STICHTING INVESTOR CLAIMS AGAINST TESCO (the "Foundation") is a Dutch foundation incorporated under Article 3:305a of the Dutch Civil Code (“DCC”) and representing the interests of all of its members (i.e. the Tesco shareholders) collectively.

To download the Deed of Incorporation click here.

The Foundation's Purpose

The purpose of the Foundation is to protect the interests and rights of all investors in Tesco PLC (“Tesco”), one of the world’s largest retailers, particularly regarding the compensation of investor losses sustained as a result of Tesco's misleading and/or insufficient communication. In particular this concerns, but is not limited to, the false and/or misleading statements stemming from the overstatements of profits, the recognition of profits and expenses, and the failure to disclose material facts about Tesco’s business, operations, prospects, as well as its financial reporting in the Relevant Period.

Tesco’s share price continuously dropped as more news about its accounting practices emerged: executives were suspended, market share was lost, and the overstatement was revised. When the first profit warning was issued in August 2014, the Tesco stock price dropped 7.3% in one day (from £248.10 on August 28, 2014 to £229.95 on August 29, 2014), followed by another drop of 11% in September (from £229.60 on September 19, 2014 to £203.00 on September 22, 2014). With the final disclosure on October 23, 2014 the stock price dropped an additional 8.3% (from £186.50 on October 22, 2014 to £171.00 on October 23, 2014). In total, in excess of £10 billion in Tesco’s market capitalization value has been erased as a result of the various disclosures in connection with its accounting irregularities.

The Foundation seeks to represent the interests of investors as well as the Representatives and Participants with respect to improving corporate governance at Tesco, seeking a determination of liability and discovery of the false and/or misleading statements, the failure to disclose material facts about the Tesco business, operations, prospects, as well as its financial reporting and condition, including but not limited to the economic consequences for investors, i.e., the destruction of market capital and, thus, the damages caused to investors.

The Foundation also seeks to assist Tesco shareholders with an investigation into avenues, jurisdictions and remedies for relief in the form of compensation to such Tesco investors in and outside of the Netherlands for any losses resulting from financial consequences of the stock price drop. The Foundation specifically seeks to assist those Tesco shareholders who have purchased Securities during the period between 2010 and 2014, but at least between January 1, 2012 to November 30, 2014 (the "Relevant Period"), or any longer period to be subsequently determined in connection with the same allegations, and who have incurred losses as a result of a fall in prices of these securities due to misleading and/or insufficient communication by Tesco.

Tesco's False and Misleading Statements

In April 2014, Tesco’s CFO Laurie McIlwee resigned. Just two months later, in July 2014, his replacement as CEO, Philip Clarke, also resigned. These resignations started a period of so-called “house cleaning” announcements, the latest of which was on October 23, 2014.

The relevant disclosures to the investing public started with an August 29, 2014 profit warning followed by heavy trading (130.29 million shares) and a sell-off by one of Tesco’s major investors. On September 22, 2014, Tesco disclosed that it had overstated its expected profits for the first half of 2014 (period ending August 22, 2014) by £250 million. It admitted that it had improperly accelerated the recognition of income while at the same time delaying the accrual of certain costs.

On October 1, 2014, the UK Financial Conduct Authority announced an investigation into the accounting irregularities at Tesco. The investigation has since been taken over by the UK’s Serious Fraud Office, which announced a criminal investigation on October 29, 2014. The Financial Reporting Council is also considering whether to take regulatory action. Media reports suggest that details of the profit overstatement were provided to recently appointed Chief Executive Dave Lewis by an internal “whistleblower” who may have been an employee within Tesco’s finance department. This whistleblower may have previously alerted senior management of Tesco to the same accounting issue, both without any appropriate reaction by management.

On October 23, 2014, Tesco issued its interim results for the first half of 2014, which included findings by Deloitte that raised the previous £250 million overstatement to £263 million. Of the increased overstatement amount, £145 million was allocated to profit overstatements in prior years’ financial statements (i.e., £70 million to 2013/14 and £75 million to pre-2013/14). These were all treated as one-off items within the reported results. Following the various disclosures, Moody’s Credit Agency downgraded Tesco’s short and long-term credit rating on October 23, 2014, also leading to a drop in Tesco’s debt securities.

Important Developments in the Tesco Matter

In the end of October 2014, the UK’s Serious Fraud Office (the “SFO”) launched a probe into the Tesco alleged accounting irregularities. The FCA dropped its inquiry given the SFO’s decision to intervene.

In January 2015, the senior long-term credit rating was reduced from BBB- to BB+, the lowest investment grade level, by S&P. The outlook was said to be stable, indicating the rating is unlikely to be changed again soon.

The Foundation’s Plan of Action

The foundation presents an ideal venue for Tesco and any additional defendants to settle its accounting related liabilities by utilizing the Dutch WCAM mechanism to enter into a binding pan-European class action settlement. For this reason, and given the Foundation’s directors’ past experience with such matters, a Dutch Foundation was formed under the applicable Dutch Civil Code Section 3:305a. Given the steadily increasing number of institutional participants as well as the amount of shares represented by its participants numbering in the hundreds of millions, the Foundation is representative in nature and therefore able – if Tesco so desires – to resolve all of Tesco’s non-U.S. shareholder liabilities related to the current accounting irregularities on a pan-European basis well in advance of the running of the applicable English statute of limitations in 2020.

Any resulting settlement, negotiated and executed by the Dutch Foundation for its members (Tesco shareholders), and ultimately approved by the Amsterdam Court of Appeals based on considerations of fairness and proper representation, would be binding on all Tesco shareholders with potential non-U.S. claims, unless they affirmatively opted-out of such a settlement within a prescribed time period (with all risks involved in such affirmative opt out action). All members of the Dutch Foundation are confidential and not subject to any litigation or other financial risks.

If the foundation cannot reach a settlement, then it will prepare for the ultimate English litigation by gathering further evidence from the U.S. ADR class action and the ongoing investigations in England, and assist its members in the filing of the English litigation. To this extent, the Foundation has already secured local UK solicitors and a well-respected QC for the representation of all investors on a success-fee basis, without any cost or other risks involved.

Tesco Investors Who Are Encouraged To Support the Foundation

Institutional investors who purchased Tesco common stock (ISIN: GB0008847096) during the Relevant Period are encouraged to join the Foundation as a Participant as soon as possible and, thereby, support the Foundation’s initiatives and purpose. Investors also include U.S. investors who purchased Tesco common stock outside the U.S. stock exchanges.

Participation in the Foundation is confidential and carries no financial risk or obligation to pay with it. Submitting a Participation Agreement also does not make any investor a party to any litigation, and is merely intended to provide the Foundation the required representative capacity under Dutch Law to act as representative body and also enter into and execute any class-wide settlement agreements on behalf of the protected Non-U.S. Investor class.

Recent Developments

As Tesco is a UK-based company, its shares trade primarily on the London Stock Exchange. Nevertheless, in addition to the shares traded on the LSE, the company also has American Depositary Receipts that trade over the counter in the U.S. On October 22, 2014, a number of plaintiffs initiated a lawsuit in the Southern District of New York on behalf of investors who purchased Tesco ADRs in the U.S. between February 2, 2014 and September 22, 2014. The complaint alleges that through a variety of misrepresentations during the class period, the defendants violated the U.S. securities laws. The complaint asserts that the company’s share price dropped 12% following the disclosure of the accounting irregularities on September 22, and fell a total of 43% from its high during the class period.