CtW Investment Group Calls on Tesco Director to Address U.S. Pay and Performance Failures at Friday's AGM

WASHINGTON, June 30, 2010 - The CtW Investment Group has called on Patrick Cescau, incoming Senior
Independent Director of Tesco PLC (London: TSCO), to step forward at Tesco's
July 2nd Annual General Meeting to address investor concerns with the poor
performance of Tesco's U.S. business and the excessive pay of its U.S. chief
executive, Tim Mason. The board's failure to link Mr. Mason's pay to U.S.
performance is expected to result in significant shareholder opposition to
the Directors' Remuneration at the AGM. The full text of yesterday's letter
from CtW to Mr. Cescau is below:

June 29, 2010

    Mr. Patrick Cescau
    Senior Independent Director
    Tesco PLC
    Tesco House
    Delamare Road
    Cheshunt, Hertfordshire EN8 9SL
    United Kingdom

Dear Mr. Cescau,

We call on you, as incoming Senior Independent Director, personally to
step forward at Tesco's Annual General Meeting this Friday to describe the
steps the board of directors is taking to exercise independent oversight of
Fresh & Easy and restore the link between pay and performance for its chief
executive, Tim Mason.

Poor performance and inadequate disclosure at Tesco's U.S. venture are at
the heart of mounting investor concerns over the board's strategic oversight
and commitment to transparency and pay for performance. Last week's report in
the Financial Times that Tesco has acquired two key suppliers to Fresh & Easy
has only exacerbated these concerns; by approving the acquisitions, Tesco's
board is effectively doubling down on a U.S. venture whose viability is
increasingly in question.

As incoming Senior Independent Director, it is incumbent upon you to
address these concerns before they further erode investor confidence in the
board. And as a member of the board's Audit and Remuneration committees, you
are well-positioned to do so. The specific issues we would like you to
address at the AGM include:

    - the steps the board has taken independently to assess the viability of
      Tesco's U.S. business strategy, including its recent decision to acquire
      the two suppliers;
    - the performance metrics and targets that the board will disclose going
      forward to allow shareholders to evaluate Fresh & Easy's future
      performance;and
    - the steps the board has taken to ensure that Mr. Mason's incentive pay,
      and that of other senior executives, will be tied to appropriate
      metrics that are both measurable and disclosed.

The CtW Investment Group works with pension funds sponsored by unions
affiliated with Change to Win, a coalition of U.S. unions representing nearly
six million members. These funds have over US$200 billion in assets and are
substantial long-term Tesco shareholders.

As you may know, CtW has urged Tesco shareholders to vote against the
Directors' Remuneration Report at the AGM, based on the Remuneration
Committee's acute failure to link Mr. Mason's pay directly with U.S.
performance and its apparent modification of previously established
performance targets. Based on recent discussions, we believe many of Tesco's
institutional investors share our concerns, both with the Remuneration Report
and with broader issues of strategic oversight and disclosure with respect to
Fresh & Easy. We detail these concerns further below.

The Need for Greater Transparency on Fresh & Easy's Targets and
Performance

Since first announcing its Fresh & Easy venture, Tesco's board has been
unduly reluctant to disclose the unit's performance targets or acknowledge
the setbacks it has experienced, which have been serious. Fresh & Easy lost
165 million pounds Sterling in the last fiscal year, on the heels of a 140
million pounds Sterling loss in the previous year. As you know, Tesco
previously projected that Fresh & Easy would break even by the end of 2009.
Additionally, despite Tesco's claim that Fresh & Easy is enjoying sales of
US$11 per square foot per week, we estimate that actual weekly sales are
closer to US$9 per square foot.

In the face of these disappointing results, the Remuneration Committee
awarded Mr. Mason increased "performance related" pay specifically tied to
the U.S. business. During the 2009/2010 fiscal year his total remuneration
grew from 3.8 million pounds Sterling to over 4.2 million pounds Sterling, or
by nearly 13%. This 480,000 pounds Sterling increase was entirely accounted
for by increases in short-term cash and preferred share awards which,
according to the Remuneration Committee, are supposed to be tied to
operational performance for which Mr. Mason is responsible. Over the past
fiscal year, when Fresh & Easy's trading loss deteriorated by 18%, the short
term component of Mr. Mason's performance related pay grew from 1.8 pounds
Sterling million to 2.3 million pounds Sterling, or by 27%.

Fresh & Easy's continuing performance and disclosure problems have eroded
the confidence of independent analysts and investors alike. Last month, MF
Global downgraded Tesco from Neutral to Sell in part because Tesco's "U.S.
strategy lacks credibility and transparency."(1) A month earlier, Citigroup's
Food Retail analyst asked "Should owners of Tesco be calling for a U.S.
exit?" While noting that Fresh & Easy's cash consumption is small compared to
the company's resources globally, Citigroup's analyst warned that "there is
no end in sight to the drag [Fresh & Easy] exerts."(2)

The apparent decisions to abandon the U.S. market by 2 Sisters and Wild
Rocket Foods, Tesco's principal meat and produce suppliers, are the latest
votes of no confidence in the U.S. venture's viability. As a consequence,
Tesco was apparently compelled to buy out the suppliers' U.S. operations.
Given that both firms are major suppliers to Tesco globally and established
their U.S. operations solely to supply Fresh & Easy, we can only conclude
that they did not arrive at their exit decision lightly. We can only assume
these effective insiders saw the writing on the wall and concluded that Fresh
& Easy was unlikely to achieve critical mass to be viable.

Adding to our concern is the fact that the two acquisitions represent a
departure from Tesco's historic approach to retailing. Tesco has generally
eschewed direct ownership of suppliers, preferring instead to forge long-term
relationships with suppliers who are committed to meeting Tesco's standards
for quality and timely delivery. The commitment to long-term supplier
relationships has allowed Tesco to maintain a high level of influence over
the standards its suppliers adhere to, without having to undertake the costs,
complications, and distractions of vertical integration.

Summary

Shareholders have long been concerned by the failure of Tesco's
management and board to provide shareholders with concrete targets by which
to judge the viability of the U.S. venture and the performance and
compensation of its chief executive, Tim Mason. But there is no question that
Fresh & Easy has grown much more slowly than planned and has continued losing
money when it was supposed to break even. With its two key suppliers
abandoning the U.S. market, the need to provide shareholders with full
disclosure of concrete performance and compensation metrics has become acute.

By stepping forward at Friday's AGM, not only can you assure shareholders
of the board's commitment to enhance disclosure and re-establish the link
between pay and performance at Tesco, but you can also take an important step
toward restoring investor confidence in the board's independent oversight of
Tesco's business strategy.

We look forward to your response.

Sincerely,

    William Patterson
    Executive Director

Cc: Tesco PLC Board of Directors

** Note: For additional information or comment please contact Michael
Garland at michael.garland@changetowin.org or visit
www.ctwinvestmentgroup.com. **

NOTES:

(1) "The Point of No Returns" MF Global Equity Research Report on Tesco,
May 5, 2010. p. 1.

(2) "Tesco: The Year Ahead Might Be Difficult Too," Citi Food Retail
Report, April 21, 2010, p. 4-5.

Michael Garland of Change to Win, +1-212-471-1317