Corporate Governance

The Board supports the principles advocated by the Combined Code on Corporate Governance (“the Code”) published in July 2003 and, in accordance with the Listing Rules of the United Kingdom Listing Authority, sets out below its report on the application of those principles for the year under review. Following the demerger from GUS in December 2005 and during the year a number of reviews and changes to the governance structure of the Group took place to ensure compliance with the Code. Unless otherwise stated below and in the Report on Directors’ Remuneration and related matters, the Company has complied with the provisions set out in Section 1 of the Code throughout the year.

Combined Code Statement
The Board
Board appointments
Directors – development
Board performance evaluation
Committees
Audit committee
Remuneration committee
Nomination committee
Relations with shareholders
Accountability and audit
Internal control
Risk assessment
Control environment and control activities
Information and communication
Monitoring

Combined Code Statement

The Board is committed to high standards of Corporate Governance and has complied in full throughout the year with the applicable code provisions of the Combined Code on Corporate Governance issued by the Financial Reporting Council in June 2006 (‘the Code’).

The Board

The Board is collectively responsible to shareholders for the success of the Group and concentrates its efforts on strategy, management performance, governance and internal control. As at the date of this report, the Board has seven members: the Chairman, the Chief Executive Officer, the Chief Financial Officer and four independent non-executive directors. The names and biographical details of each of the directors and details of their membership of the Board’s committees are set out on page 75 of the Annual Report. The Board has a formal schedule of matters reserved to it for decision and approval which include, but are not limited to:

the approval of the interim and annual financial statements
any interim dividend and the recommendation of the final dividend
the Group’s business strategy
annual budget and operating plans
major capital expenditure, acquisitions or divestments
the systems of corporate governance, internal control and risk management

The Chairman works closely with the Company Secretary to ensure that the Board is supplied in a timely manner with information in a form and of a quality appropriate to enable it to effectively discharge its duties. In addition, directors are also supplied with a monthly management report, which provides information on operational and financial performance and the Group’s business plans. Directors may obtain, in the furtherance of their duties, independent professional advice, if necessary, at the Group’s expense. In addition, all directors have direct access to the advice and services of the Company Secretary.

As an ongoing process, directors are briefed and provided with information concerning major developments affecting their roles and responsibilities. In particular, the directors’ knowledge of the Group’s worldwide operations is regularly updated by arranging presentations from local management and visits to key locations.

The Board plans to meet at least five times a year and may meet more frequently as required. During the year under review the Board held five meetings, with one meeting being held in the US. The Board considers that it met sufficiently often to enable the directors to discharge their duties effectively. Where there are occasions where circumstances arise to prevent a director attending a meeting they will receive papers for consideration and have the opportunity to submit comments to the Chairman.

At the request of any non-executive director, the Chairman will arrange meetings consisting of only the non-executive directors to allow the opportunity for any concerns to be expressed. During the year, the Chairman maintained regular contact and met with the Senior Independent Director and other non-executive directors.

The appointment and removal of the Company Secretary is a matter reserved for the Board as a whole.

The table below gives details of directors’ attendance at meetings of the Board, Audit Committee, Nomination Committee and Remuneration Committee during the financial year ended 31 March 2008.

	Board		Audit Committee		Remuneration Committee		Nomination Committee
	Attended	Possible	Attended	Possible	Attended	Possible	Attended	Possible
John Peace	5	5	–	–	4	4	2	2
Angela Ahrendts	5	5	–	–	–	–	2	2
Philip Bowman	4	5	3	3	3	4	2	2
Rose Marie Bravo	1	1	–	–	–	–	1	1
Ian Carter	4	5	2	2	3	4	2	2
Stacey Cartwright	5	5	–	–	–	–	–	–
Stephanie George	5	5	2	3	4	4	2	2
David Tyler	5	5	3	3	4	4	2	2

(1) Rose Marie Bravo ceased to serve as a director on 1 July 2007.
(2) Ian Carter was appointed a member of all committees on 18 May 2007.

There is a clear division of the roles and responsibilities of the Chairman and Chief Executive Officer which are set out in writing and agreed by the Board. The Chairman is responsible for leading the Board in reviewing the Group’s strategy and monitoring high-level progress. The day to day management and performance of the Group’s business is the responsibility of the Chief Executive Officer.

The Board has appointed Philip Bowman as the Senior Independent Director. The principle role of the Senior Independent Director is to support the Chairman in his role and to lead the non-executive directors in the oversight of the Chairman and Chief Executive Officer. The Senior Independent Director is also available to the shareholders for concerns which the normal channels have failed to resolve or are inappropriate.

Rose Marie Bravo ceased to serve as a director on 1 July 2007. She had held the position of Vice-Chairman from 1 July 2006 and was previously Chief Executive between 1997 and 2006.

The Group has operated independently since the IPO in 2002 and fully demerged from its former shareholder GUS plc in 2005. The Board considers John Peace and David Tyler to be independent since the former shareholder relationship does not affect their judgement. If there are specific matters relating to the Group’s previous relationship with GUS plc that may cause a conflict of interest to arise, in accordance with the Company’s Articles of Association, the relevant director will not participate in the determination of the matter concerned.

John Peace, Philip Bowman, Ian Carter, Stephanie George and David Tyler are, in the opinion of the Board, independent of management and free from any business relationship which could materially interfere with the exercise of their independent judgement. During the year under review the majority of the Board (excluding the Chairman) comprised independent non-executive directors.

Board appointments

Board nominations are recommended to the Board by the Nomination Committee under its terms of reference. All directors are subject to election by shareholders at the Annual General Meeting following their appointment and thereafter to re-election at least once every three years in line with the Company’s Articles of Association and provision A.7.1. of the Code. The biographical details of those directors seeking re-election at the forthcoming Annual General Meeting can be found on page 75 of this Annual Report.

Directors – development

On appointment, directors are furnished with an induction pack of information, which includes key Group policies, guidance notes and information on corporate governance matters. In addition, visits to key locations, meetings with members of the management team and updates on particular issues are arranged for directors as appropriate.

Board performance evaluation

In 2007, a review of the Board and its committees was undertaken using an external facilitator. The findings of that review led to the appointment of an additional independent non-executive director and appointments to the Board’s committees.

In 2008, an evaluation of the effectiveness of the Board, its committees and of the individual directors was carried out. The evaluation was led by the Chairman and involved holding a series of structured one-to-one interviews with each of the directors. The effectiveness of the changes made to the Board and its committees following the review in 2007 were considered and evaluated. The directors also considered the current composition and responsibilities of the Board and each of its committees, together with the frequency and structure of meetings.

The directors concluded that the Board and its committees operate efficiently and effectively. As a result of this review, it was agreed that additional non-executive directors’ briefings would be held to further increase their knowledge and understanding of the business.

The Audit and Remuneration committees each also undertook an evaluation of their performance and effectiveness during the year by way of a detailed questionnaire. The results of these evaluations were reported to the Board by the respective committee chairmen. The results of the reviews concluded that each of the committees was functioning appropriately.

A formal meeting of the non-executive directors, without the Chairman present, was held during the year, led by the Senior Independent Director.

Committees

The Board is supported by a number of committees including the following principal committees: Audit Committee, Remuneration Committee and Nomination Committee. All the non-executive directors are members of each of the principal committees of the Board.

The terms of reference of each of the principal committees are available on request and can be viewed on the Company’s website www.burberryplc.com.

The committees, if they consider it necessary, can engage with third-party consultants and independent professional advisors and can call upon other resources of the Group to assist them in developing their respective roles. In addition to the relevant committee members and the Company Secretary, external advisors and, on occasion, other directors attend committee meetings but only at the invitation of the chairmen of the committees.

Audit committee

Terms of Reference – Audit Committee

The Audit Committee comprises four independent non-executive directors:

Philip Bowman (Chairman)
Ian Carter (appointed 18 May 2007)
Stephanie George
David Tyler

The main roles and responsibilities of the Audit Committee are set out in written terms of reference.

The Audit Committee is responsible for:

monitoring the integrity of the Group’s financial statements and any formal announcements relating to the Group’s performance
reviewing the Group’s internal financial controls and risk management systems
monitoring and reviewing the effectiveness of the Group’s internal audit function
assessing the independence, objectivity and effectiveness of the external auditors
developing and implementing policies on the engagement of the external auditors for the supply of non-audit services
making recommendations for the appointment, re-appointment and removal of the external auditors and approving their remuneration and terms of engagement
reviewing arrangements by which employees may, in confidence, raise concerns about possible improprieties in matters of financial reporting and other matters

The Board is satisfied, in accordance with the provisions of the Code, that at least one member of the Audit Committee has recent and relevant financial experience given the nature of the senior management positions held by Philip Bowman and David Tyler (see biographical details on page 75 of the Annual Report).

The Committee met three times during the year. The attendance record of Committee members is recorded is shown in the table above. At the invitation of the Committee, the Chairman of the Board, the Chief Financial Officer, the Director of Audit and Risk Assurance and the external auditors regularly attend meetings. In addition, the Committee met during the year with the external auditors without management present.

The Committee is responsible for reviewing and monitoring the effectiveness of the Group’s internal control procedures and risk management systems. During the year, the Committee reviewed the Group’s internal audit plan and approved the internal audit plan for the financial year to 31 March 2009. In addition, the Committee reviewed the adequacy of the ‘whistle-blowing’ arrangements in place to enable employees to raise, in confidence, any concerns they may have.

During the financial year, the Committee reviewed the effectiveness of the external audit process and the qualification, expertise, resources and independence of the external auditors. The Committee also reviewed the proposed audit fee and terms of engagement for the financial year to 31 March 2008 and has recommended to the Board that it propose to shareholders that PricewaterhouseCoopers LLP be re-appointed as the Group’s external auditor.

The Committee recognises that the independence of the auditors is an essential part of the audit framework and the assurance that it provides. The Committee monitors the types of non-audit work that are undertaken by the external auditors to ensure that their objectivity and independence is not compromised. Any proposed non-audit assignments require prior approval and the Committee receives a report at each meeting providing details of non-audit assignments carried out by the external auditors in addition to their normal work.

Details of the fees paid to the external auditors during the financial year can be found in note 5 in the financial statements.

Remuneration committee

Terms of Reference – Remuneration Committee

The report of the Remuneration Committee is set out on pages 84 to 93 of the Annual Report.

Nomination committee

Terms of Reference – Nomination Committee

The Nomination Committee comprises:

John Peace (Chairman)
Angela Ahrendts
Philip Bowman
Rose Marie Bravo (resigned 1 July 2007)
Ian Carter (appointed 18 May 2007)
Stephanie George
David Tyler

The Nomination Committee met twice during the year under review.

The Nomination Committee is responsible for reviewing the balance and composition of the Board and its committees and for identifying and recommending appointments or renewal of appointments to the Board. These regular reviews ensure that the Group and the Board are able to draw from a complementary balance of skills and experience and that there is in place an appropriate plan for orderly succession to the Board. The procedure for appointments is set out in its terms of reference.

Relations with shareholders

The Board recognises the importance of maintaining good communications with its shareholders and does this through its Annual and Interim Reports, interim management statements, the Annual General Meeting and through the additional processes described below.

The Chief Executive Officer and Chief Financial Officer make presentations to institutional shareholders and analysts immediately following the release of the preliminary and interim results; these presentations are made available on the Company’s website www.burberryplc.com.

The Company communicates with its institutional investors frequently and regularly through a combination of formal and informal meetings, participation at investor conferences and ad-hoc briefings with management. The Board is kept abreast of the views of major shareholders by briefings from the Director of Investor Relations. During the year, the Board obtained an independent insight into the views of major shareholders through research commissioned with an external advisor. The outcomes of that research were presented and reviewed by the Board. In addition, analysts’ notes and brokers’ briefings are also used to achieve a wide understanding of investors’ views.

The non-executive directors, including the Senior Independent Director, are available to meet with major shareholders to discuss issues of importance to them, should a meeting be requested.

In accordance with the provisions of the Code, the Notice of the 2007 Annual General Meeting was sent to shareholders at least 20 working days before the Meeting. A poll vote was taken on each of the resolutions put before shareholders.

Voting at the 2008 Annual General Meeting was conducted by way of poll. The results of the voting at the Annual General Meeting were announced and details of the votes are available to view on the Company’s website www.burberryplc.com.

All directors, including the chairmen of the Audit, Remuneration and Nomination committees attended the Annual General Meeting and were available to answer shareholders’ questions.

Accountability and audit

The Board acknowledges that it should present a balanced and understandable assessment of the Company’s position and prospects. In this context, reference should be made to the Statement of Directors’ Responsibilities on page 94 of the Annual Report, which includes a statement in compliance with the Code regarding the Group’s status as a going concern, and to the Report of the Auditors on page 95 of the Annual Report which includes a statement by the auditors about their reporting responsibilities. The Board recognises that its responsibility to present a balanced and understandable assessment extends to interim and other price sensitive public reports and reports to regulators as well as information required to be presented by law.

Internal control

The Board acknowledges that it is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The Audit Committee has reviewed the effectiveness of the key procedures, which have been established to provide internal control. As part of the process that the Group has in place to review the effectiveness of the internal control system there are procedures designed to capture and evaluate failings and weaknesses, and in the case of those categorised by the Board as ‘significant’, procedures exist to ensure that necessary action is taken to remedy the failings.

In accordance with the revised guidance for directors on internal control (‘the Revised Turnbull Guidance’), the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. These include those relating to social, environmental and ethical matters. This process was in place throughout the year under review and up to the date of approval of the Annual Report and Accounts. The process is regularly reviewed by the Audit Committee which reports its findings for consideration by the Board, and is in accordance with the Revised Turnbull Guidance. The key procedures operating within the Group are as follows:

Risk assessment

The Group’s business objectives are incorporated into the annual budgeting and planning cycle. Progress towards the achievement of such objectives is monitored by a variety of financial measures and non-financial performance indicators.

The Risk Committee of executive management meets formally at least every six months to re-evaluate risk and to consider the work of the Internal Audit and Risk Assurance team. During the year the Committee met on three occasions. The Director of Audit and Risk Assurance attends these meetings.

The Board has delegated responsibility for considering operational, financial, compliance and other risks to the Audit Committee.

Control environment and control activities

The Group consists of a number of business regions, each with its own management structure which forms part of the overall management structure of the Group. The senior executives of these units report to the executive directors.

The Group has established procedures for the delegation of authorities for matters that are considered significant, either because of their value or the impact on the Group, to ensure that approval is considered at an appropriate level.

The Group’s trading units operate within a framework of policies and procedures which are either already laid down or are being established in organisation or authority manuals. Policies and procedures cover key issues such as authorisation levels, compliance with legislation and physical security.

The Group has implemented various strategies to deal with the risk factors that have been identified. Such strategies include a framework of internal control and the use of third-party services to assist in monitoring specific issues. In addition, other approaches are taken, such as insurance.

Information and communication

The Group has a comprehensive system of budgetary control, focused on monthly performance reporting which is at an appropriately detailed level. A summary of results supported by commentary and performance measures is provided to the Board each month. The performance measures are subject to review to ensure that they provide relevant and reliable indications of business performance.

A summary of the key business risks and relevant control measures is submitted by the executive directors to the Audit Committee at the end of the financial year. The Audit Committee meets with both external and internal auditors.

Monitoring

A range of procedures is used to monitor the effective application of internal control within the Group. These include management review, management confirmations of compliance with standards and procedures as well as internal audit and other specialist reviews. The Internal Audit department is responsible for reporting to the Audit Committee on the effectiveness of internal control systems.

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