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1 ADIDAS GROUP ANNUAL REPORT2 TARGETS RESULTS OUTLOOK TARGETS , 2 RESULTS , 3 OUTLOOK 2016 CURRENCY-NEUTRAL SALES DEVELO...

2 0 1 5 ADIDAS GROUP ANNUAL REPORT

TARGETS – RESULTS – OUTLOOK TARGETS 2015 1, 2

RESULTS 2015 2, 3

OUTLOOK 2016

CURRENCY-NEUTRAL SALES DEVELOPMENT: adidas Group

INCREASE AT A MID-SINGLEDIGIT RATE

INCREASE OF 10%

INCREASE AT A RATE BETWEEN 10% AND 12%

Group sales of

€ 16.915 BILLION Gross margin

Gross margin

47.5% – 48.5%

48.3%

47.3% – 47.8%

Operating margin

6.5% – 7.0%

6.5%

AT LEAST STABLE versus prior year level

Average operating working capital (in % of net sales)

Average operating working capital (in % of net sales) decreases 1.9pp to

Average operating working capital (in % of net sales)

MODERATE DECLINE

20.5%

AROUND PRIOR YEAR LEVEL

Capital expenditure

AROUND € 600 MILLION

€ 513 MILLION

AROUND € 750 MILLION

Gross borrowings

Gross borrowings decrease 2% to

Gross borrowings

MODERATE DECLINE

€ 1.830 BILLION

MODERATE DECLINE

Net borrowings/EBITDA ratio

TO BE MAINTAINED BELOW 2

0.3

TO BE MAINTAINED BELOW 2

Net income from continuing operations

INCREASE AT A RATE OF 7% TO 10%

INCREASES 12%

INCREASE AT A RATE BETWEEN 10% AND 12%

to € 720 million

to around € 800 million Shareholder value

adidas AG share price

Shareholder value

INCREASE

INCREASES 56%

FURTHER INCREASE

Dividend per share

€ 1.60 4 Share buyback in an amount of

€ 300 MILLION 1 As published on March 5, 2015. The outlook was updated over the course of the year. 2 Figures reflect continuing operations as a result of the divestiture of the Rockport business. 3 Excluding goodwill impairment of € 34 million. 4 Subject to Annual General Meeting approval.

FINANCIAL HIGHLIGHTS 2015 FINANCIAL HIGHLIGHTS 2015 (IFRS) 2015

2014

Change

Operating Highlights (€ in millions) Net sales 1

16,915

14,534

16.4%

EBITDA 1

1,475

1,283

15.0%

Operating profit 1, 3, 4

1,094

961

13.8%

Net income from continuing operations 1, 3, 4

720

642

12.2%

Net income attributable to shareholders 2, 3, 4

668

568

17.6%

48.3%

47.6%

0.6pp

Key Ratios (%) Gross margin 1 sales 1

43.1%

42.7%

0.4pp

Operating margin 1, 3, 4

6.5%

6.6%

(0.1pp)

Effective tax rate 1, 3, 4

32.9%

29.7%

3.2pp

4.0%

3.9%

0.0pp

Average operating working capital in % of netsales 1

20.5%

22.4%

(1.9pp)

Equity ratio

42.5%

45.3%

(2.8pp)

0.3

0.1

n.a.

Financial leverage

8.1%

3.3%

4.8pp

Return on equity 2

11.2%

8.7%

2.5pp

Total assets

13,343

12,417

7.5%

Inventories

3,113

2,526

23.2%

Operating expenses in % of net

Net income attributable to shareholders in % of netsales 2, 3, 4

Net borrowings/EBITDA 1

Balance Sheet and Cash Flow Data (€ in millions)

Receivables and othercurrent assets

3,003

2,861

4.9%

Working capital

2,133

2,970

(28.2%)

Net borrowings

460

185

148.9%

5,666

5,624

0.7%

513

554

(7.4%)

1,090

701

55.5%

3.32

2.72

21.9%

3.32

2.72

21.9%

5.41

3.36

61.1%

Dividend

1.60 5

1.50

6.7%

Share price at year-end

89.91

57.62

56.0%

55,555

53,731

3.4%

Shareholders' equity Capital expenditure Net cash generated from operating activities 2 Per Share of Common Stock (€) Basic earnings 2, 3, 4 Diluted

earnings 2, 3, 4

Net cash generated from operating activities 2

Other (at year-end) Number of employees 1 Number of shares outstanding

200,197,417

204,327,044

(2.0%)

Average number of shares

201,536,418

208,776,457

(3.5%)

1 Figures reflect continuing operations as a result of the divestiture of the Rockport business. 2 Includes continuing and discontinued operations. 3 2015 excluding goodwill impairment of € 34 million. 4 2014 excluding goodwill impairment of € 78 million. 5 Subject to Annual General Meeting approval.

OUR BRANDS

A D I DA S I S A T R U LY G LO B A L B R A N D W I T H G E R M A N R O OT S .

Reebok is an American-inspired global brand with the clear objective to become the leading fitness brand in the world. Reebok believes that fitness is a way of life. And Reebok’s version of fitness – Tough Fitness – can prepare all who are willing to join in for the unknown obstacles of life.

adidas Sport Performance The guiding principle of adidas Sport Performance is helping athletes to make a difference. In their game, in their world and in their life. The main focus is on key categories, such as football, running, basketball and training.

Reebok-CCM Hockey is a leading designer and marketer of ice hockey equipment and apparel, with two of the world’s most recognised ice hockey brand names: Reebok Hockey and CCM.

& adidas Originals

adidas Sport Style

adidas Originals is the authentic, iconic sportswear label for the street. adidas Sport Style includes the labels adidas NEO, Y-3 and Porsche Design Sport by adidas.

TaylorMade TaylorMade leads the golf industry in metalwood sales and is the number one driver brand on the world’s six major professional golf tours. The brand is recognised globally for its capacity to develop innovative and performanceenhancing technologies for drivers, fairway woods, hybrids, irons, putters and balls.

runtastic

adidas Golf adidas Golf develops high-performance golf footwear and apparel for active, serious, athletic-minded golfers seeking products to elevate their game.

Runtastic offers a wide variety of products and services that provide a comprehensive ecosystem for tracking and managing health and fitness data. No matter which fitness activity you prefer, Runtastic helps to motivate and link like-minded people. Together we are better and the Runtastic community is the perfect platform for anyone and everyone to reach their full potential.

Adams Golf Adams Golf designs and produces easyto-hit equipment that makes playing the game more enjoyable for golfers of all skill levels.

Five Ten Five Ten, the ‘Brand of the Brave’, is a leader in performance, high-friction footwear. From downhill mountain bike racing to rock climbing, from wingsuit flying to kayaking, Five Ten makes footwear for the world‘s most dangeroussports.

FOR MORE INFORMATION ON OUR BRANDS: WWW.ADIDAS-GROUP.COM

Ashworth Ashworth is an authentic golf apparel and footwear brand with powerful name recognition among true, authentic golfers, offering products that move effortlessly from the golf course to the clubhouse and beyond.

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CREATING SOMETHING NEW STARTS WITH DEFINING WHERE YOU WANT TO GO, WHAT YOU WANT TO ACHIEVE. IT STARTS WITH WHY YOU DO WHAT YOU DO AND WITH AN IDEA, A VISION YOU EMBODY FOR SOMETHING BETTER, AN OBSESSION YOU HAVE. AND FOR US, IT ALL STARTS WITH SPORT. SPORT IS OUR VERY PURPOSE. THROUGH SPORT WE HAVE THE POWER TO CHANGE LIVES. WEARE OBSESSED WITH INSPIRING PEOPLE TO HARNESS THE POWER OF SPORT IN THEIR LIVES. WE ARE COMMITTED TO HELPING ATHLETES MAKE A DIFFERENCE.

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FOR US, IT ALSO STARTS WITH THE ASPIRATION TO BE THE BEST. WE WANT TO BE THE BEST SPORTS COMPANY IN THE WORLD. THIS IS WHAT WE ARE HERE FOR. THIS IS WHAT WE WANT TO ACCOMPLISH. WE WANT TO WIN. WE MAKE THERULES. WE ARE THE CREATORS. AND: WE ARE CREATING THE NEW. ⁄ ⁄ ⁄ ⁄ ⁄

⁄ ⁄ ⁄ ⁄ ⁄

∕ ∕ ∕ ∕ ∕

⁄ ⁄ ⁄ ⁄ ⁄

∕ ∕ ∕ ∕ ∕

⁄ ⁄ ⁄ ⁄ ⁄

VALUE

ADIDAS GROUP ANNUAL REPORT 2015 1

TO OUR SHAREHOLDERS Operational and Sporting Highlights Letter from the CEO Executive Board Supervisory Board Supervisory BoardReport Corporate Governance Report includingthe Declaration on Corporate Governance Compensation Report Our Share

6 10 16 18 20 28 36 46

GROUP MANAGEMENT REPORT – OUR GROUP Group Strategy 54 adidas Strategy 61 Reebok Strategy 67 TaylorMade-adidas Golf Strategy 69 Reebok-CCM Hockey Strategy 72 Global Operations 74 Research and Development 80 Our People 87 Sustainability 94

• • • •

GROUP MANAGEMENT REPORT – FINANCIAL REVIEW Internal Group Management System 102 Group Business Performance 107 Economic and Sector Development 107 Income Statement 111 Statement of Financial Position and Statement of Cash Flows 119 Treasury 124 Financial Statements and Management Report of adidas AG 130 Disclosures pursuant to § 315 Section 4 and § 289 Section 4 ofthe German Commercial Code 134 Business Performance bySegment 138 Western Europe 139 North America 140 Greater China 141 Russia/CIS 142 Latin America 143 Japan 144 MEAA (Middle East, Africa and other Asian markets) 145 Other Businesses 146

• • • • • • • • • • • • • •

Subsequent Events andOutlook 148 Subsequent Events 148 Outlook 148 Risk and Opportunity Report 156 Illustration of Material Risks 162 Illustration of Opportunities 173 Management Assessment of Performance, Risks and Opportunities, and Outlook 175

• • • •

CONSOLIDATED FINANCIAL STATEMENTS Responsibility Statement 180 Auditor’s Report 181 Consolidated Statement of Financial Position 182 Consolidated Income Statement 184 Consolidated Statement of Comprehensive Income 185 Consolidated Statement of Changes in Equity 186 Consolidated Statement of Cash Flows 188 Notes 189 Notes to the Consolidated Statement of Financial Position 203 Notes to the Consolidated Income Statement 235 Additional Information 240 Statement of Movements of Intangible and Tangible Assets 248 Shareholdings 250

• • •

ADDITIONAL INFORMATION Ten-Year Overview 256 Glossary 260 Declaration of Support 263 Financial Calendar 264 Group Management Report: This report contains the Group Management Report of the adidas Group, comprising adidas AG and its consolidated subsidiaries, and the Management Report of adidas AG.

PUBLICATIONS FOR THE 2015 FINANCIAL YEAR

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1 5 ADIDAS GROUP MAGAZINE

M AGA ZI N E HOW WE CREATE THE NEW

HOW 2 0

ADIDAS GROUP ANNUAL REPORT

A N NUAL REPORT HOW WE CREATE VALUE

1 5 RESP ONSI BLY

WE CRE ATE ADIDAS GROUP SUSTAINABILITY PROGRESS REPORT

SUSTAIN ABILIT Y REPORT HOW WE CREATE RESPONSIBLY (available from mid-April onwards)

Printed versions of our Annual Report with condensed consolidated financial statements (excluding the Group’s notes) can be ordered online at WWW.A D I DAS- G RO UP.CO M /E N /I N VE STO RS/FI N AN C I AL-R E P O RT S .

TO Operational and Sporting Highlights Letter from the CEO Executive Board Supervisory Board Supervisory BoardReport Corporate Governance Report including the Declaration on Corporate Governance Compensation Report Our Share

OUR 6 10 16 18 20 28 36 46

SHARE – HOLD – ERS

1 To our S hareholders

Operational and Sporting Highlights

OPERATIONAL AND SPORTING HIGHLIGHTS Q1 2015 JANUARY 19.01. adidas Football presents its #ThereWillBeHaters campaign, focused around a provocative video featuring global football stars such as Luis Suárez, Gareth Bale, James Rodríguez and Karim Benzema. Within four weeks after its release the video is watched more than 16 million times on YouTube.

28.01. Reebok releases its new brand campaign ‘Be More Human’ with a 60-second TV spot around the Super Bowl. The campaign is a rally cry to live up to the athlete’s full potential.

25.02. TaylorMade launches the new R15 driver. The driver provides a front track technology to expand sweet spot and decrease spin. The R15 is the only driver of its kind to earn the maximum number of points in Golf Digest’s 2015 Hot List.

FEBRUARY

22.01. adidas unveils its latest running revolution: UltraBOOST. In New York City, a team of elite athletes around Yohan Blake, David Villa and Sammy Watkins pledge their allegiance to this running shoe while hundreds of witnesses from around the world are on site.

12.02. adidas Originals and Kanye West stage the global launch event for the Yeezy Season 1 and the Yeezy Boost. This worldwide simulcast event taking place in New York City is streamed to 42 theatres across the globe.

13.02. adidas releases its new campaign, Sport 15.The campaign, which is a long-term investment in the brand’s obsession with sport, aims to inspire and motivate young athletes to always be the best they can be at any sport or at any level. 22.01. The adidas Group ranks third in the ‘Global 100 Index’ and is thus recognised as one of the 100 Most Sustainable Corporations in the World, as best European company and as clear leader in its industry. This ranking by Corporate Knights is one of the most extensive data-driven corporate sustainability assessments in existence. 24.02. adidas announces that in 2014 it sourced more than 30% of all its processed cotton as Better Cotton. With this, the Group exceeds its originally set goal of 25%. This is the highest volume in sustainable cotton used in the history of adidas.

MARCH 04.03. Reebok presents to the world’s media the ZPump Fusion, a game-changing running shoe that uniquely conforms to any foot and provides runners with a locked-in custom fit. 26.03. The adidas Group introduces its new strategic business plan ‘Creating the New’ at the Investor Day 2015 in Herzogenaurach, Germany. By bringing brand desirability to new heights, the Group aims to increase its top line at a high-single-digit rate and improve net income by around 15% on average per year. 27.03. adidas Originals releases Supercolor, created in collaboration with Pharrell Williams. The iconic Superstar silhouette is transformed via a spectrum of 50 different colourways available from the launch day onwards.

1 To our S hareholders

Operational and Sporting Highlights

OPERATIONAL AND SPORTING HIGHLIGHTS Q2 2015 APRIL

MAY

15.04. Reebok teams up with international supermodel Miranda Kerr for the Skyscape March in Tokyo. The Skyscape is Reebok’s key franchise in walking footwear, taking comfort and style to a new level.

20.05. In celebration of the ten-year anniversary of the collaboration with Stella McCartney, the designer visits the first adidas by Stella McCartney women’s concept store in Seoul to meet with consumers as well as fitness and health influencers.

24.04. CCM releases the Ribcor skate line featuring Reebok’s legendary Pump technology. Providing skaters with a re-engineered shape, Ribcor features a more customised fit and maximum heel lock.

28.04. FC Bayern Munich and adidas extend their successful long-term partnership until 2030.

25.05. adidas revolutionises its football footwear offer by introducing X and Ace. The boots represent two distinct types of players: the game changers and the play makers – the ones who cause chaos and the ones who control the game.

JUNE 18.06. adidas Originals and Kanye West present the second sneaker developed in their close collaboration: Yeezy Boost 350. The shoe is designed to be simple and comfortable, featuring an entirely knitted upper.

25.06. Reebok takes home two awards at the 2015 Cannes Lions International Festival of Creativity for the creation of the ‘Be More Human’ digital experience. 30.06. adidas and Parley for the Oceans present the first shoe developed in their collaboration at a UN Climate Change event in New York City. The shoe’s upper is entirely made of yarns reclaimed and recycled from ocean waste.

30.06. Reebok and the UFC unveil the first UFCFightKit in New York City. The launch marks a cornerstone moment for both the sport of UFC and the Reebok brand.

1 To our S hareholders

Operational and Sporting Highlights

OPERATIONAL AND SPORTING HIGHLIGHTS Q3 2015 JULY 13.07. Reebok and CrossFit celebrate five years of partnership with the launch of the Reebok CrossFit Nano 5.0, developed in association with the CrossFit community.

AUGUST 01.08. adidas reunites with Manchester United and reveals the new home jersey for the 2015/16 season. The jerseys are well received and within the first five days deliver sales that were forecasted for a month.

05.08. The adidas Group announces the acquisition of Runtastic, a leading fitness app provider. With more than 140 million downloads and over 80 million registered users, Runtastic has an industry-leading position.

13.08. adidas announces its partnership with shooting guard James Harden of the Houston Rockets, one of the NBA’s most successful scorers and most recognisable players. 17.08. TaylorMade sponsored Jason Day wins the 2015 PGA Championship in Whistling Straits/ Wisconsin, USA. This victory helps him to temporarily take the number one spot in the official world golf ranking after also winning further tournaments.

10.09. adidas announces a multi-year partnership with quarterback Aaron Rodgers of the Green Bay Packers. The two-time winner of the MVP award debuts adidas cleats in the new season and will also collaborate on future product development.

10.09. For the 16th consecutive time, adidas AG is selected to join the Dow Jones Sustainability Indices (DJSI). Within the ‘Textiles, Apparel & Luxury Goods’ industry, the adidas Group is rated best in class in the category Innovation Management and achieves high scores in further categories. 10.09. The adidas Group Annual Report 2014 is ranked second among all DAX-30 companies in the ‘Best Annual Report’ ranking which focuses on the quality of content and transparency in reporting. Furthermore, ‘Make a Difference’ wins the Red Dot award that honours the quality of communication design and aesthetics. 15.09. The National Hockey League (NHL) and adidas announce a seven-year partnership starting with the 2017/18 season. Shortly afterwards, adidas announces a multi-year partnership with NHL All-Star Sidney Crosby.

03.08. The adidas Group opens a new office building, PITCH, at the World of Sports in Herzogenaurach. The building will be used to test the Group’s workplace of the future with creative meeting rooms, latest technology and innovative recreation zones.

SEPTEMBER 09.09. TaylorMade launches M1, the brand’s longest driver and most fittable product line. M1 offers the golfer TaylorMade’s first-ever ’unmetalwood’ line of drivers, fairways and rescue clubs that enable more ball speed, forgiveness and distance.

24.09. adidas introduces Sport Infinity, a research project funded by the European Commission which focuses on sporting goods that can be fully recycled. Worn sportswear will be broken down to be remoulded again in a waste-free, adhesive-free process.

1 To our S hareholders

Operational and Sporting Highlights

OPERATIONAL AND SPORTING HIGHLIGHTS Q4 2015 OCTOBER 07.10. adidas unveils the future of performance footwear with Futurecraft 3D, a unique 3D-printed running shoe midsole. The 3D concept is part of the ‘Futurecraft series’ and drives innovation across all elements of production.

19.10. Continuing its passionate commitment to the growth and support of mixed martial arts around the world, Reebok announces its latest partnership with undefeated UFC Middleweight Champion Chris Weidman. 31.10. adidas celebrates the New Zealand All Blacks who become the first team to win back-to-back Rugby World Cups and also to win the competition three times as they triumph over Australia.

12.11. Only two days after the launch of the new home kit of the German national football team for the UEFA EURO 2016, adidas reveals the Official Match Ball of the group stages: Beau Jeu. The ball is introduced by Zinédine Zidane inside the world’s first digital football stadium entitled FUTURE ARENA, visualising a 360° digital football stadium with 50,000 fans inside.

23.11. TaylorMade launches Kalea, a women’s exclusive set of clubs that is designed to deliver meaningful performance to the female player. 26.11. CCM introduces its new hockey performance lab in Montreal, Canada. The lab will contribute to game-changing products with the technology that has the power to advance the performance of hockey and that of the player.

DECEMBER

NOVEMBER

02.12. adidas opens a further chapter of its Sport 15 campaign with the film ‘Creators never follow’. The film stars James Harden who encourages all athletes to define their own path.

02.11. adidas introduces its Laceless football boot. With Laceless, players will be able to experience a new level of fit and pure touch. 05.11. adidas unveils Futurecraft Leather, a revolutionary combination of a high-tech manufacturing process and traditional material to create a completely seamless upper that enables flex, support and comfort in one single piece of material.

07.12. The adidas Group achieves its target of €2billion in net sales in Greater China. In addition, adidas is the leading women’s sports brand and the number one sport style and sport casual brand in Greater China. 08.12. adidas and Parley for the Oceans unveil a new footwear innovation which transforms deep-sea plastic waste into a 3D-printed midsole. The shoe also has an upper made from ocean plastic.

09.12. adidas Originals launches NMD, its latest footwear franchise, at an event in New York City. The NMD is technically a running shoe, realised as a lifestyle sneaker that represents in its design past adidas styles of the Micropacer, the Rising Star and the Boston Super.

09.12. adidas reveals the future of production with its pilot Speedfactory in Germany. With the use of automated manufacturing production, Speedfactory creates high-performance sporting goods faster than ever before and close to the consumer. 11.12. adidas Golf announces the release of the new Tour 360 Boost, the next generation in the popular Tour 360 franchise. 19.12. adidas Originals concludes the year with the release of two more shoes that originate out of the partnership with Kanye West: Yeezy Boost 350 tan and Yeezy Boost 750 black.

03.12. Reebok Instagram reaches 500,000 followers. The brand has achieved more than 3.8 million engagements on the account.

1 To our S hareholders Letter from the CEO

HERBERT HAINER ADIDAS GROUP CEO

LETTER FROM THE CEO 10

1 To our S hareholders Letter from the CEO

2015 was a very successful year for the adidas Group. We reached all of our major financial goals and even exceeded our initial top- and bottom-line targets. This was made possible because we reacted like true champions after the severe challenges we had been facing in 2014. We used our form crisis as an opportunity, analysed our weaknesses, realigned our business, rolled up our sleeves and took up the fight for gold. As a result, our 2015 performance is a picture-perfect example of a successful comeback in sport. As a Group, today we are stronger and in better shape than ever before:

•• ••

•• •• ••

In 2015, Group sales increased 10% on a currency-neutral basis. In euro terms, revenues were up 16% or € 2.4 billion to a new record of € 16.9 billion. Our core brand adidas, by far our largest business, drove the Group’s top-line expansion, growing 12% currency-neutral and reaching sales of € 13.9 billion in 2015, the highest level ever, with momentum accelerating towards the end of the year. This was particularly visible in Western Europe and North America, where revenues grew 31% and 12%, respectively, during the fourth quarter. Reebok reported a 6% sales increase for the full year and now has eleven consecutive quarters of growth under its belt. Our underlying net income grew 12% to € 720 million, despite delivering on our promise to significantly step up marketing investments to spur revenue growth and drive long-term brand desire. With an increase of 56%, our share was not only the top performer in the DAX-30 in 2015, but also outperformed all major peers and reached a new all-time high towards the end of the year.

These financials provide clear evidence for the major progress the Group has made over the past 15 months. But our success goes way beyond financial figures. With our strategic business plan ‘Creating the New’, we have developed a new game plan aimed at accelerating our growth trajectory until 2020 by significantly increasing brand desirability. And while officially this plan only kicked in at the beginning of 2016, Creating the New has already set free a lot of positive energy within our Group during the past year. This is the result of a completely new mindset–brands first–which we are living internally and which is also reflected in the reorganisation of roles and responsibilities within our sales and marketing organisations. Following the implementation of ‘Brand Leadership’, today our Global Brands organisation has a centralised role when it comes to key decision-making relating to the appearance of our brands and products around the globe. With this approach, we ensure that our product offering enjoys a high level of commonality worldwide, while at the same time we guarantee that major initiatives such as product launches and communication activities are managed centrally before they are executed locally by the markets. I have absolutely no doubt that this new consumer-obsessed mindset and organisational structure spurred our success in 2015 as it helped us to be much more impactful vis-à-vis the consumer in many areas of our business.

1 To our S hareholders Letter from the CEO

In this regard, we also started to redefine the future of production by building our pilot Speedfactory in Germany. Using automated manufacturing to bring production to where the consumer is, Speedfactories will make high-performance sporting goods available faster than ever before. The first concept shoes for running footwear are currently being made and I am proud that the adidas Group is at the forefront of this trend, as it will enable us to be closer to the consumer than any other brand. Another prime example of our consumer-obsessed mindset is our football category: 2015 saw a full reset of our football footwear business with the launch of Ace and X. These new football silos successfully replaced our iconic franchises f50, Predator, 11Pro and Nitrocharge. Focusing on the specific needs of two different types of football consumers was a bold decision that came with some risk. But it proved to be right, as evidenced by the double-digit increase in football footwear revenues last year. In addition, we saw a strong presence of our new cleats in the world’s top five football leagues, with almost 40% of players wearing 3-Stripes. All of this drove significant market share gains during the course of the year, particularly in Western Europe. This alone is great news. But even more importantly, it also confirms that Creating the New helps us win in this tough battlefield. In 2015, we also made a bold statement in another major performance category, running, where we launched UltraBOOST, which delivers unrivalled energy return, superior support and adaptive comfort to consumers. As we were so convinced of the performance attributes of this shoe, we called UltraBOOST ‘the greatest running shoe ever’ even before it hit the market at the beginning of 2015. Now, a year after its official launch, there is no better description for UltraBOOST than just that. Both the feedback we get from consumers as well as the sell-through rates we achieve leave no doubt that UltraBOOST was the ‘Best Sneaker of 2015’, as awarded by both running and lifestyle magazines several times throughout the year. Speaking about the fusion of lifestyle and sport: The tremendous success of our Originals business lies in our unique ability to recreate iconic sports moments and bring them to the street. This is exactly what made our iconic footwear franchises Stan Smith and Superstar driving forces of sneaker culture in 2015. In addition, our newly introduced NMD, a fusion of well-proven adidas DNA with breakthrough technology from today, has once again demonstrated the trendsetting capabilities and influence adidas Originals has on the streets. And not to forget the unprecedented demand around Yeezy Boost 350, which received the prestigious Footwear News ‘Shoe of the Year’ award. It is product launches like these that helped adidas Originals to become the world’s most relevant and best sneaker brand and deliver strong double-digit growth in every quarter of 2015. 2015 saw the complete reset of our Women’s business. As a result, we are now more focused on the female athlete than ever before. We are excited about our collaboration with former lululemon CEO Christine Day, who has been acting as a strategic adviser to our Women’s business for almost a year now. As an expert in building an athletic brand for women, Christine has been instrumental in sharpening our game plan, asking the right questions and helping us develop this important part of our business in the right way. As a result, we have made significant changes to our global product and marketing approach to enable us to create products and consumer experiences that address the very needs of women. As part of these efforts, adidas recently launched its first-ever women’s-only running shoe, PureBOOST X. In addition, our new Sport 16 campaign, ‘I’m Here to Create’, is told exclusively through the lens of some of the world’s finest female athletes, including tennis icon Caroline Wozniacki, supermodel Karlie Kloss as well as a large number of local influencers such as US rock climbing star Sasha DiGiulian and inspirational yogi Adriene Mishler.

1 To our S hareholders Letter from the CEO

North America is another area where the adidas brand made major progress last year by moving closer to the consumer. One of our main priorities in 2015 was to gain credibility in those categories that are important to authenticate our brand towards the US athlete. And indeed, through grassroots events at the high school and college level, much higher visibility in all of the major US sports and highly engaging marketing campaigns, we have become much more relevant for the US consumer in only a short period of time. In American football, for example, our partnership with Denver Broncos’ Von Miller, the most valuable player in Super Bowl 50, put the 3-Stripes right into the spotlight during the world’s biggest single sports event. In baseball, the number of players wearing our products has more than doubled within less than twelve months and now includes standouts such as the 2015 Rookies of the Year Kris Bryant and Carlos Correa. And in basketball, we have teamed up with James Harden, one of the most iconic players in the game, who has already created a lot of buzz for us as he took centre stage in the last episode of our Sport 15 campaign in December. And let’s of course not forget our unrivalled presence in the lifestyle area, where the Yeezy Boost in collaboration with Kanye West is enjoying unparalleled popularity. The sneaker’s iterations, of which seven have been released so far, have not only sold out instantly but also played a major role in propelling adidas to the most popular sneaker brand on Instagram in 2015. The major progress hasn’t gone unnoticed by the country’s most important retailers. They have become much more supportive of our products over the past twelve months, which is reflected in a significant increase in shelf space in their stores. In combination with the continued roll-out of our own-retail stores, this has also elevated the brand experience at the point of sale remarkably. So without a doubt, we have delivered on our US promise across all the different dimensions. 18months ago, we declared the US as the most important priority for us as a management team. And it makes me proud to see the momentum the adidas brand has gained in this all-important market. Turning to Reebok’s performance in more detail, the brand now looks back on eleven consecutive quarters of growth, which is proof positive of the successful repositioning of the brand and its rededication towards fitness. To celebrate this achievement and to illustrate Reebok’s mission to change how people perceive and experience fitness, the brand launched its new, fully integrated marketing campaign, ‘Be More Human’, at the beginning of 2015. The campaign underlines that, through a strong focus on innovation, Reebok is today leading the way in new fitness movements and further strengthening its overall fitness positioning across the globe, underlined by doubledigit growth in nearly all markets in 2015. At the same time, the brand continues to face challenges in its home market. To reset the brand in North America and deliver sustainable and profitable business growth going forward, we have started to streamline Reebok’s distribution footprint in this all-important market by reducing the number of factory outlets. We will continue to pursue that path in 2016. At the same time, we will introduce new concepts to better identify and connect with our target consumer.

1 To our S hareholders Letter from the CEO

2015 has also seen two important portfolio decisions. On the one hand, we completed the divestiture of Rockport, which allows us to focus our resources even more on our core competency–sport–and on the highest-potential opportunities for our Group. On the other hand, we have strengthened our digital activities with the acquisition of Runtastic. Their cutting-edge digital capabilities are enabling us to create unexpected sports experiences that will resonate with our consumers and clearly stand out in a crowded and constantly changing landscape. Another important strategic decision will be made shortly. Following a decade of strong and profitable growth, TaylorMade-adidas Golf experienced two very difficult years in 2014 and 2015, caused by a number of structural, commercial and operational issues. As a result, halfway through last year we started analysing future options for our golf business. This strategic review is expected to be concluded by the end of the first quarter of 2016. At the same time, we also initiated a major restructuring programme, with the main objective to create a more nimble and profitable organisation. In the meantime, we have seen very good response to our latest product launches. In its inaugural week, on both the PGA Tour and European Tour, TaylorMade’s M1 driver has become the number one played model. In addition, a multitude of players made an immediate switch based on the impressive results they saw in testing–a true testament to the unrivalled performance of M1 in its maiden week on tour. But the M1 was not only successful with our tour staff. Due to the strong early demand and quick sell-through at retail, our launch quantities for the M1 were sold out quickly after its launch and much faster than we had anticipated. But unlike in the past, we have decided not to push further volumes into the market, in order to keep the product fresh and demand high for the next drop in the first quarter of 2016. Summing it all up: We are in great shape and well prepared to fully compensate the cost pressure that we and the entire industry will be facing in 2016 as a result of a surge in input costs due to labour cost increases in our supply chain as well as the strong appreciation of the US dollar against most major currencies. But make no mistake, the measures we have implemented to counterbalance this year’s macroeconomic headwinds are not oriented towards the short term as we will definitely not sacrifice the long-term development of the Group and the desirability of our brands for short-term margin optimisation. In fact, the opposite is true. All of the initiatives aiming to support our margin development in 2016 will sustainably increase our operating efficiency and significantly strengthen our foundation for profitable growth in the future. At the same time, in line with our firm belief that the desirability of our brands and products will be the decisive factor to significantly increase revenues and profits over time, we will further increase our brand-building investments this year.

1 To our S hareholders Letter from the CEO

I have no doubt that 2016 will be another important and successful stage in our race to become the best sports company in the world and achieve the Group’s long-term financial ambition. Our brands are benefiting from the ever-increasing relevance of sport in the lives of people around the globe. Our products are in high demand with consumers in every part of the world. Our order books are full across all major performance and lifestyle categories. And our brands are set to shine at this year’s major sporting events. This gives us every confidence that we will again grow the top and bottom line at a double-digit rate this year and continue to create significant value for you.

H E R B E RT H A I NE R adidas Group CEO

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EXECUTIVE BOARD

1 To our S hareholders Executive Board

OUR EXECUTIVE BOARD IS COMPRISED OF FIVE MEMBERS. EACH BOARD MEMBER IS RESPONSIBLE FOR AT LEAST ONE MAJOR FUNCTION WITHIN THE GROUP.

HERBERT HAINER C H IE F E X EC U T IV E O FF ICER

Herbert Hainer was born in Dingolfing, Germany, in 1954. Following his business studies, he spent eight years with Procter & Gamble in various sales and marketing positions. Herbert Hainer joined adidas Germany in 1987 and has held numerous management positions within the Group, including Managing Director Germany and Senior Vice President for Sales and Logistics in Europe, Africa and the Middle East. Herbert Hainer joined the Executive Board in 1997 and became CEO of adidas AG in 2001. He is married, has two daughters and lives in Herzogenaurach, Germany.

Eric Liedtke was born in Dayton/Ohio, USA, in 1966. After obtaining his Bachelor’s degree in journalism, he started his career at DMB&B Advertising in the USA. He joined the adidas Group in 1994 as Global Line Manager for Cross Training in Portland/ Oregon. During his career with adidas, Eric Liedtke has held various senior management positions at adidas America, including Director of Footwear Marketing and Vice President Brand Marketing. In 2006, he moved to the adidas Group headquarters in Germany. In 2011, he became Senior Vice President adidas Sport Performance, responsible for all adidas sports categories globally. He was appointed to the Executive Board in 2014, where he assumed responsibility for Global Brands. Eric Liedtke has two daughters and lives in Nuremberg, Germany.

Herbert Hainer is also:

•• Deputy Chairman of the Supervisory Board, FC Bayern München AG, Munich, Germany

•• Member of the Supervisory Board, Allianz Deutschland AG, Munich, Germany •• Member of the Supervisory Board, Deutsche Lufthansa AG, Cologne, Germany

Eric Liedtke is also:

•• Member of the Steering Committee of Parley for the Oceans

ROLAND AUSCHEL GLO BAL SALES

Roland Auschel was born in Bad Waldsee, Germany, in 1963. After obtaining his Bachelor’s degree in European business studies in Germany and the UK as well as an MBA in the United States, he joined the adidas team as a Strategic Planner in 1989. During his career with the adidas Group, he has held many senior management positions, including Business Unit Manager, Key Account Manager Europe and Head of Region Europe, Middle East and Africa. In 2009, he became Chief Sales Officer Multichannel Markets. In 2013, Roland Auschel was appointed to the Executive Board where he assumed responsibility for Global Sales. He is married, has two children and lives in Erlangen, Germany.

ERIC LIEDTKE G LOBA L BRA N DS

ROBIN J. STALKER CHIE F F IN A N CIA L OF F ICER

Robin J. Stalker was born in Palmerston North, New Zealand, in 1958. In 1982, following his degree in business studies, he began his professional career and qualified as a Chartered Accountant. He worked for Arthur Young in New Zealand and London and subsequently held financial and controlling positions in the entertainment industry, including United International Pictures and Warner Bros. International, and also worked as an independent consultant. Robin J. Stalker joined adidas AG in 1996. Since February 2000, he has been Chief Financial Officer of adidas AG and was appointed to the Executive Board, responsible for Finance, in 2001. In 2005, he assumed additional responsibility as Labour Director. Robin J. Stalker is married and lives near Herzogenaurach, Germany. Robin J. Stalker is also:

GLENN BENNETT GLO BAL O P E R AT IO N S

•• Member of the Supervisory Board, Schaeffler AG, Herzogenaurach, Germany

Glenn Bennett was born in New Hampshire, USA, in 1963. With a degree in computer science, he began his professional career with Reebok International Ltd. in 1983, where he worked in various operations and product functions, of which the latest was Director of Footwear Development. In 1993, Glenn Bennett joined adidasAG and began working as the Head of Footwear Development. He was subsequently promoted to Senior Vice President of Footwear Operations and, in 1997, appointed to the Executive Board where his responsibilities were expanded to include Footwear, Apparel and Accessories & Gear Development, Global Sourcing, Supply Chain Management and, most recently, IT. Glenn Bennett is married, has one daughter and lives in Boston/Massachusetts, USA.

FOR MORE INFORMATION ON THE ADIDAS GROUP’S EXECUTIVE BOARD: WWW.ADIDAS-GROUP.COM / EXECUTIVE-BOARD

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SUPERVISORY BOARD

IGOR LANDAU CHAIRMAN

SABINE BAUER * DEPUTY CHAIRWOMAN

WILLI SCHWERDTLE DEPUTY CHAIRMAN

residing in Lugano, Switzerland

residing in Erlangen, Germany

residing in Munich, Germany

Pensioner, Member of the Board of Directors, Sanofi-Aventis S.A., Paris, France

Full-time member of the Works Council Herzogenaurach, adidas AG

•• Member of the Board of Directors,

Chairwoman of the Central Works Council, adidas AG

Independent Management Consultant as well as Partner, WP Force Solutions GmbH, Bad Homburg v. d. Höhe, Germany

•• Member of the Supervisory Board, Eckes AG,

Chairwoman of the European Works Council, adidas AG

•• Chairman of the Supervisory Board,

Sanofi-Aventis S.A., Paris, France

Nieder-Olm, Germany

Windeln.de AG, Munich, Germany 1

DIETER HAUENSTEIN *

DR. WOLFGANG JÄGER *

DR. STEFAN JENTZSCH

residing in Herzogenaurach, Germany

residing in Bochum, Germany

residing in London, Great Britain

Full-time member of the Works Council Herzogenaurach, adidas AG

Managing Director in charge of Public Relations and Scholarships, Hans-Böckler-Stiftung, Düsseldorf, Germany

Corporate Finance Consultant/Partner, Perella Weinberg Partners UK LLP, London, Great Britain

•• Member of the Supervisory Board, Sky

Deutschland AG, Unterföhring, Germany 2

•• Deputy Chairman of the Supervisory Board,

AILLeasing München AG, Grünwald, Germany

HERBERT KAUFFMANN

KATJA KRAUS

KATHRIN MENGES

residing in Stuttgart, Germany

residing in Hamburg, Germany

residing in Neuss, Germany

Independent Management Consultant, Stuttgart, Germany

Managing Partner, Jung von Matt/sports GmbH, Hamburg, Germany

Executive Vice President Human Resources and Infrastructure Services, Henkel AG & Co. KGaA, Düsseldorf, Germany

•• Chairman of the Supervisory Board,

Mandates within the Henkel Group

Unisconuniversal identity control GmbH, Munich, Germany 3

•• Member of the Supervisory Board, Henkel

•• Member of the Supervisory Board, DEUTZ AG,

Central Eastern Europe GmbH, Vienna, Austria

Cologne, Germany

•• Member of the Supervisory Board, Henkel

Nederland B.V., Nieuwegein, The Netherlands

•• Member of the Board of Directors,

Henkel Norden AB, Stockholm, Sweden

•• Member of the Board of Directors,

Henkel Norden Oy, Vantaa, Finland

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ROLAND NOSKO *

HANS RUPRECHT *

HEIDI THALER-VEH *

residing in Wolnzach, Germany

residing in Herzogenaurach, Germany

residing in Uffenheim, Germany

Trade Union Official, IG BCE, Headquarter Nuremberg, Nuremberg, Germany

Vice President Customer Service Central Europe West, adidas AG

Member of the Central Works Council, adidas AG

•• Deputy Chairman of the Supervisory Board, CeramTec GmbH, Plochingen, Germany

STANDING COMMITTEES Steering Committee — Igor Landau (Chairman), Sabine Bauer *, Willi Schwerdtle General Committee — Igor Landau (Chairman), Sabine Bauer *, Roland Nosko*, Willi Schwerdtle Audit Committee — Herbert Kauffmann (Chairman), Dr. Wolfgang Jäger*, Dr. Stefan Jentzsch, Hans Ruprecht * Finance and Investment Committee — Igor Landau (Chairman), Sabine Bauer *, Dr. Wolfgang Jäger *, Herbert Kauffmann Nomination Committee — Igor Landau (Chairman), Kathrin Menges, Willi Schwerdtle Mediation Committee pursuant to § 27 section 3 Co-Determination Act (MitbestG) — Igor Landau, Sabine Bauer *, Willi Schwerdtle, Heidi Thaler-Veh*

* Employee representative. 1 Since April 21, 2015. 2 Until September 18, 2015. 3 Until January 12, 2016.

1 To our S hareholders Supervisory BoardReport

SUPERVISORY BOARDREPORT

IGOR LANDAU CHAIRMAN OF THE SUPERVISORY BOARD

DEAR SHAREHOLDERS, We look back on 2015 as a very successful financial year. Thanks to strong brands and partnerships in the world of sport, as well as first-class innovations, the adidas Group was able to achieve strong sales and earnings growth. Despite the continuing weakness of the golf market worldwide and the resulting unsatisfactory business development of TaylorMade-adidas Golf, on a Group level the sales and earnings targets set at the beginning of the year were exceeded. The strong momentum currently experienced by adidas and Reebok around the globe has contributed significantly towards this. In addition to some initial visible successes

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in North America, this primarily reflects double-digit growth rates in Western Europe, Greater China and numerous other emerging markets in which the Group is superbly positioned. Additionally, in the past year, the company introduced its new strategic business plan ‘Creating the New’ for the period until 2020. Through a substantial increase in the brands’ desirability, the Group aims to significantly improve sales and earnings over the next five years. And in the short term as well, in light of upcoming product launches and the presence of our brands at numerous high-profile sports events, our Group is extremely well positioned to continue growing profitably this year.

SUPERVISION AND ADVICE IN DIALOGUE WITH THE EXECUTIVE BOARD In the year under review, we again performed all our tasks laid down by law, the Articles of Association and the Rules of Procedure carefully and conscientiously. We regularly advised the Executive Board on the management of the company and diligently and continuously supervised its management activities, assuring ourselves of the legality, expediency and regularity thereof. The Executive Board involved us directly in all of the Group’s fundamental decisions. After in-depth consultation and examination of the detailed information submitted to us by the Executive Board, we approved individual transactions where required by law. The Executive Board informed us extensively and in a timely manner through written and oral reports at our Supervisory Board meetings. This information covered all relevant aspects of the Group’s business strategy, business planning, including finance, investment and personnel planning, the course of business and the Group’s financial position and profitability. We were also kept up to date on matters relating to the risk situation, risk management and compliance as well as all major decisions and business transactions. The Executive Board always explained immediately and in a detailed manner any deviations in business performance from the established plans, and the Supervisory Board as a whole discussed these matters indepth. The Executive Board regularly provided us with comprehensive reports for the preparation of our meetings. We thus always had the opportunity to critically analyse the Executive Board’s reports and resolution proposals within the committees and within the Supervisory Board as a whole and to put forward suggestions before resolving upon the Executive Board’s proposals after in-depth examination and consultation. In the periods between our meetings, the Executive Board also provided us with extensive, timely monthly reports on the current business situation. In the year under review, we held five regular meetings of the entire Supervisory Board as well as one extraordinary meeting by way of a conference call. Apart from two of these meetings which one Supervisory Board member and one meeting which two Supervisory Board members were prevented from attending due to other business appointments which could not be postponed, all members of the Supervisory Board attended the meetings. The average attendance rate at meetings of the entire Supervisory Board was therefore just under 93%. All the committee meetings, with the exception of one Audit Committee meeting at which one member was absent, were fully attended. The external auditor, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG), attended all regular meetings of the Supervisory Board, inasfar as no Executive Board matters were dealt with. KPMG also attended all meetings of the Audit Committee. The employee representatives held separate meetings to prepare and discuss agenda items for all meetings of the entire Supervisory Board. In the periods between meetings, the Supervisory Board Chairman and the Audit Committee Chairman maintained regular contact with the Chief Executive Officer and the Chief Financial Officer, conferring on matters such as corporate strategy, business development and planning, the risk situation and risk management as well as compliance. In addition, the Executive Board immediately informed the Supervisory Board Chairman about any significant events of fundamental importance for the management and for evaluating the situation and development of the company.

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TOPICS FOR THE ENTIRE SUPERVISORY BOARD Our consultations and examinations focused on the following topics:

SITUATION AND BUSINESS DEVELOPMENT The development of sales and earnings, the employment situation as well as the financial position of the Group and the business development of the Group’s individual business areas and markets were presented to us in detail by the Executive Board following the close of the respective quarter and were discussed regularly. Further ongoing topics for discussion were the possible impact of global economic developments as well as the development of our individual brands and markets. In February 2015, the Executive Board presented us with details of the new strategic business plan Creating the New for the period until 2020, established on the three key strategic pillars of Speed, Cities and Open Source. At our meeting in March, we reviewed and dealt intensively with the KPMG-certified 2014 annual financial statements and consolidated financial statements, including the combined management report for adidas AG and the Group, as well as the Executive Board’s proposal regarding the appropriation of retained earnings. At this meeting as well as the meeting in May, we dealt in detail with the subject of retail profitability. At the meetings held in August and November, the Executive Board provided us with comprehensive information on the continuing weakness of the golf market worldwide and the resulting unsatisfactory business development for TaylorMade-adidas Golf in the 2015 financial year. The Executive Board provided us at both these meetings with an extensive outlook on the expected sales development of the golf business and informed us regarding the restructuring measures already undertaken. Following intensive discussions, we then approved the same. In November, the Executive Board reported on the major changes to the business model resulting from the Speed pillar of the 2020 strategic business plan. Furthermore, the Executive Board reported extensively on the measures the company had since taken to redress the allegations of, in some cases, adverse working conditions under the temporary work agencies used by the company at the Central Distribution Centre (CDC) in Rieste, Germany.

TRANSACTIONS REQUIRING SUPERVISORY BOARD APPROVAL In accordance with statutory regulations and the Rules of Procedure of the Supervisory Board, certain transactions and measures require a formal resolution or the prior approval of the Supervisory Board. The topic of our February meeting was, after thorough discussion, the resolution on the 2015 Budget and Investment Plan presented by the Executive Board. In March, we resolved upon the resolutions to be proposed to the 2015 Annual General Meeting, including the proposal regarding the appropriation of retained earnings for the 2014 financial year as well as the proposal to approve the compensation system for the members of the Executive Board. At the meetings in March and November, the Executive Board reported on the investment into the extension of office buildings at the World of Sports on the Herzogenaurach campus, which we approved in November after in-depth consultation and discussion. At our meeting in May, we discussed the strategic and financial advantages of acquiring the hitherto rented, strategically important distribution centre in Chekhov, Russia, which we approved in the interest of optimising profitability. At the August meeting, we discussed in detail the Executive Board’s planned acquisition of all shares in runtastic GmbH, Austria, which, with its comprehensive app portfolio, enables the company to further expand its digital marketing. We then approved the acquisition at a purchase price of € 220 million.

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COMPOSITION OF THE EXECUTIVE BOARD At our meeting in May, we dealt extensively with the new law on the equal representation of women and men in leadership positions and discussed in detail the target figure for the future representation of women on the Executive Board of the company. Although primarily professional expertise, skills and experience as well as personality will remain decisive for the Supervisory Board in selecting a member to the Executive Board, at our meeting in August we resolved upon the target of appointing at least one woman as member of the Executive Board of adidas AG by June 30, 2017 at the latest. At our November meeting, after in-depth consultation we resolved to renew Roland Auschel’s mandate as member of the Executive Board and to extend his Executive Board service contract. With this personnel decision, we acknowledged his performance and ensured continuity on the Executive Board. At our meeting in January 2016, we extensively discussed the resolution proposal prepared by the General Committee on the appointment of a successor for the long-standing Chief Executive Officer Herbert Hainer. Following in-depth consultation, we resolved to appoint Kasper Rorsted as full member of the Executive Board with effect from August 1, 2016 and as Chief Executive Officer with effect from October 1, 2016. As Kasper Rorsted is already available to assume his new position from this summer, Herbert Hainer agreed to relinquish his Executive Board mandate effective September 30, 2016.

EXECUTIVE BOARD COMPENSATION All matters regarding Executive Board compensation were prepared comprehensively by the General Committee, as provided for in the Rules of Procedure of the Supervisory Board, and then submitted to the Supervisory Board as a whole for resolution. Each year at our February meeting of the entire Supervisory Board, the main subject is Executive Board compensation. At this meeting, following an in-depth review of the performance of the Executive Board members and the achievement of targets set for the Long Term Incentive Plan 2012/2014 (‘LTIP 2012/2014‘) and for the 2014 Performance Bonus Plan respectively, we resolved upon the bonuses to be granted to the Executive Board members based on these plans. At this meeting, we discussed in detail the introduction of a cap for any potential severance payment upon premature termination of Executive Board tenure and then resolved to limit any such compensatory payment to a maximum of twice the (contractually defined) overall annual compensation, however not to exceed payment claims for the remaining period of the service contract. Regarding the minor benefits granted to Executive Board members, we also introduced a cap of 5% of the sum of the annual fixed salary plus the (potential) Performance Bonus. At our meeting in March, we discussed in detail the targets and key criteria for the new Long Term Incentive Plan LTIP 2015/2017 that is measured over a three-year period and the 2015 Performance Bonus Plan as well as the individual bonus target amounts, and then resolved upon them for each Executive Board member. In line with the German Corporate Governance Code (hereinafter referred to as the ‘Code’), in the year under review we commissioned an external, independent compensation expert to review the Executive Board compensation system and the individual compensation of the Executive Board members. The review found that the compensation structure is oriented towards sustainable development of the company and that it meets statutory requirements as well as those of the Code. It furthermore found that the target compensation of the Executive Board members is considered appropriate as defined by the German Stock Corporation Act (Aktiengesetz – AktG) and the Code, but also that a comparison with other companies reveals above all a need to address the pensions granted to the Executive Board members. Also regarding the fixed annual compensation of some individual members of the Executive Board, the review showed that there is room for a moderate increase in order to ensure competitive compensation. At the meetings of the General Committee and of the Supervisory Board as a whole in October and November, the members of the Supervisory Board considered in detail the results of the review and agreed with the assessment of the compensation expert. The Supervisory Board therefore resolved upon the necessary adjustments to the annual fixed salary with effect from the 2016 financial year as well as upon a change in the structure of the pensions granted.

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At our meeting in February 2016, we considered in depth the performance of each Executive Board member in the year under review and then resolved upon the 2015 Performance Bonuses to be granted to them. Detailed information concerning Executive Board compensation can be found in the Compensation Report. SEE COMPE N SATION RE PORT, P. 3 6

CORPORATE GOVERNANCE The Supervisory Board regularly monitors the application and further development of the corporate governance regulations within the company, in particular the implementation of the regulations of the Code. At the meeting in February, we discussed in depth the introduction of a severance payment cap and the inclusion of corresponding provisions in all new or extended Executive Board service contracts in the future. At the same meeting, we furthermore decided to also include a cap on other minor benefits in all new or extended Executive Board service contracts in the future, thus implementing a further recommendation of the Code. As Supervisory Board elections had taken place in May 2014, at the February meeting we also discussed again and updated the objectives the Supervisory Board had set for its composition in the 2013 calendar year. Additionally, we included inter alia the objective that a woman must be represented on the Nomination Committee. At our meeting in August, we discussed the amendments made to the Code by the Government Commission on the German Corporate Governance Code on May 5, 2015 concerning the professionalisation of the Supervisory Board. We furthermore resolved on the implementation of an efficiency examination by means of a questionnaire and involving an external consultant. At our November meeting, we resolved upon an intra-year amendment to the Declaration of Compliance from February 12, 2015. The amendment was necessary in light of our resolution to convert the hitherto defined benefit pension plans into defined contribution pension plans for the Executive Board members who were first appointed on or after October 1, 2013. At our meeting in February 2016, we discussed in depth the contents of the Declaration of Compliance which must be issued each year. By way of circular resolution, we resolved upon the Declaration on February15,2016, which we then made permanently available to our shareholders on our website. WWW.ADIDAS- GROUP.COM/S/ CORPOR ATE- G OV E RN AN C E

In the year under review, no conflicts of interest arose with regard to the Executive Board members. With the exception of the following matter, there were also no conflicts of interest within the Supervisory Board. In the first quarter of 2015, following extensive discussions at its meetings, the Supervisory Board gave its approval to one project-specific consulting contract and two project-specific, fixed-term service contracts with two companies in which in each case one Supervisory Board member has an interest. In order to avoid conflicts of interest, the two Supervisory Board members concerned participated neither in the respective discussions nor in the resolutions. The consulting contract was terminated by the company with effect from June 30, 2015. As the fixed-term service contracts expired at the end of the year under review, in December 2015 and under exclusion of the Supervisory Board member concerned, by way of circular resolution we approved the conclusion of a new framework contract starting in January 2016. Further information on corporate governance at the adidas Group can be found in the Corporate Governance Report including the Declaration on Corporate Governance. SEE CORPOR ATE G OVERNANCE REPORT INCLUDING TH E D EC LAR ATION ON CORPOR ATE G OVE R N AN C E , P. 28

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EFFICIENT COMMITTEE WORK In order to perform our tasks in an efficient manner, in addition to the six Supervisory Board standing committees S EE SUPERVISORY BOARD, P. 1 8 , we also established the project-related ad hoc committee ‘Relay’, which we dissolved at the November meeting of the Supervisory Board upon completion of the project. The committees prepare resolutions of the Supervisory Board as well as topics for Supervisory Board meetings. Within the legally permissible framework and in appropriate cases, we have furthermore delegated the Supervisory Board’s authority to pass certain resolutions to individual committees. With the exception of the Audit Committee, the Supervisory Board Chairman also chairs all the standing committees. The committee chairpersons inform the Supervisory Board about the content and results of the committee meetings at the subsequent meeting of the entire Supervisory Board.

• The Steering Committee did not meet in the year under review. • The General Committee held eight meetings in the 2015 financial year. One additional meeting, dealing with topics of the year under review, took place in February 2016. The main focus of the meetings of the General Committee was the preparation of the resolutions of the Supervisory Board as a whole, detailed individually above. For the resolution of the Supervisory Board on the variable compensation components, the General Committee dealt comprehensively with the performance of the Executive Board members in the 2014 and 2015 financial years, and furthermore prepared proposals for the new performance criteria and individual target bonuses for the variable compensation components applicable as of the 2015 financial year, such as the LTIP 2015/2017 and the 2015 Performance Bonus Plan. The committee furthermore prepared the resolution of the Supervisory Board on reviewing the appropriateness of Executive Board compensation and on setting a target figure for the future representation of women on the Executive Board. Based on detailed analyses and sector comparisons conducted by an external compensation consultant, the General Committee prepared a resolution proposal for restructuring the Executive Board pension scheme. Starting in February, in consultation with a high-profile external executive search firm, the General Committee dealt intensively with the search for a suitable successor for the long-standing Chief Executive Officer Herbert Hainer. Based on a requirements profile developed by the Supervisory Board, the General Committee met with several selected candidates in person and convinced itself of their qualifications and suitability before, following in-depth discussions at its meeting in November, preparing a resolution proposal for the Supervisory Board.

• The Audit Committee held five meetings in the year under review. One additional meeting, dealing with topics of the year under review, took place in February 2016. The Chief Financial Officer and the auditor were present at all meetings and reported to the committee members in detail. In addition to the supervision of the accounting process, the committee’s work focused on the comprehensive review of the first quarter report, the first half year report and the report on the first nine months together with the Chief Financial Officer and the auditor before the respective dates of publication, also the preliminary examination of the annual financial statements and the consolidated financial statements for 2014, including the combined management report of adidas AG and the Group, as well as the Executive Board’s proposal regarding the appropriation of retained earnings. Following an in-depth review of the audit reports with the auditor, the committee decided to recommend that the Supervisory Board approve the 2014 annual financial statements and consolidated financial statements. In addition, after obtaining the auditor’s declaration of independence, the Audit Committee prepared the Supervisory Board’s proposal to the Annual General Meeting concerning the selection of the auditor of the annual financial statements and the consolidated financial statements for 2015. Following extensive discussion by the committee, the priority topics for the audit of the 2015 annual financial statements and consolidated financial statements were determined and the audit assignment was granted together with the corresponding audit fee.

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As in previous years, the meeting in September focused on examining the efficiency of the internal audit system, the internal control system and the risk and compliance management system. In the context of this examination, the committee members reviewed in depth the main risk factors for the Group, the applied control methods and reporting systems and the efficiency thereof with the aid of written and oral reports. In the course of the following comprehensive discussions, inter alia with the auditor, the committee members assured themselves of the effectiveness of the systems and discussed possibilities for improvement. Furthermore, the 2015 audit report and the draft of the 2016 audit plan of Internal Audit were discussed in detail. Additionally, the committee resolved upon the implementation of an efficiency examination of its activities, the results of which were presented to the committee at its meeting in November. The reporting of the Chief Compliance Officer was a topic at every meeting of the Audit Committee. At the September meeting, he reported extensively on the independent audit conducted at the Central Distribution Centre in Rieste in order to bring clarity regarding accusations of, in some cases, adverse working conditions, and about the countermeasures to be taken.

• The Finance and Investment Committee held six meetings in the year under review, two of which were held by way of a conference call. At the meetings in the first quarter, the committee extensively discussed the commencement of a second tranche of a share buyback programme based on the authorisation granted by the Annual General Meeting in May 2014, and approved the proposal of the Executive Board to repurchase up to a maximum of six million shares in the period between March 6 and July 3, 2015 at an overall purchase price of up to € 300 million. At the August meeting, the committee discussed in detail the potential acquisition of runtastic GmbH, Austria, and recommended that the Supervisory Board approve the acquisition at an overall purchase price of €220million. Following extensive discussions, at the November and December meetings the committee members granted approval for certain capital increases for Group subsidiaries.

• The

Mediation Committee, established in accordance with the German Co-Determination Act (Mitbestimmungsgesetz – MitbestG), had no reason to convene in 2015.

• The Nomination Committee did not meet in the year under review. • The ‘Relay’ Committee, which was established for the sale of the Rockport brand, did not meet in the year under review.

1 To our S hareholders Supervisory BoardReport

EXAMINATION OF THE 2015 ANNUAL FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS KPMG audited the 2015 consolidated financial statements prepared by the Executive Board in accordance with §315a German Commercial Code (Handelsgesetzbuch – HGB) in compliance with IFRS and issued an unqualified opinion thereon. The auditor also approved without qualification the 2015 annual financial statements of adidasAG, prepared in accordance with HGB requirements, and the combined Management Report for adidasAG and the Group. The financial statements, the proposal put forward by the Executive Board regarding the appropriation of retained earnings and the auditor’s reports were distributed by the Executive Board to all Supervisory Board members in a timely manner. We examined the documents in depth, with a particular focus on legality and regularity, in the presence of the auditor at the Audit Committee meeting held on February 26,2016 and at the Supervisory Board’s March 2, 2016 financial statements meeting, during which the Executive Board explained the financial statements in detail. At both meetings, the auditor reported the material results of the audit with a focus on the priority topics of the year under review as agreed with the Audit Committee and was available for questions and the provision of additional information. The auditor did not report any significant weaknesses with respect to the internal control and risk management system relating to the accounting process. We also discussed in depth with the Executive Board the proposal concerning the appropriation of retained earnings, which provides for a dividend of € 1.60 per dividend-entitled share and adopted the proposal under consideration of the Group’s financial situation and future prospects as well as the expectations of our shareholders. Based on our own examinations of the annual and consolidated financial statements, we came to the conclusion that there are no objections to be raised. At our financial statements meeting, therefore, following the recommendation of the Audit Committee, we approved the audit results and the financial statements prepared by the Executive Board. The annual financial statements of adidas AG were thus approved.

CHANGES ON THE SUPERVISORY BOARD In the 2015 financial year, there were no changes on the Supervisory Board.

EXPRESSION OF THANKS On behalf of the Supervisory Board, I wish to thank the Executive Board and all adidas Group employees around the world for their tremendous personal dedication and their ongoing commitment, and I also thank the employee representatives for their good collaboration. For the Supervisory Board

IG O R LA NDAU Chairman of the Supervisory Board March 2016

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Corporate Governance Report includingthe Declaration on Corporate Governance

CORPORATE GOVERNANCE REPORT INCLUDINGTHE DECLARATION ON CORPORATE GOVERNANCE 1 Corporate governance stands for responsible and transparent management and corporate control oriented towards a sustainable increase in value. We are convinced that good corporate governance is an essential foundation for sustainable corporate success and enhances the confidence placed in our Group by our shareholders, business partners, employees and the financial markets. The following report includes the Corporate Governance Report and the Declaration on Corporate Governance issued by the Executive Board and Supervisory Board.

DUAL BOARD SYSTEM As a globally operating public listed company with its registered seat in Herzogenaurach, Germany, adidasAG is, inter alia, subject to the provisions of German stock corporation law. A dual board system, which assigns the management of the company to the Executive Board and advice and supervision of the Executive Board to the Supervisory Board, is one of the fundamental principles of German stock corporation law. These two boards are strictly separated both in terms of members and of competencies. In the interest of the company, however, both Boards cooperate closely.

COMPOSITION AND WORKING METHODS OF THE EXECUTIVE BOARD The composition of our Executive Board, which consists of five members, reflects the international character of our Group. No member of the Executive Board has accepted more than a total of three supervisory board mandates in non-Group listed companies or in supervisory bodies of non-Group companies with similar requirements. The Executive Board is responsible for independently managing the company, determining the Group’s strategic orientation, agreeing this with the Supervisory Board and ensuring its implementation. Further, it defines business targets, company policy and the organisation of the Group. Additionally, the Executive Board ensures appropriate risk management and risk controlling as well as compliance with statutory regulations and internal guidelines. It is bound to the company’s interest and obligated to strive for a sustainable increase in company value.

see Executive Board, p. 16

Irrespective of the Executive Board’s overall responsibility, its members are individually responsible for managing their respective business areas in accordance with the Executive Board’s Business Allocation Plan. There are no Executive Board committees. The CEO is responsible in particular for leading the entire Executive Board as well as for guiding business development, including the coordination of the business segments, brands and markets. The members of the Executive Board keep each other informed on all significant developments in their business areas and align on all cross-functional measures. Further details on collaboration within the Executive Board are governed by the Rules of Procedure of the Executive Board and the Business Allocation Plan. These documents specifically stipulate requirements for meetings and resolutions as well as for cooperation with the Supervisory Board. At the Supervisory Board meetings, the Executive Board reports in writing and orally on the agenda items and resolution proposals and answers all questions from the individual Supervisory Board members. The CEO and the CFO maintain regular contact and consult with the Chairman of the Supervisory Board and the Audit Committee Chairman on key aspects of strategy, planning and business development as well as on questions of risk management and compliance within the Group. 1 The Corporate Governance Report including the Declaration on Corporate Governance is an unaudited section of the Group Management Report.

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COMPOSITION AND WORKING METHODS OF THE SUPERVISORY BOARD Our Supervisory Board consists of an equal number of shareholder representatives and employee representatives in accordance with the German Co-Determination Act (Mitbestimmungsgesetz – MitbestG). The shareholder representatives are elected by the shareholders at the Annual General Meeting, and the employee representatives by the employees. The last periodic election took place in 2014. The term of office of the current members of the Supervisory Board expires at the end of the 2019 Annual General Meeting. In accordance with the recommendations of the German Corporate Governance Code (hereinafter the ‘Code’), the Supervisory Board resolved upon the following objectives for its composition at its meeting on February 11, 2015: •• The composition of the Supervisory Board including members with international background shall be maintained to the current extent. Diversity in terms of expertise and experience on the grounds of origin, education or professional activity shall continue to be taken into account in the future. •• The number of women on the Supervisory Board, namely four, shall be maintained. Furthermore, one woman shall be a member of the Nomination Committee. •• As in the past, all members of the Supervisory Board shall be independent. This presupposes that all employee representatives also in principle meet the independence criteria as defined by the Code. Substantial, not merely temporary conflicts of interest shall be avoided. •• The members of the Supervisory Board shall dispose of sufficient time for performing their mandate. •• The age limit of, in general, 72 years at the time of election shall be taken into account.

FURTHER I NFORMATION ON CORPORATE GOVERNANCE More information on topics covered in this report can be found on our website W W W. AD I DAS- G RO U P. CO M /S/CO R P O R ATE G OVE R N AN C E

including:

•• Articles of Association •• Rules of Procedure of the Executive Board

•• Rules of Procedure of the Supervisory Board

•• Rules of Procedure of the Audit Committee

•• Supervisory Board

Committees (composition and tasks) •• CVs of Executive Board members and Supervisory Board members

The Supervisory Board, however, cannot influence the selection of candidates for employee representatives on the Supervisory Board. In the new version dated May 5, 2015, the Code contains an additional recommendation on specifying a regular limit of length of membership for Supervisory Board members. However, at its meeting on February10, 2016, the Supervisory Board resolved not to follow this recommendation, as a general limit would not take into consideration specific factors which might justify an extended length of membership of individual Supervisory Board members in the interest of the company and from the point of view of those entitled to elect members to the Supervisory Board. The members of the Supervisory Board have the knowledge, skills and professional expertise required to properly perform their tasks. As they have extensive knowledge of various professional fields, and in some cases also many years of international experience, they bring a broad spectrum of expertise to the performance of their Supervisory Board function. The number of female Supervisory Board members currently amounts to four. Assuming all of the employee representatives also in principle meet the independence criteria for Supervisory Board members as defined by the Code, in the Supervisory Board’s assessment, all of its members are independent. The members of our Supervisory Board do not exercise directorships or similar positions or advisory tasks for key competitors of the company. Further, they do not have business or personal relations with adidas AG, its Executive Board and Supervisory Board or a controlling shareholder which may cause a substantial and not merely temporary conflict of interest. The age limit of, in general, 72 years at the time of election was taken into account in the selection process. The composition of the Supervisory Board consequently fully complies with the set objectives resolved on February 11, 2015. The personal qualification of the Supervisory Board members also remains the basis for every Supervisory Board function. Therefore, other important criteria will also be considered when nominating candidates for election. Personality, integrity and sufficient diversity in terms of expert and industry knowledge as well as particular experience, e.g. in the fields of accounting or annual auditing, will continue to be taken into account as at present. These are important preconditions for the Supervisory Board to work together productively and to competently supervise and advise the Executive Board. The best interests of the company will continue to play a decisive role when nominating candidates for election.

see Supervisory Board, p. 18

www.adidas-group.com/s/ supervisory-board

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The Supervisory Board supervises and advises the Executive Board in questions relating to Group management. The Executive Board regularly, expeditiously and comprehensively reports on business development and planning as well as on the risk situation including compliance and coordinates the strategy of the company and its implementation with the Supervisory Board. The Supervisory Board examines and approves the annual financial statements of adidas AG and the adidas Group, taking into consideration the auditor’s reports, and resolves upon the proposal of the Executive Board on the appropriation of retained earnings. Additionally, it resolves upon the resolution proposals to be presented to the Annual General Meeting. Certain business transactions and measures of the Executive Board with fundamental significance are subject to prior approval by the entire Supervisory Board or by a Supervisory Board committee. The Supervisory Board is also responsible for the appointment and dismissal of members of the Executive Board. When appointing members of the Executive Board, the Supervisory Board pays attention to the best possible composition of the Executive Board. Inter alia, experience, industry knowledge as well as personal and expert qualifications play an important role in this regard. The Supervisory Board further determines the Executive Board compensation system, examines it regularly and decides on the individual overall compensation of each Executive Board member. To this end, the relation between Executive Board compensation and that of senior management and employees overall is taken into account, also in terms of its development over time. Further information on Executive Board compensation is compiled in the Compensation Report. In order to increase the efficiency of its work and to deal with complex topics, the Supervisory Board has formed six permanent expert committees from within its members, which, inter alia, prepare its resolutions and, in certain cases, pass resolutions on its behalf. These committees are the Steering Committee, the General Committee, the Audit Committee, the Finance and Investment Committee, the Mediation Committee in accordance with § 27 section 3 MitbestG and the Nomination Committee. The chairmen of the committees report to the entire Supervisory Board on the results of the committee work on a regular basis. The composition of the committees can be found in our overview of the Supervisory Board. Further information on the committees’ tasks is available on our website. Apart from the tasks and responsibilities, the Rules of Procedure of the Supervisory Board and of the Audit Committee also set out the individual requirements expected of the members and the procedure for meetings and passing resolutions. These Rules of Procedure are available on our website. The Supervisory Board Report provides information on the activities of the Supervisory Board and its committees in the year under review. The members of the Supervisory Board are individually responsible for undertaking any necessary training and professional development measures required for their tasks and, in doing so, are supported by adidasAG. The company informs the Supervisory Board regularly about current legislative changes as well as opportunities for external training, and provides the Supervisory Board with relevant specialist literature. Every two years, the Supervisory Board and the Audit Committee examine the efficiency of their work by means of questionnaires and individual interviews. As a result, suggestions for even better cooperation can be made. The last efficiency examinations were conducted in 2015. The analysis of the questionnaires was carried out by an external consultant. At the meetings of the Supervisory Board and Audit Committee in November 2015, the results of the efficiency examinations were presented and discussed. No major efficiency deficits were identified for either body.

see Compensation Report, p. 36

see Supervisory Board, p. 18

www.adidas-group.com/s/ supervisory-board-committees

s ee Supervisory Board Report, p. 20

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COMMITMENT ON THE PROMOTION OF THE EQUAL PARTICIPATION OF WOMEN AND MEN IN LEADERSHIP POSITIONS When filling management positions in the company, the Executive Board takes diversity into consideration and especially aims for an appropriate consideration of women. By the end of 2017, it is planned to increase the number of women in management positions to 32% worldwide. The Supervisory Board is also convinced that an increase in the number of women in leadership positions in the adidas Group is necessary to ensure that, in the future, an increased number of female candidates are available for Executive Board positions. The Supervisory Board thus supports the diversity and inclusion initiatives of the Group, particularly concerning the promotion of women in leadership positions.

see Our People, p. 87

s ee Supervisory Board Report, p. 20

www.adidas-group.com/s/ directors-dealings

Pursuant to the German ‘Law on Equal Participation of Women and Men in Leadership Positions in the Private and Public Sector’, which came into force on May 1, 2015, the executive boards and supervisory boards of certain companies in Germany are required for the first time to set objectives for the percentage of female representation on the supervisory board, the executive board and the two management levels below the executive board, and to specify a deadline for implementing the individual percentage of female representation. The companies had to set their objectives including the implementation deadlines by September 30, 2015. Under the law, the first implementation deadlines for the objectives had to be no later than June 30, 2017. For the percentage of female representation on the supervisory boards of publicly listed and co-determined companies such as adidas AG, the law stipulates that a mandatory minimum representation of 30% women and 30% men when filling Supervisory Board positions has to be observed from January 1, 2016. Since the 2014 Annual General Meeting, the female representation on our Supervisory Board amounts to 30%. On August 5, 2015, the Supervisory Board of adidas AG resolved to appoint a woman to the Executive Board of adidas AG by June 30, 2017 at the latest. On July 2, 2015, the Executive Board of adidas AG resolved to increase the female representation on the first management level below the Executive Board in Germany to 18% by June 30, 2017. The female representation on the second management level below the Executive Board is to be increased to 30% within the same implementation period.

AVOIDING CONFLICTS OF INTEREST The members of the Executive Board and Supervisory Board are obligated to disclose any conflicts of interest to the Supervisory Board without any delay. Substantial transactions between the company and members of the Executive Board or persons in a close relation with them require Supervisory Board approval. Contracts between the company and members of the Supervisory Board also require Supervisory Board approval. The Supervisory Board reports any conflicts of interest, as well as the handling thereof, to the Annual General Meeting. In the year under review, neither the members of the Executive Board nor the members of the Supervisory Board faced conflicts of interest, with the exception of the matter outlined in the Supervisory Board Report.

SHARE OWNERSHIP OF THE EXECUTIVE BOARD AND SUPERVISORY BOARD At the end of the 2015 financial year, the individual ownership of shares in the company or related financial instruments held by members of the Executive Board and the Supervisory Board was below 1% of the shares issued by adidas AG. The same applies for the total number of shares held by all members of the Executive Board and the Supervisory Board. In 2015, no directors’ dealings pursuant to § 15a German Securities Trading Act (Wertpapier handelsgesetz–WpHG) were reported to the company. A detailed overview of directors’ dealings reported to adidas AG since 2008 is published on our website.

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Declaration by the Executive Board and Supervisory Board of adidas AG pursuant to § 161 German Stock Corporation Act (Aktiengesetz – AktG) on the German Corporate Governance Code The Executive Board and Supervisory Board of adidas AG issued their last Declaration of Compliance pursuant to § 161 AktG on February 12, 2015 and made an intra-year change on November 4, 2015. For the period from the publication of the last complete Declaration of Compliance up to June 12, 2015, the following Declaration refers to the German Corporate Governance Code (hereinafter referred to as the “Code”) as amended on June 24, 2014. For the period as of June 13, 2015, the following Declaration refers to the recommendations of the Code as amended on May 5, 2015, which was published in the Federal Gazette on June 12, 2015. The Executive Board and Supervisory Board of adidas AG declare that the recommendations of the ‘Government Commission on the German Corporate Governance Code’ have been and are met with the following deviations: Capping overall compensation and variable compensation components (section 4.2.3 subsection 2 sentence 6) Since the issuance of the last Declaration of Compliance, we have followed the recommendations of the Code for one Executive Board service contract that has been newly concluded and for one Executive Board service contract that has been extended with effect from January 1, 2016. Thus, all Executive Board service contracts are now compliant with the recommendations of the Code. Agreeing severance payment caps when concluding Executive Board service contracts (section 4.2.3 subsection 4) Since the issuance of the last Declaration of Compliance, a severance payment cap in accordance with the recommendations of the Code was agreed for one Executive Board service contract that has been newly concluded and for one Executive Board service contract that has been extended with effect from January 1, 2016. Thus, all Executive Board service contracts are now compliant with the recommendations of the Code. Definition of the target level of provision (section 4.2.3 subsection 3) For Executive Board members of adidas AG initially appointed on or after October 1, 2013 and for Executive Board members to be appointed in future, the hitherto defined benefit pension plans were converted to defined contribution pension plans with retroactive effect from January 1, 2015. Due to their structure, the defined contribution pension plans do not aim to reach a defined target level of provision. In the view of the Supervisory Board, the new pension plan arrangement leads to a higher degree of control and future planning capability with regard to the company’s expenses for pension plans. The pension plans of the Executive Board members initially appointed on or before September 30, 2013 will remain defined benefit pension plans. Thus, the deviation declared above does not apply to the entire Executive Board of adidas AG. Specification of a regular limit of length of membership for Supervisory Board members (section 5.4.1 subsection 2 sentence 1) In accordance with section 5.4.1 subsection 2 sentence 1 of the Code, the Supervisory Board has specified concrete objectives for its composition. However, it has not specified a regular limit of length of membership for Supervisory Board members. The Supervisory Board is of the opinion that a general limit would not take into consideration specific factors which might justify an extended length ofmembership of individual Supervisory Board members in the interest of the company and from the point of view of those entitled toelect members to the Supervisory Board. Herzogenaurach, February 15, 2016

For the Executive Board

For the Supervisory Board

HERBERT HAINER

IGOR L AND A U

Chief Executive Officer

Chairman of the Supervisory Board

The aforementioned Declaration of Compliance dated February 15, 2016 has been published under and can be downloaded at WWW. AD I DAS- G RO UP.CO M /S/CO R P O R AT E - G OVE R N AN C E .

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Corporate Governance Report includingthe Declaration on Corporate Governance

SUGGESTIONS OF THE GERMAN CORPORATE GOVERNANCE CODE FULFILLED In addition to the recommendations, the Code contains a number of suggestions for good and responsible corporate governance, compliance with which is not required to be disclosed separately by law. The adidas Group is fully compliant with all suggestions of the Code.

RELEVANT MANAGEMENT PRACTICES Performance, passion, integrity and diversity are the core values of our Group. They are actively lived by our Executive Board members, Supervisory Board members and our employees and have been incorporated into our Code of Conduct which we completely revised in 2014. Our business activities are oriented towards the legal systems in the various countries and markets in which we operate. This implies a high level of social and environmental responsibility. Compliance with working and social standards: The development of company guidelines with regard to social minimum standards, work safety as well as health and environmental protection and the monitoring thereof at the production facilities of the adidas Group and its business partners is an integral component of our corporate policy. Our Group has a separate Code of Conduct for the supply chain, the so-called ‘Workplace Standards’. We report on our sustainability programme in this Annual Report, publish a detailed sustainability report annually and provide information on our progress throughout the year on our website.

www.adidas-group.com/s/ standards-and-policies

see Sustainability, p. 94

www.adidas-group.com/s/ climate-change

Environmental responsibility: For long-term, successful management of the adidas Group, sustainable actions that embrace, in particular, social and environmental responsibility towards present and future generations are essential. Our Social & Environmental Affairs department, with its worldwide team, has for many years been responsible for monitoring the rights of employees in the supply chain as well as for product safety management and the coordination of the environmental strategy. In our chemical management, we have been running leadership programmes that address this topic within our area of direct influence for years now. Further, we have set clear targets on emission reduction and we proactively address the impacts of climate change through a number of initiatives in our own operations, in our supply chain and through various partnerships. At the invitation of the UN Climate Change Secretariat, the Group joined the ‘UN Climate Neutral Now’ initiative. As a champion of the initiative, we have committed, inter alia, to estimate and reduce our emissions and to offset at least part of the remaining unavoidable emissions with UN-certified offsets.

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Social commitment: The adidas Group cooperates with charity organisations in order to improve the quality of life for people by means of sport. Moreover, we support international humanitarian aid efforts, e.g. in the wake of natural disasters, and we are committed through various projects worldwide to education, science and humanitarian initiatives. Our employees also have a wide range of possibilities to participate in social programmes. Through the adidas Fund, for example, they can become involved in charitable causes around the world. Our website provides information on the various projects.

www.adidas-group.com/s/ employee-volunteering

s ee Risk and Opportunity Report, p. 156

In 2015, we focused in particular on refugee aid, through the extensive donation of money and products to refugee camps and through aid and integration programmes at our own locations. Following our ‘threepillar model’, we are committed to humanitarian aid, we collaborate closely with public authorities and external partners as well as volunteers, and we also develop possibilities for work integration. Overall, we contributed an amount exceeding half a million euros for refugee aid from various activities in 2015.

COMPLIANCE AND RISK MANAGEMENT WITHIN THE ADIDAS GROUP Our compliance management system is organisationally linked with the risk and opportunity management system of the Group. As part of our global Fair Play concept, the compliance management system establishes the organisational framework for Group-wide awareness of our internal rules and guidelines and for the legally compliant conduct of our business. It underscores our strong commitment to ethical and fair behaviour in our own organisation and also sets the parameters for how we deal with others. In our competitive environment, continuous development of our compliance management system is of major importance. In 2015, for example, we introduced a special web-based anti-bribery and corruption training programme for our employees worldwide. Moreover, we improved internal reporting and the Compliance responsibilities. In addition, we refined our evaluation methods for risks and opportunities and increased our focus on long-term risks and opportunities. The risk and opportunity management system ensures risk-aware, opportunity-oriented and informed actions in a dynamic business environment in order to guarantee the competitiveness and sustainable success of the adidas Group.

FURTHER INFORMATION ON THE PRINCIPLES OF OUR MANAGEMENT More information on topics covered in this report can be found on our website at W W W. AD I DAS- G RO UP.CO M including:

•• Code of Conduct •• Sustainability •• Social commitment •• Risk and opportunity management and compliance •• Information and documents on the Annual General Meeting •• Directors’ dealings •• Accounting and annual audit

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TRANSPARENCY AND PROTECTION OF SHAREHOLDERS’ INTERESTS It is our goal to inform all institutional investors, private shareholders, financial analysts, business partners, employees and the interested public about the company’s situation, at the same time and to an equal extent, through regular, transparent and up-to-date communication. We publish all essential information, such as press releases, ad hoc announcements and voting rights notifications as well as all presentations from analyst conferences, all financial reports and the financial calendar on our website. With our comprehensive Investor Relations activities, we maintain close and continuous contact with our shareholders.

www.adidas-group.com/ investors

see Our Share, p. 46

see Auditor’s Report, p. 181

In addition, we also provide all documents and information on our Annual General Meeting on our website. The shareholders of adidas AG exercise their shareholders’ rights at the Annual General Meeting. Each share grants one vote. Our shareholders are involved in all fundamental decisions at the Annual General Meeting through their participation rights. It is our intention to support our shareholders in exercising their voting rights at the Annual General Meeting. Therefore, at our next Annual General Meeting, taking place on May 12, 2016 in Fuerth (Bavaria), we will again provide our shareholders with the best possible service. Shareholders have the possibility, inter alia, to electronically register for the Annual General Meeting through our shareholder portal or to participate in voting by granting powers of representation and voting instructions online to the proxies appointed by the company. Further, all shareholders can follow the Annual General Meeting in full length live on the company’s website.

ACCOUNTING AND ANNUAL AUDIT adidas AG prepares the annual financial statements in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch – HGB) and the Stock Corporation Act. The annual consolidated financial statements are prepared in accordance with the principles of the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU). KPMG AG Wirtschaftsprüfungsgesellschaft was appointed as auditor for the 2015 annual financial statements and annual consolidated financial statements by the Annual General Meeting. The Supervisory Board had previously assured itself of the auditor’s independence.

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COMPENSATION REPORT 1 The Compensation Report outlines the principles of the compensation system and the level of Executive Board and Supervisory Board compensation in accordance with the legal requirements and the recommendations of the German Corporate Governance Code (the ‘Code’) as amended on May5, 2015. For the adidas Group, transparent and comprehensible reporting on the compensation of the Executive Board and Supervisory Board is an essential element of good corporate governance.

COMPENSATION SYSTEM FOR THE EXECUTIVE BOARD Following preparation by the Supervisory Board’s General Committee, the compensation system for our Executive Board and the total compensation of each member of the Executive Board is determined and regularly reviewed by the entire Supervisory Board. The compensation and personnel topics dealt with by the Supervisory Board and General Committee for the year under review are described in the Supervisory Board Report.

s ee Supervisory Board Report, p. 20

The compensation system is geared towards creating an incentive for successful, sustainably value-oriented corporate development and management. In determining the Executive Board members’ compensation particularly in terms of its appropriateness, such factors as the size and global orientation, the economic situation, the success and outlook of the company are taken into consideration, as well as the common level of the compensation in comparison with peer companies and with the compensation structure applicable for other areas of the company. To this end, the relation between the Executive Board compensation and that of senior management and employees overall is taken into account, also in terms of its development over time. In addition, the tasks and contribution of each Executive Board member to the company’s success, their individual performance as well as the overall performance of the Executive Board are considered when determining the compensation of the Executive Board. It aims to appropriately remunerate exceptional performance, while diminishing variable compensation when targets are not met. Thus, in the Supervisory Board’s opinion, an appropriate level of compensation can be ensured. The compensation system for the members of the Executive Board which has been applicable since the 2015 financial year was adopted by a clear majority at the Annual General Meeting on May 7, 2015.

COMPONENTS OF THE EXECUTIVE BOARD COMPENSATION The total compensation of the Executive Board members – in the case of 100% target achievement – is made up of around one-third fixed compensation and two-thirds variable, i.e. performance-related compensation components: •• The fixed compensation consists of the annual fixed salary, which is based on the tasks and responsibilities of the individual Executive Board member. It is paid in twelve equal monthly instalments and generally remains unchanged during the term of the service contract. •• The variable, performance-related compensation consists of the following two components: •• the Performance Bonus measured over a one-year period and •• the LTIP Bonus, which is based on the Long-Term Incentive Plan 2015/2017 (LTIP 2015/2017) measured over a three-year period, as a compensation component with long-term incentive effect.

1 This Compensation Report is a component of the Group Management Report and is also part of the Corporate Governance Report including the Declaration on Corporate Governance.

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The variable compensation components are designed in such a way that the incentive to achieve the decisive long-term targets set by the LTIP is significantly higher than the incentive to achieve the targets decisive for being granted the Performance Bonus. Corresponding contractual regulations ensure that this weighting will also be maintained in the future. More than 50% of the variable target compensation component is based upon multi-year performance criteria. The variable components are structured as follows: •• The Performance Bonus serves as compensation for the Executive Board’s performance in the past financial year in line with the short-term development of the company. It is determined by the Supervisory Board in a two-stage process: •• At the beginning of the financial year, the Supervisory Board establishes the differently weighted performance criteria with their respective clear targets, and determines the individual amount of the Performance Bonus target amount for each member of the Executive Board, based on a target achievement of 100% (Bonus target amount). •• At the end of the financial year, the Supervisory Board examines the precise target achievement of each Executive Board member and determines the amount of Performance Bonus to be paid, depending on the degree of actual target achievement. The bonus is payable following approval of the consolidated financial statements of the past financial year. As criteria for the 2015 Performance Bonus the Supervisory Board established the following businessrelated criteria (performance criteria): •• increase in net income from continuing operations, •• increase in net contribution at TaylorMade-adidas Golf (global), •• increase in net sales of the adidas brand in the USA (currency-neutral), •• increase in market share of football boots in Western Europe, •• increase in volume in the area of Boost Running (global). In calculating the amount of the Performance Bonus, the degree of target achievement determined for each individual performance criterion is weighted according to the percentage value of the respective performance criterion. The sum of the weighted degrees of target achievement of the performance criteria is then multiplied by the individual Bonus target amount for each Executive Board member. The Performance Bonus to be granted to the individual Executive Board members is capped at a maximum of 150% of the individual Bonus target amount. If an Executive Board member takes or leaves office during a financial year, the Performance Bonus is calculated on a pro rata basis after the end of the financial year. In certain cases defined in the Terms & Conditions of the Performance Bonus, entitlement to the payout of a Performance Bonus is generally forfeited, unless the Supervisory Board determines otherwise at its equitable discretion.

••

The LTIP Bonus serves – in line with sustainability-oriented corporate planning – as compensation for the long-term performance of the Executive Board based on the Long-Term Incentive Plan 2015/2017 (LTIP 2015/2017) measured over a three-year period. It is determined by the Supervisory Board in a two-stage process: •• In determining the LTIP 2015/2017 at the beginning of the 2015 financial year, the Supervisory Board defined the performance criteria, linked to clear targets and oriented towards the sustainable growth of the company, and also defined the individual amount of the LTIP Bonus target amount for each Executive Board member, based on a target achievement of 100% (LTIP target amount). •• At the end of the 2017 financial year, the Supervisory Board will examine the precise target achievement of each Executive Board member and determine the amount of LTIP Bonus to be paid, depending on the degree of actual target achievement. Payout will be effected after the 2017 consolidated financial statements are approved.

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For the LTIP 2015/2017, the Supervisory Board determined the following performance criteria for the three-year period: •• achievement of a defined net income from continuing operations, •• increase in the US market share measured/assessed by the increase in market shares of adidas footwear and an improvement of the brand’s popularity, •• increase in the adidas AG share price over three years and relative outperformance of the adidasAG share compared to the DAX-30 price index, •• increase in profitability of the retail segment, •• improvement of sustainability measured/assessed by the improvement of employee satisfaction and an increase in the percentage of female representation in management positions within the Group. In calculating the amount of the LTIP Bonus, the degree of target achievement determined for each individual performance criterion is weighted according to the percentage value of the respective performance criterion. The development of the individual performance criteria over the three-year period from 2015 to 2017 is decisive for the assessment of target achievement. The sum of the weighted degrees of target achievement of the performance criteria is multiplied by the individual LTIP target amount for each Executive Board member. For the ultimate evaluation of the Executive Board’s performance, qualitative criteria determined by the Supervisory Board when establishing the LTIP 2015/2017, such as the further development of company health management as well as occupational health and safety, are also taken into account. The LTIP Bonus is capped at a maximum of 150% of the individual LTIP target amount. If the overall degree of target achievement lies at or below 50%, the Executive Board member is not entitled to the LTIP Bonus. If an Executive Board member takes or leaves office during the term of the LTIP 2015/2017 (Performance Period), the LTIP Bonus is generally calculated on a pro rata basis. In certain cases defined in the Terms & Conditions of the LTIP 2015/2017, entitlement to the payout of an LTIP Bonus is generally forfeited, unless the Supervisory Board determines otherwise at its equitable discretion.

OTHER BENEFITS AND ADDITIONAL COMMITMENTS The Executive Board members are granted other minor benefits which are individually taxed in accordance with applicable law. These benefits are generally capped at 5% of the overall compensation comprising the annual fixed salary and a (possible) Performance Bonus and primarily consist of paying for or providing the monetary value of the provision of a company car, the costs for group accident insurance as well as contributions to standard insurance schemes 2. In addition, in the case of extraordinary performance on the part of an Executive Board member that is not related to the performance criteria decisive for granting the Performance Bonus or LTIP Bonus, the Supervisory Board may, at its dutiful discretion, decide on the granting of and on the potential amount of a special bonus. Such special bonus is limited to 100% of the annual fixed salary for the calendar year for which the special bonus is granted. The Executive Board members do not receive any additional compensation for mandates within the adidas Group. The Executive Board members have not received any loans or advance payments from adidas AG.

PENSION COMMITMENTS All active members of the Executive Board have individual contractual defined benefit pension plans which are calculated based on the length of appointment to the Executive Board as a percentage of contractually agreed pensionable income. Executive Board members who have been appointed since October 1, 2013, or will be appointed in the future will be granted defined contribution pension plans with effect from January 1, 2015. The defined benefit pension plans granted to Roland Auschel and Eric Liedtke as of their appointments were converted to defined contribution pension plans with effect from January 1, 2015.

2 Agreement on a cap for other benefits in Roland Auschel’s Executive Board service contract only effective as of January 1, 2016.

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Defined benefit pension plans The amount of pensionable income currently equals the individual fixed annual salary indicated in the table ‘Benefits granted’. Starting from a base amount totalling 10% 3 of the respective pensionable income at the time of appointment, a module of two percentage points 4 of the pensionable income is formed for each full year of tenure as an Executive Board member. The Supervisory Board has, as its targeted level of provision regarding pension commitments for members of the Executive Board, determined a pension entitlement amounting to a maximum of 40% 5 of an Executive Board member’s pensionable income. Following the Executive Board member’s departure from the company, benefit payments are made on a monthly basis •• as a retirement pension upon reaching the age of 65; or •• as a disability pension in the event of occupational or general disability for medical reasons, for no longer than up to the point a retirement pension is paid, amounting to the pension entitlement reached at the point the respective pension became payable; •• as survivors’ benefits upon the death of an Executive Board member, providing the spouse or partner with 50% of the pension entitlements up to this point and, if applicable, 15% of the pension entitlements up to this point for each dependent half-orphan or 30% for each dependent orphan. Taken together, survivors’ benefits may not exceed the deceased Executive Board member’s total pension entitlement. If survivors’ entitlements exceed the pension entitlement, benefits for dependent children are reduced proportionately. In the event that an Executive Board member leaves the company prior to reaching retirement age, the non-forfeiture of the pension entitlement will be in line with legal provisions. The pension entitlement is not, as legally envisaged, reduced pro rata temporis, i.e. it amounts to at least the base amount of the pension commitment made to the Executive Board member, plus the pension modules accumulated annually during the term of office. Following commencement of the pension-triggering event, ongoing pensions are adjusted in line with the development of state pensions. Defined contribution pension plans The defined contribution pension plans, each in the form of a direct commitment, basically have the same structure as the existing ‘adidas Management Pension Plan’ for managers. An amount (currently) equalling 50% of the individual annual fixed salary is credited by the company to the virtual pension account of the individual Executive Board member each year. The pension assets yield a fixed interest of 3% p.a., however for no longer than until the pension benefits initially become due. Entitlement to the pension benefits becomes vested immediately. The pension benefits comprise pensions to be received upon reaching the age of 65, or, on application, early retirement pensions to be received upon reaching the age of 62, as well as invalidity and survivors’ benefits. On occurrence of the pension-triggering event, the pension benefits generally correspond to the balance of the pension account including accumulated interest on that date. In case of invalidity or death prior to reaching the age of 62, for the minimum coverage, the Executive Board member’s pension account will be credited with the outstanding pension benefits for the time until the Executive Board member would have reached the age of 62, but no longer than for 120 months (without interest accrual). The pension benefits due upon death of the Executive Board member are payable to the widow, the widower or the registered civil partner and the orphans as joint creditors.

3 Deviating provision for Glenn Bennett: Instead of his initial appointment date (effective March6, 1997), January 1, 2000 is used for the calculation of his pension entitlements with a base amount of 20% of pensionable income; initial appointment of Herbert Hainer: effective March 6, 1997; initial appointment of Robin J.Stalker: effective January 30, 2001; initial appointment of Roland Auschel: effective October 1, 2013; initial appointment of Eric Liedtke: effective March 6, 2014. 4 Increase of the annual pension components of Glenn Bennett and Robin J. Stalker to three percentage points of the pensionable income effective March 6, 2015. 5 Increase of the targeted provision level of Glenn Bennett and Robin J. Stalker to a pension entitlement of a maximum of 50% of the individual pensionable income effective March 6, 2015.

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At the Executive Board member’s choice, the payout of all pension benefits is made either as a one-time payment or in up to ten equal annual instalments. If no choice is made by the Executive Board member, the pension benefits are paid out in three equal annual instalments. In case of a payout in three or ten annual instalments, the still outstanding instalments of the benefit phase bear the maximum interest rate of the first due date of the pension benefits for the calculation of the actuarial reserve according to the German Actuarial Reserve Ordinance (DeckRV) for life insurance companies. As part of the conversion of the defined benefit pension plans of Roland Auschel and Eric Liedtke to defined contribution pension plans, the benefit entitlements earned up until the conversion date (December31,2014) were credited to the new defined contribution pension plans as a starting balance. Insolvency insurance for the pension commitments granted to the Executive Board members as of October1,2013 is ensured by the integration of the pension plans in the existing trust model, the Contractual Trust Arrangement (CTA). Herbert Hainer, Roland Auschel, Eric Liedtke and Robin J. Stalker, who belonged to the group of senior executives of adidas AG prior to their Executive Board appointments, will at the time of their retirement receive additional payments from the ‘adidas Management Pension Plan’. Until their appointment as Executive Board members, adidas AG had contributed pension components for Herbert Hainer, Roland Auschel, Eric Liedtke and Robin J. Stalker under these supplementary provisions which were introduced for all senior executives of the company in 1989. If an Executive Board member dies during his term of office, his spouse or partner receives or, alternatively, any dependent children receive, in addition to pension benefits, the pro rata annual fixed salary for the month of death and the following three months, but no longer than until the agreed end date of the service contract.

01 PENSION COMMITMENTS IN 2015 FINANCIAL YEAR IN € Service cost

Executive Board members incumbent as at December 31, 2015

FY 2014

Accumulated pension obligation for the pension commitments excluding deferred compensation

FY 2015

FY 2014

FY 2015

11,983,870

Herbert Hainer (CEO)

330,836

428,648

12,543,634

Roland Auschel

390,536

361,000

411,198

738,627

Glenn Bennett 1

756,632

251,162

5,324,430

5,778,313

Eric Liedtke

315,951

336,000

334,503

724,482

Robin J. Stalker 1

907,791

379,868

5,144,110

5,051,190

2,701,746

1,756,678

23,757,875

24,276,482

Total

1 Based on the amendment of the Pension Agreement effective March 6, 2015, the service cost in the 2014 financial year comprised the 2014 service cost and the 2014 past service cost.

COMMITMENTS TO EXECUTIVE BOARD MEMBERS UPON PREMATURE TERMINATIONOF TENURE Executive Board service contracts are usually agreed with a contractual term of three years. This term will be shortened accordingly if the Executive Board member reaches the age of 65 prior to expiration. In case of premature termination of tenure in the absence of good cause, the Executive Board service contracts cap potential compensatory payments at a maximum of twice the overall annual compensation, not exceeding payment claims for the remaining period of the service contract (Severance Payment Cap) 6. In this context, the overall annual compensation means the Executive Board member’s overall compensation paid for the last full financial year prior to departure from the Executive Board. In calculating the overall compensation, a multi-year compensation component and the service costs will only be taken into consideration with the proportion attributable to the last full financial year prior to departure. When

6 Agreement on a Severance Payment Cap in Roland Auschel’s Executive Board service contract only effective as of January 1, 2016.

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determining the overall compensation, a possible follow-up bonus 7 is not included, but the expected overall compensation for the current financial year is considered, taking into account the outlined provisions. If the service contract is terminated due to a change of control, a possible severance payment is limited to 150% of the Severance Payment Cap.

COMMITMENTS TO EXECUTIVE BOARD MEMBERS UPON REGULAR TERMINATION OF TENURE Unless otherwise agreed, upon regular termination of the service contract, i.e. in case of non-renewal of the service contract or termination upon reaching the age of 65, the departing Executive Board member is entitled to receive not only his annual fixed salary on a pro rata basis up to the date on which he leaves office, but also a potential pro-rated Performance Bonus and a pro-rated LTIP Bonus as well as, under certain circ*mstances, a follow-up bonus 7. It is payable in two tranches, 12 and 24 months following the end of the contract. There is no entitlement to a follow-up bonus if the service contract expires after release from service with continued compensation or if it is terminated for good cause.

OVERALL COMPENSATION FOR 2015 IN ACCORDANCE WITH THE CODE Based on the Supervisory Board’s determination outlined above, the overall compensation of the Executive Board for the 2015 financial year amounts to € 9.171 million (2014: € 17.071 million 8). The overall compensation for the 2014 financial year lies above the overall compensation for the year under review, as the LTIP Bonus resulting from the LTIP 2012/2014 measured over a three-year period was granted in the 2014 financial year. Furthermore, in the 2015 financial year, the service costs of the company for the pension commitments of Glenn Bennett and Robin J. Stalker were significantly lower than in the 2014 financial year as, in the 2014 financial year, the service costs were increased by the past service costs resulting from the increase 9 of the targeted provision level. The recommendation of the Code to individually disclose the compensation components for each Executive Board member and to use the sample tables attached to the Code is implemented in the following.

BENEFITS GRANTED IN ACCORDANCE WITH THE CODE In the following table, the benefits granted for the 2014 and 2015 financial years are disclosed including other benefits and service costs, and also including the maximum and minimum achievable compensation. In accordance with the requirements of the Code, the Performance Bonus is disclosed with the amount granted in case of 100% target achievement. Pursuant to the recommendations of the Code, the LTIP Bonus resulting from the LTIP 2012/2014 and LTIP 2015/2017, each measured over a three-year period, is indicated with the pro rata temporis target amount of an ‘average probability scenario’ at the time of granting, whereby adidas AG takes the 100% target amount as the basis.

7 This bonus amounts to 75% for Roland Auschel, Glenn Bennett and Eric Liedtke, 100% for Robin J. Stalker and 125% for Herbert Hainer and is based on the Performance Bonus granted to the respective Executive Board member for the last full financial year. 8 The overall compensation for 2014 does not include the follow-up bonus of Erich Stamminger in the amount of € 603,387, granted at the time of his departure. 9 Increase of the annual pension components of Glenn Bennett and Robin J. Stalker to three percentage points of the pensionable income effective March 6, 2015.

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02 BENEFITS GRANTED IN € Herbert Hainer CEO

Fixed compensation Other benefits Total

Roland Auschel Executive Board member, Global Sales

2014

2015

2015 (min.)

2015 (max.)

2014

2015

2015 (min.)

2015 (max.)

1,500,000

1,582,258

550,000

28,304

28,199

16,237

17,742

1,528,304

1,610,457

566,237

567,742

One-year variable compensation 3

1,273,080

1,311,270

1,966,905

400,000

412,000

618,000

Multi-year variable compensation

1,540,000

1,694,000

2,541,000

550,000

616,667

925,000

LTIP 2012/2014 4

1,540,000

n.a.

550,000

n.a.

1,694,000

2,541,000

n.a.

616,667

925,000

4,341,384

4,615,727

1,610,457

6,118,362

1,516,237

1,596,408

567,742

2,110,742

330,836

428,648

390,536

361,000

4,672,220

5,044,375

2,039,105

6,547,010

1,906,773

1,957,408

928,742

2,471,742

LTIP 2015/2017 Total Service cost 5, 6 Overall compensation

Glenn Bennett Executive Board member, Global Operations

Fixed compensation Other benefits Total

Eric Liedtke Executive Board member, Global Brands Since March 6, 2014

2014 1

2015 2

2015 (min.)

2015 (max.)

2014

2015

2015 (min.)

2015 (max.)

546,029

680,560

409,946

516,667

19,730

30,993

10,213

15,656

565,759

711,553

420,159

532,322

One-year variable compensation 3

370,292

662,132

993,199

333,333

412,000

618,000

Multi-year variable compensation

839,726

901,101

1,351,651

437,500

616,667

925,000

LTIP 2012/2014 4

839,726

n.a.

437,500

n.a.

901,101

1,351,651

n.a.

616,667

925,000

1,775,777

2,274,786

711,553

3,056,402

1,190,992

1,560,989

532,322

2,075,322

756,632

251,162

315,951

336,000

2,532,409

2,525,948

962,715

3,307,564

1,506,943

1,896,989

868,322

2,411,322

LTIP 2015/2017 Total Service cost 5, 6 Overall compensation

Robin J. Stalker Chief Financial Officer

Fixed compensation Other benefits Total

Erich Stamminger Executive Board member, Global Brands Until March 6, 2014

2014

2015

2015 (min.)

2015 (max.)

2014

2015

2015 (min.)

2015 (max.)

605,000

654,603

192,500

n.a.

18,617

19,817

8,382

n.a.

623,617

674,421

200,882

n.a.

One-year variable compensation 3

402,730

520,000

780,000

n.a.

Multi-year variable compensation

770,000

741,800

1,112,700

n.a.

LTIP 2012/2014 4

770,000

n.a.

741,800

1,112,700

n.a.

1,796,347

1,936,221

674,421

2,567,121

200,882

n.a.

LTIP 2015/2017 Total Service cost 5, 6 Overall compensation

907,791

379,868

751,066

n.a.

2,704,138

2,316,089

1,054,289

2,946,989

951,948

n.a.

1 Exchange rate 1.3296 $/€ (annual average rate 2014). 2 Exchange rate 1.11005 $/€ (annual average rate 2015). 3 No Performance Bonus granted to Erich Stamminger for 2014 due to his resignation effective March 6, 2014. Contractually agreed Performance Bonus target amount 2014 for Eric Liedtke effective March 6, 2014 due to his appointment during the year. 4 Contractually agreed LTIP Bonus target amount 2012/2014 due to the appointment of Roland Auschel (effective October 1, 2013) and Eric Liedtke (effective March 6, 2014) during the plan term. Contractually agreed LTIP Bonus target amount 2012/2014 due to the resignation of Erich Stamminger (effective March 6, 2014) during the plan term. 5 Based on the amendment of the Pension Agreements of Glenn Bennett and Robin J. Stalker effective March 6, 2015, the service cost in the 2014 financial year comprised the 2014 service cost and the 2014 past service cost. 6 The service cost for Erich Stamminger also comprises the contractually agreed follow-up bonus in the amount of € 603,387 granted at the time of his departure in March 2014, as the follow-up bonus is a commitment for other pension benefits made in advance for the case of departure.

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ALLOCATION IN ACCORDANCE WITH THE CODE Pursuant to the recommendations of the Code, the fixed compensation, other benefits and the service costs as well as the Performance Bonus are to be disclosed as an allocation for the financial year in which the compensation was granted. As stipulated by the Code, the LTIP Bonus resulting from the LTIP 2012/2014 measured over a three-year period is disclosed in the year in which the plan ends, i.e. in the 2014 financial year. Consequently, a possible LTIP Bonus resulting from the LTIP 2015/2017 will not be disclosed in the 2015 financial year (also not on a pro rata basis), and is not expected to be disclosed until the 2017 financial year.

03 ALLOCATION IN € Herbert Hainer CEO

Fixed compensation Other benefits Total One-year variable compensation 3

Roland Auschel Executive Board member, Global Sales

Glenn Bennett Executive Board member, Global Operations

2014

2015

2014

2015

2014 1

2015 2

1,500,000

1,582,258

550,000

546,029

680,560

28,304

28,199

16,237

17,742

19,730

30,993

1,528,304

1,610,457

566,237

567,742

565,759

711,553

700,194

1,311,270

220,000

412,000

203,660

662,132

Multi-year variable compensation

3,234,000

n.a.

481,250

n.a.

1,763,425

n.a.

LTIP 2012/2014 4

3,234,000

n.a.

481,250

n.a.

1,763,425

n.a.

LTIP 2015/2017 Other Total 5 Service cost 6, 7 Overall compensation

n.a.

5,462,498

2,921,727

1,267,487

979,742

2,532,844

1,373,685

330,836

428,648

390,536

361,000

756,632

251,162

5,793,334

3,350,375

1,658,023

1,340,742

3,289,476

1,624,847

Eric Liedtke Executive Board member, Global Brands Since March 6, 2014

Fixed compensation Other benefits

Robin J. Stalker Chief Financial Officer

Erich Stamminger Executive Board member, Global Brands Until March 6, 2014

2014

2015

2014

2015

2014

2015

409,946

516,667

605,000

654,603

192,500

n.a.

10,213

15,656

18,617

19,817

8,382

n.a. n.a.

Total

420,159

532,322

623,617

674,421

200,882

One-year variable compensation 3

183,333

412,000

221,502

520,000

n.a.

Multi-year variable compensation

306,250

n.a.

1,617,000

n.a.

1,386,000

n.a.

LTIP 2012/2014 4

306,250

n.a.

1,617,000

n.a.

1,386,000

n.a.

LTIP 2015/2017 Other Total 5 Service cost 6, 7 Overall compensation

n.a.

909,742

944,322

2,462,119

1,194,421

1,586,882

n.a.

315,951

336,000

907,791

379,868

751,066

n.a.

1,225,693

1,280,322

3,369,910

1,574,289

2,337,948

n.a.

1 Exchange rate 1.3296 $/€ (annual average rate 2014). 2 Exchange rate 1.11005 $/€ (annual average rate 2015). 3 No Performance Bonus 2014 granted to Erich Stamminger due to his resignation effective March 6, 2014. Pro rata temporis Performance Bonus 2014 for Eric Liedtke effective March 6, 2014 due to his appointment during the year. 4 Pro rata temporis LTIP Bonus 2012/2014 due to the appointment of Roland Auschel (effective October 1, 2013) and Eric Liedtke (effective March 6, 2014) during the plan term. Pro rata temporis LTIP Bonus 2012/2014 due to the resignation of Erich Stamminger (effective March 6, 2014) during the plan term. 5 For the 2015 financial year, as well as for the previous year, the compensation components outlined above also represent the overall compensations to be disclosed individually in accordance with commercial law. 6 Based on the amendment of the Pension Agreements of Glenn Bennett and Robin J. Stalker effective March 6, 2015, the service cost in the 2014 financial year comprised the 2014 service cost and the 2014 past service cost. 7 The service cost for Erich Stamminger also comprises the contractually agreed follow-up bonus in the amount of € 603,387 granted at the time of his departure in March 2014, as the follow-up bonus is a commitment for other pension benefits made in advance for the case of departure.

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OVERALL PAYMENTS TO FORMER MEMBERS OF THE EXECUTIVE BOARD AND THEIR SURVIVING DEPENDANTS In 2015, the overall payments to former Executive Board members or to their surviving dependants amounted to € 3.524 million (2014: € 4.062 million 10). As at December 31, 2015, the provisions for pension entitlements of this group of persons totalled € 42.730 million (2014: € 45.900 million). The decrease is mainly attributable to an increase of the underlying interest rate from 2.1% to 2.5%. There are further pension commitments towards three former Executive Board members who resigned after December 31, 2005, which are covered by a pension fund or a pension fund in combination with a reinsured pension trust fund. From this, indirect obligations amounting to € 12.644 million (2014: € 13.576 million) arise for adidas AG, for which no accruals were established due to financing through the pension fund and pension trust fund. This decrease is also attributable to an increase of the underlying interest rate. The dynamisation of the pensions paid to former Executive Board members is effected in accordance with statutory regulations or regulations under collective agreements, unless a surplus from the pension fund is used for an increase in pension benefits after pension payments have already begun.

REVIEW OF EXECUTIVE BOARD COMPENSATION In 2015, the Supervisory Board had the Executive Board compensation system reviewed with regard to appropriateness by an independent external compensation expert. In doing so, the individual overall target annual income of the Executive Board members was examined in detail. The review found that the compensation meets the requirements of the German Stock Corporation Act and the Code. As the review revealed a need for action regarding the pensions granted to the Executive Board members compared to the pensions granted to executive board members of other companies in order to ensure competitive compensation, the Supervisory Board resolved, with effect from January 1, 2015, the changeover from defined benefit pension plans to defined contribution pension plans for all Executive Board members appointed on or after October 1, 2013.

COMPENSATION OF THE SUPERVISORY BOARD The compensation of the Supervisory Board members is regulated by § 18 of the company’s Articles of Association and is linked to the size of the company and to the responsibility and scope of activities of the Supervisory Board members. After the end of the respective financial year, the members receive a fixed compensation amount for their function as well as compensation for the chairmanship of or membership in committees, in accordance with the Code. For meetings requiring personal attendance, an attendance fee amounting to € 750 is granted. Additional variable compensation is not granted to the Supervisory Board members. Supervisory Board members who have not been members of the Supervisory Board for the entire financial year receive a pro-rated amount of compensation. For the 2015 financial year, each individual member of the Supervisory Board received €50,000 as fixed annual compensation; three times this amount was paid to the Chairman of the Supervisory Board and twice this amount was paid to each Deputy Chairperson. Members of the General Committee and of the Finance and Investment Committee received additional compensation of € 25,000 and members of the Audit Committee received additional compensation of € 50,000. In addition to their fixed compensation, the Chairmen of the General Committee and of the Finance and Investment Committee received a compensation amount of € 50,000 each, and the Chairman of the Audit Committee received compensation of € 75,000. The compensation paid for a committee chairmanship also covers the membership in such committee. The members of the Steering Committee, the Mediation Committee, the Nomination Committee and committees which are established ad hoc do not receive additional compensation. If a Supervisory Board member is in more than one committee, the member only receives compensation for his/her task in the committee with the highest compensation. The Supervisory Board members are reimbursed for all expenses incurred in connection with their mandates as well as for the VAT payable on their compensation, insofar as they charge for it separately. 10 The overall payments for 2014 include the follow-up bonus of Erich Stamminger in the amount of € 603,387, granted at the time of his departure.

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The total compensation paid to our Supervisory Board in the 2015 financial year amounted to € 1.15 million (2014: € 0.92 million). In addition, attendance fees totalling € 72,750 were paid. The increase in the total compensation for the 2015 financial year compared to the 2014 financial year is attributable to the resolution of the Annual General Meeting on May 8, 2014, on the increase of the fixed annual compensation from € 40,000 to € 50,000 as well as on the introduction of an attendance fee amounting to € 750 for each meeting requiring personal attendance with effect from the 2015 financial year.

OTHER BENEFITS AND ADDITIONAL COMMITMENTS The Supervisory Board members have not received any loans or advance payments from adidas AG.

04 COMPENSATION OF THE SUPERVISORY BOARD MEMBERS IN € 2015 Fixed compensation

2015 Attendance fees

2014

Igor Landau (Chairman of the Supervisory Board, Chairman of the General Committee)

200,000

8,250

160,000

Sabine Bauer (Deputy Chairwoman of the Supervisory Board, Member of the General Committee)

125,000

8,250

100,000

Willi Schwerdtle (Deputy Chairman of the Supervisory Board, Member of the General Committee)

125,000

7,500

100,000

50,000

3,750

40,000

Dr. Wolfgang Jäger (Member of the Audit Committee)

100,000

7,500

80,000

Dr. Stefan Jentzsch (Member of the Audit Committee)

100,000

6,000

80,000

Herbert Kauffmann (Chairman of the Audit Committee)

Supervisory Board members incumbent as at December 31, 2015

Dieter Hauenstein

125,000

7,500

100,000

Katja Kraus 1

50,000

3,750

25,973

Kathrin Menges 1

50,000

2,250

25,973

Roland Nosko (Member of the General Committee)

75,000

7,500

60,000

Hans Ruprecht (Member of the Audit Committee) Heidi Thaler-Veh

100,000

7,500

80,000

50,000

3,000

40,000

Supervisory Board members incumbent until the end of the Annual General Meeting on May 8, 2014 Alexander Popov 2

n.a.

14,027

Christian Tourres 2

n.a.

14,027

1,150,000

72,750

920,000

Total 1 First-time Supervisory Board member since the end of the Annual General Meeting held on May 8, 2014. 2 Supervisory Board member until the end of the Annual General Meeting held on May 8, 2014.

1 To our S hareholders Our Share

OUR SHARE In 2015, international stock market performance was mixed, characterised by highly volatile movements. While the DAX-30 increased by 10%, the MSCI World Textiles, Apparel & Luxury Goods Index declined 3%. Following an underperformance versus the overall market in 2014, the adidas AG share regained significant momentum in 2015. The positive share price development was supported by the introduction of the adidas Group’s new strategic business plan ‘Creating the New’ as well as strong operational momentum during the year. As a result, the adidas AG share reached a new all-time high during the course of the year and ended 2015 as the top performer of the DAX-30 with an increase of 56%. As a result of the stellar operational performance in 2015 as well as Management’s confidence in the strength of the Group’s financial position and long-term growth aspirations, we intend to propose a dividend per share of € 1.60 at our 2016 Annual General Meeting.

INTERNATIONAL STOCK MARKETS HIGHLY VOLATILE IN 2015 International stock markets were characterised by high volatility throughout 2015. Improving economic data in the euro area and the USA provided significant support for equity markets around the world. The bigger- and earlier-than-expected quantitative easing programme of the ECB launched at the beginning of the year as well as the weakening euro provided positive stimulus to European equity markets in particular. The DAX-30 benefited from these developments, resulting in a new all-time high of 12,375 in April. However, the Greek debt crisis and weakening economic data in China, fears of a weakening economy in emerging markets as well as falling commodity prices characterised international stock markets during the remainder of 2015. In addition, high uncertainties regarding the Federal Reserve’s policy on key interest rates weighed on investor sentiment and led to an overall volatile trading environment before the decision for a first increase was eventually made in December. Accordingly, while the DAX-30 increased 10%, the Dow Jones remained flat in 2015. The MSCI World Textiles, Apparel & Luxury Goods Index declined 3% during the period.

ADIDAS AG SHARE PRICE REACHES NEW ALL-TIME HIGH Following an underperformance versus the overall market in 2014, the adidas AG share started to regain momentum at the beginning of 2015. This was mainly due to the announcement of the divestiture of the Rockport business as well as the preliminary results release for the 2014 financial year at the end of January. Following the publication of the adidas Group’s full year 2014 financial results on March 5, the adidas AG share increased more than 3%, driven by a robust outlook for 2015 as well as Management’s proposal to keep the dividend stable at € 1.50 per share. At an Investor Day event on March 26, the adidas Group introduced its new strategic business plan ‘Creating the New’, resulting in further share price increases reflecting broad agreement amongst analysts and investors that the new strategy identified the key challenges and opportunities for the Group.

01 H ISTORICAL PERFORMANCE OF THE ADIDAS AG SHARE AND IMPORTANT INDICES AT YEAR-END 2015 IN % 1 year

3 years

5 years

10 years

Since IPO 1

adidas AG

125

830

DAX-30

389

MSCI World Textiles, Apparel & Luxury Goods

(3)

139

380

1 November 17, 1995.

Source: Bloomberg.

see Table 01

1 To our S hareholders Our Share

ADIDAS AG SHARE AT A GLANCE

02 FIVE-YEAR SHARE PRICE DEVELOPMENT 1 | Dec. 31, 2010

Dec. 31, 2015 |

190

160

130

100

1 Index: December 31, 2010 = 100.

— adidas AG — DAX-30 — MSCI World Textiles, Apparel & Luxury Goods Index

03 THE ADIDAS AG SHARE

Number of shares outstanding 1

2015

2014

200,197,417

204,327,044

Basic earnings per share

€

3.32 2

2.72 3

Cash generated from operating activities per share

€

5.41

3.36

Important indices

•• DAX-30 •• MSCI World Textiles,

Apparel & Luxury Goods

•• Deutsche Börse Prime

Year-end price

€

89.91

57.62

Year high

€

93.41

92.92

Year low

€

54.61

53.89

€ in million

18,000

11,773

€

1.60 5

1.50

•• Ethibel Sustainability Indices

€ in million

320

306

47.9 2

53.9 3

•• Euronext Vigeo

1.8

2.6

Shareholders' equity per share 4

€

28.30

27.53

Price-earnings ratio at year-end

27.1 2

21.2 3

1,199,167

1,356,914

Market

capitalisation 4

Dividend per share Dividend payout 4 Dividend payout

ratio 4

Dividend yield

Average trading volume per trading day 6 1 All shares carry full dividend rights. 2 Excluding goodwill impairment of € 34 million. 3 Excluding goodwill impairment of € 78 million. 4 Based on number of shares outstanding at year-end. 5 Subject to Annual General Meeting approval. 6 Based on number of shares traded on all German stock exchanges.

Consumer

•• Dow Jones Sustainability Indices (World and Europe)

•• ECPI Ethical Equity Indices (Euro and EMU)

(Global and Europe)

(Eurozone 120, Europe 120)

•• FTSE4Good Index Series •• MSCI Global Sustainability Indexes

•• MSCI SRI Indexes •• STOXX Global ESG Leaders

1 To our S hareholders Our Share

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.  |

93.41

May

91.59

Apr.

74.48

Mar.

74.47

Feb.

76.33

|  Jan.

77.21

04 2015 ADIDAS AG HIGH AND LOW SHARE PRICES PER MONTH 1 IN €

85.93

80.80 71.70

72.01 65.18

63.68

66.80

72.09 68.65

73.25 68.44

61.79

54.61

61.57

73.80

69.43

71.53

83.20

— 30- day moving average ■ High and low share prices

Source: Bloomberg.

1 Based on daily Xetra closing prices.

In addition, the financial objectives outlined during the day were positively perceived by the financial community and were above market expectations. At the beginning of the second quarter, the adidas AG share continued its positive trend, supported by subsequent management roadshow activities. On May 5, the adidas Group released strong first quarter results which were above market expectations. However, the overall negative market sentiment resulting from ongoing concerns with regard to a Greek default weighed on both the adidas AG share and international equity markets during the day and for the remainder of the second quarter. On June 24, the adidas Group held its first IR Tutorial Workshop. While the event was very well received by market participants, the adidas AG share was not able to escape the overall negative market sentiment. At the beginning of the third quarter of 2015, extensive roadshow activities as well as positive analyst commentary prior to the adidas Group’s first half results release provided positive stimulus to the share price in July. While the publication of the adidas Group’s first half results was positively perceived by market participants, the adidas AG share came under pressure from mid-August onwards, reflecting the overall challenging market environment caused by weakening economic data from China. During the first half of September, the adidas AG share stabilised and traded sideways, supported by positive company-specific as well as sector-related newsflow. On November 5, following the publication of a very strong set of third quarter results, together with increased guidance for the 2015 financial year and a better-than-expected initial outlook for 2016, the adidas AG share rose 9% during the day. Subsequent management roadshows and positive analyst feedback provided further momentum to the share price, resulting in a new all-time high of € 93.41 on December 2. The remaining weeks of December were characterised by macroeconomic uncertainties as well as profit taking by some investors. As a result, the adidas AG share closed 2015 at € 89.91, representing a 56% increase over the year and making the adidas AG share the top performer of the DAX-30. This implies a market capitalisation of € 18.0 billion at the end of 2015 versus € 11.8 billion at the end of 2014.

see Table 03

1 To our S hareholders Our Share

AVERAGE DAILY TRADING VOLUME DECREASES SLIGHTLY During 2015, the average daily trading volume of the adidas AG share on all German stock exchanges (excluding bank trades) declined slightly to 1.2 million shares (2014: 1.4 million). The average daily trading volume of the adidas AG share on alternative trading systems, such as CHI-X, Turquoise and BATS Europe, increased slightly to 1.0 million shares per trading day (2014: 0.9 million). Share trading on OTC markets such as BOAT and EuroNext OTC remained stable at 0.5 million shares per trading day (2014: 0.5 million).

see Table 03

www.adidas-group.com/adr

see Table 03

see Note 18, p. 212

see Table 03

LEVEL 1 ADR PERFORMS IN LINE WITH COMMON STOCK Our Level 1 ADR closed 2015 at US $ 48.51, representing an increase of 41% versus the prior year level (2014: US $ 34.51). The less pronounced increase of the Level 1 ADR price compared to the ordinary share price was due to the appreciation of the US dollar versus the euro at the end of 2015 compared to year-end 2014. The number of Level 1 ADRs outstanding increased to 8.6 million at year-end 2015 compared to 5.9 million at the end of 2014. The average daily trading volume increased to 92,100 ADRs in 2015 (2014: 80,800). Further information on our ADR Programme can be found on our website.

ADIDAS AG SHARE MEMBER OF IMPORTANT INDICES The adidas AG share is included in a variety of high-quality indices around the world, most importantly the DAX-30 and the MSCI World Textiles, Apparel & Luxury Goods Index, which comprises our Group’s major competitors. At December 31, 2015, our weighting in the DAX-30, which is calculated on the basis of free float market capitalisation and twelve-month share turnover, increased to 2.15% (2014: 1.47%). Our higher weighting compared to the prior year was mainly due to the increase in market capitalisation of adidasAG, which more than offset the decrease in share turnover. Within the DAX-30, we ranked 17 on market capitalisation (2014: 21) and 16 on turnover (2014: 15) at year-end 2015. Additionally, in recognition of our social and environmental efforts, adidas AG is listed in several key sustainability indices.

CONVERTIBLE BOND CLOSES THE YEAR AT € 125.82 In March 2012, adidas AG successfully issued a convertible bond, due on June 14, 2019, for an aggregate nominal amount of € 500 million. The bonds are not callable by the issuer or putable by the bondholders until June 2017. The bonds are convertible into up to 6.1 million new or existing adidas AG shares. Proceeds from the offering have allowed the Group to further optimise its debt structure. The bonds were priced with a 0.25% annual coupon and a conversion premium of 40% above the reference price of € 59.61, resulting in an initial conversion price of € 83.46 per share. As a consequence of contractual provisions relating to dividend protection, the conversion price was adjusted to € 82.00 per share. This adjustment became effective on May 8, 2015. The convertible bond closed the year at € 125.82, above the prior year level of € 108.95.

DIVIDEND PROPOSAL OF € 1.60 PER SHARE As a result of the stellar operational performance in 2015, the Group’s strong financial position as well as Management’s confidence in our long-term growth aspirations, the adidas AG Executive and Supervisory Boards will recommend paying a dividend of € 1.60 per share to shareholders at the Annual General Meeting (AGM) on May 12, 2016. This represents an increase of 7% compared to the prior year dividend (2014: € 1.50), which was kept stable despite a decline in net income attributable to shareholders in 2014. Subject to the meeting’s approval, the dividend will be paid on May 13, 2016. The total payout of € 320 million (2014: € 306 million) reflects a payout ratio of 47.9% of net income attributable to shareholders, excluding goodwill impairment losses. The payout ratio for 2015 is at the upper end of the increased target range of between 30% and 50% of net income attributable to shareholders as defined in our dividend policy. In the prior year, Management had decided to keep the dividend stable despite a significant decline in net income, resulting in a payout ratio of 53.9%.

1 To our S hareholders Our Share

SHAREHOLDER RETURN PROGRAMME CONTINUED On October 1, 2014, adidas AG announced a multi-year shareholder return programme of up to € 1.5 billion in total to be completed by December 31, 2017. The shareholder return programme is being executed primarily by buying back shares via the stock exchange under the authorisation given by the Annual General Meeting on May 8, 2014, for the period through to May 7, 2019. The authorisation covers the repurchase of up to 10% of the company’s share capital on the stock exchange, subject to advantageous market conditions. On March 5, 2015, adidas AG announced the commencement of the second tranche of the share buyback programme with an aggregate acquisition cost of up to € 300 million (excluding incidental purchasing costs). Within the second tranche up to and including June 15, 2015, adidas AG bought back 4,129,627 shares. This corresponds to a notional amount of € 4,129,627 in the nominal capital and consequently 1.97% of the company’s nominal capital. The average purchase price per share for this second tranche was € 72.65. The total number of shares bought back by adidas AG within the framework of the shareholder return programme amounted to 9,018,769 shares as of December 31, 2015. This corresponds to a notional amount of € 9,018,769 in the nominal capital and consequently 4.31% of the company’s nominal capital. As of year-end 2015, the adidas AG had successfully completed 40% of its multi-year shareholder return programme.

STRONG INTERNATIONAL INVESTOR BASE Based on our share register, we estimate that adidas AG currently has slightly more than 70,000 shareholders. In our latest ownership analysis conducted in February 2016, we identified almost 100% of our shares outstanding. Institutional investors represent the largest investor group, holding 87% of shares outstanding. Private investors and undisclosed holdings account for 8 %. Current members of the adidas Group Executive and Supervisory Boards hold less than 1% in total. Lastly, as a result of shares purchased so far as part of our share buyback programme, adidas AG currently holds 4% of the company’s shares as treasury shares. In terms of geographical distribution, the North American market currently accounts for 33% of institutional shareholdings, followed by the UK with 26%. Identified German institutional investors hold 9% of shares outstanding. Switzerland and France account for 6% and 5%, respectively. 21% of institutional shareholders were identified in other regions of the world.

see Diagram 05

see Diagram 06

www.adidas-group.com/ voting_rights_notifications

see Note 26, p. 220

VOTING RIGHTS NOTIFICATIONS PUBLISHED All voting rights notifications received in 2015 and thereafter in accordance with §§ 21 et seq. of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) can be viewed on our corporate website. Information on reportable shareholdings that currently exceed or fall below a certain threshold can also be found in the Notes section of this Annual Report.

DIRECTORS’ DEALINGS REPORTED ON CORPORATE WEBSITE The purchase or sale of adidas AG shares (ISIN DE000A1EWWW0) or related financial instruments, as defined by § 15a WpHG, conducted by members of our Executive or Supervisory Boards, by key executives or by any person in close relationship with these persons, is reported on our website. In 2015, adidas AG received no notifications pursuant to § 15a WpHG.

ADIDAS AG SHARE RECEIVES STRONG ANALYST SUPPORT The adidas Group and the adidas AG share continued to receive strong analyst support in 2015. Around 35analysts from investment banks and brokerage firms regularly published research reports on our Group. The vast majority of analysts are confident about the medium- and long-term potential of the Group. This is reflected in the recommendation split for our share as at December 31, 2015. 38% of analysts recommended investors to ’buy’ our share (2014: 24%). 48% advised to ‘hold’ our share (2014: 57%) and 14% of the analysts recommended to ‘sell’ our share (2014: 19%).

1 To our S hareholders Our Share

05 SHAREHOLDER STRUCTURE 1

4 5 years Total ■ 2014 ■ 2015

127

3 Group M anagement Report – F inancial Review Group Business Performance – Treasury

43 FINANCING STRUCTURE 1 € IN MILLIONS

Cash and short-term financial assets Bank borrowings Commercial paper Private placements

2015

2014

1,370

1,688

229

174

138

218

Eurobonds

981

990

Convertible bond

483

471

1,830

1,873

460

185

Gross total borrowings Net borrowings 1 Rounding differences may arise in totals.

44 ISSUED BONDS AT A GLANCE IN MILLIONS Volume

Coupon

Maturity

US private placement

USD 150

fixed

2016

Convertible bond

EUR 500

fixed

2019

Eurobond

EUR 600

fixed

2021

Eurobond

EUR 400

fixed

2026

45 N ET CASH/(NET BORROWINGS) € IN MILLIONS 2015

(460)

2014

(185)

2013

295

2012

448

2011

46 FINANCIAL LEVERAGE IN % 2015

8.1

2014

3.3

2013

(5.4)

2012

(8.5)

2011

(1.7)

128

3 Group M anagement Report – F inancial Review Group Business Performance – Treasury

INTEREST RATE DECREASES The weighted average interest rate on the Group’s gross borrowings decreased to 2.4% in 2015 (2014: 3.1%). This development is mainly due to the repayment of a US private placement of US $ 115 million, which carried a higher coupon, as well as lower interest rates on short-term financing. The latter was mainly related to euro-denominated commercial paper which was issued in the course of 2015 to meet seasonal funding needs. Fixed-rate financing represented 87% of the Group’s total gross borrowings at the end of 2015 (2014: 90%). Variable-rate financing accounted for 13% of total gross borrowings at the end of the year (2014: 10%).

see Diagram 47

see Global Operations, p. 74

s ee Risk and Opportunity Report, p. 156

47 INTEREST RATE DEVELOPMENT 1 IN % 2015

2.4

2014

3.1

2013

3.8

2012

4.4

2011

4.9

1 Weighted average interest rate of gross borrowings.

EFFECTIVE CURRENCY MANAGEMENT A KEY PRIORITY As a globally operating company, the adidas Group is exposed to currency risks. Therefore, effective currency management is a key focus of Group Treasury, with the aim of reducing the impact of currency fluctuations on non-euro-denominated net future cash flows. In this regard, hedging US dollars is a central part of our programme. This is a direct result of the Group’s Asian-dominated sourcing, which is largely denominated in US dollars. In 2015, Group Treasury managed a net deficit of around US $ 6.2 billion related to operational activities (2014: US $ 5.6 billion). Thereof, around US $ 3.6 billion was against the euro (2014: US $2.8 billion). As governed by the Group’s Treasury Policy, we have established a hedging system on a rolling basis up to 24 months in advance, under which the vast majority of the anticipated seasonal hedging volume is secured approximately six months prior to the start of a season. As a result, we have almost completed our anticipated hedging needs for 2016 as of year-end 2015 and have already started hedging our exposure for 2017. In 2016, we expect a negative effect from less favourable conversion rates, mainly as a result of the strengthening of the US dollar. The use or combination of different hedging instruments, such as forward exchange contracts, currency options and swaps, protects us against unfavourable currency movements. The use of currency options allows the Group to benefit from future favourable exchange rate developments.

12 9

3 Group M anagement Report – F inancial Review

Group Business Performance – Financial Statements and Management Report of adidas AG

FINANCIAL STATEMENTS AND MANAGEMENT REPORT OF ADIDAS AG adidas AG is the parent company of the adidas Group. It includes operating business functions, primarily for the German market, as well as corporate headquarter functions such as Marketing, Group Treasury, Taxes, Legal and Finance. It also administers the shareholdings of the company.

OPERATING ACTIVITIES AND CAPITAL STRUCTURE OF ADIDAS AG The majority of the operating business of adidas AG consists of the sale of merchandise to retailers and own-retail activities. In addition to its own trading activities, the results of adidas AG are also influenced by its holding function for the adidas Group. This is reflected primarily in currency effects, transfer of costs for services provided, interest result and income from investments in affiliated companies. The opportunities and risks as well as the future development of adidas AG largely reflect those of the adidas Group. The asset and capital structure of adidas AG is also impacted by its holding and financing function for the Group. For example, 56% of total assets in 2015 related to financial assets, which primarily consist of shares in affiliated companies. Intercompany accounts, through which transactions between affiliated companies are settled, represent another 27% of total assets and 44% of total liabilities and equity as at December 31, 2015.

PREPARATION OF ACCOUNTS Unlike the consolidated financial statements of the adidas Group, which are in conformity with the International Financial Reporting Standards (IFRS), as adopted by the European Union as at December31,2015, the following financial statements of adidas AG have been prepared in accordance with the rules set out in the German Commercial Code (Handelsgesetzbuch – HGB).

INCOME STATEMENT 48 STATEMENT OF INCOME IN ACCORDANCE WITH HGB (CONDENSED) 1 € IN MILLIONS 2015

2014

Net sales

2,416

2,142

Total output

2,416

2,142

Other operating income

1,478

647

Cost of materials

(663)

(600)

Personnel expenses

(488)

(398)

Depreciation and amortisation Other operating expenses

(96)

(91)

(2,324)

(1,581) 119

Operating profit

323

Financial result

394

128

Taxes

(78)

(71)

Net income

639

176

Retained earnings brought forward

110

Withdrawals from other revenue reserves

643

307

Retained earnings 1 Rounding differences may arise in totals.

130

s ee Subsequent Events and Outlook, p.148 see Risk and Opportunity Report, p.156

3 Group M anagement Report – F inancial Review

Group Business Performance – Financial Statements and Management Report of adidas AG

49 ADIDAS AG NET SALES 1 € IN MILLIONS

Royalty and commission income

2015

2014

1,371

1,177

adidas Germany

821

798

Foreign subsidiaries

139

Y-3 Other revenues Total

2,416

2,142

1 Rounding differences may arise in totals.

NET SALES INCREASE 13% Sales of adidas AG comprise external revenues from adidas and Reebok products generated by adidas Germany, external revenues from Y-3 products as well as Group-internal revenues from foreign subsidiaries. Reported revenues also include royalty and commission income, mainly from affiliated companies, and other revenues. In 2015, adidas AG net sales grew 13% to € 2.416 billion (2014: € 2.142 billion). This growth is mainly due to an increase in royalty income from affiliated companies.

see Table 49

see Table 48

OTHER OPERATING INCOME GROWS STRONGLY In 2015, other operating income of adidas AG more than doubled to € 1.478 billion (2014: € 647 million). This was primarily due to an increase in income from currency conversion.

OTHER OPERATING EXPENSES UP 47% Other operating expenses of adidas AG increased 47% to € 2.324 billion in 2015 (2014: € 1.581 billion). This increase was primarily attributable to higher losses from currency conversion. In addition, cost transfers within the Group, advertising and promotional expenditure as well as legal and consultancy expenses also increased.

DEPRECIATION AND AMORTISATION INCREASES 5% Depreciation and amortisation for adidas AG rose 5% to € 96 million in 2015 (2014: € 91 million), mainly as a result of the depreciation and amortisation of office buildings.

OPERATING PROFIT INCREASES STRONGLY VERSUS PRIOR YEAR In 2015, operating profit increased 171% to € 323 million (2014: € 119 million). This was mainly due to higher net sales and improved other operating income.

131

3 Group M anagement Report – F inancial Review

Group Business Performance – Financial Statements and Management Report of adidas AG

FINANCIAL RESULT IMPROVES SIGNIFICANTLY The financial result of adidas AG improved to € 394 million in 2015 from € 128 million in 2014. This increase was due to higher income from investments in affiliated companies in an amount of € 436 million (2014: € 170 million). Net interest expense of adidas AG rose 28% to € 56 million in 2015 (2014: € 44 million). This development was mainly attributable to higher interest expenses from long-term liabilities towards third parties.

NET INCOME INCREASES STRONGLY Income from ordinary activities improved 190% to € 716 million in 2015 from € 247 million in 2014. This was mainly due to the improved operating profit and higher financial result. Net income, after taxes of € 78 million, amounted to € 639 million in 2015 and was thus significantly above the prior year level (2014: € 176 million).

BALANCE SHEET 50 BALANCE SHEET IN ACCORDANCE WITH HGB (CONDENSED) 1 € IN MILLIONS Dec. 31, 2015

Dec. 31, 2014

Assets Intangible assets

118

129

Property, plant and equipment

449

419

Financial assets

4,216

3,503

Fixed assets

4,783

4,051

Inventories Receivables and other assets Cash and cash equivalents, securities Current assets Prepaid expenses Total assets

2,157

2,312

447

934

2,652

3,284

7,517

7,415

2,087

2,051

Equity and liabilities Shareholders’ equity Provisions

445

390

Liabilities and other items

4,985

4,974

Total equity and liabilities

7,517

7,415

1 Rounding differences may arise in totals.

1 32

see Table 48

3 Group M anagement Report – F inancial Review

Group Business Performance – Financial Statements and Management Report of adidas AG

TOTAL ASSETS UP 1% At the end of December 2015, total assets grew 1% to € 7.517 billion versus € 7.415 billion in the prior year. The increase in financial assets was largely offset by the decrease in current assets.

see Table 50

SHAREHOLDERS’ EQUITY 2% ABOVE PRIOR YEAR Shareholders’ equity increased 2% to € 2.087 billion at the end of December 2015 compared to € 2.051 billion in the prior year. This increase was due to higher retained earnings which more than offset the negative effect resulting from the buyback of treasury shares. The equity ratio remained stable at 28% (2014: 28%).

PROVISIONS INCREASE 14% Provisions were up 14% to € 445 million at the end of 2015 from € 390 million in 2014. The increase primarily resulted from higher pension provisions.

LIABILITIES AND OTHER ITEMS REMAIN STABLE At the end of December 2015, liabilities and other items remained virtually unchanged at € 4.985 billion versus the prior year (2014: € 4.974 billion).

CASH INFLOW FROM OPERATING ACTIVITIES REFLECTS NET INCOME adidas AG generated a positive cash flow from operating activities of € 1.076 billion (2014: € 61 million). The change versus the prior year was mainly a result of higher net income and lower receivables from affiliated companies. Net cash outflow from investment activities increased to € 830 million (2014: € 221 million). This increase was largely attributable to capital expenditure for financial assets in an amount of € 781 million. Financing activities resulted in a net cash outflow of € 733 million (2014: cash inflow of € 359 million). The net cash outflow from financing activities mainly relates to the dividend payment in an amount of € 303 million and the buyback of treasury shares in an amount of € 300 million. As a result of all these developments, cash and cash equivalents of adidas AG decreased to € 447 million at the end of December 2015 compared to € 934 million at the end of December 2014. adidas AG has bilateral credit lines of € 1.7 billion. In addition, the company has a multi-currency commercial paper programme in an amount of € 2.0 billion. adidas AG is able to meet its financial commitments at all times.

1 33

3 Group M anagement Report – F inancial Review

Group Business Performance – Disclosures pursuant to § 315 Section 4 and § 289 Section 4 ofthe German Commercial Code

DISCLOSURES PURSUANT TO § 315 SECTION 4 AND § 289 SECTION 4 OFTHE GERMAN COMMERCIAL CODE COMPOSITION OF SUBSCRIBED CAPITAL The nominal capital of adidas AG amounts to € 209,216,186 (as at December 31, 2015) and is divided into the same number of registered no-par-value shares with a pro-rata amount in the nominal capital of € 1 each (‘shares’). Pursuant to § 4 section 9 of the Articles of Association, shareholders’ claims to the issuance of individual share certificates are, in principle, excluded. Each share grants one vote at the Annual General Meeting. All shares carry the same rights and obligations. As at December 31, 2015, adidas AG holds 9,018,769 treasury shares, which however do not confer any rights to the company in accordance with §71bGerman Stock Corporation Act (Aktiengesetz – AktG).

see Note 26, p. 220

In the USA, we have issued American Depositary Receipts (ADRs). ADRs are deposit certificates of non-US shares that are traded instead of the original shares on US stock exchanges. Two ADRs equal one share.

see Our Share, p. 46

see Executive Board, p. 16

RESTRICTIONS ON VOTING RIGHTS OR TRANSFER OF SHARES We are not aware of any contractual agreements with adidas AG or other agreements restricting voting rights or the transfer of shares. Based on the Code of Conduct in conjunction with an internal guideline of adidas AG, however, particular lock-up periods do exist for members of the Executive Board with regard to the purchase and sale of adidas AG shares. These lock-up periods are connected with the publication of quarterly and full year results. Such lock-up periods also exist for employees who have access to yet unpublished financial results. In addition, restrictions of voting rights may exist pursuant, inter alia, to § 136 AktG or for treasury shares pursuant to § 71b AktG as well as due to capital market regulations, in particular pursuant to §§ 21 et seq. German Securities Trading Act (Wertpapierhandelsgesetz – WpHG).

SHAREHOLDINGS IN SHARE CAPITAL EXCEEDING 10% OF VOTING RIGHTS We have not been notified of, and are not aware of, any direct or indirect shareholdings in the share capital of adidas AG exceeding 10% of the voting rights.

SHARES WITH SPECIAL RIGHTS There are no shares bearing special rights. In particular, there are no shares with rights conferring powers of control.

VOTING RIGHT CONTROL IF EMPLOYEES HAVE A SHARE IN THE CAPITAL Like all other shareholders, employees who hold adidas AG shares exercise their control rights directly in accordance with statutory provisions and the Articles of Association.

EXECUTIVE BOARD APPOINTMENT AND DISMISSAL Pursuant to § 6 of the Articles of Association and § 84 AktG, the Supervisory Board is responsible for determining the exact number of members of the Executive Board, for their appointment and dismissal as well as for the appointment of the Chief Executive Officer (CEO). The adidas AG Executive Board, which, as a basic principle, comprises at least two members, currently consists of the CEO as well as four further members. Executive Board members may be appointed for a maximum period of five years. Such appointments may be renewed and the terms of office may be extended, provided that no term exceeds five years. The Supervisory Board may revoke the appointment of an individual as member of the Executive Board or CEO for good cause, such as gross negligence of duties or a vote of no confidence by the Annual General Meeting.

13 4

3 Group M anagement Report – F inancial Review

Group Business Performance – Disclosures pursuant to § 315 Section 4 and § 289 Section 4 ofthe German Commercial Code

As adidas AG is subject to the regulations of the German Co-Determination Act (Mitbestimmungsgesetz–MitbestG), the appointment of Executive Board members and also their dismissal requires a majority of at least two thirds of the Supervisory Board members (§ 31 MitbestG). If such a majority is not established in the first vote by the Supervisory Board, the Mediation Committee has to present a proposal which, however, does not exclude other proposals. The appointment or dismissal is then made in a second vote with a simple majority of the votes cast by the Supervisory Board members. Should the required majority not be established in this case either, a third vote, again requiring a simple majority, must be held in which, however, the Chairman of the Supervisory Board has two votes. Furthermore, the competent court shall, in urgent cases, make the necessary appointment upon application by any party involved, if the Executive Board does not have the required number of members (§ 85 section1 AktG).

AMENDMENTS TO THE ARTICLES OF ASSOCIATION Pursuant to § 179 section 1 sentence 1 AktG, the Articles of Association of adidas AG can, in principle, only be amended by a resolution passed by the Annual General Meeting. Pursuant to § 21 section 3 of the Articles of Association in conjunction with § 179 section 2 sentence 2 AktG, the Annual General Meeting of adidas AG principally resolves upon amendments to the Articles of Association with a simple majority of the votes cast and with a simple majority of the nominal capital represented when passing the resolution. If mandatory legal provisions stipulate a larger majority of voting rights or capital, this is applicable. When it comes to amendments solely relating to the wording, the Supervisory Board is, however, authorised to make these modifications in accordance with § 179 section 1 sentence 2 AktG in conjunction with §10section1oftheArticles of Association.

AUTHORISATIONS OF THE EXECUTIVE BOARD The authorisations of the Executive Board are regulated by §§ 76 et seq. AktG in conjunction with §§ 7 and 8 of the Articles of Association. The Executive Board is responsible, in particular, for managing the company and represents the company judicially and extra-judicially.

AUTHORISATION OF THE EXECUTIVE BOARD TO ISSUE SHARES The authorisation of the Executive Board to issue shares is regulated by § 4 of the Articles of Association and by statutory provisions: Authorised Capital •• Until June 2, 2018, the Executive Board is authorised to increase the nominal capital, subject to Supervisory Board approval, by issuing new shares against contributions in kind once or several times by no more than € 25,000,000 altogether (Authorised Capital 2015).

••

Until June 30, 2018, the Executive Board is authorised to increase the nominal capital, subject to Supervisory Board approval, by issuing new shares against contributions in cash once or several times by no more than € 50,000,000 altogether (Authorised Capital 2013/I).

••

Subject to Supervisory Board approval, shareholders’ subscription rights may be excluded in certain cases for each of the above-mentioned authorisations. Contingent Capital •• The nominal capital of the company is conditionally increased by up to € 36,000,000 (Contingent Capital 2010). The Contingent Capital serves the purpose of granting holders or creditors of bonds that were issued up to May 5, 2015 based on the resolution of the Annual General Meeting on May 6, 2010 subscription or conversion rights relating to no more than a total of 36,000,000 shares in compliance with the corresponding conditions of the bonds.

135

see Note 26, p. 220

3 Group M anagement Report – F inancial Review

Group Business Performance – Disclosures pursuant to § 315 Section 4 and § 289 Section 4 ofthe German Commercial Code

On March 14, 2012, following the approval of the Supervisory Board, the Executive Board resolved to make partial use of the authorisation granted by the Annual General Meeting on May 6, 2010 and issued a convertible bond, excluding shareholders’ subscription rights, on March 21, 2012. However, the shares will only be issued insofar as bondholders make use of their conversion rights. The total number of shares to be issued to bondholders in case of full conversion currently amounts to up to 6,097,243 shares. Moreover, the authorisation to issue bonds with warrants and/or convertible bonds granted on May 6, 2010 was cancelled by resolution of the Annual General Meeting on May 8, 2014.

••

Furthermore, the nominal capital of the company is conditionally increased by up to € 12,500,000 (Contingent Capital 2014). The Contingent Capital serves the purpose of granting holders or creditors of bonds that were issued based on the resolution of the Annual General Meeting on May 8, 2014 subscription or conversion rights relating to no more than a total of 12,500,000 shares in compliance with the corresponding conditions of the bonds. Based on the authorisation granted by the Annual General Meeting on May 8, 2014, the Executive Board is authorised, subject to Supervisory Board approval, to issue bonds with warrants and/or convertible bonds in an aggregate nominal value of up to € 1 billion with or without a limited term, against contributions in cash once or several times until May 7, 2019, and to guarantee bonds issued by subordinated Group companies. The Executive Board is also authorised, subject to Supervisory Board approval, to exclude shareholders’ subscription rights for fractional amounts and to exclude shareholders’ subscription rights insofar as this is necessary for granting subscription rights to which holders or creditors of previously issued bonds are entitled. Furthermore, the Executive Board is authorised, subject to Supervisory Board approval, to also exclude shareholders’ subscription rights if the issue price of the bonds is not significantly below the hypothetical market value of these bonds and the number of shares to be issued does not exceed 10% of the nominal capital. The issuance of new shares or the use of treasury shares must be taken into account when calculating the limit of 10% in certain other specific cases.

The Executive Board has so far not utilised the authorisation to issue bonds with warrants and/or convertible bonds granted by the Annual General Meeting on May 8, 2014.

AUTHORISATION OF THE EXECUTIVE BOARD TO REPURCHASE SHARES The authorisations of the Executive Board to repurchase adidas AG shares arise from §§ 71 et seq. AktG and, as at the balance sheet date, from the authorisation granted by the Annual General Meeting on May 8, 2014.

••

Until May 7, 2019, the Executive Board is authorised to repurchase adidas AG shares of up to an amount totalling 10% of the nominal capital at the date of the resolution (or, as the case may be, a lower amount of nominal capital at the date of utilisation of the authorisation) for any lawful purpose and within the legal framework. The authorisation may be used by the company but also by its subordinated Group companies or by third parties on account of the company or its subordinated Group companies or third parties assigned by the company or one of its subordinated Group companies. The repurchase will be carried out via the stock exchange, through a public invitation to submit sale offers, through a public repurchase offer, or through granting tender rights to shareholders. Furthermore, the authorisation sets out the lowest and highest nominal value that may be granted in each case. The purposes for which adidas AG shares repurchased based on this authorisation may be used are set out in the resolution on Item 8 of the Agenda for the Annual General Meeting held on May 8, 2014. The shares may in particular be used as follows:

•• ••

They may be sold via the stock exchange, through a public share purchase offer made to all shareholders or sold otherwise against cash (limited to 10% of the nominal capital taking into account certain offsets) at a price not significantly below the stock market price of shares with the same features. They may be offered and assigned as consideration for the direct or indirect acquisition of companies, parts of companies, participations in companies or other economic assets or within the scope of company mergers.

13 6

3 Group M anagement Report – F inancial Review

Group Business Performance – Disclosures pursuant to § 315 Section 4 and § 289 Section 4 ofthe German Commercial Code

•• •• ••

They may be offered and sold as consideration for the acquisition of industrial property rights or intangible property rights or for the acquisition of licences relating to such rights, also through subordinated Group companies. They may be used for purposes of meeting the subscription or conversion rights or obligations or the company’s right to delivery of shares arising from bonds with warrants and/or convertible bonds issued by the company or its subordinated Group companies. They may be cancelled without the cancellation, or the execution thereof, requiring an additional resolution of the Annual General Meeting.

Furthermore, the shares may be assigned to members of the Executive Board as compensation by way of a stock bonus subject to the provision that resale by the Executive Board members shall only be permitted following a retention period of at least three years from the date of assignment. Responsibility in this case lies with the Supervisory Board. In case of utilisation of shares for the above-mentioned purposes, except for the cancellation of shares, shareholders’ subscription rights are excluded. The Supervisory Board may determine that transactions based on this authorisation may only be carried out subject to the approval of the Supervisory Board or one of its committees. In the year under review, the Executive Board partly utilised the authorisation to repurchase treasury shares. In the period from March 6, 2015 up to and including June 15, 2015, adidas AG bought back 4,129,627 shares via the stock exchange.

••

In the scope of the authorisation resolved by the Annual General Meeting on May 8, 2014, the Executive Board is furthermore authorised to conduct the share buyback also by using equity derivatives which are arranged with a credit institution or financial services institution in close conformity with market conditions. adidas AG may acquire call options issued for physical delivery and/or sell put options or use a combination of call and put options or other equity derivatives if the option conditions ensure that these shares are only delivered if they were purchased in compliance with the equality principle. All share purchases using the aforementioned equity derivatives are limited to a maximum value of 5% of the nominal capital existing at the date on which the resolution was adopted by the Annual General Meeting (or, as the case may be, a lower amount of nominal capital at the date of utilisation of the authorisation). The term of the options may not exceed 18 months and must furthermore be chosen in such a way that the shares are acquired upon the exercise of the options no later than May 7, 2019. The authorisation furthermore sets out the lowest and highest nominal value that may be granted in each case. For excluding subscription rights as well as for the use and cancellation of shares purchased using equity derivatives, the general provisions adopted by the Annual General Meeting (set out above) are applicable accordingly.

CHANGE OF CONTROL/COMPENSATION AGREEMENTS Material agreements entered into by adidas AG containing a change-of-control clause relate to financing agreements. In the case of a change of control, these agreements, in accordance with common practice, entitle the creditor to termination and early calling-in of any outstanding amounts. No compensation agreements exist between adidas AG and members of the Executive Board or employees relating to the event of a takeover bid.

137

see Note 26, p. 220

3 Group M anagement Report – F inancial Review Business Performance bySegment

BUSINESS PERFORMANCE BYSEGMENT The adidas Group has divided its operating activities into the following operating segments: Western Europe, North America, Greater China, Russia/CIS, Latin America, Japan, Middle East, South Korea, Southeast Asia/Pacific, TaylorMade-adidas Golf, Reebok-CCM Hockey, Runtastic and Other centrally managed businesses. While the business segments Western Europe, North America, Greater China, Russia/CIS, Latin America and Japan are reported separately, the markets Middle East, South Korea and Southeast Asia/Pacific are combined to the segment MEAA (’Middle East, Africa and other Asian markets’). Each market comprises all business activities in the wholesale and retail distribution channels of the adidas and Reebok brands. The segmental results of TaylorMade-adidas Golf, Reebok-CCM Hockey, Runtastic and Other centrally managed businesses, including brands such as Y-3 and Five Ten, are aggregated under Other Businesses. Segmental operating expenses primarily relate to expenditure for point-of-sale and marketing investments as well as expenditure for sales force, logistics and administration.

01 NET SALES BY SEGMENT € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Western Europe

4,539

3,793

20%

17%

North America

2,753

2,217

24%

Greater China

2,469

1,786

38%

18% (11%)

Russia/CIS

739

1,098

(33%)

1,783

1,612

11%

12%

Japan

776

744

(0%)

MEAA

2,388

1,925

24%

14%

Other Businesses

1,467

1,358

(3%)

16,915

14,534

16%

10%

Latin America

Total 1 1 Rounding differences may arise in totals.

+ 5%

NORTH AMERICA

(11%) + 17% WESTERN EUROPE

RUSSIA / CIS

GREATER CHINA

+ 14% MEAA

+ 12% LATIN AMERICA

(3%)

OTHER BUSINESSES

138

+ 18% (0%) JAPAN

3 Group M anagement Report – F inancial Review Business Performance bySegment – Western Europe

WESTERN EUROPE REVENUES IN WESTERN EUROPE UP 17% In 2015, sales in Western Europe increased 17% on a currency-neutral basis, due to double-digit sales growth at both adidas and Reebok. From a market perspective, the main contributors to the increase were the UK, Italy, France and Spain, where revenues grew at double-digit rates each. Currency translation effects positively impacted revenues in euro terms. Sales in Western Europe grew 20% to € 4.539 billion from € 3.793 billion in 2014.

see Table 02

adidas revenues in Western Europe grew 18% on a currency-neutral basis in 2015. This development was driven by double-digit sales growth in the football category as well as at adidas Originals and adidas neo. In addition, growth in the running and outdoor categories also contributed to the sales increase. Currency translation effects had a positive impact on revenues in euro terms. adidas sales in Western Europe increased 20% to € 4.193 billion (2014: € 3.485 billion). Reebok revenues in Western Europe were up 11% on a currency-neutral basis in 2015. This increase was mainly due to double-digit sales growth in the training and studio categories. In addition, high-singledigit growth in the running category and mid-single-digit increases in Classics also contributed to the development. Currency translation effects had a positive impact on revenues in euro terms. Reebok sales in Western Europe were up 12% to € 347 million from € 308 million in the prior year.

SIGNIFICANTLY IMPROVED OPERATING MARGIN IN WESTERN EUROPE Gross margin in Western Europe increased 2.1 percentage points to 47.5% in 2015 from 45.4% in 2014. This development was driven by positive currency effects as well as a more favourable product and channel mix, partly offset by higher input costs and a less favourable pricing mix. Gross profit in Western Europe increased 25% to € 2.157 billion versus € 1.722 billion in 2014. Operating expenses were up 18% to € 1.248 billion versus € 1.055 billion in 2014. This development reflects an increase in expenditure for point-of-sale and marketing investments as well as higher sales expenditure. Operating expenses as a percentage of sales decreased 0.3 percentage points to 27.5% (2014: 27.8%). Operating margin improved 2.5 percentage points to 20.0% (2014: 17.6%), as a result of the gross margin increase as well as the positive effect of lower operating expenses as a percentage of sales. Operating profit in Western Europe increased 36% to € 909 million versus € 666 million in the prior year.

02 WESTERN EUROPE AT A GLANCE € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Net sales 1

4,539

3,793

20%

17%

adidas

4,193

3,485

20%

18%

347

308

12%

11%

Reebok Gross profit Gross margin

2,157

1,722

25%

–

47.5%

45.4%

2.1pp

–

Segmental operating profit Segmental operating margin

909

666

36%

–

20.0%

17.6%

2.5pp

–

1 Rounding differences may arise in totals.

139

3 Group M anagement Report – F inancial Review Business Performance bySegment – North America

NORTH AMERICA SALES INCREASE 5% IN NORTH AMERICA In 2015, sales in North America increased 5% on a currency-neutral basis, as a result of high-single-digit growth at adidas. Currency translation effects positively impacted revenues in euro terms. Sales in North America grew 24% to € 2.753 billion from € 2.217 billion in 2014.

see Table 03

adidas revenues in North America grew 9% on a currency-neutral basis in 2015, reflecting double-digit sales growth at adidas Originals and adidas neo as well as increases in the football and training categories. Currency translation effects had a positive impact on revenues in euro terms. adidas sales in North America increased 28% to € 2.231 billion (2014: € 1.739 billion). Reebok revenues in North America decreased 7% on a currency-neutral basis in 2015, as sales growth in the training and studio categories was more than offset by declines in the running and walking categories as well as in Classics. This development also reflects the brand’s continued efforts to further streamline Reebok’s factory outlet business in North America. Currency translation effects had a positive impact on revenues in euro terms. Reebok sales in North America were up 9% to € 523 million from € 477 million in the prior year.

GROSS MARGIN IN NORTH AMERICA IMPROVES BY 1.1 PERCENTAGE POINTS Gross margin in North America increased 1.1 percentage points to 36.6% in 2015 from 35.5% in 2014. This development was mainly due to the positive effects from a more favourable channel, product and pricing mix, partly offset by higher input costs as well as negative currency effects. Gross profit in North America increased 28% to € 1.008 billion versus € 787 million in 2014. Operating expenses were up 39% to € 977 million versus € 702 million in 2014. This reflects the planned significant increase in expenditure for point-of-sale and marketing investments as well as sales expenditure to support the company’s growth in the region. As a result, operating expenses as a percentage of sales increased 3.8 percentage points to 35.5% (2014: 31.7%). Operating margin decreased 2.9 percentage points to 2.5% (2014: 5.4%), as the positive effect from the gross margin increase was more than offset by higher operating expenses as a percentage of sales. Operating profit in North America decreased 42% to € 69 million (2014: € 120 million).

03 NORTH AMERICA AT A GLANCE € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Net sales 1

2,753

2,217

24%

adidas

2,231

1,739

28%

523

477

(7%)

Reebok Gross profit Gross margin

1,008

787

28%

–

36.6%

35.5%

1.1pp

–

Segmental operating profit Segmental operating margin

120

(42%)

–

2.5%

5.4%

(2.9pp)

–

1 Rounding differences may arise in totals.

14 0

3 Group M anagement Report – F inancial Review Business Performance bySegment – Greater China

GREATER CHINA REVENUES IN GREATER CHINA GROW 18% In 2015, sales in Greater China increased 18% on a currency-neutral basis, as a result of double-digit sales growth at both adidas and Reebok. Currency translation effects positively impacted revenues in euro terms. Sales in Greater China grew 38% to € 2.469 billion from € 1.786 billion in 2014.

see Table 04

adidas revenues in Greater China grew 17% on a currency-neutral basis in 2015. The increase was mainly due to double-digit sales growth in the training and running categories as well as at adidas Originals and adidas neo. Currency translation effects had a positive impact on revenues in euro terms. adidas sales in Greater China increased 37% to € 2.411 billion (2014: € 1.759 billion). Reebok revenues in Greater China increased 83% on a currency-neutral basis in 2015, driven by significant sales increases in the walking category and in Classics, where revenues more than doubled, as well as strong double-digit sales growth in running. Currency translation effects had a positive impact on revenues in euro terms. Reebok sales in Greater China more than doubled to € 58 million from € 27 million in the prior year.

GREATER CHINA OPERATING MARGIN INCREASES TO 35.1% Gross margin in Greater China increased 0.1 percentage points to 57.1% in 2015 (2014: 57.1%). This development was driven by a more favourable pricing, channel and product mix, partly offset by higher input costs as well as negative currency effects. Gross profit in Greater China increased 38% to € 1.411 billion versus € 1.019 billion in 2014. Operating expenses were up 36% to € 545 million versus € 402 million in 2014. This was due to an increase in expenditure for point-of-sale and marketing investments as well as higher sales expenditure. Operating expenses as a percentage of sales decreased 0.4 percentage points to 22.1% (2014: 22.5%). Operating margin increased 0.5 percentage points to 35.1% (2014: 34.6%), as a result of the gross margin increase as well as the positive effect of lower operating expenses as a percentage of sales. Operating profit in Greater China increased 40% to € 866 million versus € 617 million in the prior year.

04 GREATER CHINA AT A GLANCE € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Net sales 1

2,469

1,786

38%

18%

adidas

2,411

1,759

37%

17%

115%

83%

Reebok Gross profit Gross margin

1,411

1,019

38%

–

57.1%

0.1pp

–

Segmental operating profit Segmental operating margin

866

617

40%

–

35.1%

34.6%

0.5pp

–

1 Rounding differences may arise in totals.

1 41

3 Group M anagement Report – F inancial Review Business Performance bySegment – Russia/CIS

RUSSIA/CIS RUSSIA/CIS REVENUES DECLINE In 2015, sales in Russia/CIS decreased 11% on a currency-neutral basis, mainly due to sales declines at adidas. Currency translation effects negatively impacted revenues in euro terms. Revenues in Russia/CIS declined 33% to € 739 million from € 1.098 billion in 2014.

see Table 05

adidas revenues decreased 13% on a currency-neutral basis in Russia/CIS in 2015. This development was due to sales declines in most categories. Currency translation effects had a negative impact on revenues in euro terms. adidas sales in Russia/CIS declined 35% to € 570 million (2014: € 872 million). Reebok revenues in Russia/CIS decreased 1% on a currency-neutral basis in 2015. Sales growth in the training and studio categories was more than offset by sales declines in the walking category. Currency translation effects had a negative impact on revenues in euro terms. Reebok sales in Russia/CIS were down 25% to € 170 million from € 226 million in the prior year.

OPERATING EXPENSES IN RUSSIA/CIS REDUCED BY 30% Gross margin in Russia/CIS decreased 2.6 percentage points to 56.0% in 2015 from 58.6% in 2014. The positive impact from a significantly more favourable pricing mix was more than offset by negative currency effects as well as higher input costs. Gross profit in Russia/CIS decreased 36% to € 414 million versus € 644 million in 2014. Operating expenses were down 30% to € 329 million versus € 471 million in 2014. This was due to significantly lower sales expenditure, reflecting the reduction in the number of stores. Operating expenses as a percentage of sales increased 1.6 percentage points to 44.6% (2014: 42.9%). Operating margin decreased 4.3 percentage points to 11.4% (2014: 15.7%), due to the gross margin decline as well as the negative effect of higher operating expenses as a percentage of sales. Operating profit in Russia/CIS decreased 51% to € 85 million versus € 173 million in the prior year.

05 RUSSIA/CIS AT A GLANCE € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Net sales 1

739

1,098

(33%)

(11%)

adidas

570

872

(35%)

(13%)

Reebok

170

226

(25%)

(1%)

Gross profit

414

644

(36%)

–

56.0%

58.6%

(2.6pp)

–

Gross margin Segmental operating profit Segmental operating margin

173

(51%)

–

11.4%

15.7%

(4.3pp)

–

1 Rounding differences may arise in totals.

1 42

3 Group M anagement Report – F inancial Review Business Performance bySegment – Latin America

LATIN AMERICA DOUBLE-DIGIT SALES GROWTH AT ADIDAS AND REEBOK IN LATIN AMERICA In 2015, sales in Latin America increased 12% on a currency-neutral basis, as a result of double-digit sales growth at both adidas and Reebok. From a market perspective, the top-line development was driven by double-digit sales growth in Argentina, Mexico, Chile, Peru and Colombia. Currency translation effects negatively impacted revenues in euro terms. Sales in Latin America grew 11% to € 1.783 billion from € 1.612 billion in 2014.

see Table 06

adidas revenues grew 11% on a currency-neutral basis in Latin America in 2015. This increase was supported by double-digit sales increases in the training, basketball and outdoor categories as well as at adidas Originals and adidas neo. In addition, mid-single-digit sales growth in the running category contributed to this development. Currency translation effects had a negative impact on revenues in euro terms. adidas sales in Latin America increased 9% to € 1.516 billion (2014: € 1.389 billion). Reebok revenues in Latin America increased 16% on a currency-neutral basis in 2015, driven by doubledigit sales growth in the running, training and walking categories. In addition, mid-single-digit sales growth in Classics also contributed to this development. Currency translation effects had a positive impact on revenues in euro terms. Reebok sales in Latin America were up 19% to € 266 million from € 223 million in the prior year.

PROFITABILITY IN LATIN AMERICA INCREASES SIGNIFICANTLY Gross margin in Latin America increased 2.2 percentage points to 42.4% in 2015 from 40.2% in 2014. This development was driven by a more favourable pricing and channel mix, partly offset by negative currency effects as well as higher input costs. Gross profit in Latin America increased 17% to € 756 million versus € 648 million in 2014. Operating expenses were up 16% to € 521 million versus € 450 million in 2014. This was primarily due to higher sales expenditure as well as an increase in expenditure for point-of-sale and marketing investments. Operating expenses as a percentage of sales increased 1.3 percentage points to 29.2% (2014: 27.9%). Operating margin increased 0.8 percentage points to 13.2% (2014: 12.3%), due to the increase in gross margin, partly offset by the negative effect of higher operating expenses as a percentage of sales. Operating profit in Latin America increased 18% to € 235 million versus € 199 million in the prior year.

06 LATIN AMERICA AT A GLANCE € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Net sales 1

1,783

1,612

11%

12%

adidas

1,516

1,389

11%

266

223

19%

16%

Reebok Gross profit Gross margin

756

648

17%

–

42.4%

40.2%

2.2pp

–

Segmental operating profit Segmental operating margin

235

199

18%

–

13.2%

12.3%

0.8pp

–

1 Rounding differences may arise in totals.

1 43

3 Group M anagement Report – F inancial Review Business Performance bySegment – Japan

JAPAN STABLE REVENUE DEVELOPMENT IN JAPAN In 2015, sales in Japan remained stable on a currency-neutral basis. Currency translation effects positively impacted revenues in euro terms. Sales in Japan grew 4% to € 776 million from € 744 million in 2014.

see Table 07

adidas revenues remained stable on a currency-neutral basis in Japan in 2015. Double-digit growth at adidas Originals as well as high-single-digit increases in the running category were offset by declines in the training and football categories, the latter being mainly due to the non-recurrence of sales related to the 2014 FIFA World Cup. Currency translation effects had a positive impact on revenues in euro terms. adidas sales in Japan increased 4% to € 696 million (2014: € 667 million). Reebok revenues in Japan decreased 1% on a currency-neutral basis in 2015. Strong sales growth in the running category, where revenues more than doubled, as well as in Classics was more than offset by sales declines in the walking category. Currency translation effects had a positive impact on revenues in euro terms. Reebok sales in Japan were up 3% to € 80 million from € 77 million in the prior year.

OPERATING MARGIN IN JAPAN IMPROVES 2.8 PERCENTAGE POINTS Gross margin in Japan increased 3.7 percentage points to 47.1% in 2015 from 43.4% in 2014. The increase was driven by a more favourable channel and pricing mix, partly offset by negative currency effects, higher input costs as well as a less favourable product mix. Gross profit in Japan increased 13% to € 365 million versus € 323 million in 2014. Operating expenses were up 7% to € 231 million versus € 217 million in 2014, as a result of higher sales expenditure as well as an increase in expenditure for point-of-sale and marketing investments. Operating expenses as a percentage of sales increased 0.7 percentage points to 29.8% (2014: 29.1%). Operating margin improved 2.8 percentage points to 19.0% (2014: 16.2%) as a result of the gross margin increase, partly offset by the negative effect of higher operating expenses as a percentage of sales. Operating profit in Japan increased 22% to € 147 million versus € 121 million in the prior year.

07 JAPAN AT A GLANCE € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Net sales 1

776

744

(0%)

adidas

696

667

(0%)

Reebok

(1%)

Gross profit

365

323

13%

–

47.1%

43.4%

3.7pp

–

Gross margin Segmental operating profit Segmental operating margin

147

121

22%

–

19.0%

16.2%

2.8pp

–

1 Rounding differences may arise in totals.

14 4

3 Group M anagement Report – F inancial Review

Business Performance bySegment – MEAA (Middle East, Africa and other Asian markets)

MEAA (MIDDLE EAST, AFRICA AND OTHER ASIAN MARKETS) SALES IN MEAA INCREASE 14% In 2015, sales in MEAA increased 14% on a currency-neutral basis, as a result of double-digit sales growth at both adidas and Reebok. From a market perspective, the main contributors to the increase were South Korea, the United Arab Emirates, Turkey, Israel and Australia, where revenues grew at double-digit rates each. Currency translation effects positively impacted revenues in euro terms. Sales in MEAA grew 24% to € 2.388 billion from € 1.925 billion in 2014.

see Table 08

adidas revenues in MEAA grew 13% on a currency-neutral basis in 2015. This development was mainly due to double-digit sales increases in the training and running categories as well as at adidas Originals. Currency translation effects had a positive impact on revenues in euro terms. adidas sales in MEAA increased 23% to € 2.091 billion (2014: € 1.693 billion). Reebok revenues in MEAA increased 15% on a currency-neutral basis in 2015, driven by double-digit sales growth in the training, running and studio categories as well as in Classics. Currency translation effects had a positive impact on revenues in euro terms. Reebok sales in MEAA were up 28% to € 298 million from € 232 million in the prior year.

OPERATING PROFIT IN MEAA UP 20% Gross margin in MEAA decreased 0.2 percentage points to 51.4% in 2015 from 51.7% in 2014. The positive impact from a more favourable pricing, product and channel mix was more than offset by negative currency effects and higher input costs. Gross profit in MEAA increased 23% to € 1.228 billion versus € 995 million in 2014. Operating expenses were up 28% to € 565 million versus € 442 million in 2014. This was due to higher sales expenditure as well as an increase in expenditure for point-of-sale and marketing investments. Operating expenses as a percentage of sales increased 0.7 percentage points to 23.7% (2014: 22.9%). Operating margin decreased 1.0 percentage points to 27.8% (2014: 28.8%), due to the gross margin decline as well as the negative effect from higher operating expenses as a percentage of sales. Operating profit in MEAA increased 20% to € 664 million versus € 555 million in the prior year.

08 MEAA AT A GLANCE € IN MILLIONS 2015

2014

Change

Change (currency-neutral)

Net sales 1

2,388

1,925

24%

14%

adidas

2,091

1,693

23%

13%

298

232

28%

15%

Reebok Gross profit Gross margin

1,228

995

23%

–

51.4%

51.7%

(0.2pp)

–

Segmental operating profit Segmental operating margin

664

555

20%

–

27.8%

28.8%

(1.0pp)

–

1 Rounding differences may arise in totals.

145

3 Group M anagement Report – F inancial Review Business Performance bySegment – Other Businesses

OTHER BUSINESSES SALES IN OTHER BUSINESSES DECREASE 3% In 2015, revenues of Other Businesses were down 3% on a currency-neutral basis, as high-single-digit sales increases at Reebok-CCM Hockey as well as double-digit growth in Other centrally managed businesses were more than offset by sales declines at TaylorMade-adidas Golf. Currency translation effects positively impacted revenues in euro terms. Sales of Other Businesses increased 8% to € 1.467 billion (2014: € 1.358 billion).

see Table 09

see Table 10

TaylorMade-adidas Golf revenues declined 13% on a currency-neutral basis in 2015. This development was due to sales decreases in most categories, in particular metalwoods and irons. Currency translation effects positively impacted TaylorMade-adidas Golf sales in euro terms. Revenues decreased 1% to € 902 million from € 913 million in the prior year. Currency-neutral Reebok-CCM Hockey sales were up 8%. This increase was mainly due to strong sales growth in key categories such as skates and protective equipment. In addition, double-digit increases in apparel contributed to this development. Currency translation effects positively impacted sales in euro terms. Reebok-CCM Hockey revenues increased 18% to € 317 million in 2015 from € 269 million in 2014. Other centrally managed businesses revenues increased 35% on a currency-neutral basis, mainly as a result of double-digit sales growth at Y-3 and Five Ten. Currency translation effects had a positive impact on sales in euro terms. Revenues in Other centrally managed businesses increased 38% to € 242 million in 2015 (2014: € 175 million).

OTHER BUSINESSES DEVELOPMENT BY REGION In 2015, currency-neutral sales for Other Businesses were mixed amongst the Group’s regions. Revenues in Western Europe were up 17% on a currency-neutral basis, driven by strong double-digit sales increases at both Reebok-CCM Hockey and in Other centrally managed businesses, which more than offset double-digit sales declines at TaylorMade-adidas Golf. Sales in North America were down 11% on a currency-neutral basis as sales increases at both Reebok-CCM Hockey and in Other centrally managed businesses were more than offset by double-digit sales declines at TaylorMade-adidas Golf. In Greater China, revenues decreased 25% on a currency-neutral basis, due to double-digit sales decreases at TaylorMade-adidas Golf. Revenues in Russia/CIS were down 58% on a currency-neutral basis as a result of double-digit sales declines at both TaylorMade-adidas Golf and Reebok-CCM Hockey. In Latin America, revenues were up 14% on a currencyneutral basis, driven by double-digit sales increases at TaylorMade-adidas Golf. Sales in Japan increased 1% on a currency-neutral basis, as strong double-digit growth in Other centrally managed businesses was partly offset by sales decreases at TaylorMade-adidas Golf. Currency-neutral sales in MEAA were up 7%, due to high-single-digit sales increases at TaylorMade-adidas Golf, which more than offset sales decreases in Other centrally managed businesses. With the exception of Russia/CIS, currency translation effects had a positive impact on regional sales in euro terms.

14 6

3 Group M anagement Report – F inancial Review Business Performance bySegment – Other Businesses

GROSS MARGIN DECLINES 0.8 PERCENTAGE POINTS Gross margin in Other Businesses decreased 0.8 percentage points to 33.9% (2014: 34.7%), due to gross margin declines at both TaylorMade-adidas Golf and Reebok-CCM Hockey. Gross profit was up 6% to € 497 million in 2015 versus € 471 million in 2014.

see Table 09

Operating expenses increased 11% to € 596 million from € 536 million in 2014, as a result of higher sales expenditure as well as an increase in expenditure for point-of-sale and marketing investments. Operating expenses as a percentage of sales increased 1.2 percentage points to 40.6% (2014: 39.5%). In 2015, Other Businesses recorded an operating loss of € 89 million (2014: operating loss of € 57 million). This resulted in a negative operating margin of 6.1% compared to a negative operating margin of 4.2% in 2014. This development was a result of the gross margin decline as well as the negative effect of higher operating expenses as a percentage of sales.

09 OTHER BUSINESSES AT A GLANCE € IN MILLIONS

Net sales 1

2015

2014

1,467

1,358

(3%)

902

913

(1%)

(13%)

TaylorMade-adidas Golf

Change

Change (currency-neutral)

Reebok-CCM Hockey

317

269

18%

Other centrally managed businesses

242

175

38%

35%

Gross profit Gross margin

497

471

–

33.9%

34.7%

(0.8pp)

–

Operating profit Operating margin

(89)

(57)

(56%)

–

(6.1%)

(4.2%)

(1.9pp)

–

2015

2014

Change

Change (currency-neutral)

1 Rounding differences may arise in totals.

10 OTHER BUSINESSES NET SALES BY REGION € IN MILLIONS

Western Europe

383

315

21%

17%

North America

783

755

(11%)

Greater China

(12%)

(25%)

(68%)

(58%)

Russia/CIS

16%

14%

Japan

Latin America

156

148

MEAA

109

16%

Total 1

1,467

1,358

(3%)

1 Rounding differences may arise in totals.

1 47

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

SUBSEQUENT EVENTS ANDOUTLOOK In 2016, despite ongoing uncertainties regarding the economic outlook in the emerging economies, in particular China, we expect the global economy and consumer spending to grow, providing a positive backdrop for the continued growth and expansion of the sporting goods industry. Through our extensive pipeline of new and innovative products, increased brand-building activities and the positive effects from major sporting events, including the UEFA EURO 2016, we project significant top- and bottom-line improvements in our Group’s financial results in 2016. We forecast adidas Group sales to increase at a rate between 10% and 12% on a currency-neutral basis, driven by the strong momentum at both adidas and Reebok, with growth expected across nearly all market segments. While less favourable hedging rates and higher input costs are projected to weigh on the Group’s gross margin development in 2016, these negative effects will be largely compensated by the positive effects from price increases as well as improvements in the channel, regional and product mix. As a result, Group gross margin is forecasted to be at a level between 47.3% and 47.8%. Nevertheless, Group operating margin excluding goodwill impairment is expected to be at least stable compared to the prior year level of 6.5%, due to lower other operating expenses as a percentage of sales. As a result, we project net income from continuing operations excluding goodwill impairment to increase at a rate between 10% and 12% to a level of around € 800 million.

SUBSEQUENT EVENTS KASPER RORSTED TO SUCCEED HERBERT HAINER AS CEO OF ADIDAS AG On January 18, 2016, the Supervisory Board of adidas AG resolved upon the successor for the long-standing adidas AG CEO Herbert Hainer. Effective August 1, 2016, Kasper Rorsted is appointed as ordinary member of the Executive Board and effective October 1, 2016 as CEO of adidas AG. Herbert Hainer will relinquish his Executive Board mandate effective September 30, 2016.

OUTLOOK FORWARD-LOOKING STATEMENTS This Management Report contains forward-looking statements that reflect Management’s current view with respect to the future development of the adidas Group. The outlook is based on estimates that we have made on the basis of all the information available to us at this point in time. In addition, such forwardlooking statements are subject to uncertainties which are beyond the control of the adidas Group. In case the underlying assumptions turn out to be incorrect or described risks or opportunities materialise, actual results and developments may materially deviate (negatively or positively) from those expressed by such statements. The adidas Group does not assume any obligation to update any forward-looking statements made in this Management Report beyond statutory disclosure obligations.

14 8

s ee Risk and Opportunity Report, p. 156

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

GLOBAL ECONOMY TO GROW IN 2016 1 Global GDP is projected to grow moderately by 2.9% in 2016. At 2.1%, developed economies are expected to grow faster than last year, supported by robust domestic demand and ongoing accommodative monetary policies. GDP in developing countries is forecasted to rise 4.8% in 2016, benefiting from the strengthened recovery in high-income markets as well as the expected stabilisation of commodity prices. In Western Europe, the region’s recovery is expected to continue, supported by lower energy and oil prices fuelling domestic demand. In addition, further accommodative monetary easing by the ECB is predicted to support economic activity, gradually lifting inflation from current low levels. Moreover, low interest rates are expected to spur private consumption and further support household borrowing. However, slow wage growth as well as high unemployment rates and public debt in a number of countries across the region are expected to slow down the region’s recovery. As a result, the region’s GDP is expected to expand at a rate of 1.4%. In Germany, the economy is projected to grow 1.5% in 2016, with buoyant domestic and private consumer demand as well as robust labour markets and increased government spending prevailing as the major drivers of growth. European emerging markets are expected to grow at a moderate rate of 1.2% in 2016, as persistent geopolitical tensions and uncertainties will weigh on investment and consumer spending. In addition, adverse currency movements, high inflationary pressures and weak oil prices will negatively impact domestic demand. In particular, Russia’s economy is forecasted to contract 0.8% this year, as sluggish business sentiment, weak domestic demand and a tight fiscal policy will continue to weigh on the country’s economy. In the USA, despite higher inflationary pressures, consumer spending and domestic demand are projected to remain the major source of growth, supported by low unemployment rates as well as declining energy and oil prices. However, the strong US dollar will continue to weigh on exports. The Federal Reserve is expected to continue to gradually lift interest rates. As a result, the US economy is forecasted to grow at 2.2% in 2016. Asia’s GDP is projected to increase 5.1% in 2016. With the exception of Japan, growth is expected to remain relatively high during the year, supported by healthy industrial activity, weak oil prices, declining inflationary pressures and significant wage increases, which should bolster consumer spending. While concerns regarding a slowdown in the Chinese economy grew throughout the past year, the nation’s GDP is still forecasted to expand by 6.7% in 2016, fuelled by accommodative fiscal and monetary policies, low oil prices as well as robust private consumption. However, export growth is forecasted to weaken, weighing on industrial production and investment growth. Japan is predicted to show signs of economic recovery and grow 1.2%, supported by private consumption, low inflationary pressures, wage and export growth as well as accommodative monetary policies. In India, GDP is expected to expand by 7.8%, fuelled by strong private domestic demand, strengthened investment, low commodity prices and growing consumer and government spending. In Latin America, GDP is expected to increase 0.4% in 2016. Growth in several countries is forecasted to compensate for Brazil’s deepened recession, where political instability, muted consumer confidence, high inflationary pressures and rising unemployment are expected to weigh on domestic demand and to dampen the country’s economic activity. In contrast, Mexico and Colombia are projected to record GDP growth in 2016, due to improving domestic demand and export growth. In Argentina, higher inflation as well as sluggish export growth are forecasted to slow down the country’s economic activity.

1 Sources: World Bank, HSBC Global Research, Namura Global Market Research, Morgan Stanley Global Economics.

1 49

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

SPORTING GOODS INDUSTRY EXPANSION TO CONTINUE IN 2016 In the absence of any major economic shocks, we expect the global sporting goods industry to grow at a mid-single-digit rate in 2016. In particular, the industry is projected to benefit from major sporting events, such as the UEFA EURO 2016 as well as the Rio 2016 Olympic Games. Consumer spending on sporting goods in the emerging economies is expected to grow faster than in the more developed markets. Private consumption, supported by wage increases in many developed economies, is forecasted to improve moderately in 2016, promoting the modest industry expansion in those markets. However, wage growth in the emerging economies is predicted to continue to add significant costs to the industry, especially where the industry sources and manufactures sporting goods. Many sporting goods retailers will continue to move to a more omni-retail business model with significant emphasis on mobile. E-commerce and investment in digital are anticipated to remain growth areas for the industry. In Western Europe, lower energy and oil prices should positively impact domestic demand and consumer spending in the sporting goods industry. The region’s industry, and in particular the football category, is expected to gain momentum due to the UEFA EURO 2016, which is hosted by France. In the European emerging markets, high inflationary pressures together with low oil prices and the geopolitical tensions in Russia and Ukraine provide additional potential risk of depressing sentiment and economic activity, which is expected to negatively impact private consumption and growth in the sporting goods industry. In the USA, industry growth rates are expected to be ahead of the economy’s overall growth. E-commerce channels are forecasted to remain strong and move even further towards the mobile environment. The trend towards social fitness is set to continue, with class-based fitness activities and other shared experiences gaining significant traction. Casual and retro silhouettes are projected to remain strong across a variety of categories, including running. The US golf market is expected to remain challenging and will most likely continue to face structural challenges. In Greater China, declining inflationary pressures, strong wage growth and domestic consumption are predicted to propel the sporting goods industry in 2016. In addition, rising sports participation, strongly supported by the Chinese government, is projected to continue to boost sportswear demand. In Japan, the government’s stimulus programmes are forecasted to positively impact consumer sentiment and spending, despite subdued wage growth. Most of the other Asian markets, especially India, are projected to see robust sporting goods sales growth in 2016. In Latin America, the sporting goods industry is forecasted to grow modestly in 2016, mainly benefiting from the Olympic Games, which are being hosted by Brazil. However, headwinds from high inflation, weakness in labour market conditions as well as low commodity prices are expected to have negative implications for consumer spending in the region’s largest economies, e.g. Brazil and Argentina, which will slow down the industry’s overall growth.

150

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

ADIDAS GROUP CURRENCY-NEUTRAL SALES TO INCREASE AT A RATE BETWEEN 10% AND 12%IN 2016 We expect adidas Group sales to increase at a rate between 10% and 12% on a currency-neutral basis in 2016. Despite ongoing uncertainties regarding the economic outlook in the emerging economies, Group sales development will be favourably impacted by rising consumer spending on sporting goods, supported by the ongoing robust athleisure trend as well as increased health awareness and sports participation in most geographical areas. In addition, this year’s major sporting events will provide a positive stimulus to Group sales. As Official Sponsor of the UEFA EURO 2016 in France, the adidas brand will benefit from additional sales in the football category. Furthermore, the Rio 2016 Olympic Games will provide an excellent platform for the adidas brand to increase its overall presence across the region, and also to present its performance credentials to consumers globally. At Reebok, we project the brand to continue its growth path in 2016, leveraging its strong positioning in ‘Tough Fitness’ and addressing the most relevant fitness movements in the sporting goods industry. The sales development at TaylorMade-adidas Golf is expected to be impacted by continued structural challenges in the industry and, as part of the restructuring programme initiated during the course of 2015, the resizing of our golf business.

see Glossary, p. 260

01 ADIDAS GROUP 2016 OUTLOOK Currency-neutral sales development (in %): adidas Group

to increase at a rate between 10% and 12%

Western Europe 1

double-digit rate increase

North America 1

double-digit rate increase

Greater China 1

double-digit rate increase

Russia/CIS 1

around prior year level

Latin America 1

mid- to high-single-digit rate increase

Japan 1

high-single-digit rate increase

MEAA 1

high-single-digit rate increase

Other Businesses

below prior year level

TaylorMade-adidas Golf

below prior year level

Reebok-CCM Hockey

mid-single-digit rate increase

Gross margin

47.3% to 47.8%

Other operating expenses in % of net sales

below prior year level

Operating margin

to remain at least stable versus prior year level

Net income from continuing operations

to increase at a rate between 10% and 12% to around € 800 million

Average operating working capital in % of net sales

around prior year level

Capital expenditure

around € 750 million

Store base

net increase of around 100 stores

Gross borrowings

moderate decline

1 Combined sales of adidas and Reebok.

1 51

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

CURRENCY-NEUTRAL COMBINED SALES OF ADIDAS AND REEBOK EXPECTED TOINCREASE IN MOST MARKET SEGMENTS In 2016, we expect currency-neutral combined revenues of adidas and Reebok to increase in all our market segments except Russia/CIS. In Western Europe, gradual macroeconomic improvements, the UEFA EURO 2016 and the ongoing strong brand momentum at adidas and Reebok will positively impact sales development in this region. As a result, we forecast currency-neutral combined sales of adidas and Reebok in Western Europe to grow at a double-digit rate, with both brands contributing to the strong sales increase. In North America, currency-neutral combined sales of adidas and Reebok are also projected to grow at a double-digit rate. At the adidas brand, further improvements to our distribution network, the introduction of highly innovative and fashionable products as well as engaging marketing initiatives will strengthen our ties with consumers and customers alike and help us to accelerate growth in this market. Currency-neutral Reebok sales are forecasted to return to growth in 2016, following the successful streamlining of the brand’s factory outlet business in the prior year period. In Greater China, increasing health awareness as well as growing sports participation are projected to provide positive stimulus to the overall sales development. In addition, 2016 will see a further expansion of our distribution footprint in the region. As a result, we expect the strong momentum to continue in 2016, with currency-neutral combined sales of adidas and Reebok forecasted to continue to grow at a double-digit rate. In Russia/CIS, we expect currency-neutral combined sales of adidas and Reebok to stabilise. Revenues of both brands are projected to remain around the prior year level. Consumer confidence and consumer spending remain depressed and will continue to weigh on the overall sales development in this region. In Latin America, despite the challenging macroeconomic conditions in some of the region’s major economies, in particular Brazil, the overall sales development is projected to be positively impacted by the strong positioning of the adidas and Reebok brands as well as the Rio 2016 Olympic Games. As a result, we expect currency-neutral combined sales of adidas and Reebok to increase at a mid- to high-single-digit rate, with both adidas and Reebok contributing to this development. In Japan, the government’s stimulus programmes are expected to drive improvements in consumer sentiment and private spending, thereby lifting the growth prospects in the country. As we will leverage our market-leading position, currency-neutral combined sales of adidas and Reebok are projected to grow at a high-single-digit rate, with both adidas and Reebok contributing to the increase. Lastly, in MEAA, we expect currency-neutral combined sales of adidas and Reebok to grow at a high-single-digit rate, driven by the ongoing robust brand momentum of both adidas and Reebok across most of the region’s major markets, in particular South Korea and the United Arab Emirates.

CURRENCY-NEUTRAL SALES OF OTHER BUSINESSES TO BE BELOW THE PRIOR YEAR LEVEL In 2016, currency-neutral revenues of Other Businesses are expected to be below the prior year level, as currency-neutral revenues at TaylorMade-adidas Golf are forecasted to decline in 2016. Ongoing structural challenges in golf are expected to continue to weigh on the overall golf market, thus negatively impacting TaylorMade-adidas Golf’s sales development. In addition, TaylorMade-adidas Golf will further execute on its restructuring programme, initiated during the course of 2015, aiming at resizing its business going forward. As part of this programme, the company will shift to longer product launch cycles, thereby reducing the number of product launches while at the same time focusing on full-price sell-through. Currency-neutral sales at Reebok-CCM Hockey are projected to grow at a mid-single-digit rate, supported by new product introductions in key categories such as skates and sticks.

152

s ee TaylorMade-adidas Golf Strategy, p. 69

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

CURRENCY-NEUTRAL RETAIL REVENUES TO INCREASE AT A DOUBLE-DIGIT RATE adidas Group currency-neutral retail sales are projected to grow at a double-digit rate in 2016. This development will be driven by significant increases in eCommerce, the further expansion of the Group’s own-retail activities as well as comparable store sales growth. We plan to open around 250 new stores in 2016, depending on the availability of desired locations. As approximately 150 stores will be closed over the course of the year, the Group expects a net increase of its store base of around 100 adidas and Reebok stores. Around 250 stores will be remodelled.

GROUP GROSS MARGIN EXPECTED TO BE IN A RANGE BETWEEN 47.3% AND 47.8% In 2016, the adidas Group gross margin is forecasted to be in a range between 47.3% and 47.8% and thus between 50 and 100 basis points below the prior year level (2015: 48.3%). The decline reflects the projected increase in costs for the Group’s Asian-dominated sourcing as a result of less favourable US dollar hedging rates and rising labour expenditures. However, these negative effects are projected to be largely offset by the positive effects from a more favourable pricing, product and regional mix at both adidas and Reebok and further enhancements in the Group’s channel mix, driven by the continued expansion of our controlled space activities. Higher product margins at TaylorMade-adidas Golf are also expected to help limit the overall gross margin compression.

GROUP OTHER OPERATING EXPENSES TO DECREASE AS A PERCENTAGE OF SALES In 2016, the Group’s other operating expenses as a percentage of sales are expected to decrease compared to the prior year level of 43.1%. Expenditure for point-of-sale and marketing investments as a percentage of sales is projected to be around the prior year level (2015: 13.9%). Given the strong momentum at adidas and Reebok, we will continue to invest over-proportionately in both brands to further drive brand desirability and generate sustainable market share gains as well as strong top- and bottom-line growth. In addition, expenditure for marketing investments will be focused around major sporting events such as the UEFA EURO 2016 to leverage the strong visibility of the adidas brand during the event as well as on innovative product launches and engaging grassroots events. In addition, we will support Reebok’s growth strategy in key fitness categories, leveraging partnership assets such as CrossFit, Spartan Race and the UFC, while at the same time strengthening Reebok’s controlled space initiatives. Operating overhead expenditure as a percentage of sales is forecasted to be below the prior year level (2015: 29.2%). Higher administrative and personnel expenses in the Group’s sales and marketing organisation, aimed at supporting the successful execution of ‘Creating the New’, will be offset by significant leverage in other areas.

OPERATING MARGIN EXCLUDING GOODWILL IMPAIRMENT TO REMAIN AT LEAST STABLE COMPARED TO THE PRIOR YEAR LEVEL In 2016, we expect the operating margin excluding goodwill impairment for the adidas Group to remain at least stable compared to the prior year level of 6.5%. Lower other operating expenses as a percentage of sales are forecasted to at least offset the decline in gross margin.

NET INCOME FROM CONTINUING OPERATIONS EXCLUDING GOODWILL IMPAIRMENT TO INCREASE AT A RATE BETWEEN 10% AND 12% Net income from continuing operations excluding goodwill impairment is projected to increase at a rate between 10% and 12% to a level of around € 800 million compared to net income from continuing operations excluding goodwill impairment losses of € 720 million in 2015. Net financial expenses are forecasted to increase in 2016, as a result of the non-recurrence of positive exchange rate effects. The Group’s tax rate is projected to be at a level of around 30% and thus below the prior year level (2015: tax rate excluding goodwill impairment losses of 32.9%).

1 53

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

AVERAGE OPERATING WORKING CAPITAL AS A PERCENTAGE OF SALES TO REMAINSTABLE In 2016, average operating working capital as a percentage of sales is projected to remain around the prior year level (2015: 20.5%).

CAPITAL EXPENDITURE OF AROUND € 750 MILLION In 2016, capital expenditure is expected to increase to a level of around € 750 million (2015: € 513 million). Investments will mainly focus on adidas and Reebok controlled space initiatives. These investments will account for the vast majority of total capital expenditure in 2016. Other areas of investment include the Group’s logistics infrastructure as well as the further development of the adidas Group headquarters in Herzogenaurach. All investments within the adidas Group in 2016 are expected to be fully financed through cash generated from operating activities.

EXCESS CASH TO BE USED TO SUPPORT GROWTH INITIATIVES In 2016, we expect continued positive cash flow from operating activities. Cash will be used to finance working capital needs, investment activities, dividend payments as well as the Group’s shareholder return programme. We intend to largely use excess cash to invest in our growth activities, in particular the continued expansion and improvement of our controlled space initiatives as well as the further development of the Group’s headquarters. In 2016, gross borrowings of € 366 million mature. In order to ensure long-term flexibility, we aim to maintain a ratio of net borrowings over EBITDA of less than two times as measured at year-end (2015: 0.3).

EFFICIENT LIQUIDITY MANAGEMENT IN PLACE FOR 2016 AND BEYOND Efficient liquidity management remains a priority for the adidas Group in 2016. We focus on continuously anticipating the operating cash flows of our operating segments, as this represents the main source of liquidity within the Group. Liquidity is planned on a rolling monthly basis under a multi-year financial and liquidity plan. Long-term liquidity is ensured by continued positive operating cash flows and sufficient financial flexibility through unused credit facilities.

MANAGEMENT TO PROPOSE DIVIDEND OF € 1.60 As a result of the stellar operational performance in 2015, the Group’s strong financial position as well as Management’s confidence in our long-term growth aspirations, the adidas AG Executive and Supervisory Boards will recommend paying an increased dividend of € 1.60 to shareholders at the Annual General Meeting (AGM) on May 12, 2016 (2014: € 1.50). Subject to shareholder approval, the dividend will be paid on May 13, 2016. Based on the number of shares outstanding at the end of 2015, the total payout of €320million (2014: € 306 million) reflects a payout ratio of 47.9% of net income attributable to shareholders, excluding goodwill impairment losses. The payout ratio for 2015 is at the upper end of the increased target range of between 30% and 50% of net income attributable to shareholders as defined in our dividend policy. In the prior year, Management had decided to keep the dividend stable despite a significant decline in net income, resulting in a payout ratio of 53.9%.

15 4

see Treasury, p. 124

3 Group M anagement Report – F inancial Review Subsequent Events andOutlook

02 MAJOR 2016 PRODUCT LAUNCHES Product

Brand

Ace 16+ Pure Control and X15.1 football boots

adidas

Messi football boot

adidas

Ace 16+ Primeknit and X15.1 football boots for women

adidas

Football apparel club kits of Bayern München, Manchester United, Real Madrid, Juventus Turin, AC Milan and Chelsea

adidas

PureBOOST X running shoe for women

adidas

UltraBOOST uncaged running shoe

adidas

adizero Adios running shoe

adidas

Alpha Bounce running shoe

adidas

Originals Tubular shoe

adidas

Originals Yeezy Boost 350 black shoe

adidas

Originals ZX Flux Modern shoe

adidas

Originals NMD shoe

adidas

Cloudfoam footwear

adidas

Studio apparel collection for girls

adidas

Terrex x-king outdoor shoe

adidas

Terrex skyclimb alpha outdoor jacket

adidas

ZPump Fusion 2.0 running shoe

Reebok

Nano 6.0 training shoe

Reebok

Combat training apparel

Reebok

Urban yoga apparel

Reebok

FuryLite shoe

Reebok

M2 drivers, fairway woods and hybrids

TaylorMade

OS putters

TaylorMade

Tour 360 Boost golf shoe

adidas Golf

CCM Super Tacks skate

CCM

CCM FitLite 3DS helmet

CCM

CCM RBZ revolution stick

CCM

155

3 Group M anagement Report – F inancial Review Risk and Opportunity Report

RISK AND OPPORTUNITY REPORT The adidas Group consciously takes certain risks and continuously explores and develops opportunities in order to remain competitive and ensure sustainable success. Our risk and opportunity management principles and system provide the framework for our Group to conduct business in a well-controlled environment.

RISK AND OPPORTUNITY MANAGEMENT PRINCIPLES We define risk as the potential occurrence of an external or internal event (or series of events) that may negatively impact our ability to achieve the Group’s business objectives or financial goals. Opportunity is defined as the potential occurrence of an external or internal event (or series of events) that can positively impact the Group’s ability to achieve its business objectives or financial goals. We have summarised risks in four main categories: Strategic, Operational, Legal & Compliance and Financial. Opportunities are classified in two main categories: Strategic & Operational and Financial.

RISK AND OPPORTUNITY MANAGEMENT SYSTEM The adidas AG Executive Board has the overall responsibility to operate an effective risk and opportunity management system that ensures comprehensive and consistent management of all material risks and opportunities. The Group Risk Management department coordinates the execution and further development of the adidas Group’s risk and opportunity management system and is the owner of the centrally managed risk and opportunity management process on behalf of the adidas AG Executive Board. The adidas AG Supervisory Board has the responsibility to monitor the effectiveness of the Group’s risk management system. These duties are undertaken by the Supervisory Board’s Audit Committee. In addition, the Group Internal Audit department includes an assessment of the effectiveness of risk management processes and compliance with the Group Risk Management Policy as part of its regular auditing activities with selected adidas Group subsidiaries or functions each year. To facilitate effective risk and opportunity management, we implemented an integrated risk and opportunity management system, which is based on the integrated frameworks for enterprise risk management and internal controls developed and published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, it has been adapted to more appropriately reflect the structure as well as company and management culture of the adidas Group. This system focuses on the identification, evaluation, handling, monitoring and reporting of risks and opportunities. The key objective of the risk and opportunity management system is to support business success and protect the company as a going concern through an opportunity-focused but risk-aware decision-making framework. Our Group Risk Management Policy, which is available on our intranet, outlines the principles, processes, tools, risk areas, key responsibilities, reporting requirements and communication timelines within our Group. Risk and opportunity management is a Group-wide activity which utilises critical day-to-day management insight from both global and local business units and functions.

15 6

see Diagram 01

3 Group M anagement Report – F inancial Review Risk and Opportunity Report

Our risk and opportunity management process contains the following components:

• Risk and opportunity identification: The adidas Group continuously monitors the macroeconomic environment and developments in the sporting goods industry, as well as internal processes, to identify risks and opportunities as early as possible. Our Group-wide network of Risk Owners (i.e. all direct reports to the adidas AG Executive Board, including the Managing Directors of all our markets) ensures effective identification of risks and opportunities. The Group Risk Management department has defined a catalogue of potential risk areas (Risk Universe) to assist Risk Owners in identifying and categorising risks and opportunities. The Risk Owners use various instruments in the risk and opportunity identification process, such as primary qualitative and quantitative research including trend scouting and consumer surveys as well as feedback from our business partners and controlled space network. These efforts are supported by global market research and competitor analysis. Through this process, we seek to identify the markets, categories, consumer target groups and product styles which show most potential for future growth at a local and global level. Equally, our analysis focuses on those areas that are at risk of saturation or exposed to increased competition or changing consumer tastes. However, our risk and opportunity identification process is not only limited to external risk factors or opportunities; it also includes an internal perspective that considers processes, projects, human resources and compliance aspects.

• Risk and opportunity evaluation: We evaluate identified risks and opportunities individually according to a systematic evaluation methodology, which allows adequate prioritisation as well as allocation of resources. Risk and opportunity evaluation is also part of the Risk Owners’ responsibility. The Group Risk Management department supports and guides the Risk Owners in the evaluation process. According to our methodology, risks and opportunities are evaluated by looking at two dimensions: the potential impact and the likelihood that this impact materialises. Based on this evaluation, we classify risks and opportunities into five categories: marginal, minor, moderate, significant and major.

01 ADIDAS GROUP RISK AND OPPORTUNITY MANAGEMENT SYSTEM

Supervisory and Executive Boards

Group Risk Management Risk Management Policy & Methodology/Support

Handling

Monitoring & Reporting Risk Owners

Evaluation

Identification

157

3 Group M anagement Report – F inancial Review Risk and Opportunity Report

The potential impact is evaluated by utilising five categories: marginal, minor, moderate, significant and major. These categories represent quantitative or equivalent qualitative measurements. The quantitative measurements are based on the potential financial effect on the relevant income statement metrics (operating profit, financial result or tax expenses). Qualitative measurements used are, for example, the degree of media exposure or additional senior management attention needed. Likelihood represents the possibility that a given risk or opportunity may materialise with the specific impact. The likelihood of individual risks and opportunities is evaluated on a percentage scale divided into five categories: unlikely, possible, likely, probable and highly probable.

see Table 02

When evaluating risks and opportunities, we also consider the earliest time period when the Group’s target achievement may be impacted, in order to provide a broad perspective and ensure early identification and mitigation. Short-term risks and opportunities may affect the achievement of the Group’s objectives already in the current financial year, mid-term risks and opportunities would impact the Group’s target achievement in the next financial year, while long-term risks and opportunities might only have an effect on the achievement of the Group’s objectives after the next financial year. We consider both gross and net risks in our risk assessments. While the gross risk reflects the inherent (‘worst-case’) risk before any mitigating action, the net risk reflects the residual (‘expected’) risk after all mitigating action. On the one hand, this approach allows for a good understanding of the impact of mitigating action taken, and on the other hand it provides the basis for scenario analysis. Our assessment of risks presented in this report only reflects the net risk perspective. We measure the actual financial impact of high-level risks that materialised against the original assessment on a yearly basis. In this way, we ensure continuous monitoring of the accuracy of risk evaluations across the Group, which enables us to continuously improve evaluation methodology based on our findings.

02 CORPORATE RISK EVALUATION CATEGORIES

Likelihood

Highly probable

> 85%

Probable

50% – 85%

Likely

30% – 50%

Possible

15% – 30%

Unlikely

[PDF] ADIDAS GROUP ANNUAL REPORT - Free Download PDF (2024)

FAQs

How to read an annual report pdf? ›

Components of an Annual Report

Item 1: Business (a description of the company's operation)
Item 1A: Risk Factors.
Item 3: Legal Proceedings.
Item 6: Selected Financial Data.
Item 7: Management's Discussion and Analysis of the Financial Condition2

How is adidas doing financially? ›

Operating margin decreases to 1.3%

Operating profit decreased 60% to € 268 million in 2023 versus € 669 million in 2022. This includes a negative impact of around € 100 million related to the significant devaluation of the Argentine Peso in the fourth quarter.

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Here are some typical parts of an annual report:

Business summary. A business summary is usually the first section in an annual report. ...
Risk factors. ...
Property information. ...
Relevant financial data. ...
Stockholder information. ...
Legal information. ...
Analysis of financial condition. ...
Executive summary.

More items...

Sep 30, 2022

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5 Elements to Include in Your Annual Report

A Statement or Letter from the CEO/President. All good annual reports start with a statement from an important leader in the company. ...
Detailed Financial Information. ...
Annual Highlights. ...
A Future Forecast. ...
A “Thank You”

Sep 22, 2022

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Where can I find the annual report of a company? ›

Nowadays, nearly every reputable company has an easy to follow investor relations section on its website that is a wealth of information including an archive of its annual reports, often going back several years.