Page 4


Chairman’s statement

(Photo of Charlie Mayfield Chairman)

This was a year of profound change across the Partnership and the resilience and flexibility of our business model has underpinned a market leading performance. We have continued to invest, innovate and grow, emerging from the recession in a stronger competitive position.

Waitrose has made enormous progress in the year with significant investment in both price and in the development of new shops, new formats and strategic partnerships. This, combined with the tremendous success of essential Waitrose has made the Waitrose brand more accessible to more customers in more parts of the United Kingdom. Each week up to 400,000 more people are now choosing to shop at Waitrose.

Momentum in John Lewis built through the year as our uncompromising commitment to quality, service and value throughout the recession paid dividends. This, together with strong growth in multichannel and online operations and our increasing strength and reputation in fashion were key contributors to a successful year. The first “John Lewis at Home” in Poole traded ahead of expectations giving us confidence that this new format has demonstrated the potential for further expansion.

Partners have shown tremendous commitment during changing times. I am therefore delighted that our Partners have shared fairly in the financial rewards of a successful year with a Partnership bonus of £151.3 million which means that all our 72,000 Partners received a bonus of 15% of their salary, equivalent to nearly 8 weeks pay.

2010/11 Outlook

After eleven weeks, Partnership gross sales are 13.9% higher than last year. Waitrose gross sales have increased by 12.2% (3.1% like-for-like) and John Lewis sales are 17.2% higher than last year (14.5% like-for-like).

During March 2010 we made a one-off cash contribution of £150m into the pension fund.

We anticipate more challenging trading conditions in 2010, particularly in the second half of the year. The possible withdrawal of monetary stimulus, higher taxes, the potential for increased interest rates and the implications of public spending cuts make for an uncertain outlook which is likely to impact on consumer confidence. However, the Partnership’s ownership model enables us to focus on the long term and to push ahead with our plans even in difficult market conditions. We remain confident that we can continue to build on the momentum gained this year and will progress with restructuring plans to ensure the Partnership is able to deliver our future ambitions.

We will continue to offer outstanding service and innovative, quality products as we invest in new shops and formats, and expand and develop our multi-channel offer.

Our co-ownership model has been the subject of much attention this year, and while it is not a universal panacea, it clearly underpins the Partnership’s performance. Co-ownership creates a culture of healthy competition by sharing information openly, fosters a long term approach by making management accountable to Partners and rewards Partners fairly for their individual contribution to our collective success.

It is the framework within which our Partners’ energy, innovation and commitment drives the success and the sustainability of our business.

Charlie Mayfield

Chairman

19 April 2010