Tesco plc Annual Review and Summary Financial … — TESCO PLC Annual Review and Summary Financial Statement 2011 Chief executive’s review benefit the performance and competitiveness

overview

1 Chairman’sstatement2 Tescoaroundtheworld4 ChiefExecutive’sreview6 Ourvision

business review

14 Ourbusiness16 GrowingtheUKcore18 Tobeanoutstanding

internationalretailer20 Tobestrongineverything

wesell

22 Growingretailservices24 Communityattheheart

ofwhatwedo26 Buildingbrands28 Buildingourteam

summary financial statement

30 SummaryreportoftheDirectors

33 Groupfinancials36 OurBoardofDirectorsIBC Financialcalendar

* underlying diluted earnings per share growth calculated on constant tax rate basis; 12.8% at actual tax rates

+8.1%Group sales (including vat): £67,573m

+12.3%underlying profit before tax: £3,813m

+11.3%Group profit before tax: £3,535m

+10.8%*

underlying diluted earnings per share: 35.72p

+10.8%Dividend per share: 14.46p

Ourcorepurposeistocreatevalueforcustomerstoearntheirlifetimeloyalty.

OurValuessitattheheartofourbusiness.Theyare:

Noonetriesharderforcustomers;and

Treatpeoplehowweliketobetreated.

Contents

After14yearsasCEO,TerryLeahyannouncedhisretirementinJuneand,aspartofourlong-termsuccessionplan,PhilipClarkereplacedhimatthehelminMarch2011.

Terryisundoubtedlyoneoftheleadingbusinessmenofhisgeneration.Underhisleadershipwehavemorethanquadrupledoursalesandprofits,expandedinto13countriesoutsidetheUKandenterednewmarketssuchasonlineretailingandfinancialservices.OnbehalfofeveryoneatTescoandallourshareholders,itisaprivilegetothankTerryforhisunrivalledcontributiontothesuccessofthebusiness.

TherecouldbenobetterpersontoleadusgoingforwardthanPhilipClarke.PhiliphasworkedatTescothroughouthiscareer,spendingmanyyearsinRetailandCommercial.HejoinedtheTescoBoardin1998and,aspartofhisroleasAsia,EuropeandITDirector,hasbeenattheheartofmanyofourmostimportantdevelopmentsandoperationalimprovementsinrecentyears,suchasentryintoChina,TurkeyandIndiaandtheintroductionoftheTescoHindustanServiceCentre(HSC)–ourglobalservicesarm.

IsettheNominationsCommitteetheobjectiveofdeliveringaseamlesssuccessionandIamdelightedwiththeoutcome.ThehandoverprocessfromTerrytoPhilipwasverysmooth.IhaveeveryconfidencethatunderPhilip’sleadership,Tescowillgoontoachieveevengreatersuccessinthefuture.

InorderfortheTescoBoardtobetterreflecttheglobalnatureofourbusiness,providemorefocusonkeyareasofperformanceanddeliveronourimmediateobjectives,wemadeadditionalchangesinMarch2011.TimMasonhasbecomeDeputyCEOandChiefMarketingOfficerinadditiontohisroleasPresidentandCEOFresh&Easy.

RichardBrasherhasassumedthenewlycreatedroleofCEOfortheUK,aswellashavingresponsibilityfortheRepublicofIreland,whilstDavidPottshasbecomethefirstCEOofourgrowingAsiabusiness.LaurieMcIlweehastakenonresponsibilityforGroupStrategyinadditiontohisroleasCFO.

Iampleasedtoreportanothergoodsetofresultsinwhathasbeenachallengingyearinsomeofourmarkets.

AndrewHigginsonandLucyNeville-RolfewillcontinueintheirrolesasCEORetailServicesandExecutiveDirector(CorporateandLegalAffairs)respectively.

TherehavealsobeenafewchangestotheNon-executivemembersoftheBoardthisyear.RodneyChaseCBEretiredfromhispositionasDeputyChairmanandSeniorIndependentDirectorinJuly.PatrickCescau,whohasservedontheBoardsinceFebruary2009,hasreplacedRodneyasSeniorIndependentDirector.

CharlesAllenCBEandDrHaraldEinsmann,whohadbothservedontheTescoBoardsinceFebruary1999,alsoretiredinJulyandwerereplacedbyStuartChambersandGarethBullock.

Stuart,formerlyCEOofNSGGroupandPilkingtonplc,hasreplacedCharlesasChairmanoftheRemunerationCommittee.Gareth,formerGroupExecutiveDirectorofStandardCharteredPLC,hasjoinedtheAuditCommittee.

IwouldliketothankCharles,HaraldandRodneyfortheirexcellentadviceandimportantcontributionsoveracombined30years’service,andalsoformallywelcomeGarethandStuart,whobringwiththemawealthofinternationalexperienceandnewexpertiseinfinancialservices,furtheraddingtotheoverallstrengthoftheTescoBoard.

DividendIamdelightedtoreportthatwehaveagainincreasedourdividend–forthe27thconsecutiveyear.TheBoardhasproposedafinaldividendof10.09ppershare,takingthefull-yeardividendto14.46p.Thisrepresentsanincreaseof10.8%onlastyear’sfull-yeardividend,whichisinlinewiththegrowthinunderlyingdilutedearningspershareatconstanttaxrates.

communityThisyear,wedonatedover£64milliontocharity–againmeetingourtargettodonatetheequivalentofover1%ofourprofitstocharitiesandgood causes.

We’vemadefurtherprogresstowardsourgoalofbecomingazero-carbonbusinessby2050.Thisyearwehavereducedemissionsfromourbaselineportfolioofbuildingsby7.7%.

our peopleOurgrowthoverthepastyearisadirectresultofthededication,passionandhardworkofourpeople–ateamwhichisnowover492,000strong.I’mdelightedthatourshareownershipincentiveschemesarehelpingourstafftogettheirownpersonalstakeinthebusiness.Thisyear216,000employeessharedarecord£105.5millionthroughourSharesInSuccessscheme.OnbehalfoftheBoard,Iwouldliketothankallofourpeoplefortheirongoingcommitmenttoprovidingthebestpossibleserviceforourcustomers.

David Reid Chairman

oVeRVIeW

TESCOPLCAnnualReviewandSummaryFinancialStatement2011 — 1

Chairman’s statement

Creatingvalueforcustomersacrossallourbusinesses

2 — TESCOPLCAnnualReviewandFinancialStatement2011

tesco around the world

oVeRVIeW

UK

revenue*

£40,766mnumber of stores

2,715employees

293,676selling space (sq ft, % of Group)

36.7msqft

35.4%

tesco Bank

revenue*

£919memployees

1,274

Us

revenue*

£495mnumber of stores

164employees


1.7msqft

1.6%

employee figures represent the average number of employees during the year

± 230 employees across asia and europe work in locations other than those listed

* revenues are sales excluding vat and exclude the impact of ifric 13 (customer loyalty schemes)† revenue for europe includes france; revenue for asia includes india

GDP growth: economist intelligence unit

TESCOPLCAnnualReviewandFinancialStatement2011 — 3

revenue* GDP growth (£m) stores employees (% real change pa)

south Korea 4,984 354 23,131 6.1thailand 2,844 782 38,395 7.9China 1,141 105 27,096 10.3Malaysia 794 38 11,023 7.2Japan 476 140 4,367 4.0

europe

revenue*†


1,082employees±


30.2msqft

29.2%

India

in india, we have an exclusive franchise agreement with trent, the retail arm of the tata Group. we are supporting the development of their star bazaar format.

Asia

revenue*†


1,419employees±


35.0msqft

33.8%

revenue* GDP growth (£m) stores employees (% real change pa)

Republic of Ireland 2,332 130 13,344 -0.8 Poland 2,156 371 24,932 3.8Hungary 1,649 205 21,157 1.2Czech Republic 1,355 158 12,812 2.3slovakia 996 97 9,105 4.0turkey 700 121 8,038 8.1

I’mpleasedtoreportthatTescohasonceagainachievedagoodsetofresultswithgoodsales,profitandearningspersharegrowth,despitechallengingconditionsinsomeofourmarkets.

Iamparticularlypleasedwithourprogressonreturnoncapital,wherewehaveseenROCEgrowstronglyto12.9%,representinganimportantfirststeptowardsour2014/15targetof14.6%,withfurtherincreasestocome.

IntheUK,wehaveanoutstandingcorebusiness.Itmadeprogressintheyearbutsomeaspectsofourperformancecanimprove.StrongersalesmomentumhereisakeypriorityandIamconfidentthatthefocusandenergyournewUKleadershipteamisbringingtothebusinesswillseeareturntoforminthemonthsaheadasTescotriestodoitsbittohelpcustomerswhofacepressureontheirhousehold budgets.

Theincreasingscaleandcompetitivenessofourinternationalbusinessesarenowdrivingstronggrowthinsales,marketshare,profitsandreturns,supportedbythegenerallyimprovingglobaleconomicenvironment.Wehavebuiltsomeexcellentspringboardsforfuturegrowth,andwhilstthereisstillworktodo,particularlyintheUnitedStates,IamdelightedwithourperformanceinEuropeandAsia,whereIexpectfurtherstronggrowththisyearandbeyond.

Wehavesetsiximmediateteamobjectivesagainstwhichweintendtobejudged.First,keepingtheUKstrongandgrowing;second,wewanttobeoutstandinginternationally,notjustsuccessful;third,asthecombinationofstoresandonlinebecomescompellingforcustomers,weaimtobecomeamulti-channelretailerwhereverwetrade;fourth,wewilldeliveronthepotentialofretailingservices–ofwhich

TescoBankisabigpart;fifth,byapplyingGroupskillandscalewewillgiveourcustomersevenmorevalueandincreasethecompetitiveadvantagetoourbusinesses;andfinally,todeliverhigherreturnsoncapitalemployedforshareholders.

Also,aspartofourcommitmenttocommunities,wewanttowidenourcontributionfromtacklingclimatechangetobroaderaspectsofsustainability.

Vision and strategy

Tescoisabusinessbuiltaroundcustomersandstaff,high-qualityassetsaroundtheworldandmultipleopportunitiesforgrowth.Myjobistobuildonthislegacy–forallourstakeholders.Goingforward,therewillmostlybecontinuity.Wehaveasoundstrategy,astrongteamandtheperiodofhighestriskwiththediversificationofthebusinessisnowbehindus.However,therewillalsobesomechanges,becauseweknowthatwecandosomethingsbetterandbecause,ascustomerschange,somustTesco.

Importantly,therewillbenochangetothefoundationsofourbusiness:ourcorepurpose–to create value for customers to earn their lifetime loyalty –andourValues–no one tries harder for customers and treat people how we like to be treated.

Ihavesetoutanewvisionforthefutureofthebusiness.IwouldlikeTescotobeseenasthemost highly valuedbusinessintheworld.Valuednotonlybyourcustomers,butalsobythecommunitiesweserve,ourstaffandourshareholders.

Wewill win locally by applying our skills globally.Thekeywordhereis‘locally’.SevenyearsofrunningourbusinessesinAsiaandEuropehastaughtmethatallretailingislocal.ButincreasinglyweareutilisingtheskillandscaleoftheGroupto

IhaveinheritedagreatlegacyandIamreallyexcitedaboutthefuture.Intheendofcourse,weknowit’sallaboutperformance;that’swhatmattersandthat’swhatweaimtodeliver.

Buildingonoursuccess

oVeRVIeW

4 — TESCOPLCAnnualReviewandSummaryFinancialStatement2011

Chief executive’s review

benefittheperformanceandcompetitivenessofeachofourbusinessesaroundtheworld.

Wewillbea modern and innovative company.We’llstayaheadofthecurve,anticipatingchangesandadaptingforthesakeofourcustomersandstaff.

Weare,andwewillremaina growth company.Wewillcontinuetopursuegrowthinallpartsofthebusiness–intheUK,internationally,inservicesandacrossgeneralmerchandise,clothingandelectricals.

Moredetailonournewvisioncanbefoundonpages6to13.

Toputthisvisionintopractice,ourstrategyisevolving–withaslightchangeinemphasiswhichbuildsonthesuccessofourpreviousfive-partstrategythathasservedussowelloverthepast14years.Soourstrategywillnowhavesevenparts.Muchofitwillbefamiliarbutwithsomeimportantnewadditionsaroundbeingamulti-channelretailer,creatinghighlyvaluedbrandsandbuildingourteam:

• TogrowtheUKcore

• Tobeanoutstandinginternationalretailerinstoresandonline

• Tobeasstrongineverythingwesellasweareinfood

• Togrowretailservicesinallourmarkets

• Toputourresponsibilitiestothecommunitiesweserveattheheartofwhatwedo

• Tobeacreatorofhighlyvaluedbrands

• Tobuildourteamsothatwecreatemorevalue

Moredetailsonourstrategycanbefoundonpage14.

Management structures

We’vemadesomechangestoourmanagementstructuresinordertoequipthebusinesstodeliverourstrategyandvision.ThismeansCEOsforeachofourmainareasoffocus–theUK,Asia,ServicesincludingTescoBank,EuropeandtheUS–beingsupportedbytheintegratingfunctionssuchasITandFinancetoleveragetheskillandscaleoftheGroup.

ThebiggestpartofthischangewasintheUK,whichnowhasitsownCEOandmanagementboardforthefirsttime.Thiswillbringmorefocusandenergytoourlargestbusiness.Ofcourse,structuresdon’tmanagecompanies,peopledoandI’mconfidentthatatalllevelswehavetheverybestteamworkinghardtodeliverthebestshoppingtripforourcustomers.

IhaveinheritedagreatlegacyandIamreallyexcitedaboutthefuture.Intheendofcourse,weknowit’sallaboutperformance;that’swhatmattersandthat’swhatweaimtodeliver.

Philip Clarke GroupChiefExecutive


Tobethemosthighlyvalued

to be the most hiGhly valueD by:

the customers we serve

Ourcorepurposeistocreatevalueforcustomerstoearntheirlifetimeloyalty.ThisobjectivesitsrightattheheartofourbusinessasonepartofourValues–‘Noonetriesharderforcustomers’.

Weknowthatwearealreadyvaluedbyourcustomersacrossourmarkets.IntheUK,forexample,wehavethemostloyalcustomerbaseofthemajorgroceryretailersandinSouthKorea,HomepluswasawardedSouthKorea’sMostAdmiredCompanyawardinOctober2010.

the communities in which we operate

ForTescotobeconsideredaforceforgood,wemustbeagoodneighbourandaresponsiblememberofsociety.ThisiswhyCommunityispartofourbalancedscorecardapproachtorunningourbusiness–andwhyeachmarkethasitsownCommunityPlan,withpromisesrelatingtotheenvironment,communities,responsiblesourcing,healthylivingandjobsandcareers.

our loyal and committed staff

Weknowthatifwelookafterourstaff,theywilllookafterourcustomers.Workcanbealargepartofourlivessoourpeopledeserveanemployerwhocares.That’swhyoneofourValuesis‘Treatpeoplehowweliketobetreated’.

Wearecommittedtoprovidingopportunitiesforourpeopletogetonandturntheirjobsintocareers,andacrossallofourmarketsweofferawiderangeofcompetitivebenefits.IntheUS,forexample,wepayatleast75%ofmedical,dental,prescriptionandvisioncosts.69%ofemployeesacrosstheGroupwhocompletedourannualstaffsurveysaidthattheyfindtheirworkinteresting.

our shareholders

Astheownersofthebusiness,it’scrucialthatourshareholdersvalueTescohighly.Shareholderswantagoodreturnontheirinvestmentandthat’swhatwewillcontinuetodeliverforthem.Wehaveover200,000shareholders,includingalargenumberofpensionfunds.Weoffersustainable,profitablegrowthfromacombinationofastrongcoreUKbusinessandexposuretorapidlygrowingemergingmarkets.Overthepastdecadeourtotalshareholderreturn(TSR)hasoutperformedtheFTSE100by53.2%andwe’vedelivereddividendgrowthforthepast27years–thelongestrecordofconsecutiveincreasebyanyFTSE100company.

OURVISION

69%of employees across the Group who completed our annual staff survey said that they find their work interesting

to learn more about our vision and strategy: http://ar2011.tescoplc.com/ businessreview/ourstrategy

7

tesco Clubcard

Allretailingislocal.AndClubcardisoneofthewaysinwhichwecanberesponsivetolocalcustomerneeds.Inadditiontorewardingcustomersfortheirloyalty,Clubcardprovidesuswithinsightfrommillionsofcustomertransactions.Fromthiswecandeveloptailoredranges,promotionsandmarketingbycountryorregion–infactrightdowntotheindividualcustomerviatheirClubcardmailing.

TheknowledgeandexpertiseofoperatingClubcardwasdevelopedintheUKbuthasnowbeenrolledouttoafurther11countriesacrosstheGroup,withmoremembersinAsiaandEuropethanathomeintheUK.

F&F

We’vebeensuccessfulatexportinganumberofourbrandsinternationally,tailoringthemtolocaltrends,needsandpriceranges.

F&Fisagoodexampleofhowoneofourbrandshasspreadgloballyandwonlocally.We’rebringingthebenefitsofourGroupskillandscaletoourbuyingandsourcingoperations,helpingtoreducecostsandimprovequality.InCentralEuropeforexample,95%ofourclothingsupplierbaseisthesameasIrelandandtheUK,eventhoughtowinineachmarket,weadaptourrangetolocaltrends,tastesandclimates.

F&Fisnowintenofourmarketsandisthemarket-leadingclothingbrandintheCzechRepublic,HungaryandSlovakia.Wealsoopenedourfirststand-aloneF&FstoreinPraguethisyear.

World-class training for national talent

Weknowthattobeasuccessfulinternationalretailerweneedtocombinedeeplocalknowledgewithglobalexperience–thisiswhyallofourinternationalmanagementteamsareamixtureofnationalsandpeoplefromourUKbusiness.

Inaddition,theexperienceofworkinginternationallyhelpsusattract,retainanddevelopourpeople–overafifthofourdirectorsarecurrentlyworkingoutsidetheirhomecountry.

OurAcademysupportsthedevelopmentofbothoperationalexpertiseandleadershipexcellence.Managementcoursesaredevelopedbasedonglobalbestpracticeandthenusedtotrainteamsineachlocalmarket.OurfirstdedicatedAcademycentrewillopeninSeoul–servingAsia–inJuly.

OURVISION


9

online retailing

Customersexpecttobeabletoshopwhereandwhentheywant–asshoppinghabitshavechangedovertheyearswe’vechangedtoo.Aswe’vegrownfromaUKsupermarketchaintowardsbecominganinternationalmulti-channelretailerwe’vecontinuedtoinnovateeverystepoftheway.

Wewereviewedaspioneerswhenwefirstlaunchedanonlinegrocerybusiness11yearsago.It’snowthelargestmostprofitablebusinessofitskindintheworld.

Usingtheirsmartphones,ourcustomerscannowscanthebarcodeofgroceryitems,orderonlineandhavetheirshoppingdeliveredtotheirhome.

A leader in green retailing

Asaglobalbusinessweknowthatwecanmakearealdifferenceintacklingclimatechange–cuttingourownemissions,workingwithsuppliersandhelpingcustomerstocuttheircarbonfootprint.Wealsounderstandthatsuccessfulbusinessesneedtobegreentogrow.

Our2050targettobeazero-carbonbusinesswillbeachievedthroughimprovedefficiencyandbygeneratingourenergyfromrenewablesources.We’remakinggoodprogress–overthepastyearwehavereducedemissionsfromourbaselineportfolioofbuildingsby7.7%.

Wehavepledgedtohelpcustomerscuttheircarbonfootprintsby50%by2020.WehaveworkedwiththeCarbonTrustandotherstakeholderstodevelopauniversalcarbonfootprintlabelwhichdescribestheemissionsassociatedwitheachproduct.SinceJanuary2008,wehavecarbonlabelledmorethan500everydayproductsintheUKandhavestartedtolabelproductsinSouthKorea,helpingourcustomerstomakegreenerchoices.

OURVISION

500+Products carbon labelled since 2008


11

UK: an outstanding business

WehavemorethandoubledsalesandprofitinourUKbusinessoverthelastdecade,cementingourpositionasclearmarketleader.Yetthereremainsignificantopportunitiesforfurthergrowth.TheUKhasthelowestgroceryretailspacepercapitaofanycountryintheEU;only54%ofshoppersareabletoreachaTescoExtrawithin15minutesandwehaveonlyasmallshareoftheconveniencesector.

Beyondgrocerywe’vedevelopedastrongpositioninmanyothercategoriessuchasclothing,electricalsandentertainment.Butwithamarketshareofaround4%inthenon-foodsectorthereisstillplentymoretocome.

International growth

Morethantwo-thirdsofourprofitgrowthnowcomesfrommarketsoutsidetheUK.WeopenedourfirstinternationalTescostorein1995;todaywe’rein13marketsacrossEurope,AsiaandNorthAmerica.65%ofourfloorspaceisnowoutsidetheUK,andourbusinessesinAsiaandEuropearecollectivelythesamesizeasthewholeofTescowas11yearsago.We’vebuiltsuccessful,diversebusinessesacrosstheworld,yetthejourneyisonlyjustbeginning.

We’vealreadydevelopedmarket-leading,highlyprofitablebusinessesinanumberofcountries.InSouthKorea,ourlargestinternationalbusiness,Homeplus,alreadygenerates£5billionrevenue.Yet,ifHomeplusweretogrowtohavethesameproportionofthetotalretailmarketthatTescohasachievedintheUK,thebusinesswouldbemorethanthreetimesaslargeasitistoday.

Duringourfirstdecadeofinternationalexpansionwe’veprovedthatweareabletodevelopprofitableandmarket-leadingbusinessesinmanyofourmarkets.Overthenextdecade,inadditiontofurtherexpandingourestablishedoverseasbusinesses,wearefocusedondeliveringgrowthinthreeoftheworld’slargesteconomies:China,IndiaandtheUnitedStates,whichbetweenthemofferdecadesoffuturegrowth.

new services

CustomerstrustTescoandappreciatethatweprovidevalue,simplicityandgoodservice.Thisisourapproachwitheverythingwesellandisthekeytooursuccessinfollowingthecustomerintonewareassuchasbankingandtelecoms.

TescoBankintheUKnowhasover6.5millioncustomeraccountsandgeneratesannualprofitsof£264million.We’vemadeparticularlygoodprogressincreditcards.InFebruary,oneineightofallMasterCardandVisacreditcardtransactionsintheUKweremadeonaTescocreditcard.Aswebroadenouroffer–withmortgageslaunchingthisyear–weaimtobecomethebestchoiceforallourcustomers’bankingneeds.

WehavealsoestablishedasuccessfulTelecomsbusiness.TescoMobilenowhasover2.5millioncustomers.Byfocusingonvalueandgoodserviceandthroughour194PhoneShopswearechangingthewaythatcustomersbuyphones,servicesandaccessories.

OURVISION


13

Businessreview

our strategy

In1997,Tescosetoutastrategytogrowthecorebusinessanddiversifywithnewproductsandservicesinexistingandnewmarkets.Thisstrategyenabledustodeliverstrong,sustainedgrowthoverthepast14years.We’vefollowedcustomersintolargeexpandingmarketsintheUK–suchasfinancialservices,generalmerchandiseandtelecoms–andnewmarketsabroad,initiallyinEuropeandAsiaandmorerecentlyintheUnitedStates.

Inordertoreflectchangingconsumerneedsandtheincreasinglyglobalnatureofourbusinesswe’veevolvedourstrategy.Thestrategynowhassevenpartsandappliestoourfivebusinesssegments–theUK,Asia,Europe,theUnitedStatesandTescoBank.

Someelementsofthestrategyremainunchanged.Thegoal‘togrowthecoreUKbusiness’isasrelevanttodayasitwasin1997.TheUKisthelargestbusinessintheGroupandakeydriverofsalesandprofit.Therearemanyopportunitiesforfurthergrowthandsowewillcontinueto grow the UK core.

Anotherofouroriginalgoalswastobea‘successfulinternationalretailer’.In1997,ourinternationalbusinessesgenerated1.8%oftheGroup’sprofits.Todaytheyrepresent25%andwe’renoweithernumberoneornumbertwoineightofour13marketsoutsidetheUK.Sowe’realready‘successful’.Ournextstepisto be an outstanding international retailer in stores and online.

In1997,wewerelargelyafoodretailersowesetourselvesthechallengeofbecoming‘asstronginnon-foodasinfood’.Asourbusinesshasgrownandweofferaneverwidervarietyofproductstocustomers,thetermnon-foodnolongerdoesjusticetoalltheproductsandserviceswesell.Wenowaimto be as strong in everything we sell as we are in food.

Ourservicesbusinesseshavecomealongwaysincewefirstincludedinourstrategythedesire‘todevelopretailingservices’.TodaythesepartsofTescogenerate£583millionprofit,representing16%oftheGrouptotal.TodatethishasbeenlargelyUK-focused,butasmanyofourinternationalbusinesseshavenowestablishedwell-knownbrandsintheirlocalmarket,itistimetoexpandourambitionsandaimto grow retail services in all our markets.

In2007,weaddedafifthelementtoourstrategytounderpinourcommitmenttocommunitiesandtheenvironment.We’veupdatedthisobjectiveslightlybyemphasisingourresponsibilitiesintheseareas.Ourgoalisto put our responsibilities to the communities we serve at the heart of what we do.

Therearetwonewstrategicgoals,bothofwhichreflectthewaythatTescohasdevelopedoverthelastdecadeandourareasofemphasisforthefuture.

Thefirstisto be a creator of highly valued brands.OurbrandhasevolvedfromalogoaboveafewstoresintheUKtoamultitudeofstore,productandservicebrandsacrosstheworld.Buildingbrandsgivesourbusinessmoremeaningwithourcustomers.Ononelevel,thisrelatestoourRetailbrandssuchastheTescobranditself,butitalsoreferstoourProductbrandssuchasF&FandTechnikaandourPillarbrandssuchasFinestandValue.

Ourfinalgoalisto build our team so that we create more value.AsourbusinesscontinuestogrowanddiversifyweneedmoreleaderstorunthemanysubstantialbusinessandsupportfunctionswithintheGroup.Ourleadersnotonlyhaveanimportantroletoday,butalsohavearesponsibilitytohelpbuildabiggerandbetterteamforthefuture.

Ourprogressintheseareasisreviewedoverthefollowingpages.


our business

BUsIness ReVIeW

TogrowtheUKcore

16Tobeanoutstandinginternationalretailerinstoresandonline

18Tobeasstrongineverythingwesellasweareinfood

20Togrowretailservicesinallourmarkets

22Toputourresponsibilitiestothecommunitiesweserveattheheartofwhatwedo

24Tobeacreatorofhighlyvaluedbrands

26Tobuildourteamsothatwecreatemorevalue

28

Ourseven-partstrategy


TogrowtheUKcore

Inourmarket-leadingUKbusiness,wehavedeliveredasolidperformancebykeepingourfocusonthecustomer,providingthemwithgreatvalue,choiceandservice.

TheUKeconomyisinrecoverybutconsumershavebeenunderpressurethisyearduetoacombinationofhighpetrolprices,foodandutilityinflationand,morerecently,theVATincrease.Asaresult,we’reexperiencingaperiodofunusuallysubduedindustrygrowth.Excludingpetrol,like-for-likegrowthintheindustryhasbeensignificantlylowerthanlastyear.

Againstthisbackdrop,ourUKbusinesshasdeliveredasolidperformance.TotalUKsaleswere£44.6billion,growingby5.5%,whichwasaheadofthemarket.UKtradingprofitincreasedby3.8%orby6.4%beforetheeffectsofoursaleandleasebackprogramme;principallytheadditionalrentsincurred.

Clubcard

Clubcardisouruniquecustomerloyaltyprogramme–ourwayofsaying‘thankyou’toourcustomers.Itisnowmorepopularthaneverbefore,withactivemembershipofover15millioncustomers,comparedto13millionatthestartof2008/9.

Clubcardcontinuestobeasignificantdriverofgrowthforourbusinessandensuresthatourcustomerbasecontinuestodemonstrateconsiderablyhigherlevelsofloyaltythanourcompetitors.Formostof2010,Clubcardwasthenumberonereasonbehindcustomersswitchingtousfortheirweeklyshop.

stores

Newspacehascontinuedtodrivesalesgrowth.We’veopenedover200newstoresin2010/11andhaveastrongopeningprogrammeforthecomingyear.

Wehavealsorefreshedorextendedover400storesthisyear,receivingagreatresponsefromcustomers.Forexample,wehaveadded7,000sqfttoWembleyExtra,expandingourWorldFoodsoffertomeetbettertheneedsofcustomersinthelocalareaandthestoreisoutperformingby16%.

Range

Ourcustomerstellusthatqualityisincreasinglyimportanttothem,itisnotsimplyaboutfindingthecheapestproduct.Wehavesteppedupouremphasisonquality,withaccelerated

productdevelopment,leadingtotheintroductionofover2,000newandimprovedfoodproducts.

TheincreasingimportanceofqualityforcustomersisalsosupportedbythestrongperformanceofourFinestrange,whichhasoutpacedthegrowthofotherareasofourfoodrange,witha6.3%increaseinsalesthisyear.

Manyofourcustomerswanttobuylocallysourcedproductstosupporttheirlocalcommunities.WehavefivededicatedregionalbuyingofficesthroughouttheUKandin2010/11weincreasedsalesoflocalproductsto£1billion,upfrom£850millionin2009/10.

Price

Weremainfocusedondeliveringthebestvaluetoallcustomers.ThelaunchofEssentialSavingsinMaywasaninvestmentinlowerpricesontheeverydayproductswhichourcustomersbuy.Wehaveintroducedmoremulti-buysintothepromotionprogrammetohelpcustomerssavemoney.TogethertheseinitiativeshavehelpedustomaintainourleadingpositioninahighlycompetitivemarketandtoencouragecustomerstoswitchtoTescothroughouttheyear.

Availability

Wehavemaintainedhighlevelsofavailabilitythisyearthroughanumberofprogrammes,frombetterpromotionalforecastingthroughtoimprovedprocessesformonitoringavailabilityinourstores.Ourcustomersarebenefitingfromthisworkandhavenoticedtheimprovements–customersatisfactionwithavailabilityisatarecordhigh–up7%fromlastyearand13%fromtheyearbefore.

service

Weworkcontinuallytoimproveserviceforourcustomers.Wehavetrainedover80,000staffthisyearinEveryLittleHelpsskillsforcheckouts,supportingthemtodeliverhelpful,friendlyandefficientservice.Wealsoknowhowimportantitisforourcustomerstobeabletochoosethecheckoutthatisrightforthem,soweareworkingtocreatetheidealcheckoutconfigurationineachofourstoresbasedonthelocalcustomerprofile.

£44.6bnUK sales

£2.5bnTrading profit


BUsIness ReVIeW

Growing the UK core

clubcarD

clubcard continues to play an important role in earning customers’ loyalty. we’ve continued to invest in Double Points, we have introduced the big clubcard voucher exchange and we have expanded our Partner reward scheme.

No.1reasonforcustomers

switchingtoTesco


thailanD

tesco lotus, our business in thailand, is one of our most successful international businesses with strong profitability and the highest return on capital of all our overseas markets. we now operate 782 stores with 11m sq ft of space, having added a further 119 stores in the year.

21%SalesinThailand

up21%


Tobeanoutstandinginternationalretailerinstoresandonline

£11.0bnAsia sales

£10.6bnEurope sales

Mostofourmarketshaveseensteadyeconomicimprovementoverthepastyearandinsomecases–particularlyinAsia–sharpimprovement.Countrieshardesthitinthedownturn–inparticularHungary,IrelandandtheUnitedStates–havebeenslowertorecover,althougheventherewearenowseeingsignsofimprovement.

AparticularlyencouragingfeatureofourperformanceinAsiaandEuropehasbeenexcellentmarketsharegrowth,withmanyofourbusinessesseeingstronggrowthinbothcustomernumbersandlike-for-likesales.

Wehaveresumedafasterpaceofnewspaceopeningnowthateconomicconditionsaregenerallyimproving.Weopened6.5msqftofgrossnewspacein2010/11,comparedwith5.1msqftin2009/10andplantoopenafurther8.4msqftduringthecurrentyear.

Asia

OurbusinessesinAsiahavedeliveredanothergoodperformanceleadingtoincreasesinsalesandprofits–supportedbyimprovinglike-for-likesalesgrowth,ausefulcontributionfromnewstoresandfurtherbenefitsfromouracquisitioninSouthKoreain2008.

AseconomiesinAsiarecover,weareseeingimprovingsalestrends.Ourperformancewashelpedbyfavourableexchangeratemovementsbutneverthelessprofitsgrewbyalmost18%atconstantcurrencyrates–withexcellentgrowthcomingfromSouthKoreaandThailand.

OurAsianmarketsofferanexcitinglong-termgrowthopportunityandwillbeakeyfocusforourfutureinternationalexpansion,bothinourestablishedmarketsandinChina.Wehavecontinuedtoinvestthroughthedownturntoensurethatweareinanevenstrongerpositionastheeconomicrecoverycontinues.

Thisyearweplantoopen5.1msqftofnewsellingarea.WehavealsocontinuedtomakegoodprogressindevelopingstrongbrandsinourleadingAsianbusinesseswithfurtherexpansionofClubcardandourretailservicesbusinesses.

europe

OuroperationsinEuropehavedeliveredrecordresultsandstronggrowthinsales,profitsandmargins.Recoveringeconomiesgenerallyhelpedbutkeytothisperformancewasthestrikingimprovementinthecompetitivenessofourlocalbusinesses,whichwonincreasedmarketsharerapidly.

Wehaveinvestedforcustomersthroughlowerprices,sharperpromotionsandClubcard,fundedbystrongproductivityandsubstantialearlybenefitsofourpan-Europeansourcing.Theresultingstrongsalesgrowthhasdrivenanimprovementinprofitabilityandmargins.

Salesgrowthvariedacrosstheregionbutallmarketssawsharplyimprovedlike-for-likesalesgrowthcomparedwith2009/10,withagoodcontributionalsocomingfromnewspace.

Withtheimprovingeconomicoutlookwearesteppinguptherateofnewstoreopening.Some2.6msqftofnewspacewasopenedintheyear,withaprogrammetoaddafurther2.9msqftofnewspaceacrosstheregionin2011/12.

WehavebeendelightedbycustomerreactiontotheremodellingandconversionofsomeofourolderhypermarketstotheExtraformat.Verystrongsalesimprovementshavebeenachievedinthestores–withanaveragesalesupliftof16%intheeightcompletedsofar.Theserefitsaredeliveringparticularlymarkedupliftsinfreshfoodcategories,health&beauty,clothingandelectricals.

United states

CustomerfeedbackatFresh&Easyremainsexcellentandstronggrowthincustomernumbersisdrivingsteadysalesimprovementineachstore.

Weexpectlossestoreducesharplyinthecurrentyearasstronggrowthinlike-for-likesalescontinuesandimprovedstoreoperatingratiosstarttodelivershop-doorprofitability.Wehaveastrongplanforthebusinesstobreak-eventowardstheendofthe2012/13financialyear.


BUsIness ReVIeW

to be an outstanding international retailer

Tobeasstrongineverythingwesellasweareinfood

£10.3bnGroup sales

8.8%Group sales growth

Ourgeneralmerchandise,clothingandelectricalbusinesseshavecontinuedtogrow,despitethechallengesofweakdemandinsomeofourimportantmarkets.

IntheUK,highpetrolpricesandincreasesinVAThavehadasignificantimpactondiscretionaryconsumerspending.Manyhighstreetretailershavesufferedfromdecliningsalesandhaveissuedprofitwarnings.Tescohasfaredbetter–andmaintainedmarketshare–butwehaven’tbeensparedtheimpactofsubdueddemand.IntheUK,generalmerchandise,clothingandelectricalssalesgrewby0.4%to£5.3billion.Generalmerchandisesalesgrowthwasaffectedbyasmallercomponentofextensionsellingspaceinthisyear’snewspaceprogramme,withextensionsprovidingjust10%ofnewspace.

Inourinternationalmarketsthepicturevariesconsiderablybycountry.MostofourmarketsinEuropeandAsiasawstronggrowthingeneralmerchandiseastheeconomicrecoverytookholdduringtheyear,althoughanumberofmarkets–suchasIrelandandHungary–remainchallenging.

UK

ImprovingtheperformanceofgeneralmerchandiseintheUKisoneofourkeypriorities.Ouraimistoofferourcustomersthesamegreatquality,priceandrangeinourgeneralmerchandiseofferastheywouldfindwiththeirTescogroceryshop.Thefocusisondeliveringinthreekeyareaswiththeaimofimprovingthegeneralmerchandiseshoppingtripforourcustomers:

Investing in making the ranges more aspirationalInelectricals,wewerethefirstUKsupermarkettostocktheAppleiPadandtheAmazonKindle–twoofthemostsought-aftertechnologyproductsonthemarket.Keepingintunewithchangesintechnologyandrespondingquicklytoofferourcustomersthelatestelectricalinnovationsiscentraltoourstrategyandtobuildingourreputationasaleadingretailerineverythingwesell.

enhancing the shopping experience with specialist adviceInover200ofourlargeststores,wehaveTescoTechSupportteams,madeupofstaffspecificallytrainedtohelpcustomerswithtechnicalqueriesonelectricalitemsfromTVstocamerasandsatellitenavigationsystems.Theadditionaladvicehelps

customersgettherightproductfortheirindividualneeds,supportingareductioninproductreturns.Alongsideourin-storeteams,wehaveafreeelectricalhelplineforourcustomers,mannedbyfullytrainedengineers,andadedicatedTechSupportwebsite.

Developing our multi-channel capabilityOurmulti-channelapproachmakesiteasyforourcustomerstoshopinawaythatsuitsthem–online,in-storeorfromcatalogues.Customerscanbrowseinacatalogue,orderonlineandthencollectin-storeortheycanorderin-storeandhavethegoodsdeliveredtotheirhome.Thisyear,over40%ofTescoDirectelectricalpurchaseshavebeenmadeonlineandpickedupin-storethroughourClickandCollectservice.

europe

InEurope,generalmerchandise,clothingandelectricalssaleswerestrong,reflectinganoverallimprovingconsumerbackgroundandastrengtheningofferinourstores.

ClothinginCentralEuropehadasuccessfulyearwitha9%year-on-yeargrowthintotalsales.WearenowtheclothingmarketleaderintheCzechRepublic,HungaryandSlovakia.BuildingonthesuccessoftheF&Fbrand,wehaveintroducedourF&FBlueandF&FBasicssub-brandstoprovideourcustomerswithagreaterrangetochoosefrom.Ourfirststand-aloneF&FstorealsoopenedsuccessfullyinPraguelastyear,highlightingtheappealofthebrandintheCzechRepublic.

Asia

OurF&FclothingbrandlaunchedinSouthKoreaandThailandthisyearandtheearlyresponsefromcustomershasbeenexcellent–averygoodexampleoftheskillandscaleoftheTescoGroupbeingappliedacrossourglobalnetwork.

LastyearweopenedourfirstthreeSportsMultishopsinHomeplusstoresinSouthKorea.Theseinnovativesportszonesaredesignedtomeetgrowingcustomerneedsforsportinggoods,inaone-stopshoppingenvironment.SportsMultishophasincreasedsalesofsportinggoodsinthesestoresbyover60%withhighcustomerpenetration.


BUsIness ReVIeW

to be strong in everything we sell

clothinG

clothing is a key element of our customer offer in central europe and we have had another pleasing year with 9% sales growth. we are now clothing market leader in the czech republic, hungary and slovakia.

9%Clothingsales

growthinCentralEurope


tesco telecoms

we now have 194 Phone shops in stores across the uK and this year, we have begun to open Phone shops in our refreshed extra stores in central europe. our Phone shops provide our customers with support and advice so that they can choose the best option for them.

194PhoneShops

intheUK


Togrowretailservicesinallourmarkets

InJuly2008whenweannouncedourintentiontotakefullownershipofTescoBank,wesetatargettogrowtheprofitabilityofourretailservicesbusinessesfromjustunder£400millionin2007/8to£1billion.

Thisyear,wehavemadecreditableprogressinmovingtowardsthistarget.Wehaveattractednewcustomers,grownsalesandprofitandcontinuedtoinvest–particularlyininfrastructure–toequipthebusinessforfurthergrowth.

Wewantallofourcustomers,acrossallofourmarkets,tohaveaccesstoourfinancial,telecomsandonlineservices.WecandothisbyapplyingGroupskillandscaleandbuildingontheknowledgewhichwehaveacquiredfromourretailservicesexperienceintheUK,IrelandandSouthKorea.

In2010/11,totalretailservicessaleswere£4.0billion,up12%on2009/10andtradingprofitgrewto£583million.*

tesco Bank

Despiteachallengingyearinthewiderbankingsector,andasitcompletesitstransitiontofullseparationfromTheRoyalBankofScotland(RBS),TescoBankcontinuestoperformwell.

Thebusinesshasmadegoodprogresswithitssystemsre-platforming,whichwillcompleteasplannedin2011.WeopenedournewbankingandinsuranceservicecentresinGlasgowandNewcastleinOctober2010.Allnewmotorandhomeinsurancebusiness,includingrenewalpoliciessoldsincethenhave,asplanned,beenwrittenonnewsystems.Wealsolaunchedsuccessfullyourfirstnewproductonourownbankingplatforms–theFixedRateSaver–lastautumn.Thishasbeenfollowedbyourrecentinnovativeretailbond.Bothoftheseinitiativesexceededplanandservetodiversifyourfundingbaseandincreasetheproportionoflong-termfundingavailabletotheBank.

TheBankhasmadeprogressinkeyareas–withsavingsstronglyup,goodgrowthintheloanbookwithimprovedmarginsandanexcellentyearincreditcards,withthetransactionvalueup20%on2009/10.Thecarinsurancebook

hasalsoresumedgrowth,havingplateauedbeforethechangeofcontrol,despitetheinevitablechallengesofmigration.

Customeraccountnumbersgrewwell–inactivecreditcardsby11%,personalloansby17%andmotorinsuranceby8%.OurFixedRateSaverproductsignificantlyexceededexpectationsandweendedtheyearwithabalanceof£397million,40%higherthanplannedandwenowhaveone,twoandthree-yearoptionsavailableforcustomers.Therangeofproductsavailableforcustomerswillbebroadenedfurtherthisyearwiththeplannedlaunchofmortgages.

tesco.com

Ouronlinebusinesses,includingonlinegroceryandTescoDirect,hadanotherstrongyear.TakingintoaccountouroperationsinSouthKoreaandIreland,totalsalesgrewby15%.OurUKoperationscontinuedtogrowwell,withdouble-digitgrowthingroceryandafurther30%increaseatTescoDirect.

tesco telecoms

OurTelecomsbusinessgrewwellduringtheyear,maintainingstrongmarketshare,drivenprimarilybythegrowthofTescoMobile.In2010TescoMobilewasoneofthefastestgrowingUKmobilenetworks,growingitscustomerbaseby24%toover2.5million.

OurTescoMobilejointventureswithO2inIrelandandSlovakiaareperformingwell.Bothbusinessesaregrowingstronglyandmovedintoprofitforthefirsttimethisyear.

dunnhumby

dunnhumbyhashadaverystrongyear,increasingsalesandprofitsbyover30%withexcellentgrowthintheUKsupplierbusinessandfromitsoverseasjointventureswithretailers.

Followingtheacquisitionofthefinal10%ofthebusinessinthefirsthalfoftheyear,dunnhumbyisnowawhollyownedsubsidiaryofTesco.

*RetailservicesprofitcomprisesprofitfromTelecoms,tesco.com,dunnhumbyandTescoBank,includingUKstoreATMincome.

£4.0bnRetail services sales

15%Online business sales growth


Growing retail services

BUsIness ReVIeW

Toputourresponsibilitiestothecommunitiesweserveattheheartofwhatwedo

7.7%Emissions reduction from our baseline portfolio of buildings

£64m+Donated to local charities and good causes

Weworkhardtobeagoodneighbourinthecommunitiesaroundourstoresandprovidealeadershiproleontheenvironment.Buildingalong-termsustainablebusinessiscrucialtoourfuturesuccess.

Wewanttobehighlyvaluedbyourlocalcommunitiesandthisyear,wehavemadegoodprogresswithourcommunitypromises:

• Buyingandsellingourproductsresponsibly;

• Caringfortheenvironment;

• Providingcustomerswithhealthychoices;

• Activelysupportinglocalcommunities;and

• Creatinggoodjobsandcareers.

Buying and selling our products responsibly

Weworkinpartnershipwithoursupplierstoensureourproductsaresourcedresponsibly.

WecontinuetoengagewithoursuppliersthroughourTradingFairlyprogramme.InBangladesh,ChinaandSouthAfrica,wehelpsuppliersandstakeholdersaddresslocalandnationalchallenges.

Wehavelistenedtoourcustomersandknowthatmanyofthemwanttobuylocallysourcedproducts.ThisyearintheUK,wehavereachedsalesof£1billionforlocalproducts.

Caring for the environment

Asoneoftheworld’slargestretailers,wehaveaclearresponsibility–andasignificantopportunity–toprotecttheenvironment.Ouraimistocreatemoresustainablewaysofdoingbusiness.

Ourglobaldirectcarbonfootprintin2010/11was5.44milliontonnesofCO2e(carbondioxideequivalent).Thisyear,wecontinuedtodecoupleourbusinessgrowthfromthegrowthinourcarbonemissions:whileournetsalesareagrewby8.8%,ourcarbonfootprintincreasedbyonly1.7%.

Thisyear,weopenedourfirstinternationalzero-carbonstoreinJaromer,CzechRepublic,andcompletedtwomorezero-carbonstoresintheUK,inWelshpoolandBourne.

Providing customers with healthy choices

Wewanttohelpourstaffandcustomerstoleadhealthylives.Asaglobalbusiness,weknowthat‘healthylives’meandifferentthingsinourdifferentmarkets.

Wehaveaclearroletoplayinmakinghigh-qualityfoodsaffordabletoeveryone,andingivingcustomerstheinformationtheyneedtomakehealthyfoodchoices.Wecanalsouseourtrustedbrandtoencourageourstaffandcustomersacrosstheworldtoadopthealthy,activelifestyles.

Wecurrentlyhave100%nutritionlabellingoneligibleown-brandfoodlinesinallofourmarkets.Lastyear,weencouragedover7.2millionstaffandcustomerstogetactiveacrosstheworld–exceedingourtargetsinallourmarkets.

Actively supporting local communities

WewantTescotobemorethanastoretothestaffandcustomerswholiveinthecommunitiesaroundourstores.

Wehaveexceededourtargetofdonatingatleast1%ofpre-taxprofitstocharitiesandgoodcauses.Intotal,thismeansthatwehavedonatedover£64millionthisyear.Wehavealsoraised£7.2millionforourUKCharityoftheYear,CLICSargent.

WearecontinuingtorolloutourCommunityChampions–Tescoemployeeswhospendaproportionoftheirweekcoordinatingactivitiesintheirlocalcommunities.Wenowhaveover650CommunityChampionsacrosstheGroup.

Creating good jobs and careers

Wehaveover290,000employeesacrosstheUK,makingusthebiggestprivate-sectoremployerinthismarket,andover492,000worldwide.Wearededicatedtoprovidingdiversecareeropportunitiesforallourstaffworldwide–frompositionsinstores,torolesforstoremanagers,buyers,accountantsandlawyers.Thisyear,weincreasedthetotalnumberofstaffintheGroupby21,000.

Thisyear,wedevelopedeightnewRegenerationPartnerships–bringingthetotalto35storesandaround4,000jobsforlong-termunemployedpeople.


BUsIness ReVIeW

Community at the heart of what we do

schools of extenDeD eDucation

in south Korea, we celebrated the opening of our 100th school of extended education and took our total to 107 in the year. our south Korean schools provide people with a place to get involved in a variety of activities from dance classes to cooking.

940,000+PlacesatourSchools

ofExtendedEducationinSouthKoreathisyear


tesco value anD finest in the uK

the popularity of our Pillar brands with customers has meant that tesco value has become the second largest food brand in the uK – ahead of coca-cola – with sales of more than £1 billion a year.

tesco value is only pushed into second place by tesco finest. more than half of our customers buy from the finest range on a regular basis, from finest spectacles to finest restaurant collection ready meals. £1bn

BothFinestandValuenowsell

morethan£1bneachyear


Tobeacreatorofhighlyvaluedbrands

What’s the benefit to both our stakeholders and our Company of building brands?

Bybuildingstrongbrandsthroughourownproducts,weoffercustomersincreasedvalue,choiceandquality.Customerstrustourbrands.Theyareloyaltoourbrandsbecausetheyknowwhattoexpectfromthemandwhattheystandfor.Withwines,forexample,theFinestlogohelpscustomerstopickoutagoodqualityoptionwithouthavingtobeaconnoisseur.

StrongProductandPillarbrandsgiveusakeypointofdifferentiationfromourcompetitorsandenableustocontinuetomeetthechangingneedsofourcustomers.Oncecustomersunderstandthevaluesthatourbrandsstandfor,theyaremorelikelytotrustinourabilitytodiversifyintonewserviceareas.Infinancialservices,forexample,withTescoBankwe’vebroughtstraightforwardandgood-qualitybankingsolutionsbasedontheneedsofourcustomerstoamarketcharacterisedbycomplexityandpoorcustomerservice.

Whereverweoperatewesupportlocalcommunities,theircausesandtheenvironment.Throughinitiativessuchasour

CommunityChampionsprogramme,GetHealthywithTescoLotusinThailandandtheUKTescoGreatSchoolRun,we’reknowntobeagoodneighbour.Bybenefitinglocalcommunities,ourbrandhastakenonnewmeaningamongstakeholders–thatofaresponsibleretailer.

Bydevelopingabrandreputationforofferinggreatvalueandservicetocustomersandbeingaresponsiblememberofthecommunity,wecanattractgreatpeopletoworkforus.Asaresponsibleandflexibleemployerwithatrackrecordofdevelopingtalentwithinthebusiness,Tescoisalsoseenasagreatplacetobuildacareer.

Theincreasedemotionalandfunctionalloyaltyfromcustomers,staffandcommunitiesgeneratedbyourbrandbuildinghascontributedtoTescobecomingaprofitable,sustainablegrowthopportunityforshareholderstoinvestin.InvestmentprovidesuswithfurtheropportunitiestobuildanddevelopourbrandsacrosstheGroup,inturnallowingustodiversifytothebenefitofcustomers,staff,communitiesandshareholders.

Homeplusreceived South Korea’s Most Admired Company award in October 2010

a brand is a promise, a set of fundamental principles that define a product or business. it is an intangible representation of what a company stands for in the minds of its customers and other stakeholders.

Pillar brandsProduct brands

Retail brands

Phone Shop


BUsIness ReVIeW

Building brands

Tobuildourteamsothatwecreatemorevalue

£105.5m Value of shares awarded under Shares In Success

75%We pay at least 75% of employee medical, dental, prescription and vision costs in the US

Wetreatpeoplehowweliketobetreated.WewantourpeopletoenjoyworkingatTesco.Ourpeopledoagreatjobeachandeverydaybygivingourcustomersthebestpossibleshoppingtrip.

Bycreatinganopenenvironmentoftrustandrespect,ourpeoplefeelsupported,theysharetheirknowledgeandexperienceandworkhardtogiveourcustomersgreatservice.

Wesupportourpeople,trustingintheirabilitytodeliverwhilehelpingthemtoreachtheirfullpotential.Weencourageourpeopletolearnonthejobandtakeresponsibilityfromdayone.

Everyyear,webuildourplansfortheyeararoundourPeoplePromises.Wewantallofourpeopleacrossallofourmarketsto:

• betreatedwithrespect;

• haveanopportunitytogeton;

• haveamanagerwhohelpsthem;and

• haveaninterestingjob.

It’sthroughourPeoplePromisesandourbenefitspackagethatweareproudtosaythatourpeoplestaywithusforalongtime.AroundhalfofourDirectorpopulationhasatleast12years’service.

Inrecognitionoftheimportanceofpeopleacrossourbusiness,ourGroupPersonnelDirector,AlisonHorner,isnowpartofourExecutiveCommittee.AlisonisagreatexampleoftalentdevelopedinTesco,with12yearsofexperienceacrossthebusinessinbothPersonnelandOperations.

Recruitment and growth

AsTescogrowsanddiversifies,weareabletooffermorejobstopeopleinthecommunitiesaroundourstores,depotsandoffices.Thisyearwehaverecruited21,000peopleworldwide.

Ourgraduateprogrammesfasttrackgraduatetraineeswithhighpotentialintoleadershippositions.Thisyearwehaverecruitedaround140CommercialgraduatesintoUKandCentralEuropeanbuyingandgeneralmerchandiseroles–thelargestnumberofCommercialgraduatesthatwehaveemployedsincetheprogrammebegan.Thisispartofourongoingcommitmenttoinvestinfutureleaders.

talent and promotions

OneofourPeoplePromisesis‘anopportunitytogeton’.Wepromisetosupportanddevelopourpeoplethroughouttheircareers.

Wewantthewomeninourteamstoachievetheirfullpotential.Inthelastfouryearsthenumberoffemaledirectorshasincreasedbynearly70%acrosstheGroup,andwehavethreewomenonourBoard.

Building capability

Aspartofourongoingcommitmenttobuildingcapability,weareinvestingintheTescoAcademy.OurAcademysupportsthedevelopmentofourpeoplethroughtrainingcourses,networkingopportunitiesandmentoring.

InJuly,wewillopenourzero-carbonAcademycentreinIncheon,SouthKorea.AsiaisarapidlygrowingregionforTescoandtheAcademywillhelpustobuildcapabilityinthearea.

InChina,ourStoreManagerProgrammehasbeencreatedsothatwecanrecruitanddeveloppeopletobecomeourfutureStoreManagers.TheprogrammestartedinOctober2010with22candidatestakingpart.

Rewards and benefits

Ourpeopledoagreatjobforourcustomersandwewantthemtofeelvaluedandrewarded.Weinvestinpayand,intheUK,wehavethehighestpayratesforcustomerassistantsofanymajorsupermarket.

Acrossallofourmarkets,weofferawiderangeofcompetitivebenefits.IntheUS,wepayatleast75%ofmedical,dental,prescriptionandvisioncosts.IntheUKwehaveanopendefinedbenefitpensionschemewhichisgreatlyvaluedbyourstaffandrareamongFTSE100companies.

ShareownershipincentiveschemeshelpourstafftogettheirownpersonalstakeinTesco.216,000staffsharedatotalof£105.5millionwhentheShares|nSuccessschemematuredin2010.


Building our team

BUsIness ReVIeW

career DeveloPment

we believe that home-grown managers make valuable business leaders because they understand our culture and approach. our new ceo, Philip clarke, is an example of this, having started work at tesco part-time as a schoolboy. across the business, we currently have almost 30,000 people on development programmes, gaining the knowledge, leadership skills and qualifications for their next role.

30,000Peopletrainingfor

theirnextrole


Principal activity and business reviewTheprincipalactivityoftheGroupisretailingandassociatedactivitiesintheUK,China,theCzechRepublic,Hungary,theRepublicofIreland,India,Japan,Malaysia,Poland,Slovakia,SouthKorea,Thailand,TurkeyandtheUS.TheGroupalsoprovidesretailbankingandinsuranceservicesthroughitssubsidiary,TescoBank.ThesummaryoftheGroupfinancialsisonpages33to35.

DividendsTheDirectorsrecommendthepaymentofafinaldividendof10.09pperordinaryshare,tobepaidon8July2011tomembersontheRegisteratthecloseofbusinesson3May2011.Togetherwiththeinterimdividendof4.37pperordinarysharepaidinDecember2010,thetotaldividendfortheyearwillbe14.46pcomparedwith13.05pforthepreviousyear,anincreaseof10.8%.

DirectorsDetailsofthecurrentmembersoftheBoardareshownonpage36.

GarethBullockandStuartChambersjoinedtheBoardon3July2010.TheywillofferthemselvesforelectionandtheotherDirectorswillofferthemselvesforre-electionattheAnnualGeneralMeetingon1July2011.

Corporate governanceTescoPLCiscommittedtothehigheststandardsofcorporategovernance.

TheBoardconsidersthatTescoPLCcompliedinallrespectswiththeCombinedCodeonCorporateGovernancefortheyearended26February2011withtheexceptionofprovisionA.3.2,inrespectofwhichtheCompanywasnotincomplianceforpartoftheyear,andcompliedwiththenewUKCorporateGovernanceCodeinallrespectswiththeexceptionofprovisionsB.1.2andB.6.2.

ProvisionsA.3.2andB.1.2requirethatatleasthalfoftheBoard,excludingtheChairman,shouldcompriseNon-executiveDirectorsdeterminedbytheBoardtobeindependent.TheBoardrecognisestheimportanceofabalancedboardwithanappropriatelevelofindependence.TheBoardhadonemoreExecutivethanNon-executiveDirectors(excludingtheChairman)betweenJuly2010andtheendofthefinancialyear.FollowingSirTerryLeahy’sretirementandtheappointmentofPhilipClarkeashissuccessorasCEOinMarch2011,thereisnowanequalnumberofExecutiveandindependentNon-executiveDirectorsandtheBoardisagainbalancedandcompliantwiththisprovision.

ProvisionB.6.2ofthenewUKCorporateGovernanceCoderequiresthateverythreeyearsthereshouldbeanexternallyledevaluationoftheBoard’sperformance.TheBoardusuallycarriesoutanexternalBoardevaluationeverythreeyears,withinternalevaluationsintheinterveningyears.Thelastexternalevaluationtookplacein2007andanexternallyfacilitatedevaluationwouldnormallyhavetakenplacethisyear.GiventheextensiveBoardandseniormanagementchangestakingplaceitwasdecidedthatitwouldbemoreappropriatetoconductaninternalevaluationprocessandtocarryoutanexternallyfacilitatedprocessnextyearoncethesechangeshavehadanopportunitytobedin.

AfullcorporategovernancestatementiscontainedintheAnnualReportandFinancialStatements2011.

summary report of the Directors on remuneration

Remuneration policyItistheroleoftheRemunerationCommitteetodetermineandrecommendtotheBoardtheremunerationpolicyfortheChairmanandExecutiveDirectors.Tescohasalong-standingpolicyofvaluingtalentandexperienceandseekstoprovideincentivesfordeliveringhigh,sustainableandprofitablegrowthwhichleadstoastrongincreaseinvalueforshareholders.Theremunerationstrategyistailoredtorewardthedeliveryofstrongyear-on-yearearningsgrowthaswellassustainedperformanceinthelongerterm.TheRemunerationCommitteehasreviewedourexecutiveremunerationarrangementsinlightofourstrategy,ouroperationalgoalsandthefeedbackfromshareholders.Whilstwebelievethatourremunerationarrangementsarebroadlycompetitiveandoperatewell,theCommitteehasfoundopportunitiestosimplifyandre-balancewhereappropriate.FulldetailsarecontainedintheAnnualReportandFinancialStatements2011.

ComplianceIncarryingoutitsduties,theRemunerationCommitteegivesfullconsiderationtobestpractice.TheCommitteewasconstitutedandoperatedthroughouttheyearinaccordancewiththeprinciplesoutlinedintheListingRulesoftheFinancialServicesAuthorityderivedfromtheCombinedCodeonCorporateGovernance.TheRemunerationreporthasbeendrawnupinaccordancewiththeCombinedCodeonCorporateGovernance,Schedule8oftheLargeandMediumSizedCompaniesandGroups(AccountsandReports)Regulations2008andtheFinancialServicesAuthorityListingRules.TheRemunerationReportalsocomplieswiththedisclosuresrequiredbytheDirectors’RemunerationReportRegulations2002.

AsummaryofDirectors’emolumentsandinterestsissetoutonpages31and32.ThefullRemunerationReportisprovidedintheAnnualReportandFinancialStatements2011.


sUMMARy FInAnCIAl stAteMent

summary report of the Directors

Independent auditors’ statement to the members of tesco PlC WehaveexaminedthesummaryfinancialstatementwhichcomprisestheSummaryConsolidatedIncomeStatement,SummaryConsolidatedBalanceSheet,SummaryGroupCashFlowStatement,SummaryreportoftheDirectorsandSummaryreportoftheDirectorsonremunerationsetoutonpages30to35.

Respective responsibilities of directors and auditors ThedirectorsareresponsibleforpreparingthesummarisedAnnualReviewandSummaryFinancialStatementinaccordancewithapplicableUnitedKingdomlaw.

OurresponsibilityistoreporttoyououropinionontheconsistencyofthesummaryfinancialstatementwithinthesummarisedAnnualReviewwiththefullannualfinancialstatements,theReportoftheDirectorsandtheDirectors’RemunerationReportanditscompliancewiththerelevantrequirementsofsection428oftheCompaniesAct2006andtheregulationsmadethereunder.

WealsoreadtheotherinformationcontainedinthesummarisedAnnualReviewandconsider

theimplicationsforourstatementifwebecomeawareofanyapparentmisstatementsormaterialinconsistencieswiththesummaryfinancialstatement.TheotherinformationcomprisesonlytheChairman’sstatement,theChiefExecutive’sreviewandtheotheritemslistedonthecontentspage.

Thisstatement,includingtheopinion,hasbeenpreparedforandonlyforthecompany’smembersasabodyinaccordancewithsection428oftheCompaniesAct2006andfornootherpurpose.Wedonot,ingivingthisopinion,acceptorassumeresponsibilityforanyotherpurposeortoanyotherpersontowhomthisstatementisshownorintowhosehandsitmaycomesavewhereexpresslyagreedbyourpriorconsentinwriting.

WeconductedourworkinaccordancewithBulletin2008/3issuedbytheAuditingPracticesBoard.Ourreportsonthecompany’sfullannualfinancialstatementsdescribethebasisofourauditopinionsonthosefinancialstatements,theReportoftheDirectorsandtheDirectors’RemunerationReport.

opinion Inouropinionthesummaryfinancialstatementisconsistentwiththefullannualfinancial

statements,theReportoftheDirectorsandtheDirectors’RemunerationReportofTescoPLCforthe52weeksended26February2011andcomplieswiththeapplicablerequirementsofsection428oftheCompaniesAct2006,andtheregulationsmadethereunder.

PricewaterhouseCoopers llPCharteredAccountantsandStatutoryAuditorsEmbankmentPlace6May2011

notes: (a)ThemaintenanceandintegrityofTescoPLC

websiteistheresponsibilityofthedirectors;theworkcarriedoutbytheauditorsdoesnotinvolveconsiderationofthesemattersand,accordingly,theauditorsacceptnoresponsibilityforanychangesthatmayhaveoccurredtothefullannualfinancialstatementsorthesummaryfinancialstatementsincetheywereinitiallypresentedonthewebsite.

(b)LegislationintheUnitedKingdomgoverningthepreparationanddisseminationoffinancialstatementsmaydifferfromlegislationinotherjurisdictions.

Directors’ emoluments Fixedemoluments Performance-relatedemoluments

Salary£000

Benefits3

£000

Short-termcash

£000

Short-termdeferredshares

£000

total 2010/11

£000

Total2009/10

£000

executive Directors

RichardBrasher 825 40 765 632 2,262 2,402

PhilipClarke 825 38 765 632 2,260 2,701

AndrewHigginson 825 65 765 632 2,287 2,724

SirTerryLeahy 1,432 77 1,328 1,386 4,223 5,220

TimMason–basesalary1 825 376 716 649 2,566 3,616

TimMason–supplement1 200 – 172 156 528 649

TimMason–total 1,025 376 888 805 3,094 4,265

LaurieMcIlwee 752 57 765 632 2,206 1,789

LucyNeville-Rolfe 625 83 574 474 1,756 1,809

DavidPotts 825 86 765 632 2,308 2,708

non-executive Directors

CharlesAllen2 35 – – – 35 95

GarethBullock2 52 – – – 52 –

PatrickCescau 109 – – – 109 89

StuartChambers2 64 – – – 64 –

RodneyChase2 49 – – – 49 135

KarenCook 80 – – – 80 77

HaraldEinsmann2 28 – – – 28 77

KenHanna 92 – – – 92 79

KenHydon 98 – – – 98 95

DavidReid(Chairman) 629 64 – – 693 677

JacquelineTammenomsBakker 76 – – – 76 65

Total 8,446 886 6,615 5,825 21,772 25,007

1 TimMason’ssalaryismadeupofabasesalaryandanon-pensionablesalarysupplement(shownseparately).TimMason’sbenefitsaremadeupoftravel,medical,tax-relatedcostsandservicesandfreesharesawardedundertheallemployeeShareIncentivePlan(SIP).PaymentsinrelationtotaxequalisationonequityawardsgrantedpriortohisappointmentasUSCEOtotalling£768,000arenotincludedinthetableabove.

2 GarethBullockandStuartChamberswereappointedduringtheyear.Thefiguresinthetableabovearefromtheirdatesofappointment.CharlesAllen,RodneyChaseandHaraldEinsmannretiredduringtheyear.

3 WiththeexceptionofTimMason,benefitsaremadeupofcarbenefits,chauffeurs,disabilityandhealthinsurance,staffdiscount,gym/leisureclubmembershipandfreesharesawardedundertheallemployeeSIP.UndertheSIP,sharesintheCompanyareallocatedtoparticipantsintheschemeuptoHMRCapprovedlimits(currently£3,000perannum).TheamountofprofitallocatedtotheschemeisdeterminedbytheBoardtakingintoaccountCompanyperformance.


Disclosable interests of the Directors, including family interests

Optionsheldat27February20101

(oronappointmentiflater) Granted Exercised Lapsed

Valuerealisedduring2010/11

£000

options held at 26 february

20111,3

Ordinarysharesat26February

20112

executive Directors

RichardBrasher 2,044,136 909,721 1,298 45,567 2 2,906,992 1,220,793

PhilipClarke 2,849,105 907,282 219,123 45,567 871 3,491,697 1,824,638

AndrewHigginson 2,849,105 907,282 219,123 45,567 949 3,491,697 1,349,712

SirTerryLeahy 10,639,425 1,791,369 2,997,330 79,819 5,175 9,353,645 7,075,849

TimMason 1,159,489 387,638 1,298 0 2 1,545,829 3,876,520

LaurieMcIlwee 743,466 739,584 0 0 0 1,483,050 222,301

LucyNeville-Rolfe 1,417,358 681,078 1,298 29,919 2 2,067,219 452,886

DavidPotts 2,849,105 909,721 786,050 45,567 977 2,927,209 1,851,253

non-executive Directors

CharlesAllen4 – – – – – –

GarethBullock4 – – – – – –

PatrickCescau – – – – – –

StuartChambers4 – – – – – 5,500

RodneyChase4 – – – – – –

KarenCook – – – – – –

HaraldEinsmann4 – – – – – 355,984

KenHanna – – – – – –

KenHydon – – – – – 30,093

DavidReid – – – – – 194,337

JacquelineTammenomsBakker – – – – – –

total 24,551,189 7,233,675 4,225,520 292,006 7,978 27,267,338 18,459,866

1 OptionstoacquireordinarysharesshownabovecompriseoptionsheldundertheExecutiveShareOptionschemes,DiscretionaryShareOptionPlan,SaveAsYouEarnscheme,andnilcostoptionsunderthePerformanceSharePlan(PSP),ExecutiveIncentivePlan(EIP)andGroupNewBusinessIncentivePlan.

2 OrdinarysharesshowninthistableincludesharesheldundertheShareIncentivePlanandsharesheldunderapromiseawardedunderthePSP,EIPandUSLongTermIncentivePlan.

3 Theexercisepriceofoutstandingoptionsrangesfrom0pto473.75p.4 CharlesAllen,RodneyChaseandHaraldEinsmannretiredfromtheBoardon2July2010.GarethBullockandStuartChamberswereappointedon3July2010.



summary report of the Directors

Group sales,includingVAT,increasedby8.1%to£67.6billion.Atconstantexchangerates,salesincreasedby6.6%(includingpetrol)and6.0%(excludingpetrol).

Group trading profitwas£3,679million,up7.8%onlastyearandGrouptradingmargin,at6.0%,increasedby4basispoints.Underlying profit before taxroseto£3,813million,anincreaseof12.3%.Beforeproperty,underlyingprofitbeforetaxgrewby12.2%.Onastatutorybasis,Group operating profitroseby10.2%to£3,811million.Group profit before taxincreased11.3%to£3,535million.

net finance costsincreasedto£333million(£314millionlastyear).However,beforethenon-cashIAS19,32,and39adjustments,actualnetinterestcostfellby£83millionto£334million.Thisreflectsthecontinuedreductioninnetdebt.

TotalGroup taxhasbeenchargedataneffectiverateof24.4%(lastyear26.4%).ThisreductionwaslargelydrivenbyareductionintherateofUKcorporationtax,andalowerJapanimpairmentthanlastyear.Weexpectthetaxratefor2011/12tobebroadlyunchanged.

Cash Flow and Balance sheet.Netdebtreducedto£6.8billion,aheadofourtargetof£7.0billion,helpedbystrongcashgenerationintheseasonallyimportantsecondhalfoftheyear.Duringtheyear,werepaid£926millionofourdebtearlyandrepaid£777millionofmaturingbonds.Thestrengthofourproperty-backedbalancesheetwasagaindemonstratedthroughcontinuedstronginvestordemandforourpropertysaleandleasebacktransactionsduringtheyear.

Weexpectnetdebttofallfurtherintheyearsahead.Lookingatourliabilitiesintheround,wewillbefocusingmoreonfixedchargecoverasourprimarybalancesheetmetric,whichwearetargetingtokeepbetween4and4.5times.Wealsoaretargetingaratioof2.5timeslease-adjustednetdebttoEBITDAR*whichrepresentsasimilarleveltowherewewerepriortotheHomeverandTPFacquisitions.

Groupcapital expenditure intheyearwas£3.7billion(lastyear£3.1billion),alittlehigherthanourexpectationatthebeginningoftheyear,mainlyasaresultofexchangeratemovements.CapitalexpenditureintheUKwas£1.7billion,withanadditional£0.2billionintheBank,principallyforthere-platformingofoursystems,and£1.8billioninInternational.Forthe2011/12yearweplantoinvestaround£4.0billionincapitalexpenditureandgoingforwardweexpectannualcapitalexpendituretototalbetween5%and5.5%ofGroupsales.

GroupReturn on Capital employed(ROCE)increasedsubstantially–to12.9%(lastyear12.1%).Weexpecttodeliverourtargetincreaseof200basispoints,onour2005/6baseof12.6%,by2014/15,takingROCEto14.6%.Thisincreasewillbedrivenpredominantlybyoperationalimprovement–growthinassetturnoverandmargin–combinedwithimprovedcapitalefficiency(workinprogressreleaseandourpropertyprogramme).Bygeographyandbusinesssegment,theincreasesinROCEwillbebroadlybased,comingfromAsia,Europe,theUS,theUKandTescoBank.

TheBoardhasproposedafinal dividendof10.09ppershare,takingthefull-yeardividendto14.46p.Thisrepresentsanincreaseof10.8%onlastyear’sfull-yeardividend,whichisinlinewiththegrowthinunderlyingdilutedearningspershareatconstanttaxrates.Itisalsothe27thconsecutiveyearofdividendincrease.Thefinaldividendwillbepaidon8July2011toshareholdersontheRegisterofMembersatthecloseofbusinesson3May2011.

*EBITDARdefinedasstatutoryprofitbeforeinterest,tax,depreciation,amortisationandrent.



Group financials

summary Group income statementyear ended 26 february 2011

52 weeks2011

£m

52weeks2010

£m

continuing operations

revenue (sales excluding vat) 60,931 56,910

Costofsales (55,871) (52,303)

Gross profit 5,060 4,607

Administrativeexpenses (1,676) (1,527)

Profitarisingonproperty-relateditems 427 377

operating profit 3,811 3,457

Shareofpost-taxprofitsofjointventuresandassociates 57 33

Financeincome 150 265

Financecosts (483) (579)

Profit before tax 3,535 3,176

Taxation (864) (840)

Profit for the year 2,671 2,336

attributable to:

Ownersoftheparent 2,655 2,327

Non-controllinginterests 16 9

2,671 2,336

earnings per share

Basic 33.10p 29.33p

Diluted 32.94p 29.19p

non-GaaP measure: underlying profit before tax

52 weeks2011

£m

52weeks2010

£m

Profitbeforetax 3,535 3,176

Adjustmentsfor:

IAS32andIAS39‘FinancialInstruments’–fairvalueremeasurements (19) (151)

IAS19‘EmployeeBenefits’–non-cashGroupIncomeStatementchargeforpensions 113 24

IAS17‘Leases’–impactofannualupliftsinrentandrent-freeperiods 50 41

IFRS3‘BusinessCombinations’–intangibleassetamortisationchargesandcostsarisingfromacquisitions 42 127

IFRIC13‘CustomerLoyaltyProgrammes’–fairvalueofawards 8 14

IAS36‘ImpairmentofAssets’–impairmentofgoodwillarisingonacquisitions 55 131

Restructuringcosts 29 33

Underlyingprofitbeforetax 3,813 3,395



Group financials

summary Group balance sheet 26 february2011

£m

27February2010

£m

Non-currentassets 35,337 34,258

Currentassets(includingnon-currentassetsheldforsale) 11,869 11,765

Currentliabilities (17,731) (16,015)

Netcurrentliabilities (5,862) (4,250)

Totalassetslesscurrentliabilities 29,475 30,008

Non-currentliabilities (12,852) (15,327)

net assets 16,623 14,681

Equityattributabletoownersoftheparent 16,535 14,596

Non-controllinginterests 88 85

total equity 16,623 14,681

Balance sheetNetassetshaveincreasedby£1,942millionto£16,623million.Non-currentassetsincreasedby£1,079million,afterchargingdepreciationandamortisationof£1,420million.

Groupcapitalexpenditurewas£3.7billion.UKcapitalexpenditurewas£1.7billion.TescoBankcapitalexpenditurewas£0.2billion.Totalinternationalcapitalexpenditureroseto£1.8billion;£1.0billioninAsia,£0.6billioninEuropeand£0.2billionintheUS.IntheyearaheadweforecastGroupcapitalexpendituretobearound£4.0billion.

summary Group cash flow statementyear ended 26 february 2011

52 weeks2011

£m

52weeks2010

£m

Cashgeneratedfromoperations 5,366 5,947

Interestpaid (614) (690)

Corporationtaxpaid (760) (512)

net cash from operating activities 3,992 4,745 net cash used in investing activities (1,859) (1,877) cash flows from financing activities

Dividendspaidtoequityowners (1,081) (968)

Othernetcashflowsfromfinancingactivities (1,955) (2,639)

net cash from financing activities (3,036) (3,607)

Reconciliation of net cash flow to movement in net debtyear ended 26 february 2011

52 weeks2011

£m

52weeks2010

£m

Netdecreaseincashandcashequivalents (903) (739)

InvestmentinTescoBank (446) (230)

EliminationofnetincreaseinTescoBankcashandcashequivalents 56 (167)

Debtacquiredonacquisition (17) –

Netcashoutflowtorepaydebtandleasefinancing 2,870 2,780

DividendreceivedfromTescoBank 150 150

(Decrease)/increaseinshort-terminvestments (292) 81

Increaseinjointventureloanreceivables 159 45

Othernon-cashmovements (438) (249)

Decrease in net debt in the year 1,139 1,671

Openingnetdebt (7,929) (9,600)

Closingnetdebt (6,790) (7,929)

NB.Thereconciliationofnetcashflowtomovementinnetdebtnoteisnotaprimarystatementanddoesnotformpartofthecashflowstatementbutformspartofthenotestothefinancialstatements.


1

1. David Reid–64Non-executiveChairmanDavidReidbecameNon-executiveChairmanon2April2004.PriortohisappointmenthewasDeputyChairmanofTescoPLCandhasservedontheTescoBoardsince1985.DavidisaNon-executiveDirector(SID)ofReedElsevierGroupPLCandChairmanofbothKwik-FitGroupandWhizz-Kidz.InNovember2010DavidwasappointedoneofPrimeMinisterDavidCameron’sBusinessAmbassadors.

2. Philip Clarke–50GroupChiefExecutivePhilipClarkewasappointedtotheBoardon16November1998.PriortohisappointmentasCEOinMarch2011hewasAsia,Europe&ITDirectorandhaspreviouslyheldanumberofrolesinstoreoperations,commercialandmarketing.

3. tim Mason–53DeputyGroupCEOandCMOandCEOFresh&EasyTimMasonhasbeenPresidentandChiefExecutiveOfficer,Fresh&EasyNeighborhoodMarketsinceJanuary2006andbecameDeputyGroupCEOandChiefMarketingOfficerinMarch2011.HewasappointedtotheBoardon16February1995.HejoinedTescoin1982.

4. Richard Brasher –49CEO–UKandROIRichardBrasherwasappointedtotheBoardon15March2004.HejoinedTescoin1986.Hehasheldanumberofmarketing,commercialandstoreoperationspositions,mostrecentlyBoardCommercialDirector,beforebeingappointedUKandROICEOinMarch2011.

5. Andrew Higginson–53CEO–RetailServicesAndrewHigginsonwasappointedtotheBoardon17November1997.PriortohisappointmentasChiefExecutiveofRetailingServicesinJuly2008hewasGroupFinanceandStrategyDirector.HeisChairmanofTescoBankandaNon-executiveDirectorofBSkyBplc.

6. laurie McIlwee–48ChiefFinancialOfficerLaurieMcIlweewasappointedtotheBoardon27January2009.HejoinedTescoin2000asUKFinanceDirectorandbecameDistributionDirectorin2005.LaurieisaCharteredManagementAccountant.

7. lucy neville-Rolfe, CMG–58ExecutiveDirector(CorporateandLegalAffairs)LucyNeville-RolfewasappointedtotheBoardon14December2006.ShejoinedTescoin1997fromtheCabinetOffice.SheisDeputyChairoftheBritishRetailConsortium,aNon-executiveDirectorofITVplcandtheCarbonTrustandamemberoftheChinaBritainBusinessCouncil,theUKIndiaBusinessCouncilandtheCorporateLeadersGrouponClimateChange.

8. David Potts–53CEO–AsiaDavidPottswasappointedtotheBoardon16November1998.HejoinedTescoin1973.From1997hedirectedtheintegrationofourbusinessesinNorthernIrelandandtheRepublicofIrelandbeforereturningtotheUKin2000asDirectorresponsibleforUKRetailOperations.From2004,David’sresponsibilitiesalsoincludedtheUKSupplyChainandtheRepublicofIreland,beforebeingappointedCEOAsiainMarch2011.

9. Patrick Cescau–62SeniorIndependentDirector10. Gareth Bullock–57Non-executiveDirector11. stuart Chambers–55Non-executiveDirector12. Karen Cook–57Non-executiveDirector13. Ken Hanna–57Non-executiveDirector14. Ken Hydon–66Non-executiveDirector15. Jacqueline tammenoms Bakker–57Non-executiveDirector16. Jonathan lloyd –44CompanySecretary

Directors’agesasat26February2011.

2 3 4 5 6

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8

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9

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our Board of Directors

Financialyearend2010/11 26February2011Finalex-dividenddate 27April2011Recorddate 3May2011Q1InterimManagementStatement June2011AnnualGeneralMeeting 1July2011Finaldividendpaymentdate 8July2011Half-yearend2011/12 27August2011InterimResults October2011Q3InterimManagementStatement December2011ChristmasandNewYearTradingStatement January2012Financialyearended2011/12 25February2012

Pleasenotethatdatesareprovisionalandsubjecttochange.

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Financial calendar

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Documents

Tesco plc Annual Review and Summary Financial … — TESCO PLC Annual Review and Summary Financial Statement 2011 Chief executive’s review benefit the performance and competitiveness