Huma Khan

Wajiha Khan

Uzma Naseer

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THE GROUP ..................................................................................... 8

INTRODUCTION TO ADIDAS BASICS .................................................. 9

Significance of AG ........................................................................................................... 10

Legal basis of the AG ....................................................................................................... 10

Structure of the AG ......................................................................................................... 10

Significance of p.l.c. ......................................................................................................... 10

ADIDAS – THE STORY OF A LOGO ................................................... 12

Reebok ........................................................................................................................... 15

TaylorMade-Adidas Golf ................................................................................................. 16

HISTORY OF ADIDAS GROUP ........................................................... 17

Early 1920's till the Late 1930s .......................................................................................... 18 Gebrüder Dassler Schuhfabrik ......................................................................................... 18 Company split .............................................................................................................. 18

The 1940s ....................................................................................................................... 19 The Foundation ............................................................................................................ 19

The 1950s ....................................................................................................................... 19 The 'Miracle of Bern' ..................................................................................................... 19

The 1960s ....................................................................................................................... 19 Higher ........................................................................................................................ 19

The 1970s ....................................................................................................................... 19 The adidas Team Wins ................................................................................................... 19

The 1980s ....................................................................................................................... 19 The Transition .............................................................................................................. 19 The Tapie affair ............................................................................................................ 19

The Early 1990s .............................................................................................................. 20 With a New Management ............................................................................................... 20 Post-Tapie era .............................................................................................................. 20

1995 ............................................................................................................................... 20 adidas Goes Public ........................................................................................................ 20

1996 ............................................................................................................................... 21 A Splendid Year ........................................................................................................... 21

From 1997 to 1998 ........................................................................................................... 21 adidas-Salomon AG ...................................................................................................... 21

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1999 ............................................................................................................................... 21 The new brands ............................................................................................................ 21

The Early 2000s .............................................................................................................. 21 New management ......................................................................................................... 21

2005 ............................................................................................................................... 22

2006 ............................................................................................................................... 22 adidas-Salomon AG acquires Reebok ............................................................................... 22

S.W.O.T. ANALYSIS ......................................................................... 24

Strengths ........................................................................................................................ 25 Leading player in the sporting goods industry ..................................................................... 25 Steady increase in sales revenues. .................................................................................... 25 Successful new product innovations ................................................................................. 25 Lead time improvements ................................................................................................ 26 Marketing strength ........................................................................................................ 26

Weaknesses .................................................................................................................... 26 Unfocused strategy ........................................................................................................ 26 Over-dependence on Adidas brand segment ....................................................................... 26 High level of long-term borrowings .................................................................................. 27 Order cancellations........................................................................................................ 27

Opportunities.................................................................................................................. 27 Strategic acquisitions and agreements ............................................................................... 27 Supply-chain and manufacturing initiatives ........................................................................ 28 Sponsoring sporting events ............................................................................................. 28 Own retail stores ........................................................................................................... 28

Threats .......................................................................................................................... 29 Competition ................................................................................................................. 29 Foreign exchange fluctuations ......................................................................................... 29 Weak global economy .................................................................................................... 29 Impact of scandals in the US and Germany ........................................................................ 29

VALUES, STRATEGIES, AND GOALS ................................................ 30

Adi's Three Guiding Principles ......................................................................................... 31

adidas' Values ................................................................................................................. 31

adidas' Strategy .............................................................................................................. 31 Performance as core Group value ..................................................................................... 31 Leveraging opportunities across adidas' brand portfolio ........................................................ 32 Leading position in markets worldwide ............................................................................. 32 Leading through innovation and design ............................................................................. 33 Customizing distribution ................................................................................................ 33 Creating shareholder value .............................................................................................. 34

Adidas' Strategy for 2010 ................................................................................................. 34

BRANDS & PRODUCTS .................................................................... 35

Brands ........................................................................................................................... 36

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About adidas ................................................................................................................... 36 Sport Performance ........................................................................................................ 36 Sport Style ................................................................................................................... 36

About Reebok ................................................................................................................. 36 Reebok-CCM Hockey .................................................................................................... 36 Rockport ..................................................................................................................... 36

About TaylorMade-adidas Golf ........................................................................................ 36 adidas Golf .................................................................................................................. 37 Ashworth .................................................................................................................... 37

Products ......................................................................................................................... 37 Running ...................................................................................................................... 37 Association football ....................................................................................................... 37 Tennis ........................................................................................................................ 38 Golf ........................................................................................................................... 38 Cricket ........................................................................................................................ 38 Basketball ................................................................................................................... 39 Lacrosse ...................................................................................................................... 39 Rugby ......................................................................................................................... 39 Gymnastics .................................................................................................................. 39 Skateboarding .............................................................................................................. 39 Accessories .................................................................................................................. 39

MARKETING .................................................................................... 40

Group Focus ................................................................................................................... 41

Slogan ............................................................................................................................ 41

Contender ...................................................................................................................... 41

CORPORATE INFORMATION ............................................................ 44

Articles of Association of adidas AG .................................................................................. 45 Corporate Name, Place of Registered Office and Financial Year ............................................ 45 Purpose of the Company ................................................................................................ 45 Publications and Transmission of Data .............................................................................. 45 Nominal Capital ........................................................................................................... 45 Corporate Bodies .......................................................................................................... 47 Executive Board ........................................................................................................... 48 Management of the Executive Board ................................................................................ 48 Representation of the Company ....................................................................................... 48 Composition of the Supervisory Board .............................................................................. 48 Duties and Rights of the Supervisory Board ....................................................................... 49 Declarations by the Supervisory Board .............................................................................. 49 The Chairman and his Deputies ....................................................................................... 49 Rules of Procedure and Committees ................................................................................. 50 Convocation ................................................................................................................ 50 Resolutions .................................................................................................................. 50 Minutes ....................................................................................................................... 51 Secrecy ....................................................................................................................... 52 Compensation of the Supervisory Board ............................................................................ 52 Place and Convocation of the General Meeting ................................................................... 53 Participation in the General Meeting ................................................................................. 53 Voting Right ................................................................................................................ 54 Chairman of the General Meeting, Chairing the General Meeting ........................................... 54

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Management Report and Annual Financial Statements, Discharge of the Executive Board and the Supervisory Board ........................................................................................................ 54 Capital Surplus ............................................................................................................. 55

Supervisory Board ........................................................................................................... 55 Members of the Supervisory Board .................................................................................. 55 Committees of the Supervisory Board ............................................................................... 57

Steering Committee ................................................................................................... 57 General Committee ................................................................................................... 57 Audit Committee ...................................................................................................... 58 Mediation Committee pursuant to 27 section 3 Co-Determination Act (MitbestG) ................. 58 Nomination Committee .............................................................................................. 58

Executive Board .............................................................................................................. 58

Financial information ...................................................................................................... 59

Branches & Locations ...................................................................................................... 59

All Main Locations .......................................................................................................... 60

SUSTAINABILITY ............................................................................. 61

Overview ........................................................................................................................ 63

Challenges and Responses ................................................................................................ 63

Vision and Governance .................................................................................................... 64

Sustainability Statement ................................................................................................... 64

Corporate Missions ......................................................................................................... 65 Social and Environmental Affairs ..................................................................................... 65 Human Resources ......................................................................................................... 65 Community Affairs ....................................................................................................... 65

Social and Environmental Affairs Team ............................................................................. 65

adidas' Stakeholders ........................................................................................................ 66

Partnerships and Ways We Engage ................................................................................... 66 Corporate responsibility ................................................................................................. 66 Supply chain conditions ................................................................................................. 66 Environment ................................................................................................................ 67

adidas’ Workplace Standards ........................................................................................... 67 General Principle .......................................................................................................... 67 Employment Standards .................................................................................................. 67

Forced Labor ........................................................................................................... 67 Child Labor ............................................................................................................. 68 Discrimination.......................................................................................................... 68 Wages & Benefits ..................................................................................................... 68 Working Hours ......................................................................................................... 68 Freedom of Association & Collective Bargaining ............................................................ 68 Disciplinary Practices ................................................................................................ 68

Health and Safety .......................................................................................................... 69 Environmental Requirements .......................................................................................... 69

How We Work With Suppliers .......................................................................................... 69

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Standards and Guidelines ............................................................................................... 69 Capacity Building and Outreach ...................................................................................... 69 Monitoring and Verification ............................................................................................ 69 Rating ......................................................................................................................... 70 Sourcing Decision ......................................................................................................... 70

Supporting Guidelines ..................................................................................................... 70

Environment ................................................................................................................... 70

Managing Impact ............................................................................................................ 71 Improving Materials ...................................................................................................... 71 Tackling Pollution ......................................................................................................... 71 Restricted Substances Standards ...................................................................................... 71

Employees ...................................................................................................................... 71

Performance Data ........................................................................................................... 72

Corporate Responsibility Strategy ..................................................................................... 72 Environmental Sustainability ........................................................................................... 73

Products .................................................................................................................. 73 Production ............................................................................................................... 73 Own sites ................................................................................................................ 74

Supply Chain Management ............................................................................................. 74 Direct Sourcing ........................................................................................................ 74 Indirect Sourcing ...................................................................................................... 74 Business Entity Relationships ...................................................................................... 74 Impact of the Global Economic Crisis ........................................................................... 75

Stake Holder Engagement ............................................................................................... 75 Our Employees ............................................................................................................. 75

INVESTER RELATIONS .................................................................... 76

Reasons to invest ............................................................................................................. 77

Basic Data ...................................................................................................................... 77 Share Price .................................................................................................................. 78 Shareholder Structure .................................................................................................... 78

Corporate Governance ..................................................................................................... 78

Risk and Opportunity Report ........................................................................................... 79 Risk and Opportunity Management Principles .................................................................... 79 Risk and Opportunity Management System ........................................................................ 79

Risk and opportunity identification: .............................................................................. 80 Risk and opportunity assessment: ................................................................................. 80 Risk and opportunity treatment: ................................................................................... 80 Risk and opportunity monitoring and controlling: ............................................................ 81 Risk and opportunity aggregation and reporting: ............................................................. 81

REFERENCES ....................... FEHLER! TEXTMARKE NICHT DEFINIERT.

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The Group

Contributor: Huma Khan

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Introduction to adidas Basics

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Adidas AG is a German-based sports apparel manufacturer and part of the Adidas Group, which consists of Reebok sportswear company, TaylorMade-Adidas golf company, and Rockport. Besides sports footwear, the company also produces other products such as bags, shirts, watches, eyewear and other sports and clothing related goods. The company is the largest sportswear manufacturer in Europe and the second biggest sportswear manufacturer in the world, after its U.S. rival Nike.

Significance of AG To better understand Adidas, it is convenient to understand the German terms & laws.

AG is an abbreviation for Aktiengesellschaft (a German term which is a compound noun made up of two elements: Aktien meaning shares, and Gesellschaft meaning society, or, in this context, company) refers to a corporation that is limited by shares, i.e. owned by shareholders, and may be traded on a stock market. The term is used in Germany, Austria, and Switzerland.

Legal basis of the AG The legal basis of the AG is, in Germany and Austria, the respective Aktiengesetz - translated as Share Law in English - (abbr. AktG), in Switzerland a part of the Obligationenrecht (OR) - translated as the Obligatory Right. As the law requires all corporations to specify their legal form (which gives the limitation of liability) in the name, all German and Austrian stock corporations bear Aktiengesellschaft or AG as part (usually suffix) of their name.

Structure of the AG German AGs have a "two-tiered board" structure consisting of a supervisory board (Aufsichtsrat) and a management board (Vorstand). The supervisory board is generally controlled by shareholders, although employees may have seats depending on the size of the company. The management board directly runs the company, but its members may be removed by the supervisory board. The supervisory board also determines the management board's compensation, although this is not always the case. Some German AGs have management boards which determine their own remuneration, although that situation is now relatively uncommon.

Now, there are many types of business entities defined in the legal systems of various countries. These include corporations, cooperatives, partnerships, sole traders, and other specialized types of organization.

Depending on which type of business entity you choose will also influence the legal structure.

Significance of p.l.c. A public limited company (legally abbreviated to plc with or without full stops) is a type of limited liability company (in the United Kingdom and the Republic of Ireland

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and other jurisdictions where companies law is derived from English law), which is permitted to offer its shares to the public.

A public limited company must include the words "public limited company" or its abbreviation "plc" at the end and as part of its legal company name. Certain public limited companies (mostly nationalized concerns), incorporated under special legislation, are exempted from bearing any of the identifying suffixes.

From the above facts, Adidas (being a German-based corporation) is AG (Aktiengesellschaft): ≈ p.l.c. (UK) with a minimum capital of €50,000.

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adidas – The Story of a Logo

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The 3-Stripes mark is without doubt the quintessential Adidas symbol. It was created by the Adidas company founder, Adi Dassler, and first used on footwear in 1949. Dassler created a symbol that could be immediately recognized when his footwear was used in athletic competition and associated with Adidas. He emphasized the association with the slogan “The Brand with the 3 Stripes”. The 3-Stripes were first used on apparel in 1967. The 3-Stripes now enjoy worldwide recognition as an Adidas symbol.

In the late 60s Adidas expanded into the leisure and apparel sector, and this prompted Käthe and Adi Dassler to seek a new, additional identification mark for the Adidas

brand. In August 1971, the Trefoil ((from Latin trifolium, "three-leaved plant") was born, out of more than 100 ideas. Inspired by the 3-Stripes, it is a geometric execution with a triple intersection, symbolizing the diversity of the Adidas brand. This symbol was first used on Adidas products in 1972, and later became the company’s corporate symbol. Today it plays the important role of representing the Adidas Originals collection.

In 1997, Adidas decided to introduce an integrated corporate design, choosing as the core element a new and yet familiar logo: the 3 bars. It was designed in 1990 by the then Creative Director Peter Moore, and initially used on the Equipment range of performance products. It is inspired by the 3-Stripes as they appear on footwear. The shape formed by the bars also represents a mountain, indicating the challenge to be faced and the goals to be achieved.

In August 1998, following the merger of Adidas and Salomon, the then named Adidas-Salomon AG introduced a new corporate logo. The logo unites the values of the brands of the Group, incorporating the typical colours of the two previous groups: blue for Adidas, red for Salomon. The logo shows three shapes coming together to form a larger shape, namely a diamond. The space between the shapes forms another

shape, that of a person with arms raised in victory and celebration. This logo appeared on all corporate documents of the then named Adidas-Salomon AG, but not on products.

In July 2002, Adidas-Salomon AG presented a revolutionary new business strategy for the Adidas brand, aimed at expanding its customer base and driving top-line growth. The new structure marked a fundamental shift from the traditional “Footwear” and “Apparel” structure, introducing a new three-divisional approach with the “Sport Performance”, “Sport Heritage” and “Sport Style” divisions.

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The products in the Adidas Sport Performance division are developed for the sports performance market but have design appeal, encouraging consumers to wear the products both on and off the court or playing field.

The Adidas Sport Heritage division contains Adidas Originals products. Originals products seek to extend the Adidas brand’s unique and authentic heritage to the lifestyle market. Design and functionality are already strong aspects of the two existing Adidas divisions and are continued with an even stronger focus in the new Sport Style division.

Adidas Sport Style - the future in sportswear designed by Yohji Yamamoto is an exclusive collection, consisting of men’s and women’s footwear, apparel and accessories. It combines the mission of the sports brand with the vision of style to develop an unexpected and radical appeal.

In 2007, the Sport Heritage and Sport Style divisions merged into a single Sport Style division. The logos of the two divisions remain visible on the respective collections.

The corporate logo changed after the divestiture of Salomon in October 2005. The new logo of the Adidas Group was launched in April 2006. The Adidas Group logo is the umbrella under which all Group-owned brands stand. It brings Adidas back to its roots by using the familiar Adidas word-mark as a visual identity to the business community, strengthening image and impression.

From a design perspective, the new logo is simple, clear, confident, and shows leadership. It will support future business growth and is flexible enough to anticipate any unforeseen changes.

At the same time the Adidas brand received a new logo to incorporate the divisions Sport Performance and Sport Style.

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The following chart shows all the brands gathered under the roof of the Adidas Group:

The other brands of the Adidas Group also have a long history of logos themselves but we will limit ourselves to the basics as well as the design changes:

Reebok Reebok officially joined the Adidas Group on January 31st, 2006. Chronologically, following is the list of changes made to the Reebok logo:

To achieve a greater connection to the youth market, in 2001 Reebok introduced a new tier of product – known as Rbk. The success of this branding influenced Reebok to look at its overall branding scheme and determine that the future of the brand would best be represented by this new logo.

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At the 50th anniversary of the brand name in 2008, Reebok returned its brand identity from Rbk to Reebok. While Rbk captured a moment in time for the brand, Reebok is timeless and reflects the company’s heritage. The new design entails a new font that is modern, yet simple, and incorporates the face of the brand.

TaylorMade-Adidas Golf TaylorMade-Adidas Golf officially joined the Adidas Group in 1997.

Following is the list of changes made to the TaylorMade logo:

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History of adidas Group

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Early 1920's till the Late 1930s

Gebrüder Dassler Schuhfabrik

Adolf ("Adi") Dassler started to produce his own sports shoes in his mother's wash kitchen in Herzogenaurach, Bavaria, after his return from World War I. In 1924, his brother Rudolf (Rudi) Dassler joined the business which became Gebrüder Dassler Schuhfabrik (Dassler Brothers Shoe Factory) and prospered. The pair started their venture in their mother's laundry, but at the time, electricity supplies in the town were unreliable, and the brothers sometimes had to use pedal power from a stationary bicycle to run their equipment.

By the 1936 Summer Olympics, Adi Dassler drove from Bavaria on one of the world's first motorways to the Olympic village with a suitcase full of spikes and persuaded United States sprinter Jesse Owens to use them, the first sponsorship for an African-American. After Owens won four gold medals, his success cemented the good reputation of Dassler shoes among the world's most famous sportsmen. Letters from around the world landed on the brothers' desks, and the trainers of other national teams were all interested in their shoes. Business boomed and the Dasslers were selling 200,000 pairs of shoes each year before World War II.

Late in World War II, the shoe factory shifted to production of the Panzerschreck anti-tank weapon.

Company split

Both brothers joined the Nazi Party, but Rudolf was slightly closer to the party. During the war, a growing rift between the pair reached a breaking point after an Allied bomb attack in 1943 when Adi and his wife climbed into a bomb shelter that Rudolf and his family were already in: "The dirty bastards are back again", Adi said, apparently referring to the Allied war planes, but Rudolf was convinced his brother meant him and his family. After Rudolf was later picked up by American soldiers and accused of being a member of the Waffen SS, he was convinced that his brother had turned him in.

The brothers split up in 1947, with

• Rudi forming a new firm that he called Ruda - from Rudolf Dassler, later rebranded Puma, • And Adi forming a company formally registered as Adidas AG on 18 August 1949. The acronym All Day I Dream About Sport, although sometimes considered the origin of the Adidas name, was applied retroactively. The name is actually a portmanteau word formed from "Adi" (a nickname for Adolf) and "Das" (from "Dassler").

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The 1940s

The Foundation

18 August, 1949 - adidas is registered as a company, named after its founder, Adolf Dassler.

The 1950s

The 'Miracle of Bern'

1954 - The 'Miracle of Bern' Germany battle Hungary with a competitive advantage. They are wearing adidas soccer boots which for the first time feature removable studs.

The 1960s

Higher

Driven by a desire to help all athletes committed to performance, adidas manufactures equipment for what some consider "fringe sports". Unconventional high jumper Dick Fosbury launches himself up and over in adidas footwear.

The 1970s

The adidas Team Wins

Crowning moment: Franz Beckenbauer, the "Kaiser", raising the World Cup in victory salute. Germany had just beaten Holland 2-1 in the 1974 final.

The 1980s

The Transition

After Adi Dassler's death, Adi's wife Käthe, his son Horst, and his daughters carry on the business.

The Tapie affair

After a period of trouble following the death of Adolf Dassler's son Horst Dassler in 1987, the company was bought in 1989 by French industrialist Bernard Tapie, for 1.6 billion French francs (now €243.918 million), which Tapie borrowed. Tapie was at the time a famous specialist of rescuing bankrupt companies, an expertise on which he built his fortune.

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Tapie decided to move production offshore to Asia. He also hired Madonna for promotion. He sent, from Christchurch, New Zealand, a shoe sales representative, to Germany and met Adolf Dassler's descendants (Amelia Randall Dassler and Bella Beck Dassler) and was sent back with a few items to promote the company there.

The Early 1990s In 1992, Tapie was unable to pay the interest from his loan. He mandated the Crédit Lyonnais bank to sell Adidas, and the bank subsequently converted the outstanding debt owed into equity of the enterprise, which was unusual as per the prevalent French banking practice. Apparently, the state-owned bank had tried to get Tapie out of dire financial straits as a personal favour to Tapie, reportedly because Tapie was Minister of Urban Affairs (ministre de la Ville) in the French government at the time.

With a New Management

In February 1993, Crédit Lyonnais sold Adidas to Robert Louis-Dreyfus, a friend of Bernard Tapie for a much higher amount of money than what Tapie owed, 4.485 billion (€683.514 million) francs rather than 2.85 billion (€434.479 million). Tapie later sued the bank, because he felt "spoiled" by the indirect sale.

Robert Louis-Dreyfus became the new CEO of the company. He was also the president of Olympique de Marseille, a team Tapie had owned until 1993.

Under the CEO Robert Louis-Dreyfus, adidas is moving from being a manufacturing and sales based company to a marketing company.

Tapie filed for personal bankruptcy in 1994. He was the object of several lawsuits, notably related to match fixing at the soccer club. During 1997, he served 6 months of an 18 month prison sentence in La Santé prison in Paris.

In 2005, French courts awarded Tapie a €135 million compensation (about 886 million francs).

Post-Tapie era

In 1994, combined with FIFA Youth Group, SOS Children's Villages became the main beneficiary.

1995

adidas Goes Public

Flotation of the company on the Frankfurt and Paris Stock Exchange.

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1996

A Splendid Year

The "three-stripes company" equips 6,000 Olympic athletes from 33 countries. adidas athletes win 220 medals, including 70 gold. Apparel sales increase 50%.

From 1997 to 1998

adidas-Salomon AG

adidas AG acquires the Salomon Group with the brands Salomon, TaylorMade, Mavic and Bonfire in December 1997. The new company is named adidas-Salomon AG.

In 1997, Adidas AG acquired the Salomon Group who specialized in ski wear, and its official corporate name was changed to Adidas-Salomon AG because with this acquisition Adidas also acquired the Taylormade Golf Company and Maxfli which allowed them to compete with Nike Golf.

In 1998, Adidas sued the NCAA over their rules limiting the size and number of commercial logos on team uniforms and apparel. Adidas withdrew the suit, and the two groups established guidelines as to what three-stripe designs would be considered uses of the Adidas trademark.

1999

The new brands

The integration of the new brands is gaining momentum. The new TaylorMade FireSole clubs boost sales. Salomon in-line skates take off with high double-digit growth during the first half of 1999.

The Early 2000s

New management

Following personnel changes, the new management initiates an ambitious Growth and Efficiency Program. Major sports events such as the European Soccer Championship EURO 2000™ and the Olympic Summer Games, where swimmer Ian Thorpe takes three gold medals, contribute to the company’s success.

In 2003, Adidas filed a lawsuit in a British court challenging Fitness World Trading's use of a two-stripe motif similar to Adidas's three stripes. The court ruled that despite the simplicity of the mark, Fitness World 's use was infringing because the public could establish a link between that use and Adidas's mark.

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In September 2004, top English fashion designer Stella McCartney launched a joint-venture line with Adidas, establishing a long-term partnership with the corporation. This line is a sports performance collection for women called "Adidas by Stella McCartney", and it has been critically acclaimed.

2005 Sale of Salomon The Salomon Group (including Salomon, Mavic, Bonfire, Cliché and Arc’Teryx) is being sold to Amer Sports in October 2005. The new adidas Group is focusing even more on its core strength in the athletic footwear and apparel market as well as the growing golf category. The legal name of the company will change to “adidas AG” in May/June 2006.

Also in 2005, on 3 May, Adidas told the public that they sold their partner company Salomon Group for €485m to Amer Sports of Finland.

In August 2005, Adidas declared its intention to buy British rival Reebok for $3.8 billion (US). This takeover was completed with partnership in January 2006 and meant that the company will have business sales closer to those of Nike in North America. The acquisition of Reebok will also allow Adidas to compete with Nike worldwide as the number two athletic shoemaker in the world.

Adidas has corporate headquarters in Germany, and many other business locations around the world such as Hong Kong, Toronto, Taiwan, England, Japan, Australia and Spain. Mainly sold in the U.S., Adidas makes lots of assets from these countries and is expanding to more oversea countries.

In 2005, Adidas introduced the Adidas 1, the first ever production shoe to utilize a microprocessor. Dubbed by the company "The World's First Intelligent Shoe", it features a microprocessor capable of performing 5 million calculations per second that automatically adjusts the shoe's level of cushioning to suit its environment. The shoe requires a small, user-replaceable battery that lasts for approximately 100 hours of running. On 25 November 2005, Adidas released a new version of the Adidas 1 with an increased range of cushioning, allowing the shoe to become softer or firmer, and a new motor with 153 percent more torque.

2006

adidas-Salomon AG acquires Reebok

The closing of the Reebok transaction on January 31, 2006 marks a new chapter in the history of the adidas Group. By combining two of the most respected and well-known brands in the worldwide sporting goods industry, the new Group will benefit from a more competitive worldwide platform, well-defined and complementary brand identities, a wider range of products, and a stronger presence across teams, athletes, events and leagues.

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On 11 April 2006, Adidas announced an 11-year deal to become the official NBA apparel-provider. They will make NBA, NBDL, and WNBA jerseys and products as well as team-coloured versions of the "Superstar" basketball shoe. This deal (worth over $400 million) takes the place of the previous 10-year Reebok deal that was put in place in 2001.

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S.W.O.T. Analysis

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Strengths

Leading player in the sporting goods industry

The company is amongst the top players in the sporting goods industry due to its strong brands, market-leading products and commitment to sports for meeting consumer expectations. The global sportswear market (E45 billion) is dominated by Adidas-Salomon and Nike and, at a certain distance, Reebok, PUMA and New Balance. Adidas-Salomon’s brands include Adidas, Salomon, TaylorMade and others, which have very strong brand name recognition in markets served. The company’s products serve many markets and include footwear, hardware, apparel, snowboard, golf-related and other products. It has sponsored many sporting events including the Winter Olympics, the FIFA World Cup of 2002 and most recently the Euro 2004 tournament and the Olympics in Athens 2004.

Steady increase in sales revenues. Adidas-Salomon’s revenues from sales have been steadily increasing as reflected in the last five years’ sales performance ending 2002. From E5.1 billion of sales in 1998 to E6.5 billion in 2002, the performance has improved by a CAGR of 7%. Though sales declined by 3.9% in 2003 over 2002, it was mainly due to currency translations. The company has been able to achieve this steady growth in revenues due to its strong brand image, continuous commitment to product innovation that is consumer focused.

Such a steady growth in the company’s revenue performance helps in maintaining a very good image for the company and improves investor confidence. Additionally, the company reported an outstanding operational and financial performance in the first half of fiscal 2004. This underlined the company’s momentum, with quarter on quarter sales improvements for all brands, and a record gross margin and earnings growth of almost 40%, marking the strongest first half year performance in the company’s history.

Successful new product innovations

The company has consistently launched new products and this has enabled it to widen its portfolio and also enhance its competitive position. Each company brand targets a specific market and new products are introduced based on their requirements. This has helped the company achieve a greater degree of success. During 2002-2003, the company launched ClimaCool and a3 in its running shoes category, which were big successes. The company sold over 500,000 pairs in a3 and over one million in ClimaCool.

Furthermore, in the basketball shoes division, the T-MAC and T-MAC were the bestselling in the US market in 2002 which has led to the release of T-MAC 4 lace less footwear for 2004. The company’s continuous commitment towards new product innovations not only improves revenues but also helps in strengthening its relationship with its customers and attracts new customers. In May 2004 the company

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announced introduced what the company described as the first Intelligent Shoe - called "1", the shoe provides intelligent cushioning by automatically and continuously adjusting itself.

Lead time improvements

The company has considerably improved the lead-time required for footwear manufacturing through lean manufacturing principles. Earlier in 2000, the company used to take 120 days for producing footwear; by 2003, this had been reduced to around 60 days. Such a reduction was made possible as a result of the company’s efficient implementation of lean manufacturing principles which helped in removing non-value-adding procedures and activities, improved labeling, special handling and other such activities to reduce time taken. These process improvements have helped the company in avoiding warehousing of its footwear products.

Marketing strength

The company has planned and implemented major advertising campaigns during 2004. The company’s immense size and strong position have afforded it the opportunity to undertake global advertising campaigns with focus on TV, print media and outdoor advertising as well as point of sale and PR activities. The campaign

"Impossible is Nothing", includes top athletes from different disciplines such as Muhammad Ali and his daughter (brand image, boxing and lifestyle), Haile Gebrselassi (brand image, running), David Beckham (brand image, football) and Tracy McGrady (brand image, basketball). This mega campaign will not increase the annual advertising budget in 2004 as it replaces the budgets of last year, demonstrating the company’s consistency in brand advertising.

Weaknesses

Unfocused strategy

The strategy of Adidas-Salomon is lacking focus. This is because it has a very broad product portfolio, including sport performance products for athletic sports, basketball, golf, tennis, Nordic disciplines, cycling and fashion oriented products. Rival Puma has demonstrated that focus can translate into a high profitability.

Over-dependence on Adidas brand segment

While the purchase of Salomon, the French maker of ski and golf gear, steered the company into the equipment arena, the company generated 79% ($4.9 billion) of its total revenues of E6.3 billion from the Adidas brand segment in 2003, while the other two contributed to the balance. Despite a strong image for the TaylorMade and Salomon brands, they generated only about 21% of the total revenues. The company’s over-dependence on the Adidas brand segment, which mainly serves the athletes’ requirements, makes the company’s overall revenues susceptible to the market conditions in this segment.

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High level of long-term borrowings

Though the company reduced its borrowings by E181 million against 2002, the level of borrowings is still very high. At the fiscal year end 2003 the company’s long-term borrowings as a percentage of equity were very high at around 146%, which amounted to E1, 574 million. Such high debt level affects investor confidence in the company and makes low-cost funding of growth plans difficult. By half year fiscal 2004 strong cash flow had enabled more progress in debt reduction has been (net borrowings at June 30, 2004 were E967 million, down 39% or E616 million versus

E1, 583 billion in the prior year) made but debt remained high.

Order cancellations

2003 revenue growth was substantially below the company’s first impression from year-end 2002 order backlogs, which were up a strong 14%. As 2003 revenues growth was only 5%, significant order cancellations in the course of the first half of 2003 are evident. The company achieved revenues that totaled E6, 267 million ($7,570.4 million), a decrease of 3.9% against the previous years revenues that totaled E6, 523 million.

Opportunities

Strategic acquisitions and agreements

The company made a few strategic acquisitions during 2004. In September Adidas and Stella McCartney announced a long-term partnership in New York, presenting the Adidas by Stella McCartney sport performance collection. For the first time ever a high-end fashion designer had created a functional sport performance range for women. The first collection will be available in stores across the US, Japan and Europe starting spring/summer 2005. It offers products for running, gym/workout and swimming as well as cover-ups. The Adidas by Stella McCartney range shows the company’s willingness to innovate in the women’s sportswear market.

Adidas-Salomon acquired Valley Apparel Company of Cedar Rapids, Iowa in June 2004, a producer and distributor of collegiate and professional league apparel and accessories. It serves small- to mid-size retailers, such as sporting goods stores, department stores, fan shops and college bookstores. It has a reputation of producing and delivering large quantities of apparel and branded accessories within hours of a team’s victory.

In early 2003, the company acquired the Maxfli brand of accessories and other golf related products from Dunlop Slazenger Group through its TaylorMade-Adidas division. This acquisition has helped the company in offering market leading products in all the golf categories and has improved its global market share to 16% from less than 1% prior to the acquisition. The company also entered into a strategic agreement in June 2003 with the INTERSPORT International Corporation (IIC), a multi-sport retailer, in order to strengthen its sales and distribution network. Specifically, the four

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year agreement will - in time - strengthen the company’s sport performance, casual, Salomon and other products’ sales.

Supply-chain and manufacturing initiatives

The company’s success in reducing footwear manufacturing time is likely to continue in the future also. The company plans to reduce its production time further, which will help the company achieve faster delivery of its products to the retailers, thereby reducing inventory costs. On the supply-chain side, the industry faces a problem due to longer time to market. The total time taken is about 15 to 18 months of which 12 months are spent in creation of the product, while the balance of the time in arranging for the raw materials, production and delivery to the retail stores. The company plans to implement a new model for its supply chain, which will considerably reduce the time taken and improve cost efficiency, etc. This initiative will help the company in serving its customers faster, thereby gaining a competitive edge over its peers.

Sponsoring sporting events

The company’s sponsorship of major sports events brings great recognition to its products. Adidas supplied more than 1.4 million products to federations, volunteers, officials and others during the 2004 Olympics. Following a successful marketing campaign at the Euro 2004 Soccer Tournament in Portugal, the company once again expected to achieve new record sales in football during 2004. During 2002, the company sponsored FIFA World Cup Championship in Korea and Japan and was acclaimed as the most visible among the brands advertised during the event and was viewed by 44 billion cumulative spectators during the course of the event. Furthermore, in the Winter Olympics of 2002, the company sponsored over 50% of the participating athletes who won about 200 medals.

Adidas has a life-time agreement with Kevin Garnett (most valuable player of the NBA 2003/2004). It also signed a six-year cooperative agreement with Chinese Football in

June 2003. The company is preparing to sponsor the World Cup in 2006, which will be held in Germany. Sponsorship of these events helps the company in building its Sport Heritage, Sport Style and other such divisions. For instance, the Sport Heritage division grew into an E900 million businesses and doubled its sales from 2001 to 2003.

Own retail stores

In 2003 Adidas generated 9% of group revenues in own retail outlets. A significant number of new shops have not yet positively contributed to earnings because the cost for new shops (of hiring of sales people and training costs etc.) exceeded early revenues. This will begin to level out going forward and the company will continue to open own retail shops. Management recently explained that own retail sell-through was positive in the US in 2003 in contrast to external customers. The company is therefore planning to open 15 new US shops in the coming two years and 40 worldwide. Management expects Sport Heritage to grow again from 2004 driven by

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more own retail stores and no more cutting of external points of sales. The company opens its second UK store in Manchester in 2004.

Threats

Competition

Adidas operates within a highly competitive market which in many cases overlaps into other markets as sportswear retailers increasingly compete with fashion retailers. The company’s traditional competitors like Reebok, Nike and Puma make competitive levels intense, but the addition of casual footwear and apparel manufacturers such as Tommy Hilfiger, adding a designer edge to the market, has increased competitive levels.

Companies have come under increasing pressure recently from products designed for the value conscious consumer. Adidas have long been one of the premium brands in sportswear and have charged accordingly, though this strategy is coming under more pressure as cheaper substitute products are bought by consumers adding to problems in terms of customer retention.

Foreign exchange fluctuations

The company’s manufacturing activities are mostly concentrated in China and other Southeast Asian countries. Since most of these countries transact in US Dollars, the company incurred about 70% to 80% of its outsourcing expenditure in US Dollars, whereas, the company’s revenue generation in US dollar and other non-Euro currencies is comparatively lower. Hence, any adverse changes in the exchange rate between US dollar and Euro will have a negative impact on its overall revenues.

Weak global economy

The GDP of European countries have grown at a negligible rate and are unlikely to improve in the near future. Similarly, the Latin American markets such as Argentina and Brazil continue to witness weak economic conditions, while the Southeast and Middle-East regions continue to reel from political unrest. Thus, the company’s revenues could be significantly affected in the near future due to these adverse economic conditions.

Impact of scandals in the US and Germany

Accounting scandals across industries in Germany and the US have impacted upon the company’s stock performance recently. The weak performance of many companies in the sports goods industry adversely affected the investor confidence in the industry. The company’s stock price has been as low as E80 during the last two years. Thus, external factors can have an adverse impact on the company’s stock price performance and might in turn affect its brand’s value.

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Values, Strategies, and Goals

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Adi's Three Guiding Principles Adi Dassler followed three guiding principles in his development work, driven by his passion for sports and shoemaking:

1. To produce the best shoe to serve the needs of the sport, 2. To protect the athlete from injury, and 3. To make the product durable.

adidas' Values The adidas Group strives to be the global leader in the sporting goods industry with sports brands built on a passion for sports and a sporting lifestyle.

adidas is consumer focused and therefore continuously improve the quality, look, feel and image of their our products and their our organizational structures to match and exceed consumer expectations and to provide them with the highest value.

They are innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product they bring to market.

They are a global organization that is socially and environmentally responsible, creative and financially rewarding for their employees and shareholders. They are committed to continuously strengthening their brands and products to improve their competitive position.

They are dedicated to consistently delivering outstanding financial results.

adidas' Strategy Adidas' goal as a Group is to lead the sporting goods industry with brands built on a passion for sports and a sporting lifestyle. Adidas continuously strives to generate consumer excitement and enhance brand profitability by executing a clear strategy. In everything Adidas does, it is focused on strengthening and developing its brands to maximize the Group’s operational and financial performance and create shareholder value.

Performance as core Group value

Adidas Group’s mission and strategy are rooted in its desire to provide athletes with the best possible equipment to optimize their performance. This philosophy originated with the brands’ founders Adi Dassler, J. W. Foster and Gary Adams whose passion for sport inspired them to develop innovative sports products and create new sports categories. Adidas aims to consistently perform at a level where it not only meets but exceeds the expectations of its stakeholders. It strives to be closer to consumers than any of its competitors, and its unique understanding of consumers enables it to enhance their athletic experience. In support of these efforts, Adidas continuously

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optimizes its sales and distribution processes and improves its customer service efforts for its retail partners. It makes every effort to align its employees’ personal objectives with the Group and brand targets and reward its staff for high achievement. Further, Adidas is particularly focused on ensuring best-practice social and environmental standards. A commitment to constantly increase value for its share holders is at the core of its activities. This commitment to top performance differentiates it from other competitors and is a unifying principle across the multi-brand organization.

Leveraging opportunities across adidas' brand portfolio

The strength of the brands is a key factor in the Group’s success. Within the brand portfolio, adidas primarily pursues two strategic priorities: Market penetration – gaining market share across all markets in which we compete, and Market development – expanding into new markets and addressing new consumer segments.

adidas' multi-brand approach allows it to tackle opportunities from several perspectives, as both a mass and a niche player, providing distinct and relevant products to a broad spectrum of consumers. In this way, each brand is able to concentrate on its core competencies. Across all brands, it focuses on increasing awareness and visibility, providing clear and consistent messaging and supporting product initiatives at the point-of-sale. In addition, adidas' commercial success also depends on leveraging the scale of the organization and sharing best practice across the Group. In particular, it continues to prioritize the development and further integration of its supply chain across all brands, turning it into a long-term competitive advantage for the Group.

Leading position in markets worldwide

As a global organization, adidas targets leading market positions in all regions where it competes. In Europe, where the Group is the market leader in terms of sales, its strategy is twofold. First, it continues to strengthen its position in the major Western European markets and strive to grow its brands through well-coordinated efforts with key account partners. Secondly, it is capitalizing on the strong growth opportunities in the region’s emerging markets (i.e. Eastern Europe, the Middle East and Africa).

In North America, adidas sees significant upside potential. As a Group, adidas is number two in terms of sales, but it believes it is currently under-represented in the North American sporting goods market. Therefore, it targets market share expansion via a strong, consumer-driven product offering, a diversified distribution strategy, and visible and engaging communication initiatives.

In Asia, where the Group is the market leader in terms of sales with number one positions in several markets, adidas' goal is to strengthen and extend its market leadership position. adidas' key priority in the medium term is expanding its business in the region’s two most important markets: China and Japan. In tandem, it will also continue to capitalize on opportunities in other emerging markets in Asia such as India.

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Finally, in Latin America, adidas' Group’s fastest-growing region for the last several years, it is focused on rapidly expanding its business in the four most important markets: Brazil, Argentina, Mexico and Chile. adidas' target is to take over market leadership in terms of sales by 2010.

Leading through innovation and design

adidas' is determined to address every consumer in a specific and unique way – with product and communication initiatives that generate trade and consumer interest. As a result, adidas believes that technological innovation and cutting-edge design are essential to sustainable leadership in the industry.

Innovation plays a significant role in differentiating adidas' product offering in the minds of consumers. By leveraging the extensive R&D expertise within its Group, adidas continuously challenges the boundaries of functionality and performance. It is adidas' objective to launch at least one major new technology or technological evolution per year.

Through design partnerships and collaborations with Stella McCartney, Yohji Yamamoto, Porsche Design and Jean-Michel Basquiat adidas is widening its design reach and imbuing its products with the excitement consumers demand. By continually expanding its capabilities in R&D and design, adidas is able to introduce new products at premium price points, thus contributing to Group margin improvement.

Customizing distribution

The Group will drive future success by engaging consumers with unique interactive product approaches and rewarding point-of-sale experiences. Adidas' brands must be competitive in this environment where consumers make their final purchase decisions based on availability, convenience and breadth of product offering. As a result, it is continuously refining its distribution proposition, concentrating on two areas: expanding controlled space and improving retail relationships. Controlled space includes: adidas' own-retail business including e-commerce; mono-branded stores run by retail partners; shop-in-shops that it establishes with its key accounts; joint ventures with retail partners; co-branded stores with sports organizations or other brands.

These formats provide adidas with a high level of brand control, as it either manages the stores itself (i.e. own retail) or it works closely with its partners (mono-branded stores, shop-in-shops, joint ventures, co-branded stores) to ensure the appropriate product offering and presentation at the point-of-sale. Brand control helps it drive sales and profitability increases and expand its market position.

Going forward, we will also further differentiate and segment our product offering to align our distribution more closely with a given retailer’s customer base. In addition, we are partnering with retailers to increase the level and quality of sell-through information we receive. This creates a mutually beneficial relationship that will help us become a more valuable and reliable business partner to our retailers.

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Creating shareholder value

Sustainable revenue and operating profit growth are critical to adidas' success. Creating value for its shareholders through significant free cash flow generation drives its overall decision-making process. For each of its brands, adidas pursues the most value-enhancing avenues for growth, with particular emphasis on continuously improving profitability.

Adidas' Strategy for 2010 The adidas Group’s social and environmental strategy 2008-2010 has been built on the achievements and experiences from previous years. It responds to changes in adidas' overall business development and to feedback that it has captured from stakeholders. adidas' strategy defines primary areas which are core to its business and where it dedicates its attention, efforts and resources. These areas are:

• Embedding environmental sustainability across our business – this recognizes the urgent need to address questions of resource use, environmental degradation and climate change, ‘the’ business drivers for the 21st Century. • Effectively managing business risks and social compliance in its supply chain – the supply chain is expanding, and becoming more complex with multiple relationships and stretched lines of communication and control. • Extending its engagement internally and externally – partnering with others to embed new thinking and better ways of working within its business and along its supply chain. The issues are so large and complex that adidas cannot solve them alone. • Creating the best and most productive workplace in the industry by becoming a champion in talent and succession management, a world-class recruiter and a Top 10 employer in every key market in which it operates.

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Brands & Products

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Brands adidas & Reebok work in footwear, apparel, and accessories whereas TaylorMade-adidas Golf is the brand for golf equipment: metalwoods, irons putters, golf balls, footwear, apparel, and accessories

About adidas

Sport Performance

The guiding principle of the adidas Sport Performance Division is to equip all athletes to achieve their “impossible”. adidas Sport Performance brings its passion for great products to athletes in all sports and mainly focuses on four key categories globally: football, running, training and basketball.

Sport Style

The Sport Style Division is the home of Originals, defined as authentic sportswear, the Fashion Group, which is the future of sportswear, and Style Essentials, the fresh sport-inspired label made accessible for style-adopting youth. Together they offer consumers products from street fashion to high fashion, all uniquely inspired and linked to sport.

About Reebok Inspired by its roots in sport and women’s fitness, Reebok is a global brand that is committed to developing innovative products which will allow Reebok to own Women’s Fitness, challenge the Men’s Sport category and revive its Classics heritage.

Reebok-CCM Hockey

Reebok-CCM Hockey is one of the world’s largest designers, manufacturers and marketers of hockey equipment and apparel with two of the world’s most recognized hockey brand names: Reebok Hockey and CCM Hockey.

Rockport

Building on nearly four decades of engineering expertise and a commitment to innovation, Rockport designs and markets dress, casual and outdoor footwear as well as apparel and accessories that fuse dynamic technology and modern style.

About TaylorMade-adidas Golf TaylorMade is a leader in the industry and the number one metalwood supplier. It focuses on consumers who seek the most innovative, performance-enhancing golf

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equipment available, including technologically superior drivers, fairway woods, irons, putters and balls.

adidas Golf

adidas Golf targets active, serious, athletic-minded golfers who understand that the right technologies can dramatically improve the performance of golf footwear and apparel.

Ashworth

Ashworth is a leading designer of men’s and women’s golf-inspired lifestyle sportswear distributed internationally in golf pro shops and resorts as well as upscale department and specialty stores.

Products

Running

Adidas currently manufactures several running shoes, including the adiStar Control 5, the adiStar Ride (the replacement for the adiStar Cushion 6), the Supernova Sequence (the replacement for the Supernova Control 10), and the Supernova Cushion 7 (which will soon be replaced by the Supernova Glide), among others. In addition, their performance apparel is widely used by runners. Adidas also uses kangaroo leather to make their more expensive shoes.

Association football

One of the main focuses of Adidas is football kit and associated equipment. Adidas also provides apparel and equipment for all teams in Major League Soccer. Adidas remain a major company in the supply of team kits for international football teams. Current examples include Russia, France, Germany, Greece, Romania, Argentina, Spain, Mexico, Japan and Nigeria. Adidas also makes referee kits that are used in international competition and by many countries and leagues in the world. In the United States, referees wear the Adidas kits in MLS matches even though the primary referee supplier is Official Sports. The company has been an innovator in the area of footwear for the sport with notable examples including development of the Copa Mondial moulded boot used for matches on firm dry pitches for almost forty years. The studded equivalent was named World Cup follow in celebration of the 1978 tournament won by Argentina, one of the nations it supplied at the time. Adidas became renowned for advancing the "Predator" boot design developed by ex-Liverpool and Australian international player Craig Johnston. This design featured a ribbed rubber structure for the upper leather of the shoe, used to accent the movement of the ball when struck; highly skilled players claimed they were able to curve the flight of the ball more easily when wearing this new contoured design. The Predator also features the Craig Johnston invented "Traxion" sole. As the development and popularity of Football continued Adidas played a leading role in shaping the style of the play itself. FIFA, the sports governing body, commissioned specially designed footballs for use in its own World Cup tournaments to favour more attacking play.

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The balls supplied for the 2006 Germany World Cup were particular noteworthy for their ability to travel further than previous types when struck, leading to longer range goal strikes that were intended to increase the number of goals scores and increase spectator enjoyment. Goalkeepers were believed to be less comfortable with the design claiming it would move significantly and unpredictably in flight.

Tennis

Adidas has sponsored tennis players and recently introduced a new line of tennis racquets. While the Feather is made for the "regular player", and the Response for the "club player", Adidas targets the "tournament player" with the 12.2 oz Barricade tour model. Adidas sponsors the following professional players: Dinara Safina, Ana Ivanović, Daniela Hantuchová, Fernando Verdasco, Novak Djokovic, Gilles Simon, Marcos Baghdatis, Fernando González, Marat Safin, doubles team Bob and Mike Bryan and upcoming players like Melanie Oudin, Sorana Cirstea and Grigor Dimitrov. Adidas tennis apparel contains the ClimaCool technology found in other athletic jerseys and shoes.

In Cincinnati, at the ATP Tennis Tournament in Mason, they have also sponsored the ball-boy and ball-girl uniforms.

Golf

In 1997, Adidas purchased TaylorMade. The image and focus of TaylorMade was redirected shortly after the acquisition to take over the driver market. The company succeeded in achieving this goal in late 2004 when it officially became the No. 1 driver in golf. On 14 October 2008, Adidas, through its subsidiary TaylorMade, acquired Ashworth for $72 million, assuming $46.3 million in debt.

Cricket

In the 1990s, Adidas signed the world No. 1 batsman Sachin Tendulkar and made shoes for him. He is still wearing Adidas shoes when he plays matches. Adidas even made action figures after Sachin Tendulkar.

In 2008, Adidas made their move into English cricket market by sponsoring English batting star Kevin Pietersen after the cancellation of his lifetime deal with Woodworm, when they ran into financial difficulties. The following year they signed up fellow England player Ian Bell and Indian Player Ravindra Jadeja. Having made cricket footwear for many years, the company finally entered the field of bat manufacture in 2008 and their products are available in the Incurza, Pellara and Libro ranges

Adidas also manufactures the uniforms worn by both the England cricket team and the Australian cricket team.

In 2008 and 2009 in both the seasons of the Indian Premier League (IPL), it took up the sponsorship of the Mumbai Indians and the Delhi Daredevils.

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In 2009, Adidas signed Sachin Tendulkar and started sponsoring his bat. It created a new bat 'Adidas ST' for him and 'Adidas KP' for Kevin Pietersen, the same year. Now both of them use their personalized bats in cricket.

Basketball

Adidas has been a longtime basketball shoe manufacturer and is one of the leading basketball brands in the world. They are most famous for their iconic Superstar and Pro Model shoes, affectionately known as "shelltoes" for their stylized hard rubber toe box. These were made very popular in the 1980s hip hop street-wear scene alongside Adidas' stripe-sided polyester suits.

Adidas is also the current outfitter of all 30 franchises in the National Basketball Association (replacing the Reebok brand after the merger) and sponsors numerous players past and present like Kareem Abdul-Jabbar and Tracy McGrady, as well as Dwight Howard, Chauncey Billups, Derrick Rose, Kevin Garnett, Tim Duncan, Candace Parker, and Gilbert Arenas.

Lacrosse

In 2007, Adidas announced the future production of lacrosse equipment, and will sponsor the Adidas National Lacrosse Classic in July 2008 for the top 600 high school underclassmen lacrosse players in the United States.

Rugby

Adidas make rugby balls and other rugby gear. They are the current kit and ball supplier to the New Zealand All Blacks, Irish Munster Rugby, and the Argentinean Pumas, among others.

Gymnastics

Since 2000, Adidas has provided men's and women's gymnastics wear for Team USA, through USA Gymnastics. In 2006, Adidas gymnastics leotards for women and Adidas men's comp shirts, gymnastics pants and gymnastics shorts have been available in the USA, with seasonal leotards offered for Spring, Summer, Fall and Holidays. Starting in 2009, Adidas gymnastics wear has been available worldwide through GK Elite Sportswear.

Skateboarding

Adidas SB (Skateboarding) are shoes made specifically for skateboarding. Many of the shoes Adidas previously made were redesigned for skateboarding.

Accessories

Adidas also designs and makes watches, eyewear, bags, baseball caps, and socks. As well, Adidas has a branded range of male and female deodorants, perfumes, aftershave and lotions.

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Marketing

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Adidas, like other sports brands is believed to engender high consumer brand loyalty. Brand loyalty towards Adidas, Nike and several other sportswear brands was examined in a recent study. The study found consumers did not exhibit unduly high loyalty towards such brands.

Group Focus During the mid to late 1990s, Adidas divided the brand into three main groups with each a separate focus: Adidas Performance was designed to maintain their devotion to the athlete; Adidas Originals was designed to focus on fashion and life-style; and Style Essentials, with the main group within this one being Y-3.

Slogan "Impossible is Nothing" is the current mainstream marketing slogan for Adidas. This campaign was developed by 180/TBWA based in Amsterdam but also with significant work being done by TBWA/Chiat/Day in San Francisco - particularly for its basketball campaign "Believe In Five".

Contender When adidas entered the marketplace some 50 years ago, its focus was to produce shoes crafted specifically for soccer and running. Establishing the brand as the choice for professional athletes eventually parlayed into preference in the mainstream.

In the 80's, Run DMC furthered adidas’s street cred with the rap “My adidas,” paying homage to their favorite shell-toe. But by the early 90's, Nike and Reebok were out-marketing adidas – even in Germany, its own turf. Kids weren’t interested in the sneakers their parents wore, and adidas found itself forgotten in the back of the closet, heading for the Goodwill

The new millennium has since brought about an adidas renaissance; the brand has steadily regained market share over the past five years to become the world's number two athletic shoe company (behind Nike). How did it go about repositioning to once again be among the coolest of kicks?

Adidas claims that, "the brand values of the company – authenticity, inspiration, honesty and commitment – are derived from sport." Historically, this sensibility was demonstrated through early and continued involvement with Olympic athletes, as well as active sponsorship of major global sporting events – like the World Cup. Today these events provide an ample playing field for sportswear companies to duke it out for representation and thus market share. Adidas’s rapid growth in Asia, where revenue rose by 15 percent to US$ 878M last year, may be further propelled in Japan and Korea when those two nations host the World Cup this year – an event which is expected to garner 2.5M spectators and one billion TV viewers worldwide.

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However, the key to revitalized success seems to lie in the considerable endorsement deals adidas has developed with world class athletes. Recent sports figures representing adidas don’t only score high marks in their game – they also score high in their celebrity quotient. British football star David Beckham’s relationship with adidas has no doubt lent itself well to the brand’s visibility in the UK. Recently dubbed "Captain of England," Beckham led his team to victory in the 2000 FIFA World Cup. It doesn’t hurt that he’s married to a highly visible, ex-Spice girl and is often seen in the tabloids sporting the adidas logo. With Europe as adidas’s largest market, exposure like this reflects in the numbers; sales grew seven percent to US$ 2.7 billion, last year.

Stateside, Kobe Bryant is another example of a winning adidas endorsee. The LA Laker and youngest NBA all-star player is an athlete with substantial celebrity leverage. This translates directly into sales, young men who idolize Bryant want to play basketball like he does, and thus will want to wear what he wears. The equally compelling Russian born, American-bred tennis star Anna Kournikova also meets these criteria. She’s a young, brilliant professional athlete whose celebrity extends well beyond the world of tennis – like Bryant and Beckham she’s captured the public’s interest in mainstream newspapers, magazines and tabloids.

Reinvention was key, not only for the adidas’s marketing strategy, but also for its product line. On its website, adidas acknowledges that "The markets and industry in which we compete are transforming rapidly, paced by the evolution – or revolution – in how 'sports' are defined. Team sports such as soccer and basketball will always be a fundamental part of sporting competition. Today, however, eclectic, individual, 'no-rules' sports such as snowboarding, inline skating and surfing have grown into significant categories. Activities such as golf, hiking and mountain biking, which used to be seen as lifestyle and leisure activities, are now part of mainstream sports." Increased product offerings in these categories have undoubtedly contributed to a better score for the brand.

To keep up with the competition, adidas generates close to 60 new foot-friendly designs each year. The adidas credo is to regard shoes as feet, resulting in a product with superior fit and performance capabilities. Tactics have been revised in getting these products out for consumption. As a result, products have been repositioned in higher-end and sports specialty stores. As their main competitor has sprinkled flagship NikeTown stores throughout the US, Europe and Australia, adidas has also embarked on a foray into retail. The first adidas-Solomon megastore launched in Paris last year to capitalize on the brand awareness in that market; France scored victories in both the 1998 World Cup and 2000 European Cup football championships. Word on the street is the brand hopes to eventually roll out this concept to more cities in Europe and North America.

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Adidas continues to prove itself as a brand built to last through a game plan of reinvention. With the recent acquisition of a lifetime partnership with Orlando Magic's Tracy McGrady (basketball) and its heavy involvement with 2002 World Cup, it continues to strike savvy deals that capitalize on the star power of young athletes and increase its visibility in the marketplace.

It appears that team adidas has honed its strategy to become a revitalized contender in today’s competitive sporting goods market and is now duly recognized as the sneaker of yesterday and today

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Corporate information

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Articles of Association of adidas AG (Translated from German. In the event of any differences in interpretation, the German text shall prevail.)

Corporate Name, Place of Registered Office and Financial Year

1. The name of the publicly-listed Company is adidas AG . 2. The registered office of the Company shall be located in Herzogenaurach. 3. The financial year of the Company shall be the calendar year.

Purpose of the Company

1. The purpose of the Company is the production and distribution of apparel, footwear and equipment for sports and leisure as well as of products of adjoining fields and, in addition, the commercialization of the registered adidas trademark.

2. The Company is entitled to all measures and business transactions which are appropriate to promote the purpose of the Company. This also includes the establishment of branches as well as the acquisition and establishment of other enterprises as well as of an interest in such enterprises, in Germany and abroad.

Publications and Transmission of Data

1. Official announcements of the Company shall be published in the electronic version of the German Federal Gazette (Elektronischer Bundesanzeiger).

2. The Company shall be authorized to transmit information by electronic means to its shareholders subject to their approval.

Nominal Capital

1. The nominal capital of the Company shall be EUR 193,515,512 and be divided into 193,515,512 no-par-value shares.

2. The Executive Board shall be entitled for a duration of five years, effective from the entry of this authorization with the Commercial Register, to increase the nominal capital, subject to Supervisory Board approval, by issuing new shares against contributions in cash once or several times by up to a total of EUR 50,000,000 (Authorized Capital 2009/I). The new shares may also be offered to one or several credit institutions with the obligation to offer them to the shareholders for subscription (indirect subscription right). The Executive Board is authorized, subject to Supervisory Board approval, to exclude residual amounts from the shareholders’ subscription rights.

3. The Executive Board shall be entitled for a duration of three years, effective from the entry of this authorization with the Commercial Register, to increase the nominal capital, subject to Supervisory Board approval, by issuing new shares against contributions in kind once or several times by up to a total of EUR 25,000,000 (Authorized Capital 2009/II). The Executive Board may, subject to Supervisory Board approval, exclude the subscription rights of the shareholders. The shareholders may also be granted the statutory subscription right by offering

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the new shares to one or several credit institutions with the obligation to offer them to the shareholders for subscription (indirect subscription right).

4. The Executive Board shall be entitled for a duration of 5 years, effective from the entry of this authorization with the Commercial Register, to increase the nominal capital, subject to Supervisory Board approval, by issuing new shares against contributions in cash once or several times by up to a total of EUR 20,000,000 (Authorized Capital 2006). The new shares may also be offered to one or several credit institutions with the obligation to offer them to the shareholders for subscription (indirect subscription right). The Executive Board may, subject to Supervisory Board approval, exclude residual amounts from shareholders' subscription rights. Additionally, the Executive Board may, subject to Supervisory Board approval, exclude shareholders' subscription rights when issuing the new shares at a value not essentially below the stock exchange value of shares with the same features. The authorization to exclude subscription rights pursuant to the previous sentence, may, however, only be used to the extent that the pro-rata amount of the new shares in the nominal capital together with the pro-rata amount in the nominal capital of other shares which have been issued by the Company since May 11, 2006, subject to the exclusion of subscription rights pursuant to or in accordance with § 186 section 3 sentence 4 of the German Stock Corporation Act (Aktiengesetz - AktG) on the basis of an authorized capital or following a repurchase or for which conversion or subscription rights have been granted after May 11, 2006, through issuance of convertible bonds or bonds with warrants, with subscription rights excluded pursuant to § 186 section 3 sentence 4 AktG, does not exceed 10% of the nominal capital existing on the date of the entry of this authorization with the Commercial Register or – if this amount is lower – as of the respective date on which the authorization is used.

5. The Company's nominal capital shall be increased conditionally by up to EUR 1,294,748 through the issuance of not more than 1,294,748 no-par-value shares (Contingent Capital 1999/I). The contingent capital increase shall serve exclusively to grant up to 323,687 share options to members of the Executive Board as well as to Managing Directors/Senior Vice Presidents of its affiliated companies as well as further senior executives and executives of the Company and its affiliated companies as more fully described in the provisions of the authorization resolution adopted by the Annual General Meeting on May 20, 1999 in the version of the resolutions of the Annual General Meetings of May 8, 2002, May 13, 2004 and May 11, 2006. It shall be implemented only to the extent these share options are exercised. The new shares shall carry dividend rights from the commencement of the financial year in which the shares are issued.

6. The nominal capital shall be conditionally increased by up to EUR 35,998,040 divided into not more than 35,998,040 bearer shares (Contingent Capital 2003/II). The contingent capital increase will be implemented only to the extent that the holders of the subscription or conversion rights or the persons obliged to exercise the subscription or conversion duties based on the bonds with warrants or convertible bonds, which are issued by the Company or a wholly-owned direct or indirect subsidiary of the Company pursuant to the authorization of the Executive Board by the resolution of the Annual General Meeting of May 8, 2003 in the version of the resolution of the Annual General Meeting of May 11, 2006, make use of their subscription or conversion right or, if they are obliged to exercise the subscription or conversion rights, they discharge their obligations to exercise the warrant or convert the bond. The new shares shall be issued at the respective

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subscription or conversion price to be established in accordance with the aforementioned authorization resolution.

The new shares shall have profit participation rights beginning in the financial year in which they were created as a result of the exercise of the subscription or conversion rights or the discharge of the subscription or conversion obligations. The Executive Board is authorized, subject to Supervisory Board approval, to stipulate any additional details concerning the implementation of the contingent capital increase.

7. The nominal capital shall be conditionally increased by up to EUR 20,000,000 divided into not more than 20,000,000 no-par-value bearer shares (Contingent Capital 2006). The contingent capital increase will be implemented only to the extent that the holders of the subscription or conversion rights or the persons obliged to exercise the subscription or conversion duties based on the bonds with warrants or convertible bonds, which are issued or guaranteed by the Company or an affiliated company of the Company pursuant to the authorization of the Executive Board by resolution of the Annual General Meeting of May 11, 2006, make use of their subscription or conversion right or, if they are obliged to exercise the subscription or conversion rights, they discharge their obligations to exercise the warrant or convert the bond. The new shares shall be issued at the respective subscription or the conversion price to be established in accordance with the aforementioned authorization resolution.

The new shares shall have profit participation rights beginning in the financial year in which they were created as a result of the exercise of the subscription or conversion rights or the discharge of the subscription or conversion obligations. The Executive Board is authorized, subject to Supervisory Board approval, to stipulate any additional details concerning the implementation of the contingent capital increase.

8. Upon issuance of new shares, the beginning of profit-participation may be fixed in deviation from § 60 section 2 AktG.

9. The shares shall be no-par-value shares and bearer shares. 10. The Executive Board, in agreement with the Supervisory Board, shall decide upon

form and contents of the share certificates, profit share and renewal coupons. The Company shall be entitled to document its total nominal capital by one or several multiple share certificates. The shareholders' claim to the issuance of individual share certificates shall be excluded unless such issuance is required in accordance with the regulations valid at a stock exchange at which the shares are admitted.

Corporate Bodies

Corporate bodies are:

a) The Executive Board b) The Supervisory Board c) The General Meeting

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Executive Board

The Executive Board shall consist of at least two persons. The exact number of Executive Board members shall be determined by the Supervisory Board through the respective appointment or cancellation of the appointment of Executive Board members. The Supervisory Board may appoint a Chairman as well as a Deputy Chairman of the Executive Board.

Management of the Executive Board

1. The members of the Executive Board shall do business in accordance with the laws, the Articles of Association and the Rules of Procedure of the Executive Board and of the Supervisory Board.

2. The resolutions of the Executive Board shall be passed with a simple majority of the submitted votes. In the case of a draw, the Chairman of the Executive Board shall have the casting vote. In case he should be prevented from performing this duty, the Deputy Chairman shall have the casting vote, both if they plead so.

Representation of the Company

The Company shall be represented

a) By two members of the Executive Board or b) By one member of the Executive Board jointly together with an authorised

representative (Prokurist).

Composition of the Supervisory Board

1. The Supervisory Board shall be composed of 12 members to be elected pursuant to the provisions of the German Co-Determination Act (Mitbestimmungsgesetz - MitbestG), that is of

six members to be elected by the General Meeting, and six members to be elected by the employees.

2. The members of the Supervisory Board shall be appointed for the period until the end of such Annual General Meeting which resolves on their discharge from responsibility for the fourth financial year after the beginning of the term of office unless the General Meeting, when electing its members for the Supervisory Board, decides on shorter terms of individual members or of all members to be elected by it. The financial year in which the term of office begins is not counted.

3. For members of the Supervisory Board representing the shareholders, substitute members may be elected, who, in the order determined at the election, replace the prematurely leaving members of the Supervisory Board representing the shareholders.

4. If a member of the Supervisory Board is elected as substitute for a leaving member, his/her office shall continue for the remainder of the term of office of the leaving member. If a substitute member is replacing the leaving member, his/her office shall

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terminate at the end of the next General Meeting at which new elections take place, at the latest with the expiration of the term of office of the leaving Supervisory Board member.

5. The members and the substitute members of the Supervisory Board may resign from their office by means of a written declaration addressed to the Chairman of the Supervisory Board or to the Executive Board, observing a period of notice of four weeks.

Duties and Rights of the Supervisory Board

1. The Supervisory Board shall have all duties and rights which are assigned to it by law, the Articles of Association or otherwise. The Supervisory Board shall be entitled to make amendments to the Articles of Association concerning only the wording.

2. The Executive Board shall report to the Supervisory Board or respectively to the Chairman of the Supervisory Board on an individual case basis as well as on a regular basis, at the latest at the end of each quarter of a calendar year, and to the extent provided by law and the Rules of Procedure of the Executive Board and of the Supervisory Board.

Furthermore, the Supervisory Board as well as any of its members may, at any time, request a report to the Supervisory Board on matters of the Company, on its legal and business relations to affiliated companies as well as on business transactions within those companies which may materially affect the situation of the Company.

Declarations by the Supervisory Board

Declarations by the Supervisory Board shall be made by the Chairman on behalf of the Supervisory Board or, in case he should be prevented from doing so, by a deputy.

The Chairman and his Deputies

1. The Supervisory Board shall elect from among itself, in accordance with § 27 sections 1 and 2 MitbestG, a Chairman and a deputy for the fixed term. It shall further elect an additional deputy, the election of whom shall not be subject to § 27 MitbestG. The election shall take place in a meeting not separately convened following the General Meeting which has elected the members of the Supervisory Board representing the shareholders. In case the Chairman or a deputy resigns from office prior to the end of their term, the Supervisory Board shall hold a new election for the remaining term in office of the leaving member pursuant to the 1st and 2nd sentence above.

2. A deputy of the Chairman shall have the same rights as the Chairman in all cases in which s/he, while the Chairman is prevented from performing his duties, acts in substitution of the Chairman, however with the exception of the second vote granted to the Chairman in accordance with MitbestG regulations.

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3. In case both, the Chairman and his deputies, are prevented from fulfilling their duties, these obligations shall be taken over by the oldest member of the Supervisory Board for the period of prevention.

Rules of Procedure and Committees

1. The Supervisory Board shall adopt rules of procedure.

2. The Supervisory Board may, from among itself, form committees and determine their duties and rights. Powers of decision may also be transferred to such committees within the scope of mandatory provisions of law.

Immediately upon the election of the Chairman and his deputy elected in accordance with § 27 MitbestG, the Supervisory Board shall form a committee to carry out the duties stipulated in § 31 section 3, sentence 1 MitbestG, which shall consist of the Chairman, his deputy elected in accordance with § 27 MitbestG as well as one member to be elected by the employees' representatives and one member to be elected by the shareholders' representatives with a majority of the submitted votes.

3. In case the Chairman of the Supervisory Board is a member of a committee which consists of an equal number of members of the Supervisory Board representing the shareholders and members representing the employees, and a voting of the committee results in a draw, then the Chairman shall have two votes if another voting on the same issue results in a draw again. § 108 section 3 AktG is also applicable to the second vote.

Convocation

1. The meetings of the Supervisory Board shall be called by the Chairman or, in case he should be prevented from performing this duty, by a deputy by written notice given at least 14 days prior to the meeting. For computation of such period both the day of posting the invitation and the day of the meeting are not counted. In urgent cases the Chairman may shorten this period and call the meeting orally, by telephone or by any other means of electronic telecommunication. The legal authorisation of other corporate bodies or members of other corporate bodies to convene Supervisory Board meetings shall remain unaffected.

2. The invitation shall include the agenda of the meeting.

Resolutions

1. The Chairman of the Supervisory Board or, in case he should be prevented from performing this duty, a deputy shall be entitled to adjourn a convened meeting prior to its opening.

2. A quorum of the Supervisory Board exists if all members were invited under their last notified address and if at least one half of the members, of whom it shall consist, take part in the passing of the resolution. A resolution on an item of the agenda which was not included in the invitation is only admitted if no member of the Supervisory

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Board objects thereto. Absent members of the Supervisory Board shall be given the opportunity, within a reasonable period of time to be determined by the Chairman, to oppose the resolution or to send a written vote. The resolution shall only be valid if none of the absent Supervisory Board members oppose within the said period of time. Members participating in the meeting via video conference shall be considered present.

3. The Chairman of the Supervisory Board or, in case he should be prevented from performing this duty, a deputy shall preside over the meeting. The Chairman, or, in case he should be prevented from performing this duty, a deputy shall determine the order in which the items of the agenda are discussed as well as the type and the order of the voting. He may adjourn the resolution on individual or all items of the agenda by four weeks at the longest, if not the same number of Supervisory Board members elected by the shareholders and of Supervisory Board members elected by the employees participates in the resolution or if any other significant reason for such adjournment exists. He shall not be entitled to an additional adjournment.

4. Resolutions of the Supervisory Board shall be passed with a simple majority of the votes unless the law determines otherwise. The same applies to elections. An abstention shall not be considered as a submitted vote. In case of a draw, the Chairman shall decide whether a new vote shall be taken on the respective item and whether the new vote shall be taken during the same or during another meeting of the Supervisory Board, unless the Supervisory Board decides on a different procedure. If a new vote on the same item results in a draw again, the Chairman has two votes. This second vote can also be submitted in written form pursuant to section 5.

5. An absent member of the Supervisory Board may submit his/her written vote or vote transmitted by facsimile through another Supervisory Board member.

6. A Supervisory Board resolution may also be passed outside a meeting in writing, by telephone, facsimile or by any other electronic means of telecommunication, if the Chairman of the Supervisory Board or, in case he should be prevented from doing so, a deputy directs so for special reasons, and provided that none of the members object thereto. There shall be no right of objection if the resolutions are taken in such a manner that the members of the Supervisory Board participating therein are connected with one another by means of electronic telecommunication and are in a position to discuss the subject of the resolution. Resolutions passed not in written form shall subsequently be confirmed in writing. In all other respects the above provisions shall apply mutatis mutandis. Subject to the above conditions, a resolution may also be passed in combination of a meeting and resolutions passed outside the meeting.

Minutes

Minutes shall be taken on the resolutions and the meetings of the Supervisory Board and its committees and shall be signed by the person presiding over the respective meeting or, in case of § 15 section 6, by the Chairman of the Supervisory Board.

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Secrecy

1. Members of the Supervisory Board shall observe secrecy on confidential data and secrets of the Company, namely trade and business secrets which came to their knowledge through their function. The Supervisory Board members shall be bound to observe secrecy particularly with regard to confidential reports received and confidential discussions. Persons who are present during meetings of the Supervisory Board but are not members of the Supervisory Board shall be expressly bound to observe secrecy.

2. Confidential data in the sense of section 1 shall be all data which the person giving the data expressly declares as confidential and the disclosure of which, if seen from a reasonable economic point of view, might possibly impair the interests of the Company.

A secret in the sense of section 1 shall be all facts connected directly or indirectly with the operational and entrepreneurial transactions which are known to a limited circle of persons only and of which the maintenance of secrecy, if seen from a reasonable economic point of view, is assumingly desired by the entrepreneur and cannot be denied as being in the interest of the enterprise.

3. In case a member of the Supervisory Board intends to give any information to third parties and it is doubtful whether such information is subject to secrecy, s/he shall inform the Chairman of the Supervisory Board in advance, thereby stating the person to whom s/he intends to give such information. Before such information is passed on, the Supervisory Board shall have the opportunity to comment on whether or not the passing on of such information is compatible with sections 1 and 2. The statement shall be expressed by the Chairman.

Compensation of the Supervisory Board

1. Starting with the financial year 2008, each member of the Supervisory Board shall receive a fixed annual compensation of EUR 40,000, payable at the end of each financial year.

2. The compensation shall amount to three times the amount mentioned under section 1 above for the Chairman and twice the amount for each of his deputies.

3. Each member of a committee with exception of the committee formed pursuant to § 27 section 3 MitbestG, the Steering Committee, the Nomination Committee and the Audit Committee shall receive a bonus amounting to 50% of the compensation pursuant to section 1 above, the committee chairman shall receive a bonus amounting to 100% of the same. Each member of the Audit Committee shall receive a bonus amounting to 100% of the compensation pursuant to section 1 above; the Chairman of the Audit Committee shall receive a bonus amounting to 150% of the same.

4. The compensation paid for a committee chairmanship shall also cover the membership in such committee. If a member of the Supervisory Board is a member of several Supervisory Board committees, s/he shall be compensated only for the tasks performed in the committee with the highest payable bonus.

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5. There is no additional compensation for membership in committees established ad hoc.

6. Supervisory Board members which have been members of the Supervisory Board or a Supervisory Board committee only during part of the financial year shall receive a pro-rata amount of compensation in accordance with the duration of their membership.

7. Moreover, the Supervisory Board members shall receive compensation for any expenses incurred as well any VAT thereon.

Place and Convocation of the General Meeting

1. General Meetings shall be held at the registered office of the Company or in a city within a distance of not more than 100 kilometres from the registered office or in any other German city where a stock exchange is located.

2. The General Meeting shall be called by the Executive Board with at least thirty days’ notice before the final registration date (§ 20 section 1). The legal right of other persons to call the General Meeting shall remain unaffected.

3. The Annual General Meeting shall be convened within the first eight months of each financial year. Extraordinary General Meetings may be convened as often as it is deemed necessary for the interest of the Company.

4. The Company may allow the participation in the General Meeting by means of electronic telecommunication as far as legally admissible.

Participation in the General Meeting

1. Shareholders wishing to participate in general meetings and exercise their voting rights must register for the General Meeting and provide proof of their authorisation. The registration and proof of authorisation must reach the Company at the address specified in the invitation not later than the seventh day before the general meeting (registration date).

2. The registration shall be made in text form and must be submitted in English or German.

3. A separate record of the share ownership issued in text form in English or German by the depository is necessary as proof of authorisation. Such record must refer to the record date specified in AktG regulations. If the correctness or authenticity of the proof of authorisation is in doubt, the Company shall be entitled to demand further suitable evidence. If this is not submitted at all or not in a suitable form, the Company may reject the shareholder.

4. The invitation to the General Meeting may provide for the participation in the General Meeting, its transmission as well as the participation in votes or the exercise of other participation rights of the shareholders by electronic or other means of telecommunication as far as legally admissible.

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Voting Right

1. Each share grants one vote.

2. Shareholders can act by proxy at the General Meeting. Statutory provisions are applicable for issuing the power of representation. Insofar as the law does not compulsorily require a stricter form, text form is sufficient; § 135 AktG remains unaffected. If the Company appoints proxies, it is sufficient if the power of representation is received by the last day prior to the General Meeting in writing, by facsimile, by email or another text form at the address indicated in the invitation to the General Meeting or that the power of representation is granted electronically by the end of the general debate via the website indicated in the invitation to the General Meeting, subject to technical availability, if the law does not stipulate a stricter form.

3. Resolutions of the General Meeting require a simple majority of the votes submitted unless the Articles of Association or mandatory AktG provisions provide otherwise. If, in addition thereto, AktG regulations prescribe for the passing of resolutions a majority of the nominal capital represented when resolutions are passed, then the simple majority of the represented nominal capital shall be sufficient to the extent permitted by law. In case of a draw a motion shall be deemed dismissed.

Chairman of the General Meeting, Chairing the General Meeting

1. The General Meeting shall be presided over by the Chairman of the Supervisory Board or one of the members of the Supervisory Board representing the shareholders, who shall be appointed for this purpose by the Supervisory Board prior to the meeting for one or several meetings. 2. The Chairperson presides over the meeting. S/he determines in particular the sequence of the subject-matters to be discussed as well as the votes and the kind of the vote. Furthermore, the Chairperson determines the sequence of the speakers. S/he can limit the shareholder’s right to speak to an appropriate time limit. At the beginning of the General Meeting or during its course, s/he is in particular authorised to set an appropriate time frame for the entire course of the General Meeting, for individual agenda items and for individual questions or statements.

Management Report and Annual Financial Statements, Discharge of the Executive Board and the Supervisory Board

1. Within the first three months of each financial year, the Executive Board shall draw up the management report and the annual financial statements for the preceding financial year and submit those documents to the auditors. These documents shall be presented to the Supervisory Board immediately after receipt of the report on the audit of the financial statements together with this report and the proposal for the resolution of the General Meeting on the appropriation of the retained earnings.

2. The annual financial statements, the management report, the report of the Supervisory Board and the Executive Board's proposal for the resolution of the General Meeting on the appropriation of the retained earnings shall be made available

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for inspection by the shareholders on the premises of the Company as soon as the General Meeting has been convened.

3. Within the first eight months of every financial year, after having received the report to be made by the Supervisory Board in accordance with § 171 section 2 AktG, the General Meeting shall resolve on the ratification of the actions of the Executive Board and the Supervisory Board, on the appropriation of the retained earnings, on the appointment of the auditor and on the determination of the annual financial statements in the cases established by law.

5. Upon expiration of a financial year, the Executive Board may distribute to the shareholders an interim dividend, subject to Supervisory Board approval and in accordance with § 59 AktG.

Capital Surplus

1. When determining the annual financial statements, the Executive Board and the Supervisory Board may decide to allocate up to 50% of the retained earnings to other capital reserves. In addition thereto, they shall be entitled to allocate further amounts up to 50% to other capital reserves, provided that the other capital reserves do not and will not exceed half of the nominal capital before and after allocation of such surplus to other capital reserves.

2. When computing the amounts to be allocated to other capital reserves pursuant to section 1, any allocations to the legal reserves and any losses carried forward shall in advance be deducted from the annual net income for the year.

Supervisory Board The Supervisory Board of adidas AG - in accordance with the German Co-Determination Act (Mitbestimmungsgesetz - MitBestG) is composed of twelve members, of which six members are elected by the Annual General Meeting and six members are elected by the employees.

Members of the Supervisory Board

Igor Landau (Chairman)

Former Chief Executive Officer of Aventis S.A., Paris, France Member of the Supervisory Board, Allianz SE, Munich,

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

France Member of the Board of Directors, HSBC France S.A., Paris,

France

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Sabine Bauer* (Deputy Chairwoman)

Senior Manager Quality Analysis & Reporting Global Operations, adidas AG

Willi Schwerdtle (Deputy Chairman)

General Manager, Procter & Gamble GmbH, Schwalbach

am Taunus, Germany

Dieter Hauenstein*

Chairman of the Works Council Herzogenaurach, adidas AG

Dr. Wolfgang Jäger*

Managing Director, Hans-Böckler-Stiftung, Düsseldorf,

Germany

Dr. Stefan Jentzsch

Partner, Perella Weinberg Partners UK LLP, London, United Kingdom (since July 1, 2009)

Member of the Supervisory Board, Sky Deutschland AG, Unterföhring, Germany

Herbert Kauffmann

Management Consultant, Stuttgart, Germany (since July 1, 2009)

Roland Nosko*

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

Member of the Supervisory Board, CeramTec AG, Plochingen, Germany

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Alexander Popov

Chairman, RFSO "Lokomotiv", Moscow, Russia

Hans Ruprecht*

Sales Director Customer Service, Area Central, adidas AG

Heidi Thaler-Veh*

Member of the Central Works Council, adidas AG

Christian Tourres

Former Member of the Executive Board of adidas AG Member of the Board of Directors, Beleta Worldwide Ltd.,

Guernsey, Channel Islands

Committees of the Supervisory Board

The following standing committees have been established by the Supervisory Board:

Steering Committee

- Igor Landau (Chairman) - Sabine Bauer - Willi Schwerdtle

General Committee

- Igor Landau (Chairman) - Sabine Bauer - Roland Nosko - Willi Schwerdtle

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Audit Committee

- Herbert Kauffmann (Chairman) - Dr. Wolfgang Jäger - Dr. Stefan Jentzsch - Hans Ruprecht

Mediation Committee pursuant to 27 section 3 Co-Determination Act (MitbestG)

- Igor Landau - Sabine Bauer - Willi Schwerdtle - Heidi Thaler-Veh

Nomination Committee

- Igor Landau (Chairman) - Willi Schwerdtle - Christian Tourres

Executive Board Our Executive Board is composed of four members who reflect the diversity and internationality of the Group. Each member is responsible for a major business area within the Group.

Herbert Hainer – CEO

since 03/1997 : adidas AG Member of the Executive Board

01/2000 - 03/2001 : adidas AG* Deputy Chairman of the Executive Board

since 03/2001 : adidas AG* Chief Executive Officer adidas-Salomon AG from 12/1997 until 05/2006

Glenn Bennett

• since 03/1997 : adidas AG* Member of the Executive Board, responsible for Global Operations

• adidas-Salomon AG from 12/1997 until 05/2006

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Robin J. Stalker

• since 02/2001 : adidas AG** Member of the Executive Board, responsible for Finance

o now Ernst & Young o ** adidas-Salomon AG from 12/1997 until 05/2006

Erich Stamminger

• 2006 – 2009 : adidas AG* President and CEO of the adidas Brand Member of the Executive Board of adidas AG

• since 01/2010 : adidas AG* Member of the Executive Board

• Responsible for Global Brands

Financial information The company revenue for 2008 was listed at €10.799 billion and the 2007 figure was listed at €10.299 billion, or about US$15.6 billion.

Branches & Locations Activities of the company and its more than 170 subsidiaries are directed from the Group's headquarters in Herzogenaurach, Germany. It is also home to the adidas brand. Reebok Headquarters are located in Canton, Massachusetts. TaylorMade-adidas Golf is based in California. The company also operates creation centres and development departments at other locations around the world, corresponding to the related business activity.

adidas Sourcing Ltd., a fully-owned subsidiary headquartered in Hong Kong, is responsible for worldwide sourcing.

Effective December 31, 2008, the adidas Group employed 38,982 people.

The adidas Group is a global player which is represented in markets all over the world.

To find out more about our major locations, see the following list:

Financial data in millions of euros[27] Year 2002 2003 2004 2005 2006 Sales 6.523 6.266 6.478 6.636 10.084 EBITDA 532 627 725 818 1 098 Net results 208 260 314 382 483 Net debt 1498 946 594 551 2231

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All Main Locations

• adidas Group Headquarters – Herzogenaurach, Germany • adidas International Marketing – Amsterdam, The Netherlands • Reebok Europe – Amsterdam, The Netherlands • adidas North America • adidas America, Inc. - Portland, OR, USA • Reebok North America • Reebok International Limited - Canton, MA, USA • TaylorMade-adidas Golf - Carlsbad, CA, USA • adidas Sourcing Limited - Taikoo Shing, Island East, Hong Kong • adidas Latin America, S.A.

Panamá, Republic of Panamá

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Sustainability

Contributor: Wajiha Khan

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First of all, what is a Sustainable Corporation’?

The concept of sustainability is a contentious one, to say the least. Debates have been raging in various circles (e.g. academia, business, government, the UN, etc.) for a number of years over exactly how to define sustainability, and more importantly over what it should look like in practice. We do not have the pretence to know how to resolve this dispute, let alone be able to produce an authoritative blue-print for ‘sustainable behavior’. What we do know is that social, environmental and governance factors are increasingly relevant to financial performance, and that companies which show superior management of these issues are fast gaining an edge over their competitors – an edge which we believe will translate into outperformance in the long haul. Therefore, companies are sustainable in the sense that they have displayed a better ability than most of their industry peers to identify and effectively manage material environmental, social and governance factors impacting the opportunity and risk sides of their business.

Sustainability and corporate responsibility set the foundation for who we are and what we do.

Overview For more than 80 years, the adidas Group has been part of the world of sports on every level, delivering state-of-the-art sports footwear, apparel and accessories. Today, the adidas Group is a global leader in the sporting goods industry and offers a broad portfolio of products which are available in virtually every country of the world. Its strategy is simple: continuously strengthen its brands and products to improve its competitive position and financial performance.

adidas has offices in more than 55 countries and 50 nationalities represented amongst its staff at the Group’s Headquarters in Herzogenaurach, Germany. It has more than 150 subsidiaries and source products from a multi-tiered external supply chain in more than 60 countries. Its brands are visible all over the world and sponsor global sports events such as the Olympic Games.

So as a truly global business in the sporting goods industry, the adidas Group is continually confronted with a variety of challenges that arise from our commitment to striking the balance between shareholder interests and the needs and concerns of our employees, the workers in our supply chain and the environment, or in short in our aim to become a sustainable company.

Challenges and Responses adidas aims to be the best sports company in the world and that means meeting the challenges it faces head on and finding the appropriate responses to them. adidas' challenges are:

Being a global business Being competitive

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Managing an external supply chain Building credibility and trust Managing change Being environmentally responsible Developing our people Supporting local communities

Vision and Governance adidas' vision is clear: to enhance social and environmental performance in the company and the supply chain, thereby improving the lives of the people making its products.

adidas is striving to be the global leader in the sporting goods industry and this demands that it return strong financial results. But leadership is not only about results, it is also about how success is achieved. adidas is accountable for the way it does business. In particular, it accepts responsibility for the way its products are manufactured by its suppliers. By adidas' actions it can – and should – improve the lives of workers who make its products.

adidas is committed to good governance, and uses its sustainability statement and its corporate missions on Social and Environmental Affairs, Human Resources and Community Affairs to achieve its vision.

Sustainability Statement PERFORMANCE • PASSION • INTEGRITY • DIVERSITY

These are the adidas Group values.

They help adidas create brands that its customers believe in and they commit adidas to playing by the rules that society expects of a responsible company.

Unlike sport, society's rules are not always written down. adidas discovers them by engaging with the people that the business touches, learning above all that companies are expected to be accountable for their actions. So adidas is committed to reporting publicly on the steps it takes to have a more positive impact on society and the planet.

For the adidas Group, this means designing products that are environmentally sound, and reducing the environmental impacts of our day-to-day operations and in its supply chain.

It is about setting workplace standards for its suppliers to meet and helping them to ensure fair, safe and healthy conditions in their factories.

Importantly, it also means looking after the wellbeing and careers of its employees - the company's biggest asset - and making a positive contribution to the communities where adidas operates.

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Adhering to all applicable laws, directives and guidelines is a business imperative. But that is not enough. adidas continuously strives to improve its performance and its standing in society. It sets itself targets that stretch it, regularly reviews its progress and sets itself new goals. That is what the world's leading athletes do, and it is what adidas must do as a global leader in the sporting goods industry.

Corporate Missions

Social and Environmental Affairs

adidas' vision is clear: to enhance social and environmental performance in the supply chain, thereby improving the lives of the people making its products.

And its approach is simple: to increase accountability and transparency and make suppliers’ compliance process self-governing.

Human Resources

The success of the Group is a direct result of the commitment and talents of people who work for it. adidas is seeking to build the leading global team in the industry. Its mission is to create the best and most productive workplace in the world by:

• Creating a working environment that stimulates team spirit and passion, engagement and achievement • Instilling a performance culture, based upon strong leadership, setting the ground for winners • Fostering an understanding of social and environmental responsibility for the world in which we live; for the rights of all individuals and for the laws and customs of the countries in which we operate • Providing a secure working environment.

Community Affairs

It is our responsibility as a member of each community to act as a true corporate citizen and we are committed to doing this through a range of programmes and activities including corporate giving, volunteer work and community relations programmes.

Social and Environmental Affairs Team The Social and Environmental Affairs (SEA) Team is tasked with ensuring compliance with adidas' Workplace Standards within the supply chain and manages the Group’s environmental and community affairs programme.

It consists of a diverse group of 63 individuals – engineers, lawyers, HR managers and former members of non-governmental organizations (NGOs) and is organized into three regional teams covering Asia, the Americas and Europe, Middle East and Africa (EMEA).

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adidas' Stakeholders adidas' stakeholders are a diverse group and include the following:

Employees of the adidas Group Authorizers - government, trade associations, shareholders, Board of Directors Business partners - unions, suppliers, service providers Workers in adidas' suppliers' factories Opinion-formers - journalists, community members, special interest groups Customers - professional sports people, distributors, retailers, consumers

Partnerships and Ways We Engage adidas has always worked closely with its business stakeholders – including customers, suppliers, shareholders and our own staff – in order to build trusting relationships. Increasingly, adidas is working in partnerships with social enterprises and NGOs so that together they can improve the way they conduct their business. Following are listed adidas' noteworthy partnerships in three areas:

Corporate responsibility

• World Federation of the Sporting Goods Industry (WFGSI) • World Business Council for Sustainable Development (WCSBD)

Supply chain conditions

• Fair Labor Association (FLA) • Fair Factories Clearinghouse (FFC) • Round Table on Codes of Conduct, Germany

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Environment

• AFIRM Working Group • Better Cotton Initiative (BCI)

In addition to formal partnerships, adidas engages with its stakeholders in a number of other ways:

• Formal stakeholder consultation meetings (called ‘stakeholder dialogues’) with workers, union representatives, NGOs, suppliers and others.

• Meetings with socially responsible investment (SRI) analysts • With its employees through internal reporting and induction programmes • Responding to enquiries from consumers and the media • Collaborating with other brands in joint initiatives • Outreach to graduates and the academic community.

adidas’ Workplace Standards PERFORMANCE. PASSION. INTEGRITY. DIVERSITY. These are the core values found in sport. Sport is the soul of the adidas Group. adidas' measures itself by these values, and it measures its business partners in the same way.

Consistent with these values, adidas expects its partners – contractors, subcontractors, suppliers, and others – to conduct themselves with the utmost fairness, honesty and responsibility in all aspects of their business.

The adidas Group Workplace Standards are used as a tool to assist adidas in selecting and retaining business partners who follow business practices consistent with its policies and values. As a set of guiding principles, the Workplace Standards also help identify potential problems so that adidas can work with its business partners to address issues of concern as they arise. Business partners will develop and implement action plans for continuous improvement in factory working conditions. Progress against these plans will be monitored by the business partners themselves, adidas' internal monitoring team and external independent monitors.

Specifically, adidas expects its business partners to operate work places where the following standards and practices are implemented:

General Principle

Business partners must comply fully with all legal requirements relevant to the conduct of their businesses.

Employment Standards

Forced Labor

Business partners must not use forced labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise. No employee may be compelled to work

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through force or intimidation of any form, or as a means of political coercion or as punishment for holding or expressing political views.

Child Labor

Business partners must not employ children who are less than 15 years old, or less than the age for completing compulsory education in the country of manufacture where such age is higher than 15.

Discrimination

Business partners must not discriminate in recruitment and employment practices. Decisions about hiring, salary, benefits, training opportunities, work assignments, advancement, discipline and termination must be based solely on ability to perform the job, rather than on the basis of personal characteristics or beliefs, such as race, national origin, gender, religion, age, disability, marital status, parental status, association membership, sexual orientation or political opinion. Additionally, business partners must implement effective measures to protect migrant employees against any form of discrimination and to provide appropriate support services that reflect their special status.

Wages & Benefits

Wages must equal or exceed the minimum wage required by law or the prevailing industry wage, whichever is higher, and legally mandated benefits must be provided. In addition to compensation for regular working hours, employees must be compensated for overtime hours at the rate legally required in the country of manufacture or, in those countries where such laws do not exist, at a rate exceeding the regular hourly compensation rate.

Working Hours

Employees must not be required, except in extraordinary circumstances, to work more than 60 hours per week including overtime or the local legal requirement, whichever is less. Employees must be allowed at least 24 consecutive hours rest within every seven-day period, and must receive paid annual leave.

Freedom of Association & Collective Bargaining

Business partners must recognize and respect the right of employees to join and organize associations of their own choosing and to bargain collectively. Business partners must develop and fully implement mechanisms for resolving industrial disputes, including employee grievances, and ensure effective communication with employees and their representatives.

Disciplinary Practices

Employees must be treated with respect and dignity. No employee may be subjected to any physical, sexual, psychological or verbal harassment or abuse or to fines or

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penalties as a disciplinary measure. Business partners must publicize and enforce a non-retaliation policy that permits factory employees to express their concerns about workplace conditions directly to factory management or to us without fear of retribution or losing their jobs.

Health and Safety

A safe and hygienic working environment must be provided, and occupational health and safety practices which prevent accidents and injury must be promoted. This includes protection from fire, accidents and toxic substances. Lighting, heating and ventilation systems must be adequate. Employees must have access at all times to sanitary facilities which should be adequate and clean. Business partners must have health and safety policies which are clearly communicated to employees. Where residential facilities are provided to employees, the same standards apply.

Environmental Requirements

Business partners must make progressive improvement in environmental performance in their own operations and require the same of their partners, suppliers and subcontractors. This includes: integrating principles of sustainability into business decisions; responsible use of natural resources; adoption of cleaner production and pollution prevention measures; and designing and developing products, materials and technologies according to the principles of sustainability.

How We Work With Suppliers Over the past ten years, adidas has continuously refined its methods, tools and techniques to promote compliance in its supply chain. The principal cornerstones of adidas’ management approach are described below.

Standards and Guidelines

adidas has had a supplier code of conduct for more than ten years. Based on extensive experience of applying the Standards, adidas has produced guidelines for its suppliers, which help them to work together to find solutions to problems in the workplace.

Capacity Building and Outreach

adidas trains its suppliers so they understand the importance of establishing and maintaining management systems and open lines of communication with those concerned about how they operate, such as government officials, local communities or the workers themselves.

Monitoring and Verification

adidas has a dedicated team of auditors, which monitors suppliers’ performance against its Standards. adidas also values independent monitoring by third parties because it helps it to improve how it works and adds credibility to its programme.

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Rating

adidas audits its suppliers against its Standards and rate them according to their performance. It uses an innovative way to rate the supplier on its ability to deliver fair, healthy and environmentally sound workplace conditions in an effective manner.

Sourcing Decision

Rating results are incorporated in the overall supplier rating that informs adidas’ decision of which suppliers to use.

Supporting Guidelines The Workplace Standards are a set of rules that our suppliers must abide by, but to illustrate how suppliers should implement adidas’ Standards, it has created a set of guidelines for use in factory settings. These expand on its Workplace Standards, giving detailed instructions and practical examples for implementation.

The guidelines are also used by our SEA team to:

• Determine whether a supplier is complying with adidas’ Standards • Advise and train adidas’ suppliers in improving their performance.

adidas regularly creates new guidelines and revises existing ones. There are currently seven guidelines and those seven are further complemented by specific supplementary materials. The seven guidelines are:

• Guidelines on Health, Safety and Environment • Guidelines on Employment Standards • Guide to Best Environmental Practice • Worker Cooperative Guidelines • Enforcement Guidelines • Guidelines on Sustainable Compliance • Termination Guidelines.

Environment As a global business operating in more than 55 countries, the adidas Group has a responsibility to look after the natural environment, both for people today and in the future. Environmental impacts occur in various forms at all stages of the lifecycle, from product design to disposal. The adidas Group adopts a systems-based approach to managing environmental impacts in its own production facilities and in the supply chain. Production has been largely outsourced, so the greatest environmental impacts occur at our suppliers' sites, where more than 95% of adidas Group products are manufactured. Using the environmental performance of its own production sites as examples of best practice, the adidas Group develops appropriate guidelines and training programmes for its suppliers to reduce their own environmental impacts.

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Managing Impact Within the lifecycle of its products there are two points in the design and development process where a significant difference to the company's environmental footprint can be made. The first is in improving the materials that go into the products, and the second is in tackling pollution in factories.

Improving Materials

The company’s approach is to seek to design out polluting materials and processes and increasingly to adopt sustainable materials instead. The adidas Group has various initiatives in place that help to achieve its goal of improving materials. These include avoiding raw materials from any endangered or threatened species, eliminating PVC and seeking ways to include more recycled materials in its products.

Tackling Pollution

adidas has limited control over the direct environmental impacts of the manufacturing process and how its suppliers act. The best way it can influence the environmental impacts at its suppliers’ factories is to encourage the introduction of environmental management systems. And it has made implementing an environmental management system mandatory for all its core suppliers.

Restricted Substances Standards

The Group has a strict policy on controlling restricted substances, which are those that cause harm, or are suspected to cause harm, to human health or the environment. adidas’ policy is that suppliers must avoid using restricted substances to ensure that its products are environmentally safe. adidas’ standards and policies on restricted substances are the ‘A-01 Requirements’.

Employees The company’s people are crucial to its success. Achieving its goal to be the global leader in the sporting goods industry depends on the talents, enthusiasm and engagement of adidas’ employees.

adidas aims to develop staff with opportunities for career progression, while striving to create a climate that celebrates diversity. The way it rewards its staff has to be fair and related to its, and their, achievements. Employees have a responsibility to adhere to the Employee Code of Conduct; and as an employer adidas has the responsibility to ensure their health and safety. And it looks after its employees by promoting global mobility, helping staff achieve a healthy work-life balance, and offering access to a wide range of company sports activities.

adidas’ people are critical to its continuing commercial success. With more than 38,000 employees working at more than 150 locations around the world, adidas needs

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HR strategies that can be implemented globally. The first step is to identify the common challenges it faces wherever it operates:

• Talent management: identifying, recruiting and retaining the best people and developing career opportunities for them that meet company needs

• Employee-oriented leadership: strengthening the alignment of management and employees by improving communication and enhancing employee feedback systems

• Performance management: instilling a result-driven management culture that supports two-way performance feedback for continuous learning and improvement

• Motivation: providing reward and incentive schemes in a working environment that promotes commitment, engagement and well-being

• Communication: increased transparency and efficiency in all our communications.

Rising to these challenges can enhance the adidas Group's business success.

Performance Data Reliable performance data is important. It allows adidas to review its progress and plan its next steps. By publishing that data adidas invites its stakeholders to form their own view about its performance.

The data included here covers its suppliers (e.g. size of supply chain or number of audits and trainings), the environmental performance (e.g. water and energy consumption at its own sites or VOC levels in athletic footwear factories) as well as key statistics about its employees and community involvement.

Corporate Responsibility Strategy As a leading company within the international sporting goods market, the adidas Group is exposed to various business challenges and interests of stakeholders. Aligning those interests requires strong commitment, strategic direction, efficient and careful execution, and regular reflection of the achievements made.

Corporate responsibility (CR) has become a widely accepted concept in striking the balance between business needs and societal and environmental demands. This is what it is to be a ‘sustainable business’.

There is no ‘one size fits all’ solution to achieve this stage. Every company – depending on the nature of its business – needs to develop its own approach for responding to changes in the economy, society and the environment. So it is for the adidas Group too.

adidas’ commitment in managing its business in a responsible way is rooted in the Group’s values and principles. Its understanding of becoming a sustainable company is outlined in the adidas Group Sustainability Statement.

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That is what the world’s leading athletes do, and it is what adidas must do as a global leader in the sporting goods industry.

Environmental Sustainability

To manage and further reduce the environmental footprint of adidas’ business operations, the environmental strategy has defined core subjects which are products, production and own sites.

Products

Improving the environmental impact of adidas’ products requires tackling the root cause. The major part of environmental footprints of its products is predetermined through decisions made in the product creation, design and development stage. adidas’ goal is to further drive and extend research, product innovation and development to ensure that it has made the right choice. By this it means that adidas has created and launched products that are environmentally sustainable and high performance.

Production

95% of direct environmental impacts are caused during the production of adidas’ products. Manufacturing operations are almost entirely managed by its external supply chain. While it does not have direct accountability for and control over its suppliers’ operations, adidas has a shared responsibility in supporting them to reduce environmental pollution and resource use.

adidas’ long-term goal is to be a partner for change with its suppliers in improving their manufacturing conditions.

adidas is looking for effective mechanisms that make environmental aspects an embedded part of their management. It strives to achieve this by supporting suppliers in awareness raising, capacity building programmes and in developing partnerships with brand and scientific organizations that help them manage change.

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Own sites

adidas has direct accountability for minimizing the environmental impact resulting from its own sites and offices.

Supply Chain Management

Workers in adidas’ suppliers’ factories play a central role in its programme. It was concern for their welfare and working conditions that led adidas to write its Workplace Standards and to establish a compliance management system covering all brands of the adidas Group.

Its supply chain is large, multi-tiered and varied. It has a detailed approach to managing relationships with its suppliers and it continues to develop approaches for engaging suppliers who are part of adidas’ direct and indirect supply chain.

Four primary areas are a critical part of our supply chain strategy:

• Our internal direct relationships with suppliers, which are managed by the adidas Group sourcing organization. It accounts for around 75% of our sourcing business in terms of sourced units • Our external indirect sourcing relationships we hold with agents and licensees • Management of those adidas Group entities which manage their own sourcing arrangements • Our immediate and mid-term efforts to support suppliers impacted by the global financial crisis.

Below are summarized the goals for each of these work areas.

Direct Sourcing

For adidas’ direct sourcing relationships with suppliers it is looking for them to achieve self-governance, to internalize and manage their social compliance and fulfill the Workplace Standards. adidas expects them to achieve this through a committed leadership team, who are driving change through qualified, capable managers and effective management systems. We measure this through our Key Performance Indicator (KPI).

Indirect Sourcing

For adidas’ indirect sourcing relationships it is looking to ensure that it is partnering with agents and licensees and developing supporting resources through external and independent monitors.

Business Entity Relationships

For those business entities, which manage their own sourcing arrangements outside the adidas Group sourcing organization, adidas will further strengthen communication and understanding of Group-wide systems, policies and procedures. Ultimately, the

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accountability for the supply chain rests in their hands, but adidas needs to partner with them to drive change, to reduce risk and to safeguard rights.

Impact of the Global Economic Crisis

With the prospect of a global recession, adidas is focused on transparently managing two issues that may directly impact its supply chain:

• The sharp downturn in global consumption and the effect this may have on the financial stability of its suppliers and long-term business continuity

• The future job security of workers who make adidas’ products

Stake Holder Engagement

adidas has to look inside and outside the Group if it is to effectively manage risks and partner for change and accountability.

To drive improvement in the social and environmental performance of the adidas Group as a business and adidas’ global supply chain it will partner for change, accountability and transparency with external stakeholders. These stakeholders include governments, civil society and investors. To address systematic or chronic non-compliance, it will work with regulatory agencies and multi-stakeholder organizations such as the Fair Labor Association (FLA) or partner with other industry players.

Our Employees

adidas knows that its people are crucial to its success.

Becoming the global leader in the sporting goods industry depends on the performance, potential, enthusiasm and dedication of its employees. adidas strives to create a working environment that promotes team spirit, passion, engagement and achievement. adidas promotes a performance culture based on strong leadership and therefore link employee compensation to Group and individual achievements. It aims to continuously develop its employees with opportunities for career progression, while upholding a culture that celebrates diversity and encourages global mobility. This is now doubly important given the challenges we are all facing in these tough economic conditions.

adidas also knows how important it is to continue to attract and recruit new talents to the adidas Group. In this so-called ‘war for talent’ it is important that it becomes a world-class recruiter and this ambition has led it to launch innovative programmes to raise its profile with potential employees.

adidas aims to create a stimulating and attractive work environment as it strives to be a Top 10 employer of choice in the key markets in which it operates.

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Invester Relations

Contributor: Uzma Naseer

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Here you will find all info about the Group's key figures, the share, strategy and financial events.

Reasons to invest adidas Group is one of the leaders in the sporting goods industry

• Clear market positioning: Performance-oriented brands target distinct consumer segments

• Innovation leadership and cutting-edge design sustain ongoing brand momentum • Strong medium-term sales and profitability outlook due to expanding leading

market positions around the world, exceptional growth potential in emerging markets and own-retail opportunities

• Strong commitment to maximizing free cash flow by strict working capital management and financial leverage optimization

• Clear shareholder value orientation

Basic Data The adidas AG share is listed on the "Deutsche Börse" stock exchange in Frankfurt. The stock is part of the DAX-30 index, which includes only the largest German companies listed.

For your information, the DAX (Deutscher Aktien IndeX, formerly Deutscher Aktien-Index) – translates to German stock index - is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange.

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Share Price

Shareholder Structure

Based on the amount of invitations to adidas’ AGM (Assistant general manager) in May 2008, it is estimated that adidas AG currently has around 70,000 shareholders. In their latest ownership analysis conducted in December 2008, 72% of its shares were identified as outstanding. Shareholdings in the North American market account for 30% of adidas’ total shares outstanding. Identified German institutional investors hold 10% of shares outstanding. The shareholdings in the rest of Europe excluding Germany amount to 28%, while 1% of institutional shareholders were identified in other regions of the world. adidas Group Management, which comprises current members of the Executive and Supervisory Boards, holds 3% in total. Undisclosed holdings, which also include private investors, account for the remaining 28%.

Corporate Governance adidas AG is an international corporation with shareholders, customers, suppliers, employees and Executive and Supervisory Board members from all over the world. In light of this fact, adidas welcomes the German Corporate Governance Code and the aim pursued thereby to achieve greater transparency for both national and international investors and to strengthen confidence in the management of German corporations.

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Risk and Opportunity Report The adidas Group continuously explores and develops opportunities to sustain and maximize earnings and also to drive long-term increases in shareholder value. In doing so, it acknowledges that it is necessary to take certain risks to maximize business opportunities. adidas’ risk and opportunity management principles provide the framework for its Group to conduct business in a well-controlled environment.

Risk and Opportunity Management Principles

The adidas Group is regularly confronted with risks and opportunities which have the potential to negatively or positively impact the Group’s asset value, earnings, cash flow strength, or intangible values such as brand image. The most important of these risks and opportunities fall in three main categories: External and Industry, Strategic and Operational, and Financial. adidas’ defines risk as the potential occurrence of external or internal events that may negatively impact its ability to achieve short-term goals or long-term strategies. Risks also include lost or poorly utilized opportunities.

Opportunities are broadly defined as internal and external strategic and operational developments that have the potential to positively impact the Group if properly exploited.

Risk and Opportunity Management System

To facilitate effective management, adidas has implemented an integrated management system which focuses on the identification, assessment, treatment, controlling and reporting of risks and opportunities. The key objective of this system is to protect and further grow shareholder value through an opportunity-focused, but risk-aware decision-making framework.

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The main components of adidas’ risk and opportunity management process are:

Risk and opportunity identification:

The adidas Group continuously monitors the macroeconomic environment, developments in the sporting goods industry, as well as internal processes to identify risks and opportunities as early as possible. In addition to the potential financial impacts from changes in the overall macroeconomic, political and social landscape, each business unit actively monitors brand, distribution channel and price point developments in adidas’ core sport, leisure lifestyle and sport fusion markets. A key element of the identification process is primary qualitative and quantitative research such as trend scouting, consumer sur-veys and feedback from our business partners and controlled space network.

Through this process, adidas seeks to identify the markets, categories, consumer target groups, and product styles which show most potential for future growth at a local, regional and global level. Equally, adidas’ analysis focuses on those areas that are at risk of saturation, increased competition or changing consumer tastes.

Risk and opportunity assessment:

Identified risks and opportunities are assessed with respect to (1) occurrence probability, and (2) potential contribution to loss or profit, with contribution being defined as operating profit before intra-Group royalties. The occurrence probability of individual risks and opportunities is evaluated on a scale of 0 to 100% likelihood. As risks and opportunities have different characteristics, adidas has defined separate methodologies for assessing the potential financial impact. In assessing the potential contribution from opportunities, each opportunity is appraised with respect to viability, commerciality, potential risks and the expected profit contribution. This approach is applied to longer-term strategic prospects but also to shorter-term tactical and opportunistic initiatives at both the Group and, more extensively, the brand level.

Risk and opportunity treatment:

Risks and opportunities are treated in accordance with the Group’s risk and opportunity management principles. Line management in cooperation with central risk management and, in exceptional cases, the Executive Board and /or Supervisory

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Board, decides which individual risks adidas accepts or avoids and the opportunities to pursue or forgo. As part of this process, it also decides on which risk-compensating or transfer measures will be implemented. Similarly, to maximize opportunities, it may be necessary to reduce or limit distribution to protect prices and margins or prolong product lifecycles. In some cases, it also seeks to transfer the responsibility or execution for certain risks and opportunities to third parties (e.g. insurance, outsourcing, distribution agreements or brand sub-licensing).

Risk and opportunity monitoring and controlling:

A primary objective of adidas’ integrated risk and opportunity management system is to increase the transparency of Group risks and opportunities. In addition, it also seeks to measure the success of its risk-compensating initiatives. The Group centrally monitors each of these efforts on a frequent basis. In particular, central risk management regularly examines the results of actions taken by operational management to accept, avoid, reduce or transfer risks over time. With respect to opportunities, it regularly monitors the objectives and key performance indicators established during the initial identification and evaluation process. This not only facilitates the validation of opportunities but also allows the company to adapt and refine its products, communication and distribution strategy to ongoing developments in its rapidly changing marketplace. In particular, adidas collaborates with its manufacturing partners and retail customers to evaluate the impact of its growth and efficiency initiatives. Feedback is relayed in a timely manner to product, marketing and controlling functions.

Risk and opportunity aggregation and reporting:

Central risk management aggregates Group-wide risks and reports them to the Executive Board on a regular basis. Individual risks are aggregated based on the sum of all assessed risks (sum of occurrence likelihood × potential net loss), taking correlations between individual risks into account. Risks with a likely impact of at least € 1 million on the forecasted full year contribution are reported to central risk management on a monthly basis. In addition, risks with a likely financial impact of € 5 million or more are required to be reported immediately upon identification to central risk management. Opportunities are aggregated separately as part of the strategic business planning, budgeting and forecasting processes. The realization of risks and opportunities can have a critical impact on our ability to achieve adidas’ strategic objectives. Therefore, Management is updated in regular business reviews, but also through ad hoc discussions as appropriate.

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