 2016 Boardeffectiveness review and the recommendations for Boardgovernance and enhancing the composition of the Board.Board succession and composition will continue to remaina priority for the coming year as the Board continues toexecute its succession plan.Sir John PeaceChairman, Nomination CommitteeNomination Committee membershipThe following directors served as members of theCommittee during the year ended 31 March 2016:Members Appointment dateSir John Peace (Chairman) 21 June 2002Fabiola Arredondo 10 March 2015Philip Bowman 21 June 2002Ian Carter 18 May 2007Jeremy Darroch 5 February 2014Stephanie George 23 March 2007Matthew Key 26 September 2013Dame Carolyn McCall 1 September 2014David Tyler 1 23 March 20071 David Tyler stepped down from the Committee on 31 December 2015.Role of the CommitteeThe main roles and responsibilities of the NominationCommittee are set out in written terms of reference,which are available on the Company’s website atwww.burberryplc.com. The Committee reviews itsterms of reference annually.Activities during the yearThe Committee met three times during the year underreview. The table on page 72 gives details of directors’attendance at these meetings.The Committee continued to spend a significant amountof time on the Board succession plan as well as theconsideration of the composition of the Board Committeesand the tenure of the Committee Chairs, to ensure thatthese roles are refreshed from time to time. Following thisreview the Committee recommended to the Board theappointment of Jeremy Darroch as Chair of the AuditCommittee and Fabiola Arredondo as Chair of theRemuneration Committee. The Committee is satisfiedthat these appointees have the requisite background,experience and personal qualities required to act aseffective Chairs of these respective Committees.Other regular attendees at Committee meetings include theChief Creative and Chief Executive Officer, the Chief Peopleand Corporate Affairs Officer and the Company Secretary.81Board and Governance – Corporate Governance ReportAnnual General Meeting and annual re-electionof directorsAs required by the UK Corporate Governance Code, theNotice of the 2015 Annual General Meeting was sent toshareholders at least 20 working days before the meeting.A poll vote was taken on each of the resolutions put beforeshareholders. All directors serving at the time of the 2015Annual General Meeting, attended and the Chairman ofthe Board and the Chairmen of each of the Committeeswere available to answer shareholders’ questions.Voting at the upcoming 2016 Annual General Meetingwill be by way of poll. The results of the voting at theAnnual General Meeting will be announced and detailsof the votes will be available to view on the Group’swebsite at www.burberryplc.com as soon as possibleafter the meeting.It is the intention that all directors, including the Chairmenof the Audit, Remuneration and Nomination Committees,will attend the 2016 Annual General Meeting and will beavailable to answer shareholders’ questions.All directors have, since the 2011 Annual General Meeting,offered themselves for annual re-election in accordancewith the UK Corporate Governance Code. At the 2016Annual General Meeting, all of the directors will again retireand all will offer themselves for re-election or, in the caseof any newly appointed directors, for election.The biographical details of the current directors can befound on pages 64 and 65 of this Annual Report. TheChairman confirms that, following the external evaluationconducted during the year and the review of individualdirector roles and performance led by the Chairman, theperformance of each of the directors standing for electioncontinues to be effective and demonstrates commitmentto their roles, including commitment of time for Board andCommittee meetings and any other duties. Accordingly,the Board recommends that shareholders approve theresolutions to be proposed at the 2016 Annual GeneralMeeting relating to the re-election or election ofthe directors.The terms and conditions of appointment of the directors,including the expected time commitment, are available forinspection at the Company’s registered office.Other governance disclosuresTax strategyThe Group is committed to complying with global taxregulations in a responsible manner with due regard togovernments and shareholders, and to engage in openand constructive relationships with tax authorities in theterritories in which it operates. The Group’s tax planning isconsistent with this responsible approach, and it will notenter into arrangements for the purpose of achieving a taxadvantage. The Group tax strategy is implemented throughthe Group’s tax policy which directs and aligns the activitiesof the various functions within the Group in order to achievethe strategy’s objectives.Tax governance frameworkThe Chief Financial Officer is responsible for the Group’stax policy which is implemented with the assistanceof the finance leadership team. This is reviewed on anongoing basis as part of the regular financial planningcycle. In addition, the Group’s tax status is reportedregularly to the Group Risk and Audit Committees.The Audit Committee is responsible for monitoring allsignificant tax matters including the Group’s tax policy.Audit Committee meetings are attended by a numberof Group officers and employees including the ChiefFinancial Officer, the Senior Vice President – Group Tax,the Company Secretary, the General Counsel, and theChief People and Corporate Affairs Officer, whooversees all corporate responsibility matters.Share capitalFurther information about the Company’s share capital,including substantial shareholdings, can be found inthe Directors’ Report on page 107.82Board and Governance – Corporate Governance ReportDear Shareholder,The role of the Remuneration Committee continues to be to ensure that remuneration for the executive directors and othersenior executives enables them to be completely focused on driving the Company’s performance and delivering our keystrategies in a responsible way. It is also our responsibility to ensure that remuneration received by the executive directorsis aligned with the levels of performance achieved and the value delivered to you as shareholders.As reported by the Chairman and the Chief Creative and Chief Executive Officer in their introductory letters to this year’sAnnual Report, 2015/16 has been a challenging year for the luxury sector globally, resulting in Group Revenue of £2,514.7mand Group Adjusted Profit Before Tax (‘PBT’) of £420.6m. As we have announced, with the outlook for demand in luxuryuncertain and underlying cost pressures persisting for the sector, we are accelerating our productivity and efficiencyagenda, especially looking at our ways of working. We are also addressing how to optimise future organic revenue growthopportunities, the resulting investment plans and our capital structure. Please see page 30 for further information.Remuneration for 2015/16Against this backdrop of a challenging external environment, the senior executive team has remained focused on themanagement of the business and the execution of our key strategies. We continue to drive the business to ensure Burberryis best placed for long-term, sustainable growth and value creation. Our financial outcomes reflect these economicchallenges and, given the stretching nature of the performance targets we had set at the beginning of our financial year,the level of remuneration received by the executive directors for the 2015/16 year is lower than in 2014/15. In particular,the points I would draw your attention to are as follows:· 2015/16 Group Adjusted PBT achieved was below the threshold target set by the Remuneration Committee at the startof the year and so no annual bonus will be paid to the executive directors;· the relatively subdued growth in Group Adjusted PBT over the three-year period ending in 2015/16 means that awardsgranted in 2013 based on this performance measure – Co-Investment Plan (‘CIP’) awards and 50% of Restricted SharePlan (‘RSP’) awards – will not vest. The remaining 50% of 2013 RSP awards based on Total Shareholder Return (‘TSR’)relative to our peers will also not vest;· the Committee has reviewed progress for the year against the performance criteria on Christopher Bailey’s 2014exceptional share award and has determined that achievement for 2015/16 was 50% of maximum. Section 5 of thisreport includes detailed commentary on progress towards the objectives for this second year of the performanceperiod; and· Given the uncertain external environment and the reflection of these economic challenges in our financial outcomes,Christopher Bailey has requested that the vesting date of the first tranche of his 2013 exceptional share award be deferredfor a further 12 months, from July 2016 to July 2017. Ahead of the new vesting date in July 2017, the Committee andChristopher Bailey will again assess the extent to which vesting would be appropriate.Remuneration Policy OperationThe Remuneration Committee is pleased to confirm that all remuneration payments to executive directors made during theyear have been in line with Burberry’s directors’ remuneration policy (‘remuneration policy’) approved by shareholders at the2014 Annual General Meeting (‘AGM’). The Committee is satisfied that the remuneration policy has proved fit-for-purpose,reflecting the long-term performance of the Company, and remains appropriate for the year ahead. We have chosen to includethe full remuneration policy in this report to help you to better interpret the Annual Report on Remuneration.We will be seeking shareholder approval for a new remuneration policy at the 2017 AGM, when the existing policy reachesthe end of its three year-life. The Committee will be reviewing our remuneration arrangements in detail ahead of this,to ensure the new policy will serve Burberry well for a further three-year period. We will look to consult with our largestshareholders regarding the new remuneration policy towards the end of the year.83Board and Governance – Directors’ Remuneration ReportDirectors’Remuneration ReportRemuneration for 2016/17In terms of how the remuneration policy will be operated during the 2016/17 year, section 4 sets out the Committee’sintended approach in detail. The points I would draw to your attention are that:· the executive directors will not be receiving any increase to salaries;· the weightings and definitions for the Executive Share Plan (‘ESP’) performance measures to be applied to awardsto be granted in 2016 will remain unchanged from those used for the 2015 awards; and· the award levels for the 2016 ESP grant will be reviewed and the performance measure targets to be applied will becarefully re-calibrated to ensure they remain stretching and appropriately motivating and, most importantly, are alignedwith our strategy and performance goals.In the context of work on our productivity and efficiency agenda and its resulting benefits, the Committee is currentlyreviewing the approach to take for ESP awards to be granted in 2016, and in particular the performance targets thatwill be applied. The Committee considers it critical that the 2016 ESP performance targets are aligned with the resultingthree-year financial goals and are calibrated based on the most relevant internal and external information. We typicallygrant our share awards each year during July, and the Committee’s normal approach is to determine the quantum andperformance targets to be applied to these awards well in advance, at its March meeting. This was not possible this yeardue to the ongoing productivity and efficiency work described above. As a result, the Committee was not in a positionto determine and disclose the 2016 ESP award levels and targets ahead of publication of this report. The Committee hastherefore decided to delay the grant of awards for 2016 from the normal date in July to November. The Committee valuesthe views of shareholders and has decided on this timing to allow time to share and discuss the proposed targets withour largest shareholders ahead of any formal disclosure and grant. The Committee will review the quantum of ESP awardsin light of any changes to performance targets. The Committee remains committed that remuneration should be stronglylinked to performance. Once determined, the final 2016 ESP awards and targets will be disclosed on our website.The Committee values the views of shareholders and takes feedback received on any aspect of Burberry’s executiveremuneration very seriously and I would like to thank shareholders for the ongoing feedback on executive remunerationgenerally in this and prior years.Following four years as Chairman of the Remuneration Committee, I have decided to step down from the role. I am delightedto share with you that Fabiola Arredondo will succeed me as Chairman with effect from 1 August 2016 and I am confidentthat under her chairmanship the Committee will continue to take a responsive and responsible approach to executiveremuneration. I would like to thank shareholders once again for the time you have invested and the support you have giventhe Committee, and to me personally, during my time as Chairman.This 2016/17 Annual Report on Remuneration and this statement will be put to an advisory vote at the AGM on 14 July 2016.As I hope it is clear from this report, the Committee remains committed to aligning pay with performance and with the experienceof long-term shareholders. We look forward to gaining your support on the report when it is put to the vote at the AGM.Ian CarterChairman, Remuneration Committee84Board and Governance – Directors’ Remuneration ReportSummary contentsThe remuneration report is set out in the following sections:1. Directors’ remuneration policy2. Directors’ remuneration in 2015/16 (Annual Report on Remuneration)3. Outstanding share interests4. Directors’ remuneration in 2016/175. Further information on Christopher Bailey’s 2014 exceptional performance-based award of 500,000 shares6. Payments made in the year to former directors7. Payments for loss of office8. Remuneration Committee in 2015/169. Seven-year performance graph and Chief Executive Officer remuneration1. Directors’ remuneration policyBurberry’s directors’ remuneration policy was approved by shareholders at the 2014 Annual General Meeting (‘AGM’) andtook effect from the date of the 2014 AGM, 11 July 2014. Since the policy has a maximum life of three years and has notchanged since its introduction, we are not seeking approval for it this year and it is set out in this report for reference only.The Committee intends that this policy should apply until the 2017 AGM. The charts illustrating indicative levels of totalremuneration for the executive directors have not been included this year, and the full original version of the remunerationpolicy can be found in the 2013/14 Annual Report, available on the Company’s website.The Committee believes the Group’s remuneration should be strongly linked to performance and internationally competitive,taking into account the global markets in which it operates and from which it recruits. The remuneration policy is basedon the following principles.Linked to the success and strategy of the business: the overall remuneration framework should provide a balancebetween key short-term and long-term business objectives. Variable pay for executive directors includes (1) an annualcash bonus based on the financial performance of Burberry (currently Adjusted Profit Before Tax (‘Adjusted PBT’*) is thesole performance measure), and (2) long-term share-based incentives linked primarily to the financial performance of theCompany but having regard to the delivery of objectives set in accordance with the Company’s long-term strategic themes.Shareholder value: remuneration should provide close alignment with long-term value creation for shareholders throughthe selection of appropriate performance measures and targets, be tied to the future success of the Company, emphasisevariable pay and deliver a significant proportion of remuneration in shares, some of which are expected to be retained inaccordance with the Group’s executive shareholding policy.Competitive in the global talent market: total remuneration should be sufficient to attract, motivate and retain exceptionaltalent within the global luxury goods and digital sectors. Total remuneration for executive directors and other seniorexecutives is therefore benchmarked against Burberry’s main global competitors for talent and comparable UK companies.The Committee recognises that, for each executive, the relative importance of each of these reference groups may bedifferent depending on the skills and experience required to undertake the specific role. Benefits are based on competitivemarket practice for each executive depending on individual circumstances.* Adjusted Profit Before Tax is defined in note 2 of the Financial Statements and all references to Adjusted PBT in this report refer to this definition.85Board and Governance – Directors’ Remuneration Report1.1 Directors’ remuneration policy effective from 11 July 2014PurposeMaximum annual opportunityand link to performance OperationExecutive directorsBase salaryTo recognise theresponsibilities,experience and abilityof our talent in acompetitive globalenvironment, keepingour people focused on,and passionate about,the brand.Maximum annual increase (per individualexecutive director): 15% of salary.Annual increases are normally in line with the average increasefor all employees and below the maximum shown.Salary levels and increases for executive directors are set withinthe same framework and ranges as those for all other employees,taking into account individual performance and overall contributionto the business during the year, cost to the Company and theexternal economic climate.Salaries are benchmarked annually against global companies ofsimilar size and/or global reach within relevant sectors. Dependingon the role, this comprises companies in the luxury goods sectorand/or companies with high-profile global brands particularly inthe digital sector, and to a lesser extent comparable UK companiesand/or companies with a high growth profile. Salaries are reviewed,although not necessarily increased, annually.The Committee considers the impact of any base salary increaseon the total remuneration package.The Committee retains the ability to recognise, for example,development in role, change in responsibility, and/or other mattersrelating to the role or incumbent. In these situations the Committeereserves the discretion to make annual increases above themaximum increase shown.Annual bonusTo reward executivedirectors for achievingannual financial targetslinked to the strategicplan agreed bythe Board.Maximum awards are:· 225% of salaryPerformance measure(s):· 100% linked to adjusted profit performancePercentage of maximum bonus payableat each level of performance:· 25% at threshold· 50% at target· 100% at maximumThe Committee reviews the performance measure annually to ensureit remains appropriate and is aligned with Burberry’s strategy.Adjusted profit will be the primary measure used by managementand the Committee believes strong performance in adjusted profitis key to delivering superior shareholder returns. Ultimately, thesuccessful implementation of the key strategic themes is reflectedin the adjusted profit.Targets are set before the start of each year by reference to budget,the strategic plan, long-term financial goals, latest projections forthe relevant year and broker earnings estimates for Burberry andits competitors.Targets will be disclosed retrospectively following completionof the relevant financial year, provided they are not deemed tobe commercially sensitive.50% of bonus will be deferred in shares for three years untilexecutive shareholding guidelines are met.Use of judgement: The Committee may determine that it isappropriate to adjust (down or up) the bonus outcome. Thismay take into account factors such as misalignment of adjustedprofit performance with other financial and operational measuresof performance or targets no longer being appropriate. It isanticipated that any adjustment would be infrequent and inexceptional circumstances only. Details of any applicationof judgement would be disclosed at the time in the relevantremuneration report.86Board and Governance – Directors’ Remuneration ReportPurposeMaximum annual opportunityand link to performance OperationBurberry ExecutiveShare Plan (‘ESP’)To focus executiveson, and reward them for,sustainable long-termperformance andsuccessful executionof the Group’slong-term strategy.To help maintain thestability of the topexecutive team, and alignexecutives’ interests withthose of shareholders.Maximum awards are:· 400% of salary (in normal circumstances)· 600% of salary (in exceptionalcircumstances, to be determined at theCommittee’s discretion)Performance measures for executivedirectors to be measured over three years:· 50% to 60% on growth in adjusted profit:– 25% vesting for threshold performance– 100% vesting for maximum performance– Straight-line vesting in between· 20% to 25% on a measure to incentivisethe efficient use of capital:– 25% vesting for threshold performance– 100% vesting for maximum performance– Straight-line vesting in between· 20% to 25% on revenue growth:– 25% vesting for threshold performance– 100% vesting for maximum performance– Straight-line vesting in betweenVesting: 50% after three years, remaining50% after four years.Targets for the measures will be calibrated ahead of each annualgrant by reference to the latest strategic plan, long-term financialgoals, latest three-year projections and broker earnings estimatesfor Burberry and its competitors. The threshold targets will becalibrated to be of median difficulty, and the maximum targetswill be of upper quartile difficulty. Targets will be disclosed aheadof each annual grant.Growth in adjusted profit has been chosen as it continues to be theprimary financial measure used by shareholders and management,and the Committee believes strong growth in adjusted profit is keyto delivering superior shareholder returns. The efficient use of capitalmeasure is intended to incentivise management to combine superiorgrowth in profit and revenue with attractive return on incrementalinvestment but not to act as a disincentive to invest. Burberry’sstrategy is designed to deliver both profit and revenue growthand therefore to align with strategy a measure based on revenuegrowth is proposed as a transparent and quantifiable indicatorof performance.Where the information is not deemed by the Committee to becommercially sensitive, commentary will be provided on an annualbasis outlining progress against the targets and, for completedcycles, detail on the performance achieved.A cash payment equivalent to the value of dividends which wouldhave been received during the vesting period will be paid only inrespect of shares that vest.Discretion: The Committee retains the discretion to grant awardsof up to 600% of salary in exceptional circumstances and to varythe weighting applied to each measure within the ranges shown.The Committee will consult with major shareholders in advanceof applying such discretion to grant awards of up to 600%.Use of judgement: The Committee will have the ability to adjustdown or up the calculated level of vesting by reference to the qualityof earnings and effective execution of strategy to ensure the growthdelivered is long-term sustainable growth. Details of anyadjustments would be disclosed in the relevant remuneration report.Malus provision: Unvested shares or awards may be forfeited inwhole or in part in the event of a material misstatement in theCompany’s audited financial statements.All-employeeshare plansTo encourage employeeshare ownership atall levels.Sharesave: maximum savings amount of£6,000 per annum, with which shares canbe purchased with a 20% discount.Share Incentive Plan and InternationalFreeshare Plan: awards with a value ofup to £500 per annum.Burberry operates two all-employee share plans:The Sharesave Scheme offers eligible employees (includingexecutive directors) an opportunity to enter into a three or five-yearsavings contract to save a portion of their salary which can be usedto purchase Burberry shares, normally at the end of the savingscontract, at up to a 20% discount to the market price at the dateof invitation.Awards of shares or a cash equivalent (where the use of sharesis not possible) are made annually to all eligible employees underthe UK Share Incentive Plan and International Freeshare Plans.Discretion: The Committee reserves the right to increase themaxima to the extent that the change is made on the same basisfor all employees participating in the plan.PensionsTo offer marketcompetitive benefits.Maximum Company contribution:30% of salary per annum.Executive directors participate in defined contribution arrangements.Participants may elect to receive some or all of their entitlement asa cash allowance.87Board and Governance – Directors’ Remuneration ReportPurposeMaximum annual opportunityand link to performance OperationOther benefitsand allowancesTo promote thewell-being of employees,allowing them to focuson the business.The aggregate maximum value of all otherbenefits and allowances is not anticipated toexceed £100,000 per individual per annum.The Committee may agree that the Companywill pay additional allowances linked torelocation or international assignment. Forthe purposes of providing a maximum, it is notexpected that this would exceed £250,000 inany year for one individual.For the CC & CEO only, the maximum valueof all cash allowances is £440,000 per annum,as agreed in his previous role, prior to hisappointment as an executive director. He isalso entitled to receive the non-cash benefits,as noted to the right; the value of these isnot expected to exceed £20,000 per annum.Benefit levels are reviewed on an annual basis and the cost to theCompany of providing benefits can vary due to a number of factors.Benefits for executive directors may include, but are not limited to:· private medical insurance· life assurance· long-term disability insurance· car allowance· clothing allowance· employee discountReasonably incurred expenses will be reimbursed.Discretion: The Committee retains the discretion to provideother benefits to the executive directors as deemed necessary.Discretion to honour all prior commitmentsThe Committee reserves the right to make any payments where the terms were agreed before this policy came into effect or prior to anindividual being appointed a director of the Company. These payments will include the satisfaction of share awards previously granted.OutstandingCo-Investment Plan(‘CIP’) awards (priorcommitments)To allow payment ofawards made underprevious policy.Maximum awards (subject to investmentof bonus):· 400% of salary (that is a two-times matchon a maximum bonus of 200% of salary)The performance measure that determinesvesting is growth in Adjusted PBT overthree years.It is the Committee’s intention that outstanding CIP awardsshould be allowed to pay out according to the terms on grant.Further details are contained in the remuneration report for theyear of grant and will be included in the remuneration reportfor the final year of the performance period.Malus provision: None.Outstanding RestrictedShare Plan (‘RSP’)awards (priorcommitments)To allow payment ofoutstanding awards,made underprevious policy.Maximum awards:· 200% of salary· One-off exceptional award of 300% ofsalary (granted to the CC & CEO in hisprevious role, prior to his appointmentas an executive director)Performance conditions for executive directors:· 50% on growth in Adjusted PBT overthree years· 50% on relative TSR vs. sector peersover three yearsIt is the Committee’s intention that outstanding RSP awards shouldbe allowed to pay out according to the terms on grant.Further details are contained in the remuneration report for the yearof grant and will be included in the remuneration report for the finalyear of the performance period.Malus provision: None.Outstandingexceptional shareawards (priorcommitments)To allow payment ofoutstanding awards,made under priorcommitments toChristopher Bailey.(1) In Christopher Bailey’s prior role asChief Creative Officer.Maximum outstanding awards:· 1,350,000 sharesVesting conditions are continued employmentover three, four and five years from date of grant(2) On Christopher Bailey’s appointment toCC & CEO.Maximum outstanding award:· 500,000 sharesVesting conditions are key strategicperformance objectives, as determined by theRemuneration Committee at date of grant, andcontinued employment over three, four and fiveyears from date of grantIt is the Committee’s intention that outstanding exceptionalshare awards should be allowed to pay out according to theterms on grant.Further details will be included in the remuneration report for theyear when any awards are included in the single figure of totalremuneration.In the case of the award on appointment to the CC & CEO,the Committee will disclose further details on the key strategicperformance objectives at the time they are considered notto be commercially sensitive and will provide commentaryon progress towards these objectives on an annual basis.Notes:– Adjustment of share awards: The number of shares subject to an award can be adjusted on a rights issue, special dividend, demerger or variation of capitalor similar transaction. Awards will vest on a takeover to the extent performance conditions are achieved and the number of shares will be generally proratedto reflect early vesting. Alternatively, they can be exchanged for equivalent awards over shares in the acquiring company. The Committee can also allowfull or partial vesting on a demerger, special dividend, distribution in specie or if the participant is relocated in circumstances which would give rise tounfavourable tax treatment. Share awards can be satisfied by a cash payment equal to the value of shares the participant would otherwise have received.– In respect of our share plans, this table presents a summary of the key and relevant information for the Plan Rules. It is the Committee’s intention that theseplans will operate in accordance with the Plan Rules as approved by shareholders.88Board and Governance – Directors’ Remuneration ReportPurpose Maximum annual opportunity OperationNon-executive directorsChairman – feesTo attract and retain ahigh-calibre chairmanby offering a marketcompetitive fee.Maximum increase: 10% of fee (per annum over periodsince last review date).The Chairman is paid a single fee for all responsibilities.The fee level is reviewed at least every three years bythe Committee, with reference to UK market levelsin companies of a similar size, the time commitmentand personal contribution.The fee is paid in cash.Non-executivedirectors (NEDs) – feesTo attract and retainhigh-calibre nonexecutive directorsby offering marketcompetitive fees.Maximum increase for each type of fee (per individualdirector): 10% of fee (per annum over period since lastreview date).The non-executive directors are paid a basic fee. TheChairmen of the Audit and Remuneration Committeesand the Senior Independent Director are paid anadditional fee to reflect their extra responsibilities.Fee levels are reviewed at least every three years by theBoard, with reference to UK market levels in companiesof a similar size.Fees are paid in cash.Chairman and NEDs– other benefitsTo enable the Chairmanand non-executivedirectors to undertaketheir roles.Non-executive directors receive a £2,000 attendanceallowance per meeting for attendance at Board meetingsoutside of their country of residence (except theChairman) and, as brand ambassadors, discounton Burberry products.Attendance allowances are paid in cash.Reasonably incurred expenses will be reimbursed.NEDs – additional feesTo allow flexibility toprovide additional feesif required.Maximum additional fee: £20,000 The Company has the discretion to pay an additionalfee to a non-executive director should the Companyrequire significant additional time commitment inexceptional circumstances.The Company currently has no intention to usethis discretion.1.2. Policy on recruitment and promotion arrangementsThe Committee will pay new directors in accordance with the approved remuneration policy and all its elements as set outin the table above. The ongoing annual remuneration arrangements for new executive directors will therefore comprise basesalary, annual bonus, ESP award, pension, benefits and all employee share plans. In addition, the recruitment policy belowpermits the Committee to take the following actions, as appropriate, in the best interests of the Company and thereforeshareholders.· For an internal appointment, any commitment made in respect of the prior role will be allowed to pay out accordingto its terms.· For external and internal appointments, the Committee may agree that the Company will pay certain allowances linkedto relocation, as appropriate, and will meet expenses/reimburse an executive against additional costs on appointment.In addition, the Committee may agree that the Company will pay certain allowances linked to repatriation on terminationof employment.· For external appointments, the Committee may offer additional cash and/or share-based elements to take accountof remuneration relinquished when leaving a former employer. As far as possible and appropriate, such paymentswould reflect the nature, time horizons and performance requirements attaching to the relinquished remuneration.· If necessary, the Committee may offer additional cash and/or share-based elements to secure an appointment.The Committee would determine the performance conditions and time horizons that would apply to such awardsat the time. Such awards would be limited to 600% of salary.· If necessary, the Committee may enter into a service contract with a longer initial notice period, reducing to 12 monthsor less on a rolling basis to secure the appointment of an executive from an environment where longer notice periodsare market practice.· For internal appointments the terms and conditions of the individual employment prior to the appointment will remainin force unless the Committee otherwise decides and the individual agrees.89Board and Governance – Directors’ Remuneration Report1.3. Supplementary informationExternal directorshipsThe Board’s executive directors are permitted to hold only one non-executive directorship of a FTSE 100 company andmay retain the fees payable from such an appointment. Details of the directors’ other directorships can be found in theirbiographies on pages 64 and 65.Remuneration policy in the rest of the CompanyThe remuneration arrangements for executive directors outlined in section 1.1. above are consistent with those for theother senior executives, although quantum and award opportunities vary by executive level.During its deliberations on executive remuneration, the Committee considers the reward framework for all employeesworldwide, ensuring that the principles applied are consistent with the executive remuneration policy. Merit increasesawarded to executives are determined within the broader context of employee remuneration. All employees are eligiblefor an annual bonus based on performance and executive share plans are extended through the organisation to seniorexecutives and high-potential employees as and where appropriate. The principle of shareholder alignment is reflectedthroughout the organisation through our all employee share plans, which are (where legally possible) extended to alleligible Burberry employees globally.Policy on service agreements and termination provisionsExecutive directorsThe Company’s general policy on directors’ service agreements is that they operate on a rolling basis with no specific end dateand include a 12-month notice period both to and from the Company. Christopher Bailey and Carol Fairweather have serviceagreements put in place prior to implementation of this policy and each includes a 6-month notice period to the Company.Date of current serviceagreementDate employmentcommencedNotice period to theCompanyNotice period from theCompanyChristopher Bailey 30 April 2014 7 May 2001 6 months 12 monthsCarol Fairweather 11 July 2013 12 June 2006 6 months 12 monthsJohn Smith 6 February 2013 4 March 2013 12 months 12 monthsStandard terms on terminationSalary, benefits and allowances: Executive directors continue to receive salary, benefits and allowances during theirnotice period. Pursuant to the terms of Business Protection Agreements (which set out restrictive covenants and termsrelating to the non-solicitation of employees) in place with the executive directors (except the CC & CEO), payments equalto salary for the duration of certain restrictive covenants may be made if the employer chooses to enforce them to protectBurberry’s continuing business.Annual bonus paid in cash: An executive considered to be a ‘good leaver’ (for example leaving the Company on retirement,redundancy, ill health, as a result of death in service or as decided by the Committee) may remain eligible for a proratedpayment of the annual bonus subject to achievement of bonus targets. An executive who has left employment for a reasonsuch as leaving to join a competitor company during the performance period or before the payment is due, or who hasgiven or been given notice in those circumstances at the time of payment, will not be eligible to receive an annual bonus.The Committee retains discretion to vary the approach and the payment of annual bonus to leavers, as outlined below.CIP invested shares: An executive leaving the Company for any reason is entitled to retain all invested shares held.CIP matching awards: For an executive considered to be a ‘good leaver’ (including leaving the Company on retirement,redundancy, ill health, as a result of death in service or as decided by the Committee), outstanding awards will be proratedfor time and vest subject to performance on the original vesting date. Upon a change in control of the Company, outstandingawards will be prorated for time and vest subject to performance at the point of change in control. For an executive whoseemployment is terminated for any other reason (such as leaving to join a competitor company) during the performance period,CIP matching awards will lapse in full. The Committee retains discretion to vary the approach and the extent to which CIPmatching awards vest for leavers, as outlined below.90Board and Governance – Directors’ Remuneration ReportRSP awards: For an executive considered to be a ‘good leaver’ (including leaving the Company on retirement, redundancy,ill health, as a result of death in service or as decided by the Committee), outstanding awards will be prorated for time andvest subject to performance. Upon a change in control of the Company, outstanding awards will vest subject to performanceat the point of change in control. For an executive whose employment is terminated for any other reason (such as leaving tojoin a competitor company) during the performance period, RSP awards will lapse in full. The Committee retains discretionto vary the approach and the extent to which RSP awards vest for leavers, as outlined below.ESP awards: For an executive considered to be a ‘good leaver’ (including leaving the Company on retirement, redundancy,ill health, as a result of death in service or as decided by the Committee), outstanding awards will be prorated for time andvest subject to performance on the original vesting date. Upon a change in control of the Company, outstanding awards willbe prorated for time and vest subject to performance at the point of change in control. For an executive whose employmentis terminated for any other reason (such as leaving to join a competitor company) during the performance period, ESP awardswill lapse in full. The Committee retains discretion to vary the approach and the extent to which awards vest for leavers,as outlined below.Other: Reasonable disbursements (for example, legal or professional fees, relocation costs) will be paid.Discretion: In the Committee’s experience, directors leave for a wide variety of reasons and individual circumstances,which do not all fall within the ‘good leaver’ categories outlined above. The Committee therefore retains discretionto approve payments to individuals based on individual circumstances and performance while in office. In applying anysuch discretion, the Committee will make any decisions by considering the best interests of shareholders and thoseof the remaining employees including directors. Where awards are subject to performance conditions, these would betested at the end of the relevant period(s) and any award which is allowed to vest would be prorated for time in office.Christopher BaileyThe Company has agreed specific arrangements with Christopher Bailey in relation to termination of his employmentin substitution for the first two bullets of the standard terms described in the previous section (‘Salary, benefits andallowances’ and ‘Annual bonus paid in cash’). These specific arrangements are described below.The Company may terminate Christopher Bailey’s service agreement without cause by giving 12 months’ written notice.The Company may terminate the service agreement immediately, in its sole discretion, by written notice and electing topay to Christopher Bailey either (1) a lump sum representing his salary in lieu of the unexpired notice period within 14 daysof termination or (2) in monthly instalments of 1/12 of his annual salary and 1/12 of his annual allowance of £440,000 inlieu of the unexpired notice period or until Christopher Bailey commences any new employment or engagement if earlier.Christopher Bailey must use his reasonable endeavours to seek alternative employment during the balance of his unexpirednotice period. The Company will also pay Christopher Bailey a bonus for the year in which employment terminated subjectto achievement of the performance targets and other requirements of the bonus arrangements for that year, prorated toactual service in the bonus year. The bonus would be paid on the usual bonus payment date.Christopher Bailey may terminate his service agreement at any time for ‘Good Reason’, provided he has requested that theCompany remedy the relevant breach within 14 days of notification and the Company has failed to do so. ‘Good Reason’means the Company is guilty of serious and continued non-observance or breach of the terms of the service agreementor of any applicable substantial laws which are detrimental to Christopher Bailey. On termination for ‘Good Reason’Christopher Bailey is entitled to a lump sum payment representing his salary in lieu of notice. The Company will also payChristopher Bailey a bonus for the year in which employment terminated subject to achievement of the performance targetsand other requirements of the bonus arrangements for that year, prorated to actual service in the bonus year. The bonuswould be paid on the usual bonus payment date.91Board and Governance – Directors’ Remuneration ReportThe Company may terminate the service agreement on health grounds by giving Christopher Bailey not less than six months’notice once Christopher Bailey’s entitlement to Company sick pay has been exhausted or he has been incapacitatedfor more than 26 weeks (whether or not continuous) in any period of 52 weeks. The Company may, in its sole discretion,terminate the employment by making a payment of 130% of his salary, and pay the allowance in lieu of notice within 14 daysof termination. The Company will also pay Christopher Bailey a bonus for the year in which employment terminated subjectto achievement of the performance targets and other requirements of the bonus arrangements for that year, prorated toactual service in that year. The bonus would be paid on the usual bonus payment date.If Christopher Bailey dies during his employment with the Company, the Company will pay his estate his salary to thetermination date and a bonus calculated as for an ill health termination described above.Upon termination of the service agreement, Christopher Bailey’s entitlements (if any) under the relevant share plansin which he participates will be determined in accordance with the rules of those plans, as described above.Non-executive directorsThe non-executive directors serve under Letters of Appointment with the Company. Non-executive directors may continueto serve subject to the annual re-election by shareholders at each Annual General Meeting of the Company, subject tosix months’ notice by either party. There are no provisions for compensation for loss of office, or payments in lieu of noticein the Letters of Appointment.1.4. Development of directors’ remuneration policyIn developing and reviewing the directors’ remuneration policy, the Committee is mindful of the views of shareholders andis sensitive of the relativities of arrangements for senior executives to those for employees more generally.The Committee proactively seeks feedback from shareholders when considering any significant changes to remunerationfor executive directors. The Committee also listens to and takes into consideration investor views more generally throughoutthe year. The Company will be consulting with its largest shareholders later in the summer of 2016 regarding 2016 ESPawards (in particular the performance measure targets that will be applied) and later in the year regarding the 2017remuneration policy.Base salary increases awarded to executives are determined within the broader context of Company-wide salary increases.Given the scale, geographic spread and the diversity of roles of the Company’s employees, the Committee does not proactivelyconsult with employees specifically on the remuneration policy for directors. Employees are free to communicate their viewsinternally on any topic including by using the Burberry internal social media platform or using the employee confidentialhelpline. In addition, many of the Company’s employees are shareholders, through the Sharesave and Free Share plans,and they, like other shareholders, are able to express their views on directors’ remuneration at each general meeting.92Board and Governance – Directors’ Remuneration Report2. Directors’ remuneration in 2015/16 (Annual Report on Remuneration)The information set out in this section has been subject to external audit where indicated.2.1. Single figure of total remuneration outcomes for 2015/16 (audited)The table below sets out the single figure of total remuneration received or receivable by the directors in respect of the2015/16 year (or the three-year performance period ending on 31 March 2016 in respect of the 2013 Co-Investment Planand 2013 Restricted Share Plan awards). The single figures of total remuneration are also included for the prior (2014/15) 96Board and Governance – Directors’ Remuneration Report3. Outstanding share interestsThe information set out in this section has been subject to external audit where indicated.3.1. Conditional share awards granted in 2015/16 (audited)The table below summarises the long-term conditional share awards granted to directors during 2015/16.Summary of conditional share awards granted in 2015/16Type of awardPerformancemeasureVestingschedulePerformanceperiod end DirectorBasis ofawardNumber ofshares awardedFace valueat grant2ESP shareawards1Growth inAdjusted PBTover three years(50%)25% for 3% p.a.100% for 11%p.a. or aboveStraight-linevesting between31/3/2018 ChristopherBaileyCarol FairweatherJohn Smith350% of salary250% of salary250% of salary241,58178,43592,867£3,850,000£1,250,000£1,480,000Growth inGroup revenueover three years(25%)25% for 3% p.a.100% for 11%p.a. or aboveStraight-linevesting betweenAdjusted Retail/Wholesale Returnon InvestedCapital (25%)25% for 2014/15ROIC minus 250basis points100% for 2014/15ROICStraight-linevesting between1 The ESP shares were awarded on 22 July 2015 and will vest 50% after three years and 50% after four years, subject to the performance conditions outlinedabove. No ESP shares may be sold except to cover any tax liabilities arising out of the award until five years from the date of grant.2 The face value of each award has been calculated using the three-day average price prior to the date of grant (£15.9367). As receipt of these is conditionalon performance, the actual value of these awards may be nil. Vesting outcomes will be disclosed in the 2018/19 remuneration report.3.2. Further information on conditional share awards granted in 2015/16 (audited)Growth in Adjusted PBT and Group revenueThe vesting outcomes based on each of three-year Adjusted PBT and three-year Group revenue growth are calculated usingAdjusted PBT and Group revenue as disclosed in the annual accounts, subject to any adjustments (down or up) made by theCommittee to reflect constant exchange rates and any other items deemed to be outside of management’s control.Adjusted Retail/Wholesale Return on Invested Capital (‘ROIC’)Adjusted Retail/Wholesale ROIC, for the purposes of the ESP performance measure, is calculated as the Retail/Wholesalepost-tax adjusted operating profit divided by the average operating assets, measured over the three-year period, on areported currency basis. A reconciliation of Adjusted Retail/Wholesale ROIC is included in the five-year summary on pages170 and 171.Clawback and malus provisionsA clawback provision applies to ESP awards, whereby for a period of three years from date of vesting, any vested sharesor awards may be recovered from individuals in whole or in part in the event of a material misstatement in the Company’saudited financial statements or if the outturn has been incorrectly calculated. In addition, there is a malus provision thatapplies to ESP awards, whereby unvested shares or awards may be forfeited in whole or in part in the event of a materialmisstatement in the Company’s audited financial statements.97Board and Governance – Directors’ Remuneration Report3.3. Total interests in shares (audited)The table below summarises the total interests of the directors in ordinary shares of Burberry Group plc as at 31 March2016. There have been no changes in the period up to and including 17 May 2016. These include beneficial and conditionalinterests and the interests of their connected persons in shares.Director Type of award Date of grantConditional(withperformance)Conditional(continuedemployment)UnconditionalbutunexercisedNumberof sharesowned TotalChristopher Bailey5 RSP1 17-Jun-13 243,542 – – – –RSP1 12-Jun-14 74,610 – – – –CIP2 14-Jun-13 165,161 – – – –CIP2 12-Jun-14 147,491 – – – –ESP3 22-Jul-15 241,581 – – – –NCO4 14-Jun-13 – 1,000,000 – – –NCO4 12-Jun-14 500,000 – – – –SAYE/SIP 20-Jun-13 – 1,229 – – –SAYE/SIP 18-Jul-15 – 1,099 – – –Total 1,372,385 1,002,328 – 561,589 2,936,302Carol Fairweather6 RSP 14-Jun-13 25,830 – – – –RSP1 12-Jun-14 50,870 – – – –CIP2 14-Jun-13 21,677 – – – –CIP2 12-Jun-14 30,545 – – – –ESP3 22-Jul-15 78,435 – – – –SAYE/SIP 20-Jun-13 – 737 – – –SAYE/SIP 18-Jul-15 – 659 – – –Total 207,357 1,396 – 67,963 276,716John Smith RSP1 14-Jun-13 63,653 – – – –RSP1 12-Jun-14 40,154 – – – –CIP2 12-Jun-14 43,367 – – – –ESP3 22-Jul-15 92,867 – – – –SAYE/SIP 20-Jun-13 – 737 – – –SAYE/SIP 20-Jun-14 – 740 – – –Total 240,041 1,477 – 36,235 277,753Sir John Peace – – – 195,738 195,738Fabiola Arredondo – – – 7,500 7,500Philip Bowman – – – 75,000 75,000Ian Carter – – – 35,909 35,909Jeremy Darroch – – – 1,000 1,000Stephanie George – – – 41,600 41,600Matthew Key – – – 2,420 2,420Dame Carolyn McCall – – – 1,144 1,144Former directorsDavid Tyler – – – 30,000 30,0001 RSP awards are awarded as nil-cost options and are subject to the same performance conditions as outlined on page 96, and vest 50% after 3 years, 25% after4 years and 25% after 5 years from date of grant.2 CIP awards are awarded as nil-cost options and are subject to the same performance conditions as outlined on page 95.3 ESP awards are awarded as nil-cost options and are subject to the same performance conditions as outlined on page 97.4 ‘NCO’ denotes a Nil-Cost Option award.5 Christopher Bailey exercised the following awards during the year:235,151 shares under CIP (granted 18 July 2012). The market value of Burberry shares on the date of exercise (22 July 2015) was 1559p; 350,000 shares underNCO (granted 8 December 2010). The market value of Burberry shares on the date of exercise (22 July 2015) was 1559p.6 Carol Fairweather exercised the following awards during the year:24,134 shares under CIP (granted 18 July 2012). The market value of Burberry shares on the date of exercise (22 July 2015) was 1559p; 6,250 shares under RSP(granted 25 June 2008). The market value of Burberry shares on the date of exercise (22 July 2015) was 1559p; 6,525 shares under RSP (granted 10 June 2010).The market value of Burberry shares on the date of exercise (22 July 2015) was 1559p.98Board and Governance – Directors’ Remuneration ReportShareholding guidelinesTo ensure continued alignment with the interests of shareholders, in 2014 the Board increased the minimum shareholdingrequirement for directors and senior executives to the following levels:· 500,000 shares for the CC · two-times base salary for other executive directors;· one-times base salary for other senior executives; and· the Chairman and non-executive directors are expected to hold shares with a market value of £6,000 for each yearof their appointment.Senior executives are expected to retain 50% of shares acquired on the exercise of options and awards net of tax, until suchguidelines are met – there is no specific timeline in which shareholding guidelines must be achieved. Only shares that areowned outright count towards the shareholding requirement. The shareholding guidelines are applicable whilst directorsand senior executives are employed by the Company.As at 31 March 2016, Christopher Bailey owned 561,589 shares and has therefore achieved his shareholding guideline.As at 31 March 2016 (at the closing share price of £13.65), the value of shares owned by Carol Fairweather and John Smithwas £927,695 and £494,608 respectively (or 186% and 84% of their respective salaries as at that date). Carol Fairweather’sshareholding is just below her shareholding guideline of two-times salary due to the change in share price during theyear. John Smith became an executive director during 2013, he is making progress towards his executive shareholdingrequirement of two-times salary and, as detailed above, is expected to retain 50% of shares acquired on the exercise ofoptions and awards (net of tax). As at 31 March 2016, all of the non-executive directors had fulfilled the requirement to holdshares with a market value of £6,000 for each year of their appointment. As at his leaving date, David Tyler had fulfilled hisshareholding requirement. This information on the achievement of shareholding guidelines has been audited.4. Directors’ remuneration in 2016/17The table below summarises how the remuneration policy will be implemented for executive directors in the year 2016/17.The executive directors will not receive any increase to salary for the 2016/17 year. There will be no changes to the policyfor the 2016/17 year as compared to 2015/16.4.1. Summary of key remuneration aspects in 2016/17 for executive directorsElement Performance measure(s) Director Maximum levelBase salary – Christopher Bailey £1,100,000(0% increase)Carol Fairweather £500,000(0% increase)John Smith £592,000(0% increase)Annual bonus Annual Adjusted PBTThe Board considers the forward-looking PBT bonus targets to becommercially sensitive as they are linked to the Company’s financialand strategic plans. Targets will therefore be disclosedretrospectively onlyChristopher Bailey 200% of salaryCarol Fairweather 150% of salaryJohn Smith 150% of salaryESP share awards Three-year growth in Adjusted PBT (50%)Targets to be determinedThree-year growth in Group revenue (25%)Targets to be determinedAdjusted Retail/Wholesale Return on Invested Capital (25%)Targets to be determinedChristopher BaileyCarol FairweatherJohn SmithAward levels to bedetermined in conjunctionwith targets99Board and Governance – Directors’ Remuneration Report4.2. Further information on ESP performance measuresWhilst the ESP design has been agreed, the remuneration policy allows a degree of flexibility around a number of theESP design elements. This flexibility allows the Committee to determine the most appropriate approach to the followingparameters ahead of each annual award:· the weighting of each performance measure (within the specified ranges)· the definition (and calculation approach) of each performance measure· the threshold and maximum performance targets for each performance measureThe Committee has determined that the weightings and definitions of each performance measure for the 2016 ESP awardswill remain unchanged from those used in 2015. These are summarised in the table below.ESP performance measure DefinitionWeighting(% of award)Group Adjusted Profit Before Tax (‘PBT’) 3-year growth, calculatedon a constant currency basis50%Group Revenue 3-year growth, calculatedon a constant currency basis25%Adjusted Return on Invested Capital (‘ROIC’) in Retail/Wholesale 3-year average 25%The proposed targets for all three performance measures will be carefully calibrated in light of a number of factors, including,most importantly, our strategy and performance goals, latest three-year projections and broker earnings estimates forBurberry and its competitors. The Committee will ensure the targets are stretching and incentivise management to continueto deliver superior returns to shareholders. As detailed in the introductory letter, the Committee is reviewing both the quantumof awards and the performance targets ahead of granting the 2016 ESP awards. Due to the timing of work on the productivityand efficiency agenda, the Committee was not in a position to determine and disclose the 2016 ESP award levels and targetsahead of publication of this report. The Committee therefore decided to delay the grant of awards from the normal date in Julyto November 2016 to allow time to engage with larger shareholders on the proposed awards and targets. Once determined,the final awards and targets will be disclosed on our website.ESP awards will vest 50% after 3 years and 50% after 4 years (from the date of grant). The Committee also applies anadditional holding period on ESP awards granted to executive directors. To increase long-term alignment with shareholders,while executives are employed by Burberry, no ESP shares may be sold except to cover any tax liabilities arising out of theaward until five years from the date of grant.100Board and Governance – Directors’ Remuneration Report4.3. Summary of Chairman and Non-Executive Director fees for 2016/17The table below sets out the fee structure for the Chairman and non-executive directors for 2016/17.Summary of Chairman and NED fees for 2016/17Fee level£’000Chairman1 400Non-Executive Director 80Senior Independent Director 20Audit Committee Chair 35Remuneration Committee Chair 35Attendance allowance2 21 The Chairman is not eligible for committee chairmanship fees or attendance allowances.2 Non-executive directors receive an attendance allowance for each meeting attended outside of their country of residence.3 Expenses incurred in the normal course of business are reimbursed and, as these are considered by HMRC to be taxable benefits, the tax due on these will alsobe met by the Company.5. Further information on Christopher Bailey’s 2014 exceptional performance-based award of 500,000 sharesThe vesting of the exceptional performance-based award of 500,000 shares that was granted to Christopher Bailey uponhis appointment to the Chief Creative and Chief Executive Officer role will be determined by reference to the followingkey performance criteria:· the strategic development of the business measured against the strategic plan approved by the Board from time to time;· the Company’s financial performance, in assessing which, the Remuneration Committee will have reference to the profitbefore tax condition applied to awards made in 2014 under the Burberry Group Co-Investment Plan. This performancecondition requires growth in Adjusted PBT over three years of between 5% at threshold and 10% p.a. at maximum.· the personal contribution made by Christopher Bailey;· the shareholder value delivered in the context of the evolution of the luxury goods markets in which Burberry operatedover the period between the date of grant and the relevant vesting date; and· any other performance factors which are appropriate in assessing the extent of vesting having regard to the interestsof shareholders.Vesting of the award will be phased over five years from the date of grant and only subject to the extent that the performancecriteria outlined above have been met. 125,000 shares will vest on 31 July 2017, 125,000 shares on 31 July 2018 and 250,000shares on 31 July 2019, subject to performance measured from the date of grant to the relevant vesting date.101Board and Governance – Directors’ Remuneration ReportThe Committee assesses progress towards achieving these objectives each financial year and prior to each vesting datewill determine the extent to which the objectives were achieved over the three, four or five year performance period, havingregard to the level of performance achieved in each relevant financial year. By way of a reminder, the Committee determinedthat overall there was an 85% performance achievement in the 2014/15 year. At the end of 2015/16 the Committee reviewedperformance in relation to the award of 500,000 shares granted to the Chief Creative and Chief Executive Officer, in thecontext of the following.· Strategic developmentIn 2015/16 Burberry saw significant progress across the four key strategic themes:Brand First– Continued to drive digital innovation through partnerships with leading media brands (including DreamWorks,Snapchat and LINE), leveraging Burberry’s new mobile platform, and continuing to blur the physical and digitalconsumer touch points, including the online/offline inventory merge in the US and UK– Initiated and substantially progressed complex process to move to single Burberry label for SS17– Awarded genius status and top fashion brand by digital consultant L2Famous for Product– Continued to renew Burberry’s Heritage proposition with launch of Scarf Bar and colour and style option additionsto the trench offering– Accessories outperformed in year boosted by Banner bag and hit runway rucksack– Achieved major milestone in make-up development with the global Sephora launch on Sephora.com, and subsequentroll out to select stores including Paris flagshipCustomer Centric– In retail, continued to invest in customer relationships (loyalty and conversion) through the extension of theCustomer Value Management tool to over 380 stores globally, and expansion of the Burberry Private Client team– Revolutionised runway show format with announcement of ‘see now/wear now’ September show– Achieved the final stage of the global brand integration with the Japan licence exit in 2015, including launch ofheritage marketing campaign in-market to educate local consumer, opening Shinjuku flagship store, and doublingretail sales year-over-yearProductive and Responsible– Realised £25 million discretionary spend savings in response to sudden change in operating environment– Continued to reinforce Burberry’s distinctive culture by becoming a principal partner of The Living Wage Foundationand accredited as a UK Living Wage employer, as well as gaining inclusion into the Dow Jones Sustainability Index,which recognises Burberry as among world’s top performing apparel companies for sustainability– Professional social network LinkedIn named Burberry as the UK’s 12th most sought after employer· Financial performanceUnderlying Group Adjusted PBT annual change of -10% in a challenging global environment.Underlying Group revenue annual change of -1% in a challenging global environment.· Personal contributionIn the context of a challenging external environment, Christopher ensured the senior executive team remained focusedon the management of the business and the execution of our key strategies. He also ensured the senior executives wereretained and motivated to continue to drive the business so that it is best placed for long-term, sustainable growth andvalue creation. Christopher also initiated and led the team’s work on accelerating our productivity and efficiency agendaand addressing how to optimise future organic revenue growth opportunities.· Shareholder valueShare price has decreased by -8.1% since Christopher’s appointment to the CEO role (from closing price on 30 April 2014to 31 March 2016) and dividends for 2015/16 are 37.0 pence per share. This is an increase of 5% on 2014/15.Overall Total Shareholder Return (‘TSR’) of -1.5% for Burberry for the two years to 31 March 2016, which compares to anaverage TSR of -10.8% for our core luxury peers* and -0.1% for the FTSE 100.* Boss, Coach, Ferragamo, Hermes, Kering, LVMH, Prada, Ralph Lauren, Richemont, Swatch, Tiffany, Tod’s.102Board and Governance – Directors’ Remuneration ReportAfter careful review the Committee reached the conclusion that overall there was a 50% performance achievement in the2015/16 year. This outcome reflects that the annual change in Group Adjusted PBT was -10% and Group revenue was-1% (underlying year-on-year), while 2015/16 shareholder return was lower than in 2014/15. In the context of the slowdownin the luxury sector, the Committee considered that both the strategic development of the business and Christopher’spersonal performance during the 2015/16 year continued to be excellent.The outcomes for each year to date are as follows (as a % of maximum): 2015/16: 50%; 2014/15: 85%.6. Payments made in the year to former directors (audited)No payment has been made to a former director during the 2015/16 year.7. Payments for loss of office (audited)There were no payments made for loss of office during the 2015/16 year.8. Remuneration Committee in 2015/16Committee membershipThe following directors served as members of the Committee throughout the financial year ending 31 March 2016:Ian Carter (Chairman)Fabiola ArredondoPhilip BowmanJeremy DarrochStephanie GeorgeMatthew KeyDame Carolyn McCallDavid Tyler (until 31 December 2015)Advisers to the Committee during 2015/16At the invitation of the Committee, except where their own remuneration was being discussed, the following peopleattended meetings and provided advice to the Committee: Sir John Peace (Chairman), Christopher Bailey (Chief Creativeand Chief Executive Officer), Carol Fairweather (Chief Financial Officer), John Smith (Chief Operating Officer), Leanne Wood(Chief People and Corporate Affairs Officer), Anne-Soline Thorndike (Senior Vice President – Reward and Recognition),Nigel Jones (Vice President – Group Financial Controller), Catherine Sukmonowski (Company Secretary) andMichael Mahony (former Chief Corporate Affairs Officer).During the 2015/16 financial year, the Committee received external advice from Willis Towers Watson, as detailed in the tablebelow. Willis Towers Watson has been the appointed independent adviser to the Committee since 2011 and was selectedat that time following a formal tender process. Willis Towers Watson is a member of the Remuneration Consultants’ Group,which is responsible for the development and maintenance of the voluntary Code of Conduct that clearly sets out the roleof executive remuneration consultants and the professional standards by which they advise their clients and, as such,the Committee is satisfied that their advice is objective and independent.Linklaters LLP provided advice to the Committee in relation to compliance with legislation, namely the regulations governingthe disclosure of directors’ remuneration in the Directors’ Remuneration Report.103Board and Governance – Directors’ Remuneration ReportExternal advisers and feesAdvisersServices providedto the CommitteeOther services providedto the CompanyFees for CommitteeassistanceWillis Towers Watson(‘WTW’)Appointed by the Committee,to provide advice on theongoing operation of employeeand executive share planstogether with advice onexecutive remunerationA term of the engagement between the Committeeand WTW is that any additional consulting servicesprovided by WTW to management are reported ona regular basis to the Committee. Where an actualor potential conflict may occur, such work isagreed by the Chairman of the Committee priorto commencement.£73,516Fees charged on a timeand expense basisWTW provides market benchmarking informationto management in relation to a small numberof roles which fall below the remit ofCommittee review.Fees charged on a timeand expense basisRemuneration report voting resultsThe table below shows the results of the remuneration related shareholder vote from the 2015 AGM and the last Directors’Remuneration Policy vote which took place at the 2014 AGM. As mentioned earlier in this report, the Committee listens toand takes into consideration investor views throughout the year, and was extremely pleased to receive majority support forthe advisory vote on the 2014/15 Directors’ Remuneration Report.As detailed in the introductory letter from the Remuneration Committee, the Company will be consulting with its largestshareholders later in the summer of 2016 regarding 2016 ESP awards (in particular the performance measure targets thatwill be applied) and later in the year regarding the 2017 remuneration policy.AGM voting resultsVote Votes for Votes against Votes withheldAny issues raised andCompany response2015 AGM:To approve the Directors’Remuneration Report for the yearended 31 March 2015 (advisory)293,615,258(92.27%)24,597,147(7.73%)18,133,355 Not applicable2014 AGM:To approve the Directors’Remuneration Policy271,305,305(83.92%)51,981,069(16.08%)11,037,131 Not applicableBoard and Governance – Directors’ Remuneration Report1049. Seven-year performance graph and Chief Executive Officer remunerationThe chart below shows the Total Shareholder Return (‘TSR’) for Burberry Group plc compared to the companies in theFTSE 100 index assuming £100 was invested on 31 March 2009. The FTSE 100 was selected because Burberry becamea constituent on 10 September 2009 and prior to that had a market capitalisation close to that of companies at the lowerend of the FTSE 100 index.The table below shows the total remuneration earned by the incumbent Chief Executive Officer over the same seven-yearperiod, along with the proportion of maximum opportunity earned in relation to each type of incentive. The total amountsare based on the same methodology as used for the table on page 93 (Single figure of total remuneration for 2015/16).Seven-year TSR performance graph and Chief Executive Officer remuneration£3002001000Burberry FTSE 100Value of £100 invested on 31 March 20092009 2010 2011 2012 2013 2014 2015 2016700500600400Angela Ahrendts (AA, CEO to 30 April 2014), Christopher Bailey (CB, CC & CEO from 1 May 2014)2009/10 (AA) 2010/11 (AA) 2011/12 (AA) 2012/13 (AA) 2013/14 (AA) 2014/15 (AA) 2014/15 (CB) 2015/16 (CB)Total remuneration (£’000) 7,362 16,003 9,574 10,901 8,007 157 7,508 1,894Bonus (% of maximum) 100% 100% 100% 75% 70% – 81% 0%CIP (% of maximum) 100% 100% – 100% 100% – 75% 0%RSP (% of maximum) 42.5% – 100% – – – – 0%EPP* (% of maximum) 15% 50% – – – – – –* The ‘EPP’ was the Burberry Exceptional Performance Share Plan, a one-off long-term incentive plan under which performance-based awards were grantedin 2007 only. Details of this plan can be found in the relevant historical directors’ remuneration reports.ApprovalThis report has been approved by the Board and signed on its behalf by:Ian CarterChairman, Remuneration Committee17 May 2016Board and Governance – Directors’ Remuneration Report105The directors present their Annual Report and the auditedconsolidated financial statements of the Company for theyear to 31 March 2016.Strategic ReportBurberry Group plc is required by the Companies Act2006 to prepare a Strategic Report that includes a fairreview of the Company’s business, the development andthe performance of the Company’s business during theyear, of the position of the Company at the end of thefinancial year to 31 March 2016 and a description of theprincipal risks and uncertainties faced by the Company.The Strategic Report can be found on pages 7 to 61.The Corporate Governance Report is set out on pages68 to 82, is incorporated by reference and shall bedeemed to form part of this report.Other Governance DisclosuresRevenue and profitRevenue from the continuing business during the periodamounted to £2,514.7m (2015: £2,523.2m). The profit forthe year attributable to equity holders of the Companywas £309.5m (2015: £336.3m).Going concernThe going concern statements for the Group andCompany are set out on pages 126 and 176 of the financialstatements and are incorporated by reference and shall bedeemed to be part of this report.Independent auditorsIn accordance with section 418(2) of the Companies Act2006, each of the Company’s directors in office as at thedate of this report confirms that:· so far as the director is aware, there is no relevantaudit information of which the Company’s auditorsare unaware; and· he or she has taken all the steps that he or she oughtto have taken as a director in order to make himself orherself aware of any relevant audit information and toestablish that the Company’s auditors are aware ofthat information.The Group’s auditors are PricewaterhouseCoopers LLP.A resolution to reappoint PricewaterhouseCoopers LLPas auditors to the Company will be proposed at theforthcoming Annual General Meeting. Note 7 of thefinancial statements states the auditors’ fees both foraudit and non-audit work.Political donationsThe Company made no political donations during theyear in line with its policy (2015: £nil). In keeping with theCompany’s approach in prior years, shareholder approvalis being sought at the forthcoming Annual General Meeting,as a precautionary measure, for the Company and itssubsidiaries to make donations and/or incur expenditurewhich may be construed as ‘political’ by the wide definitionof that term included in the relevant legislation. Furtherdetails are provided in the Notice of this year’s AnnualGeneral Meeting.Financial instrumentsThe Group’s financial risk management objectivesand policies are set out within note 25 of the financialstatements. Note 25 also details the Group’s exposureto foreign exchange, share price, interest, credit, capitaland liquidity risks. This note is incorporated by referenceand deemed to form part of this report.Annual General MeetingThe Annual General Meeting of the Company will beheld at the InterContinental Hotel, One Hamilton Place,Park Lane, London W1J 7QY commencing at 9.30amon Thursday, 14 July 2016. The Notice of this year’sAnnual General Meeting will be available to view onthe Company’s website at www.burberryplc.com.The directors consider that each of the proposedresolutions to be considered at the Annual GeneralMeeting are in the best interests of the Company and itsshareholders and are most likely to promote the success ofthe Company for the benefit of its shareholders as a whole.The directors unanimously recommend that shareholdersvote in favour of each of the proposed resolutions, as thedirectors intend to do in respect of their own shareholdings.DirectorsThe names and biographical details of the directors as atthe date of this report are set out on pages 64 and 65 andare incorporated by reference into this report.At the 2016 Annual General Meeting, all of the currentdirectors will offer themselves for election or re-election.The Notice of this year’s Annual General Meeting sets outwhy the Board believes the directors should be electedor re-elected. Details of the directors’ service agreementsand letters of appointment are given in the Directors’Remuneration Report on pages 83 to 105.DIRECTORS’REPORT106Board and Governance – Directors’ ReportDirectors’ insurance and indemnitiesThe Company maintains directors’ and officers’ liabilityinsurance which gives cover for legal actions broughtagainst its directors and officers. In accordance withsection 236 of the Companies Act 2006, qualifying thirdparty indemnity provisions are in place for the directorsin respect of liabilities incurred as a result of their office,to the extent permitted by law. Both the insurance andindemnities applied throughout the financial year ended31 March 2016 and through to the date of this report.Directors’ share interestsThe interests of the directors holding office at 31 March2016 in the shares of the Company are shown within theDirectors’ Remuneration Report on page 98. There wereno changes to the beneficial interests of the directorsbetween the period 31 March 2016 and 17 May 2016.DividendsThe directors recommend that a final dividend of 26.8pper ordinary share (2015: 25.50p) in respect of the year to31 March 2016 be paid on 5 August 2016 to those personson the Register of Members as at 8 July 2016.An interim dividend of 10.20p per ordinary share waspaid to shareholders on 22 January 2016 (2015: 9.70p).This will make a total dividend of 37.0p per ordinary sharein respect of the financial year to 31 March 2016. Theaggregate dividends paid and recommended in respectof the year to 31 March 2016 total £163.7m (2015: £155.2m).Substantial shareholdingsAs at 31 March 2016, the Company had been notified underRule 5 of the Disclosure and Transparency Rules of thefollowing major interests in its issued ordinary share capital:Number ofordinary shares% of totalvoting rightsBlackRock, Inc. 26,983,661 6.06The Capital Group Companies, Inc 26,868,502 6.04Thornburg Investment Management 21,910,655 4.94FMR LLC 21,867,513 4.98Schroders plc 21,666,352 4.99Ameriprise Financial, Inc. 21,664,800 4.97JP Morgan Chase & Co 21,578,580 4.99Massachusetts FinancialServices Company20,073,645 4.61As at 17 May 2016, the Company had not received anyfurther notifications under Rule 5 of the Disclosure andTransparency Rules of major interests in its issuedordinary share capital.Interests in own sharesDetails of the Company’s interests in its own sharesare set out in note 22 to the financial statements.Share capitalDetails of the issued share capital, together with detailsof movements in the issued share capital of BurberryGroup plc during the year are shown in note 22 whichis incorporated by reference and deemed to be part ofthis report.The Company has one class of ordinary share whichcarries no right to fixed income. Each share carries theright to one vote at general meetings of the Company.The ordinary shares are listed on the Official List andtraded on the London Stock Exchange. As at 31 March2016, the Company had 445,037,254 ordinary shares inissue. The Company does not hold any shares in treasury.In order to retain maximum flexibility, the Companyproposes to renew the authority granted by ordinaryshareholders at the Annual General Meeting in 2015, torepurchase up to just under 10% of its issued share capital.It is the Group’s intention to commence a share buybackprogramme of up to £150m starting in FY 2017, with futurereturns to be kept under regular review. Further detailsare provided in the Notice of this year’s Annual GeneralMeeting. No such purchases have taken place in the year.At the Annual General Meeting in 2015, shareholdersapproved resolutions to allot shares up to an aggregatenominal value of £73,380 and to allot shares for cash otherthan pro rata to existing shareholders. Resolutions will beproposed at this year’s Annual General Meeting to renewthese authorities.No person has any special rights of control over theCompany’s share capital and all issued shares are fullypaid. There are no specific restrictions on the size ofholding or on the transfer of shares which are bothgoverned by the general provisions of the Articles ofAssociation and prevailing legislation. The directors arenot aware of any agreements between holders of theCompany’s shares that may result in restrictions on thetransfer of securities or voting rights. The directors haveno current plans to issue shares other than in connectionwith employee share schemes.Details of employee share schemes are set out in note26. The Burberry Group plc ESOP Trust has waived alldividends payable by the Company in respect of theordinary shares held by it. In addition, the BurberryGroup plc SIP Trust has waived all dividends payableby the Company in respect of the unappropriated ordinaryshares held by it. The total dividends waived by the trustsin the year to 31 March 2016 were in aggregate £1.2m(2015: £1.2m).With regard to the appointment and replacementof directors, the Company follows the UK CorporateGovernance Code and is governed by its Articlesof Association, the Companies Act 2006 and relatedlegislation. The Articles of Association may beamended by special resolution of the shareholders.107Board and Governance – Directors’ ReportSignificant contracts – change of controlPursuant to the Companies Act 2006, the directors disclose that in the event of a change of control, the Company’sborrowings under the Group’s £300m Revolving Credit Facility (dated 25 November 2014) could become repayable.Details of the service agreements of the executive directors are set out on page 90 of the Directors’ Remuneration Report.The provisions of the Company’s employee share plans may cause options and awards granted under such plans to vestupon a change of control.Corporate Responsibility DisclosuresEnvironmentEnvironmental Targets and Progress ReportBurberry is committed to reducing its environmental impacts of its global supply chain and internal operations. Followinga 2012 independent baseline assessment, key targets were set to reduce Burberry’s environmental impacts arising frommaterials, energy, water, chemical inputs and waste measured in CO2 equivalent. Focused on resource efficiency andmitigating climate change, all 15 environmental targets are owned and monitored by members of the Senior Leadership Team.2017 Targets ProgressProductBurberry continues toinvest in the design andquality of every product,and is committed todramatically reducing theimpact of its products.Raw materialsImprove the environmental and social impacts of how we source:· Cotton· CashmereReduce the environmental impact of:· Leather· PVCOn plan^On plan^On plan^Behind planChemical use in manufacturingEliminate chemicals from use that have a negative impact on the environment,beyond legal limitsOn plan^Packaging100% of point of sale packaging to be sustainably sourced (where alternativesare available)On planProcessBurberry is committedto ensuring its futureresilience by integratingsustainability decisionsacross the businessand collaboratingwith suppliers.Internal ManufacturingReduce the energy use from Burberry’s two UK manufacturing sites by 25%* Behind plan^SuppliersWork with key suppliers to assist them in reducing their energy use by up to 20%* Behind plan^MillsWork with key mills to assist them to reduce their water consumption by up to 20%* Behind plan^TransportReduce carbon emissions from the transport of Burberry products by 10%* On planDistribution centresReduce energy use in Burberry’s five third-party distribution centres by 10%*Achieved^PropertyBurberry continuesto expand its globalfootprint in existingand new markets toenable the growthof the business,and is committed tominimising the impactof this expansion.Energy use reductionReduce Burberry controlled store and office energy usage by up to 15%* Behind planSustainable consumables60% of office consumables to be sustainably sourced (where available) Behind planRenewable energyAll Burberry controlled stores and offices to be powered either by on site or greentariff renewable energy (where available)Behind planBuild certificationsAll new builds will be sustainable build certified LEED (silver), BREEAM (very good)or Greenmark (silver)On planSustainable construction materials30% of wood by spend is either recycled materials or sourced from certifiedsupply chainsAchieved^Construction waste recycling30% of construction waste to be recycled for global major projectsAchievedLED lighting75% of lighting is LED or energy efficient in new concept storesAchieved* When normalised by a relevant productivity factor.108Board and Governance – Directors’ ReportFor those targets that are ‘Behind plan’, action plans are inplace to drive further progress. For additional informationon performance against the above targets and relatedaction plans see www.burberryplc.com.Energy and global greenhouse gas emissionsThe disclosures required by the Companies Act 2006(Strategic Report and Directors’ Report) Regulations 2013are included below.(Year to 31 March)Emissions from:Currentreporting year FY16Comparisonyear FY15Comparisonyear FY14Combustion of fuel andoperation of facilities(Scope 1) (Kg CO2e)2,013,350^ 2,203,611 1,956,313Electricity, heat, steamand cooling purchasedfor own use (Scope 2)(Kg CO2e)40,274,835^ 42,203,278 40,227,239Total emissions(Scope 1 & 2) (Kg CO2e)42,288,185^ 44,406,889 42,183,532Intensity measurement(Kg CO2e per £1,000sales revenue)17^ 18 18Renewable energyproduced on site (KWH)1,266,062 1,247,270 –Note:Burberry applies an operational control approach to defining its organisationalboundaries. Data is reported for sites where it is considered that Burberryhas the ability to influence energy management. Data is not reported forsites where Burberry has a physical presence, but does not influence theenergy management for those sites, such as a concession within a departmentstore. Overall, the emissions inventory reported equates to 95% of oursq.ft (net selling space). The Company uses the Greenhouse Gas Protocol(using a location based approach to reporting Scope 2 emissions) to estimateemissions and applies conversion factors from DEFRA and IEA guidance.All material sources of emissions are reported. Refrigerant gases andfuels consumed in Company vehicles were deemed not material and arenot reported. Burberry has updated greenhouse gas data for 2013/14 and2014/15 to account for improvements in data availability and estimationmethods. A further restatement to 2014/15 Scope 1 emissions has beenmade to account for natural gas consumption at two locations that werenot previously reported. Further detail is available within Burberry’s basisof reporting at www.burberryplc.com.External assurance of Corporate Responsibility DisclosuresBurberry appointed Ernst & Young LLP to provide limitedexternal assurance over selected statements relating toenvironmental targets, 2015/16 performance and ethicaltrading activities. The statements and data that formed partof the review are denoted with a ^ on pages 108 to 109.The full independent assurance statement and Burberry’sbasis of reporting are available at www.burberryplc.com.Ethical TradingThe following indicators illustrate Burberry’s ethicaltrading activities during the year.Number of audits and assessments2015/162014/152013/14548ˆ548541713As Burberry’s Ethical Trading Programme has evolved,the Company has focused on how it can make the mostmeaningful, positive impacts on the lives of peoplethroughout its supply chain rather than increasing thenumber of audits. Auditing remains, however, an importanttool to help Burberry and its manufacturers identify areasthat are in need of improvement.Number of training and engagement activities2015/162014/152013/14217ˆ217205142Burberry continued to drive improvements in its supplychain through a number of engagement activities, includingnew training programmes and the provision of confidentialworker hotlines in local languages.Ready to Wear, Accessories and Shoe Supply Chain^2015/16 (second half)2014/15 (second half)Rejected Acceptable with improvements Satisfactory2015/16 ( rst half)0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Results of the 2015/16 audit programme show an overallpositive shift in ethical trading performance by Burberry’sapparel and non-apparel partners^. Manufacturers who didnot meet key requirements as outlined in Burberry’s EthicalTrading Code of Conduct were rejected, others were foundto meet key requirements but were asked to implementfurther improvements.109Board and Governance – Directors’ ReportHuman Rights StatementThe Group recognises its responsibility to respect humanrights wherever it operates and has conducted a materialityanalysis to identify its principal human rights impacts. TheGroup believes that these impacts arise in relation to itsown workforce, its supply chain and communities, and itscustomers. Burberry’s Human Rights Policy sets out theCompany’s commitments to respecting these stakeholders’human rights. The Policy is informed by the International Billof Human Rights and reflects the UN Guiding Principles onBusiness and Human Rights framework to Protect, Respectand Remedy. Responsibility for the Policy lies withBurberry’s Chief Creative & Chief Executive Officer.Burberry has an established global team who work topromote human rights and good labour practices in theBurberry workplace as well as in the Company’s supplychain as identified and prioritised through Human RightsImpact Assessments. Burberry has established grievancemechanisms, including hotlines in its supply chain wherelocal labour laws are weak, absent or poorly enforced, aswell as globally for its own employees.This year Burberry has produced its first Modern SlaveryStatement in line with the UK Modern Slavery Act. Thiscan be found at www.burberryplc.com.Employee involvementEmployee communicationThe Group believes that employee communicationis important to enhance the Company culture andconnectivity, and to motivate and retain its employees.A global communications programme, incorporatingvarious physical and digital methods and channels,enables all employees to connect and collaborate closely,and to understand the Company’s key strategies, financialperformance and other matters of interest and importance,quickly and efficiently.Social media platform ‘Burberry World’ is the key digitalchannel used by the Company to communicate internally.However, other methods and channels are also used,including face-to-face briefings, open discussion forumswith senior management, email and instant messaging.Burberry ‘Chat Live’ global video broadcasts are hosted byChristopher Bailey and provide real-time communicationsto highlight the Group’s performance and its ongoingstrategic initiatives. The Company also uses videosand digital web pages to communicate key initiatives,events and other brand messages, to enhance internalcommunication, employee connectivity and theBurberry culture.Employee share ownershipThe Group encourages share ownership at all levels andruns incentive schemes and share ownership schemes forthe benefit of employees. Further details of these schemesare set out in the Directors’ Remuneration Report onpages 83 to 105.The Group again intends to grant free share awardsor equivalent cash-based awards to all eligibleemployees during 2016/17. The Group also intends,where possible, to invite eligible employees to takepart in the Sharesave Scheme.Further information regarding the Group’s approachto employee involvement and communications areprovided in Build our Culture on pages 44 to 46.Employment policiesDiversity and inclusionThe Group takes a very inclusive approach to diversity.As a global business, Burberry values people of all cultures,nationalities, races, religions and ethnicities, regardlessof characteristics such as gender, gender identity and/orexpression, age, disability or sexual orientation. Burberryis passionate about attracting, developing and rewardingthe most talented and skilled individuals, regardless ofbackground. The Group encourages its employees to workacross functions, geographies and cultures to enhanceunderstanding and create a connected global community.As the Group continues to grow globally, it is buildingon its long-term commitment to diversity and inclusion –embracing the cultures of all the countries where we dobusiness. Burberry is committed to making the necessaryadjustments to support the employment of people withdisabilities and provide training and development to ensurethey have the opportunity to achieve their potential.Further information regarding the Group’s employmentpolicies are provided in Build our Culture on pages44 to 46.110Board and Governance – Directors’ ReportHealth and safetyThe Group has a health and safety policy approved bythe Board. Governance of the health and safety strategy ismaintained through a Global Health and Safety Committeewhich is chaired by the Chief People and Corporate AffairsOfficer. Health and safety is also considered at the GroupRisk Committee and Audit Committee. Each region haslocal Committees which assist with the implementation ofthe health and safety strategy. Strategic direction on healthand safety matters is provided by the Director of Health& Safety and is supported by a global team. The globalHealth & Safety team aims to visit each location worldwideapproximately every three years to provide advice,assistance and support. In addition, occupational healthand safety compliance is formally audited every five yearsin stores and annually in our Regent Street flagship, ourcorporate offices and our internal manufacturing anddistribution sites.Information relating to Burberry’s business interestsin Central and Southern AmericaOn 5 May 2016, the US Treasury Department’s Office ofForeign Assets Control imposed sanctions on BurberryLimited’s franchisee and beauty distributor, Grupo WisaS.A., which operates seven Burberry branded franchisestores in Colombia, Chile, Barbados, Panama, Aruba anddistributes Burberry beauty products across Central andSouthern America. As a consequence of these sanctionsall assets of Grupo Wisa S.A. that are under the jurisdictionof the United States or in the control of US persons arefrozen and banks are generally prohibited from or likelyto implement prohibitions in respect of accepting, receivingor transferring monies to or from Grupo Wisa S.A. orany associated persons. Grupo Wisa S.A. representsa significant number of international luxury brands in thesale and distribution of products in Central and SouthernAmerica. Grupo Wisa S.A. rejects any allegation of wrongdoing and states they are cooperating with the authorities.Burberry is monitoring these developments closely. Thereis a risk that the distribution of Burberry beauty productsand the business of the Burberry branded franchise storesin these markets will be adversely affected and may notcontinue in their current form. Burberry is considering itsoptions in connection with these events, including potentialalternative routes to market. The financial implications,were these arrangements to come to an end, are notconsidered to be material on the basis that annual salesto Grupo Wisa S.A. over the past three years have beenunder £10m per annum.The Strategic Report (from pages 7 to 61) and Directors’Report (from pages 106 to 111) have been approved bythe Board on 17 May 2016.By order of the BoardCatherine SukmonowskiCompany Secretary17 May 2016Burberry Group plcRegistered Office:Horseferry HouseHorseferry RoadLondonSW1P 2AWRegistered in England and WalesRegistered number: 03458224111Board and Governance – Directors’ Report 113FinancialStatements114 Statement of Directors’ Responsibilities115 Independent Auditor’s Report to theMembers of Burberry Group plc121 Group Income Statement122 Group Statement of Comprehensive Income123 Group Balance Sheet124 Group Statement of Changes in Equity125 Group Statement of Cash Flows125 Analysis of Net Cash126 Notes to the Financial Statements170 Five Year Summary172 Independent Auditor’s Report tothe Members of Burberry Group plc174 Company Balance Sheet175 Company Statement of Changes in Equity176 Notes to the Company Financial Statements114Statement of Directors’ Responsibilities Statement of Directors’ Responsibilities114The directors are responsible for preparing the Annual Report, which includes the Strategic Report; the Directors’ Report;the Directors’ Remuneration Report; and the financial statements in accordance with applicable laws and regulations.Company law requires the directors to prepare financial statements for each financial year. Under that law the directors haveprepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adoptedby the European Union, and the parent Company financial statements in accordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standards and applicable law) including Financial Reporting Standard 101‘Reduced Disclosure Framework’. Under company law the directors must not approve the financial statements unless they aresatisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of theGroup for that period. In preparing these financial statements the directors are required to:· select suitable accounting policies and then apply them consistently;· make judgements and accounting estimates that are reasonable and prudent;· state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards, including FRS 101,have been followed, subject to any material departures disclosed and explained in the Group and parent Company financialstatements respectively; and· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Companywill continue in business.The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group andenable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguardingthe assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud andother irregularities.The directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdomgoverning the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.The directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides theinformation necessary for shareholders to assess the Group’s position and performance, business model and strategy.Each of the directors, whose names and functions are listed on pages 64 to 65 confirm that, to the best of their knowledge:· the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union,give a true and fair view of the assets, liabilities, financial position and profit of the Group; and· the Strategic Report includes a fair review of the development and performance of the business and the position of theGroup, together with a description of the principal risks and uncertainties that it faces.These statements were approved by the Board on 17 May 2016 and signed on its behalf by:Sir John Peace Carol FairweatherChairman Chief Financial Officer115Independent Auditors’ Report to the Members of Burberry Group plc115Report on the Group financial statementsOur opinionIn our opinion, Burberry Group plc’s Group financial statements (the financial statements):· give a true and fair view of the state of the Group’s affairs as at 31 March 2016 and of its profit and cash flows for the yearthen ended;· have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by theEuropean Union; and· have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.What we have auditedThe financial statements, included within the Burberry Group plc Annual Report 2015/16 (the Annual Report), comprise:· the Group Balance Sheet as at 31 March 2016;· the Group Income Statement and Statement of Comprehensive Income for the year then ended;· the Group Statement of Changes in Equity and Statement of Cash Flows for the year then ended;· the Analysis of Net Cash as at 31 March 2016; and· the notes to the financial statements, which include a summary of significant accounting policies and otherexplanatory information.Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financialstatements. These are cross-referenced from the financial statements and are identified as audited.The financial reporting framework that has been applied in the preparation of the financial statements is applicable law andIFRSs as adopted by the European Union.Our audit approachContextBurberry Group plc is a British global luxury goods manufacturer, retailer and wholesaler listed on the London Stock Exchange.The Group operates globally across over 30 countries. The context for our audit has been set against the Group’s structure andstrategy as well as the more challenging trading conditions. This was particularly relevant for the work performed on inventoryprovisioning, impairment of property, plant and equipment and onerous lease provisions and the valuation of the China putoption liability.The area of focus where work was primarily performed by component teams was the assessment of inventory provisioning.The judgements in respect of the completeness and valuation of provisions for tax exposures, China put option liabilityvaluation, impairment of fragrance and beauty licence intangible asset, impairment of property, plant and equipment andonerous lease provisions and presentation of non-GAAP measures are primarily taken at a Group level.OverviewMateriality Overall Group materiality: £20 million which represents approximately 5% of profit before tax (2015: £20 million).AuditScope• Of the Group’s 82 reporting units we identified six reporting units which, in our view, require a full scope audit of their financialinformation, either due to their size or their risk characteristics.• These reporting units are located in the UK, China, Hong Kong and Korea and two are located in the US. We used local teamsin these countries to perform those full scope audits relating to the relevant reporting units.• All six reporting units were visited by the Group audit team during the course of the year in order to attend local managementmeetings and, for financially significant reporting units, review working papers. Throughout the year, the Group audit team heldregular meetings with these components to direct and supervise the work of these local teams and to ensure that we had a fulland comprehensive understanding of the results of their work – particularly insofar as it related to the identified areas of focus.• The six components where we performed full scope audits represented 76% (2015: 78%) of Group revenue and 89% (2015: 92%)of profit before taxation.Areas ofFocus• Inventory provisioning.• Completeness and valuation of provisions for tax exposures.• China put option liability valuation.• Impairment of fragrance and beauty licence intangible asset.• Impairment of property, plant and equipment and onerous lease provisions.• Presentation of results and non-GAAP measures.Independent Auditors’ Report to the Members of Burberry Group plc116Independent Auditors’ Report to the Members of Burberry Group plc116The scope of our audit and our areas of focus 1 Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would be available to unrelated third parties.2 Amortisation of £14.9m relating to the fragrance and beauty licence intangible asset is presented as an adjusting item and excluded from the segmental analysis.3 Refer to note 6 for details of adjusting items.Notes to the Financial Statements137Notes to the Financial Statements1373. Segmental analysis (continued)Segmental asset analysis Retail/Wholesale Licensing TotalYear to31 March2016£mYear to31 March2015£mYear to31 March2016£mYear to31 March2015£mYear to31 March2016£mYear to31 March2015£mAdditions to non-current assets 146.2 157.1 – – 146.2 157.1Total segment assets 1,365.5 1,300.6 3.5 2.6 1,369.0 1,303.2Goodwill 88.8 88.8Cash and cash equivalents 711.8 617.4Taxation 137.4 156.3Assets relating to discontinued Spanish operations 7.3 7.5Total assets per Balance Sheet 2,314.3 2,173.2Additional revenue analysisRevenue by product divisionYear to31 March2016£mYear to31 March2015£mAccessories 901.7 892.5Womens 729.0 743.0Mens 548.4 557.5Childrens/Other 90.7 77.7Beauty 202.5 184.8Retail/Wholesale 2,472.3 2,455.5Licensing 42.4 67.7Total 2,514.7 2,523.2Revenue by destinationYear to31 March2016£mYear to31 March2015£mAsia Pacific 932.9 938.1EMEIA1 878.5 869.0Americas 660.9 648.4Retail/Wholesale 2,472.3 2,455.5Licensing 42.4 67.7Total 2,514.7 2,523.21 EMEIA comprises Europe, Middle East, India and Africa.Entity-wide disclosuresRevenue derived from external customers in the UK totalled £250.2m for the year to 31 March 2016 (2015: £233.3m).Revenue derived from external customers in foreign countries totalled £2,264.5m for the year to 31 March 2016 (2015: £2,289.9m).This amount includes £562.1m of external revenues derived from customers in the USA (2015: £551.6m) and £350.9m ofexternal revenues derived from customers in China (2015: £346.2m).The total of non-current assets other than financial instruments and deferred tax assets located in the UK is £194.6m(2015: £197.7m). The remaining £452.6m of non-current assets are located in other countries (2015: £455.4m), with£153.1m located in the USA (2015: £174.9m) and £82.0m located in China (2015: £87.8m).Notes to the Financial Statements138Notes to the Financial Statements1384. Net operating expensesNoteYear to31 March2016£mYear to31 March2015£mSelling and distribution costs 816.7 762.9Administrative expenses 528.2 547.4Adjusting itemsAmortisation of the fragrance and beauty licence intangible asset 6 14.9 14.9Total 1,359.8 1,325.25. Profit before taxationNoteYear to31 March2016£mYear to31 March2015£mAdjusted profit before taxation is stated after charging/(crediting):Depreciation of property, plant and equipmentWithin cost of sales 1.4 1.0Within selling and distribution costs 98.7 88.8Within administrative expenses 11.8 14.2Amortisation of intangible assetsWithin selling and distribution costs 1.8 1.7Within administrative expenses 18.5 18.0Loss on disposal of property, plant and equipment and intangible assets 1.2 2.1Net impairment charge 13 26.5 4.1Employee costs 396.4 468.1Operating lease rentalsMinimum lease payments1 235.3 190.9Contingent rents 86.1 87.5Net exchange gain on revaluation of monetary assets and liabilities (1.6) (1.4)Net exchange loss/(gain) on derivatives held for trading for the year 5.8 (1.4)Trade receivables net impairment charge 3.1 0.1Adjusting itemsAmortisation of the fragrance and beauty licence intangible asset 6 14.9 14.9Put option liability finance income 6 (9.9) (3.7)1 Included within minimum lease payments are amounts of £20.1m (2015: £6.5m) relating to net charges for onerous lease provisions (refer to note 20).6. Adjusting itemsAmortisation of the fragrance and beauty licence intangible assetDuring the year ended 31 March 2013, an intangible asset of £70.9m was recognised on the Balance Sheet, relating to the presentvalue of the anticipated incremental income to be earned by the Group as a result of selling Beauty products through retail andwholesale channels rather than under licence, following the termination of the existing licence relationship with Interparfums SA.This asset is amortised on a straight-line basis over the period 1 April 2013 to 31 December 2017. The amortisation is presentedas an adjusting item, which is consistent with the treatment of the cost recognised on termination of the licence relationship in theyear ended 31 March 2013. The amortisation expense recognised for the year ended 31 March 2016 is £14.9m (2015: £14.9m)(refer to note 12). A related tax credit of £2.8m (2015: £3.1m) has also been recognised in the current period.Notes to the Financial Statements139Notes to the Financial Statements1396. Adjusting items (continued)Put option liability finance incomeThe financing income of £9.9m for the year ended 31 March 2016 (2015: £3.7m) relates to fair value movements and theunwinding of the discount on the put option liability over the non-controlling interest in Burberry (Shanghai) Trading Co., Ltd.Refer to note 19 for further details of the carrying value of the put option liability. No tax has been recognised on this item,as the value of the option on exercise is not considered to be deductible for tax purposes.7. Auditor remunerationFees incurred during the year in relation to audit and non-audit services are analysed below. All work performed by theexternal auditors is controlled by an authorisation policy agreed by the Audit Committee. The overriding principle precludesthe auditors from engaging in non-audit services that would compromise their independence. Non-audit services are providedby the auditors where they are best placed to provide the service due to their previous experience or market leadership in aparticular area.Year to31 March2016£mYear to31 March2015£mAudit services in respect of the financial statements of the Company and consolidation 0.4 0.4Audit services in respect of the financial statements of subsidiary companies 1.8 1.5Audit related assurance services 0.1 0.1Services relating to taxationCompliance services – 0.1Advisory services 0.2 0.3Other non-audit related services 0.1 0.2Total 2.6 2.68. FinancingNoteYear to31 March2016£mYear to31 March2015£mBank interest income 4.6 3.7Other finance income 0.5 0.7Finance income 5.1 4.4Interest expense on bank loans and overdrafts (1.5) (1.8)Bank charges (0.7) (1.8)Other finance expense (0.1) (0.2)Finance expense (2.3) (3.8)Other financing income – put option liability 6 9.9 3.7Net finance income 12.7 4.3Notes to the Financial Statements140Notes to the Financial Statements1409. TaxationAnalysis of charge for the year recognised in the Group Income Statement:Year to31 March2016£mYear to31 March2015£mCurrent taxUK corporation taxCurrent tax on income for the year to 31 March 2016 at 20% (2015: 21%) 52.8 58.8Double taxation relief (0.8) (0.7)Adjustments in respect of prior years (3.1) (2.4)48.9 55.7Foreign taxCurrent tax on income for the year 49.1 60.9Adjustments in respect of prior years (2.0) 6.9Total current tax 96.0 123.5Deferred taxUK deferred taxOrigination and reversal of temporary differences 9.9 2.1Impact of changes to tax rates 1.3 –Adjustments in respect of prior years (0.7) 0.910.5 3.0Foreign deferred taxOrigination and reversal of temporary differences (13.1) (21.3)Adjustments in respect of prior years 7.6 (1.7)Total deferred tax 5.0 (20.0)Total tax charge on profit 101.0 103.5Analysis of charge for the year recognised in other comprehensive income and directly in equity:Year to31 March2016£mYear to31 March2015£mCurrent taxRecognised in other comprehensive incomeCurrent tax charge on exchange differences on loans (foreign currency translation reserve) 1.9 4.4Total current tax recognised in other comprehensive income 1.9 4.4Recognised in equityCurrent tax credit on share options (retained earnings) (2.0) (5.6)Total current tax recognised directly in equity (2.0) (5.6)Deferred taxRecognised in other comprehensive incomeDeferred tax charge/(credit) on cash flow hedges deferred in equity (hedging reserve) 1.5 (1.3)Deferred tax charge/(credit) on cash flow hedges transferred to income (hedging reserve) 0.7 (0.2)Deferred tax credit on net investment hedges deferred in equity (hedging reserve) (0.1) –Deferred tax credit on net investment hedges transferred to income (hedging reserve) (0.5) –Total deferred tax recognised in other comprehensive income 1.6 (1.5)Recognised in equityDeferred tax charge on share options (retained earnings) 6.5 0.4Total deferred tax recognised directly in equity 6.5 0.4Notes to the Financial Statements141Notes to the Financial Statements1419. Taxation (continued)The tax rate applicable on profit varied from the standard rate of corporation tax in the UK due to the following factors:Year to31 March2016£mYear to31 March2015£mProfit before taxation 415.6 444.6Tax at 20% (2015: 21%) on profit before taxation 83.1 93.4Rate adjustments relating to overseas profits 3.4 1.8Permanent differences 5.5 5.6Tax on dividends not creditable 1.6 –Current year tax losses not recognised 4.7 2.4Prior year tax losses recognised in the year (0.4) (3.4)Adjustments in respect of prior years 1.8 3.7Adjustments to deferred tax relating to changes in tax rates 1.3 –Total taxation charge 101.0 103.5Total taxation recognised in the Group Income Statement arises on:Year to31 March2016£mYear to31 March2015£mAdjusted profit before taxation 103.8 106.6Adjusting items (2.8) (3.1)Total taxation charge 101.0 103.510. Earnings per shareThe calculation of basic earnings per share is based on profit or loss attributable to owners of the Company for the yeardivided by the weighted average number of ordinary shares in issue during the year. Basic and diluted earnings per sharebased on adjusted profit before taxation are also disclosed to indicate the underlying profitability of the Group.Year to31 March2016£mYear to31 March2015£mAttributable profit for the year before adjusting items1 311.7 344.4Effect of adjusting items1 (after taxation) (2.2) (8.1)Attributable profit for the year 309.5 336.31 Refer to note 6 for details of adjusting items.The weighted average number of ordinary shares represents the weighted average number of Burberry Group plc ordinaryshares in issue throughout the year, excluding ordinary shares held in the Group’s ESOP trusts.Diluted earnings per share is based on the weighted average number of ordinary shares in issue during the year. In addition,account is taken of any options and awards made under the employee share incentive schemes, which will have a dilutiveeffect when exercised. Refer to note 26 for additional information on the terms and conditions of the employee shareincentive schemes.Year to31 March2016MillionsYear to31 March2015MillionsWeighted average number of ordinary shares in issue during the year 441.9 440.0Dilutive effect of the employee share incentive schemes 4.2 7.8Diluted weighted average number of ordinary shares in issue during the year 446.1 447.8Notes to the Financial Statements142Notes to the Financial Statements14211. Dividends paid to owners of the CompanyYear to31 March2016£mYear to31 March2015£mPrior year final dividend paid 25.5p per share (2015: 23.2p) 112.5 102.1Interim dividend paid 10.2p per share (2015: 9.7p) 45.2 42.8Total 157.7 144.9A final dividend in respect of the year to 31 March 2016 of 26.8p (2015: 25.5p) per share, amounting to £118.5m, has beenproposed for approval by the shareholders at the Annual General Meeting subsequent to the balance sheet date. The finaldividend to Burberry Group plc shareholders has not been recognised as a liability at the year end and will be paid on5 August 2016 to shareholders on the register at the close of business on 8 July 2016.12. Intangible assetsCostGoodwill£mTrade marks,licences andother intangibleassets£mComputersoftware£mIntangible assetsin the course ofconstruction£mTotal 50/507 UpA&WCactus CoolerCanada DryCanfield'sCrushDr PepperHires Root BeerIBC Root BeerOranginaRC ColaDiet RiteNehiSchweppesSquirtStewart's Fountain ClassicsSun DropSunkistSussex GoldenVenom EnergyVernorsWinkCoffees Diedrich CoffeeGreen MountainTimothy's World CoffeeTully's CoffeeVan HoutteJuices, teas,and others Dejà BlueHawaiian PunchMott'sNantucket NectarsPeñafielReaLemonReaLimeSnappleYoo-hooBeverage mixers ClamatoMr & Mrs TRose'sA-TreatAle-8-OneBarritt'sBlenheimBoylanBuffalo RockBundabergCanada DryCatawissaCrabbie'sDr. Brown'sFaygoFentimansFitz'sFoxon ParkPolarRed RockReed'sSchweppesSeagram'sSprecherStewart'sStoneySussex GoldenVernorsVessWhite RockCitrus drink lines AmratA-TreatBig Ben'sBlue SkyBogaBrisaClubCrestaCrushFantaFaygoFoxon ParkFrescaHank'sJaffaJarritosJones SodaKasLiftLiltMirindaMountain DewNehiNesbitt'sPschittRamuneSan PellegrinoSchinSchweppesShastaSliceSusoTangoVessCitrus drinks 50/50Ale-8-OneCitradnLHeee HawIrn-BruKickKickapoo Joy JuiceLa CaseraMello YelloMountain BreezeMDXMountain HollerMountain LightningOranginaRondoSkiSun DropSurgeTizerUrgeVaultLimcaDuke's LemonadeGeneric citrus sodasLemon-lime drinks List of lemon-lime soda brands7 UpBantaBitter lemonBubble UpChilsung CiderDr. EnufFruktsodaGreen RiverKellukeLemonetteCitraQuwat JabalSliceSoloSierra MistSpriteTeemUpper 10Orange soft drinks AranciataBlunaDad's Orange Cream SodaFitz'sGold SpotGreen SpotKinnieKrestLaranjadaOasisOrange CrushOrangettePakolaRoyal TruSisiSliceSoloSprecher BrewerySun CrestSunkistZingoGrapefruit drinks Citrus BlastFrescaJarritosPelmosodaSquirtTingWinkTangerine drinks JarritosTanoraBy Appointment toHM The Queen Abels Moving ServicesAinsworthsAngostura LimitedAkzoNobelAutoglymAxminster CarpetsBendicksBentley MotorsBollingerBritvicBTBurberryCadburyCarphone WarehouseCastrolCharbonnel et WalkerDAKSDHL ExpressDormaEde & RavenscroftFortnum & MasonFrank SmythsonGieves & HawkesH. P. BulmerHenry Poole & CoJ. Barbour and SonsJames Purdey and SonsJaguar CarsJohn Lewis & PartnersJohn LobbLand RoverLouis RoedererMappin & WebbMartini & RossiMinkyMolton BrownMoët & ChandonNestléProcter & Gamble UKRicher SoundsRoberts RadioRyvitaSchweppesSpodeSteinway & SonsTanquerayTwiningsUnilever UKUnited BiscuitsVauxhall MotorsVeuve Clicquot PonsardinWaitroseWeetabixWilkin & SonsWilliam DrakeWolseyWorcestershire Medal Service By Appointment toHRH The Duke of Edinburgh Boots OpticiansDAKSEde & RavenscroftFrank SmythsonGieves & HawkesHatchardsHolland & HollandJ. Barbour and SonsJames Purdey and SonsJohn LobbLand RoverLyle & ScottPenhaligon'sTruefitt & HillBy Appointment toHRH The Prince of Wales AinsworthsAston MartinAutoglymBentley MotorsBurberryCrabtree & EvelynDAKSEde & RavenscroftFrank SmythsonGieves & HawkesHolland & HollandJ. Barbour and SonsJaguar CarsJames Purdey and SonsJohn LobbLand RoverLaphroaigLinn ProductsMinkyPenhaligon'sPeter JonesRitz HotelRoberts RadioShepherd NeameTaylors of HarrogateTurnbull & AsserVauxhall MotorsWaitroseWeetabixWinsor & Newton Notes to the Financial Statements145Notes to the Financial Statements14513. Property, plant and equipment (continued)Management has considered the potential impact of changes in assumptions on the total recorded as a result of the review forimpairment of retail store assets and consideration of onerous lease provisions. The most significant estimate is the future levelof revenues achieved by the retail stores. It is estimated that, for the stores subject to an impairment or onerous lease provisionin the year, a 5% decrease/increase in revenue assumptions for the year ending 31 March 2017, with no change to subsequentforecast revenue growth rate assumptions, would result in a £7m increase/£6m decrease in the charge in the year ended31 March 2016.The impairment charge recorded in property, plant and equipment relates to 32 retail cash generating units (2015: 22 retail cashgenerating units) for which the total recoverable amount at the balance sheet date is £18.2m (2015: £6.5m). Impairment chargesof £2.3m (2015: £nil) arose relating to other assets in the year.14. Deferred taxationDeferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against currenttax liabilities and there is an intention to settle on a net basis, and to the same fiscal authority. The offset amounts are shownin the table below:As at31 March2016£mAs at31 March2015£mDeferred tax assets 134.4 145.0Deferred tax liabilities (0.6) (0.9)Net amount 133.8 144.1The movement in the deferred tax account is as follows:Year to31 March2016£mYear to31 March2015£mAs at 1 April 144.1 115.0Effect of foreign exchange rate changes 2.8 8.0(Charged)/credited to the Income Statement (5.0) 20.0(Charged)/credited to other comprehensive income (1.6) 1.5Charged to equity (6.5) (0.4)As at 31 March 133.8 144.1The movement in deferred tax assets and liabilities during the year, without taking into consideration the off-setting of balanceswithin the same tax jurisdiction, is as follows:Deferred tax liabilitiesCapitalallowances£mUnrealisedinventoryprofit and otherinventoryprovisions£mDerivativeinstruments£mUnused taxlosses£mOther£mTotal£mAs at 31 March 2014 15.1 (3.6) 1.5 (0.2) (7.2) 5.6Effect of foreign exchange rate changes 0.1 (0.1) – – (0.3) (0.3)(Credited)/charged to the Income Statement (13.0) 2.6 – 0.2 9.1 (1.1)As at 31 March 2015 2.2 (1.1) 1.5 – 1.6 4.2Effect of foreign exchange rate changes 0.2 – – – 0.2Charged/(credited) to the Income Statement 0.4 0.2 – – (0.6) –Credited to other comprehensive income – – (0.4) – – (0.4)As at 31 March 2016 2.8 (0.9) 1.1 – 1.0 4.0 Notes to the Financial Statements146Notes to the Financial Statements14614. Deferred taxation (continued)Deferred tax assetsCapitalallowances£mUnrealisedinventory profitand otherinventoryprovisions£mShareschemes£mDerivativeinstruments£mUnusedtaxlosses£mOther1£mTotal£m As at 31 March 2016 11.5 46.9 9.3 (0.7) 6.9 63.9 137.81 Deferred tax balances within the ‘Other’ category in the analysis above include temporary differences arising on property provisions of £8.5m (2015: £2.4m), accruedintercompany expenses of £23.0m (2015: £38.4m) and other provisions and accruals of £32.4m (2015: £30.8m).Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related benefit throughthe future taxable profits is probable. The Group did not recognise deferred tax assets of £62.3m (2015: £53.2m) in respectof losses and temporary timing differences amounting to £215.1m (2015: £190.6m) that can be set off against future taxableincome. There is a time limit for the recovery of £24.8m of these potential assets (2015: £16.8m) which ranges from three toten years (2015: four to nine years).Included within other temporary differences above is a deferred tax liability of £1.2m (2015: £nil) relating to unremitted overseasearnings. No deferred tax liability is provided in respect of any future remittance of earnings of foreign subsidiaries where theGroup is able to control the remittance of earnings and it is probable that such earnings will not be remitted in the foreseeablefuture, or where no liability would arise on the remittance. The aggregate amount of temporary differences in respect ofunremitted earnings is £270m (2015: £250m).Notes to the Financial Statements147Notes to the Financial Statements14715. Trade and other receivablesAs at31 March2016£mAs at31 March2015£mNon-currentDeposits and other financial receivables 37.5 39.6Other non-financial receivables 2.8 2.7Prepayments 26.2 18.2Total non-current trade and other receivables 66.5 60.5CurrentTrade receivables 205.1 193.6Provision for doubtful debts (7.2) (4.6)Net trade receivables 197.9 189.0Other financial receivables 20.9 16.3Other non-financial receivables 27.5 23.9Prepayments 35.4 28.1Accrued income 3.7 3.0Total current trade and other receivables 285.4 260.3Total trade and other receivables 351.9 320.8Included in total trade and other receivables are non-financial assets of £91.9m (2015: £72.9m).The individually impaired receivables relate to balances with trading parties which have passed their payment due dates orwhere uncertainty exists over recoverability. As at 31 March 2016, trade receivables of £18.2m (2015: £13.6m) were impaired.The amount of the provision against these receivables was £7.2m as at 31 March 2016 (2015: £4.6m). It was assessed that aportion of the receivables is expected to be recovered. The ageing of the impaired trade receivables is as follows:As at31 March2016£mAs at31 March2015£mCurrent 3.7 0.1Less than one month overdue 11.5 8.8One to three months overdue 1.5 1.5Over three months overdue 1.5 3.218.2 13.6Notes to the Financial Statements148Notes to the Financial Statements14815. Trade and other receivables (continued)As at 31 March 2016, trade receivables of £9.3m (2015: £7.5m) were overdue but not impaired. The ageing of these overduereceivables is as follows:As at31 March2016£mAs at31 March2015£mLess than one month overdue 4.3 4.5One to three months overdue 4.1 2.3Over three months overdue 0.9 0.79.3 7.5Movement in the provision for doubtful debts is as follows:Year to31 March2016£mYear to31 March2015£mAs at 1 April 4.6 5.3Increase in provision for doubtful debts 3.1 0.1Receivables written off during the year as uncollectable (0.5) (0.8)As at 31 March 7.2 4.6As at 31 March 2016 there were £1.5m impaired receivables within other receivables (2015: £nil).The carrying amounts of the Group’s non-derivative financial assets excluding cash and cash equivalents by customergeographical location are:Year to31 March2016£mYear to31 March2015£mAsia Pacific 99.3 105.0EMEIA 89.1 78.2Americas 71.6 64.7260.0 247.916. InventoriesAs at31 March2016£mAs at31 March2015£mRaw materials 38.3 29.2Work in progress 1.3 2.2Finished goods 447.1 405.2Total inventories 486.7 436.6The cost of inventories recognised as an expense and included in cost of sales amounted to £723.3m (2015: £730.1m).The net movement in inventory provisions included in cost of sales for the year ended 31 March 2016 was a cost of£24.9m (2015: £31.3m).The cost of finished goods physically destroyed in the year is £18.8m (2015: £19.7m).Notes to the Financial Statements149Notes to the Financial Statements14917. Derivative financial instrumentsMaster netting arrangementsThe Group’s forward foreign exchange contracts and equity swap contracts are entered into under International Swaps andDerivatives Association (ISDA) master netting arrangements. In general, under such agreements the amounts owed by eachcounterparty on a single day in respect of all transactions outstanding in the same currency are aggregated into a singleamount that is payable by one party to the other. In certain circumstances, such as when a default occurs, all outstandingtransactions under the agreement are terminated, the termination value is assessed and only a single net amount is payablein settlement of all transactions. The ISDA agreements do not meet the criteria for offsetting in the Balance Sheet as theGroup’s right to offset is enforceable only on the occurrence of future events such as default. The Group’s Balance Sheetwould not be materially different if it had offset its forward foreign exchange contracts and equity swap contracts subjectto these ISDA agreements.Derivative financial assetsAs at31 March2016£mAs at31 March2015£mForward foreign exchange contracts – cash flow hedges 7.8 6.6Forward foreign exchange contracts – held for trading1 – 0.5Equity swap contracts – held for trading 0.5 2.8Total position 8.3 9.9Comprising:Total non-current position 0.3 1.5Total current position 8.0 8.4Derivative financial liabilitiesAs at31 March2016£mAs at31 March2015£mForward foreign exchange contracts – cash flow hedges (1.3) (10.7)Forward foreign exchange contracts – held for trading1 (0.1) (1.8)Forward foreign exchange contracts – hedge of net investment (0.8) –Equity swap contracts – held for trading (0.1) –Total position (2.3) (12.5)Comprising:Total non-current position – –Total current position (2.3) (12.5)Net derivative financial instrumentsThe notional principal amounts of the outstanding forward foreign exchange and equity swap contracts at year end are:As at31 March2016£mAs at31 March2015£mCash flow hedges 107.4 218.4Held for trading1 61.4 197.4Hedge of net investment 17.4 –Equity swap contracts 5.9 13.81 Forward foreign exchange contracts classified as held for trading are used for cash management purposes. At 31 March 2016 all such contracts had maturities of nogreater than three months from the balance sheet date.Notes to the Financial Statements150Notes to the Financial Statements15017. Derivative financial instruments (continued)Contractual maturities of derivatives used for hedgingThe gross inflows/(outflows) disclosed in the table below represent the contractual undiscounted cash flows relating toderivative financial assets and liabilities held for risk management purposes. They are usually not closed out prior to thecontractual maturity. The foreign currency cash flows shown are based on spot rates at the balance sheet date.Contractual maturities Carrying amount£mContractualcash flows£m1 to 6months£m6 to 12months£mAs at 31 March 2016Forward exchange contracts used for hedging:Outflow (124.2) (45.7) (78.5)Inflow 130.2 50.4 79.85.7 6.0 4.7 1.3As at 31 March 2015Forward exchange contracts used for hedging:Outflow (216.0) (167.8) (48.2)Inflow 211.7 165.2 46.5 (4.1) (4.3) (2.6) (1.7)The contractual maturity profile of non-current financial liabilities is shown in note 25. For further details of cash flow hedgingand net investment hedging refer to note 25 – Market Risk.18. Cash and cash equivalentsAs at31 March2016£mAs at31 March2015£mCash at bank and in hand 282.1 252.3Short-term deposits 429.7 365.1Total 711.8 617.419. Trade and other payables £mNon-currentPut option liability over non-controlling interest 45.8 54.4Other payables 3.0 3.7Deferred income and non-financial accruals 65.9 59.0Total non-current trade and other payables 114.7 117.1CurrentTrade payables 167.2 159.8Other taxes and social security costs 58.3 61.0Other payables 3.9 4.5Accruals 132.4 164.0Deferred income and non-financial accruals 25.4 16.7Total current trade and other payables 387.2 406.0Total trade and other payables 501.9 523.1Included in total trade and other payables are non-financial liabilities of £149.6m (2015: £136.7m).Notes to the Financial Statements151Notes to the Financial Statements15119. Trade and other payables (continued)Put option liability over non-controlling interestFollowing the acquisition of the Burberry retail and distribution business in China, Sparkle Roll Holdings Limited, a non-Groupcompany, retains a 15% economic interest in the Group’s business in China. Put and call options exist over this interest stake.The call option is currently exercisable and the put option is exercisable after 1 September 2020. The net present value of theput option liability has been recognised as a non-current financial liability under IAS 39. The present value of any paymentunder the call option before 1 September 2020 would be different should Burberry decide to exercise the call option due tothe difference between estimated risk adjusted discount rates and estimated growth in business performance in China overthe period to 1 September 2020.The value of the put option liability is £45.8m at 31 March 2016 (2015: £54.4m). The movement in the liability for the periodincludes a decrease of £9.9m relating to unrealised fair value movements, as described in note 6, offset by the impact oftranslation of the put option liability to the Group’s presentational currency.The key inputs applied in arriving at the value of the put option liability are the future performance of the Group’s business inChina; the average historical Burberry Group plc multiple; and the risk adjusted discount rate for China, taking into account therisk-free rate in China. The future performance of the business is estimated by using management’s business plans togetherwith long-term observable growth forecasts.The carrying value of the put option liability is dependent on assumptions applied in determining these key inputs, and is subjectto change in the event that there is a change in any of those assumptions. The valuation is updated at every reporting periodor more often if a significant change to any input is observed.A 10% increase/decrease in the future performance of the Group’s business in China at the put option exercise date wouldresult in a £4.6m increase/decrease in the carrying value of the put option liability at 31 March 2016 (2015: £5.4m), anda corresponding £4.6m loss/gain in the profit before taxation for the year ended 31 March 2016 (2015: £5.4m).A 1% increase/decrease in the risk adjusted discount rate for China would result in a £2.0m decrease/£2.1m increase inthe carrying value of the put option liability at 31 March 2016 (2015: £2.9m decrease/£3.0m increase), and a corresponding£2.0m gain/£2.1m loss in the profit before taxation for the year ended 31 March 2016 (2015: £2.9m gain/£3.0m loss).Ultimately, the put option liability is subject to a contractual cap of £200m. The undiscounted value of the put option liabilityat 31 March 2016 is £79.7m (2015: £109.0m).Notes to the Financial Statements152Notes to the Financial Statements15220. Provisions for other liabilities and chargesPropertyobligations£mRestructuringcosts£mOthercosts£mTotal£mBalance as at 31 March 2014 22.9 1.5 2.2 26.6Effect of foreign exchange rate changes 0.7 (0.1) (0.1) 0.5Created during the year 12.3 – 0.6 12.9Discount unwind 0.2 – – 0.2Utilised during the year (5.4) (0.6) (0.2) (6.2)Released during the year (1.3) – (0.2) (1.5)Balance as at 31 March 2015 29.4 0.8 2.3 32.5Effect of foreign exchange rate changes 1.0 – 0.1 1.1Created during the year 30.8 – 2.2 33.0Discount unwind 0.1 – – 0.1Utilised during the year (5.8) (0.1) (0.2) (6.1)Released during the year (3.7) (0.7) (0.2) (4.6)Balance as at 31 March 2016 51.8 – 4.2 56.0Within property obligations are amounts of £27.0m (2015: £12.1m) relating to onerous lease obligations. See note 13 for detailsrelating to impairment of assets and onerous lease provisions for retail cash generating units.The net charge in the year for onerous lease obligations is £20.1m (2015: £6.5m). This includes amounts of £21.1m(2015: £6.7m) relating to retail stores (refer to note 13) and a credit of £1.0m (2015: £0.2m) relating to other properties.As at31 March2016£mAs at31 March2015£mAnalysis of total provisions:Non-current 38.4 22.2Current 17.6 10.3Total 56.0 32.5The non-current provisions relate to provisions for onerous leases and property reinstatement costs which are expectedto be utilised within 20 years (2015: 21 years).21. Bank overdrafts and borrowingsIncluded within bank overdrafts is £44.9m (2015: £60.9m) representing balances on cash pooling arrangements in the Group.The Group has a number of uncommitted overdraft and borrowing facilities agreed with third-party banks. At 31 March 2016,the Group held bank overdrafts of £6.6m (2015: £4.3m) excluding balances on cash pooling arrangements.On 25 November 2014, the Group entered into a £300m multi-currency revolving credit facility with a syndicate ofthird-party banks. This replaced the previous facility which would have matured on 30 June 2016. At 31 March 2016, therewere £nil outstanding drawings (2015: £nil). During the year the Group exercised an option to extend the maturity of thefacility to November 2020, after receiving consent from all members of the syndicate. The agreement contains anotheroption, exercisable in 2016, which allows the Group to extend for an additional one year, at the consent of the syndicate.The Group is in compliance with the financial and other covenants within this facility and has been in compliancethroughout the financial year.The fair value of borrowings and overdrafts approximate the carrying amount because of the short maturity ofthese instruments.Notes to the Financial Statements153Notes to the Financial Statements15322. Share capital and reservesAllotted, called up and fully paid share capital Number £mOrdinary shares of 0.05p (2015: 0.05p) eachAs at 31 March 2014 443,642,290 0.2Allotted on exercise of options during the year 1,101,777 –As at 31 March 2015 444,744,067 0.2Allotted on exercise of options during the year 293,187 –As at 31 March 2016 445,037,254 0.2The Company has a general authority from shareholders, renewed at each Annual General Meeting, to repurchase a maximumof 10% of its issued share capital. During the year to 31 March 2016, no ordinary shares were repurchased by the Companyunder this authority (2015: nil).The cost of purchasing own shares held by the Group has been offset against retained earnings, as the amounts paid reducethe profits available for distribution by the Company. As at 31 March 2016 the amounts offset against this reserve are £39.9m(2015: £57.0m). As at 31 March 2016, the ESOP trusts held 3.1m shares (2015: 4.1m) in the Company, with a market value of£42.7m (2015: £71.9m). In the year to 31 March 2016 the ESOP trusts have waived their entitlement to dividends of £1.2m(2015: £1.2m).During the year profits of £2.0m (2015: £5.3m) have been transferred to capital reserves due to statutory requirements ofsubsidiaries. Due to the disposal and merger of subsidiaries, £6.2m (2015: £nil) has been transferred from capital reserves toretained earnings. The capital reserve consists of non-distributable reserves and the capital redemption reserve arising on thepurchase of own shares.Other Reserves in the statement of changes in equity consists of the capital reserve, the foreign currency translation reserve,and the hedging reserves. The hedging reserves consist of the cash flow hedge reserve and the net investment hedge reserve.Capitalreserve£mHedging reservesForeigncurrencytranslation reserve£mTotal£mCash flowhedges£mNetinvestmenthedge£mBalance as at 31 March 2014 40.0 1.5 4.1 104.7 150.3Other comprehensive income:Cash flow hedges – losses deferred in equity – (6.1) – – (6.1)Cash flow hedges – gains transferred to income – (1.3) – – (1.3)Foreign currency translation differences – – – 46.5 46.5Tax on other comprehensive income – 1.5 – (4.4) (2.9)Total comprehensive (expense)/income for the year – (5.9) – 42.1 36.2Transfer between reserves 5.3 – – 0.5 5.8Balance as at 31 March 2015 45.3 (4.4) 4.1 147.3 192.3Other comprehensive income:Cash flow hedges – gains deferred in equity – 7.3 – – 7.3Cash flow hedges – losses transferred to income – 3.5 – – 3.5Net investment hedges – losses deferred in equity – – (0.8) – (0.8)Foreign currency translation differences – – – 19.5 19.5Tax on other comprehensive income – (2.2) 0.6 (1.9) (3.5)Total comprehensive income/(expense) for the year – 8.6 (0.2) 17.6 26.0Disposal of subsidiaries (6.2) – – – (6.2)Transfer between reserves 2.0 – – – 2.0Balance as at 31 March 2016 41.1 4.2 3.9 164.9 214.1Notes to the Financial Statements154Notes to the Financial Statements15423. Financial commitmentsThe Group leases various retail stores, offices, warehouses and equipment under non-cancellable operating leasearrangements. The leases have varying terms, escalation clauses and renewal rights. The Group has commitments relatingto future minimum lease payments under these non-cancellable operating leases as follows:As at31 March2016£mAs at31 March2015£mAmounts falling due:Within one year 206.2 205.4Between two and five years 461.3 513.1After five years 188.9 264.4Total 856.4 982.9The financial commitments for operating lease amounts calculated as a percentage of revenue (‘revenue leases’) have beenbased on the minimum payment that is required under the terms of the relevant lease excluding any contingent payments.Under certain revenue based leases, there are no minimums and therefore no financial commitment is included in the tableabove. As a result, the amounts charged to the Income Statement may be materially higher than the financial commitmentat the prior year end.The total of future minimum payments to be received under non-cancellable leases on investment properties and subleaseson land and buildings is as follows:Leases SubleasesAs at31 March2016£mAs at31 March2015£mAs at31 March2016£mAs at31 March2015£mAmounts falling due:Within one year 0.7 0.7 2.3 2.1Between two and five years 2.1 2.6 3.4 5.6Total 2.8 3.3 5.7 7.724. Capital commitmentsAs at31 March2016£mAs at31 March2015£mCapital commitments contracted but not provided for:Property, plant and equipment 15.2 36.3Intangible assets 1.6 1.0Total 16.8 37.3Contracted capital commitments represent contracts entered into by the year end and future work in respect of majorcapital expenditure projects where activity has commenced by the year end relating to property, plant and equipment andintangible assets.Notes to the Financial Statements155Notes to the Financial Statements15525. Financial risk managementThe Group’s principal financial instruments comprise derivatives, cash and short-term deposits, external borrowings(including overdrafts), trade and other receivables, and trade and other payables arising directly from operations.The Group’s activities expose it to a variety of financial risks: market risks (including foreign exchange risk, share price riskand interest rate risk), credit risk, liquidity risk and capital risk.Risk management is carried out by the Group treasury department (Group Treasury) based on forecast business requirementsto reduce financial risk and to ensure sufficient liquidity is available to meet foreseeable needs and to invest in cash assetssafely and profitably. Group Treasury does not operate as a profit centre and transacts only in relation to the underlyingbusiness requirements. The policies of Group Treasury are reviewed and approved by the Board of Directors. The Groupuses derivative instruments to hedge certain risk exposures.Market riskForeign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures.The Group’s Income Statement is affected by transactions denominated in foreign currency. To reduce exposure to currencyfluctuations, the Group has a policy of hedging foreign currency denominated transactions by entering into forward foreignexchange contracts (see note 17). These transactions are recorded as cash flow hedges. The Group’s foreign currencytransactions arise principally from purchases and sales of inventory and royalty income.The Group’s treasury risk management policy is to hedge anticipated cash flows in each major foreign currency that qualifyas ‘highly probable’ forecast transactions for hedge accounting purposes within the current or previous year. Currently, theGroup does not hedge intercompany foreign currency transactions.The Group monitors the desirability of hedging the net assets of overseas subsidiaries when translated into Sterling forreporting purposes. The Group has entered into a net investment hedge during the year, using forward foreign exchangecontracts with a principal value of KRW 42.7bn (£26.0m) to hedge net assets of overseas subsidiaries, relating to surpluscash whose remittance is foreseeable.At 31 March 2016, the Group has performed a sensitivity analysis to determine the effect of Sterling strengthening/weakeningby 20% (2015: 20%) against other currencies with all other variables held constant. The effect on translating foreign currencydenominated net cash, trade, intercompany and other financial receivables and payables and financial instruments at fairvalue through profit or loss would have been to decrease/increase operating profit for the year by £16.5m (2015: decrease/increase £12.6m). The effect on translating forward foreign exchange contracts designated as cash flow hedges and Sterlingdenominated loans held as a net investment in overseas subsidiaries would have been to decrease/increase equity by£11.5m (2015: decrease/increase £13.0m) on a post-tax basis.The following table shows the extent to which the Group has monetary assets and liabilities at the year end in currencies otherthan the local currency of operation, after accounting for the effect of any specific forward foreign exchange contracts used tomanage currency exposure. Monetary assets and liabilities refer to cash, deposits, borrowings and other amounts to be receivedor paid in cash. Amounts exclude intercompany balances which eliminate on consolidation. Foreign exchange differences onretranslation of these assets and liabilities are recognised in ‘Net operating expenses’ with the exception of the put liability overthe non-controlling interest which are recognised in ‘Other financing income’.As at 31 March 2016 As at 31 March 2015MonetaryassetsMonetaryliabilities NetMonetaryassetsMonetaryliabilities Net£m £m £m £m £m £mSterling 0.2 (0.6) (0.4) 0.9 (0.9) –US Dollar 41.4 (11.0) 30.4 33.4 (13.0) 20.4Euro 44.5 (36.4) 8.1 50.6 (63.0) (12.4)Chinese Yuan Renminbi1 0.4 (47.5) (47.1) 0.1 (58.0) (57.9)Other currencies 5.2 (2.6) 2.6 2.3 (3.0) (0.7)Total 91.7 (98.1) (6.4) 87.3 (137.9) (50.6)1 The balance includes the put option over the non-controlling interest (refer to note 19).Notes to the Financial Statements156Notes to the Financial Statements15625. Financial risk management (continued)Market risk (continued)Share price riskThe Group is exposed to employer’s national insurance liability due to the implementation of various employee shareincentive schemes.To reduce exposure to fluctuations in the employer’s national insurance liability due to movements in the Group’s share price,the Group has a policy of entering into equity swaps at the time of granting share options and awards. The Group does notseek hedge accounting treatment for equity swaps. The Group monitors its exposure to fluctuations in the employer’s nationalinsurance liability on an ongoing basis. An increase/decrease in the share price of 50.0p would have resulted in anincrease/decrease in profit after tax of £nil (2015: £0.1m).Interest rate riskThe Group’s exposure to market risk for changes in interest rates relates primarily to cash, short-term deposits and externalborrowings (including overdrafts).The floating rate financial liabilities at 31 March 2016 are £51.5m (2015: £65.2m). This includes cash pool overdraft balancesof £44.9m (2015: £60.9m) which are offset by cash balances for the purpose of interest calculations. At 31 March 2016 theremaining borrowings were £6.6m (2015: £4.3m) and any change in interest rates would not significantly impact profit.The floating rate financial assets as at 31 March 2016 comprise short-term deposits of £429.7m (2015: £365.2m), interestbearing current accounts of £41.7m (2015: £72.5m) and cash pool asset balances of £45.4m (2015: £60.8m). At 31 March 2016,if interest rates on floating rate financial assets had been 100 basis points higher/lower (2015: 100 basis points), excluding theimpact on cash pool asset balances and with all other variables held constant, post-tax profit for the year would have been£3.6m (2015: £2.4m) higher/lower, as a result of higher/lower interest income.Credit riskThe Group has no significant concentrations of credit risk. The trade receivables balance is spread across a large numberof different customers with no single debtor representing more than 10% of the total balance due (2015: 8%). The Grouphas policies in place to ensure that wholesale sales are made to customers with an appropriate credit history. Sales to retailcustomers are made in cash or via major credit cards. In addition, receivables balances are monitored on an ongoing basiswith the result that the Group’s exposure to bad debts is not significant and default rates have historically been very low.An ageing of overdue receivables is included in note 15.During the year ended 31 March 2013 the Group entered into a retail leasing arrangement in the Republic of Korea.As part of this arrangement, a KRW 27bn (£16.5m) 15 year interest-free loan was provided to the landlord. The Group holdsa registered mortgage over the leased property for the equivalent value of the loan which acts as collateral. At 31 March 2016the discounted fair value of the loan is £13.9m (2015: £9.8m). The book value of the loan, recorded at amortised cost, is£11.0m (2015: £9.8m). Other than this arrangement, the Group does not hold any other collateral as security. The maximumexposure to credit risk at the reporting date with respect to trade and other receivables is approximated by the carryingamount on the Balance Sheet.With respect to credit risk arising from other financial assets, which comprise cash and short-term deposits and certainderivative instruments, the Group’s exposure to credit risk arises from the default of the counterparty with a maximumexposure equal to the carrying value of these instruments. The Group has policies that limit the amount of credit exposureto any financial institution and only deposits funds with independently rated financial institutions with a minimum rating of‘A’ other than where required for operational purposes. A total of £49.1m was held with institutions with a rating below ‘A’at 31 March 2016, of which £38.6m (2015: £36.6m) was held in a UK government majority owned institution. These amountsare monitored on a weekly basis and regularly reported to the Board.The Group has deposited CHF 0.3m (2015: CHF 0.3m), INR nil (2015: INR 0.2m), AED 0.3m (2015: AED 0.3m) and GBP0.3m (2015: GBP nil) which is held as collateral at a number of European banks.Notes to the Financial Statements157Notes to the Financial Statements15725. Financial risk management (continued)Liquidity riskThe Group’s financial risk management policy aims to ensure that sufficient cash is maintained to meet foreseeable needsand close out market positions. Due to the dynamic nature of the underlying business, Group Treasury aims to maintainflexibility in funding by keeping committed credit lines available. For further details of this, see note 21.All short-term trade and other payables, accruals, bank overdrafts and borrowings mature within one year or less. Thecarrying value of all financial liabilities due in less than one year is equal to their contractual undiscounted cash flows.The maturity profile of the contractual undiscounted cash flows of the Group’s non-current financial liabilities, excludingderivatives used for hedging, is as follows:As at 31 March2016£mAs at 31 March2015£mIn more than one year, but not more than two years 10.0 5.9In more than two years, but not more than three years 5.0 2.3In more than three years, but not more than four years 4.8 0.8In more than four years, but not more than five years 83.7 0.8In more than five years 16.7 109.5Total financial liabilities 120.2 119.3Other non-current financial liabilities relate to other payables, onerous lease provisions and the put option liability overnon-controlling interests.Capital riskThe Board reviews the Group’s capital allocation policy annually. The capital allocation framework prioritises the investmentneeds of the business and regular dividend payments. It then considers additional returns to shareholders, balancing capitalefficiency with financial flexibility in what is a cyclical sector. At 31 March 2016, the Group had net cash of £660.3m(2015: £552.2m) and total equity excluding non-controlling interests of £1,565.0m (2015: £1,400.9m).In the current period, having reached its target dividend pay-out ratio of 50%, the Group now intends to move to a progressivedividend policy going forward, looking to maintain or grow the dividend in pence per share over time.Furthermore, having considered the future cash generation, growth, productivity and investment plans, taking intoconsideration the current challenging external environment and relevant financial parameters, the Group has decidedto commence a share buyback programme of up to £150m starting in the year ending 31 March 2017. Additional capitalreturns to shareholders in the future periods will be kept under regular review reflecting the factors discussed above.26. Employee costsStaff costs, including the cost of directors, incurred during the year are as shown below. Directors’ remuneration, which isseparately disclosed in the Directors’ Remuneration Report on pages 83 to 105 and forms part of these financial statements,includes the notional gains arising on the exercise of share options and awards but excludes the charge in respect of theseshare options and awards recognised in the Group Income Statement.Year to31 March2016£mYear to31 March2015£mWages and salaries 349.3 384.8Social security costs 34.9 44.3Share based compensation (all awards and options settled in shares) (0.3) 21.0Other pension costs 12.5 18.0Total 396.4 468.1Notes to the Financial Statements158Notes to the Financial Statements15826. Employee costs (continued)The average number of full-time equivalent employees (including executive directors) during the year was as follows: Number of employeesYear to31 March2016Year to31 March2015EMEIA1 5,310 5,113Americas 2,005 2,048Asia Pacific 2,866 3,148Total 10,181 10,3091 EMEIA comprises Europe, Middle East, India and Africa.Share options granted to directors and employeesThe Group operates a number of equity-settled share based compensation schemes for its directors and employees. Detailsof each of these schemes are set out in this note. The share option schemes have been valued using the Black-Scholes optionpricing model.The key inputs used in the Black-Scholes pricing model to determine the fair value include the share price at the commencementdate; the exercise price attached to the option; the vesting period of the award; an appropriate risk-free interest rate; a dividendyield discount for those schemes that do not accrue dividends during the course of the vesting period; and an expected shareprice volatility, which is determined by calculating the historical annualised standard deviation of the market price of BurberryGroup plc shares over a period of time, prior to the grant, equivalent to the vesting period of the option.The Senior Executive Restricted Share Plan, which has market based performance conditions attached, has been valuedusing the Black-Scholes option pricing model with a discount applied to this value, based on information obtained by runninga Monte Carlo simulation model on the scheme.Where applicable, equity swaps have been entered into to cover future employer’s national insurance liability (or overseasequivalent) that may arise in respect of these schemes.Savings-Related Share Option SchemeIn the financial year ended 31 March 2007, a Savings-Related Share Option Scheme (Sharesave) offering Burberry Group plcordinary shares was introduced for employees.On 18 June 2015, further options were granted under this scheme with a three-year and five-year vesting period offered toemployees. The savings contract commencement date for this grant was 1 September 2015. These options are exercisablefor a period of up to six months from 1 September 2018 and 1 September 2020 for the three-year and five-year schemesrespectively, with vesting dependent on continued employment, as well as a saving obligation over the vesting period.The exercise price for these options is calculated at a 20% discount to market price over the three dealing days precedingthe invitation date. Three day averages are calculated by taking middle market quotations of a Burberry Group plc sharefrom the London Stock Exchange.The fair value per option for the three-year and five-year grants is £1.69 and £1.46 respectively. The fair values have beendetermined by applying the Black-Scholes option pricing model. The key factors used in determining the fair value wereas follows: Three-year grant Five-year grantShare price at contract commencement date £16.22 £16.22Exercise price £13.64 £13.64Life of award 3 years 5 yearsDividend yield 2.71% 2.71%Expected volatility 28.6% 32.1%Risk-free interest rate 0.94% 1.42%Notes to the Financial Statements159Notes to the Financial Statements15926. Employee costs (continued)Savings-Related Share Option Scheme (continued)Movements in the number of share options outstanding and their weighted average exercise prices are as follows:Weightedaverage exercisepriceYear to31 March2016Weighted average exercisepriceYear to31 March2015Outstanding at 1 April 1,175.0p 1,161,489 1,066.0p 958,090Granted during the year 1,364.0p 471,453 1,216.0p 704,230Lapsed and forfeited during the year 1,241.4p (172,524) 1,157.0p (156,786)Withdrawn during the year 1,229.6p (97,331) 1,167.3p (47,131)Exercised during the year 1,038.6p (209,446) 931.1p (296,914)Outstanding at 31 March 1,262.5p 1,153,641 1,175.0p 1,161,489Exercisable at 31 March 998.9p 4,297 1,049.0p 1,667The weighted average share price at the respective exercise dates in the year was £13.18 (2015: £15.39).Share options outstanding at the end of the year have the following expiry dates and exercise prices:Option termExercisepriceNumber ofshares underoption as at31 March2016Number ofshares underoption as at31 March201530 June 2010 – 28 February 2016 557.0p 826 26,12424 June 2011 – 28 February 2015 1,049.0p – 1,66724 June 2011 – 28 February 2017 1,049.0p 35,445 36,03322 June 2012 – 28 February 2016 1,104.0p 3,471 209,68722 June 2012 – 28 February 2018 1,104.0p 11,035 13,45520 June 2013 – 28 February 2017 1,220.0p 167,118 220,29620 June 2013 – 28 February 2019 1,220.0p 11,974 15,16620 June 2014 – 28 February 2018 1,216.0p 479,716 603,64220 June 2014 – 28 February 2020 1,216.0p 31,737 35,41918 June 2015 – 28 February 2019 1,364.0p 387,987 –18 June 2015 – 28 February 2021 1,364.0p 24,332 –Total 1,153,641 1,161,489All Employee Share PlanEmployees are offered awards of ordinary shares in the Company at a £nil exercise price under an All Employee Share Plan.All awards vest after three years and the vesting of these share awards is dependent on continued employment over thevesting period.On 30 July 2015, 223,140 ordinary shares were granted under this scheme (2015: 212,940). The fair value of the awardsgranted is £15.64, determined by applying the Black-Scholes option pricing model. The key factors used in determiningthe fair value were as follows:Share price at grant date £15.64Exercise price £nilLife of award Equivalent to vesting periodExpected volatility 27.8%Risk-free interest rate 0.98% Notes to the Financial Statements160Notes to the Financial Statements16026. Employee costs (continued)All Employee Share Plan (continued)Movements in the number of share awards outstanding are as follows:Year to31 March2016Year to31 March2015Outstanding at 1 April 501,040 458,410Granted during the year 223,140 212,940Lapsed and forfeited during the year (96,810) (89,280)Exercised during the year (93,150) (81,030)Outstanding at 31 March 534,220 501,040Exercisable at 31 March 81,730 64,180The weighted average share price at the respective exercise dates in the year was £15.28 (2015: £15.06).Share awards outstanding at the end of the year have the following terms:Term of the awardNumber ofawards as at31 March2016Number ofawards as at31 March201512 July 2002 – 18 July 20821 2,500 2,70030 August 2003 – 18 July 20821 2,650 2,85020 August 2004 – 18 July 20821 5,800 6,0001 September 2005 – 18 July 20821 3,880 3,88019 July 2010 – 18 July 20821 19,560 26,16018 July 2011 – 18 July 20821 18,090 22,59018 July 2012 – 18 July 20821 29,220 47,46018 July 2012 – 18 September 2015 30 64,71017 July 2013 – 18 July 20821 51,510 59,49017 July 2013 – 17 October 2016 67,050 83,88031 July 2014 – 18 July 20821 61,980 72,72031 July 2014 – 31 October 2017 83,310 108,60030 July 2015 – 18 July 20821 77,640 –30 July 2015 – 30 October 2018 111,000 –Total 534,220 501,0401 No date has been specified when awards lapse. The cessation date of the trust in which the awards are held is 18 July 2082.The Burberry Group plc Executive Share Plan 2014 (‘the ESP’)The ESP was set up in the year ended 31 March 2015, to replace the previous two long-term incentive plans – the BurberryCo-Investment Plan and the Burberry Senior Executive Restricted Share Plan (‘the RSP’). The ESP aims to reward executivesand senior management for sustainable long-term performance and successful execution of the Group’s long-term strategy.Under the ESP, participants are awarded shares, structured as nil-cost options, up to a maximum value of four times base salaryper annum. Awards may be subject to a combination of non-market performance conditions, including compound annual Groupadjusted PBT growth; compound annual Group revenue growth; and average retail/wholesale adjusted return on invested capital(‘ROIC’). Performance conditions will be measured over a three-year period from the last reporting period prior to the grant date.Each performance condition will stipulate a threshold and maximum target. The portion of the scheme relating to each performancetarget will vest 25% if the threshold target is met, and then on a straight-line basis up to 100% if the maximum target is met.Dependent on the performance of the vesting conditions, 50% of the award will vest on the third anniversary of the grant date,and the remaining 50% of the award will vest on the fourth anniversary of the grant date.Awards made to the Senior Leadership Team will be subject to all three non-market performance conditions and will bemeasured 50% based on annual adjusted PBT growth; 25% based on annual revenue growth; and 25% based on ROIC.Awards made to Senior Management will be subject to two non-market performance conditions and will be measured75% based on annual adjusted PBT growth and 25% based on annual revenue growth.Awards made to Management will not be subject to performance conditions apart from continued service during thevesting period.Notes to the Financial Statements161Notes to the Financial Statements16126. Employee costs (continued)The Burberry Group plc Executive Share Plan 2014 (‘the ESP’) (continued)During the year, the following grants were made under the ESP: TargetsDate of grant Options grantedFairvalue Participant group Performance conditions Threshold Maximum22 July 2015 1,505,556 £15.59Senior LeadershipTeam 3-year growth in Group adjusted PBT 3% 11% 3-year growth in Group revenue 3% 11% 3-year average retail/wholesale adjusted ROIC 15.3% 17.8%22 July 2015 1,503,478 £15.59 Senior Management 3-year growth in Group adjusted PBT 3% 11% 3-year growth in Group revenue 3% 11%22 July 2015 261,478 £15.59 Management Continued service N/A N/A18 November2015 133,328 £12.82Senior LeadershipTeam 3-year growth in Group adjusted PBT 3% 11% 3-year growth in Group revenue 3% 11% 3-year average retail/wholesale adjusted ROIC 15.3% 17.8%18 November2015 1,138 £12.82 Senior Management 3-year growth in Group adjusted PBT 3% 11% 3-year growth in Group revenue 3% 11%18 November2015 3,950 £12.82 Management Continued service N/A N/AThe fair values for the above grants have been determined by applying the Black-Scholes option pricing model. The key factorsused in determining the fair value were as follows: 22 July 2015 18 November 2015Share price at contract commencement date £15.59 £12.82Exercise price £nil £nilLife of awardEquivalent tovesting periodEquivalent tovesting periodExpected volatility 27.8% 32.6%Risk-free interest rate 1.01% 0.90%Obligations under this plan will be met either by market purchase shares via the ESOP trust or by the issue of ordinary sharesof the Company.Movements in the number of share awards outstanding are as follows:Year to31 March2016Outstanding at 1 April –Granted during the year 3,408,928Lapsed and forfeited during the year (170,448)Outstanding at 31 March 3,238,480Exercisable at 31 March –Share awards outstanding at the end of the year have the following terms:Term of the awardNumber ofawards as at31 March201622 July 2015 – 21 July 2025 3,100,06418 November 2015 – 17 November 2025 138,416Total 3,238,480 Notes to the Financial Statements162Notes to the Financial Statements16226. Employee costs (continued)Burberry Senior Executive Restricted Share Plan 2004 (‘the RSP’)The final grant under the RSP was made on 12 June 2014.Under the RSP participants were awarded shares, structured as nil-cost options, up to a maximum value of two times basesalary per annum. Certain participants were granted awards subject to both market and non-market performance conditions,while other participants were granted awards subject to non-market performance conditions only. A limited number of awardswere granted without performance conditions.The market performance condition is a measure of TSR performance relative to sector peers. The non-market performancecondition is compound annual adjusted PBT growth over a three-year period from the date of grant.Awards subject to both market and non-market performance conditions will vest in full if the Group achieves at least upperquartile TSR relative to its global peers, and if the maximum adjusted PBT growth target is achieved. A proportion of the award(12.5%) vests if TSR performance exceeds the median of the peer group, or if the threshold adjusted PBT growth target isachieved. Vesting against each metric occurs on a straight-line basis between the threshold and maximum. None of the awardvests if TSR performance is below the median of the peer group and if the adjusted PBT growth is below the threshold. Of theshares which meet the performance criteria, 50% vest after three years. The remaining 50% vest in two equal tranches on thefourth and fifth anniversaries of the date of grant.Awards subject to non-market performance conditions only will vest in full if the maximum adjusted PBT growth target isachieved. A proportion of the award (25%) vests if the threshold adjusted PBT growth target is achieved. Vesting occurson a straight-line basis between the threshold and maximum. None of the award vests if the adjusted PBT growth is belowthe threshold. Of the shares which meet the performance criteria, 50% vest after three years. The remaining 50% vest intwo equal tranches on the fourth and fifth anniversaries of the date of grant.The threshold and maximum adjusted PBT growth targets for the RSP awards that are still within the initial three-year vestingperiod as at 31 March 2016 are:Three-year compound adjusted PBTgrowth targetsYear of grant and participant groupNumber of awardsoutstanding as at31 March 2016 Threshold Maximum2013 – market and non-market conditions 1,177,598 10% 15%2013 – non-market conditions only 833,415 5% 15%2013 – no performance conditions 221,851 N/A N/A2014 – market and non-market conditions 775,207 5% 15%2014 – non-market conditions only 1,104,422 5% 15%2014 – no performance conditions 272,033 N/A N/AObligations under this plan will be met either by market purchase shares via the ESOP trust or by the issue of ordinary sharesof the Company.Notes to the Financial Statements163Notes to the Financial Statements16326. Employee costs (continued)Burberry Senior Executive Restricted Share Plan 2004 (‘the RSP’) (continued)Movements in the number of share awards outstanding are as follows:Year to31 March2016Year to31 March2015Outstanding at 1 April 7,913,082 7,675,508Granted during the year – 2,481,329Lapsed and forfeited during the year (1,959,768) (505,036)Exercised during the year (763,014) (1,738,719)Outstanding at 31 March 5,190,300 7,913,082Exercisable at 31 March 401,183 301,555The weighted average share price at the respective exercise dates in the year was £15.12 (2015: £15.15).Share awards outstanding at the end of the year have the following terms:Term of the awardNumber ofawards as at31 March2016Number ofawards as at31 March201521 July 2005 – 20 July 2015 – 5,41110 August 2006 – 9 August 2016 4,463 5,10127 November 2006 – 26 November 2016 2,124 2,12411 June 2007 – 10 June 2017 6,612 8,76425 June 2008 – 24 June 2018 15,817 30,4921 June 2009 – 31 May 2019 67,092 106,86710 June 2010 – 9 June 2020 122,342 398,55422 November 2010 – 21 November 2020 1,500 3,00020 June 2011 – 19 June 2021 230,262 438,62621 November 2011 – 20 November 2021 15,522 27,51413 June 2012 – 12 June 2022 305,939 1,989,09016 November 2012 – 15 November 2022 34,101 127,00614 June 2013 – 13 June 2023 1,966,666 2,124,85217 June 2013 – 16 June 2023 243,542 243,54225 November 2013 – 24 November 2023 22,656 22,65612 June 2014 – 11 June 2024 2,151,662 2,379,483Total 5,190,300 7,913,082Notes to the Financial Statements164Notes to the Financial Statements16426. Employee costs (continued)The Burberry Co-Investment PlanThe final award granted under the Burberry Co-Investment Plan was made on 12 June 2014.Under the Burberry Co-Investment Plan, executive directors and certain senior management were able to defer receipt of allor part of their annual bonus and invest it in ordinary shares in the Company with up to a 2:1 match based on individual andGroup performance during the year. The matching share awards do not vest for three years and are forfeited if the executiveleaves within that period. The exercise price of these share awards is £nil. The awards are also subject to secondaryperformance conditions.Awards granted in 2013 and 2014 vest in full only if the Group achieves at least 10% per annum adjusted PBT growth overthe three-year vesting period. A proportion of the award (25%) vests if growth in adjusted PBT achieves 5% per annum.Vesting occurs on a straight-line basis between the threshold and the maximum. None of the award vests if adjusted PBTgrowth is below 5% per annum.Movements in the number of share awards outstanding are as follows:Year to31 March2016Year to31 March2015Outstanding at 1 April 2,777,125 3,348,510Granted during the year – 849,617Lapsed and forfeited during the year (318,647) (92,441)Exercised during the year (897,959) (1,328,561)Outstanding at 31 March 1,560,519 2,777,125Exercisable at 31 March 55,643 34,119The weighted average share price at the respective exercise dates in the year was £15.31 (2015: £14.85).Share awards outstanding at the end of the year have the following terms:Term of the awardNumber ofawards as at31 March2016Number ofawards as at31 March20157 June 2011 – 6 June 2016 – 34,11918 July 2012 – 17 July 2017 55,643 1,203,24714 June 2013 – 13 June 2018 714,365 724,25012 June 2014 – 11 June 2019 790,511 815,509Total 1,560,519 2,777,125Notes to the Financial Statements165Notes to the Financial Statements16526. Employee costs (continued)December 2010 One-off GrantOn 8 December 2010, options in respect of 850,000 ordinary shares were granted as a one-off award. The vesting of theseoptions was dependent on continued employment over the vesting period. The exercise price of these share options was £nil.At 31 March 2015, 350,000 options remained outstanding. These options vested in full on 1 April 2015 and were exercisedduring the current period. No options remain outstanding at 31 March 2016.June 2013 One-off GrantOn 14 June 2013, options in respect of 1,000,000 ordinary shares were granted as a one-off award, with a £nil exercise price.The options were granted on the basis that they would vest in three tranches: 20% exercisable on 15 July 2016; 40%exercisable on 15 July 2017; and the remaining 40% exercisable on 15 July 2018, dependent upon continued employmentover the vesting period. Under the current arrangement, the first tranche now becomes exercisable on 15 July 2017(or earlier upon termination of employment). Any vested but unexercised options will automatically lapse on 15 July 2019.Movements in the number of share awards outstanding are as follows:Year to31 March2016Year to31 March2015Outstanding at 1 April 1,000,000 1,000,000Granted during the year – –Outstanding at 31 March 1,000,000 1,000,000Exercisable at 31 March – –June 2014 One-off GrantOn 12 June 2014, options in respect of 500,000 ordinary shares were granted as a one-off award, with a £nil exercise price.The options were granted on the basis that they are due to vest in three stages: 25% are exercisable on 31 July 2017; 25%are exercisable on 31 July 2018; and the remaining 50% are exercisable on 31 July 2019. Key strategic performance objectiveslinked to the long-term growth of the Group must be met in order for the options to vest. These performance conditions willbe assessed at each of the relevant vesting dates, and each tranche will only vest to the extent that performance targets havebeen achieved at that date. Any vested but unexercised options will automatically lapse on 31 July 2020.Movements in the number of share awards outstanding are as follows:Year to31 March2016Year to31 March2015Outstanding at 1 April 500,000 –Granted during the year – 500,000Outstanding at 31 March 500,000 500,000Exercisable at 31 March – –Notes to the Financial Statements166Notes to the Financial Statements16626. Employee costs (continued)November 2015 One-off GrantOn 18 November 2015, options in respect of 73,000 ordinary shares were granted as a one-off award, with a £nilexercise price.The options are due to vest in three stages: 25,000 options are exercisable on 1 July 2016; 30,000 options are exercisableon 1 July 2017; and the remaining 18,000 options are exercisable on 1 July 2018. The vesting of these options is dependentupon continued employment over the vesting period. Any vested but unexercised options will automatically lapse on18 November 2025.The fair value of the award is £12.82, determined by applying the Black-Scholes option pricing model. The key factors usedin determining the fair value were as follows:Share price at grant date £12.82Exercise price £nilLife of award Equivalent to vesting periodExpected volatility 24.4%Risk-free interest rate 0.79%Movements in the number of share awards outstanding are as follows:Year to31 March2016Outstanding at 1 April –Granted during the year 73,000Outstanding at 31 March 73,000Exercisable at 31 March –November 2015 Exceptional GrantOn 18 November 2015, options in respect of 570,151 ordinary shares were granted as an exceptional one-off grant, with a £nilexercise price.The options are due to vest in two stages: 50% are exercisable on 15 December 2017; and the remaining 50% are exercisableon 15 December 2018. The vesting of these options will be dependent upon continued employment as well as continuedsatisfactory performance. Any unvested options will automatically lapse on 18 November 2025.The fair value of the award is £12.82, determined by applying the Black-Scholes option pricing model. The key factors usedin determining the fair value were as follows:Share price at grant date £12.82Exercise price £nilLife of award Equivalent to vesting periodExpected volatility 23.3%Risk-free interest rate 0.68%Movements in the number of share awards outstanding are as follows:Year to31 March2016Outstanding at 1 April –Granted during the year 570,151Outstanding at 31 March 570,151Exercisable at 31 March –Notes to the Financial Statements167Notes to the Financial Statements16727. Related party transactionsTransactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated onconsolidation and are not disclosed in this note. Total compensation in respect of key management, who are defined as theBoard of Directors and certain members of senior management, is considered to be a related party transaction.The total compensation in respect of key management for the year was as follows:Year to31 March2016£mYear to31 March2015£mSalaries, short-term benefits and social security costs 9.1 17.6Post-employment benefits 0.1 0.1Share based compensation (all awards and options settled in shares) 0.5 9.5Total 9.7 27.2There were no other material related party transactions in the period.28. Subsidiary undertakings and investmentsIn accordance with Section 409 of the Companies Act 2006 a full list of related undertakings as at 31 March 2016, includingtheir country of incorporation and percentage share ownership, is disclosed below. Unless otherwise stated, all undertakingsare indirectly owned by Burberry Group plc and operate in the country of incorporation. All the subsidiary undertakings havebeen consolidated as at 31 March 2016. In addition to the subsidiary undertakings listed below, the Group also holds aninterest in 21.5% of the ordinary shares of Suitspain SL, which is incorporated in Spain and is currently in the processof liquidation.Company nameCountry ofincorporation Interest Holding (%)Burberry Pacific Pty Ltd Australia Ordinary shares 100Burberry (Austria) GmbH Austria Ordinary shares 100Sandringham Bahrain SPC2 Bahrain Ordinary shares 100Burberry Antwerp N.V. Belgium Ordinary shares 100Burberry Brasil Comércio de Artigos de Vestuário e Acessórios Ltda Brazil Ordinary shares 100Burberry Canada Inc Canada Common stock 100Burberry (Shanghai) Trading Co., Ltd3 China Ordinary shares 100Burberry Czech Rep s.r.o. Czech Republic Ordinary shares 100Burberry France SASU France Ordinary shares 100Burberry (Deutschland) GmbH Germany Ordinary shares 100Burberry Asia Holdings Limited Hong Kong Ordinary shares 100Burberry Asia Limited Hong Kong Ordinary shares 100Burberry China Holdings Limited Hong Kong Ordinary shares 100Burberry Hungary kft Hungary Ordinary shares 100Burberry India Private Limited India Ordinary shares 51Burberry Ireland Investments Ireland Ordinary A sharesOrdinary B shares100100Burberry Ireland Limited Ireland Ordinary shares 100Burberry Italy (Rome) SRL Italy Ordinary shares 100Burberry Italy SRL1 Italy Ordinary shares 100Burberry Japan K.K. Japan Ordinary shares 100Burberry Al Kuwait General Trading Textiles and Accessories Company WLL4 Kuwait 49Burberry Macau Limited Macau Ordinary quota 100Burberry (Malaysia) Sdn. Bhd. Malaysia Ordinary shares 100Horseferry Mexico S.A. de C.V. Mexico Ordinary (fixed) sharesOrdinary (variable) shares100100Horseferry Mexico Servicios Administrativos, S.A. de C.V. Mexico Ordinary shares 100Burberry Netherlands BV Netherlands Ordinary shares 100Burberry Qatar WLL4 Qatar 49Burberry Korea Limited Republic of Korea Ordinary shares 100Burberry Retail LLC Russian Federation Participatory share 100Burberry Saudi Company LimitedKingdom of SaudiArabia Ordinary shares 75Burberry (Singapore) Distribution Co. PTE Ltd Singapore Ordinary shares 100Burberry (Spain) Retail SL Spain Ordinary shares 100Notes to the Financial Statements168Notes to the Financial Statements16828. Subsidiary undertakings and investments (continued)Company nameCountry ofincorporation Interest Holding (%)Burberry Latin America Holdings, S.L. Spain Ordinary shares 100Burberry (Suisse) SA1 Switzerland Ordinary shares 100Burberry (Taiwan) Co Ltd Taiwan Ordinary shares 100Burberry (Thailand) Limited Thailand Ordinary shares 100Burberry FZ-LLC United Arab Emirates Ordinary shares 100Burberry Middle East LLC4 United Arab Emirates Ordinary shares 49Burberry (Espana) Holdings Limited United Kingdom Ordinary shares 100Burberry (No. 1) Unlimited United Kingdom Ordinary shares 100Burberry (No. 2) Unlimited United Kingdom Ordinary shares 100Burberry (No. 7) Unlimited United Kingdom Ordinary shares 100Burberry (No. 8) Unlimited United Kingdom Ordinary shares 100Burberry (Spain) Finance Limited1 United Kingdom Ordinary shares 100Burberry (UK) Limited United Kingdom Ordinary shares 100Burberry Beauty Limited1 United Kingdom Ordinary shares 100Burberry Distribution Limited United Kingdom Ordinary shares 100Burberry Europe Holdings Limited1 United Kingdom Ordinary shares 100Burberry Finance Limited United Kingdom Ordinary shares 100Burberry Haymarket Limited1 United Kingdom Ordinary shares 100Burberry Holdings Limited United Kingdom Ordinary shares 100Burberry International Holdings Limited1 United Kingdom Ordinary shares 100Burberry Italy Retail Limited5 United Kingdom Ordinary shares 100Burberry Latin America Limited United Kingdom Ordinary shares 100Burberry Limited United Kingdom Ordinary shares 100Burberry London Limited United Kingdom Ordinary shares 100Burberry New York 2005 Limited United Kingdom Ordinary shares 100Burberry New York Unlimited United Kingdom Ordinary A sharesOrdinary B shares100100Burberry Spain (UK) Limited United Kingdom Ordinary shares 100Burberry Treasury Limited United Kingdom Ordinary shares 100Burberry Wholesale 2005 Limited United Kingdom Ordinary shares 100Burberry Wholesale Unlimited United Kingdom Ordinary A sharesOrdinary B shares100100Burberrys Limited1 United Kingdom Ordinary shares 100Hampstead (UK) Limited1 United Kingdom Ordinary shares 100Sweet Street Developments Limited United Kingdom Ordinary shares 100Temple Works Limited United Kingdom Ordinary shares 100The Scotch House Limited1 United Kingdom Ordinary shares 100Thomas Burberry Holdings Limited1 United Kingdom Ordinary shares 100Thomas Burberry Limited1 United Kingdom Ordinary shares 100Woodrow-Universal Limited1 United Kingdom Ordinary shares 100Woodrow-Universal Pension Trustee Limited1 United Kingdom Ordinary shares 100Worldwide Debt Collections Limited United Kingdom Ordinary shares 100Burberry (Wholesale) Limited United States Class X common stockClass Y common stock100100Burberry Limited United States Class X common stockClass Y common stock100100Burberry North America, Inc United States Common stock 100Burberry USA Holdings Inc United States Common stock 100Burberry Warehousing Corporation United States Common stock 100Castleford Industries, Ltd United States Series A common stockSeries B common stock100100Castleford Tailors, Ltd United States Common stock 1001 Held directly by Burberry Group plc.2 The Group has an indirect holding of 100% of the issued share capital through a nominee.3 Sparkle Roll Holdings Limited, a non-Group company, holds a 15% economic interest in Burberry (Shanghai) Trading Co., Ltd.4 The Group has a 59% share in profits of Burberry Middle East LLC and its subsidiaries in Kuwait and Qatar and has the power to control these companies via theterms of the shareholder agreement for Burberry Middle East LLC.5 Operates principally in Italy.Notes to the Financial Statements169Notes to the Financial Statements16929. Contingent liabilitiesIn a number of jurisdictions the Group is subject to claims against it and to tax audits. These typically relate to Valued AddedTaxes, sales taxes, customs duties, corporate taxes, transfer pricing, payroll taxes, various contractual claims and othermatters. Included in these claims is a dispute with the Spanish tax authorities regarding the tax treatment of interest paid duringthe year ended 31 March 2005 arising in respect of debt that was put in place after the Group had taken specialist externaladvice. The Group is looking to resolve this dispute by all reasonable means. Where appropriate, the estimated cost of knownobligations have been provided in these financial statements in accordance with the Group’s accounting policies but thesematters are inherently difficult to quantify. While changes to the amounts that may be payable could be material to the resultsor cash flows of the Group in the period in which they are recognised the Group does not currently expect the outcome ofthese contingent liabilities to have a material effect on the Group’s financial condition.30. Events after the balance sheet dateOn 22 April 2016 the Group entered into an agreement to transfer the economic right to the non-controlling interest inBurberry Middle East LLC to the Group in consideration for payments to be made to the minority shareholder relatingto the future revenue of Burberry Middle East LLC and its subsidiaries, Burberry Al Kuwait General Trading Textiles andAccessories Company WLL and Burberry Qatar WLL, over the period 2016 to 2023. Under the terms of the agreementdividends of AED 120.0m (£22.6m) will be paid by Burberry Middle East LLC to the minority shareholder in respect of profitsup to 31 March 2016. The fair value of the variable deferred consideration at the date of the transaction is estimated to be£30m. This transaction will be accounted for as a purchase of the non-controlling interest in Burberry Middle East LLC andits subsidiaries by the Group, with the exception of a 12% interest in Burberry Qatar WLL which will continue to be held byanother minority shareholder.Notes to the Financial Statements170Five Year Summary170Continuing operationsYear to 31 MarchRevenue by channel2012£m2013£m2014£m2015£m2016£mRetail 1,270.3 1,416.6 1,622.6 1,807.4 1,837.7Wholesale 478.3 472.7 628.0 648.1 634.6Retail/Wholesale 1,748.6 1,889.3 2,250.6 2,455.5 2,472.3Licensing 108.6 109.4 79.2 67.7 42.4Total revenue 1,857.2 1,998.7 2,329.8 2,523.2 2,514.7 Profit by channel £m £m £m £m £mRetail/Wholesale 286.9 335.6 393.5 399.2 380.9Licensing 90.0 92.5 66.8 56.0 36.9Adjusted operating profit1 376.9 428.1 460.3 455.2 417.8 Segmental analysis % % % % %Retail/Wholesale gross margin 68.1 70.6 70.2 69.2 69.6Retail/Wholesale adjusted operating expenses as a percentage of sales1 51.7 52.8 52.7 52.9 54.2Retail/Wholesale adjusted operating margin1 16.4 17.8 17.5 16.3 15.4Licensing operating margin 82.9 84.6 84.3 82.7 87.0 Summary profit analysis £m £m £m £m £mAdjusted operating profit1 376.9 428.1 460.3 455.2 417.8Net finance (charge)/income1 (0.7) (0.3) 0.7 0.6 2.8Adjusted profit before taxation1 376.2 427.8 461.0 455.8 420.6Adjusting items (10.2) (77.1) (16.6) (11.2) (5.0)Profit before taxation 366.0 350.7 444.4 444.6 415.6Taxation (100.6) (91.5) (112.1) (103.5) (101.0)Discontinued operations (0.3) – – – –Non-controlling interest (1.8) (4.9) (9.8) (4.8) (5.1)Attributable profit 263.3 254.3 322.5 336.3 309.5 Retail/Wholesale revenue by product division £m £m £m £m £mAccessories2 689.4 729.1 816.1 892.5 901.7Womens 582.5 618.2 684.0 743.0 729.0Mens 410.5 464.2 520.8 557.5 548.4Childrens/Other 66.2 72.6 78.4 77.7 90.7Beauty – 5.2 151.3 184.8 202.5Retail/Wholesale revenue by destination £m £m £m £m £mAsia Pacific 652.5 745.3 870.3 938.1 932.9EMEIA3 661.6 680.7 811.5 869.0 878.5Americas 434.5 463.3 568.8 648.4 660.9 Financial KPIsTotal revenue growth4 +23% +8% +17% +11% -1%Adjusted PBT growth1,4 +24% +13% +8% +7% -10%Adjusted retail/wholesale return on invested capital (ROIC)1 20.0% 19.0% 19.6% 17.9% 14.8%Comparable store sales growth 14% 5% 12% 9% -1%Adjusted retail/wholesale operating margin1 16.4% 17.8% 17.5% 16.3% 15.4%Adjusted diluted EPS growth1 +26% +14% +8% +2% -9%Year to 31 MarchEarnings and dividends2012penceper share2013penceper share2014penceper share2015penceper share2016penceper shareAdjusted earnings per share – diluted1 61.6 70.0 75.4 76.9 69.9Earnings per share – diluted 59.3 57.0 72.1 75.1 69.4Diluted weighted average number of ordinary shares (millions) 444.3 446.5 447.3 447.8 446.1Dividend per share (on a paid basis) 22.0 26.0 29.8 32.9 35.71 Excludes the impact of adjusting items.2 The Accessories revenue for the year ended 31 March 2013 has been restated to exclude Beauty retail sales.3 EMEIA comprises Europe, Middle East, India and Africa. As a result of an internal reorganisation, the Europe and Rest of World divisions were integrated to formEMEIA, effective from 1 April 2013. The results for the years ended 31 March 2012 and 31 March 2013 have been re-presented to reflect this organisational change.4 Growth rate is year-on-year underlying change, i.e. at constant exchange rates.Five Year Summary171Five Year Summary171Year to 31 MarchNet Cash Flow2012£m2013£m2014£m2015£m2016£mAdjusted operating profit1 376.9 428.1 460.3 455.2 417.8Discontinued operations 2.5 – – – –Restructuring spend (8.6) (1.0) (0.7) – –Depreciation and amortisation1 87.6 111.2 123.7 123.7 132.2Employee share scheme costs 31.8 24.9 25.4 21.0 (0.3)Proceeds/(payment) on equity swap contracts – – 15.7 (0.2) (1.6)Increase in inventories (61.8) (39.2) (68.2) (15.1) (49.3)Increase in receivables (17.4) (32.0) (73.8) (43.8) (31.7)Increase in payables and provisions 70.1 17.6 42.3 19.7 9.1Other non-cash items 1.4 13.4 10.8 7.6 26.8Cash flow from operations 482.5 523.0 535.5 568.1 503.0Capital expenditure (153.1) (175.9) (154.0) (155.7) (138.0)Payment to terminate licence relationship – (144.1) – – –Proceeds from sale of assets held for sale – 0.1 – – –Capital contributions from JV partners 4.9 0.4 0.7 0.4 –Acquisitions (23.5) (1.0) (2.6) (3.4) –Net interest (0.6) 0.9 0.8 1.2 3.1Tax paid (108.2) (99.0) (111.1) (114.4) (94.8)Free cash flow 202.0 104.4 269.3 296.2 273.3Dividends (99.2) (113.5) (130.7) (145.3) (158.4)ESOP trust purchases/other (60.0) (45.4) (18.8) (15.1) (8.2)Exchange difference (2.4) 12.8 (13.9) 13.9 1.4Total movement in net cash 40.4 (41.7) 105.9 149.7 108.1 Net cash 338.3 296.6 402.5 552.2 660.3As at 31 MarchBalance Sheet2012£m2013£m2014£m2015£m2016£mIntangible assets 133.1 210.2 195.4 193.5 189.6Property, plant and equipment 328.8 409.1 398.4 436.5 426.2Inventories 311.1 351.0 419.8 436.6 486.7Trade and other receivables 167.5 199.5 273.7 320.8 351.9Trade and other payables (429.3) (447.8) (507.2) (523.1) (501.9)Taxation (including deferred taxation) 39.1 45.3 47.4 68.6 56.4Net cash 338.3 296.6 402.5 552.2 660.3Other net assets 2.8 (11.1) (22.0) (33.6) (48.3)Net assets 891.4 1,052.8 1,208.0 1,451.5 1,620.9Reconciliation of Adjusted Retail/Wholesale ROIC2012£m2013£m2014£m2015£m2016£mRetail/Wholesale adjusted operating profit1 286.9 335.6 393.5 399.2 380.9Adjusted effective tax rate1 26.7% 25.8% 24.7% 23.4% 24.7%Retail/Wholesale adjusted operating profit after tax1 210.3 249.0 296.3 305.8 286.7 Net assets excluding licensing segment assets 884.4 1,048.6 1,202.2 1,448.9 1,617.4Net cash (338.3) (296.6) (402.5) (552.2) (660.3)Assumed lease assets2,3 560.0 713.0 782.5 922.0 1,076.0Exclude adjusting items:Licence intangible asset – (70.9) (56.0) (41.1) (26.1)Put option liability 57.8 55.0 51.3 54.4 45.8Restructuring provisions 3.5 1.9 1.5 0.8 –Adjusted operating assets 1,167.4 1,451.0 1,579.0 1,832.8 2,052.8Average operating assets 1,049.3 1,309.2 1,515.0 1,705.9 1,942.8Adjusted Retail/Wholesale ROIC 20.0% 19.0% 19.6% 17.9% 14.8%1 Excludes the impact of adjusting items.2 Assumed lease assets and assumed lease debt are calculated as a factor of five times lease payments, excluding the impact of charges relating to onerouslease provisions.3 Assumed lease assets as at 31 March 2015 has been restated to remove the impact of charges relating to onerous lease provisions.Five Year Summary172Independent Auditors’ Report to the Members of Burberry Group plc172Report on the Company financial statementsOur opinionIn our opinion, Burberry Group plc’s Company financial statements (the ‘financial statements’):· give a true and fair view of the state of the Company’s affairs as at 31 March 2016;· have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and· have been prepared in accordance with the requirements of the Companies Act 2006.What we have auditedThe financial statements, included within the Burberry Group plc Annual Report 2015/16 (the ‘Annual Report’), comprise:· the Company Balance Sheet as at 31 March 2016;· the Company Statement of Changes in Equity for the year then ended; and· the notes to the financial statements, which include a summary of significant accounting policies and otherexplanatory information.Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financialstatements. These are cross-referenced from the financial statements and are identified as audited.The financial reporting framework that has been applied in the preparation of the financial statements is United KingdomAccounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law (United KingdomGenerally Accepted Accounting Practice).Other required reportingConsistency of other informationCompanies Act 2006 opinionIn our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which thefinancial statements are prepared is consistent with the financial statements.ISAs (UK & Ireland) reportingUnder International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”) we are required to report to you if,in our opinion, information in the Annual Report is:· materially inconsistent with the information in the audited financial statements; or· apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in thecourse of performing our audit; or· otherwise misleading.We have no exceptions to report arising from this responsibility.Adequacy of accounting records and information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in our opinion:· we have not received all the information and explanations we require for our audit; or· adequate accounting records have not been kept by the Company, or returns adequate for our audit have not beenreceived from branches not visited by us; or· the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement withthe accounting records and returns.We have no exceptions to report arising from this responsibility.Independent Auditors’ Report to the Members of Burberry Group plc173Independent Auditors’ Report to the Members of Burberry Group plc173Directors’ remunerationDirectors’ remuneration report – Companies Act 2006 opinionIn our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance withthe Companies Act 2006.Other Companies Act 2006 reportingUnder the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remunerationspecified by law are not made. We have no exceptions to report arising from this responsibility.Responsibilities for the financial statements and the auditOur responsibilities and those of the directorsAs explained more fully in the Directors’ Responsibilities Statement set out on page 114, the directors are responsible forthe preparation of the financial statements and for being satisfied that they give a true and fair view.Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs(UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordancewith Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, acceptor assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands itmay come save where expressly agreed by our prior consent in writing.What an audit of financial statements involvesWe conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amountsand disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud or error. This includes an assessment of:· whether the accounting policies are appropriate to the Company’s circumstances and have been consistently appliedand adequately disclosed;· the reasonableness of significant accounting estimates made by the directors; and· the overall presentation of the financial statements.We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming ourown judgements, and evaluating the disclosures in the financial statements.We test and examine information, using sampling and other auditing techniques, to the extent we consider necessaryto provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness ofcontrols, substantive procedures or a combination of both.In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies withthe audited financial statements and to identify any information that is apparently materially incorrect based on, or materiallyinconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparentmaterial misstatements or inconsistencies we consider the implications for our report.Other mattersWe have reported separately on the Group financial statements of Burberry Group plc for the year ended 31 March 2016.Paul CraggSenior Statutory Auditor,for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon17 May 2016Independent Auditors’ Report to the Members of Burberry Group plc174Company Balance Sheet174NoteAs at31 March2016£mAs at31 March2015£mFixed assetsInvestments in subsidiaries D 1,712.7 2,237.31,712.7 2,237.3Current assetsTrade and other receivables – amounts falling due after more than one year E 497.2 303.6Trade and other receivables – amounts falling due within one year E 57.1 163.3Derivative assets maturing after more than one year 0.3 1.5Derivative assets maturing within one year 0.2 1.3Cash at bank and in hand 0.2 0.8555.0 470.5Creditors – amounts falling due within one year F (59.6) (58.8)Derivative liabilities maturing within one year (0.1) –Net current assets 495.3 411.7Total assets less current liabilities 2,208.0 2,649.0Creditors – amounts falling due after more than one year F (801.5) (1,536.0)Provisions for liabilities (1.0) (1.4)Net assets 1,405.5 1,111.6EquityCalled up share capital G 0.2 0.2Share premium account 209.8 207.6Capital reserve 0.9 0.9Hedging reserve 4.6 4.1Profit and loss account 1,190.0 898.8Total Equity 1,405.5 1,111.6The financial statements on pages 174 to 181 were approved by the Board on 17 May 2016 and signed on its behalf by:Sir John Peace Carol FairweatherChairman Chief Financial OfficerCompany Balance Sheet175Company Statement of Changes in Equity175NoteOrdinarysharecapital£mSharepremiumaccount£mCapitalreserve£mHedgingreserve£mRetainedearnings£mTotal equity£mBalance as at 31 March 2014 0.2 204.8 0.9 4.1 781.1 991.1Profit for the financial year – – – – 260.8 260.8Total comprehensive income for the year – – – – 260.8 260.8Employee share incentive schemesValue of share options granted – – – – 21.0 21.0Exercise of share options – 2.8 – – – 2.8Purchase of own shares by ESOP trusts – – – – (19.2) (19.2)Dividends paid in the year H – – – – (144.9) (144.9)Balance as at 31 March 2015 0.2 207.6 0.9 4.1 898.8 1,111.6Profit for the financial year – – – – 460.1 460.1Other comprehensive income:Tax on net investment hedges transferred to income – – – 0.5 – 0.5Total comprehensive income for the year – – – 0.5 460.1 460.6Employee share incentive schemesValue of share options granted – – – – (0.3) (0.3)Exercise of share options – 2.2 – – – 2.2Purchase of own shares by ESOP trusts – – – – (10.9) (10.9)Dividends paid in the year H – – – – (157.7) (157.7)Balance as at 31 March 2016 0.2 209.8 0.9 4.6 1,190.0 1,405.5Company Statement of Changes in Equity176Notes to the Company Financial Statements176A. Basis of preparationBurberry Group plc (the Company) is the parent Company of the Burberry Group. Burberry Group plc is listed on theLondon Stock Exchange and its principal business is investment. The Company is incorporated and domiciled in theUK. The address of its registered office is Horseferry House, Horseferry Road, London, SW1P 2AW. The Company is thesponsoring entity of The Burberry Group plc ESOP Trust and The Burberry Group plc SIP Trust (collectively known as theESOP trusts). These financial statements have been prepared by including the ESOP trusts within the financial statementsof the Company. The purpose of the ESOP trusts is to purchase shares of the Company in order to satisfy Group sharebased payment arrangements.Burberry Group plc and its subsidiaries (the Group) is a global luxury goods manufacturer, wholesaler and retailer. The Groupalso licenses third parties to manufacture and distribute products using the ‘Burberry’ trade marks. All of the companieswhich comprise the Group are controlled by the Company directly or indirectly.The financial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 ‘ReducedDisclosure Framework’ (‘FRS 101’). The financial statements have been prepared on a going concern basis under the historicalcost convention, as modified by derivative financial asset and derivative financial liabilities measured at fair value through profitor loss, and in accordance with the Companies Act 2006. Profit for the year on ordinary activities, but before dividends payable,was £460.1m (2015: £260.8m). As permitted by Section 408 of the Companies Act 2006, the Company has not presented itsown profit and loss account.The preparation of the financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates.It also requires management to exercise judgement in applying the Company’s accounting policies (see note C).Financial Reporting Standard 101 – reduced disclosure exemptionsThe change in basis of preparation has enabled the Company to take advantage of the applicable disclosure exemptionspermitted by FRS 101 in the financial statements, which are summarised below:Standard Disclosure exemptionIFRS 7, ‘Financial Instruments: Disclosures’ • Full exemptionIFRS 13, ‘Fair Value Measurement’ • para 91-99 – disclosure of valuation techniques and inputs used for fair value measurementof assets and liabilitiesIAS 1, ‘Presentation of the Financial Statements’ • para 10(d) – statement of cash flows• para 10(f) – a statement of financial position as at the beginning of the preceding period whenan entity applies an accounting policy retrospectively or makes a retrospective statementof items in its financial statements, or when it reclassifies items in its financial statements• para 16 – statement of compliance with all IFRS• para 38 – present comparative information in respect of paragraph 79(a)(iv) of IAS 1• para 38A – requirement for minimum of two primary statements, including cashflow statements• para 38B-D – additional comparative information• para 40A-D – requirements for a third statement of financial position• para 111 – cash flow statement information• para 134-136 – capital management disclosuresIAS 7, ‘Statement of Cash Flows’ • Full exemptionIAS 8, ‘Accounting Policies, Changesin Accounting Estimates and Errors’• para 30 & 31 – requirement for the disclosure of information when an entity has notapplied a new IFRS that has been issued but is not yet effectiveIAS 24, ‘Related Party Disclosures’ • para 17 – key management compensation• The requirements to disclose related party transactions entered into between two or moremembers of a group, provided that any subsidiary which is a party to the transaction iswholly owned by such a memberIAS 36, ‘Impairment of Assets’ • para 134(d)-134(f) and 135(c)-135(e) Notes to the Company Financial Statements177Notes to the Company Financial Statements177A. Basis of preparation (continued)First time application of FRS 100 and FRS 101In the current year the Group has adopted FRS 100 and FRS 101. In previous years the financial statements were preparedin accordance with applicable UK accounting standards.The Company has revised its accounting policies in accordance with FRS 101, however this change in the basis of preparationhas not materially altered the recognition, measurement and disclosure requirements previously applied in accordance withUK GAAP. The Company is required to inform its shareholders and to provide a reasonable opportunity for its shareholders toobject to the use of FRS 101. A shareholder or shareholders holding, in aggregate, 5% or more of the total allotted shares inBurberry Group plc, may object to the Company applying FRS 101 ‘Reduced Disclosure Framework’ to its individual financialstatements by notifying the Company Secretary, in writing, at the registered address of the Company shown on page 183 byFriday 8 July 2016.B. Accounting policiesThe following principal accounting policies have been applied in the preparation of these financial statements. These policieshave been consistently applied to all the years presented, unless otherwise stated:Going concernTaking into account reasonable possible changes in trading performance and after making enquiries, the directors considerit appropriate to continue to adopt the going concern basis in preparing the financial statements for the year ended31 March 2016.Share schemesThe Group operates a number of equity-settled share based compensation schemes, under which services are received fromemployees (including executive directors) as consideration for equity instruments of the Company. The cost of the share basedincentives is measured with reference to the fair value of the equity instruments awarded at the date of grant. Appropriateoption pricing models, including Black-Scholes and Monte Carlo, are used to determine the fair value of the awards made.The fair value takes into account the impact of any market performance conditions, but the impact of non-market performanceconditions is not considered in determining the fair value on the date of grant. Vesting conditions which relate to non-marketconditions are allowed for in the assumptions used for the number of options expected to vest. The estimate of the numberof options expected to vest is revised at each balance sheet date.In some circumstances, employees may provide services in advance of the grant date. The grant date fair value is estimatedfor the purposes of recognising the expense during the period between the service commencement period and the grant date.The grant by the Company of options over its equity instruments to employees of subsidiary undertakings in the Group istreated as a capital contribution. In the Company’s financial statements, the cost of the share based incentives is recognisedover the vesting period of the awards as an increase in investment in subsidiary undertakings, with a corresponding increasein equity. Where amounts are received from Group companies in relation to equity instruments granted to the employees ofthe subsidiary undertaking, the amount is derecognised from investments in Group companies, to the extent that it was initiallytreated as a capital contribution, with any remaining amounts recognised as an increase in equity.When options and awards are exercised, they are settled either via issue of new shares in the Company, or through shares heldin the ESOP trusts, depending on the terms and conditions of the relevant scheme. The proceeds received from the exercises,net of any directly attributable transaction costs, are credited to share capital and share premium. Share based paymentsdisclosures relevant to the Company are presented within note 26 to the consolidated financial statements.Dividend distributionDividend distributions to Burberry Group plc’s shareholders are recognised as a liability in the year in which the dividendbecomes a committed obligation. Final dividends are recognised when they are approved by the shareholders. Interimdividends are recognised when paid.Investments in subsidiariesInvestments in subsidiaries are stated at cost, less any provisions to reflect impairment in value. Notes to the Company Financial Statements178Notes to the Company Financial Statements178B. Accounting policies (continued)Impairment of investments in subsidiariesInvestments in subsidiaries are not subject to amortisation and are tested annually for impairment. An impairment loss isrecognised for the amount by which the carrying value exceeds its recoverable amount. The recoverable amount is the higherof an asset’s net realisable value and value-in-use. For the purpose of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generating units).TaxationTax expense represents the sum of the tax currently payable and deferred tax charge.The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit because it excludesitems of income or expense which are taxable or deductible in other years and it further excludes items which are never taxableor deductible. The current tax liability is calculated using tax rates which have been enacted or substantively enacted by thebalance sheet date.Deferred income tax is recognised, using the liabilities method, on temporary differences arising between the tax bases ofassets and liabilities and their carrying amounts in the financial statements. However, if the temporary difference arises frominitial recognition of an asset or liability in a transaction other than a business combination that at the time of the transactionaffects neither accounting nor taxable profit or loss, no deferred tax will be recognised.Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheetdate and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled.Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against whichthe temporary differences can be utilised.Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of thereversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will notreverse in the foreseeable future.Financial instrumentsA financial instrument is initially recognised at fair value on the Balance Sheet when the Company becomes a party to thecontractual provisions of the instrument. A financial asset is derecognised when the contractual rights to the cash flow expireor substantially all risks and rewards of the asset are transferred. A financial liability is derecognised when the obligationspecified in the contract is discharged, cancelled or expires.Subsequent to initial recognition, all financial liabilities, with the exception of derivative financial instruments, are stated atamortised cost using the effective interest rate method. The fair value of the financial assets and liabilities held at amortisedcost approximate their carrying amount due to the use of market interest rates.The Company’s primary categories of financial instruments are listed below:Cash and cash equivalentsOn the Balance Sheet, cash and cash equivalents comprise cash held with banks.Trade and other receivablesTrade and other receivables are included in current assets. Receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairmentof trade receivables is established when there is objective evidence that the Company will not be able to collect all amountsdue according to the original terms of receivables. The amount of the movement in the provision is recognised in theIncome Statement.Notes to the Company Financial Statements179Notes to the Company Financial Statements179B. Accounting policies (continued)Financial instruments (continued)BorrowingsBorrowings are recognised initially at fair value, inclusive of transaction costs incurred. Borrowings are subsequently statedat amortised cost and the difference between the proceeds (net of transaction costs) and the redemption value is recognisedin the Income Statement over the period of the borrowings using the effective interest rate method. Borrowings are classifiedin creditors amounts falling due within one year unless the Company has an unconditional right to defer settlement of theliability for at least 12 months after the balance sheet date.Derivative financial instrumentsThe Company uses equity swap contracts to economically hedge its exposure to fluctuations in the Company’s share pricewhich impacts the social security costs payable by Group companies in relation to share based compensation schemes.The equity swap contracts are initially recognised at fair value at the trade date and classified as held for trading. All subsequentchanges in fair value are recognised in the Income Statement up to the maturity date.Foreign currency translationFunctional and presentation currencyItems included in the financial statements are measured using the currency of the primary economic environment in whichthe Company operates (the functional currency). The financial statements are presented in Sterling which is the Company’sfunctional and presentation currency.Transactions in foreign currenciesTransactions denominated in foreign currencies are translated into the functional currency at the exchange rate prevailing atthe date of the transaction. Monetary assets and liabilities denominated in foreign currencies, which are held at the year end,are translated into the functional currency at the exchange rate ruling at the balance sheet date. Exchange differences onmonetary items are recognised in the Income Statement in the period in which they arise.Ordinary share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shownin equity as a deduction, net of tax, from the proceeds.C. Key sources of estimation and judgementPreparation of the financial statements in conformity with FRS 101 requires that management make certain judgements,estimates and assumptions that affect the reported revenues, expenses, assets and liabilities and the disclosure of contingentliabilities. If in the future such estimates and assumptions, which are based on management’s best judgements at the date ofthe financial statements, deviate from actual circumstances, the original estimate and assumptions will be updated asappropriate in the period in which the circumstances change.Estimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances. The key areas where the estimatesand assumptions applied have a significant risk of causing a material adjustment to the carrying value of assets and liabilitiesare discussed below:Impairment of investments in subsidiariesInvestments in subsidiaries are not subject to amortisation and are tested annually for impairment. When a review for potentialimpairment is conducted, the recoverable amount is determined based on the higher of an asset's fair value less costs to selland value-in-use calculations prepared on the basis of management’s assumptions and estimates. Refer to note D for furtherdetails of investments.Impairment of loan receivablesThe Company is required to make an estimate of the recoverable value of loan receivables. When assessing potentialimpairment of loan receivables, management considers factors including any specific known problems or risks. Referto note E for further details on the net carrying value of trade and loan receivables.Notes to the Company Financial Statements180Notes to the Company Financial Statements180D. Investments in subsidiariesCost £mAs at 1 April 2015 2,237.3Additions 26.0Disposal of subsidiaries (76.4)Impairment charge (474.2)As at 31 March 2016 1,712.7During the year the Company liquidated £76.4m (2015: £nil) direct and indirect non-operating subsidiaries as part of a widercorporate restructuring exercise, resulting in impairments of £469.8m (2015: £nil). These disposals and impairments are offsetby distributions made by these subsidiaries.The directors consider that the carrying value of the investments is supported by their underlying net assets. The subsidiaryundertakings and investments of the Burberry Group are listed in note 28 of the Group financial statements.E. Trade and other receivablesAs at31 March2016£mAs at31 March2015£mAmounts owed by Group companies 496.4 302.7Prepayments 0.8 0.9Trade and other receivables – amounts falling due after more than one year 497.2 303.6Amounts owed by Group companies 56.7 163.1Prepayments 0.4 0.2Trade and other receivables – amounts falling due within one year 57.1 163.3Total trade and other receivables 554.3 466.9Included in amounts owed by Group companies are loans of £553.1m (2015: £414.8m) which are interest bearing.The interest rate earned is based on relevant national LIBOR equivalents plus 0.5% to 0.9%. These loans are unsecuredand repayable between 1 March 2017 and 17 June 2021. The remaining receivable of £nil (2015: £51.0m) is unsecured,interest free and repayable on demand.F. CreditorsAs at31 March2016£mAs at31 March2015£mAmounts owed to Group companies 801.5 1,536.0Creditors – amounts falling due after more than one year 801.5 1,536.0Amounts owed to Group companies 59.4 58.6Accruals 0.2 0.2Creditors – amounts falling due within one year 59.6 58.8Total creditors 861.1 1,594.8Amounts owed to Group companies falling due after more than one year are interest bearing. The interest rate earned isbased on LIBOR plus 0.5% to 0.9%. These loans are unsecured and repayable between 17 June 2019 and 17 June 2020.All amounts owed to Group companies falling due within one year are unsecured, interest free and repayable on demand.Notes to the Company Financial Statements181Notes to the Company Financial Statements181G. Ordinary share capitalAllotted, called up and fully paid share capital Number £mOrdinary shares of 0.05p (2015: 0.05p) eachAs at 1 April 2015 444,744,067 0.2Allotted on exercise of options during the year 293,187 –As at 31 March 2016 445,037,254 0.2The Company has a general authority from shareholders, renewed at each Annual General Meeting, to repurchase a maximumof 10% of its issued share capital. During the year to 31 March 2016, no ordinary shares were repurchased by the Companyunder this authority (2015: nil).The cost of purchasing own shares held by the Group has been offset against retained earnings, as the amounts paid reducethe profits available for distribution by the Company. As at 31 March 2016 the amounts offset against this reserve are £39.9m(2015: £57.0m). As at 31 March 2016, the ESOP trusts held 3.1m shares (2015: 4.1m) in the Company, with a market valueof £42.7m (2015: £71.9m). In the year to 31 March 2016 the ESOP trusts have waived their entitlement to dividends of£1.2m (2015: £1.2m).The capital reserve consists of the capital redemption reserve arising on the purchase of own shares.H. DividendsYear to31 March2016£mYear to31 March2015£mPrior year final dividend paid 25.5p per share (2015: 23.2p) 112.5 102.1Interim dividend paid 10.2p per share (2015: 9.7p) 45.2 42.8Total 157.7 144.9A final dividend in respect of the year to 31 March 2016 of 26.8p (2015: 25.5p) per share, amounting to £118.5m, has beenproposed for approval by the shareholders at the Annual General Meeting subsequent to the balance sheet date. The finaldividend has not been recognised as a liability at the year end and will be paid on 5 August 2016 to shareholders on theregister at the close of business on 8 July 2016.I. Financial guaranteesOn 25 November 2014, the Group entered into a £300m multi-currency revolving credit facility with a syndicate of third-partybanks. This replaced the previous facility which would have matured on 30 June 2016. At 31 March 2016, there were£nil outstanding drawings (2015: £nil). During the year the Group exercised an option to extend the maturity of the facilityto November 2020, after receiving consent from all members of the syndicate. The agreement contains another option,exercisable in 2016, which allows the Group to extend for an additional one year, at the consent of the syndicate.The companies acting as guarantor to the facility consist of Burberry Group plc, Burberry Limited, Burberry Asia Limited,Burberry (Wholesale) Limited (US) and Burberry Limited (US). The fair value of this financial guarantee as at 31 March 2016is £nil (2015: £nil).A potential liability may arise in the future if one of the Group members defaults on the loan facility. Each guarantor,including Burberry Group plc, would be liable to cover the amounts outstanding, including principal and interest elements.J. Audit feesThe Company has incurred audit fees of £0.1m for the current year which are borne by Burberry Limited (2015: £0.1m).Notes to the Company Financial StatementsGeneral shareholder enquiriesEnquiries relating to shareholdings, such as the transfer ofshares, change of name or address, lost share certificatesor dividend cheques, should be referred to the Company’sRegistrar, Equiniti, using the details below:EquinitiAspect HouseSpencer RoadLancingWest SussexBN99 6DATelM\ebsite: wwGeneral MeetingBurberry’s Annual General Meeting will be held at theInterContinental Hotel, One Hamilton Place, Park Lane,London W1J 7QY commencing at 9.30am on Thursday,14 July 2016.The Notice of Meeting, together with details of thebusiness to be conducted at the meeting, is availableon the Company’s website at www.burberryplc.com.The voting results for the 2016 Annual General Meetingwill be accessible on the Company’s website atwww.burberryplc.com shortly after the meeting.DividendsAn interim dividend for the financial year ended 31 March 2016of 10.2p per ordinary share was paid on 22 January 2016.A final dividend of 26.8p per share has been proposed and,subject to approval at the Annual General Meeting on14 July 2016, will be paid according to the following timetable:Final dividend record date: 8 July 2016Deadline for return of DRIP mandate forms: 15 July 2016Final dividend payment date: 5 August 2016The ADR local payment date will be approximately fivebusiness days after the proposed dividend payment datefor ordinary shareholders.Dividends can be paid by BACS directly into a UK bankaccount, with the tax voucher being sent to the shareholder’saddress. This is the easiest way for shareholders to receivedividend payments and avoids the risk of lost or out of datecheques. A dividend mandate form is available from Equinitior at www.shareview.co.uk.If you are a UK taxpayer, please note that from 6 April 2016the Dividend Tax Credit has been replaced by a tax-freeDividend Allowance of £5,000. Any dividends receivedabove this amount will be subject to taxation. Dividendspaid on shares held within pensions and Individual SavingsAccounts (‘ISAs’) will continue to be tax-free. Furtherinformation can be found at www.gov.uk/tax-on-dividends.Dividends payable in foreign currenciesEquiniti are able to pay dividends to shareholder bankaccounts in over 30 currencies worldwide through theOverseas Payment Service. An administrative fee will bededucted from each dividend payment. Further details canbe obtained from Equiniti or online at www.shareview.co.uk.Dividend Reinvestment PlanThe Company’s Dividend Reinvestment Plan (‘DRIP’) enablesshareholders to use their dividends to buy further Burberryshares. Full details of the DRIP can be obtained from Equiniti.If shareholders would like their Final 2016 and futuredividends to qualify for the DRIP, completed applicationforms must be returned to Equiniti by 15 July 2016.Duplicate accountsShareholders who have more than one account due toinconsistency in account details may avoid duplicatemailings by contacting Equiniti and requesting theamalgamation of their share accounts.182Shareholder InformationShareholderInformationElectronic communicationShareholders may at any time choose to receive allshareholder documentation in electronic form via theinternet, rather than in paper format. Shareholders whodecide to register for this option will receive an emaileach time a shareholder document is publishedon the internet. Shareholders who wish to receivedocumentation in electronic form should registeronline at www.shareview.co.uk.Equiniti offers a range of shareholder information andservices online at www.shareview.co.uk. A textphonefacility for those with hearing difficulties is available bycalling: 0371 384 2255. Lines are open 8.30am to 5.30pm,Monday to Friday. Please call +44 121 415 7047 ifcalling from outside the UK.Financial calendarFirst quarter trading update 13 July 2016Annual General Meeting 14 July 2016First half trading update October 2016Interim results announcement November 2016Third quarter trading update January 2017Second half trading update April 2017Preliminary results announcement May 2017Registered officeBurberry Group plcHorseferry HouseHorseferry RoadLondonSW1P 2AWRegistered in England and WalesRegistered Number 03458224www.burberryplc.comShare dealingBurberry Group plc shares can be traded through mostbanks, building societies or stock brokers. Equiniti offersa telephone and internet dealing service. Terms andconditions and details of the commission charges areavailable on request.For telephone dealing please telephone 03456 037 037between 8.00am and 4.30pm, Monday to Friday, andfor internet dealing visit www.shareview.co.uk/dealing.Shareholders will need their reference number whichcan be found on their share certificate.ShareGiftShareholders with a small number of shares, the valueof which makes them uneconomic to sell, may wish toconsider donating their shares to charity through ShareGift,a donation scheme operated by The Orr MackintoshFoundation. A ShareGift donation form can be obtainedfrom Equiniti. Further information is available atwww.sharegift.org or by telephone on 0207 930 3737.Share price informationThe latest Burberry Group plc share price is availableon the Company’s website at www.burberryplc.com.Unauthorised brokers (boiler room scams)Shareholders are advised to be very wary of any unsolicitedadvice, offers to buy shares at a discount or offers of freecompany reports. These are typically from overseas-based‘brokers’ who target UK shareholders offering to sell themwhat often turn out to be worthless or high-risk shares inUS or UK investments. These operations are commonlyknown as boiler rooms.If you receive any unsolicited investment advice, get thecorrect name of the person and organisation and checkthat they are properly authorised by the FCA beforegetting involved by visiting www.fca.org.uk/register/If you deal with an unauthorised firm, you will not beeligible to receive payment under the Financial ServicesCompensation Scheme if things go wrong.If you think you have been approached by an unauthorisedfirm you should contact the FCA consumer helpline on0800 111 6768.More detailed information can be found on the FCAwebsite at www.fca.org.uk/consumers/protect-yourself/unauthorised-firms.WebsiteThis Annual Report and other information aboutBurberry Group plc, including share price informationand details of results announcements, are availableat www.burberryplc.com.183Shareholder InformationDisclaimerThe purpose of this document is to provide information to the members of Burberry Group plc. This document contains certain statements that are forwardlooking statements. They appear in a number of places throughout this document and include statements regarding our intentions, beliefs or current expectationsand those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth,strategies and the business we operate. By their nature, these statements involve uncertainty since future events and circumstances can cause results anddevelopments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparationof this document and unless otherwise required by applicable law the Company undertakes no obligation to update or revise these forward-looking statements.Nothing in this document should be construed as a profit forecast. The Company and its directors accept no liability to third parties in respect of this documentsave as would arise under English law. This document does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of anyBurberry Group plc shares, in the UK, or in the USA, or under the USA Securities Act 1933 or any other jurisdiction.The cover and accounts section of this report (pages 113-184) are printed on Colorplan. Thisproduct is made from virgin ECF pulp, which is produced from sawmill residues, forest thinnings,and roundwood from managed sustainable forests. The main section (pages 1-112) are printedon Oxygen Offset which is made from 100% de-inked pulp recycled fibre. Printed in the UKby Pureprint who are a Carbon Neutral Company using their technology. Both themanufacturing mills and printer are registered to the Environmental Management SystemISO14001 and are Forest Stewardship Council® (FSC) chain-of-custody certified.184 Royal warrant of appointment ArticleTalkReadEditView history ToolsFrom Wikipedia, the free encyclopediaRoyal warrants of appointment have been issued for centuries to tradespeople who supply goods or services to a royal court or certain royal personages. The royal warrant enables the supplier to advertise the fact that they supply to the issuer of the royal warrant; thus lending prestige to the supplier. Royal families of the United Kingdom, the Netherlands, Belgium, Luxembourg, Monaco, Denmark, Sweden, and Japan among others, allow tradesmen to advertise royal patronage. Suppliers having a royal warrant charge for the goods and services supplied; a royal warrant does not imply that suppliers provide goods or services free of charge. Royal warrants are typically advertised on company hoardings, letter-heads and products by displaying the coat of arms or the heraldic badge of the royal personage issuing the royal warrant. Warrants granted by members of the British royal family usually include the phrase "By Appointment to…" followed by the title and name of the royal customer, and then what goods are provided; no other details of what is supplied may be given. Purveyors for current householdsAustraliaRoyal warrant holders of the Court of Australia: Hardy BrothersBelgium Au grand RasoirIn Belgium the title of 'Purveyor to the Court' (Gebrevetteerd Hofleverancier van België/Fournisseur breveté de la Cour de Belgique) is granted to businesses who provide services or goods to the royal court. The list of 'purveyors to the Court' is updated every year. The king himself makes the decision who gets a title or not. Some of the 'Purveyors to the Court' include:[1] ArmaniBMW Belgium LuxembourgMercedes-Benz Belgium LuxembourgBrussels AirlinesNeuhausLeonidasGodivaJules DestrooperDelvauxNatan CoutureDenmarkPurveyors to the Royal Danish Court: Main article: List of Purveyors to the Court of DenmarkJapan This list is incomplete; you can help by adding missing items. (February 2010)Purveyors to the Imperial Household Ministry; after World War II, the permission system was abolished, but purveyors still exist today: Miyamoto Shoko – silverwareGekkeikan – sakeKikkoman – soy sauceNissin Foods – foodToraya Confectionery – wagashiToyota – motor vehiclesManyoken – cateringYamada Heiando – lacquerwareKoransha – ceramic wareKuni – perfumeOtsuka Shoe – shoesOnshino Tabako - tobaccoOnshino Konpeitō - konpeitō sweetsMonacoHigh Patronage of the Monaco Royal Family: Chocolaterie de Monaco – chocolatesBritish Theatre Season, Monaco – theatreLexus – automobilesNetherlands Hofleverancier sign displayed on a storeIn the Netherlands, the status hofleverancier is awarded to small and medium-sized businesses that have existed for at least 100 years which have a good reputation regionally.[2] However, the companies need not actually supply goods to the court. At present there are at least 387 companies that hold this status, which can be renewed every 25 years.[3] Companies designated as hofleverancier are further permitted to display a plaque on their premises attesting to their status. In addition, certain companies are granted the use of the designation koninklijke ("royal" in Dutch).[4] These companies are also allowed to incorporate a crown in their logo. Examples include: KLM Royal Dutch AirlinesKPNRoyal DelftRoyal Dutch ShellRoyal Philips ElectronicsRoyal VopakRoyal Dutch Football AssociationNorwayPurveyors to the Royal Court of the Norway: the status 'purveyor to the court' (hofflevrandør) is no longer awarded. King Haakon crown on Foss brewery beer.Karl August Anderson – photographer (Kongl. Hoffotograf)Farris – mineral waterFoss Bryggeri – Brewery (H.VII Eneberettiget)Hans H. Holm – Felt hatsKing Oscar – Sea foodH. C. Reiersen – Tailor (Kongl. Hoffskredder)Christian Rohde & Søn – Tailor (Kngl. Norske slotts hoffleverandør)[5]M. Selmer – photographer (Kongl. Hoffotograf)O. Sørensen Vogn- og Karosserifabrikk – AutomobilL. Szaciński – photographer (Kongl. Hoffotograf)RomaniaPurveyors to the Romanian Royal House: The wording reads: Purveyor to the Romanian Royal House, used since 2003 (and probably between 1923 and 1947)BMW[6]Farina gegenüber – eau de Cologne to Carol I (1881)Steinway & Sons – pianosM. Welte & Söhne – orchestrions, reproducing pianos (1894, 1910)Murfatlar SA – wines to Michael (2003)Frottirex – bath towels and bedding to Michael (2005)Doina Levintza – clothing and accessories to Michael (2005)Dan Coma – clothing and accessories to Michael (2005)Halewood International – Rhein extra sparkling wines to Michael (2006)SC Transavia SA – chicken meat to Michael (2005)Principal Company SA – Salonta sausage products to Michael (2007)Biborţeni – mineral water to Michael (2008)Exotique Romania – Exotic furniture and decorative items (2009)Carol Parc Hotel – Hotelier and catering services (2011)Rue du Pain – Boulangerie Artisanale – bakery, pastry and confectionery products (2011)Bridge Painting Group - Printing Company, Offset lithography, Hot-foil stamping, Embossing, and special finishings (2013)SpainMain article: Royal Warrant of Appointment (Spain) Royal Warrant of the Queen of Spain on Henry Creed & Sons, 1885SwedenMain article: List of Royal Warrant Holders of the Swedish courtThailandMain article: Royal Warrant of Appointment (Thailand)UgandaThe Royal House of Bunyoro-Kitara awards royal warrants to businesses that deliver goods and services to the royal house on a regular basis. The royal warrant can be awarded by a grantor, either the King, the Queen or the Crown Prince. The Board of the Royal Warrant Holder Society advises the Grantors but each Grantor makes the final decision to grant a Warrant. A business may only receive one Warrant from a Grantor. The warrants of the Bunyoro-Kitara Kingdom are valid for one year.[7] United KingdomMain article: Royal Warrant of Appointment (United Kingdom)Historical reigning householdsAustria-Hungary Purveyors to the Imperial and Royal Court were allowed to display the double-headed eagle. Imperial eagle displayed at the store of the purveyor Rudolf Waniek, in Vienna Imperial and royal warrant of appointment issued to Johann Backhausen on November 8, 1888Main article: Imperial and Royal Warrant of AppointmentAugarten porcelain – porcelain and chinaJ. A. Baczewski – vodkaBakalowits – crystal chandeliersMatthäus Bauer – accordionsJan Becher – herbal bitterLucas Bols – liqueursIgnaz Bösendorfer – pianosCarl Suchy & Söhne - watchesChristofle – silverwareCourvoisier – cognacDemel – chocolate and confectioneryFarina gegenüber – eau de Cologne to Franz Joseph I (1872)E. Fessler – ovensMóric Fischer de Farkasházy, owner of Herend Porcelain Manufactory – porcelainCafé Gerbeaud – cakes and pastriesGräf & Stift – carriagesHancocks & Co – jewelryL. & C. Hardtmuth – ovens and pencilsAntoni Hawełka – cateringJ. A. Henckels – knivesHotel Imperial – cateringLiebig's Extract of Meat Company – processed meatsJ. & L. Lobmeyr – crystal and glasswareLöblich & Co. – heatingLohner-Werke – carriagesGirolamo Luxardo – apéritif and digestifRémy Martin – champagneMoët et Chandon – champagneMoser – glass and crystalFerdinand Mülhens, owner of the 4711 (brand) – perfumeG. H. Mumm – champagneA. Obholzer Kürschnerei – fursPaulaner Brewery – beerPauly Beds / J. Pauly & Sohn – beds and mattressesPeek Freans – cookiesPilsner Urquell – beerRieger Orgelbau – organsLouis Roederer – champagneRoyal Worcester – porcelainEduard Sacher, owner of the Hotel Sacher – cakes and pastriesRobert Schlumberger von Goldeck – sparkling wineSchweighofer – pianosAdolf Steiner - pianosWilliam Steinway – pianosBaron Raimund von Stillfried – photosGebrüder Thonet – furnitureMichael Thonet – furnitureCharles Lewis Tiffany – jewelry and silverwareTörley – sparkling wineUnderberg – digestif bitterJohn Thomas Underwood – typewritersVeuve Clicquot – champagneNathaniel Wheeler – sewing machinesWilhelm J. Sluka – cakes and pastriesZwack – herbal liquors This list is incomplete; you can help by adding missing items. (August 2008)BavariaPurveyors to the Court of Bavaria: See Liste bayerischer Hoflieferanten (in German).FA Ackermanns Kunstverlag – art publishing (1879)Eilles – coffee and tea (1873)Farina gegenüber – eau de Cologne to Ludwig II (1872)Fr. Ant. Prantl – printing and leather goods (1797)BrazilPurveyors to the Brazilian Imperial Family: Casa Granado – chemists/pharmacists and toiletriesHenry Poole & Co – tailors to Pedro II (1874)FrancePurveyors to the Court of France: Moutard – printer and bookseller to Marie Antoinette, to Princess Marie Joséphine of Savoy, and to Princess Maria Theresa of Savoy (1770)Marc-Etienne Janety – master goldsmith and jeweler to Louis XVI (1777)Adam Weisweiler – cabinet maker to Louis XVI (1778)Jean-Louis Fargeon [fr] – perfumer to Marie Antoinette (1779)Farina gegenüber – eau de Cologne to Napoleon I (1811) and to Napoleon III (1867)Debauve & Gallais – chocolates to Louis XVIII (1819)Champagne Delbeck – champagne to Louis Philippe I (1838)Guerlain – eau de Cologne to Napoleon III (1868)ItalyPurveyors to the Italian Royal Family: Acqua di Biella – eau de Cologne to Umberto I (1878)Ballarino Gioielli (Cavour) – jewelleryBaratti & Milano (Turin) – sweetsBianchi – carsCaffarel (Turin) – chocolateCaraceni (Milan) – clothesFratelli Carli (Imperia) – olive oilFarina Gegenüber – eau de Cologne to King Victor Emmanuel II (1876)Florio (Marsala) – wineGancia – wineGentilini (Roma) – food (biscuits)Marinella (Naples) – tiesMartini & Rossi – liquorMusy, Padre & Figli (Turin) – jewelleryPagani (Parma) – sweetsPernigotti – chocolatePetochi (Rome) – jewelleryPrada (Milan) – leather goods, trunks and clothesSaiwa – food (biscuits)Sperlari – food (biscuits)Steinway & Sons – pianosLuigi Borrelli (Naples) – clothing Royal warrant of appointment issued to Confeitaria Nacional on 28 October 1873Ottoman EmpirePurveyors to the sultans of the Ottoman Empire: M. Welte & Söhne, orchestrions (1896)Abdullah Frères, photographers (1863)PortugalPurveyors to the Portuguese Royal Household: Ballarino Gioielli (Cavour, Italy) – jewelleryFarina Gegenüber – eau de Cologne to Luís I (1866)Confeitaria Nacional – confectionary to Luís I, Carlos I, Manuel II (1873-1910)PrussiaPurveyors to the Court of Prussia: See Liste preußischer Hoflieferanten (in German).Farina gegenüber – eau de Cologne to Friedrich Wilhelm IV (1841), Wilhelm I (1871), to Friedrich III (1888) and to Wilhelm II (1888)Russia Coat of arms of the purveyors to the Imperial court[8]In the Russian Empire since 1856 there was the designation with the highest authorization "Supplier of His Imperial Majesty" with the state coat of arms on the shield. From 1895, at the request of Empress Alexandra Feodorovna, a second, additional authorization was granted: "Supplier of Her Imperial Majesty". Both authorizations existed until 1917, until the abdication of Nicholas II.[9] Purveyors to the Russian Imperial Family: Farina gegenüber – eau de Cologne to Nicholas I 1843Fabergé – jewellery to Nicholas IISmirnoff – vodkaCristal – champagneSteinway & Sons – pianosGubanova Toiletries of Morshansk Russia appointed in 1763 with a Royal Warrant by Empress Catherine II to provide special cleaning and skincare productsThe Victoria Fine Soap Works, Minsk, Belarus – soap to Nicholas I and the Imperial familyThe Perfume Factory Partnership of Pharmacist A. M. Ostroumov - perfume, cologne, anti-dandruff soap and other medicinal cosmetics, 1900 - 1920[10][11]YugoslaviaRoyal Warrant Holders of the Yugoslav Court: Sljeme (Zagreb) – trunks and leather goods, appointed in 1931 Royal charters continue to be used in the United Kingdom to incorporate charities and professional bodies, to raise districts to borough status, and to grant university status and degree awarding powers to colleges previously incorporated by royal charter. Most new grants of royal charters are reserved for eminent professional bodies, learned societies or charities "which can demonstrate pre-eminence, stability and permanence in their particular field".[113] The body in question has to demonstrate not just pre-eminence and financial stability but also that bringing it under public regulation in this manner is in the public interest.[114] In 2016, the decision to grant a royal charter to the (British) Association for Project Management (APM) was challenged in the court by the (American) Project Management Institute (PMI), who feared it would give a competitive advantage to APM and claimed the criteria had not been correctly applied; the courts ruled that while the possibility of suffering a competitive disadvantage did give PMI standing to challenge the decision, the Privy Council was permitted to take the public interest (in having a chartered body promoting the profession of project management) into account as outweighing any failure to meet the criteria in full.[115] A list of UK chartered professional associations is at List of professional associations in the United Kingdom § Chartered. Individual chartered designations, such as chartered accountant or chartered engineer, are granted by some chartered professional bodies to individual members that meet certain criteria. The Privy Council's policy is that all chartered designations should be broadly similar, and most require Master's level qualifications (or similar experience).[116] In January 2007, the UK Trade Marks Registry refused to grant protection to the American Chartered Financial Analyst trademark, as the word "chartered" in the UK is associated with royal charters, thus its use would be misleading.[117] "Charter" and "chartered" continue to be "sensitive words" in company names, requiring evidence of a royal charter or (for "chartered") permission from a professional body operating under royal charter.[118] The use of "chartered" in a collective trade mark similarly requires the association applying for the mark to have a royal charter as otherwise "the mark would mislead the public into believing that the association and its members have chartered status".[119] Unlike other royal charters, a charter to raise a district to borough status is issued using statutory powers under the Local Government Act 1972 rather than by the royal prerogative.[116] The company registration number of a corporation with a royal charter is prefixed by "RC" for companies registered in England and Wales, "SR" for companies registered in Scotland, and "NR" for companies registered in Northern Ireland.[120] However, many chartered corporations from outside England have an RC prefix from when this was used universally. The BBC operates under a royal charter which lasts for a period of ten years, after which it is renewed.