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Annual Report and Accounts 2009/10 nulRpr n cons2009/10 Accounts and Report Annual

Hello, what brings you to our store today? Contents

Directors’ Report Financial Statements

Business Overview 63 Independent Auditors’ Report 1 Welcome 64 Consolidated Income Statement 2 Customer Plan 65 Consolidated Statement of Comprehensive 12 Group at a Glance Income and Expense 14 Highlights 66 Consolidated Balance Sheet 15 Chairman’s Statement 67 Consolidated Cash Flow Statement 16 Chief Executive’s Statement 68 Consolidated Statement of Changes in Equity Strategic Summary 69 Notes to the Consolidated Financial 20 Group Overview Statements 21 Key Performance Indicators (KPIs) 114 Company Balance Sheet 22 Risks to Achieving the Group’s Objectives 115 Company Cash Flow Statement Performance Review 116 Company Statement of Changes in Equity 24 Overview 117 Notes to the Company Financial 26 UK & Statements 28 Nordics 29 Other International Information for Shareholders 31 e-commerce 32 Group Financial Summary 126 Five Year Record 35 Corporate Responsibility Review 128 Shareholder Information Corporate Governance 129 Index 40 Board of Directors 41 Executive Committee 42 Statutory Information 45 Corporate Governance Report 49 Audit Committee Report 51 Nominations Committee Report 52 Remuneration Report 62 Directors’ Responsibilities

Cautionary statement Certain statements made in this Annual Report and Accounts are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or results referred to in these forward-looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Nothing in this Annual Report and Accounts should be regarded as a profit forecast.

Front cover Kristina Luropa, Combined 2-in-1 & PC World Megastore, Fulham, Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 1

Annual Report and Accounts 2009/10 DSG international plc

and get the Ulrika Gedin Barkaby, El Giganten Megastore, Customer service is at Customer service the heart of everything want to we do. We the help you choose for your product right needs most out of it. Welcome Directors’ Report: Business Overview “It’s an exciting place to be – and shopping is so easy.”

Signage 10,000 Our new formatformat storesstores Our Megastores stock have betterbetter signagenavigation to up to 10,000 products. helpand signageyou find yourto help product. you We make sure that there find your product. is always availability, especially on the most popular items.

Clarity We are improving our point of sale information, making it easier to see the features and benefits, as well as compare products.

2 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 3 Bilal Chudhary Staples CornerPC World, Annual Report and Accounts 2009/10 plc DSG international Brands are All the best products clearly visible in distinct making it easier to areas, you want. find the products Our 2-in-1 Currys & give stores PC World you the best of both brands with more all expertise across categories. Together more. they offer Combined 2-in-1 Currys & PC World Megastore, Fulham, London Fulham, Megastore, & PC World Combined 2-in-1 Currys We are transforming our stores. Clearer signage and better navigation makes and better navigation signage Clearer our stores. transforming are We With for your needs. on playtables, find the right product it easier to products stations gaming audio rooms, TV demonstrations, to try out, with 3D up powered to be. an exciting place is plenty that makes our stores there and experts on hand, Directors’ Report: Business Overview “We’re here to help you work out what’s right for you.”

Play With all our products powered up and available to road test, come and try before you buy to make sure you get the best product for your needs.

We have improved our ranges to give you great choices and our FIVES training means we can help you better, as well as explaining the features and benefits.

Ben Edwards Combined 2-in-1 Currys & PC World, Hemel Hempstead, Herts

4 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 5 Annual Report and Accounts 2009/10 Choice Wider ranges mean more to suit choice of products your needs. DSG international plc Value to value Our commitment you can get the ensures and best price in our stores on our websites. Our price means we won’t promise be beaten on price. . Help ticket information More and ‘How to Choose’ combined with boards, our colleague training, will help you choose the right product Digital cameras ready to try before you buy to try before Digital cameras ready We’re really interested in working out what’s right for you. Using our innovative FIVES service model, FIVES service you. Using our innovative right for working out what’s in interested really We’re help you make knowledge to product better with great your needs able to understand are our colleagues the appreciating are that our customers important is most out of it. What’s and get the the right choice our likely or very likely to recommend saying they are making, with 87% of customers changes we’re the shopping improve to do and we will continue to still more There’s to their friends and family. stores shop with us. every day however they wish to trip for our customers Directors’ Report: Business Overview “People appreciate great service wherever they are.”

Share We are improving the shopping trip for our customers in all of our operations across , helping us to grow market share.

UK & Ireland Nordics Other International

6 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 7 Claudia Zanzarri Combined UniEuro & PC City Megastore, Muratella, Rome, Italy Annual Report and Accounts 2009/10 DSG international plc We are rolling out best rolling are We each practices from Europe operation across our customers an to offer unbeatable combination of value, choice and service. Combined UniEuro & PC City Megastore, Muratella, Rome, Italy PC City Megastore, & Combined UniEuro As an international Group, our customers, wherever they are, benefit from the benefit from they are, As an international wherever our customers, Group, all the best bits taking are We the business. making across we are improvements the store improving are We Group. our them across and sharing of our businesses Megastores knowledge, as well as introducing ranges and product environments, Europe. across services in all our operations better after-sales and providing Directors’ Report: Business Overview “It’s easier than ever to shop online.”

Navigate We are revamping our websites, making them easier to navigate and to see the features and benefits of all the exciting products available today.

e-commerce

8 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 9 Annual Report and Accounts 2009/10 Great deals Our websites make it easy deals and to see the great packages we have for to you or delivery direct for you to pick up in store. DSG international plc Reserve & Collect Combining the ease of the internet with the convenience of our stores choice gives you greater of how you shop with us. is Europe’s leading specialist electrical retailer, operating in 26 countries, in 26 countries, operating retailer, specialist electrical leading is Europe’s PIXmania e-merchant, operating platform, market leading it has the good reason, and with With scale. ranges and great friendly navigation, customer the Group’s leveraging this platform out to our other rolling are information we deals and better product customers are Currys.co.uk and PCWorld.co.uk websites. Our .co.uk, websites. this with improved benefiting from already Directors’ Report: Business Overview “We make things work and keep them working.”

Recycle We’ll even take away your old product and recycle it for free.

We offer the UK’s biggest range of after-sales services, from next-day delivery to home set-up and support, as well as fix and repair facilities.

Sandeep Gurram TechGuys, Watford

10 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 11 Annual Report and Accounts 2009/10 facility in the UK repaired over facility in the UK repaired We 1 million TVs last year. have over 2,500 engineers operation, in our TechGuys to help you. all there Install have re-engineered We our delivery and installation your network to ensure can be up and product running as soon as it is delivered. Fix Our new state-of-the-art DSG international plc

Advice online or at home, In-store, on the phone, our TechGuys to help. here are

Technology gets more Technology complicated every day. can help you get your We up and running product and show you how to get the most out of it. Set-up We have made significant improvements to our after-sales services. You can now You services. to our after-sales improvements have made significant We day in a to suit you, next or at a time for free either delivered products have your home with your even follow you we’ll our Megastores, at slot or, time three-hour that you a wider choice of services to ensure have also introduced We product. the unfortunate does happen, we’re and when your product get the most out of get it sorted quickly and smoothly. on hand to help you Directors’ Report: Business Overview Group at a Glance

Underlying sales by division ■ UK & Ireland £4,013.5m ■ Nordics £2,093.7m ■ Other International £1,503.2m ■ e-commerce £921.2m

Our brands Description Highlights

Currys is the UK’s largest specialist The UK & Ireland operations are the focus of the most significant electrical retailer. changes under the Renewal and Transformation plan. 156 stores had been transformed by the end of the financial year, 12 of PC World is the UK and Ireland’s biggest which are Megastores under the Currys and combined Currys specialist computing retailer. & PC World formats.

We operate from High Street stores, Superstores The multichannel offering provides customers with the convenience and Megastores. Currently most of our stores of online and accessibility of stores, particularly through the operate under one brand. We are opening reserve&collect facility. combined 2-in-1 Currys & PC World stores, bringing the benefits of both brands in one Improvements are being made to the services we offer to convenient location to our customers. customers with a wider range, including online storage, installation and repair. We now offer the UK’s leading delivery and installation stores are based at airports and operation with options ranging from next day delivery in three hour the Eurotunnel terminal. time slots to free delivery, as well as a free recycling option.

TechGuys is the UK’s leading help and support Dixons Travel is expanding its brand overseas with operations now open service for electrical and computing products. in Rome airport and is identifying further opportunities across Europe. UK & Ireland

Elkjøp is the leading specialist electrical retailer Elkjøp is famous for customer service with an efficient centralised across the Nordics. operation. It has been able to leverage its leading market positions across the Nordics and grow market share during the year. Elkjøp and Lefdal stores operate in , El Giganten in Sweden and and It is reformatting all its stores as well as rolling out Megastores Gigantti in . across its markets with 16 now open. Nordics

Kotsovolos is Greece’s leading specialist , with its strong market position, has been improving electrical retailer. the offer for customers while controlling costs and stock in a difficult economic environment. In Italy, we operate UniEuro electrical stores with some as combined 2-in-1 UniEuro & The turnaround of the operations in Italy has made significant PC City stores. progress with an improved store portfolio, better stock availability and an improving sales and margin performance. In the Czech Republic and Slovakia, we operate under the brand. The operations in the Czech Republic and Slovakia have been streamlined and are now well positioned to exploit a recovery In Spain, PC City is the leading specialist in consumer demand in those markets. computing retailer. The operations in Turkey continue to go from strength to strength. In Turkey, we operate the Electro World brand It has now launched a franchise operation to provide an additional with a local joint venture partner. opportunity for growth in that market. Other International

PIXmania is a pan-European electrical e-tailer PIXmania has been growing its market positions across Europe operating in 26 countries. while leveraging the benefits of being part of the DSGi Group.

Dixons.co.uk is one of the leading UK electrical Dixons.co.uk was relaunched on the PIXmania e-merchant platform e-tailers. during the year enabling it to offer customers an improved online shopping experience. e-commerce

12 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 13 Employees 7,296 7,573 1,413 sq ft Annual Report and Accounts 2009/10 area per store area Average selling Average DSG international plc ’000 sq ft Selling space Stores es only es Stores and online presence Stores only Online presence Stor Countries we operate in Countries ■ ■ £million 921.2 – – – Underlying sales 1,503.2 323 4,719 14,610 2,093.7 269 4,061 15,097 4,013.5 683 7,889 11,551 22,323 www.pixmania.com www.dixons.co.uk www.kotsovolos.gr www.unieuro.it www.pccity.es www.electroworld.cz www.electroworld.gr www.currys.co.uk www.pcworld.co.uk www.pcwb.co.uk www.techguys.co.uk www.elkjop.no www..se www.elgiganten.dk www.gigantti.fi www.lefdal.com Websites Directors’ Report: Business Overview Highlights

Underlying Group sales(1) EBIT(4) £million £million

2009/10 8,531.6 2009/10 133.2 2008/09 8,180.2 2008/09 83.0

2007/08 8,292.2 2007/08 217.5

2006/07 7,730.1 2006/07 291.0

2005/06 6,875.9 2005/06 299.3

Underlying profit before tax(2) Underlying diluted earnings per share(2)(5) £million Pence

2009/10 90.5 2009/10 1.5 2008/09 56.1 2008/09 1.0

2007/08 230.5 2007/08 7.4

2006/07 312.6 2006/07 10.1

2005/06 325.8 2005/06 10.4

Note: references relate to definitions on page 25.

14 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 15 Annual Report and Accounts 2009/10 DSG international plc I efforts would like to thank our management team for their during the progress and the contribution they have made to our the customer focus and resolution They have the strategy, year. years ahead. in the continued long term progress to ensure it not would have been in vain were Of course, their efforts responsible who are for our 39,000 colleagues in the Group above all, our interaction with customers. I would like to for, they have made congratulate every colleague for the progress work. and thank them for their hard to amend the Group’s approval seeking shareholder are We to harness order name to Dixons plc in the registered delivers on the of the Dixons name as the Group strength profitability. plan and improves Renewal and Transformation with suppliers, the market strongly The Dixons name resonates and colleagues in a way that DSG internationalnot been has brand. Further able to without significant investment in the is set out in the accompanying information on this proposal notice of annual general meeting. selected two national charities to support, the Group This year, Lifelites and the e-Learning Foundation, which help to provide access to technology for disadvantaged or disabled children. of our colleagues, who have organised so many I am very proud ‘Send a fundraising activities, including supporting Blue Peter’s Smile’ campaign as well as raising money for the DEC Haiti appeal. Sir John Collins for his I would like to thank my predecessor Our thanks also go to service and contribution to the Group. at last Board the from Count Emmanuel d’André, who retired the Board from who retired AGM, and John Whybrow, year’s their I would like to thank them both for this year. in March wish We significant contribution as non-executive directors. them well. and Tim Utho Creusen How Dr. I would like to welcome Prof. Both Utho and Timas non-executive directors. bring significant track records with proven management experience to the Group sector. in the retail John Allan Chairman Chairman . John Allan Our Renewal and Transformation plan is and Transformation Our Renewal our customers, for the Group improving and our shareholders. our colleagues

Directors’ Report: Directors’ Overview Business

I was delighted to be appointed your new Chairman in I was delighted to be appointed your new an excellent year September 2009 and am pleased to report business make making to the changes we are The of progress. enjoyable a much simpler and more shopping at our stores have also made significant improvements experience. We during and after the point of before, to our service offering a truly market These changes will enable us to offer purchase. for our customers. leading value, choice and service proposition in all our markets has been The economic environment it is encouraging to However, the year. challenging throughout plan Transformation see all the work under the Renewal and the performance of the business and our starting to improve in particular in the second half. The operations for the year, results with our a good trading result delivered in the UK and Nordics and improved share market us with greater customers rewarding making The turnaround of the business in Italy is profitability. Spain, Turkey, our operations in Greece, and good progress, performed well. and Dixons Travel Central Europe with over offer strides in our online made great have We £1.4 billion of sales now transacted over the internet, through play internetour pure operations of PIXmania and Dixons.co.uk our multi-channel internetas well as through operations. Our choice as to how they gives customers greater offering broad online or a combination of both, shop with us, either in-store, with the convenience of reserve&collect for their support in I would like to thank our shareholders the Placing and Rights our capital base through strengthening with the financial the Group Issue in April 2009. This provided to allow further investment in the Renewal and resources from to emerge is enabling the Group plan and Transformation position. Since then we have in a much stronger the recession of the balance sheet through the strength continued to improve an intense focus on cash generation and stock management. In May this year we announced that we had successfully our bank facilities. renegotiated by will inevitably be impacted to some degree Short term progress economic and political the uncertain UK and Continental European plan the Renewal and Transformation through However, prospects. positive as we improve we should have the momentum to remain the business for customers and shareholders. and focused management team strong have an extremely We ably led by a very talented and determined Chief Executive. Chairman’s Statement Chairman’s Directors’ Report: Business Overview Chief Executive’s Statement

To provide an unbeatable combination of value, choice and service, we have put the customer at the heart of everything we do.

John Browett Chief Executive

We are two years into an intense period of work and progress Our colleagues in the Nordics are already well versed in these under our Renewal and Transformation plan. We have made principles. Customers are increasingly recognising the great significant changes to the business. This year we really started experience they get in our stores across the region and are to see the benefits. With the customer at the heart of everything rewarding us with greater market share and higher profitability we do, we are offering an unbeatable combination of value, in our Elkjøp Group. We will be developing these colleague choice and service. training programmes across all our Continental European operations to share best practice in customer engagement. For clarity on our goals for customers, we have established the core purpose of the Group as ‘bringing life to technology’. The We will also be improving the information available to stores simple principle is to make technology exciting and accessible to ensure they can better match colleague rostering with for our customers, helping them to choose the right product customer footfall. for their needs and then to get the most out of it once they get home. In order to deliver on our core purpose and to constantly It’s an exciting place to be focus the business and our colleagues on the customer we We have now transformed over 200 stores across the Group. have developed our ‘Customer Plan’. Under each customer The new formats provide a layout that is easier to shop, more promise there lies a detailed programme of work to assist in the contemporary in look and feel as well as enabling customers delivery of the Renewal and Transformation plan and achieve to try products before they buy through the use of improved our target of an EBIT return on sales of 3%-4%. I would like to shop fittings, such as playtables. Also, by improving ranges and share with you some of the great work we are doing under each working with suppliers we can make our shops more appealing element of the Customer Plan. and showcase technology that makes a difference. This year we carried out a detailed analysis of our store portfolio They’re interested in working out what’s right for me in the UK to determine the ideal footprint of stores that will best We must give every customer trusted and great advice whenever serve customers’ needs. This is a combination of High Street they come into our stores. Our colleague training programme stores, Megastores and combined 2-in-1 Currys & PC World called FIVES gives our people good product knowledge and Superstores. Our long term goal is to get to 500 stores in the skills. Our selling service is broken down into five parts so that UK with up to 70 Megastores, 330 Superstores, the majority we understand a customer’s needs, match the appropriate of which will be combined 2-in-1 stores, and up to 100 High product to those needs and also help the customer understand Street stores. Our Megastores create a real destination for our the features and benefits to ensure they get the most out of their customers where they can experience the widest range of product. All our colleagues in the UK have already been through electrical products under one roof. Our combined 2-in-1 Currys FIVES training and many are now going through additional & PC World Superstores bring the expertise of PC World to programmes to reinforce our approach. more locations alongside the strength of the Currys brand in We have also improved our product training, often with the consumer electrical and white goods. support of manufacturers. We have new methods to help our Outside the UK, we are also reformatting stores using the same colleagues understand the products in our stores and to ensure principles as we have developed for Currys and PC World as they can provide detailed information to our customers. well as trialling and rolling out Megastores.

16 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 17 y hop eas Annual Report and Accounts 2009/10 s Store to s citing It’s s Store an ex place to be facility, that allows customers to browse facility, It’s DSG international plc s Product I can get what I want when I want it reserve&collect re customers better understand the features and benefits of the customers better understand the features ‘customer journeys’ also introducing to ensure are We products. customers have all they need to get the most out of their products when they get them home. Our for on our websites and then reserve and choose products continues to be popular and a convenient store, collection from all our platforms we aim to make this demonstrates how across it an easy shopping trip for customers. right ted in ing out tomer for me Plan They’ Colleagues what’s work s intere

Cus

Value are good are The prices e e ing s Problem brilliantly eep They deal work with queries and complaints s t Purcha and k They mak things Pos them work e for our customers to choose the right product. e It’s easy to shop It’s websites make it easier layout and improved Our new store than ever befor and ticketing information to help signage improving are We We have also improved our websites in the UK using PIXmania’s have also improved We platform. Our customers on the web market leading e-merchant navigation and information, improved now have better product layouts making it easier for customers to find the easier screen after. they are products Directors’ Report: Chief Executive’s Statement continued Business Overview

I can get what I want when I want it The prices are good We have improved ranges to ensure we have the best product As the market leader in many of our markets, we are able in stock for customers’ needs. We are constantly listening to to leverage our international presence and size to allow us and learning from our customers to help us develop ranges to offer our customers great deals at great prices every day. further. Of course, we need to ensure that the product is always We constantly monitor prices in our markets and on the internet available and so we have improved our logistics infrastructure to to ensure we are always one step ahead of our competitors. reduce complexity and increase availability. True availability is at The DSGi brands must be famous for value and we will record levels. This work has also enabled us to hold more stock continuously improve the prices we offer customers. All this in the centre to ensure the products are always in the right place is backed up by our market leading price promise to refund for the customer, as well as enabling us to increase the turnover 110% of the difference if a customer finds the same product of our stock, improving working capital. We have made significant cheaper elsewhere. progress, but we will be making further improvements in the year ahead. They make things work and keep them working Our TechGuys are available to help our customers get their We have introduced choices on delivery for customers which products working and keep them working. From in-store advice range from next day three hour timed delivery slots, to free to installation and set-up at home, from telephone and internet delivery, to even a ‘follow-me-home’ service at our Megastores. advice to repair, we are committed to helping our customers Our services team have done a fantastic job of making sure with issues and problems they encounter with the electrical we get it right first time for customers, and if there is an issue, products they use. This year we have built a state of the art resolving it quickly to ensure the customer gets their product facility in Newark for TV and laptop repairs. Consequently, when we say they will. We have introduced data and processes we have significantly improved the service we can offer while to ensure customers are informed of when we are on the way to reducing costs. For example, we have now reduced the repair them to help them plan their day around the expected delivery. time for TVs to less than six days. As a result, we are achieving a 99.8% success rate on first or second delivery. We will continuously strive to improve this, but We have introduced practices and processes to keep we now operate the UK’s leading home delivery and installation customers informed of deliveries and repairs and our Premier service for electricals. Club support agreement even provides customers with a loan TV or laptop while it is away for repair. The scale at which we operate in this area gives us a unique competitive advantage. Our customers can trust us to provide them with expertise and help with whatever challenge they face. It also enhances the trust and brand perception of Currys and PC World. Outside of the UK, the repair and service functions operate differently market by market. However, we will, over time, use the learnings from the UK across the rest of Europe.

Working with suppliers our new store formats are great places to showcase the latest technology.

18 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 19 The new combined Currys & PC World provide 2-in-1 stores customers with the range, expertise and authority of both brands in one convenient location. Annual Report and Accounts 2009/10 oughout the year. We expect these conditions We oughout the year. DSG international plc Outlook has remained Europe across The economic backdrop challenging thr to continue throughout the coming year in many of our markets, the coming year in many to continue throughout will come under consumer spending where particularly in the UK for this well prepared are We fiscal tightening. from pressure for the offer and continue to focus on improving environment costs, margins, stock turncustomers while managing and cash plan, and Transformation given the Renewal Consequently, flow. will continue to improve. profitability Group customer remains Despite all the economic uncertainties the at the heart of all that we do. John Browett Chief Executive esult, we now own the contact with customers esult, we now own the They deal with queries and complaints brilliantly They deal with queries back decision to bring our call centre This year we made the in house. As a r have made the We or query. when they have a problem of why cause analysis using root Through simpler. processes the need for reducing contacting us, we are customers are a customer does have an issue we are them to do so. When to take ownership of the issue empowering our colleagues satisfactory resolution. to achieve a swift and Customer doing under the we are The majority of the work we see the greatest Plan has been focused on the UK where for the the business and profitability opportunity to improve for our shareholders. benefit of not just our customers but also across in our operations the stores improving While we are we also see opportunities for many elements of the the Group Our businesses the Group. Customer Plan to be used right across that we can bring to outside the UK also have many practices so we can the Group these across the UK. Our aim is to share be best in class in all our businesses. made a significant amount of change, particularly in have We and I am pleased to say that our customers are the last year, our mystery from starting to notice. Satisfaction measures rising and, for the first shops and exit interviews in the UK are scoring us as time, we now have over 80% of our customers experience. This being ‘satisfied’ or ‘very satisfied’ with their the business has been on where is a significant improvement to do. I am also pleased to but we still have more historically, in with a 80% increase see that our advocacy is improving our stores now very likely to recommend customers who are to their friends and family. Directors’ Report: Strategic Summary Group Overview

The objectives of the Group are described in the Chief Executive’s Statement on pages 16 to 19. Overview of products and services

Products The market in which the Group operates The principal products sold by the Group are categorised as brown goods, white goods, computing products and mobile phones. Specialist electrical retailers are the predominant destination for customers in the European market. Buying groups, general Brown goods include: vision products, such as televisions and merchants and independents also have a retail presence across DVD players; audio products, such as stereos, iPods and MP3 Europe. The market is served by a relatively small number of players; imaging products, such as cameras and camcorders; global manufacturers supplying goods to local, regional, national gaming products, such as games consoles; and related and international retailers. essentials and accessories. The internet delivers enhanced product information and White goods include: major domestic appliances such as facilitates price comparability for consumers. Whilst this creates washing machines, dryers, refrigerators, freezers as well as gas new challenges, it also provides a significant opportunity. The and electric cookers; and small domestic appliances such as Group believes that over time internet demand will polarise microwave ovens, vacuum cleaners, kettles, coffee makers, towards the larger retailers with scalable distribution and systems, toasters, irons and bread makers. together with proven after-sales service and support. Computing products include desktop computers, laptop computers, iPads, netbooks, printers and a wide range of related essentials and accessories. Principal activities Mobile phones include pre-paid and contract mobile phones, DSGi is a specialist electrical and computing retailer which sells mobile broadband modems and related accessories. consumer electronics, personal computers, domestic appliances, Brown goods, computing products and mobile phones are photographic equipment and communication products. It is generally characterised by rapid technological advances that offer a multi-channel retailer, selling products in stores, over the major improvements in quality, functionality, interactivity and design. internet and by phone and provides product support services White goods tend to benefit from innovation, fashion and improved to customers. It also undertakes business to business (B2B) design and are typically heavily dependent on the replacement sales and services. cycle in most markets. The Group is organised into four divisions: UK & Ireland, In addition to selling third party branded products, the Group sells Nordics, Other International and e-commerce. Each division a number of own-branded products such as Advent in computing. offers a full range of the Group’s products and services. The activities of each division are described as follows: Services ■ UK & Ireland division comprises UK & Ireland Electricals The Group offers a broad range of product support services. and UK Computing. Both UK & Ireland Electricals and UK The most important of these, which represent a substantial Computing engage in multi-channel retail sales and provide proportion of the revenue from support services provided by product support services to their customers. In addition, UK the Group, are customer support agreements for repairs and Computing also engages in B2B sales of computer hardware, protection against breakdown and mishap, and after-sales software and services; support for products bought from the Group. In addition, the Group provides a range of technical support, repair, installation ■ Nordics division, which operates primarily in Norway, Sweden, Finland and Denmark, engages in multi-channel retail sales and and other services, predominantly in relation to computing provides related product support services to its customers. It products. The Group also offers a range of home delivery and also engages in B2B sales of computer hardware, software and installation services for its products, including deliveries within services. Across the region, the division operates a successful specified time frames, collection of customers’ old appliances, franchise business, typically in smaller markets; appliance installation as well as television installation and set-up. In the UK these services are provided through a network of ■ Other International division comprises operations in Italy, customer service centres: TechGuys clinics in PC World stores; Greece, Spain, Turkey, the Czech Republic and Slovakia. laptop and TV repair centres; and a dedicated TechGuys The Other International division engages in retail sales (including telephone support team. The Group also has arrangements multi-channel sales in some countries) and provides related with a number of third parties for the repair of products product support services to its customers in all its markets. purchased at DSGi stores, particularly white goods. It also engages in B2B sales of computer hardware, software and services in Italy, Spain and Greece and has franchise operations in Italy and Greece; and ■ e-commerce division is engaged in pure-play internet retail sales, primarily through the PIXmania brand which operates in 26 countries across Europe and the Dixons.co.uk brand in the UK.

20 DSG international plc Annual Report and Accounts 2009/10 Business Overview

Key Performance Indicators (KPIs)

Financial and operational Definition Strategic Summary Total sales Growth in total sales

Like for like sales The ability to grow sales in stores in the Group is an important measure of a brand’s appeal to customers and its competitive position. The Board measures like for like sales as sales in stores that have been open for a full financial year both at the beginning and end of the financial period and are calculated using constant exchange rates. Customer support agreement sales are excluded from all UK like for like calculations. Operations that are subject to closure have sales excluded as of the announcement date. Stores subject to a refurbishment are excluded during the period of refurbishment. Sales targets and growth are set relative to the market and expected economic conditions.

Market position In line with the Group’s strategy to be the leading specialist electrical retailer in Europe, this is Performance Review an important measure of how well customers are being engaged by the Group’s brands in each market. Retailing operations should be, or be capable of becoming, the number one or number two specialist electrical retailer in their market, measured by market share.

Underlying operating profit Continued growth of underlying operating profit enables the Group to invest in its future and provide a return for shareholders. Targets are set relative to expected market performance.

Underlying profit before tax Continued growth of underlying profit before tax represents a measure of Group performance to external investors and shareholders. Targets are set relative to expected market performance.

Free Cash Flow The Group defines Free Cash Flow as net cash generated from operations, less net finance costs, taxation and net capital expenditure and excluding certain discrete items such as special pension contributions. The management of cash usage, in particular working capital employed

in the business, optimises resources available for the Group to invest in its future growth and to Corporate Governance generate shareholder value.

Shareholder Definition Underlying diluted The level of growth in EPS provides a suitable measure of the financial health of the Group earnings per share (EPS) and its ability to deliver returns to shareholders each year. The Group targets growth in EPS commensurate with growth in earnings.

Total Shareholder Return (TSR) The relative performance measure over the longer term of the Group’s ability to deliver returns for shareholders. For 2008/09 and 2009/10, the base which the Group used is to measure itself against was a bespoke weighted average index of UK and European retailers over a three year period. From 2010/11, the base will be to measure against the FTSE 250 index (comprising FTSE 101-350 companies), excluding investment trusts, over a three year period. Financial Statements Under the Renewal and Transformation plan, the Group is developing a range of customer KPIs which the Board will consider for inclusion in future reports.

Corporate Responsibility KPIs

During the year the Group reviewed the KPIs which it uses 5. Waste electrical equipment collected and recycled to monitor Corporate Responsibility (CR). The CR Committee from customers has agreed to monitor the following KPIs on an ongoing basis, 6. Business waste recycled initially concentrating on the Group’s biggest business in the 7. Group carbon emissions UK and via the Group’s central buying function. The Group will extend monitoring of the KPIs to the other Group businesses 8. Contributions to the community Information for Shareholders over time. These KPIs are: Details are set out in the Corporate Responsibility Review 1. Staff diversity – age, gender and ethnicity of employees on pages 35 to 39. KPIs are monitored by the CR Committee on behalf of the Board and the Board considers CR issues 2. Health and Safety – employee accidents and injuries on an annual basis. The CR Committee assists the Board in 3. Performance on ethical supply chain audits identifying risks to achieving the Group’s objectives and any 4. Customer satisfaction required mitigating actions.

DSG international plc Annual Report and Accounts 2009/10 21 Directors’ Report: Strategic Summary Risks to Achieving the Group’s Objectives

Risk management is an integral part of business management and it’s something that DSGi takes seriously. The Group’s approach to risk management combines a top-down understanding with bottom-up activity to gain a complete view of risk. For example, the Board undertakes a regular review of risks facing the business, which included a thorough risk assessment from first principles at the beginning of 2010. Some of the key risks facing the business, along with illustrations of mitigating actions are set out below:

Key risks

Risk Examples of mitigating action

Economic environment ■ Ongoing monitoring by Finance and the Executive Committee, including review Risk that a prolonged economic downturn, of the portfolio of businesses particularly in the UK, severely impacts our business ■ Renewal and Transformation plan to improve our business performance irrespective of macroeconomic factors ■ Strategy and business planning which takes into account varying economic scenarios

Meeting customer needs ■ Understanding our customers and monitoring our level of service through mystery Risk that our retail brands fail to meet the shopping, customer exit surveys and analysis of purchase data expectations of our customers ■ Delivery of the Renewal and Transformation plan to improve our stores across the Group ■ FIVES customer service training for all colleagues and product workshops to improve product knowledge ■ Implementation of the Customer Plan in the UK to improve the customer journey – a clear and focused plan at the heart of the business (see Chief Executive’s Statement) ■ Innovations in service propositions and improved customer service levels across the Group ■ Clearer and easier navigation of our e-commerce websites

Competition ■ Renewal and Transformation plan improving our stores, cost structure and Risk that competitors reduce the Group’s market service proposition share and / or drive down margins in specific markets ■ Continuing development of strong online brands, notably PIXmania and Dixons.co.uk ■ Ensuring our prices offer good value, including a customer price index

Market margin pressure ■ Continued focus on ensuring we have an excellent range across all price points, Risk that margins are reduced due to falling including own label brands consumer demand, manufacturer supply, ■ Continuing to take money out of our cost base competitors, regulation and tax ■ Building ever stronger relationships with suppliers

Changes in supplier credit ■ Ongoing engagement with suppliers and credit insurers Risk that credit insurance is no longer available ■ Improvements in stock turn to electrical and computing suppliers ■ Innovations in, and close scrutiny of, working capital together with regular monitoring and review

Employees ■ Group-wide standardised performance management Risk that we fail to attract, develop and retain ■ Talent reviews across the business the necessary talent for our business ■ Store structures which provide a clear career path for all employees ■ Improved quality of training courses and development programmes with specialist focus on service, product, commercial and technical ■ Bonus plans, which include a component relating to individual performance and business performance ■ Reward strategy aligned to retain best talent

Changing technology / consumer ■ Strong supplier relationships (e.g. UK launch partner for Apple iPads) preferences ■ Delivery of Customer Plan to respond to identified changes in technology Risk that we fail to capitalise on new technology ■ Store transformations to take into account emerging trends in store layouts or emerging trends to maximise revenues ■ Exciting product launches to make our stores the destination for the latest technology (e.g. 3D TVs)

22 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 23 Annual Report and Accounts 2009/10 DSG international plc The store portfolio is reviewed on a regular basis with a view to optimising our on a regular portfolio is reviewed The store estate presence retail in place plans are Disaster recovery business interruption to mitigate against Insurance is purchased the likelihood constantly being updated to reduce are measures Preventative of an incident is a risks. There A number of committees exist to help DSGi manage its regulatory Corporate Responsibility Committee and a Compliance Committee, both of which functions Secretarial supported by our Legal and Company are Financial planning takes into account expected peaks and troughs during the year peaks and troughs Financial planning takes into account expected and the business is run accordingly of income stream a regular business provides of services related The proportion over the course of the year it becomes available to the market launches of new technology as Effective the number and value of business to increase of services related Growth sales non-product uplifts in transformed stores profit gross Improve Launch of Group Ethical Conduct policy, supported by annual declaration supported by annual declaration Ethical Conduct policy, Launch of Group of compliance by colleagues Monitoring changes in legislation / regulation and to discuss reputational Corporate Responsibility Committee meets regularly risks regulatory assembly product Quality checks and factory audits for own-branded facilities credit activity that may impact the terms of Group Compliance Committee approves and governedThe portfolio plan is clearly defined and is managed regular through and meetings processes put in place including financial Post-investment analysis and performance tracking and customer measures aligned to our UK budget under the Customer Plan are Projects Strong pre- and post-investment appraisal processes pre- Strong activity treasury of Central control activities in place Deficit reduction accrual of UK scheme closed to future Defined benefit section tested regularly that are Contingency plans developed updating implementation analysis carried out before Evaluation, planning and new systems that have an impact on critical functions or introducing of the business Ongoing systems implementation in key areas basis and legal and frequent In-house legal teams communicate on a regular submitted to the Board are reports Detailed group hedging policies reviewed through a separate Tax and Treasury Committee Treasury and a separate Tax through reviewed hedging policies Detailed group management and reviews Balance sheet balance Regular monitoring of receivables ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Examples of mitigating action Examples of mitigating ■ ■ ■ eact to nsumer Change in government policy and regulatory is subject to a range of legal The Group the UK and EU originating from requirements Damage to property and consequential Damage to property business interruption to its ability to distribute merchandise The Group’s its to and to sell and distribute merchandise stores on its operational infrastructure, customers is reliant distribution functioning of its particularly the efficient and distribution network centres This is a key contributor to the Group’s strategy performance and growth Quality and location of store portfolio Quality and location of store Price deflation across Price deflation has been a common feature most electrical goods categories for a number of years, primarily driven by technological advances throughout in production efficiencies and improved the life cycle of a product Seasonality and operating profit of revenue A substantial proportion which financial quarter, is generated during the third season. In addition, includes the Christmas and New Year in southern exists in the summer a second peak Europe sale of air conditioning units period through Project delivery Project delivering an element of our Risk that a project plan does not deliver Renewal and Transformation its anticipated benefits Legislative, contractual, reputational and Legislative, contractual, reputational risks regulatory and / or financial reputational Risk that we suffer our in of an exposure damage as a result compliance activities (e.g. competition, co or address deficits, which may deficits, or address arise on the Group’s pension schemes becomes unavailable for a Risk that a key system period of time contractual obligations, rights, intellectual property, of customer’s health and safety or compromise confidential data) Systems failure Pension risk and policies r policy fails to Risk that the pension funding Risk treasury Finance and to exchange rate, exposure Group’s Risk that the risks have an rate, liquidity and credit interest funding impact on results, adverse or unexpected ability. or purchasing requirements Directors’ Report: Performance Review Overview

Financial highlights Operational highlights ■ Total Underlying Group sales(1) (2) up 4% to £8,531.6 million ■ Renewal and Transformation plan improving the offer (2008/09 £8,180.2 million). for customers. ■ Total Group sales, including those from closed businesses, ■ Store transformation programme on track: up 3% to £8,532.5 million (2008/09 £8,317.8 million). − Over 200 stores had been reformatted across the Group ■ Group like for like sales(3) up 2% in the full year and up 6% by the year end; in the second half. − Additional 80 reformatted stores to be opened by Peak ■ Underlying Group gross margins flat across the full year. in the UK, including 21 Megastores; ■ Underlying EBIT(4) up 60% at £133.2 million − Two thirds of store portfolio by sales will be transformed (2008/09 £83.0 million). in the UK by October 2010; ■ Significant profit improvements including UK & Ireland − Nordic store reformatting continues, with 16 Megastores up 21% and Nordics up 28%. now open; ■ Underlying pre-tax profit(2) up 61% at £90.5 million − Portfolio review completed with over 160 stores exited (2008/09 £56.1 million). over the last two years. ■ Underlying diluted earnings per share(2) (5) up 50% at ■ Reformatted stores continue to perform strongly: 1.5 pence (2008/09 1.0 pence). Basic earnings per share − Average gross profit uplifts of 20% versus the rest of for continuing operations of 1.7 pence (2008/09 loss per the chains; share of (10.2) pence). − Average gross profit uplifts of 50% achieved in the ■ Total profit before tax after net non-underlying items was Megastores and 2-in-1s; £112.7 million (2008/09 loss £(123.6) million). − Second year trading for reformatted stores remains strong. ■ Free Cash Flow(6) of £28.1 million before restructuring items ■ Significant improvements to services for customers: (2008/09 outflow of £(340.0) million). − Further compelling services for customers launched ■ As at 1 May 2010 the Group had net debt of £(220.6) million including free delivery slots, next day timed delivery slots (2008/09 £(477.5) million). and ‘follow-me-home’ services from Megastores; ■ New £360 million revolving credit facility signed with syndicate − Better availability of stock in store with stock turn up 12% of banks, providing the Group with flexibility. year on year; − Satisfaction measures rising, due to focus on service, connectivity, delivery, installation and repair. ■ Good progress with online operations: − Internet sales of £1.4 billion, representing 16% of total Group sales; − Successful roll-out of ‘e-merchant’ operating platform to UK internet sites. ■ International plans making progress: − Turnaround plans in Italy ahead of schedule with positive like for like sales and margin improvements; − Businesses in Greece and Spain weathering economic challenges well and gaining market share. ■ £200 million four year cost saving programme on track, delivering £50 million reduction in the year. ■ UK defined benefit pension scheme closed to future accrual thereby reducing risk for the Group. ■ On track for medium term target of a 3%-4% EBIT return on sales.

24 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders (2) 25 ended 83.0 58.7 56.1 15.0 17.7 41.0 76.1 £million (25.0) (18.1) (26.9) (23.7) 101.1 52 weeks 2 May 2009 (8.3) 71.1 11.3 32.0 39.1 97.4 90.5 ended Underlying profit /(loss) Underlying profit (18.8) (42.7) (19.5) £million 152.0 133.2 52 weeks 1 May 2010 (1) (3) Annual Report and Accounts 2009/10 ations of PC City in Sweden and Markantalo ding trading results from closed businesses, closed businesses, from ding trading results ms, profit on sale of investments, net fair value ms, profit scribed in note 8 to the financial statements). contributions, less net finance costs, less income e, which completed on 9 June 2009, has been Underlying sales usinesses. Total revenue including discontinued revenue usinesses. Total ance costs and tax. ended £million % change 807.4 11% 52 weeks 8,180.2 2% 4,228.6 (3)% 2,657.81,570.8 (1)% (9)% 1,625.21,519.0 13% flat 2 May 2009 Like for like DSG international plc ended £million 921.2 52 weeks 2,650.6 1,362.9 2,093.7 1,503.2 4,013.5 8,531.6 1 May 2010 8 9 10 11 12 Note constant exchange rates. Customer support agreement sales are excluded from all UK like for like calculations. Operations that are subject to closure have sales excluded to closure subject that all UK like for like calculations. Operations are excluded from sales are constant exchange rates. Customer support agreement excluded during the period of refurbishment. are subject to a refurbishment as of the announcement date. Stores World). and Slovakia (Electro World) (Electro in Finland. ite non-recurring and business impairment charges and other one-off net restructuring intangibles, the amortisation of acquired of these as ‘non-underlying’. described The financial effect applicable, discontinued operations. These excluded items are of financial instruments and, where remeasurements items is shown in the analyses on the face of the income statement and in note 4 to the financial statements. issued under the terms of the Rights Issue (as de the bonus element of the shares multiplied by an adjustment factor to reflect The adjustment factor used was 1.2138. tax paid and net capital expenditure. operations and closed businesses was £8,543.4 million (2008/09 £8,415.1 million). Group underlying profit before tax before underlying profit Group EBIT Underlying net finance costs Total Group Retail Group Total losses Property Central costs Other International e-commerce Nordics UK & Ireland Electricals UK & Ireland UK Computing UK & Ireland Underlying sales and profit analysis profit Underlying sales and Business performance (4) underlying earnings deduction of net fin defined as are before (EBIT), or Operating Profit, and Tax Interest Earnings Before (12) division comprises PIXmania and Dixons.co.uk e-commerce (2) defined as exclu are Underlying results made to ‘underlying’ performance measures. are statement, references this Throughout (3) calculated using that have been open for a full financial year both at the beginning and end of the financial period and are calculated based on stores are Like for like sales (6) special pension operating activities before to continuing operations and comprises net cash flow from relates Cash Flow Free (7) of closed b to continuing operations, excluding the results relate this statement figures noted, throughout Unless otherwise (8) in the UK as well as the operations in Ireland. comprises Currys, CurrysDigital and Dixons Travel Electricals UK & Ireland (9) only. for PC World Like for like sales are DSGi Business and TechGuys. comprises PC World, UK Computing (10) (Elkjøp, El Giganten, Gigantti and Lefdal). comprises the Elkjøp group Nordics (11) the Czech World), (Electro (PC City), Turkey Italy), Spain PC City and Dixons Travel Italy (UniEuro, World), Other International (Kotsovolos and Electro Republic comprises Greece Notes (1) closed businesses and discontinued operations. Closed businesses comprise the oper sales exclude sales from Underlying Group (5) used in the calculation of earnings for the periods prior to the Rights Issu average number of shares per share The weighted Directors’ Report: Performance Review UK & Ireland

The economic environment in the UK & Ireland remained challenging across the year. During the first half the Group Total sales in the UK & Ireland were down 5% to was focused on cash margins while much of the Renewal and £4,013.5 million (2008/09 £4,228.6 million) and like Transformation plan and store reformatting was taking place. for like sales were down 3% across the year. The business then experienced a strong Christmas Peak as the benefits of the plan started to improve the business performance Like for like sales in the second half were up 3% and deliver market share gains in all major categories. as the Renewal and Transformation plan began to deliver benefits. UK & Ireland Electricals includes Currys, CurrysDigital and Dixons Travel in the UK and Currys and PC World in Ireland. Underlying operating profit for the full year was up Total sales were flat year on year at £2,650.6 million (2008/09 21% at £71.1 million (2008/09 £58.7 million). £2,657.8 million) with like for like sales down 1%, across the year, but up 6% in the second half. Underlying operating profit Underlying sales improved by 81% to £32.0 million (2008/09 £17.7 million). £million UK Computing includes PC World, DSGi Business and 2009/10 4,013.5 TechGuys. Total sales were down 13% at £1,362.9 million (2008/09 £1,570.8 million) with like for like sales down 9%. 2008/09 4,228.6 The decline in sales was predominantly driven by lower sales in the B2B operations as small businesses reduced capital Underlying operating profit expenditure during the credit crunch. Despite the weak sales £million environment, underlying operating profit was relatively stable at £39.1 million (2008/09 £41.0 million). 2009/10 71.1 UK & Ireland has historically been reported separately as 2008/09 58.7 UK & Ireland Electricals and UK Computing. A key objective of the Renewal and Transformation plan is to remove complexity, simplify processes, make operations easier for colleagues and reduce costs in the Group. As a result, the back office functions supporting the PC World, Currys, CurrysDigital and Dixons Travel operations have been brought together with the combined commercial, merchandising and buying teams supporting all brands. The logistics infrastructure has also been consolidated with the main warehouse in Newark providing one fulfilment centre for stores and customers. In addition, with an increasing number of combined 2-in-1 Currys & PC World stores, the Electricals and Computing operations in the UK & Ireland will no longer report figures separately and will consequently be reported as one operation going forward.

Combined 2-in-1 Currys & PC World Superstore in Hemel Hempstead with our new clear 2-in-1 brand signage.

26 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 27 Annual Report and Accounts 2009/10 DSG international plc 21 new Megastores, taking the total in the UK to 33 21 new Megastores, Megastores; stores; 44 combined 2-in-1 Currys and PC World and standalone Superstores; 12 Currys and PC World stores. 3 High Street DSGi Business experienced an extremely challenging trading challenging an extremely DSGi Business experienced capital expenditure as smaller businesses reduced environment team is focused crunch. The new management during the credit cash. The B2B operations will benefit on managing costs and investment as the economic restart when small businesses improves. environment in total stores had transformed 164 Group As at 18 June 2010 the combined and 20 were Megastores were in the UK, of which 12 The transformed stores Superstores. 2-in-1 Currys & PC World of 20%, with uplifts as high uplifts profit continue to deliver gross and combined 2-in-1 Currys & PC as 50% in the Megastores Superstores. World over stores limited number of reformatted a are While there strong. remains a year old, performance in the second year benefited the stores Management estimate that the transformed the year. 3% across like for like sales in the UK by approximately the important through Having traded the new format stores portfolio has determined the appropriate Peak period the Group and announced going forward, and transformation programme in the UK to the number of stores its intention to reduce under the Dixons Travel 500 (excluding stores approximately and 2-in-1 combined stores brand) over time. The Megastore particularly popular with customers. to be proving are format have been identified 70 locations for the Megastore in the portfolio with 60 being developed using existing stores of existing the relocation from resulting and the remainder to have approximately expects addition the Group In stores. of the combined predominantly 330 out of town Superstores, format which can be similarly 2-in-1 Currys and PC World the existing portfolio. With within from limited overlap created between the PC the and Currys customer demographic World brand to the PC World access provide combined 2-in-1 stores also expects to continue in existing Currys markets. The Group locations. to operate up to 100 High Street expects to refurbish the Group In the UK & Ireland with during the 2010/11 financial year, 100 stores approximately Christmas 2010, as follows: the majority to be completed before ■ ■ ■ ■ The Group has also been implementing those parts of the store The Group the portfolio across to existing stores transformation programme little or the shopping trip for customers but require that improve have already these stores As a result, no additional expenditure. ranges, colleague training and the improved benefitted from help and support. enhanced after-sales The main focus of the Renewal and Transformation plan has, to Renewal and Transformation The main focus of the The stores operations. the UK & Ireland date, primarily benefited ranges and selling service. All improved from benefiting are undergone FIVES training, our bespoke colleagues have now meeting focusing on understanding and training programme knowledge. product needs as well as improving a customer’s significantly, have improved processes Stock management costs and availability and ranges while controlling improving in the business. working capital utilised have been made to significant improvements During the year, This enables Currys and PC World the services infrastructure. customers flexible options to suit their needs even to offer hour the market leading next day delivery in three from better, times continue to improve Delivery delivery. timed slots to free ‘right second time’ with ‘right first time’ achieving 97% with able we are Utilising our logistics infrastructure even higher. costs or without materially impacting recycling free to offer carbon emissions. and support operations have been restructured, The repair costs. A new state of the art and reducing processes improving for TVs and laptops has been opened in Newark. facility repair to considerably improve These changes have enabled the Group time for times, for example, halving the average repair repair under way. televisions to six days, with further improvements back in house was successfully brought The contact centre the quality of service and support offered enabling us to improve to our customers. continues to perform well. The new format stores Dixons Travel to existing locations bringing improved out being rolled are Dixons layouts to the airport stores. ranges, playtables and store in Rome initiated its overseas expansion opening stores Travel in has opened a store airport. Since the year end Dixons Travel Dublin airport. Further international expected to locations are be added over time. providing continues to be a valued differentiator The TechGuys service desks are service and expertise to customers. TechGuys and has and combined 2-in-1 stores now operational in PC World In August TechGuys been incorporated in the Currys Megastores. launched a range of over 60 enhanced services for customers Club’ options for ‘Club’ and ‘Premier as well as introducing Under the ‘Whateverhappens’ customer support agreements. customers experience Club’, support agreement the ‘Premier times and enhanced levels of service such as faster response if theirs has to be taken away for repair. the loan of a product has been particularly the economic environment In Ireland, took early action to manage costs tough. The business there performance in the second half with in an improving resulting up year on year. sales and profits Directors’ Report: Performance Review Nordics

Elkjøp performed very strongly in all of its markets and product categories. It has performed particularly strongly in Sweden and In the Nordic region, Elkjøp delivered a very strong Denmark despite the more challenging economic environments performance with sales increasing by 22% in local experienced in these markets across the year. With excellent in currency and 29% in sterling to £2,093.7 million store service and customer engagement, the Nordic business is (2008/09 £1,625.2 million). the preferred operating model for the Group and practices are being increasingly shared across all of the Group’s divisions. Like for like sales were up 16% in the second half Management continue to simplify the business, taking out costs and up 13% across the year. and reducing complexity. The efficient central operating structure, Underlying operating profits increased by 28% customer focused business model and strong market positions to £97.4 million (2008/09 £76.1 million). have enabled Elkjøp to gain market share from other competitors. Elkjøp has now opened 16 Megastores which have performed Underlying sales particularly well. It has also started a programme to refurbish £million existing Superstores using the same principles employed in the UK businesses. 2009/10 2,093.7 Elkjøp’s multi-channel offering continued to grow in all markets 2008/09 1,625.2 doubling its sales through the internet during the year. Its reserve and collect service continues to be well received Underlying operating profit by customers. £million Nordic region results are stated excluding the businesses of 2009/10 97.4 PC City in Sweden and Markantalo in Finland, which closed at the beginning of the financial year. 2008/09 76.1

Left We are incorporating new store formats in our stores across Europe.

Right Our excellent customer service model in the Nordics is being used across the Group.

28 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 29 Left Our first Megastore in Italy employs the format from new store the UK. Right As such, it provides the widest choice in its markets for products such as TVs. Annual Report and Accounts 2009/10 ravel The Italy operating in the airport in Rome. DSG international plc eece. The difficult economic environment currently being currently economic environment eece. The difficult Italy stores PC City implants in UniEuro This comprises UniEuro, and Dixons T experienced in Greece is well documented. The business has experienced in Greece seen total sales impacted, particularly against tough comparables turnaround plan in Italy continues to make good progress. turnaround plan in Italy in trend in an improving have resulted Management actions for like sales, particularly in the second sales with positive like a continued challenging economic half of the year despite further year on year. margins improved Gross environment. with stock turn has also been improved, up Stock control 20%. by approximately has increased 11%, while availability in vision, computing, has experienced good growth UniEuro accessories. communications, built-in appliances and successfully completed UniEuro At the beginning of the year, rationalisation plan ahead of schedule, closing 51 its store 97, largely and now operates from underperforming stores It has added 35 PC City implants into out of town, stores. performing well. During the year, the portfolio, all of which are in Muratella in Rome. This opened its first Megastore UniEuro along the same principles as refurbished is a 40,000 sq ft store gross and has experienced strong those in the UK and Nordics uplift. Management have also developed a new format profit which refits and have completed the first three for smaller stores profit gross successfully launched in May 2010 with strong were and cost efficienciesuplifts. The range improvements identified make good progress. as part of the turnaround plan continue to challenging, but the The economic outlook in Italy remains competitive position. in a strong turnaround plan puts UniEuro performance gives management further The improving for UniEuro. confidence in the prospects Greece electrical retailer Kotsovolos is the market leading specialist in Gr 2009/10 2008/09 1,519.0 1,503.2 (8.3) ales

(23.7)

2008/09 Underlying operating loss £million Underlying s 2009/10 £million Directors’ Report: Directors’ Review Performance

The Other International division comprises Spain, the Czech Greece, operations in Italy, were sales Total and Turkey. Republic, Slovakia exchange rates and by 1% in down 5% at constant million (2008/09 £1,519.0 million). sterling to £1,503.2 in the second half with like A better performance in a flat like for like resulted for like sales up 4% the year. performance across reduced Underlying operating losses were loss of significantly to £(8.3) million (2008/09 £(23.7) million). Other InternationalOther Directors’ Report: Other International continued Performance Review

in the prior year. However, management have continued to despite the continued weak consumer environment. This focus on the customer, maintained margins, reduced costs and performance gives management further confidence in the improved cash flow by increasing stock turn. They have also prospects for the business. continued to invest in the store renewal programme to limit the effects of the weakening environment on bottom line performance. The Czech Republic and Slovakia On 19 May 2009 and 1 September 2009 the Group sold the During the period, Kotsovolos refurbished nine stores into the operations of Electro World in Hungary and Poland, respectively, Renewal and Transformation plan format, which are showing in each case for a consideration of €1. Following these disposals, encouraging uplifts and excellent feedback from customers. The the central operations in Prague and logistics infrastructure focus has also been on building new channels of business and in Brno have been refocused on its core operations of the in one year Kotsovolos has become a significant player online, Czech Republic and Slovakia, significantly reducing costs increased the franchise network to 30 stores and commenced and complexity. operations of B2B sales, all of which have helped to offset the negative trends in the market. Operations in the Czech Republic have performed well in their markets, despite the weak consumer environment. During the The operations in Greece are in a strong position with a market year, Electro World reformatted its first store in Prague, utilising leading offer and a strong focus on delivering for customers. As the Renewal and Transformation plan format which has reported such, it will benefit when the economy recovers. These strengths encouraging results with a great response from customers. will enable Kotsovolos to capitalise on the tough environment The Group now operates 16 stores and a multi-channel internet for competitors and to grow market share. operation in the Czech Republic and three stores in Slovakia which are trading in line with expectations. Management Spain recently announced plans to open three new stores in time While the consumer environment has been very tough in Spain for the Christmas Peak. over the last two years, PC City remains the leading computer specialist in the market. Costs have been reduced while Turkey continuing to focus on the customer offer. 11 stores have been The Group now operates 12 stores in Turkey under the Electro closed and PC City now operates from 32 stores. Using some World brand with its local joint venture partner. These new stores of the principles of the UK transformation plan, management are based on the Group’s new large space format, providing introduced a light refit plan which adds incremental sales while a greater product range and exciting retail environment for keeping the cash payback period to a minimum. These actions customers. The business continues to deliver good sales growth have started to deliver improved gross margins, enabling the as customers recognise the benefits of large store formats in business to significantly reduce losses year on year. They have delivering value, choice and service. With a solid store base now also enabled PC City to maintain its overall market share with established, it was announced in April 2010 the intention to roll 11 fewer stores while positioning the business better for when out a franchise operation in Turkey. The first franchise store the Spanish economy recovers. Encouragingly, the business opened very successfully in Sakarya and further franchise stores delivered positive like for like sales during the second half, will be opened over the next two years.

The standardisation of layout, fixtures and fittings enables new formats to be rolled out across the Group, such as here in Kotsovolos in Greece.

30 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 31 PIXmania provides with the the Group market-leading platform e-merchant which provides customers with easier navigation as well as improved knowledge. product Annual Report and Accounts 2009/10 DSG international plc PIXmania continues to trade strongly across all its markets. It across to trade strongly PIXmania continues European in its core sales growth strong has experienced very customer and Spain) driven by increased markets (France, Italy communication. and offline online increased acquisition through all key categories, in good progress PIXmania has made electronics outside its traditional consumer including growth outside it has been investing in growth categories. In addition, emerging markets (e.g. Central of its main markets especially and Eastern Europe). platform, marketplace channel, its reseller newest PIXmania’s since launch with its sales three-fold PIXplace, has grown of new categories expansion in new countries, the introduction transacting through in new merchants as well as an increase this platform. out into platform was rolled The market-leading e-merchant UK internet operations (dixons.co.uk, currys.co.uk, the Group’s navigation, improved pcworld.co.uk) in February 2010 and has display and information as well as the ability to show product attachments to customers. PIXmania With 276 million unique visitors during the year, the 4th rank of the most visited consumer websites reached to Alexa.com. e-tailers in the world according electronics internetDixons.co.uk has been operating as a pure-play during growth years. Following strong operation for over three made to the this period, a number of changes have been relevant more operating model to make the business even well over the for customers. While dixons.co.uk performed impacted sales important Christmas Peak, these changes of the year. performance during the rest 921.2 15.0 807.4 11.3 ales

2008/09 Underlying operating profit £million 2009/10 £million 2008/09 Underlying s 2009/10 Directors’ Report: Directors’ Review Performance

e-commerce comprises PIXmania and Dixons.co.uk. e-commerce (2008/09 up 14% at £921.2 million sales were Total £807.4 million). was £11.3 million profit Underlying operating (2008/09 £15.0 million). e-commerce Directors’ Report: Performance Review Group Financial Summary

Financial position Free Cash Flow The Group’s financial priorities in 2009/10 included improving Free Cash Flow before restructuring items was £28.1 million profitability and strengthening the balance sheet: (2008/09 outflow £(340.0) million) and total free cash outflow was £(17.6) million (2008/09 £(404.2) million). ■ Underlying EBIT increased by 60% to £133.2 million

(2008/09 £83.0 million). 52 weeks 52 weeks ■ Underlying profit before tax increased by 61% to £90.5 million ended ended 1 May 2010 2 May 2009 (2008/09 £56.1 million). £million £million ■ Total profit before tax, after adding back non-underlying items Underlying profit before tax 90.5 56.1 of £22.2 million, was £112.7 million (2008/09 loss before tax Closed businesses loss before tax (0.2) (14.1) of £(123.6) million). Depreciation and amortisation 128.6 134.7 ■ Underlying diluted earnings per share increased by 50% to Working capital 39.7 (285.4) 1.5 pence (2008/09 1.0 pence, after adjusting for the Rights Issue). Taxation (31.9) (35.7) Capital expenditure (165.3) (140.7) ■ Loss making businesses in Hungary and Poland were Sale of freehold property 0.7 10.8 disposed of successfully. * Other cash items (34.0) (65.7) ■ Net proceeds of £291.3 million were received following the Equity Placing and Rights Issue. Free Cash Flow before restructuring items 28.1 (340.0) Net restructuring items (45.7) (64.2) ■ Significant headroom was maintained on the revolving credit facility throughout the year and a new revolving credit facility Free Cash Flow (17.6) (404.2) of £360 million was signed in May 2010. * Sale of freehold property excludes £9.0 million of sale proceeds relating to the sale ■ The UK defined benefit scheme was closed to future accrual of the Group’s former warehouse in Stevenage (2008/09 £18.0 million). These sale proceeds are shown within net restructuring and impairment costs. reducing the deficit by £33.4 million. ■ Positive Free Cash Flow, before restructuring items, Free Cash Flow before restructuring showed a significant of £28.1 million was generated. improvement over the prior year, driven by improved profitability, improved working capital management and reduced hedge ■ The Group’s working capital position was improved, through losses, partly offset by increased capital expenditure relating a reduction in debtors, and stock turn improved by 12%. to the Renewal and Transformation plan. Underlying Group sales (excluding discontinued operations and The improved working capital movement was primarily due to closed businesses) were up 4% to £8,531.6 million (2008/09 improved stock management, including £43.9 million reduction £8,180.2 million) and up 2% on a like for like basis. Underlying in stock aged over six months, and improved control of debtors. Group sales were up 2% at constant exchange rates. Total This was partly offset by the continued unwinding of the Group sales (including closed businesses) were up 3% to historically higher proportion of term versus pay-as-you-go £8,532.5 million (2008/09 £8,317.8 million). Group gross Customer Support Agreement deferred income. The prior year margins were flat across the year. was, as previously announced, impacted by the unwinding of deferrals of supplier payments made at the end of the 2007/08 Operational improvements financial year which have not recurred. The Group is focused on re-engineering and simplifying the operational processes within the Group in order to reduce costs Capital expenditure was £165.3 million (2008/09 £140.7 million), for the Company, improve the service provided to customers, up £24.6 million, reflecting the increased investment associated and assist colleagues in operating the business effectively. with the Renewal and Transformation plan, particularly in the UK. There were no significant disposals during the year, with There remains significant opportunity for productivity cash generated from the sale of property of £0.7 million improvements within the Group and management are targeting (2008/09 £10.8 million). these improvements to deliver some £200 million in cost savings over a four year period. In the first year of this programme the As previously disclosed, the Group has in place certain historical Group has delivered £50 million of cost savings through, for hedging agreements. The principal outstanding agreements example, efficiency initiatives in head office administration and relate primarily to foreign exchange and interest hedges. The in-store processes. Process improvement initiatives have already majority of these were put in place at the time the Group issued contributed to reductions in levels of stock held by the Group as its Bonds in 2002, and in relation to overseas investments. A well as improving stock turn by approximately 12% during the year. number of these hedges matured during the financial year and resulted in a cash outflow of £62.2 million (2008/09 £83.3 million). The Group continues to implement the step change programme The remaining hedges at year end rates would imply a net cash that makes the business better for customers, easier for outflow of approximately £50 million, primarily payable in 2012. colleagues to operate and cheaper for the Group. Other cash items of £(34.0) million (2008/09 £(65.7) million) Management remains confident that it can achieve a 3%-4% improved by £31.7 million mainly due to increased add back of EBIT return on sales, through the Renewal and Transformation non cash costs included in profit, such as pension interest and fee plan, over the medium term. amortisation, and the reduced hedge outflows mentioned above.

32 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 33 14.1 56.1 £million 179.7 165.6 (123.6) 2 May 2009 - 52 weeks ended 4.9 7.4 (1.9) 59.1 96.1 0.2 (22.4) (22.2) £million 112.7 1 May 2010 – – 52 weeks ended 4.6 5.6 0.8 Annual Report and Accounts 2009/10 (33.4) eas: DSG international plc remeasurements Strategic reorganisation Strategic reorganisation intangibles Net fair value closed businesses items – total charges to add back Net foreign exchange losses. Net foreign earned by interest on overpayments of tax Partly offset in prior periods. Increased borrowing costs subsequent to the refinancing costs subsequent to the refinancing borrowing Increased facility. credit revolving of the Group’s set at the beginning of the Higher net pension interest of a higher discount rate financial year largely as a result item. applied to liabilities, which is a non-cash edits of £22.2 million. A further explanation of these items is edits of £22.2 million. A further explanation Net restructuring charges: Net restructuring Business impairments Change in pension benefits Other non-underlying items: Amortisation of acquired Other items Financing items: Add back non-underlying items: from results Trading Other non-underlying tax before Underlying profit 90.5 Profit/(loss) before tax before Profit/(loss) Total net non-underlying Total At the earliest, the New Facility will mature on 15 August 2012 on 15 Facility will mature At the earliest, the New the to 15 August 2013 in the event that and would be extended £100 million by additional finance of a minimum of raises Group that the proceeds intention the Group’s November 2011. It is to refinance such financing would principally be used any from 2012 Bond. the Group’s level the appropriate gives the Group This new agreement for its working capital needs. It also of committed financing of either a longer term on with the flexibility the Group provides credit revolving enter into a new or revised the New Facility or to facility at a later date. Underlying net finance costs £(42.7) million (2008/09 Underlying net finance costs were was driven by (£26.9) million). The movement year on year the following key ar ■ ■ shown below: ■ ■ Adjustments to underlying results net non-underlying before tax is reported before Underlying profit cr 50.1 £million (404.2) (477.5) (123.4) 2 May 2009 – 52 weeks ended (1.9) (27.6) (21.6) (12.0) (60.3) (17.6) £million 274.5 (220.6) 1 May 2010 – 52 weeks ended (7.0) (8.6) 10.8 (12.0) 291.3 ed with net debt of £(477.5) million at the end of the ed with net debt of £(477.5) million at the contribution disposals Rights Issue Discontinued operations Special pension Other items Acquisitions and Dividend Equity Placing and Other movements Closing net debt Free Cash Flow Free Opening net (debt)/funds (477.5) previous year. The Group’s net debt includes restricted funds net debt includes restricted The Group’s year. previous predominantly of £78.9 million (2008/09 £67.6 million) which Customer Support comprise funds held under trust for potential liabilities. Agreement Funding Net (debt) / funds million, had net debt of £(220.6) At 1 May 2010 the Group compar Net restructuring and impairment reflects the cash outflows reflects and impairment Net restructuring activities and business the strategic reorganisation to relating for in 2008/09. These provided impairment, predominantly payments and related and other property mainly comprise lease costs, less the final tranche of disposal employee severance in the UK. the sale of a former warehouse from proceeds Movements in net debt include net proceeds of £291.3 million Movements in net debt include net proceeds the Equity Placing and Rights Issue in the first from received £7.0 million acquisition costs primarily half of the financial year, an associated undertaking in Norway being representing of a put option, and £8.6 million following the exercise acquired the net cash utilisation of the discontinued representing operations in Hungary and Poland. The £12.0 million special with the pension contribution was made in accordance with the trustee of the UK defined benefit pension agreement the pension deficit. Other items include the scheme to reduce of the 2012 impact on net debt of the accounting revaluation as well as currencies, Bonds, and of net funds held in foreign partner in Turkey. capital contributions made by the joint venture facility credit signed a new revolving On 12 May 2010 the Group (the New Facility) for £360 million. The New Facility agreement by 15 August 2010 at which time it will will come into effect The terms existing £400 million Facility. the Group’s replace substantially and covenants attaching to the New Facility are the same as that for the £400 million Facility except that the comprises UK and Irish companies only, guarantee structure 2012 Bond. closely to the Group’s aligning it more thereby Directors’ Report: Group Financial Summary continued Performance Review

■ In May the Group closed the standalone stores of PC City Consolidated balance sheet in Sweden and Markantalo in Finland. Trading results from Consolidated net assets at 1 May 2010 increased to closed businesses comprises the pre-tax losses from £875.1 million from £584.9 million. The main movements were these operations. as follows: £49.8 million generated from underlying post-tax ■ Amortisation of acquired intangibles of £4.6 million predominantly profits together with £7.5 million of post-tax net non-underlying comprises brand names with the year on year change being credits and which are set out in the consolidated income affected by currency movements. statement on page 64. Net assets benefited by £291.3 million from the Placing and Rights Issue as well as foreign exchange ■ Strategic re-organisation costs of £5.6 million relate to the UK movements of £45.3 million. These benefits were partially offset business transformation and primarily comprise accelerated by actuarial losses of £156.0 million on the defined benefit depreciation charges associated with the reformat of the section of the UK pension scheme, although these were limited UK & Ireland store portfolio and onerous lease obligations by the largely associated tax benefits of £44.2 million. All of following re-organisation of the service infrastructure. these latter items affected reserves directly. ■ The change in pension benefits of £33.4 million arises from the curtailment of the defined benefit section of the UK Tax pension scheme whereby this section was closed to future The Group’s tax rate on underlying profit before tax was 45% accrual on 30 April 2010. The amount represents the effect (2008/09: 61%). The decrease in the tax rate reflects a reduced of active members’ future salary increases, included in the proportion of loss making businesses where tax benefits are not valuation assumptions of the deficit, now being capped at fully recognised. inflation as they are now being treated as deferred members of the scheme. Pensions ■ The financing charge of £0.8 million relates to net fair value At 1 May 2010, the IAS 19 accounting deficit of the defined remeasurement losses on revaluation of financial instruments benefit section of the UK pension scheme amounted to as required by IAS 32 and 39 and can be volatile, dependant £263.5 million (2 May 2009 £148.8 million). The assumptions on market conditions existing at the balance sheet date. used for determining the accounting valuation use a consistent basis to that adopted in prior periods. Although the assets of the Property losses scheme have recovered considerably year on year, the overall Property losses increased to £18.8 million (2008/09 £18.1 million deficit has still increased substantially due to a significant increase loss), primarily due to provisions made relating to closure or refit in the liabilities. This is due to an increase in the assumption for of stores as part of the Renewal and Transformation plan. long term inflation (which affects final salary on retirement) coupled with a significant decrease in the discount rate applied Dividends to the liabilities which reflects yields on corporate bonds. The Board believes that DSGi’s existing financial resources Over recent years, the Group has implemented a number of should be used to invest in the Renewal and Transformation changes to pension arrangements in order to address the deficit plan, which is showing encouraging signs of delivering changes over the longer term. Since 1 September 2002, the defined in DSGi’s performance. benefit section of the UK pension scheme has been closed to The Revolving Credit Facility and Letter of Credit Facilities new entrants and on 30 April 2010 was closed to future accrual prohibit payments of dividends to shareholders in respect of with automatic entry into the defined contribution section being the 2009/10 financial year. The same agreements do allow the offered to those active members of the defined benefit section. Company, subject to certain conditions, to pay a dividend in The effect of this change is to remove the future volatility respect of the 2010/11 financial year and beyond, however, associated with adding further accrual for active employees the progress of the Renewal and Transformation plan remains as well as a more immediate benefit of £33.4 million to the the priority; the Board aims to resume dividend payments when valuation of the liabilities which has been treated as a non- appropriate, consistent with a sustained recovery in DSGi’s underlying item as described further above. operational and financial performance. The actuarial deficit of £61.0 million (measured as at 5 April 2007) is being addressed by special cash contributions of £12 million per annum which are payable in two equal tranches of £6 million by June and December each year until December 2012. A further actuarial valuation as at 5 April 2010 is currently underway, however, its results will not be known until early in the 2011/12 financial year.

34 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 35 oup on CR matters, which was oup on CR matters, Annual Report and Accounts 2009/10 DSG international plc to engage colleagues through the provision of rewarding the provision to engage colleagues through whilst assisting in the and careers, workplace environments of customer service levels; ongoing improvement for customers, a safe and healthy environment to provide and other locations; colleagues and visitors to our stores own-brand products, of safe and reliable the provision of our expert technical knowledge, achieved as a result audited who are manufacturers from sourced with products and against our ethical requirements; which complements community giving policy, an appropriate we work. our interaction with the communities in which to add to and promote the customer proposition in relation in relation the customer proposition to add to and promote and recycling; reuse to product and to raise revenue our impact on the environment to reduce waste recycling; improved costs through and reduce planning; and forward operational energy efficiency to improve e at the heart of everything we do. We must deliver for our e at the heart of everything we do. We ■ ■ ■ ■ customers an unbeatable combination of value, choice and service. As a business we have developed a plan for the Group with our customers which covers all aspects of our relationship thinking about choosing a the point at which they are from (the to a lifelong service and technical support offer product detail Customer Plan). The Customer Plan is discussed in more Statement on pages 16 to 19. in the Chief Executive’s ■ ■ ■ subsequently approved by the Board. The aim of the review was The aim of the review by the Board. subsequently approved matters to the our CR focus is on the most appropriate to ensure long both short and considered review evolving business. The and their potential operational and term risks and opportunities During 2009/10 the Committee value impact on the business. economic the risks identified in the light of the changing reviewed with and undertook this review and business landscape giving consideration legislation and prospective to new reference confirmed that the The review as to when it comes into force. set of priorities developed in 2008/09 continued to be agreed the changes over time. with additions to reflect appropriate, These priorities are: Risk management of the Committee carried out a review During 2008/09 the CR for the Gr risks and opportunities A member of the CR Committee has been identified as accountable for each of the priorities together with individuals for the outside of the CR Committee who have responsibility area. relevant Our customers that our customers Our primary aim as a business is to ensure ar d, sets the

nance of CR matters

ector with responsibility for CR matters. The CR Committee, ector with responsibility reviewing the impact of the Carbon Reduction Commitment reviewing upon the UK business and the internal mechanisms reporting compliance. to ensure assessing the reporting structures in place and determining structures assessing the reporting changes to be implemented when gathering information in of the KPIs; respect Health and Safety Policy; and the Group reviewing ongoing evaluation of the Group’s risks and opportunities and ongoing evaluation of the Group’s the CR Committee needs to where identification of areas in place; mechanisms already or control enhance reporting Directors’ Report: Directors’ Review Performance ■ ■ ■ ■ which is chaired by the Company Secretary and General by the Company Secretary which is chaired who have Counsel, also comprises other senior executives for risk management, logistics, supply chain, responsibility communications, human resources, UK operations, Group marketing and property. risks and considers CR matters, including relevant The Board of the CR Minutes of meetings opportunities, at least annually. and Executive Committee, to the Board circulated Committee are so they can keep up to date with the action being taken in this and any issues which arise. area The CR Committee met four times during the period under and a summary of key matters discussed is listed below: review The Group Finance Director, Nicholas Cadbury, is the executive Nicholas Cadbury, Finance Director, The Group dir How we deliver Gover direction for the Group’s CR efforts and initiatives, monitors CR efforts for the Group’s direction opportunities and mitigate risks identified action plans to realise set of key an agreed on actions through and tracks progress performance indicators (KPIs). the Committee has reviewed the period under review Throughout and risks (the Risk and maintained a matrix of opportunities has been operations, which the Group’s Matrix) arising from of the Risk The aim by the Board. and approved reviewed that CR focus is applied to the most Matrix is to ensure matters, taking into consideration the potential appropriate operational and value impact. Our approach to Corporate Responsibility Our approach has appointed a Corporate Responsibility Committee The Group the Boar (CR Committee) which, in consultation with DSGi takes its responsibilities to its stakeholders seriously, DSGi takes its responsibilities in place which balance and procedures aiming to have policies employees customers, shareholders, the expectations of our with our own competitive objectives. and the wider community and is a description of how we assess Set out in this review to relevant and ethical issues act upon social, environmental our with details of how we measure our business together of the actions and examples of some performance in this area is to Our goal the period under review. we have taken during over time. achieve continuous improvement Corporate Responsibility Review Responsibility Corporate Directors’ Report: Corporate Responsibility Review continued Performance Review

Customer satisfaction We now rate suppliers based upon a Green Amber Red status. Monitoring customer satisfaction is not just about ensuring Green status indicates that a supplier meets or exceeds the that the customer receives excellent service. We use customer standards expected by the policy. Where a supplier obtains an feedback to drive our range selection and merchandising, store Amber indicator not all of the minimum standards have been layout and navigation, point of sale material, in store and after met and a Corrective Action Plan (CAP) is agreed and issued. sales services and the quality of goods available. During the This is followed up with an audit to address the issues raised, period under review a specific customer research team has which is carried out within six months of issuing the CAP. been established with the sole remit of capturing customer A factory with a Red indicator must provide a satisfactory CAP insight. This insight is used to drive customer focused business within 30 days. A new supplier wishing to join the Group’s decisions and to make our plans for the store operations, supplier base will provisionally be awarded a Red indicator until category, marketing, pricing and training teams. an audit is completed. If the supplier fails to provide the CAP it will be considered as a failure to meet our Policy and the We currently assess the level of customer satisfaction we deliver supplier will not be approved or will be de-listed as appropriate. in a number of ways: A full copy of our Ethical Sourcing policy is available on our ■ mystery shopping evaluates our performance around our corporate website. FIVES training programme in the UK; ■ internationally store exit surveys capture customer satisfaction Performance on ethical supply chain audits

with our in-store experience; and 2009/10 2008/09* 2007/08* ■ a new online programme is measuring customer experience Green (meets requirements) 6 14 15 across all our online brands. Amber (minor improvements required) 148 73 47 The mystery shop and exit interviews are designed to focus Red (major corrective action required) 51 26 56 our stores on delivering a great ‘shopping trip experience’. Total factories audited 205 113 118 FIVES training is designed to empower colleagues to understand a customer’s needs better and to deliver great service. It Delisted / Not approved 39 48 encourages our colleagues and gives them confidence when * 2007/08 and 2008/09 have been restated to 2009/10 standards. dealing with customers. During the period under review each store’s performance on the mystery shopping programme has Our colleagues been linked to that store’s reward and recognition, so that Our 39,000 employees are our greatest asset and are a key individual colleagues understand the importance of giving enabler of delivering the Customer Plan. We are committed to our customers great service. high standards of employment practice and to providing equality of opportunity, training and development and a safe workplace, At each CR Committee meeting the Committee reviews the UK in addition to developing initiatives which encourage innovation. data concerning customer satisfaction by service and by brand, We aim to reward individuals fairly and to ensure that all our and this information is also reviewed by the Board. This data colleagues are incentivised in an appropriate way. has been collated since the beginning of 2009 and comparative trend data is not available. The Committee continues to monitor Training and development this KPI and will provide data externally over time. FIVES, our bespoke customer training plan, has continued to develop. All our UK colleagues have received initial FIVES training Ethical sourcing in previous years. This year over 7,800 UK colleagues have The Group is both a customer and a supplier. The Group seeks attended a FIVES course. We have introduced FIVES to our UK to ensure that the high quality, choice and service that we Contact Centres and all store managers have been refreshed on deliver to our customers are reciprocated by our suppliers. FIVES to ensure our continued commitment to improve customer The Committee has adopted an ethical sourcing policy based service is maintained. In addition, the Group operates a wide upon the Social Accountability 8000 criteria which applies to range of training solutions designed to ensure our colleagues suppliers of product which will be sold under one of the Group’s possess the latest product knowledge and are able to match the own brands. In order to ensure compliance with our policy we benefits of products to the needs of our customers. We provide audit all new factories and reassess existing factories which specialist workshops hosted by our key partner manufacturers supply own brand product at least every two years. During the and workshops delivered by our own product trainers to ensure year under review the criteria used to determine compliance product learning is as up to date as possible. The new group with our policy have been reviewed, changed and made more learning system ‘The Edge’ has also been launched in the UK rigorous. Due to the change in criteria, the comparative data giving complete online training plans to all colleagues providing has been restated. With a wider supplier base we’ve lifelong learning in any role. ‘The Edge’ provides all store significantly increased the number of audits carried out. managers with a complete view of the capability of their store to ensure the correct levels of customer experience.

36 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 37 48.9 55.2 2008/09 2007/08 1,298 1,556 945 40.7 2009/10 Annual Report and Accounts 2009/10 DSG international plc der to create a universal understanding of the Group’s aims a universal understanding of the Group’s der to create Number of accidents or injuries reported per 1,000 employees Rate of accidents The fundamentals to enable good compliance are already in already enable good compliance are The fundamentals to Safety policy has a Health and the Group place. For example, minimum of its operations which meets at least the all across which it operates and in the countries in legal requirements of good safety management. This emphasises the principles Health a strategy to standardise through is being augmented within a centrally the Group, across and Safety good practice Framework. For example, in developed Safety Management system a fully functional safety management the UK & Ireland, and Safety Health assessments and regular is in operation. Risk and offices warehouses carried out in the stores, audits are for responsible and each location has a nominated individual Health and Safety. Health and Safety Each jurisdiction has a matrix of Group fulfils its KPIs within which the Group and related Standards maintaining a healthy obligations and assists our colleagues in and safe workplace and shopping environment. of the success of our Health and One of the key measures and accidents to our Safety management is the rate of injuries cause data and root customers and our colleagues. Through liaison with analysis, focused risk assessment and proactive at functions to design out hazards design and merchandising in accidents we have achieved a significant reduction source, financial years. This has been particularly over the past three which makes stores, evident in our Renewal and Transformation the customer journey for better and the working environment our colleagues safer. to the CR each quarter reported are The key measures initiatives and Committee, together with updates on ongoing A number of for the following quarter. the actions proposed such scheduled for 2010/11 which cover areas initiatives are audit and awareness. as training, design, merchandising, Health and Safety: employee accidents and injuries Data for the UK & Ireland. Communication DSGi places considerable value on internal communications in or also the Group and agenda. During the period under review developed the Customer Plan, which focused the priorities for the UK. 2009/10 and which is now being implemented across the Group Regular communications in the form of blogs across our colleagues, including the cover matters which may affect development and performance of the business. 6% 8% 33% 33% 67% 67% 52% 57% 48% 43% 10% 17% 2008/09 2007/08 38,169 40,730 (1) 7% 33% 67% 67% 33% 27% 2009/10 38,746 (2) eward, health and well-being, health eward, e of all customers, colleagues, visitors and record this information. record Average number of employees Average Female Male Full time Part time Ethnic minority / non-national Aged over 50 espect. We are committed to treating our colleagues equally committed to treating are espect. We members of the public who are or may be affected by our or may be affected members of the public who are activities is very important to us. As a demonstration of this, for Health has overall responsibility a member of the Board on at least annually to the Board and Safety and reports compliance with Health and Safety policies. the Group’s Health and Safety the health, practicable steps to ensure all reasonably Taking safety and welfar (1) by law or voluntarily either required that are the Group Data for those countries within (2)discontinued operations. to Excluding employees related Staff diversity: age, gender and ethnicity of employees Staff and fairly and we actively pursue a diversity policy. The UK & policy. and fairly and we actively pursue a diversity Opportunities states that no employee policy on Equal Ireland’s sexual gender, of disability, discrimination in respect should suffer marital nationality, belief, race, colour, orientation, age, religious This policy applies to the recruitment, status or any other reason. development of all colleagues. The policy is training and career intranet site and is communicated to all colleagues via the HR the Additionally, its effectiveness. to ensure regularly reviewed new and existing of the ethnic origins of keeps records Group decisions. and promotion employees and recruitment promotion, development and general working policies. The aim promotion, and obligations of these policies is to set out our responsibilities commitment to be to our colleagues whilst demonstrating our the location of our an employer of choice. These policies, given normally communicated and subsequently colleagues, are stores reviewed via our intranet site. The policies are the Group across and legislation. regulation for compliance with current regularly Diversity with our colleagues and their right to be treated value We r We regularly assess our colleagues’ performance across the our colleagues’ performance across assess regularly We bi-annual This review. a balanced scorecard through Group and the individual’s our key principles based around is review with talented individuals to provide potential, to enable DSGi helps frameworks. The review career and rewarding structured planning within business units, cascading facilitate succession the Group. within leaders of tomorrow up to identify the business policies Human resources policies, of human resources set has a comprehensive The Group such as r which cover matters Directors’ Report: Corporate Responsibility Review continued Performance Review

The Chief Executive regularly visits stores both in the UK and Energy and transport efficiency overseas and discusses strategy with local management. The Reviewing the way in which we operate our stores and transport Group also encourages local initiatives for communicating within our products not only lowers our carbon emissions but also individual businesses, including updates from business directors reduces our cost base. During the period under review the as well as daily store meetings. Company implemented a cross business working group to ensure that the regulatory requirements of the CRC Energy In the Nordics, the senior management team, including the Efficiency Scheme are identified, understood and proactively Managing Director, lead and participate in training sessions for managed in the UK. We are currently collecting data in the store teams. This ensures that the management team have compliance with the regulations and have made considerable an opportunity to discuss strategy and customer focus with progress in our preparations to report externally next year on the colleagues in-store and receive in return an insight into how this matter. The Group views this as a significant opportunity to that strategy is being received by the customer. reduce both the emissions of our buildings and also our energy costs. We hope to develop the lessons learnt from compliance Our stores and operations with the regulations and implement these across the Group. Environment The information relating to carbon emissions from buildings has As a business we are seeking to minimise the environmental only been collated since the beginning of 2009 and as a result impact and carbon footprint associated with our operations comparative data is not available. The CR Committee will and stores. To do this we look at initiatives to improve continue to monitor this KPI during the coming year and ■ the energy efficiency of the products we sell; would aim to provide data externally over time. ■ our energy and transport efficiency; The Group has an ongoing programme to look at ways of ■ the reduction of both our and our customers’ waste; and reducing the environmental impact and associated cost of ■ the recycling of products and packaging where possible. delivering our products to our customers. During the period under review the Group logistics team have reviewed the cubic Products metre delivery load of each delivery and determined ways to One of the principal ways in which the EU and the UK intend optimise the space used, thereby increasing the volume of to meet their targets for the reduction of CO emissions is by 2 product transported in each vehicle. This has led to fewer increasing energy efficiency across all sectors, including that deliveries being required to deliver the same or greater volume of products and appliances. The aim is to improve the of product to our customers. This methodology has been environmental performance of products throughout their life- applied to the entire Group supply chain starting from the cycle by systematic integration of environmental aspects at an container ships used to bring the product to country, the trains early stage in the product design. The Energy Using Products used to deliver the product to distribution centre and the lorries Regulations are being phased in for a number of product used to transport the product to store or customer. categories over a number of years. We have been in touch with all of our suppliers regarding their compliance with these The Group has also increased the number of rail deliveries regulations to ensure the products that we stock meet the used in moving our goods from port to distribution centre and requirements of the legislation. We also work hard to ensure has utilised over 1,200 train movements in the UK, saving our own brand products comply with applicable legislation. approximately £230,000 had the same volume of product been moved by road. During the period under review we moved 670 In the UK, we have voluntarily joined a new initiative launched containers by rail in Sweden which enabled us to reduce our by the Energy Saving Trust and Department for Environment, road mileage by 150,000 miles, saving 190 tonnes in CO . Food and Rural Affairs (DEFRA) to remove the least energy 2 efficient TVs from our stock, and educate shoppers about the The Group also utilises ‘reverse logistics’ to transport electrical benefit of buying energy efficient products. This commitment products for recycling. This aims to efficiently use trucks means that we will endeavour to stock TVs which meet new returning to the warehouse to transport these products in minimum efficiency standards at least one year in advance vehicles that would otherwise be empty. of the EU introducing the Energy Using Products Regulations In the UK the Committee has reviewed the KPI data reported which will apply to all retailers from July 2012. in prior years relating to carbon emissions from the delivery fleet and has widened the remit to include all road usage. For 2009/10 our UK delivery fleet has been split into two areas. This consists of our home delivery fleet and our retail delivery fleet.

The CO2 emissions for the home delivery fleet in 2009/10 were 8,250 tonnes and for the retail delivery fleet 15,750 tonnes.

38 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 39 £12,000 Amount given £600,000 £849,000 £1,043,000 Annual Report and Accounts 2009/10 DSG international plc oup sales in 2009/10; and the Group commenced oup sales in 2009/10; and the Group 2009/10 2008/09 2007/08 2006/07 While colleagues can support a charity of their choice, the While colleagues can can selected two national charities that colleagues has Group and the e-Learningchoose to support (Lifelites Foundation), their working locally with colleagues to support which are fundraising efforts. participated our colleagues have Under the new programme activities, including raising money in many local and national charities, the DEC Haiti appeal, operating for the two selected as part of Relief and collecting T-shirts telephones for Comic collected we a Smile’ campaign, where the Blue Peter ‘Send Smile over £90,000. and saved Operation over 30,000 T-shirts the DSGi also invited to apply for a grant from Colleagues are Foundation to support their fundraising activities. fundraising economic environment, Given the continued difficult years in previous activity by colleagues has been lower than its grants from which enabled the DSGi Foundation to satisfy to make a cash rather than calling on the Group cash reserves financial year. contribution for the reported has raised a total of the Elkjøp Group In the Nordics NOK 1.25 million in support of the Norwegian Red Cross campaign and for their Haiti appeal. for Life for their Water a combination of fundraising activities by This was through colleagues and donations by the Elkjøp Group. plans to continue the Looking ahead to 2010/11, the Group its of engaging with local communities around above programme access to technology. to support activities that improve and stores Charitable donations made by the Foundation collecting all of the KPIs in respect of the UK business in collecting all of the KPIs in respect 2008/09. In 2009/10 we commenced collecting data for other available. Our data for 2009/10 includes the countries where 72% represents which together with the UK & Ireland, Nordics, sales. of Group Nicholas Cadbury for CR with responsibility Executive Director KPIs representing largest business is in the UK & Ireland The Group’s 47% of Gr –– –– 53% 40% 2008/09 2007/08 2008/09* 2007/08* 13,706 18,008 13,844 17,364 27,550 35,372 91% 67% 2009/10 2009/10 8,250 8,942 15,750 32,942 (1) om the Company for charitable ecycled is a key opportunity for the produced 2 (2) available for Nordics region. available for Nordics Data for 2007/08 and 2008/09 not available for Nordics region. not available for Nordics Data for 2007/08 and 2008/09 UK home delivery fleet fleet UK retail UK Nordics Waste recycled as a recycled Waste of total waste: percentage Nordics delivery fleet Nordics Total Tonnes of CO Tonnes activities, came to the end of its three year programme in 2009, year programme activities, came to the end of its three during which time £1.5 million was donated to the three supported charities. experienced across economic environment Given the difficult to refocused the charitable activities in the UK were Europe The new likely lower levels of fundraising activity. reflect continues the Switched on Communities theme programme access to technology for disadvantaged and of improving while encouraging colleagues to engage disabled children, with their local communities by supporting local charities. Our community put The successful Switched on Communities programme in place by the DSGi Foundation, a charitable trust which administers donations fr (1) Not including WEEE. (2) Data for 2007/08 and 2008/09 not Norway only. Data for Denmark, Sweden and * recycled Waste and increasing Reducing the impact of packaging waste the volume of material r recycled Waste business as well as good for the environment and something business as well as good for the environment to. Our ongoing responding and are our customers appreciate Equipment Electrical and Electronic commitment to the Waste developing its various (WEEE) has led to the Group Directive for the collection of end of life electrical goods. We routes and home in-store in the UK the only free continue to offer customer service as part of our standard collection recycling recycling service. This scheme, together with our cartridge is operated within our existing carbon footprint. process, and Batteries the Waste During the period under review to the UK. In introduced Accumulators Regulations were have battery collection to this, all DSGi UK stores response spent batteries points within which our customers can place target in the first year is Our battery recycling for recycling. 30 this data. tonnes. The Committee will continue to monitor Fleet carbon emissions Directors’ Report: Corporate Governance Board of Directors

1234

567

● Member of the Audit Committee ▲ Member of the Nominations Committee ■ Member of the Remuneration Committee ◆ Independent non-executive director

1 John Allan 5 Rita Clifton Chairman ■▲ Non-Executive Director ●■▲◆ John Allan (61) joined the Board on 23 June 2009 and was appointed Rita Clifton (52) joined the Board in September 2003. She is Chairman of Chairman on 2 September 2009. He is a non-executive director of National Interbrand, non-executive Chairman of Populus Ltd, the opinion pollster to Grid plc and 3i Group plc. He was previously CFO of Deutsche Post, The Times, and a non-executive director of Bupa. She was a non-executive having been appointed to the Management Board following its acquisition director of Emap plc prior to its sale in 2008 and had previously spent 18 of Exel plc in December 2005 where he had been Chief Executive since years in the advertising industry, including positions with Saatchi & Saatchi September 1994. He started his career in marketing, at Lever Brothers, and J Walter Thompson. She has been a member of the UK Government’s moving to Bristol-Myers Company Ltd and then Fine Fare Ltd. He joined Sustainable Development Commission, is a Trustee of WWF (World Wide BET plc in 1985 and was appointed to the board in 1987. He is a member Fund for Nature) and is on the Assurance and Advisory board for BP’s of the University of Edinburgh Campaign Board. He was previously carbon offset programme ‘targetneutral’. She is also a Visiting Professor Chairman of Samsonite Corporation and a non-executive director of PHS at Henley Management College and has recently been appointed Group plc, Wolseley plc, Hamleys plc and Connell plc and a member of President of the Market Research Society. the Supervisory Boards of both Lufthansa AG and Deutsche Postbank. 6 Prof. Dr. Utho Creusen 2 John Browett Non-Executive Director ●■▲◆ Chief Executive Utho Creusen (54) was appointed to the Board on 1 February 2010. He John Browett (46) joined the Group as Chief Executive in December 2007. has extensive international retail experience having spent the early part of He is also a non-executive director of easyJet PLC. He was formerly his career at OBI AG (a leading European DIY retailer) and he was Chief Operations Development Director at Tesco plc, responsible for the design Human Resources Director of Media-Saturn Holding GmbH (part of the and improvement of the Tesco operating model. Prior to this, he was Metro AG Group) from 2002 – 2008. He is currently a non-executive CEO of Tesco.com, Group Strategy Director of Tesco plc and held a senior director of M.Video (a leading Russian consumer electronics retailer). position at Boston Consulting Group, where he worked with a variety of He also holds a number of advisory and academic positions. clients specialising in consumer goods and retail. A graduate of Cambridge University, he has an MBA from the Wharton Business School. 7 Tim How Non-Executive Director ●■▲◆ 3 Nicholas Cadbury Tim How (59) was appointed to the Board on 8 September 2009 and was Group Finance Director appointed Chairman of the Remuneration Committee on 31 March 2010. Nicholas Cadbury (44) was appointed to the Board in July 2008 and took He is a non-executive director of Henderson Group plc, Framlington AIM over the role of Group Finance Director in August 2008. He joined the VCT PLC and Framlington AIM VCT 2 PLC. He was Chief Executive of Group in 1993 and has held various roles including Finance Director and Majestic Wine plc from 1989 to 2008, having initially led the management Commercial Director of PC World, Managing Director of Dixons Tax Free, buy-out of the business in 1989 and subsequently leading the flotation and, most recently, International Finance Director. He qualified as a of the business on the Alternative Investment chartered accountant with Price Waterhouse. Market (‘AIM’) in 1996. He was previously Managing Director of Bejam Group plc. He holds an MA from Cambridge University and a Masters 4 Andrew Lynch FCA Degree in Business Studies from London Business School. Non-Executive Director ●■▲◆ Andrew Lynch (53) joined the Board in May 2003. He is Chairman of the Audit Committee and the Board’s designated Senior Independent Director. He is Chief Executive Officer of SSP, the travel concessions catering company formerly part of Compass Group PLC. He was a director of Compass Group from 1997 to 2005 where he held the position of Group Finance Director from 1997 to 2003 and Chief Executive Officer of SSP from 2003. His earlier career included corporate finance and financial management positions with Prudential Corporation plc and KPMG. He is a Fellow of the Institute of Chartered Accountants in England and Wales.

40 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 41 eviously Annual Report and Accounts 2009/10 other and investment fund support oup in 2002 as Corporate Development Director, DSG international plc ector – Southern Europe PIXmania March 2010 having joined the Group in February 2008 as Managing 2010 having joined the Group March other and investment fund support in 2001. PIXmania was acquired other and investment fund support in 2001. PIXmania oup Operations Director oup Operations Director ice Président – PIXmania ransformation Director ransformation Director Steve Rosenblum (36) joined the Executive Committee in January 2007. Steve Rosenblum (36) joined the Executive Committee out the business with He has been Président of PIXmania since buying his br from in Commerce degree in 2006. He holds a Bachelor’s by the Group Canada. Montreal, University, Concordia Jean-Emile Rosenblum V Jean-Emile Rosenblum (32) has been Vice Président of PIXmania since buying out the business with his br in 2006. He holds a by the Group in 2001. PIXmania was acquired ISG, Paris. from in Commerce degree Bachelor’s (43) was appointed as Group Operations Director leading Operations Director appointed as Group Sebastian James (43) was teams in January 2010, having pr both the Retail and Services he Director Development Group until that date. As been Services Director to working at the Prior Programme. managed the Currys Transformation Insurance Services Limited, a he was Chief Executive of Synergy Group experience He has wide retail company. private equity backed insurance the for developing and implementing responsible as Strategy Director at The Boston plc. He started his career turnaround strategy at Mothercare at INSEAD. having completed an MBA Consulting Group Mario Maiocchi Managing Dir South Europe Director Mario Maiocchi (54) was appointed as Managing on 14 he held the position of Prior to joining the Group, of UniEuro. Director France and Italia, CFO of Metro and General Manager of Metro President in Bocconi University MD of EMI Financial Services. He holds a BA from MIT University, at Harvard Milan and has attended several programmes Retail in ‘Retail Marketing and and INSEAD. He is also a visiting Professor Brands Strategy’ at Parma University. Milliken Andrew T in January Director Milliken (39) was appointed Transformation Andrew 2009. He joined the Gr early of Airport Retail in 2004. He spent his moving to Managing Director and holds and BBC Worldwide, with The Boston Consulting Group career INSEAD. an MBA from Steve Rosenblum Président – Sebastian James Gr eviously cial and buying roles both in the UK and cial and buying roles oup in 2007 from William she oup in 2007 from Hill plc, where etary & General Counsel ector – Nordics cial Director

oup Finance Director oup People, Marketing and Property Director oup People, Marketing and Property operty Director in June 2008. She was previously Managing Director of Managing Director in June 2008. She was previously operty Director Helen Grantham Company Secr and General Company Secretary Helen Grantham (45) is the Group’s Counsel. She joined the Gr See page 40 was Company Secretary and General Counsel. She has also served was Company Secretary at Chubb plc and Hepworth plc. Earlier in her as Company Secretary she was an in-house lawyer at Boots and qualified as a solicitor career with Hammonds. Ronny Blomseth (41) was appointed as Nordics Managing Director in Managing Director Ronny Blomseth (41) was appointed as Nordics years, having pr January 2009. He has worked for Elkjøp for 20 Nicholas Cadbury Gr John Browett John Browett Chief Executive See page 40 Katie Bickerstaffe (43) joined DSGi as Group People, Marketing and (43) joined DSGi as Group Katie Bickerstaffe Pr Ronny Blomseth Managing Dir Norway and Sales Manager in Elkjøp held positions as Managing Director for eight years. Prior to this, stores and various positions in different at the Norwegian School he completed a full time Economics degree of Management. Kwik Save, and Group Retail Director and Group HR Director at Somerfield. HR Director and Group Retail Director Kwik Save, and Group at Dyson, PepsiCo and Unilever. included roles Her earlier career Steve Ager (50) joined the Group in October 2008 from Tesco, where where Tesco, 2008 from in October Group Steve Ager (50) joined the he held a number of commer Steve Ager Commer Katie Bickerstaffe Gr The Executive Committee is an internationalThe Executive Committee functional executive cross strategy and the day to day for the implementation of team responsible business. management of the Group’s set up operations in Asia and Central Europe; he at Tesco, While globally. format and he Express the Tesco of the creation for he was responsible Finest range. masterminded the Tesco Executive Committee Executive Directors’ Report: Corporate Governance

Statutory Information

Pages 1 to 62, together with any sections of this Annual Report and Accounts which have been incorporated by reference, comprise the Directors’ Report which has been drawn up and presented in accordance with and in reliance upon applicable company law in England and Wales. The liabilities of the directors in connection with that report shall be subject to the limitations and restrictions provided by such law. The Performance Review, which can be found on pages 24 to 39, is based on many of the principles contained in the best practice statement ‘Reporting Statement: Operating and Financial Review’ issued by the Accounting Standards Board (ASB). Reference to information that fulfils the business review requirements of Section 417 of the Companies Act 2006 together with other disclosures required in the Directors’ Report are set out below:

Section of Directors’ Report Page Appointment and retirement of directors Statutory Information 43 Auditors and disclosure of information to auditors Statutory Information 44 Business performance Performance Review 24-34 Charitable donations Corporate Responsibility Review 39, 44 Chairman’s Statement Business Overview 15 Chief Executive’s Statement Business Overview 16-19 Conflicts of interest Statutory Information 43 Corporate Governance Statement Corporate Governance Report 45 Directors Board of Directors and Statutory Information 40, 43 Directors’ Responsibilities Directors’ Responsibilities 62 Directors’ and officers’ liability insurance Statutory Information 43 Dividends Statutory Information 44 Employees (including diversity and equal opportunities) Corporate Responsibility Review 36-37 Environmental matters Corporate Responsibility Review 38-39 Factors likely to affect future performance Chief Executive’s Statement – Outlook 19 Financial position at end of the year Performance Review 32-34 Going concern Statutory Information 44 Key Performance Indicators Strategic Summary 21 Objectives and strategy of the Group Chief Executive’s Statement 16-19 Payment of suppliers Statutory Information 44 Political donations Statutory Information 44 Principal activities Strategic Summary 20 Principal risks and uncertainties Strategic Summary 22-23 Share capital structure Statutory Information 43 Social and community issues Corporate Responsibility Review 39 Substantial share interests Statutory Information 43

42 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 43 Annual Report and Accounts 2009/10 DSG international plc fect from 1 October 2008 to permit the Board to consider 1 October 2008 to permit the Board fect from ectors, secretary and other officers of the Company are entitled of the Company are and other officers ectors, secretary The interests of the directors in the share capital of the Company in the share of the directors The interests 57, 59 and 60. in the Remuneration Report on pages shown are of any in the shares had any beneficial interests No director or in any contract or arrangement (apart subsidiary undertaking any subsidiary of service) to which the Company or contracts from at the end of the financial period. was a party during or relating provisions plans contain share All of the Company’s and options Outstanding awards to a change of control. a change of on and become exercisable would normally vest conditions subject to the satisfaction of performance control, applicable. where liability insurance and officers’ Directors’ Association, the Pursuant to Article 159 of the Articles of dir and, if appropriate, to authorise situations where a director has a director to authorise situations where and, if appropriate, that conflicts, or may possibly conflict, with the an interest of the Company. interests to declare has a formal system in place for directors The Board for authorisation by those directors conflicts to be considered In deciding in the matter being considered. who have no interest conflict, those whether to authorise a conflict and potential to act in the way requested deciding the matter are directors the success they consider would be most likely to promote of the Company and may impose limits and conditions when giving authorisation. to the Audit Committee has delegated responsibility The Board authorised on an annual basis the conflicts previously to review and to consider whether any authority provided by the Board in place, whether any terms and conditions should remain should be imposed or amended and whether such authority to and to make such recommendations should be revoked accordingly. the Board to be indemnified by the Company out of its own funds against to be indemnified by the Company out of to the business the conduct of the Group’s liabilities arising from appropriate has purchased The Group extent permitted by law. liability insurance cover which in general and officers’ directors’ personal and officers’ terms indemnifies individual directors’ out of actions taken legal liability and costs for claims arising business. in connection with the Group’s Conflicts of interest amended at the 2008 AGM The Articles of Association were with ef 6.05% 4.95% 3.53% 5.73% 13.29% 10.27% 13.06% 24 June 2010 share capital at capital share e shown on Percentage of issued Percentage eceived notification as at 24 June 2010 of the eceived notification as e capital during the period, including share options capital during the period, including share e Schroders Plc Schroders Standard Life Investments Ltd Standard Plc Legal & General Group UBS Global Asset Management & Associates Inc. Letko, Brosseau Ameriprise Financial, Inc. and its group & Management CompanyCapital Research Limited Suisse Securities (Europe) Credit 4.92% page 40. All of the directors served throughout the period, served throughout page 40. All of the directors Utho Creusen except for John Allan, Tim Dr. How and Prof. appointed on 23 June 2009, 8 September 2009 and who were 1 the from served John Whybrow February 2010, respectively. on the Board from beginning of the period until his resignation 2010. Sir John Collins and Count Emmanuel d’André 31 March the beginning of the period until their resignations served from on 2 September 2009. Lynch, with the Articles of Association, Andrew In accordance would be the directors Utho Creusen Tim Dr. How and Prof. been agreed It has, however, at the 2010 AGM. to retire required at this meeting will retire that in line with best practice all directors The themselves for reappointment. and, being eligible, will offer Remuneration Committee Report on pages 56 and 57 provides for executive directors details of applicable service agreements The and terms of appointment for non-executive directors. is qualified director is satisfied that each respective Board by virtue of their skills, experience and for reappointment contributions to the Board. Directors at the date of this report, in office The names of the directors ar their biographical details and other information, following interests in voting rights of 3% or more in the issued in voting rights of 3% or more following interests capital of the Company: share Substantial share interests Substantial share Rules, Transparency and with the Disclosure In accordance DTR5, we have r Share capital Share changes to the capital and share Details of the Company’s issued shar financial statements, given in note 23(a) to the are exercised, on page 104. Directors’ Report: Statutory Information continued Corporate Governance

Corporate activity Payment of suppliers On 19 May 2009 the Group disposed of its operations in Hungary It is the Group’s policy to agree terms of payment with its (Electro World Magyarorzág Kereskedelmi És Szolgáltato Kft) suppliers. Payments are made in accordance with these terms to EW Electro Retail Limited (EWH) for consideration of €1. provided that the supplier has complied with all the relevant The sale saw the transfer of all nine stores, operations and contractual obligations. Trade creditors at 1 May 2010 represent employees to EWH. 49 days of annual purchases made during the period (2 May 2009 50 days). On 1 September 2009 the Group disposed of its operations in Poland (Electro World Polska sp. zo.o.) to IDMSA Brokerage Auditors and disclosure of information to auditors House (Dom Maklerski IDM S.A.) working with Mix Electronics Deloitte LLP are willing to continue in office as auditors to the S.A., for a consideration of €1. The sale saw the transfer of all Company. Resolutions for their reappointment and to authorise eight stores, operations and employees. the directors to agree their remuneration will be proposed at the forthcoming AGM. Dividends No dividend was paid in respect of the 52 weeks ended In accordance with the provisions of Section 418 of the 2 May 2009. Companies Act 2006, each of the directors at the date of approval of this report confirms that to their knowledge and No dividend will be paid in respect of the 52 weeks ended belief, and having made appropriate enquiries of other officers 1 May 2010. of the Group: Going concern ■ so far as they are aware, there is no relevant audit information In considering the going concern basis for preparing the financial of which the Company’s auditors are unaware; and statements, the directors have considered the Company’s ■ they have taken all the steps that they ought to have taken objectives and strategy, risks to achieving its objectives and as a director to make themselves aware of any relevant audit its review of business performance which are all set out in the information and to establish that the Company’s auditors are Directors’ Report and Business Review section of the Annual aware of that information. Report and Accounts. The Group’s liquidity and funding arrangements are described in notes 17 and 22(f) to the financial Annual General Meeting statements as well as in the funding section of the performance The AGM will be held on 8 September 2010 at Holiday Inn review and the directors consider that the Group has significant London-Bloomsbury, Coram Street, Russell Square, London, covenant and liquidity headroom in its borrowing facilities for WC1N 1HT at 10.00am. Notice of the meeting, together with the foreseeable future. full details and an explanation of the business to be considered, is given in a separate letter accompanying this report. Accordingly, after reviewing the Company’s expenditure commitments, current financial projections and expected future By Order of the Board cash flows, together with the available cash resources and undrawn committed borrowing facilities, the directors have considered that adequate resources exist for the Company to continue in operational existence for the foreseeable future. Helen Grantham Accordingly, the directors continue to adopt the going concern Company Secretary basis in preparing the financial statements. 24 June 2010 Charitable and political donations During the period the Company, together with certain of its subsidiaries, made donations of £136,000 (2008/09 £200,000) for charitable purposes. Further information on charitable activities is set out in the CR Review on page 39. During the year the Company made no payments (2008/09 £nil) which constituted EU Political Expenditure. A resolution to authorise the directors to incur EU Political Expenditure in the coming year to an aggregate amount not exceeding £25,000 will be proposed at the forthcoming AGM.

44 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 45 eligible to attend Annual Report and Accounts 2009/10 during the period meetings attended Scheduled meetings Number of scheduled DSG international plc meet with members of the Executive Committee and other meet with members of the Executive Committee members of senior management; both in the UK and overseas, operations visit the Group’s visits and discussions with local colleagues; including store auditors and other advisors; and meet with the Group’s industry and attend external to the retail seminars relevant corporate governance matters. a review by the Nominations Committee of the Board’s size, by the Nominations Committee of the Board’s a review of and the skills and experience composition and structure, and the Board; and committee the Board from feedback to the Board any action to regarding chairmen with recommendations issues identified. address Tim meeting due to a prior commitment made How was unable to attend one Board his appointment. before Director directors Current John Allan (Chairman)John BrowettNicholas CadburyRita Clifton Utho Creusen Dr. Prof. Tim How 8 LynchAndrew Former directors Sir John Collins 9Count Emmanuel d’André 2 9 John Whybrow 9 4 8 9 4* 4 9 2 9 8 9 4 9 5 4 8 * normal practice is to hold meetings both in the UK The Board’s ■ ■ ■ ■ ■ ■ The Board met 13 times during the period, including nine The Board scheduled meetings and four ad hoc meetings convened to consideration or Board deal with specific matters requiring Due to the ad hoc meetings being called at short approval. available to attend these were notice, not all the directors meetings due to other commitments. The Senior Independent Director also discusses, on an individual also discusses, Director The Senior Independent and of the Chairman with each director basis, the performance feedback on these discussions to the Chairman. provides concluded that the balance of skills and experience The Board for the and its committees was appropriate of the Board of the additional The recruitment the Group. of requirements is detailed in the Nominations non-executive directors Committee Report. induction a tailored receives On appointment, each director together with guidance and training into the Group programme experience. The induction to their level of previous appropriate at the outset between the relevant is agreed programme and involves both the and the Company Secretary director the to the Company, of information in writing relating provision corporate governance and its committees and relevant Board being given the opportunity to: guidance and each director ed to be independent

each committee considering a detailed questionnaire relating each committee considering a detailed questionnaire and a of responsibility committees’ areas to the relevant terms of of feedback, together with appropriate review at a committee meeting; reference, a meeting between the Chairman and each director to review a meeting between the Chairman and each director performance; and individual director the responses a summary of comments (on an anonymous basis) being and discussed with the Chairman and then circulated to the Board; circulated the circulation of a questionnaire to each director; of a questionnaire the circulation and individual meetings between the Company Secretary and feedback on the questionnaire to provide each director any additional comments on performance; Directors’ Report: Directors’ GovernanceCorporate ■ ■ ■ ■ ■ upon appointment, four non-executive directors considered considered upon appointment, four non-executive directors to be independent and two executive directors. by the Board of his In 2008/09, following Sir John Collins’ notification on 2 September 2009, Andrew the Board from intention to retire an for led the search the Senior Independent Director, Lynch, to assume the position of Chairman, having additional director performance with the other the outgoing Chairman’s considered and having established an appropriate non-executive directors John Allan was appointed as description. During the year, role and then, in succession to Sir John a non-executive director on 2 September 2009. Collins, became Chairman of the Board with the assistance of the Nominations Committee, The Board, its committees conducted an annual assessment of the Board, was led by performance. This process and individual director the Chairman with the assistance of the Company Secretary and involved: Board of Directors of Board Composition and performance comprises a non- the Board As at the date of this report, executive Chairman, who was consider The Board recognises the importance of good corporate the importance recognises The Board governance of corporate and maintains high standards collectively accountable governance are for which the directors Sound governanceto shareholders. to achieving the is central value and prime objective of maximising shareholder directors’ is by which the Group processes the comprises, principally, and and controlled identified and managed, risks are directed consider that the directors The accountability is assured. effective the provisions the period complied with Company has throughout the June 2008 Combined Code (the set out in Section 1 of together with the ‘Combined Code’). The following statement, the Audit Committee Remuneration Report on pages 52 to 61, Committee Report on pages 49 and 50 and the Nominations has throughout Report on page 51, explains how the Group in Section 1 of the the period applied the principles set out Combined Code. Corporate GovernanceCorporate Report Directors’ Report: Corporate Governance Report continued Corporate Governance

and in Europe, enabling, in particular, the non-executive ■ communication with shareholders, including approval of all directors to gain first-hand experience of markets in which the circulars, prospectuses and major public announcements; Group operates and giving local management direct access ■ changes relating to the Company’s capital structure and the to members of the Board. There were meetings of the non- Memorandum and Articles of Association; executive directors during the period without the executive ■ the appointment, removal and remuneration of non-executive directors being present and meetings between the Senior directors and the Company Secretary; Independent Director and the other non-executive directors without the Chairman being present. ■ the terms of reference of Board committees, the Chairman and the executive directors; The Articles of Association require one third of the Board not ■ approval of the Group’s strategy and annual budget; otherwise subject to reappointment by shareholders to retire by rotation each year and ensure that over a three year period ■ review of Group performance; each director is subject to reappointment by shareholders at ■ maintaining and monitoring the Group’s system of internal a general meeting. For 2010 the Board has decided that each control and risk management; and director will retire and seek reappointment at the AGM on ■ approval of major capital expenditure or disposals, material 8 September 2010. Whilst not required by the Combined Code, contracts, material acquisitions and divestments. the Board considers it best practice that directors are elected each year. All directors have access to the services of the Company Secretary and may take independent professional advice at Details of the directors retiring and seeking re-election at the the Company’s expense in the furtherance of their duties. AGM are set out in the Statutory Information on page 43, with detailed biographies of the Board members shown on page 40. Board committees Information flows The Board has established a number of committees to which it The Chairman ensures that the Board has full and timely access has delegated specific responsibilities. Separate reports from the to all relevant information and holds occasional meetings with Audit, Nominations and Remuneration Committees, including the non-executive directors without the executive directors details of membership and terms of reference, are set out on being present to discuss, amongst other matters, corporate pages 49 to 61. The trading businesses are managed by strategy, performance and the performance of the executive separate management committees and the Group has also team. There is frequent contact between directors outside established an Executive Committee as detailed below. formal meetings to progress the Group’s business and to The Executive Committee is responsible for the implementation promote open communication and team working. of strategy and the day to day management of the Group’s Non-executive directors are encouraged to meet members business. Individuals from the Committee attend Board of senior management regularly, to undertake visits to all parts meetings at the request of the Chairman to report on areas of the Group, particularly developing businesses, and to attend within their executive responsibilities. Membership of the external seminars on corporate governance matters. All Executive Committee and further information relating to the directors are kept informed of changes in relevant legislation Executive Committee members can be found on page 41. and changes in commercial and financial risks. All Board committees operate within written terms of reference A corporate governance framework has been approved by the approved by the Board, which are available on request from the Board which defines the role and responsibilities of the constituent Company Secretary. The Board receives and reviews minutes of elements of the Group’s management structure. This enables the their meetings and those of the Executive Committee and the Board to plan, execute, control and monitor the Group’s activities Company Secretary is the secretary to the Executive Committee. so as to achieve its strategic objectives. The Board has a formal schedule of matters reserved for Board approval, a copy of Relations with shareholders and other stakeholders which can be found on the corporate website. The Board attaches considerable importance to the maintenance of constructive relationships with shareholders and The schedule of matters reserved for the Board includes: its other stakeholders. Relationships with suppliers, employees ■ approval of the interim statement and Annual Report and and the community are further discussed in the CR Review Accounts (including the review of critical accounting policies on pages 35 to 39. Effective two way communication with and accounting judgements and an assessment of the institutional investors and analysts is established through regular Company’s position and prospects); presentations and meetings in the UK and overseas, usually ■ approval of interim and final dividends; by the Chief Executive, Group Finance Director and Group Communications Director. The Chairman holds occasional ■ the appointment and remuneration of the external auditors meetings with major shareholders to discuss matters of mutual on the recommendation of the Audit Committee; interest including corporate strategy and governance. Where appropriate, the Chairman of the Remuneration Committee communicates with major shareholders to canvas opinion when deciding remuneration policy. Matters arising from these

46 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 47 Annual Report and Accounts 2009/10 oup’s system of internal control and processes system of internal processes and control oup’s DSG international plc nal control and for reviewing its effectiveness. The its effectiveness. and for reviewing nal control each business function has established procedures and each business function has established procedures the to minimise the risk of fraud and to safeguard controls assets; Group’s the Board and management committees meet regularly to and management committees meet regularly the Board against the targets set out in the Group’s monitor progress budget and strategic five year plan and to consider the financial period end expected of the Group’s re-forecasts position. Financial and non-financial performance reports weekly and daily, produced in varying levels of detail are process; to facilitate this review four-weekly ensure the defined lines of authority established by the Board level. taken at an appropriate that significant decisions are of and control for the approval These include requirements operations treasury both capital and operating expenditure, of in respect and cash management. The procedures delegated authority have been enhanced during the year and of authorities have been issued, notably in respect revised contracts and commitments. Details on the schedule of shown on page 46; are for the Board matters reserved egard to the materiality of the relevant risks, the likelihood of to the materiality of the relevant egard Responsibility and accountability Responsibility and system for the Group’s has overall responsibility The Board of inter ■ for managing risk comprise the following main elements: ■ ■ Board delegates to executive management the day to day to executive management the day delegates Board the risks for identifying, evaluating and managing responsibility and operations, and for implementing facing the Group’s maintaining internal systems that manage those risks control their nature to appropriate manner, and effective in an efficient accountable and is responsible and scale. Senior management for internal and for ensuring and risk management control policies and procedures. compliance with the Group’s limitations and continuous improvement Inherent has In determining its policies on internal the Board control, r are The directors losses occurring and the costs of control. limitations in any system of control that the inherent aware It follows that the means that risk cannot be totally eliminated. system of internal is designed to manage and control Group’s to achieve failure mitigate, rather than eliminate, the risk of but not reasonable business objectives and can only provide or loss. The absolute assurance against material misstatement to managing and monitoring internal approach control Group’s to identify ways in regularly and risk assessment is reviewed and further embedded throughout which it can be improved are significant weaknesses Where operations. the Group’s internal investigated fully using appropriate identified, these are engaging external deemed necessary, and, where resources the drawn up to remedy expertise. Detailed plans are ongoing basis. on an is monitored weaknesses and progress activities and control environment Control In addition to the corporate governance described structure above, the Gr e accrual on 30 April 2010 with members e accrual on 30 April 2010 with members nal Control: Revised Guidance for Directors Revised Guidance for Directors nal Control: on the Combined Code’, the Group has established and on the Combined Code’, the Group for identifying, evaluating and managing maintained a process the for reviewing the significant risks faced by the Group, of the system of internal and for confirming effectiveness control any significant failings or that action has been taken to remedy which is weaknesses that have been identified. This process, the was in place throughout periodically by the Board, reviewed of the 52 weeks ended 1 May 2010 and to the date of approval financial statements. Internal control working party with the guidance of the Turnbull In accordance set out in ‘Inter of this section being offered membership of the defined membership of this section being offered of the scheme contribution section. A trust holds the assets and this trust is managed those of the Group separately from of the trustee six directors are by a corporate trustee. There two have the Group, company: two have been nominated by amongst the scheme membership and two been selected from Asset management is delegated to independent directors. are a number of independent companies whose performance is service. by a specialist performance measurement monitored audited annually by Nexia Smith accounts are The scheme’s companies. and Williamson, not auditors to any Group who are an annual statement of their Members of the scheme receive annual report. accrued benefits and a copy of the trustee’s Further information about pensions is given in note 21 to the financial statements. Pension schemes operates a number of defined contribution and The Group scheme, which defined benefit pension schemes. The principal defined benefit section operates in the UK, comprises a funded benefit section and a defined contribution section. The defined was closed to futur presentations and meetings are communicated to the Board. communicated and meetings are presentations with the Financial conducted in accordance are Presentations Rules on the dissemination of Disclosure Services Authority’s of such information the protection ensure inside information to to the been made available generally that has not already shareholders. Company’s report an investor relations and reviews receives The Board is The Senior Independent Director at each of its meetings. any major issues that with shareholders available to discuss and non-executive normal channels through cannot be resolved the opportunity to attend meetings with offered are directors an opportunity for The AGM provides major shareholders. and with shareholders to communicate directly the Board and Nominations the chairmen of the Audit, Remuneration available at the meeting to answer questions Committees are documents Notice of the AGM and related shareholders. from the at least 20 working days before mailed to shareholders are on each being proposed meeting with separate resolutions and issue. In addition to the interim report substantially different obtain can and financial statements, shareholders annual report the corporate website. from information about the Group Directors’ Report: Corporate Governance Report continued Corporate Governance

■ appropriate controls and procedures have been established Internal audit over the security of data held on, and functionality provided The Internal Audit department is fully independent of business by, the Group’s business systems. These include disaster operations and has a Group-wide mandate. Its work is driven by recovery arrangements. The Group’s computer systems are a risk-based methodology ensuring that the controls to mitigate periodically tested and reviewed by both Internal Audit and the Group’s key risks are audited on a regular basis. Its plans the external auditors; are approved by the Audit Committee, which also receives ■ the Group appoints individuals who are of a calibre to enable regular reports on its findings and progress of related actions. them to discharge the duties and responsibilities of the roles The department also works with the businesses to promote and assigned to them. Established performance review and further develop effective risk management within their operations. development mechanisms exist to identify key objectives and The Group Director for Internal Audit and Risk Management areas for improvement for each member of staff. Succession attends all Audit Committee meetings. planning forms an integral part of human resources management; External auditors The external auditors provide further independent observations ■ Group Treasury operates within established and documented on certain elements of the internal financial controls as part of policies and procedures. The policies are described in their audit of the financial statements and their findings are note 22(a) to the financial statements and are reviewed and presented to the Audit Committee. The engagement and approved annually by the Board or one of its Committees; independence of the external auditors is considered annually ■ the Group’s insurance covers the material risks to the before the Audit Committee makes a recommendation to Group’s assets and business and is reviewed annually by the Board. the Audit Committee; ■ local management at each business unit and in those Corporate Responsibility (CR) functions of the Group requiring greater overview, has As set out in the Group’s CR Review on pages 35 to 39 the responsibility for identification and evaluation of significant Group’s CR Committee was chaired by the Company Secretary risks to their business areas together with design of mitigating throughout the period under review and the Committee’s controls. They are supported in this role by the Internal Audit membership is made up of senior executives. During the and Risk Management function; period under review the Committee met on four occasions. ■ all entities within the Group are required to adhere to common The CR Committee assists the Board in identifying reputational standards of internal control and corporate governance, which and other risks arising from the conduct of the Group’s are specified in documented guidance; and businesses. The Committee does this through undertaking a risk assessment to identify key risks and opportunities and then ■ post-completion assessments are carried out following monitoring agreed mitigating action. It makes recommendations major acquisitions. on measurement tools and audit procedures and reports on the effectiveness of systems for managing CR related matters. Assurance and monitoring The Group Finance Director is the Board member with specific The Board oversees the monitoring system whilst senior responsibility for social, environmental, ethical and other management, under the direction of the Board, is responsible CR related matters. for maintaining the appropriate internal control systems and for managing risk at an operational level. Independent assurance Whistleblowing from both the external auditors and Internal Audit provides The Group operates a whistleblowing policy and has a important input into the monitoring system. The Board conducts confidential helpline operated by a third party. This can be used an annual evaluation of the management of risk and the to report, anonymously if so wished, on matters of concern to processes of internal control and has established a monitoring employees. This can range from unethical behaviour, such as framework comprising the functions set out below: fraud, to practices that might endanger the health of customers and employees. Audit Committee The Audit Committee seeks ongoing assurance that the control Corporate website environment and activities described above are operating Further information relating to corporate governance including effectively. For example, throughout the period under review the terms of reference for Board committees, a full schedule of Committee received reports from the external auditors and matters reserved for the Board, and corporate responsibility Internal Audit. The Committee reports regularly to the Board and may be found on the corporate responsibility section of the the Audit Committee’s review of the effectiveness of the internal corporate website. controls is formally reported to the Board on an annual basis.

48 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 49 Annual Report and Accounts 2009/10 DSG international plc review the directors’ conflicts of interest register and to agree register conflicts of interest the directors’ review conflicts; approved any amendments to previously policy on the supply of non-audit Group’s the regularly review services by the external relevant auditors taking into account services, of non-audit the provision ethical guidance regarding the qualifying services and the level of non-audit to approve the In this respect fees and to monitor the services provided. when taken as a level of fees paid for non-audit services, in addition to the of the audit fee, is considered proportion the external to preserve of such services in order nature auditors’ independence and objectivity; and of arrangements under and effectiveness monitor the results which employees can raise in confidence issues of concern to financial matters and internalrelating controls (whistleblowing). monitor the integrity of the financial statements and any monitor the integrity financial to the Group’s relating formal announcements performance; accounting policies and financial reporting critical review judgements; system of internal control integrity of the Group’s the review and risk management; internal of the Group’s the effectiveness monitor and review audit function; the annual audit plan of both the internal and approve review and external audit functions including the principal areas of focus; risk and insurance programmes; the Group’s review carry out an annual assessment of the external auditors, and monitor their independence and objectivity taking review and regulatory UK professional into consideration relevant of the external assess the effectiveness audit requirements, the external and approve auditors’ remuneration process, in respect terms of engagement and make recommendations or removal; of their reappointment Role of the Committee to: has delegated to the Audit Committee responsibility The Board ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ The full terms of reference of the Audit Committee are available of the Audit Committee are The full terms of reference section of the corporate website. on the corporate responsibility eligible to attend Number of during the period meetings attended Meetings e set out on page 40, is set out in the table e set out on page 40,

Current directors Current (Chairman) Lynch Andrew Rita Clifton Creusen Utho Dr. Prof. Tim HowFormer directors 4Count Emmanuel d’AndréJohn Whybrow 1 1 4 4 2 3 1 2 4 2 3 Member Directors’ Report: Directors’ GovernanceCorporate The Chairman has recent and relevant financial experience. and relevant The Chairman has recent to the Committee acted as secretary The Company Secretary of the externalduring the period. Representatives auditors, Financial the Group Finance Director, the Chairman, the Group Director Chief Accountant and the Group the Group Controller, of Internal invited to attend were Audit and Risk Management fully that Committee members were each meeting to ensure informed and fully supported in carrying out their duties. The also attended Treasurer and the Group Director Tax Group Part of each meeting request. meetings at the Committee’s was held between the members of the Committee and the external in private. auditors

Membership and meetings Membership and biographies membership of the Committee, whose The current and qualifications ar the four independent non-executive below and comprises retired Count Emmanuel d’André and John Whybrow directors. from effect and members of the Committee with as directors 2 Tim How respectively. 2010, September 2009 and 31 March of the appointed as members were Utho Creusen Dr. and Prof. 2009 and 1 February 8 September from Committee with effect since and have both attended all meetings 2010 respectively Committee members served their appointment. The remaining the period. The Committee was scheduled to meet throughout November and four times during the period in June, September, April in advance of key internal and external dates. The reporting to be considered Committee has a formal schedule of matters the allocated across over the course of the year which are matters requiring four scheduled meetings. Any additional dealt with either at ad hoc meetings or consideration are discussions with the Chairman and other members through of the Committee between meetings. Audit Committee Report Committee Audit Directors’ Report: Audit Committee Report continued Corporate Governance

Key matters considered In addition to executing the responsibilities described above, the key matters considered by the Committee during the period included: ■ significant issues arising from reports from both the internal and external audits; ■ measures adopted to ensure compliance with the Group’s credit facilities; ■ the working capital position of the Group and the management of its cash flow; ■ the carrying value of certain assets in the Group; ■ tax matters; ■ recommendations from the Nominations Committee concerning the composition of the Committee; ■ a review of the Committee’s performance, and terms of reference; ■ the role and resources of Internal Audit; ■ a review of the Group’s Delegation of Authority policy; ■ the implementation of a new Ethical Conduct policy; ■ developments in corporate governance, such as the Walker Review and the Financial Reporting Council’s review of the Combined Code; and ■ the annual audit fee, with due regard to the balance between audit and non-audit fees and the policy for approval of non- audit fees paid to the Group’s auditors. It was considered that this policy has been working well and remained appropriate. The Committee, having considered the policies and procedures applied by the Group and the internal policies and representations of Deloitte LLP, including the regular rotation of audit partner, remains satisfied with the auditors’ objectivity and independence and the effectiveness of the audit process. Accordingly, the Committee has recommended to the Board that a resolution for their reappointment be proposed at the AGM.

Andrew Lynch FCA Chairman of the Audit Committee 24 June 2010

50 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 51 Annual Report and Accounts 2009/10 DSG international plc Partnership. The Committee believes that both TimPartnership. The Committee How and and independent in character are Utho Creusen Dr. Prof. and meet the independence judgement on appointment the Combined Code; criteria as set out in a review of the Committee’s performance and terms of of the Committee’s a review and reference; of the policy for externala review appointments for both non-executive and executive directors. the appointment of Tim How and Prof. Dr. Utho Creusen; the appointment of Tim Dr. and Prof. How Committees following the composition of the Board reviewing from Sir John Collins and John Whybrow of the retirement the Board; year which undertaken during the Board the evaluation of the size, opinion that the Board’s confirmed the Committee’s Committee and the Board composition and structure needs of the Group. to the present appropriate were structure structure The Committee is also satisfied that the present but does not for the Company, leadership strong offers As part concentrate authority in one or two key individuals. the Board of the evaluation the Committee benchmarked of companies; against a peer group each from the evaluation of the time commitment required and the Chairman in fulfilling their non-executive director outside the need for availability recognising roles, respective timetable; the scheduled Board ■ ■ ■ ■ ■ ■ The Committee is satisfied that the Board keeps abreast of keeps abreast The Committee is satisfied that the Board of private a mixture developments within the industry through internal from external and and presentations advisors research of importance to the Company. on key areas at the retiring The Committee is satisfied that all the directors by qualified for reappointment properly forthcoming AGM are virtue of their skills and experience and their contribution of deliberations. guidance and time to the Board’s John Allan Chairman of the Nominations Committee 24 June 2010 eligible to attend Number of during the period meetings attended Meetings e the following:

ectors and the Chairman. Sir John Collins and John Whybrow ectors and the Chairman. the recruitment of Tim How and Prof. Dr. Utho Creusen Utho Creusen of Tim Dr. the recruitment How and Prof. description A role to join the Board. as additional directors setting out the competencies and experience for the new for process at the start of the recruitment was agreed role skills and the existing Board’s having considered each role was led by the Chairman with the experience. This process The Zygos consultancy, assistance of a recruitment to make recommendations to the Board for the continuation to the Board to make recommendations upon the expiry of any in office or otherwise of a director specified term of appointment. to identify, evaluate and nominate to the Board candidates evaluate and nominate to the Board to identify, for appointment to the Board; members, for succession planning for Board to be responsible and Chief Executive; and the Chairman in particular, to keep under review the structure, size and composition of the structure, to keep under review and its principal committees and to recommend the Board changes deemed necessary; Member directors Current John Allan (Chairman)Rita Clifton Creusen Utho Dr. Prof. Tim How LynchAndrew Former directors 4Sir John CollinsCount Emmanuel d’André 1John Whybrow 4 0 4 4 3 0 1 3 4 0 4 3 0 3 Directors’ Report: Directors’ GovernanceCorporate ■ ■ ■ ■ ■ Role of the Committee are: and responsibilities principal roles The Committee’s retired as directors and members of the Committee with effect and members as directors retired 2from 2010, respectively. September 2009 and 31 March as a member of the Committee on John Allan was appointed its chairman on 2 September 2009. 23 June 2009 and became appointed as were Utho Creusen Tim Dr. How and Prof. 8 September 2009 from with effect members of the Committee The biographies and and 1 February 2010, respectively. set out on Committee members are qualifications of the current during the period and page 40. The Committee met four times of the Committee. is secretary the Company Secretary Membership and meetings Membership and out in the table membership of the Committee is set The current the four independent non-executive below and comprises dir Nominations Committee Report Committee Nominations Key matters considered by the Committee during the The principal matters considered period wer No member of the Committee participates in discussions or decisions concerning appointment to the Board. their own on the corporate are full terms of reference The Committee’s section of the corporate website. responsibility Directors’ Report: Corporate Governance

Remuneration Report

This report, approved by the Board, has been prepared in The Chairman has joined the Committee in accordance with the accordance with the Companies Act 2006, Schedule 8 of the provision of the Combined Code permitting a company Chairman Large and Medium sized Companies and Groups (Accounts to be a member, but not Chairman, of the Remuneration and Reports) Regulations 2008 (‘Schedule 8’) and the Listing Committee. The Committee’s terms of reference are shown on Rules of the Financial Services Authority. This report is divided the corporate responsibility section of the corporate website. into two sections: The Committee met five times during the period. ■ remuneration policy (not subject to audit as set out in sections Number of (I) to (V)) which details the role of the Committee, the meetings attended Meetings principles of remuneration and other matters; and Members during the period during the period eligible to attend ■ remuneration review (audited as set out in sections (VI) to (X)) Current directors which details directors’ and former directors’ emoluments, Tim How (Chairman) 2* 3 share awards, share options and pension arrangements. John Allan 5 5 Rita Clifton 5 5 The purpose of this report is to inform shareholders of the Prof. Dr. Utho Creusen 1* 2 Company’s policies on directors’ remuneration for the financial Andrew Lynch 5 5 period ended 1 May 2010 and, so far as practicable, for Former directors subsequent years as well; and to provide details of the Sir John Collins 2 2 remuneration of individual directors as determined by the John Whybrow 4 4 Remuneration Committee. Shareholders will be asked to approve the report at the AGM on 8 September 2010. * Tim How and Prof. Dr. Utho Creusen were unable to attend one Committee meeting due to a prior commitment made before their respective appointments. The Chief Executive and the Group People, Marketing and Remuneration policy (not subject to audit) Property Director attended meetings of the Committee by invitation in an advisory capacity. Meetings are attended by the (I) Role of the Remuneration Committee Company Secretary (who acts as secretary to the Committee) The Board has delegated to the Remuneration Committee and by the Group Reward Director and occasionally by responsibility for determining policy in relation to, and approval representatives from the Group’s external remuneration of, remuneration packages for senior management. This includes advisors, Hewitt New Bridge Street (a trading name of Hewitt the terms and conditions of employment of each of the executive Associates Ltd) (HNBS). directors of the Company and for other senior management of Nobody attends any part of a meeting at which their own the Group; and policy in relation to the operation of the Group’s remuneration is discussed. During the period under review the share-based employee incentive schemes. Committee obtained advice from HNBS for which they received The membership of the Committee during the period under fees of £119,000. HNBS provided no other services to the review, whose biographies and qualifications are set out on Company other than as set out below. During the period under page 40, is set out in the table below and comprises the four review, HNBS, on a one-off basis, provided the Company with independent non-executive directors and the Chairman of the advice on redesigning the pension arrangements offered to staff Company. Sir John Collins retired as a director with effect from and the future structure of these pension arrangements. The 2 September 2009 and John Whybrow retired as Chairman of pensions team operates separately from the rest of HNBS the Committee and as a director with effect from 31 March remuneration consultants and there are provisions in place to 2010. John Allan and Prof. Dr. Utho Creusen joined the ensure that there is no crossover of information between the Committee upon their appointments to the Board on 23 June two teams. 2009 and 1 February 2010, respectively. Tim How joined the Committee on 9 September 2009 and became Chairman of the Committee following John Whybrow’s retirement. The remaining Committee members served throughout both the period under review and the prior period.

52 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 53 Annual Report and Accounts 2009/10 DSG international plc (a) Base salaries the Committee’s salaries reflect base As a general policy, and positions rate for relevant assessment of the mid-market experience, and the individual executive’s levels of responsibility to the business. The Committee also performance and value conditions of employees of the assesses pay and employment remuneration. determining the executive directors’ when Group a salary the Committee agreed review, For the period under included both the the organisation. This policy across freeze exception to and senior management. The executive directors a selective number granted to were pay increases this was where behind the of employees whose base salary was considerably performing above expectation. market or to individuals who were an overall inflationary For 2010/11 the Committee has approved of the whole UK workforce to base salaries across increase the executive 1.5%. This policy will also be applied to both and other senior management. The exception to this directors need to be granted to employees pay increases will be where the market or to whose base salary is considerably behind performing above expectation. In making individuals who are to the salaries of this decision the Committee had due regard directors. all UK employees including the two executive Finance Director’s and Group the Chief Executive’s Accordingly, by 1.5% to £680,050 and £406,000 salaries will be increased for 2010/11. respectively the operation of the approved At the 2009 AGM, shareholders Sacrifice Scheme. Under this scheme the Chief Executive Reward took up the opportunity to Finance Director and the Group a returnsacrifice a portion of their base salary in for receiving options market value share grant of non-performance related salary (‘Reward of an equivalent ‘fair value’ to the sacrificed to agreed Sacrifice’). Under this scheme the Chief Executive Finance waive 25% of his 2009/10 annual salary and the Group 10% of his annual salary in exchange for the share Director of this in respect option grants. The salary sacrifice required scheme must be made during the 12 month period commencing 15 October 2009. During the period of salary sacrifice, all other to the base emoluments have been determined by reference salary levels prior to the sacrifice. remuneration (b) Performance-related designed are The performance-based elements of remuneration the alignment between to drive performance and to strengthen senior and its shareholders of the Company’s the interests The management, whilst encouraging management retention. as follows: are remuneration components of performance-related , the Remuneration Committee takes , the Remuneration Committee facilitate effective succession planning. facilitate effective align the directors’ interests with those of shareholders by of shareholders with those interests align the directors’ opportunities participation in schemes which provide offering in the Company; and to build shareholdings facilitate the building and retention of a high-calibre and of a high-calibre facilitate the building and retention to achieve the focused team which will work effectively objectives; longer term strategic Group’s maintain, particularly through reward schemes based on schemes reward maintain, particularly through and benefits performance, a competitive package of pay achievement; the motivation for future which provides ensure that the remuneration structure motivates the directors motivates structure that the remuneration ensure rewards appropriately and senior management to succeed and of the Group’s them for their contribution to the attainment short and long term results; ■ ■ ■ ■ ■ (II) Remuneration principles (II) Remuneration to several the Committee has regard In setting its policies, benefits arrangements which apply below factors including the level and competitor benchmarking. senior management In implementing this policy internal and surveys from account of information and independent comparable positions paid for and the remuneration sources by data and surveys provided It reviews in other companies. companies with consultants and market research remuneration composition of the total to the scale and particular reference packages payable to people with like responsibilities, remuneration of similar size qualifications, skills and experience in businesses and structure. and senior of the directors In setting the remuneration account the economic management, the Committee takes into along and financial performance of the Group, environment elsewhere with pay and employment conditions of employees in the Group. Executive directors to: policy are The objectives of the remuneration The Committee is satisfied that the incentive structure for senior The Committee is satisfied that the incentive structure management does not raise governance risks by inadvertently behaviour. or reckless motivating irresponsible strategy for 2010/11 remuneration In deciding the appropriate the Remuneration Committee has taken into account the performance over the last year which has seen the Company’s plan, a continued delivery of the Renewal and Transformation external and profitability factors such as in the Group’s recovery in our senior and competitor interest the economic environment employee population. Directors’ Report: Remuneration Report continued Corporate Governance

(i) Annual cash bonus (ii) Long Term Incentive Plan (LTIP) and Performance Share During 2008/09 and 2009/10, performance-based Plan (PSP) remuneration for the executive directors and senior On 3 September 2008, the Company established a new management team comprised an annual cash bonus plan incentive plan called the PSP, which replaced the LTIP. The based on the achievement of the Group’s targets and personal rules of the PSP permit awards to be made over shares worth objectives. In the case of other participating executives below up to 100% of salary per annum (200% of salary in exceptional Board level, divisional and business unit targets were applied circumstances). Awards under the PSP are subject to a Total where relevant. Shareholder Return (TSR) performance condition as it aligns management interests with those of the shareholders. For 2009/10 the maximum potential bonus for the Chief Executive was 100% of basic salary and for the Group Finance For awards made in June 2008 and June 2009, TSR Director was 85% of basic salary. Payment was dependent on performance was compared to that of a bespoke weighted underlying Group operating profit (55% of bonus), Group Free index comprising UK and European retailers. For the June 2008 Cash Flow (25% of bonus) and achievement of personal award this group comprised Debenhams, Group, objectives (20% of bonus), which included an element related Home Retail Group, Inchcape, Signet Group, Jelmoli, Kesa to non-financial objectives. For 2009/10 the maximum potential Electricals, Kingfisher, Marks and Spencer Group, Metro Group, bonus for members of the Executive Committee was 85% of Next, Praktiker, PPR, Sports Direct International and Tesco. basic salary. All companies had equal weighting within the group other than Kesa Electricals and Metro Group, who have greater The bonus structure for 2009/10 was essentially unchanged competitive relevance and therefore have double weighting. from 2008/09 with the exception that in 2008/09 the weighting of bonus payable for Group operating profit and Group Free The comparator group for the June 2009 award was broadly Cash Flow were 60% and 20%, respectively. Although there the same as for the 2008 awards with the exclusion of Jelmoli was an entitlement under the personal objectives element of and the inclusion of Brown (N) Group, the bonus plan, the executive directors volunteered not to Group, Game Group, HMV Group and WH Smith Group. receive any bonus for the 2008/09 financial year and this offer The same weighting provisions in regard to Kesa and Metro was accepted by the Remuneration Committee. Group applied. The Committee is satisfied that the stretch targets for the Under the TSR condition, full vesting occurs for performance 2009/10 bonus plan have been met and that there has been equivalent to the upper quartile over the three year performance a genuine improvement in the Group’s underlying financial period reducing to 25% of an award vesting for performance performance representing a 60% increase in underlying equivalent to median (nothing below). Vesting between these operating profit compared to 2008/09. The Chief Executive will targets will occur on a straight-line basis. therefore receive a bonus payment totalling £670,000 and the Awards to be made in 2010/11 will continue to be subject Group Finance Director £340,000. Members of the Executive to TSR performance, however, TSR will be measured relative Committee will also receive bonus payments commensurate to the constituents of the FTSE 250 Index (comprising with the Group’s performance during the period under review. FTSE 101-350), excluding investment trusts, at the start Bonus payments as detailed above are not pensionable. of the performance period. Full vesting will occur for upper For 2010/11 there will be no change in the existing bonus quartile performance reducing on a straight-line basis to 25% potential for the executive directors; 100% of salary for the of the award at median. No award will vest for below median Chief Executive and 85% of salary for the Group Finance Director. performance. Additionally, awards made to the executive The bonus paid will be dependent on underlying Group operating directors will contain an EPS underpin requiring total EPS profit (55% of bonus), Group Free Cash Flow (25% of bonus) and growth of RPI plus 2% per annum for the performance period. achievement of personal objectives (20% of bonus). When setting The Committee believes that the revised comparator group will the objectives of the executive directors, the Committee has align senior management’s interests with those of shareholders considered corporate performance on environmental and social in driving strong sustainable TSR performance relative to a governance matters; the Committee is satisfied that the wider index. It also addresses concerns that the use of a remuneration structure put in place for the executive directors bespoke index is not transparent to participants. does not raise environmental and social governance risks by Prior to vesting, the Remuneration Committee will satisfy itself inadvertently motivating irresponsible behaviour. that the TSR performance achieved reasonably reflects the Bonus targets for 2010/11 have been set at levels which are financial performance of the Group and reserves the right to considerably more demanding relative to 2009/10 using vary awards accordingly. Any shares which vest cannot be benchmarks that reflect both internal business objectives and released within close periods. external expectations. The Committee is satisfied that the targets are challenging and would represent a significant increase in underlying Group operating profit relative to 2009/10.

54 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 55 Annual Report and Accounts 2009/10 DSG international plc of 100% of salary (the number of shares awarded was awarded number of shares of 100% of salary (the months price over three average share determined using an prior to grant). as described in the base salaries Additionally the Committee, with leading institutional shareholders section, in consultation the senior executive bodies, offered and their representative in 2009/10 in a lower salary to receive population an opportunity options (Reward an additional grant of share return for receiving at the September 2009 was approved Sacrifice). This proposal 2009/10 package for the remuneration AGM and consequently, lowering fixed pay and raising variable pay as was rebalanced, a consequence. options, other than those under the Sharesave All share the years from and 10 between three exercisable scheme, are to a performance date of grant and, for those options subject that the performance target, only if the Committee determines is made once conditions have been met. Such determination financial year and known for the relevant are EPS figures options tested only once. All share targets, since 2004, are the date of grant or, lapse on the earlier of 10 years from on the date on which the performance conditions apply, where the performance Remuneration Committee determines that conditions have not been met. executive directors, For 2010/11, options will be granted to the including the top 90 executives and other eligible employees Managers. The vesting schedule will remain Regional and Store vesting for an award the same as for prior years, with 25% of and will be set at the time performance equivalent to threshold challenging more of grant. The EPS targets will be significantly will be disclosed in than those applying to 2009/10 grants and month average Using a three report. remuneration next year’s will the awards price ending at the date of this report, share have a face value of up to 174% of salary for the executive of awards with the Executive Committee receiving directors, the individuals between 174% and 261% of salary to ensure incentivised and ‘locked in’ to concerned appropriately are years. the Company for a further three (iv) Dilution bought and shares A combination of both newly issued shares under the to be used to satisfy awards in the market are incentive arrangements. employee share Group’s of, and supports, The Remuneration Committee is aware monitors dilution and regularly the ABI guidelines regarding The Remuneration compliance with these requirements. in the scheme rules adopted Committee included provisions at the 2008 AGM which limit the number of newly issued shares capital in which can be granted to 10% of the issued share schemes and 5% for the 10 years under all employee share and senior management under the executive directors plans. share discretionary In 2009 the Remuneration Committee reviewed the level the Committee reviewed In 2009 the Remuneration of the fall in the In light to be made under the PSP. of award at in profitability and the reduction price share Company’s levels should determined that award that time, the Committee in Accordingly, 2008/09 levels in 2009/10. from be reduced awards and Nicholas Cadbury received 2009/10, John Browett was determined awarded number of shares of 25% of salary (the months prior to grant). price over three using an average share to Nicholas made in 2008/09 and 2009/10 Details of awards in section (VIII) of contained are Cadbury and John Browett this report. arrangements of the remuneration As part of the 2009/10 review the contribution of the executive the Committee recognised plan to the delivery of the Renewal and Transformation directors performance of the Company. and their importance to the future (operating profitability improved The Company has also delivered by 60% and 61%, tax increased before and profit profit the Committee to 2008/09). Therefore, compared respectively, will be made decided that in 2010/11 the executive directors month average a three using of 87% of salary, a PSP award to be The awards ending at the date of this report. price share These 44% of salary. made to the Executive Committee will be the Executive Committee are to ensure arrangements are incentivised and ‘locked in’ to the Company for appropriately years. a further three (iii) Shareand Reward Share Option plans the basis on which The Remuneration Committee approves and other employees granted to executive directors options are option schemes and share discretionary under the Company’s normally granted annually other performance plans. Options are and to senior management under the to executive directors plan permits Option Plan (ESOP). The Executive Share Group’s with a market value on the date of grant of making an award in However, basic salary. than twice the recipient’s not more (for instance to facilitate recruitment exceptional circumstances key executives) this limit can be exceeded. Executive or to retain also entitled to participate and senior management are directors plan on the same conditions as other in the Sharesave employees. The Company will be inviting employees to plan in July 2010. participate in a Sharesave granted under the ESOP to the top 90 In 2009/10, options were executives and other eligible employees including Regional and and granted to the executive directors Managers. Awards Store subject to an EPS target with the participating employees were 25% vesting for an EPS in 2011/12 of 2p and full vesting for an EPS in 2011/12 of 4p (straight-line between these targets). will vest if EPS in 2011/12 is less than 2p. No awards the level of In 2009 the Remuneration Committee reviewed of the fall in the In light to be made under the ESOP. award at that in profitability price and the reduction share Company’s levels should be time, the Committee determined that award in 2008/09 levels in 2009/10. Accordingly, from reduced awards and Nicholas Cadbury received 2009/10 John Browett Directors’ Report: Remuneration Report continued Corporate Governance

As at the date of this report, the Company’s usage of shares Following a recent consultation with affected employees across against the limits detailed above in respect of all employees the UK, the Group has closed the defined benefit section of in the all employee schemes was 7.16% of the issued capital; DRESS to future accrual for all active members. This was and in respect of grants to executive directors and senior effective from 30 April 2010. As a result, Nicholas Cadbury will management under discretionary plans was 2.73% of issued accrue future pension benefits within the defined contribution capital. The Group uses a trust to hold existing shares and the section of DRESS. The Company’s contribution will be set at 20% Committee’s intention is to make purchases, if required, of of salary per annum and will be subject to the same earnings shares taking into account the portion of awards and options cap as for the defined benefit section and which will be adjusted to be satisfied by new issue, the likelihood of any performance annually for inflation (from 1 May 2010 this is £123,600). targets being met and also potential lapsing of awards when Membership of the defined benefit section of DRESS provides employees leave the Group. the option for the provision of dependants’ pensions and also (v) Placing and Rights Issue an insured lump sum on death in service. The insured lump sum Following the Placing and Rights Issue, the Committee agreed is four times basic salary. However, for a period of two years this to adjust the approved share options awarded in prior years, will be increased to six times in recognition of the fact that to reflect the dilutive effect of the Rights Issue. This HMRC members’ individual defined benefit accounts under the defined specified adjustment was applied to both the approved and contribution section of DRESS will be relatively small during this unapproved options and outstanding LTIP and PSP awards, period. This two year provision will apply equally to all members so that all awards granted would be treated in the same of the defined benefit section of DRESS who are being manner. Adjustments to all the awards are reflected in the transferred to the defined contribution section with effect from tables in the audited section of this report. 1 May 2010. Further information on share-based payments is set out in note John Browett has chosen not to become a member of any 26 to the financial statements. DSGi pension plan. However, he receives a contribution of 32.1% of basic salary to fund his own retirement arrangements. (c) Taxable benefits John Browett is also entitled to receive life assurance cover Each of the executive directors receives a cash payment in equal to four times basic salary and personal accident cover lieu of a company car and is a member of the non-contributory at the level of £2,000,000. DSGi medical expenses plan which provides benefits similar to those applicable in comparable companies. New externally recruited executive directors will be offered membership of the defined contribution section of DRESS Further information on employee costs and those relating to (pensionbuilder) and the Remuneration Committee may exercise senior management is given in notes 6 and 33, respectively, its discretion regarding the level of award of any salary supplement to the financial statements. or enhanced contributions. (d) Pensions and related benefit (e) Service agreements Until 30 April 2010, Nicholas Cadbury accrued benefits under John Browett and Nicholas Cadbury have service agreements the defined benefit section of the DSGi Retirement & Employee with DSG international plc which may be terminated at any time Security Scheme (DRESS). This is a funded, HMRC registered by 12 months’ notice. Service agreements contain neither a contributory pension scheme which provides a pension at a liquidated damages nor a change of control clause. It is the normal retirement age of 65 accrued at a rate of 1/60th of Company’s policy to ensure that any payments made to a pensionable salary per annum up to a maximum of 40 years. director in the event of the early termination of a service Part of this pension may be exchanged for cash at the date of agreement reflect the circumstances giving rise to termination retirement. Membership of the scheme also confers dependants’ and, where considered appropriate, the obligation of the pensions and insured lump sums on death in service (equal to outgoing director to mitigate his loss. Accordingly, consideration four times basic salary). Notwithstanding the abolition of the is given to making compensation payments in instalments and statutory earnings cap for pension purposes on 6 April 2006, an is conditional on the leaver’s employment and earnings status. equivalent cap, adjusted annually for inflation, was introduced for the purposes of DRESS. From 3 May 2009 the cap was The service agreements of the executive directors who £123,600. Nicholas Cadbury was provided with a salary served during the financial period were entered into on the supplement at the annual rate of 30% of the difference between following dates: his basic salary and the scheme earnings cap as set by the Company from time to time. A similar salary supplement Date arrangement for pension purposes applies to five other John Browett 6 Jun 2007 senior executives. Nicholas Cadbury 13 Apr 2009

56 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 57 – – 2,500 2010 1 May 30,000 23,698 2 May 2009* 171,428 125,000 2009 2 May – 81,428 80,000 24,903 40,625 2008 3 May 1 May 2010 271,428 214,285 Annual Report and Accounts 2009/10 FTSE 350 Index 2007 28 Apr 2006 29 Apr DSG international plc DSG international plc ed by TSR on a holding of £100 in the Company’s 2005 30 April £ 0 50 200 150 100 Or date of appointment if later. Andrew Lynch Andrew Tim How Prof. Dr. Utho Creusen Dr. Prof. Rita Clifton Non-executive directors John Allan Nicholas Cadbury Unrestricted beneficial and family interests Unrestricted Executive directors John Browett Source: Thomson Reuters. Source: This index has been selected as the Company has been the five year period shown. a constituent of it throughout * 18 May 2009, each Following the Placing and Rights Issue on shares. took their full rights to new ordinary of the directors or unrestricted restricted in directors’ no changes were There between 1 May 2010 and the date of this report. interest share Return (TSR) Shareholder (V) Total performance The graph set out below shows the Company’s measur against over the five years since 1 May 2005, measured shares Index. The other the same amount invested in the FTSE 350 the values at intervening financial year ends. points plotted are Date 1 Jul 2012 1 Feb 2013 7 Sep 2012 1 Sep 2012 24 May 2012 ectors to build shareholdings in ectors to build shareholdings ent terms expire as follows: ent terms expire Prof. Dr. Utho Creusen Utho Dr. Prof. Rita Clifton Tim How Lynch Andrew John Allan the Company. The policy is that executive directors are required are The policy is that executive directors the Company. 50% of the net of tax out-turn the vesting of future to retain from plans until share options under the Company’s or share awards with a minimum value equivalent to their basic a shareholding salary is achieved. (IV) Directors’ share interests share (IV) Directors’ The Committee implemented a policy in the 2008/09 financial year of encouraging executive dir The remuneration of non-executive directors is determined by of non-executive directors The remuneration of the Chief Executive and upon the recommendation the Board Finance Director. the Group fee is £250,000 per annum. The other non- John Allan’s a fee of £48,000 per annum or euro receive executive directors bi-annually and is due equivalent. The fee is normally reviewed later in 2010. to be reviewed The Chairmen of the Audit and Remuneration Committees Lynch an additional fee of £10,000 per annum. Andrew receive for which he has been designated Senior Independent Director a further fee of £5,000 per annum. Non-executive receives not and are their office derive no other benefits from directors pension scheme. It is eligible to participate in the Group’s options to non-executive Company policy not to grant share in the form part of their fees to be paid or to require directors of shares. are Letters of appointment of the non-executive directors available on application to the Company Secretary. (III) Non-executive directors year normally appointed for three are Non-executive directors on length of terms, although appointments vary depending service and succession planning considerations. Their curr The service agreements of the continuing directors are available are of the continuing directors The service agreements of the Company during office registered for inspection at the on each business day. normal business hours (f) External directorships accept non-executive permitted to are Executive directors in external the fees which directorships companies and to retain one such appointment Normally only in such roles. they receive is a non- John Browett each director. will be authorised for fee at the rate of easyJet plc and was paid a executive director of £45,000 per annum. Directors’ Report: Remuneration Report continued Corporate Governance

Remuneration review (audited)

(VI) Directors’ remuneration The following table shows an analysis of the emoluments of individual directors:

52 weeks 52 weeks ended ended Basic salary Pension Cash Taxable 1 May 2010 Basic salary Pension Cash Taxable 2 May 2009 and fees contributions bonus benefits Total and fees contributions bonus benefits Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Executive Current directors John Browett 670(1) 215(2) 670 15 1,570 670 215(2) – 15 900 Nicholas Cadbury 400(1) 83(3) 340 16 839 338(4) 58(3) – 16 412 Former directors Kevin O’Byrne –––––152 35(5) – 5 192 1,070 298 1,010 31 2,409 1,160 308 – 36 1,504 Non-execuitve Current directors John Allan(6) 184 – – – 184 ––––– Rita Clifton 48 – – – 48 47 – – – 47 Prof. Dr. Utho Creusen(7) 12 – – – 12 ––––– Tim How(8) 31 – – – 31 ––––– Andrew Lynch 63 – – – 63 62 – – – 62 Former directors Sir John Collins(9) 125 – – – 125 327 – – 2 329 Count Emmanuel d’André(10) 16 – – – 16 47 – – – 47 John Whybrow(11) 53 – – – 53 57 – – – 57 532 – – – 532 540 – – 2 542

1,602 298 1,010 31 2,941 1,700 308 – 38 2,046

(1) John Browett and Nicholas Cadbury have elected to take up the opportunity to sacrifice a portion of their salaries under the Reward Sacrifice Scheme. Amounts sacrificed were £52,000 for John Browett and £40,000 for Nicholas Cadbury making their basic salaries after the sacrificed amounts £618,000 and £360,000, respectively. (2) John Browett’s pension contribution payable to him represented an amount calculated as a percentage of basic salary to fund his own retirement arrangements. (3) Nicholas Cadbury’s pension contributions represent 30% of the difference between his basic salary and the scheme earnings cap set by the Company. (4) Amounts shown relate to Nicholas Cadbury’s period in office as a director (17 July 2008 to 2 May 2009). (5) Kevin O’Byrne’s pension contributions represented amounts which would have been payable to DRESS had his pensionable salary not been subject to an earnings cap. (6) Amounts shown relate to John Allan’s period in office as a director (23 June 2009 to 1 May 2010). (7) Amounts shown relate to Prof. Dr. Utho Creusen’s period in office as a director (1 February 2010 to 1 May 2010). (8) Amounts shown relate to Tim How’s period in office as a director (9 September 2009 to 1 May 2010). (9) Sir John Collins retired as a director with effect from 2 September 2009. (10) Count Emmanuel d’André retired as a director with effect from 2 September 2009. (11) John Whybrow retired as a director with effect from 31 March 2010.

(VII) Directors’ pensions

Gross Increase in Transfer Transfer increase in accrued value of value of Change in Accrued Accrued accrued pension during accrued accrued transfer values pension as at pension as at pension during the period, benefits as at benefits as at less members’ 1 May 2010 2 May 2009 the period net of inflation 1 May 2010 2 May 2009 contributions £’000 £’000 £’000 £’000 £’000 £’000 £’000 Nicholas Cadbury 37 34 3 3 284 212 63

Accrued pension shown is that payable at normal retirement age (65). The transfer value as at 1 May 2010 has been calculated in accordance with the Government regulations on the calculation of transfer values, ‘Occupational Pensions Schemes (Transfer Values) (Amendment) Regulations 2008’.

58 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders (2) 59 l der in’ to re in report. Full vesting N/A Jul 2011 N/A Dec 2010 period date Vesting End of performance Apr 2010Apr 2011 Jun 2010 Jul 2011 Apr 2010 Dec 2010 Apr 2011 Jul 2011 May 2012 Jul 2012 May 2009 May 2009 May 2012 Jul 2012 Status if status maintained Award Annual Report and Accounts 2009/10 TSR below median No award TSR above Index (+27%) DSG international plc – 396,511 – 396,511 – – (38,095) – – 664,155 – 664,155 15,61353,580 – – – – 59,595 204,511 40,185 – – 153,383 the period the period the period At 1 May 2010 Adjusted in in Awarded Lapsed in 399,567199,438 – – – 1,525,108 – 761,236 280,036 – – 1,068,870 109,378 396,511 (38,095) 814,000 879,041 664,155 – 4,019,369 (1) 346,206 2,476,173 on award At 3 May 2009 38.50p 150,931 25.22p – 38.50p 561,798 38.50p 113,198 25.22p – Market price 163.70p 43,982 115.50p 1,125,541 183.75p 38,095 115.50p 788,834 (3) TIP, PSP or Retention and Recruitment plan (Reward Shares). Details of the LTIP and PSP, including performance and PSP, the LTIP Details of Shares). plan (Reward PSP or Retention and Recruitment TIP, date on which John Browett accepted the offer of employment with the Group. The ‘one-off’ award of shares was made in compensation of the significant value of share awards was made in compensation of the significant value of share of shares The ‘one-off’ award of employment with the Group. accepted the offer date on which John Browett was forfeiting upon joining the Company. and bonus entitlement John Browett on an earlier date in certain circumstances. Nicholas Cadbury LTIP 2006/07 Reward Shares Reward 2008/09 PSP 2009/10 2007/08 2009/10 Period in which provisional award made award Period in which provisional 2008/09 2008/09 PSP 2008/09 2007/08 2009/10 John Browett LTIP 2007/08 The status of the provisional awards under the LTIP and PSP are reviewed regularly and as at the last review in June 2010, and as at the last review regularly reviewed and PSP are under the LTIP awards The status of the provisional is as follows: as at the date of this report the status of the awards (1) on 6 June 2007, the was calculated using the mid-market value shares of the awarded made on 6 December 2007. The quantum of shares was of 788,834 shares The award (2) may vest in employment until the vesting date, 6 December 2010. These shares remaining is dependent on John Browett circumstances, in most of these shares, The release (3) Cadbury joining the Board. was made prior to Nicholas The award (VIII) Directors’ LTIP, PSP and Reward Share awards Share Reward PSP and LTIP, (VIII) Directors’ which may vest maximum number of shares the represent shown in the table below beneficial interests restricted The directors’ under the L report. described in section (II)(b)(ii) of this conditions, are of an award level received number of senior executives below Board and Recruitment plan, a limited In 2008, under the Retention wil shares of death or change of control, applied, but, other than in the event no performance conditions whereby Shares Reward incentivised and ‘locked appropriately were those executives key to delivering the targets that necessary to ensure considered only be released in the event that the relevant individuals remain with the Group for a three year period. The Reward Shares we Shares year period. The Reward for a three the Group with individuals remain in the event that the relevant only be released of this Issue which is detailed in section (II)(b)(v) have been adjusted for the Rights years. The awards the Company for three Vesting of the 2007/08 LTIP award was dependent on the Company’s TSR performance relative to the constituents of the FTSE TSR performance relative was dependent on the Company’s award of the 2007/08 LTIP Vesting not met over the financial years ended 3 May 2008, 2 May 2009 and 1 May 2010. These conditions were 100 Index over the three has subsequently lapsed. performance periods and the award relevant is not subject to any performance conditions. upon joining the Group made to John Browett award The ‘one-off’ LTIP International held in trust by Halifax EES Trustees will be satisfied by shares under the LTIP of shares It is intended that any releases in 2008/09 under the LTIP awarded provisionally of the shares ownership trust. Vesting Limited, the trustee of the employee share under the PSP of shares that any release occurs in July 2011, subject to the attainment of performance targets. It is intended un awarded provisionally of the shares Vesting made in July 2009 will be satisfied by newly issued shares. of the award respect the PSP occurs in July 2012 subject to the attainment of performance targets. Directors’ Report: Remuneration Report continued Corporate Governance

(IX) Directors’ share options Following the Rights Issue the number of options held and their respective exercise price have been adjusted as detailed in section (II) (b)(v) of this report. No exercises occurred during the period.

Adjusted in Awarded in Lapsed in Date from which Expiry of the Exercise At 2 May 2009 the period the period the period At 1 May 2010 Date of grant first exercisable exercise period price John Browett Discretionary 1,152,073 409,299 – – 1,561,372 6 Dec 2007 6 Dec 2010 5 Dec 2017 83.26p 2,247,191 798,675 – – 3,045,866 11 Jul 2008 11 Jul 2011 11 Jul 2018 27.63p – – 2,656,622 – 2,656,622 23 Jul 2009 23 Jul 2012 23 Jul 2019 23.95p Reward Sacrifice(1) – – 1,992,466 – 1,992,466 28 Sep 2009 28 Sep 2012 27 Sep 2019 28.43p Sharesave(2) – – 24,768 – 24,768 24 Jul 2009 1 Oct 2012 31 Mar 2013 18.32p 3,399,264 1,207,974 4,673,856 – 9,281,094

Nicholas Cadbury Discretionary 11,948 – – (11,948) – 19 Jul 1999 N/A N/A 334.75p 16,484 5,855 – – 22,339 17 Jul 2000 17 Jul 2003 17 Jul 2010 201.44p 25,974 9,226 – – 35,200 23 Jul 2001 23 Jul 2004 23 Jul 2011 170.45p 44,720 15,885 – – 60,605 22 Jul 2002 22 Jul 2005 22 Jul 2012 118.80p 84,133 29,887 – – 114,020 2 Jul 2007 2 Jul 2010 2 Jul 2017 118.40p 565,990 201,158 – – 767,148 11 Jul 2008 11 Jul 2011 11 Jul 2018 27.63p 787,064 279,535 – – 1,066,599 14 Aug 2008 14 Aug 2011 14 Aug 2018 41.84p – – 1,586,043 – 1,586,043 23 Jul 2009 23 Jul 2012 23 Jul 2019 23.95p Reward Sacrifice(1) – – 475,813 – 475,813 28 Sep 2009 28 Sep 2012 27 Sep 2019 28.43p Sharesave(2) 3,503 1,244 – (4,747) – 26 Feb 2007 1 Apr 2011 30 Sep 2011 99.52p – – 24,768 – 24,768 24 Jul 2009 1 Oct 2012 31 Mar 2013 18.32p 1,539,816 542,790 2,086,624 (16,695) 4,152,535

(1) Details of the Reward Sacrifice Scheme may be found in section (II)(a) of this report. (2) Options granted under the Sharesave Scheme are exercisable in the six month period following the date of maturity of a three year or five year savings contract. (3) All of the options are granted for nil consideration. The share price on 1 May 2010 was 33.10p and, adjusted to take account of the Placing & Rights Issue, ranged from 19.75p and 38.67p during the year.

60 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 61 s ion ary Re-testing Annual Report and Accounts 2009/10 DSG international plc eceived £30,893 for his services as President during the year. His remunerat during the year. eceived £30,893 for his services as President after the date of grant. For later exercises, the rate of share growth is growth of share the rate For later exercises, after the date of grant. the Retail Price Index (RPI). adjusted in line with between 50% and 100% of the award. Performance conditions Exercise is also conditional upon EPS having increased by not less than is also conditional upon EPS having increased Exercise 3% above the annual RPI over any consecutive period of three years years period of three 3% above the annual RPI over any consecutive a straight-line basis between 33% and 100% of the award. a straight-line basis between 33% and 100% between 25% and 100% of the award. during the life of the option. options will vest on a straight-line basis between 50% and 100% of the options will vest on a straight-line basis between is between EPS growth of 300% of salary where For an award award. annum, options will vest on annual RPI plus 4% and RPI plus 10% per Grants made on 23 July 2009 25% of the options vest for an EPS in 2011/12 of 2p. 100% of the options No re-testing for an EPS in 2011/12 of 4p, options will vest on a straight-line basis vest Grants made between 11 October 2004 and is equal to or greateryear performance period, EPS growth Over the three 11 July 2008 is between annual EPS growth than annual RPI plus 5% per annum. Where No re-testing vest on a straight-line basis RPI plus 3% and RPI plus 5%, options will Grants made before1 July 2003 20% higher than the is at least on the date of exercise The market price During the life and four years takes place between three option price, assuming exercise of the option Grants made between 12 July 2008 and is equal to or greateryear performance period, EPS growth Over the three 23 July 2009 No re-testing of 200% of salary where than annual RPI plus 4% per annum. For an award plus 4% and RPI plus 7% per annum, is between annual RPI growth EPS (X) Former executive director of the Company for Kalms, the former Chairman, was appointed President dated 1 October 2002, Lord Pursuant to an agreement an initial period ending on 16 September 2012. He r in the UK and overseas on the basis of management grade; these options were granted with no performance conditions for those grade; these options were in the UK and overseas on the basis of management granted to other options were management grades at the date of grant. In 2009/10, share employees below the top three performance granted with the same were employees in the UK and overseas on the basis of management grade; these options conditions as the executive directors. Prior to 2005/06, share options were granted to other employees in the UK and overseas on the basis of management grade and granted to other employees in the UK and overseas on the options were Prior to 2005/06, share executive level have either years’ service. Since 2005/06 and until 2007/08, employees below than three to employees with more options, both of which cases have been granted share plan or in a few selected share participated in a cash settled performance granted to other employee options were year EPS targets. In 2008/09, share linked in most cases to the attainment of three were Tim How Chairman of the Remuneration Committee 24 June 2010 options (excluding Reward Sacrifice Options which do not have a performance condition) outstanding as at 1 May 2010: do not have a performance condition) outstanding Sacrifice Options which options (excluding Reward with benefits amounting to £36,238 comprising membership of the in line with RPI. He was provided is subject to annual review facilities. He is not eligible to participate in discretionary benefits and with office medical expenses plan, a car and related Group’s schemes or in any bonus arrangements. share and signed on its behalf by by the Board Approved Options are exercisable between three and 10 years from the date of grant, subject to performance conditions being met. The the date of grant, subject to performance and 10 years from between three exercisable Options are discretion and senior management’s to the executive directors’ the performance conditions applicable following table summarises Directors’ Report: Corporate Governance

Directors’ Responsibilities

The directors are responsible for preparing the Annual Report The directors are responsible for maintaining adequate and the financial statements in accordance with applicable law accounting records and sufficient internal controls to safeguard and regulations. UK company law requires the directors to the assets of the Company and to take reasonable steps for prepare financial statements for each financial year and under the prevention and detection of fraud or any other irregularities that law, the directors have prepared the Group and the and for the preparation of a Directors’ Report and directors’ Company financial statements in accordance with International Remuneration Report which comply with the requirements of Financial Reporting Standards (IFRS) as adopted by the the Companies Act 2006 and, as regards the Group financial European Union. statements, Article 4 of the IAS regulation. The directors are responsible for the maintenance and integrity of the corporate The financial statements are required by law to give a true and and financial information included on the Company’s website. fair view of the state of affairs of the Group and the Company Legislation in the governing the preparation and of the profit or loss of the Group for the period. In preparing and dissemination of financial statements may differ from the financial statements, the directors are also required to: legislation in other jurisdictions. ■ properly select and apply accounting policies; ■ present information, including accounting policies, in a Responsibility statement manner that provides relevant, reliable, comparable and We confirm to the best of our knowledge: understandable information; and ■ the Group and Company financial statements give a true and ■ provide additional disclosures when compliance with fair view of the assets, liabilities, financial position and profit / the specific requirements of IFRS is insufficient to enable (loss) of the Group and Company, respectively; and users to understand the impact of particular transactions, ■ the business and financial review includes a fair review of other events and conditions on the financial position and the development and performance of the business and the financial performance. position of the Group and Company together with a description In preparing both the Group and the Company financial of the principal risks and uncertainties they face. statements, suitable accounting policies have been used and By Order of the Board applied consistently, and reasonable and prudent judgements and estimates have been made. Applicable accounting standards have been followed. The financial statements have been prepared on the going concern basis as disclosed in the Directors’ Report and Business Review.

John Browett Nicholas Cadbury Chief Executive Group Finance Director 24 June 2010 24 June 2010

62 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 63 e required to report to to report e required Annual Report and Accounts 2009/10 DSG international plc oup and Company, in addition to complying with its legal in addition oup and Company, adequate accounting records have not been kept by the adequate accounting records for our audit have not been or returns adequate Company, visited by us; or branches from received part of the the Company financial statements and the not in Remuneration Report to be audited are directors’ or and returns; with the accounting records agreement specified by remuneration of directors’ certain disclosures not made; and law are all the information and explanations we have not received for our audit. we require statement contained within the Directors’ the directors’ to going concern;Report and Business Review in relation and the part of the Corporate Governance to Statement relating of the compliance with the nine provisions the Company’s 2006 Combined Code specified for our review. the information given in the Directors’ Report for the financial the information given in the Directors’ is prepared year for which the financial statements are and consistent with the financial statements; audited has the part of the Remuneration Report to be with the Companies in accordance prepared been properly Act 2006. ■ ■ ■ ■ ■ ■ obligation to apply IFRSs as adopted by the European Union, as adopted by the European obligation to apply IFRSs as issued by the Internationalhas also applied IFRSs Accounting the financial statements (IASB). In our opinion Board Standards issued by the IASB. comply with IFRSs as 2006 by the Companies Act Other matters prescribed In our opinion: ■ ■ you if, in our opinion: IFRSs issued by the IASB IFRSs issued by the the financial statements, 1.1 to the Group As explained in note Gr Under the Listing Rules we are required to review: required Under the Listing Rules we are Nicola Mitchell FCA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Accountants and Statutory Auditors Chartered London, United Kingdom 24 June 2010 Matters on which we are required to report by exception to report required Matters on which we are of the following: upon in respect nothing to report have We Under the Companies Act 2006 we ar ectors are responsible for the preparation responsible ectors are es in the financial statements sufficient to give es in the financial statements sufficient

have been prepared in accordance with the requirements of with the requirements in accordance have been prepared financial the Group the Companies Act 2006 and as regards statements, Article 4 of the IAS Regulation. have been properly prepared in accordance with IFRSs as in accordance prepared have been properly Union; and adopted by the European give a true and fair view of the state of the Group’s and of the give a true and fair view of the state of the Group’s profit as at 1 May 2010 and of the Group’s affairs Company’s for the 52 weeks then ended; Financial Statements Financial ■ ■ ■ Opinions Financial statements In our opinion the financial statements: reasonable assurance that the financial statements are free free assurance that the financial statements are reasonable material misstatement, whether caused by fraud or error. from This includes an assessment of: whether the accounting and the Company’s to the Group’s appropriate policies are and have been consistently applied and circumstances of significant adequately disclosed; the reasonableness and the overall accounting estimates made by the directors; of the financial statements. presentation Scope of the audit of the financial statements Scope of the audit of the financial the amounts An audit involves obtaining evidence about and disclosur of the financial statements and for being satisfied that they give of the financial statements and for being is to audit the financial Our responsibility a true and fair view. with applicable law and Internationalstatements in accordance Those standards on Auditing (UK and Ireland). Standards (APB’s) us to comply with the Auditing Practices Board’s require for Auditors. Ethical Standards Respective responsibilities of directors and auditors of directors Respective responsibilities fully in the Statement of Directors’ As explained more Responsibilities, the dir We have audited the consolidated and the Company financial have audited the consolidated We statements of DSG international plc for the 52 weeks ended 1consolidated income statement, May 2010 which comprise the and income of comprehensive the consolidated statement and Company balance sheets, expense, the consolidated Company cash flow statements, the the consolidated and statement of changes in equity and consolidated and Company reporting notes 1 to 34 and C1 to C18. The financial the related is applicable applied in their preparation framework that has been law and International (IFRSs) as Financial Reporting Standards Union. adopted by the European members, as a is made solely to the Company’s This report 3 of Part 16 of the Companies with Chapter in accordance body, so that we might Act 2006. Our audit work has been undertaken required members those matters we are state to the Company’s and for no other purpose. to state to them in an auditors’ report we do not accept or permitted by law, the fullest extent To to anyone other than the Company and assume responsibility our audit work, for this for members as a body, the Company’s or for the opinions we have formed. report, Independent Auditors’ Report Auditors’ Independent Financial Statements

Consolidated Income Statement

52 weeks ended 1 May 2010 52 weeks ended 2 May 2009 Non-underlying* Non-underlying* Closed Closed Underlying* businesses** Other Total Underlying* businesses** Other Total Note £million £million £million £million £million £million £million £million Continuing operations Revenue 2,3 8,531.6 0.9 – 8,532.5 8,180.2 137.6 – 8,317.8 Profit / (loss) from operations before associates 131.6 (0.2) 23.2 154.6 79.4 (12.2) (158.2) (91.0) Share of post-tax results of associates 12 1.6 – – 1.6 3.6 – – 3.6

Operating profit / (loss) 2,3 133.2 (0.2) 23.2 156.2 83.0 (12.2) (158.2) (87.4)

Finance income 58.2 – 1.1 59.3 69.6 – 32.2 101.8 Finance costs (100.9) – (1.9) (102.8) (96.5) (1.9) (39.6) (138.0)

Net finance costs 5 (42.7) – (0.8) (43.5) (26.9) (1.9) (7.4) (36.2)

Profit / (loss) before tax 90.5 (0.2) 22.4 112.7 56.1 (14.1) (165.6) (123.6)

Income tax (expense) / credit 7 (40.7) 0.1 (6.1) (46.7) (34.3) 2.7 (25.2) (56.8) Profit / (loss) after tax – continuing operations 49.8 (0.1) 16.3 66.0 21.8 (11.4) (190.8) (180.4) Loss after tax – discontinued operations 29 – – (8.7) (8.7) – – (38.9) (38.9)

Profit / (loss) for the period 49.8 (0.1) 7.6 57.3 21.8 (11.4) (229.7) (219.3)

Attributable to: Equity shareholders of the parent company 52.3 (0.1) 7.6 59.8 21.7 (11.4) (229.7) (219.4) Minority interests (2.5) – – (2.5) 0.1 – – 0.1 49.8 (0.1) 7.6 57.3 21.8 (11.4) (229.7) (219.3)

Earnings / (loss) per share (pence) 8 Basic – total 1.7p (10.2)p Diluted – total 1.7p (10.2)p Basic – continuing operations 2.0p (8.4)p Diluted – continuing operations 1.9p (8.4)p

Underlying earnings per share (pence) 1,8 Basic – continuing operations 1.5p 1.0p Diluted – continuing operations 1.5p 1.0p * ‘Underlying’ profit and earnings per share measures exclude the trading results of closed businesses, amortisation of acquired intangibles, net restructuring and business impairment charges and other one-off, non-recurring items, profit on sale of investments, fair value remeasurements of financial instruments and, where applicable, discontinued operations. Such excluded items are described as ‘Non-underlying’. Further information on these items is shown in notes 1, 4, 5, 7 and 29. ** Closed businesses comprise Markantalo and PC City Sweden whereby these store based businesses were closed on 10 May 2009 and 20 May 2009, respectively. These operations do not meet the definition of discontinued operations as stipulated by IFRS 5 and accordingly the disclosures made above differ from those for discontinued operations.

64 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 65 3.5 (0.9) (2.1) ended 42.6 53.2 £million (14.1) (13.4) (27.4) (74.3) 122.5 (233.4) (236.9) (219.3) (233.4) (114.3) 52 weeks 2 May 2009 2.7 0.8 1.5 (8.9) (2.4) (3.8) 45.3 57.3 15.1 44.2 ended (68.6) (11.3) (18.4) (11.3) £million (156.0) 52 weeks 1 May 2010 21 21 22 22 22 Note Annual Report and Accounts 2009/10 DSG international plc – Nordics

Gains transferred to income statement Gains transferred Losses / (gains) transferred to carrying amount of inventories to carrying amount of Losses / (gains) transferred Fair value remeasurement gains / (losses) Fair value remeasurement Fair value remeasurement gains / (losses) Fair value remeasurement Fair value remeasurement (losses) / gains Fair value remeasurement Attributable to: company of the parent Equity shareholders Minority interests Currency translation movements Currency in equity directly Net expense recognised expense for the period comprehensive Total Profit / (loss) for the period / (loss) Profit Comprehensive Income and Expense and Income Comprehensive Consolidated Statement of Statement Consolidated Actuarial (losses) / gains on defined benefit pension schemesActuarial (losses) / gains – UK Net investment hedges Tax on items taken directly to equity directly on items taken Tax Investments Cash flow hedges Financial Statements

Consolidated Balance Sheet

1 May 2010 2 May 2009 Note £million £million Non-current assets Goodwill 9 1,116.5 1,069.1 Intangible assets 10 130.7 148.4 Property, plant & equipment 11 541.0 489.6 Investments in associates 12 26.4 29.8 Trade and other receivables 14 58.0 68.5 Deferred tax assets 7 169.4 150.3 2,042.0 1,955.7 Current assets Inventories 13 972.6 971.9 Trade and other receivables 14 395.1 508.2 Income tax receivable 1.9 8.3 Short term investments 15 8.5 9.0 Cash and cash equivalents 16 295.7 192.6 1,673.8 1,690.0 Assets held for sale 29 – 13.2 Total assets 3,715.8 3,658.9 Current liabilities Bank overdrafts 17 (4.9) (4.8) Borrowings 17 (98.5) (250.1) Obligations under finance leases 18 (2.4) (2.8) Trade and other payables 19 (1,605.9) (1,664.5) Income tax payable (47.0) (58.0) Provisions 20 (22.3) (72.1) (1,781.0) (2,052.3) Net current liabilities (107.2) (362.3) Non-current liabilities Borrowings 17 (321.4) (322.5) Obligations under finance leases 18 (97.6) (98.9) Retirement benefit obligations 21 (266.8) (153.0) Other payables 19 (325.7) (369.8) Deferred tax liabilities 7 (18.7) (22.7) Provisions 20 (29.5) (40.4) (1,059.7) (1,007.3) Liabilities directly associated with assets classified as held for sale 29 – (14.4) Total liabilities (2,840.7) (3,074.0) Net assets 875.1 584.9

Capital and reserves Called up share capital 23 90.2 44.3 Share premium account 169.4 169.4 Other reserves 23 (537.5) (534.9) Retained earnings 1,124.4 880.1 Equity attributable to equity holders of the parent company 846.5 558.9 Equity minority interests 28.6 26.0 Total equity 875.1 584.9

The financial statements were approved by the directors on 24 June 2010 and signed on their behalf by:

John Browett Nicholas Cadbury Chief Executive Group Finance Director

66 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – – 67 2.4 4.9 5.7 (1.7) (0.1) (6.9) ended 62.2 15.4 20.9 73.3 28.8 £million (40.4) (60.3) (12.0) (35.7) (27.6) (21.6) 363.7 187.8 249.9 (169.7) (191.5) (143.8) (191.3) (404.2) (140.7) (126.8) 52 weeks 2 May 2009 – – – – 1.3 9.7 4.0 5.0 (1.7) (0.1) (7.1) (8.6) (7.0) 17.1 25.5 ended (17.6) (12.0) (31.9) £million 291.3 111.7 226.4 103.1 187.8 290.8 270.3 (131.8) (151.6) (118.8) (165.3) 52 weeks 1 May 2010 29 27 21 28 29 Note (i) (i) 27 (i) 27 (ii) Annual Report and Accounts 2009/10 * * * * * * * ivalents’ on the face of the balance sheet, DSG international plc and comprises cash generated from / (utilised by) continuing operations before special pension contributions, less net finance / (utilised by) continuing operations before and comprises cash generated from *

less overdrafts, which are classified within current liabilities on the face of the balance sheet. A reconciliation to the balance sheet amounts is shown in note 27. liabilities on the face of the balance sheet. A reconciliation classified within current which are less overdrafts, expense, less income tax paid and net capital expenditure. The directors consider that ‘Free Cash Flow’ provides additional useful information to shareholders in respect of cash in respect information to shareholders additional useful Cash Flow’ provides consider that ‘Free The directors expense, less income tax paid and net capital expenditure. internally. generation and is consistent with how business performance is measured Interest element of finance lease payments Interest Capital element of finance lease payments Additions to finance leases (ii) Cash Flow comprises those items marked Free (i) cash equ For the purposes of this cash flow statement, cash and cash equivalents comprise those items disclosed as ‘cash and Cash and cash equivalents at end of period Cash Flow Free Currency translation differences Currency Continuing operations Discontinued operations Financing activities – continuing operations capital share Issue of ordinary Equity dividend paid financing activities Net cash flows from in cash and cash equivalents Decrease Proceeds from sale of discontinued operations sale from Proceeds investing activities Net cash flows from Income tax paid operating activities Net cash flows from Operating activities – continuing operations Operating activities / (utilised by) operations Cash generated from Consolidated Cash Flow Statement Cash Flow Consolidated Investing activities – continuing operations Investing activities and other intangibles plant & equipment of property, Purchase Special contributions to defined benefit pension scheme Special contributions in short term investments Decrease and other intangibles plant & equipment Disposals of property, associate from Dividend received Cash and cash equivalents at beginning of period Interest paid Interest Decrease in borrowings due after more than one year than due after more in borrowings Decrease (Decrease) / increase in borrowings due within one year due within in borrowings / increase (Decrease) Purchase of subsidiaries Purchase received Interest minority shareholder Investment from Financial Statements

Consolidated Statement of Changes in Equity

Share Share Other Retained Minority capital premium reserves earnings Sub total interests Total equity £million £million £million £million £million £million £million At 4 May 2008 44.3 169.4 (502.9) 1,115.9 826.7 26.8 853.5

Loss for the period – – – (219.3) (219.3) – (219.3) Other comprehensive income and expense recognised directly in equity – – (52.8) 35.2 (17.6) 3.5 (14.1) Total comprehensive income and expense for the period – – (52.8) (184.1) (236.9) 3.5 (233.4) Equity dividends paid – – – (60.7) (60.7) – (60.7) Minority interests–increase in capital–––––5.75.7 Transfers – – (6.7) 6.7 – – – Put option exercised – – 27.5 – 27.5 (10.0) 17.5 Share-based payments – – – 2.1 2.1 – 2.1 Tax on share-based payments – – – 0.2 0.2 – 0.2 At 2 May 2009 44.3 169.4 (534.9) 880.1 558.9 26.0 584.9

Profit for the period – – – 57.3 57.3 – 57.3 Other comprehensive income and expense recognised directly in equity – – (2.6) (63.6) (66.2) (2.4) (68.6) Total comprehensive income and expense for the period – – (2.6) (6.3) (8.9) (2.4) (11.3) Minority interests – increase in capital –––––5.05.0 Placing and Rights Issue 45.9 – 245.4 – 291.3 – 291.3 Transfer – – (245.4) 245.4 – – – Share-based payments – – – 4.9 4.9 – 4.9 Tax on share-based payments – – – 0.3 0.3 – 0.3 At 1 May 2010 90.2 169.4 (537.5) 1,124.4 846.5 28.6 875.1

Minority interests comprise shareholdings in PIXmania S.A.S., (PIXmania), ElectroWorld Iç ve Dis Ticaret AS (ElectroWorld Turkey) and DSGi South-East Europe A.E.V.E. (Kotsovolos).

68 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 69 olled by the Annual Report and Accounts 2009/10 DSG international plc IFRS 7 ‘Financial Instruments disclosures (Amendment)’. IFRS 7 ‘Financial Instruments disclosures fair value regarding additional disclosures This introduces and liquidity risk. This has had no impact on measurement or net assets. results the Group’s IAS 1 ‘Revised Presentation of Financial Statements’. This of Financial Statements’. IAS 1 ‘Revised Presentation income’. Instead a ‘statement of comprehensive introduces income the one statement of comprehensive of presenting an ‘income two statements: elected to present has Group and income of comprehensive statement’ and a ‘statement the consolidated has presented expense’. The Group which was previously in equity, statement of changes as a note, as a primary statement. presented payments: Vesting Amendment to IFRS 2 ‘Share-based the definition conditions and cancellations’. This restricts performance of vesting conditions to include service and not vesting conditions are All other features conditions only. in the grant date fair value. It specifies and must be reflected the same accounting that all cancellations should receive This has impacted the accounting for Save As You treatment. plans. The adoption of this amendment share Earn (SAYE) or results has not had a significant impact on the Group’s net assets. Certain new accounting pronouncements have become pronouncements Certain new accounting period. During the period the Group applicable during the has adopted: ■ the Company has the is achieved where Control Company. the financial and operating policies of an power to control of its activities. The results entity so as to obtain benefits from the date on which power included from are subsidiaries acquired are passes. The net assets of subsidiaries acquired to control of subsidiaries disposed at their fair values. The results recorded date of disposal. included up to the effective of are accounted for using the equity method of Associates are the date on which the power to exercise accounting from significant influence passes. transactions, balances, income and expenses All intra-group eliminated on consolidation. are ■ ■ The Group previously adopted IFRS 8 Operating Segments, previously The Group 4 May 2008. from date, with effect in advance of its effective and IFRIC amendments to standards Other new standards, during the current for the Group effective are interpretations or have had no either not relevant financial period but are or net assets. results impact on the Group’s set out below: The principal accounting policies are 1.2 Accounting convention and basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities contr

dance with International Reporting Standards Financial

(IFRS) as adopted by the EU, IFRS issued by the International(IFRS) as adopted by parts of the Companies and those Board Accounting Standards under IFRS, to those companies reporting Act 2006 applicable concern on a going basis as disclosed and have been prepared in the going concern statement in the statutory information Report on page 44. section of the Directors’ statement and segmental analysis income The Group’s and non- measures identify separately underlying performance reflect measures underlying items. Underlying performance to exclude the an adjustment to total performance measures items. impact of closed businesses and other non-underlying and losses comprise profits Underlying performance measures activities of as part of the day to day ongoing retail incurred on the and losses incurred the Company and include profits that occur of owned or leased properties disposal and closure churn. or losses annual retail The profits as part of the Group’s of owned or leased properties on disposal or closure incurred excluded from are programme restructuring as part of a one-off included, therefore and are underlying performance measures items as described among other items, within non-underlying consider ‘underlying’ performance The directors below. the ongoing trading of accurate reflection to be a more measures and believe that these measures performance of the Group on the additional useful information for shareholders provide business consistent with how and are performance Group’s internally. performance is measured of closed Non-underlying items comprise trading results intangibles, net businesses, amortisation of acquired and business impairment charges and other restructuring on sale of investments, items, profit non-recurring one-off, of financial instruments and, where fair value remeasurements applicable, discontinued operations. Closed businesses are those which do not meet the definition of discontinued operations as stipulated by IFRS 5. Items excluded from one financial year to the can evolve from underlying results type or one-off of reorganisation next depending on the nature were for 2009/10, there activities described above, however, no new exclusions. and non-underlying Underlying performance measures comparable with may not be directly performance measures or profit or ‘adjusted’ revenue other similarly titled measures used by other companies. measures

1 Accounting policies 1.1 Basis of preparation in statements have been prepared The consolidated financial accor Notes to the Consolidated Financial Statements Financial Consolidated to the Notes Financial Statements Notes to the Consolidated Financial Statements continued

1 Accounting policies continued Operating leases 1.3 Revenue Rentals payable under operating property leases are charged Revenue comprises sales of goods and services excluding sales to the income statement on a straight-line basis over the fixed taxes. Revenue from sales of goods is recognised at the point term of the lease. At the end of the fixed term of leases, rental of sale or, where later, upon delivery to the customer and is payments are reset to market rates, typically on an upwards stated net of returns. Revenue earned from customer support only basis. agreements is recognised as such over the life of the agreement Benefits received and receivable as an incentive to enter into by reference to the stage of completion of the transaction at an operating lease are also spread on a straight-line basis over the balance sheet date. the lease term. 1.4 Other income, including non-operating income Where a lease forms part of a separate cash generating unit Other income which is incidental to the Group’s principal (CGU), such as a store or group of stores, and business activities of selling goods and services and accordingly is not indicators exist which could lead to the conclusion that the recorded as part of revenue is recognised when the Group carrying value of the CGU is not supportable, the recoverable obtains the right to consideration by performance of its amount of the CGU is determined by calculating its value in contractual obligations. Interest income is accrued on a time use. The value in use is calculated by applying discounted cash basis, by reference to the principal outstanding and at the flow modelling to management’s projection of future profitability. effective interest rate applicable. Dividend income from If an impairment of a CGU has been identified such that the investments is recognised when the right to receive payment value in use is negative and a lease exists in that CGU, a has been established. provision for the onerous portion of the lease is made equal 1.5 Discontinued operations to the lower of the outstanding lease commitment and the A discontinued operation is a component of the Group which negative present value of the CGU. represents a significant separate line of business which has 1.7 Translation of foreign currencies been sold. Classification as a discontinued operation occurs Transactions in foreign currencies are initially recorded at the upon disposal or earlier if beneficial title and risk has transferred rate of exchange prevailing at the transaction date. Monetary to the purchaser and in the case of a business acquired assets and liabilities denominated in foreign currencies are exclusively with a view to subsequent disposal, on the date retranslated at the rates of exchange ruling at the balance of acquisition. sheet date. Exchange gains and losses arising on settlement Where the sale of a component of the Group is considered or retranslation of monetary assets and liabilities are included highly probable and the business is available for immediate sale in the income statement. in its present condition, it is classified as held for sale. Assets Assets and liabilities of overseas subsidiaries are translated at and liabilities held for sale are measured at the lower of carrying the rate of exchange ruling at the balance sheet date. The results amount and fair value less costs to sell. of overseas subsidiary undertakings are translated into sterling 1.6 Leases at the average rates of exchange during the period. Exchange Leases are classified as finance leases whenever the terms differences resulting from the translation of the results and of the lease transfer substantially all the risks and rewards of balance sheets of overseas subsidiary undertakings are charged ownership to the lessee. The determination of the classification or credited directly to retained earnings. Such translation of property leases is made by reference to the land and buildings differences become recognised in the income statement in elements separately. All leases not classified as finance leases the period in which the subsidiary undertaking is disposed. are operating leases. As the cumulative translation differences for all foreign Finance leases subsidiaries were deemed to be zero at the transition date to Assets held under finance leases are capitalised at their fair IFRS on 2 May 2004, upon disposal of a foreign subsidiary, value on acquisition or, if lower, at the present value of the any gain or loss arising will include only those foreign exchange minimum lease payments, each determined at the inception gains or losses attributable to periods after that date. of the lease and depreciated over their estimated useful lives 1.8 Goodwill or the lease term if shorter. The corresponding obligation to On acquisition of a subsidiary or associate, the fair value of the the lessor is included in the balance sheet as a liability. Lease consideration is allocated between the identifiable net tangible payments are apportioned between finance charges and and intangible assets / liabilities on a fair value basis, with any reduction of the lease obligation. Finance charges are charged excess consideration representing goodwill. Goodwill in respect to the income statement over the period of the lease in of subsidiaries is capitalised as goodwill on the balance sheet; proportion to the capital element outstanding. goodwill relating to associates is capitalised in investments in associates as part of the carrying value of the associate.

70 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 71 eceivables Annual Report and Accounts 2009/10 DSG international plc which involve a contractual right to receive cash from external cash from which involve a contractual right to receive shown in notes 14, parties. Financial assets comprise all items and derivatives. 15 and 16 with the exception of prepayments 39, short term Under the classifications stipulated by IAS (excluding investments and trade and other receivables classified as ‘available for sale’ derivative financial assets) are Cash and cash respectively. and ‘loans and receivables’, which are equivalents and derivative financial instruments, classified as are further described in notes 1.14 and 1.16, and ‘held for trading unless designated ‘loans and receivables’ respectively. in a hedge relationship’, and sales of investments and other financial All purchases becomes on the date that the Group recognised assets are or sale (‘the trade date’). committed to make such purchase Investment in associates accounted for using the equity method of Associates are the date on which the power to exercise accounting from significant influence passes. Short term investments at fair value and then initially measured Investments are to fair value at each balance sheet subsequently remeasured date owing to occasional sales of such investments. The fair value of unlisted investments is estimated either by comparing length transactions or by using discounted cash arm’s recent flow analysis or other modelling techniques. Gains and losses recognised at the balance sheet date are revaluation arising from For unlisted investments a significant or in equity. directly decline in the fair value of the investment below prolonged evidence of impairment. its cost is considered deemed permanent, the extent that any fair value losses are To in the income statement. Upon such impairment is recognised sale or impairment of the investments, any cumulative gains or to the income statement. transferred losses held in equity are Property, plant & equipment are assessed on an ongoing basis assessed & equipment are plant Property, lead to the exist that could circumstances to determine whether book value is not supportable. Where conclusion that the net charge is to be taken out of use, an impairment assets are shortened, an estimate is assets useful lives are levied. Where charge and an accelerated depreciation made of their new lives form part of a plant & equipment the property, is levied. Where or group unit (CGU), such as a store separate cash generating exist which could lead to the and business indicators of stores, net book value is not supportable, the conclusions that the amount of the CGU is determined by calculating recoverable by applying its value in use. The value in use is calculated projection discounted cash flow modelling to management’s and any impairment is determined by profitability of future in use. comparing the net book value with the value 1.11 Investments and other financial assets assets comprise cash and cash financial The Group’s those r equivalents, short term investments and % per annum 3 % per annum / 2 1 / 1 % and 2 3 / 2 ed intangibles comprise brands and customer lists intangibles comprise brands and customer ed eciation and, where appropriate, provision for impairment in provision appropriate, eciation and, where leasehold buildings and equipment value or estimated loss on disposal. Depreciation is provided to is provided value or estimated loss on disposal. Depreciation the cost of the assets by equal instalments over their write off estimated useful lives. The rates used are: Short leasehold property – over the term of the lease Freehold and long –1 between purchased as part of acquisitions of businesses and are purchased economic lives on a capitalised and amortised over their useful stated at cost less intangibles are straight-line basis. Acquired for provision appropriate, accumulated amortisation and, where disposal. Amortisation impairment in value or estimated loss on the cost of assets on a straight-line basis to write off is provided and 30 years. between three Other intangible assets: computer software is capitalised on the basis of the costs Computer software use the specific software. and bring into both to acquire incurred the cost of assets on a to write off Amortisation is provided lives of between straight-line basis over their estimated useful and seven years. Costs associated with developing or three as an expense recognised are maintaining computer software benefits economic the future unless they increase as incurred capitalised. of the asset, in which case they are Internally is capitalised at cost generated computer software feasible and the is technically and commercially if the project expected to be generated exceed economic benefits which are capitalised includes the cost of The expenditure one year. of proportion labour and an appropriate materials, direct is capitalised only when overheads. Subsequent expenditure economic benefits embodied in the the future it increases to Amortisation is provided specific asset to which it relates. the cost of assets on a straight-line basis between write off and seven years. three is stated at cost less accumulated Computer software for impairment provision appropriate, amortisation and, where in value or estimated loss on disposal. plant & equipment 1.10 Property, stated at cost less accumulated plant & equipment are Property, depr Goodwill is not amortised, but instead is reviewed annually for but instead is reviewed Goodwill is not amortised, in the immediately is recognised impairment. Any impairment is not subsequently reversed. income statement and or associate the attributable amount On disposal of a subsidiary in the determination of the gain or loss of goodwill is included on disposal. 1.9 Intangible assets intangibles Acquired Acquir Fixtures, fittings Fixtures, 33 – between 10% and No depreciation is provided on freehold and long leasehold land on freehold is provided No depreciation or on assets in the course of construction. Financial Statements Notes to the Consolidated Financial Statements continued

1 Accounting policies continued 1.13 Inventories Trade and other receivables Inventories are stated at the lower of average cost and net Trade and other receivables (excluding derivative financial realisable value. Cost comprises direct purchase cost and those assets) are recorded at cost less an allowance for estimated overheads that have been incurred in bringing the inventories to irrecoverable amounts and any other adjustments required to their present location and condition, both types of cost being align cost to fair value. The carrying amount of trade receivables measured using a weighted average cost formula. Net realisable is reduced through the use of a provision account. A provision value represents the estimated selling price less all estimated for bad and doubtful debts is made for specific receivables and directly attributable costs of completion and costs to be when there is objective evidence that the Group will not be able incurred in marketing, selling and distribution. to collect all of the amounts due under the original terms of 1.14 Cash and cash equivalents the invoice. Receivables that are not assessed individually for Cash and cash equivalents comprise cash at bank and in hand, impairment are assessed for impairment on a collective basis bank overdrafts and short term highly liquid deposits with a using ageing analysis to determine the required provision. maturity of three months or less and which are subject to an Bad debts are written off when identified. insignificant risk of changes in value. Bank overdrafts, which 1.12 Taxation form part of cash and cash equivalents for the purpose of the Current taxation cash flow statement, are shown under current liabilities. Current taxation is the expected tax payable on the taxable 1.15 Borrowings and other financial liabilities income for the period, using prevailing tax rates and adjusted The Group’s financial liabilities are those which involve a for any tax payable in respect of previous periods. contractual obligation to deliver cash to external parties at a Deferred taxation future date. Financial liabilities comprise all items shown in notes Deferred tax liabilities are recognised for all taxable temporary 17, 18 and 19 with the exception of other taxation and social differences and deferred tax assets are recognised to the extent security, deferred income from customer support agreements, that it is probable that taxable profits will be available against other deferred income and other non-financial creditors. Under which deductible temporary differences can be utilised. Such the classifications stipulated by IAS 39, borrowings, finance assets and liabilities are not recognised if the temporary lease obligations and trade and other payables (excluding difference arises from goodwill or from the initial recognition derivative financial liabilities) are classified as ‘financial liabilities (other than in a business combination) of other assets and measured at amortised cost’. Derivative financial instruments, liabilities in a transaction that affects neither the tax profit nor which are described further in note 1.16 below, are classified the accounting profit. as ‘held for trading unless designated in a hedge relationship’. Deferred tax liabilities are recognised for taxable temporary Borrowings differences arising on investments in subsidiaries, except Borrowings are initially recorded at the consideration received where the Group is able to control the reversal of the temporary less directly attributable transaction costs. Transaction costs difference and it is probable that the temporary difference will are amortised through the income statement using the effective not reverse in the foreseeable future. No provision is made interest method and the unamortised balance is included as for tax which would have been payable on the distribution part of the related borrowing at the balance sheet date. A fair of retained profits of overseas subsidiaries or associated value adjustment is made to the borrowing where hedge undertakings where it has been determined that these profits accounting, as described in note 1.16 below, has been applied. will not be distributed in the foreseeable future. Trade and other payables Deferred tax assets and liabilities are offset against each other Trade and other payables (excluding derivative financial liabilities) when they relate to income taxes levied by the same tax are recorded at cost. Derivative financial instruments, which jurisdiction and when the Group intends to settle its current includes put options over equity held by minority shareholders, tax assets and liabilities on a net basis. are initially recorded at fair value and then subsequently remeasured to fair value at each balance sheet date and are Deferred tax is charged or credited in the income statement, held within assets or liabilities as appropriate. Gains and losses except when it relates to items charged or credited directly to arising from revaluation at the balance sheet date are recognised equity, in which case the deferred tax is also dealt with in equity. in the income statement unless the derivatives are designated Deferred tax is measured at the average tax rates that are as hedges and such hedges are proved to be effective. expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted, or substantially enacted by the balance sheet date. Deferred tax balances are not discounted.

72 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 73 Annual Report and Accounts 2009/10 e charged to the income statement on DSG international plc Cash flow hedges exchange contracts to hedge foreign uses forward The Group and on inventory ordered exposure currency the foreign policy to It is Group and certain sales of inventory. purchased orders and 100% of committed purchase hedge between 80% up to also hedges in time the Group and sales. At any point of in respect exposure currency foreign 80% of its estimated subsequent 12 months. and sales for the purchases forecast each considered are as well as sales purchases and Orders transactions. to be separate hedge for such cash flow Derivative financial instruments that qualify on the balance sheet with gains initially recognised hedging are portion the effective of to the remeasurement and losses relating the extent that such items To in equity. of the hedge being deferred to the ineffective gains or losses relating hedged, ineffectively are in the income statement. Amounts taken recognised portion are to the income statement when the transferred to equity are or loss (i.e. when a purchase profit transaction affects hedged the associated gains or sale is made). For inventory purchases, been recognised or losses on the derivative that had previously For of inventory. included in the initial measurement in equity are that had previously sales, the gains or losses on the derivative included in the income statement in equity are been recognised in the period in which the sale is made. Net investment hedges swaps currency contracts and forward uses currency The Group risk on the translation of net investments in to hedge its currency of the entities. Gains and losses arising on the retranslation foreign in equity. recognised derivatives are investments and the related IAS of this is on the basis that the hedging requirements However, the extent To is effective. met and the hedging relationship 39 are to hedged, gains or losses relating ineffectively that such items are income statement. within the recognised portion are the ineffective benefit obligations 1.17 Retirement Company contributions to defined contribution pension schemes and contributions made to state pension schemes for certain overseas employees ar an accruals basis as contributions become payable. service cost For defined benefit pension schemes, the regular benefits to employees during the period, retirement of providing to past service, is together with the cost of any benefits relating representing in the period. A credit charged to operating results benefit schemes the expected return on assets of the retirement during the period is included within other finance income. This is based on the market value of the assets of the schemes at the start of the financial period. A charge is included within in the the expected increase other finance costs, representing benefit schemes during the period. liabilities of the retirement between the market value of the assets and the The difference value of the accrued pension liabilities is shown as an present between the asset or liability in the balance sheet. Differences actual and expected returns on assets during the period are in the consolidated statement of comprehensive recognised arising from income and expense, together with differences changes in actuarial assumptions. ecognised in the balance sheet at fair value within assets or ecognised in the balance liabilities as appropriate and then subsequently remeasured to and then subsequently remeasured liabilities as appropriate sheet date. Gains and losses arising fair value at each balance in recognised date are at the balance sheet revaluation from designated unless the derivatives are the income statement to be effective. proved hedges are as hedges and such assets or liabilities classified as non-current Derivatives are and the remaining is identified hedge relationship a where than 12 months from maturity of the hedged item is greater classified as current the balance sheet date. Derivatives are assets or liabilities in all other circumstances. market values. The fair value of derived from Fair values are is based on financial instruments traded in active markets date. quoted market prices at the balance sheet Hedge accounting expose it primarily to the financial risks activities The Group’s currency rates and foreign associated with changes in interest uses derivative financial instruments exchange rates. The Group swaps currency rate swaps, options, cross such as interest contracts to hedge these risks. The currency and forward does not use derivative financial instruments for Group speculative purposes. formally hedge accounting is to be applied, the Group Where to which designates and documents the hedge relationship wishes to apply hedge accounting and the risk the Group the hedge. management objective and strategy for undertaking the hedging instrument Hedge accounting is discontinued when or no longer meets or is sold, terminated or exercised, expires the criteria for hedge accounting. of derivatives that qualify for The accounting treatment designated. hedge accounting is dependent on how they are are designations and accounting treatments The different explained below: Fair value hedges to rate swaps to hedge the exposure uses interest The Group assets and liabilities. changes in the fair value of recognised Derivative financial instruments that meet the ‘fair value’ hedging balance sheet at fair value in the recognised are requirements within fair value movements recognised with corresponding finance income / costs in the income statement. For an effective fair value hedge, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding the extent that the designated entry in the income statement. To such amounts in the income is effective, hedge relationship only the ineffective As a result, each other. statement offset impacts the element of any designated hedging relationship income statement. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the method is used, is interest hedged item for which the effective amortised to the income statement over the period to maturity. 1.16 Derivative financial instruments and hedge accounting 1.16 Derivative financial initially are held by the Group Derivative financial instruments r Financial Statements Notes to the Consolidated Financial Statements continued

1 Accounting policies continued between the cost of stock and its estimated net realisable 1.18 Share-based payments value, based on ageing. Calculation of these provisions requires The Group issues equity settled share-based payments to judgements to be made which include forecast consumer certain employees which are measured at fair value at the date demand, the promotional, competitive and economic of grant. This fair value is expensed in the income statement environment and inventory loss trends. on a straight-line basis over the vesting period, based on an Provisions and accruals for onerous leases estimate of the number of shares that will eventually vest as If the Group vacates a store or other property prior to the expiry adjusted for any non-market conditions. of the related lease, or a lease forms part of a separate CGU A liability equal to the portion of services received from whereby the carrying value of that CGU is not considered employees is recognised at the current fair value determined at supportable, it records a provision or accrual for the expected each balance sheet date for cash settled share-based payments. lease payments that the Group will incur prior to assignment or sublease of the property. Such a calculation requires a 1.19 Estimates, judgements and critical accounting policies judgement as to the timing and duration of the expected vacant The preparation of financial statements in conformity with periods and the amount and timing of future potential sublease generally accepted accounting principles requires management income. When making these judgements, the directors consider to make estimates and assumptions that affect the reported a number of factors, including the landlord, the location and amounts of assets and liabilities and the disclosure of condition of the property, the terms of the lease, the specific contingent assets and liabilities. Significant items subject to marketplace demand and the economic environment. such assumptions and estimates include the useful lives of assets; the measurement and recognition of provisions; the Goodwill, intangible assets and property, plant & equipment recognition of deferred tax assets; and liabilities for potential impairment reviews corporation tax. Actual results could differ from these estimates Goodwill is required to be valued annually to assess the and any subsequent changes are accounted for with an effect requirement for potential impairment. Other assets are assessed on income at the time such updated information becomes on an ongoing basis to determine whether circumstances exist available. The most critical accounting policies in determining that could lead to the conclusion that the net book value of the financial condition and results of the Group are those such assets is not supportable. Impairment testing on goodwill requiring the greatest degree of subjective or complex is carried out in accordance with the analyses described in judgements. These relate to revenue recognition, inventory note 9. Such calculations require judgement relating to the valuation, onerous lease costs, the valuation of goodwill, appropriate discount factors and long term growth prevalent in acquired intangible assets and property, plant & equipment, a particular market as well as short and medium term business share-based payments, post-retirement benefits and taxation, plans. The directors draw upon experience as well as external and are set out below. resources in making these judgements. Revenue recognition In assessing impairment of intangible assets and property, Revenue earned from the sale of customer support agreements plant & equipment, discounted cash flow methods are used as is recognised over the term of the contracts when the Group described in note 1.10. Judgement is required in determining obtains the right to consideration as a result of performance of the appropriate discount factors as well as the short and its contractual obligations. Revenue in any one year is therefore medium term business plans. As for goodwill, the directors recognised to match the proportion of the expected costs of draw upon experience and external resources in making fulfilling the Group’s total obligations under the agreements. these judgements. An estimate of the degree of performance of these contractual Share-based payments obligations is determined by reference to extensive historical The charge for share-based payments is calculated by claims data. Reliance on historical data assumes that current estimating the fair value of the award at the date of grant using and future experience will follow past trends. The directors either the Binomial or Black Scholes option pricing model or consider that the quantity and quality of data available provides the Monte Carlo simulation. The option valuation models used an appropriate proxy for current trends. require highly subjective assumptions to be made including Inventory valuation the future volatility of the Company’s share price, expected Inventories are valued at the lower of average cost and net dividend yields, risk-free interest rates and expected staff realisable value. Cost comprises direct purchase cost and those turnover. The directors draw upon a variety of external sources overheads that have been incurred in bring the inventories to to aid in the determination of the appropriate data to use in their present location and condition, both types of cost being such calculations. measures using a weighted average cost formula. Net realisable Defined benefit pension schemes value represents the estimated selling price less all estimated The surplus or deficit in the UK defined benefit scheme that and directly attributable costs of completion and costs to be is recognised through the statement of recognised income incurred in the marketing, selling and distribution. Net realisable and expense is subject to a number of assumptions and value includes, where necessary, provisions for slow moving and uncertainties. The calculated liabilities of the scheme are based damaged inventory. The provision represents the difference on assumptions regarding salary increases, inflation rates,

74 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 75 Annual Report and Accounts 2009/10 eported to the Board. This information is eported to the Board. DSG international plc UK & Ireland comprises UK & Ireland Electricals and UK comprises UK & Ireland UK & Ireland engaged predominantly Computing both of which are sales, associated peripherals and services and in retail services with the latter financial and after-sales related of computer also engaging in business to business sales and software. hardware which operates in comprises the Elkjøp Group Nordics Sweden, Finland, Denmark, , Greenland Norway, division engages Islands. The Nordics and the Faroe sales. in retail predominantly Greece, Other International comprises operations in Italy, The Other Spain, the Czech Republic, Slovakia and Turkey. sales. International in retail division engages predominantly It is engaged online retailers. comprises pure-play e-commerce sales and operates in all of the countries in which in online retail Europe. the other divisions operate and across predominantly based on geographical areas which are either which are based on geographical areas predominantly or have similar trading characteristics such managed separately and in together into one segment that they can be aggregated with geographical as a business area the case of e-commerce, operating Accounting policies for each territories aggregated. as described in the same as those for the Group segment are based evaluates each operating segment note 1. The Group which excludes those items on underlying operating profits described in note 1.1. involved in the multi-channel sale of high All segments are personal computers, technology consumer electronics, communication domestic appliances, photographic equipment, services. The financial and after-sales and related products business to business retail, principal categories of customer are and online. disposed of its operations in During the period the Group been classified as Hungary and Poland, both of which have shown in the Other previously discontinued operations and were International in note 29. division. Further information is provided as follows: segments have been identified reportable The Group’s ■ ■ ■ ■ 2 Segmental analysis determined based operating segments have been The Group’s on the information r Closed businesses comprise Markantalo and PC City Sweden closed on 10 May 2009 operations were these store whereby rather Owing to their closure and 20 May 2009, respectively. than disposal, these operations do not meet the definition of discontinued operations as stipulated by IFRS 5. ds, which are applicable to the ds, which are IAS 27 Revised Consolidated and Separate Financial that a change in Statements. IAS 27 Revised requires of a subsidiary is accounted for the ownership interest as an equity transaction. These changes must be applied acquisitions and future and will affect prospectively transactions with minority interests. IFRS 3 Revised Business Combinations. IFRS 3 Revised a number of changes in the accounting for introduces business combinations that will impact the amount of in the period results the reported goodwill recognised, results. reported that an acquisition occurs and the future ■ ■ Group were published, but do not become effective until future published, but do not become effective were Group accounting periods: for the financial year ending effective The following are 30 April 2011: discount rates, the long term expected return on the scheme’s discount rates, the long based are Such assumptions longevity. assets and member similar benchmarked against are on actuarial advice and pension schemes. Taxation businesses may be amended laws that apply to the Group’s Tax of changes in authorities, for example as a result by the relevant amendments or priorities. Such potential fiscal circumstances and regularly monitored are to the Group and their application of any liabilities assessed where for recognition the requirement to income taxes in a number of is subject The Group necessary. in determining and judgement is required jurisdictions different the ultimate for transactions where provision the appropriate the tax determination is uncertain. In such circumstances, liabilities for anticipated taxes due based recognises Group the anticipated liability on best information available and where the final outcome of such and estimable. Where is probable any the amounts initially recorded, from matters differs tax will impact the income tax and deferred differences in the period to which such determination is made. provisions probable, not considered the potential liabilities are Where adverse outcome the amount at risk is disclosed unless an remote. is considered losses based on the on taxable tax is recognised Deferred ability takes account expected ability to utilise such losses. This companies, potential of the business plans for the relevant the longer term aspects of these business uncertainties around volatility potential future plans, any expiry of taxable benefits and in the local tax regimes. and interpretations 1.20 New accounting standards and During the period, the following new standards, amendments to existing standar It is not expected that these changes will have a material impact they may however, or net assets of the Group, on the net results impact acquisitions in the future. Financial Statements Notes to the Consolidated Financial Statements continued

2 Segmental analysis continued (a) Income statement 2009/10 External Intersegmental Underlying Total revenue revenue Revenue profit / (loss) profit / (loss) £million £million £million £million £million UK & Ireland 4,013.5 101.7 4,115.2 71.1 93.7 Nordics 2,094.6 1.7 2,096.3 95.8 95.6 Other International 1,503.2 1.5 1,504.7 (8.3) (9.0) e-commerce 921.2 3.8 925.0 11.3 7.9 Eliminations – (108.7) (108.7) – – 8,532.5 – 8,532.5 169.9 188.2 Share of post-tax result of associates 1.6 1.6 Operating profit before central costs and property losses 171.5 189.8 Central costs (19.5) (14.8) Property losses (18.8) (18.8) Operating profit 133.2 156.2 Finance income 58.2 59.3 Finance costs (100.9) (102.8) Profit before tax for the period 90.5 112.7

External revenue for the Nordics includes £0.9 million relating to closed businesses. Reconciliation of underlying profit / (loss) to total profit / (loss) 2009/10 Amortisation Net Change in Net fair Underlying Closed of acquired restructuring pension value re- Total profit / (loss) businesses intangibles charges benefits measurements profit / (loss) £million £million £million £million £million £million £million UK & Ireland 71.1 – (0.5) (5.6) 28.7 – 93.7 Nordics 95.8 (0.2) ––––95.6 Other International (8.3) – (0.7) – – – (9.0) e-commerce 11.3 – (3.4) – – – 7.9 169.9 (0.2) (4.6) (5.6) 28.7 – 188.2 Share of post-tax result of associates 1.6–––––1.6 Operating profit before central costs and property losses 171.5 (0.2) (4.6) (5.6) 28.7 – 189.8 Central costs (19.5) – – – 4.7 – (14.8) Property losses (18.8) –––––(18.8) Operating profit 133.2 (0.2) (4.6) (5.6) 33.4 – 156.2 Finance income 58.2 ––––1.159.3 Finance costs (100.9) ––––(1.9) (102.8) Profit before tax for the period 90.5 (0.2) (4.6) (5.6) 33.4 (0.8) 112.7

Share of post-tax result of associates relates to the Nordics.

76 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 77 (18.1) 2008/09 2008/09 3.6 3.6 83.069.6 (87.4) 101.8 56.1 (123.6) 32.2 101.8 (18.1) (18.1) (96.5) (138.0) (25.0) (39.2) Annual Report and Accounts 2009/10 – (88.0) (88.0) – – DSG international plc £million £million £million £million £million revenue revenue Revenue / (loss) profit / (loss) profit External Intersegmental Underlying Total 8,317.8 – 8,317.8 122.5 (33.7) 1,762.8 1.1 1,763.9 72.5 14.2 4,228.6 84.2 4,312.8 58.7 (17.0) 1,519.0 2.3 1,521.3 (23.7) (42.6) Amortisationfair Net Business Net –––– ––––– –––––3.6 3.6 58.772.5 (12.2) – (0.5) (0.4) (43.0) – (32.3) (45.6) – – (17.0) 14.2 69.6 83.0 (12.2) (4.9) (57.2) (96.1) – (87.4) 56.1 (14.1) (4.9) (57.2) (96.1) (7.4) (123.6) £million £million £million £million £million £million £million (18.1) (96.5) (1.9) – – – (39.6) (138.0) (25.0) – – (14.2) – – (39.2) (23.7) – (0.7) – (18.2) – (42.6) 122.5 (12.2) (4.9) (43.0) (96.1) – (33.7) 126.1 (12.2) (4.9) (43.0) (96.1) – (30.1) Underlying Closed of acquired restructuring impairment value re- Total profit / (loss)profit businesses intangibles charges charges measurements / (loss) profit and property losses and property Operating profit / (loss) Operating profit Finance income Finance costs tax for the period / (loss) before Profit to the Nordics. of associates relates of post-tax result Share Property losses Property Share of post-tax result of associates of post-tax result Share e-commerce 15.0e-commerce – (3.3) – – – 11.7 Operating profit / (loss) Operating profit Finance income to closed businesses. includes £137.6 million relating External for the Nordics revenue / (loss) / (loss) to total profit Reconciliation of underlying profit UK & Ireland Nordics Other International central costs / (loss) before Operating profit Central costs Profit / (loss) before tax for the period tax for the period / (loss) before Profit Finance costs Property losses Property Eliminations of associates post-tax result of Share UK & Ireland Nordics Other International 807.4 e-commerce 0.4 losses central costs and property / (loss) before Operating profit 807.8Central costs 15.0 11.7 126.1 (30.1) Financial Statements Notes to the Consolidated Financial Statements continued

2 Segmental analysis continued (b) Geographical analysis Revenues are allocated to countries according to the entity’s country of domicile. Revenue generated by the UK business was £3,878.7 million (2008/09 £4,086.8 million). Revenue by destination is not materially different to that shown by domicile. Revenue from discontinued operations is shown in note 29. Non-current assets comprise property, plant & equipment, goodwill, intangible assets, investments in associates and non-current trade and other receivables. Non-current assets held by the UK, Italy and PIXmania were £327.4 million (2009 £290.9 million), £180.8 million (2009 £184.5 million), and £236.7 million (2009 £251.7 million), respectively. Non-current assets held by the Nordics were £799.3 million (2009 £738.2 million) and predominantly comprised goodwill (as disclosed in note 9) which has not been allocated to individual countries. (c) Balance sheet 2009/10 Segment Investment Total Segment assets in associates segment assets liabilities Net assets £million £million £million £million £million UK & Ireland 1,543.1 – 1,543.1 (1,087.4) 455.7 Nordics 1,054.3 26.4 1,080.7 (467.2) 613.5 Other International 696.8 – 696.8 (1,351.6) (654.8) e-commerce 373.3 – 373.3 (335.3) 38.0 Central 1,411.3 – 1,411.3 (987.5) 423.8 Eliminations (1,389.4) – (1,389.4) 1,389.4 – Continuing operations 3,689.4 26.4 3,715.8 (2,839.6) 876.2 Discontinued operations – – – (1.1) (1.1) 3,689.4 26.4 3,715.8 (2,840.7) 875.1

2008/09 Segment Investment Total Segment assets in associates segment assets liabilities Net assets £million £million £million £million £million UK & Ireland 3,386.7 – 3,386.7 (3,003.0) 383.7 Nordics 998.3 29.8 1,028.1 (515.1) 513.0 Other International 673.8 – 673.8 (1,378.2) (704.4) e-commerce 387.0 – 387.0 (346.3) 40.7 Central 3,038.5 – 3,038.5 (2,683.1) 355.4 Eliminations (4,879.3) – (4,879.3) 4,879.3 – Continuing operations 3,605.0 29.8 3,634.8 (3,046.4) 588.4 Discontinued operations 24.1 – 24.1 (27.6) (3.5) 3,629.1 29.8 3,658.9 (3,074.0) 584.9

Central assets and liabilities predominantly comprise intersegment balances, cash and cash equivalents, borrowings, net retirement benefit obligations, derivative financial instruments and tax assets and liabilities.

78 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 79 . ments 2008/09 2008/09 2009/10 f nistrative . Non-underlying Closed Annual Report and Accounts 2009/10 3.6 – – 3.6 83.0 (12.2) (158.2) (87.4) 79.4 (12.2) (158.2) (91.0) £million £million £million £million (20.0) – – (20.0) 580.2 (12.2) (121.4) 446.6 (205.4)(275.4) – – (36.8) – (312.2) (205.4) Underlying businesses Other Total 8,180.2 137.6 – 8,317.8 (7,600.0) (149.8) (121.4) (7,871.2) Capital expenditure –––0.1–– 5.4 1.6 0.6 1.2 DSG international plc Capital expenditure 7.32.62.8 95.81.4 29.9 26.6 58.7 2.4 21.1 21.4 15.5 3.0 4.7 3.8 3.2 6.1 0.6 0.6 0.1 4.9 20.9 20.8 5.0 – 7.8 46.4 72.8 15.7 1.0 2.1 28.2 24.8 3.0 0.2 0.2 1.2 1.8 0.2 – assets & equipment Depreciation Amortisation payments 14.1 160.1 105.8 30.7 5.7 32.0 105.2 123.8 29.1 1.8 14.1 160.1 105.9 30.7 5.7 assets & equipment Depreciation Amortisation pay £million £million £million £million £million £million £million £million £million £million 2009/10 Intangible plant Property, Share-based Intangible plant Property, Share-based Non-underlying Closed 1.6 – – 1.6 (19.6) – – (19.6) £million £million £million £million 133.2 (0.2) 23.2 156.2 647.7 (0.2) (5.6) 641.9 131.6 (0.2) 23.2 154.6 (186.7)(309.8) – – 28.8 – (281.0) (186.7) 8,531.6 0.9 – 8,532.5 Underlying Other businesses Total (7,883.9) (1.1) (5.6) (7,890.6) before associates before of associates Non-underlying items comprise amortisation of acquired intangibles of £4.6 million (2008/09 £4.9 million), included within admi intangibles of £4.6 million (2008/09 £4.9 million), included Non-underlying items comprise amortisation of acquired described further in note 4 items. Such items are and business impairment charges and other one-off expenses, net restructuring is amortisation of other intangibles o Included within underlying cost of sales, distribution costs and administrative expenses Distribution costs Administrative expenses respectively) (2008/09 £14.5 million, £2.8 million and £6.9 million, £14.5 million, £2.8 million and £8.8 million, respectively Total operating profit / (loss) operating profit Total Other operating charge Revenue Cost of sales Nordics Other International 1.9 e-commerce 3.9 2.4 4.8 – / (loss) profit Gross operations / (loss) from Profit of post-tax results Share Central 15.1Central Continuing operations Discontinued operations 4.6 1.2 0.4 0.6 31.8 104.0 122.0 28.9 1.8 UK & Ireland Central Discontinued operations UK & Ireland (d) Other information Nordics Other International e-commerce Continuing operations 3 Revenue and operating profit / (loss) 3 Revenue and operating profit Financial Statements Notes to the Consolidated Financial Statements continued

3 Revenue and operating profit / (loss) continued 2009/10 2008/09 Closed Closed Underlying businesses Total Underlying businesses Total £million £million £million £million £million £million Sale of goods 8,010.7 0.9 8,011.6 7,652.8 136.8 7,789.6 Revenue from services 520.9 – 520.9 527.4 0.8 528.2 8,531.6 0.9 8,532.5 8,180.2 137.6 8,317.8

Revenue from services predominantly comprises those relating to customer support agreements, delivery and installation, product repairs and product support. 2009/10 2008/09 Closed Underlying Underlying businesses Total £million £million £million £million Inventories recognised as an expense 6,197.4 5,956.2 101.9 6,058.1 Cost of inventory write-down 35.7 31.7 6.5 38.2 Rentals paid under operating leases: Plant and machinery 5.5 7.7 0.1 7.8 Property – non-contingent rent 365.7 348.4 5.1 353.5 Property – contingent rent 13.5 11.8 – 11.8 Rentals received under operating leases: Property – subleases (5.5) (10.6) – (10.6)

2009/10 2008/09 Auditors’ remuneration Audit services – Group financial statements 0.5 0.5 – Subsidiary financial statements 0.7 0.8 Total audit fees 1.2 1.3 Non-audit services pursuant to legislation 0.2 0.1 Corporate finance services – in capacity as auditors – 1.2 – other 0.1 2.7 Tax services – 0.7 Other 0.1 – Total fees paid to the auditors 1.6 6.0

Auditors’ remuneration in respect of corporate finance services in the prior year comprised those activities carried out in the capacity as auditors (reporting accountants) in respect of the Placing and Rights Issue. Other corporate finance services related to businesses disposed and aborted disposals together with fees associated with the refinancing described in note 17. Fees in respect of corporate finance services for disposal of businesses have been charged as part of costs of disposal.

80 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 81 Total 2008/09 Other –––– (59.1) (59.1) – (7.4) (7.4) – (4.9) (4.9) – 27.5 27.5 2.7 (25.2) (22.5) 2.7 – 2.7 (1.9) (7.4) (9.3) (1.9) – (1.9) Asset Closed £million £million £million (14.1) (165.6) (179.7) (12.2) –(12.2) (12.2) (158.2) (170.4) (11.4) (190.8) (202.2) businesses Other Total Annual Report and Accounts 2009/10 (3.9) (13.6) (41.6) (59.1) (2.3) (3.3) – (5.6) £million £million £million £million 2009/10 charges impairments charges Property DSG international plc –––– (52.7) (52.7) ––––– ––––– (5.6) (96.1) 33.4 (5.6) (96.1) 1.9 33.4 – 1.9 – (0.8) (0.8) (0.8) (0.8) – (4.6) (4.6) ––– – (6.1) (6.1) 0.1 (6.1) (6.0) 0.1 – 0.1 (0.2) 22.4 22.2 (0.2) –(0.2) (0.2) 23.2 23.0 (0.1) 16.3 16.2 Closed £million £million £million businesses Other Total (i) (ii) (v) (iii) (vi) (iv) (vii) Note of financial instruments and 20 May 2009, respectively. 2008/09 2009/10 Net restructuring charges relate to the renewal and transformation of the UK business which has been focused mainly on the to the renewal charges relate Net restructuring of the service offering. portfolio and the reorganisation of the UK store reformatting Asset impairments, which are to vacating properties. lease costs and charges related charges comprise onerous Property plant & to intangible assets and items of property, portfolio, relate of the UK store of the reformatting mainly in respect useful expected lives and in the business over a shorter period than their current to be eliminated from equipment which are plant & equipment comprise a combination addition for 2008/09, inventories. Impairments of intangible assets and property, charges associated with the economic useful life of these assets accelerated depreciation and incremental of asset write offs spread expected to be incurred, charges of £5 million (2008/09 £5 million) are being shortened and for which incremental comprised employee severance and contract financial periods. In 2008/09, other charges predominantly over the next three termination costs. Business impairment charges Business impairment Change in pension benefits Change in pension benefits Closed businesses HMRC settlement Net fair value remeasurements Net fair value remeasurements Closed businesses Amortisation of acquired intangibles Amortisation of acquired charges Net restructuring Closed businesses Other non-underlying items Other items Total impact on profit / (loss) before tax / (loss) before impact on profit Total Included in income tax expense: Included in net finance costs: Total impact on profit / (loss) after tax impact on profit Total (i) closed on 10 May 2009 activities of Markantalo and PC City Sweden which were Closed businesses: Comprises the operating (ii) charges – strategic reorganisation Net restructuring Included in operating profit / (loss): profit Included in operating 4 Non-underlying items 4 Non-underlying Financial Statements Notes to the Consolidated Financial Statements continued

4 Non-underlying items continued (iii) Net business impairment charges: Property Other Goodwill Other assets credits / credits / impairment impairment (charges) (charges) Total £million £million £million £million £million 2008/09 Italian business – – 12.4 6.4 18.8 Other businesses (10.2) (45.2) (50.5) (9.0) (114.9) (10.2) (45.2) (38.1) (2.6) (96.1)

2009/10: No such charges were incurred. 2008/09: The Italian business impairment credits related to the reversal of charges incurred in prior periods whereby liabilities were settled at lower amounts than those originally provided. 2008/09: Other business impairments comprised businesses in Spain, closed businesses in the Nordics as well as stores in underperforming locations in the UK High Street. Goodwill impairment related to the full write off of Markantalo in Finland following the announcement of the closure of this business. Other asset impairments comprised the Markantalo brand name, other intangible assets, property, plant & equipment and inventory. Other charges related predominantly to employee severance. (iv) The change in pension benefits arises from the closure to future accrual of the defined benefit section of the UK pension scheme which occurred on 30 April 2010 and which is described further in note 21(c). (v) 2008/09: Other items related to releases of unutilised provisions and settlement income received for claims for damages incurred following the Buncefield explosion in December 2005 and for which exceptional charges were incurred in the 2005/06 financial year. (vi) Net fair value remeasurement gains and losses on revaluation of financial instruments: Items excluded from underlying finance income and expense represent the gains and losses arising from the revaluation of derivative financial instruments under methodologies stipulated by IAS 39 compared with those on an accruals basis (the basis upon which all other items in the financial statements are prepared). Also included within this amount are remeasurement losses relating to put options predominantly held by minority shareholders. Such a treatment is a form of revaluation gain or loss created by an assumption that the derivatives will be settled before their maturity. Such gains and losses are unrealised and in the directors’ view also conflict with both the commercial reasons for entering into such arrangements as well as Group Treasury policy whereby early settlement in the majority of cases would amount to speculative use of derivatives. (vii) 2008/09: On 4 June 2009, following an agreement in principle in April 2009, the Group agreed a settlement with HMRC in respect of a dispute concerning certain historical intra group trading arrangements in the years 1997 to 2005 as well as certain other matters. The settlement exceeded the provision already held in the balance sheet and accordingly a non-underlying income tax charge of £52.7 million was recorded in current tax. This charge was in addition to the tax effects applied to the net non-underlying charges before tax and was treated as non-underlying owing to its size and one-off non-recurring nature.

82 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – 83 8.2 1.4 (0.9) (9.7) (1.9) (6.9) 12.2 21.8 21.8 47.8 32.2 £million £million £million (18.3) (36.2) (13.5) (47.2) (24.1) (24.1) (39.6) (26.9) 2008/09 2008/09 2008/09 101.8 (138.0) formal hin – – 2.6 6.2 1.1 (4.6) (3.1) (7.1) (1.9) 59.3 11.8 20.6 20.6 37.6 (18.3) (43.5) (22.2) (45.6) (29.9) (29.9) (42.7) £million £million £million 2009/10 2009/10 2009/10 (102.8) (i) (ii) (iii) (iv) (iv) Note Annual Report and Accounts 2009/10 * * * DSG international plc . See note 4 for a description of such items. Net finance costs . See note 4 for a description of such items. * Exchange gains Interest on bank loans and overdrafts Interest of financial instruments on an accruals basis Remeasurement Interest on overpayments of tax in prior periods on Interest of financial instruments on an accruals basis Remeasurement Exchange losses Interest on cash and cash equivalents and short term investments on Interest for closed businesses comprise interest on bank loans and overdrafts. for closed businesses comprise interest Included within the bank loans, overdrafts and other interest payable (2009 bank and other interest receivable) within receivable) payable (2009 bank and other interest and other interest Included within the bank loans, overdrafts exchange gains of £16.9 million (2008/09 gains of £5.1 of financial instruments on an accruals basis are remeasurement million) financial instruments not in a for a £16.9 million charge (2008/09 £5.1 million charge) arising from which is a natural offset designated hedging relationship under the rules stipulated by IAS 39. designated hedging relationship net finance costs relating to assets and liabilities respectively not held at fair value through the income statement. not held at fair value through to assets and liabilities respectively net finance costs relating Included within the remeasurement of financial instruments is a £3.1 million charge (2008/09 £8.2 million charge) which is not Included within the remeasurement under the rules stipulated by IAS 39. in a designated hedging relationship £11.5under the rules stipulated by IAS 39. hedging relationship not in a designated which are million) Underlying Closed businesses 6.125% Guaranteed Bonds 2012 interest and related charges and related Bonds 2012 interest 6.125% Guaranteed payable and other interest Bank loans, overdrafts Underlying total net finance costs – continuing operations Underlying total net finance costs – continuing Total net finance costs – continuing operations net finance costs – continuing Total Fair value remeasurement losses on financial instruments Fair value remeasurement Finance costs Finance income Bank and other interest receivable receivable Bank and other interest instruments gains on financial Fair value remeasurement 5 Net finance costs (ii) comprise: receivable Bank and other interest (iii) payable comprise: and other interest Bank loans, overdrafts Expected return on pension scheme assets Expected return on pension (iv) million) and losses of £0.7 million (2008/09 gains and losses include gains of £nil (2008/09 £4.2 Fair value remeasurement (v) of £2.6 million (2008/09 £8.2 million) and expense of £55.3 million (2008/09 £38.7 million) is included wit income Interest Finance lease interest payable Finance lease interest on pension scheme liabilities Interest (i) items marked Underlying total net finance costs excludes Financial Statements Notes to the Consolidated Financial Statements continued

6 Employees Staff costs for the period were: 2009/10 2008/09 £million £million Wages and salaries 724.9 704.9 Social security costs 109.3 103.7 Other pension costs 15.4 17.3 849.6 825.9

In addition to the above other pension costs, a non-underlying curtailment gain of £33.4 million was incurred as described in note 4. The average number of employees, including part time employees, was: 2009/10 2008/09 Number Number UK & Ireland 22,323 22,978 Nordics 7,296 7,091 Other International 7,573 8,517 e-commerce 1,413 1,213 Corporate centre and shared services 141 143 Continuing operations 38,746 39,942 Discontinued operations 170 856 38,916 40,798

7 Tax (a) Income tax expense 2009/10 2008/09 £million £million Current tax UK corporation tax at 28% 0.4 0.2 Double tax relief (0.4) (0.2) – – Overseas taxation – underlying 25.0 24.2 – non-underlying: closed businesses – (1.1) Credit in respect of other non-underlying items * – (3.1) Adjustment in respect of earlier periods: * UK corporation tax – underlying (1.8) 6.8 – non-underlying – 52.7 Overseas taxation * 1.3 (5.3) 24.5 74.2 Deferred tax Current period – underlying 18.0 9.6 – non-underlying: closed businesses (0.1) (2.5) Charge / (credit) in respect of other non-underlying items * 6.1 (24.4) Adjustment in respect of earlier periods: * UK corporation tax – underlying (6.0) 1.6 Overseas taxation – underlying 4.2 (2.6) – non-underlying: closed businesses * – 0.9 22.2 (17.4) Income tax expense – continuing operations 46.7 56.8

Underlying income tax expense – continuing operations 40.7 34.3 Underlying income tax expense excludes those items marked *. Tax relating to discontinued operations is included in note 29.

84 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – 85 2.6 8.9 6.3 0.5 4.6 2.9 3.7 2.6 2.4 (0.3) 56.8 56.8 14.5 53.6 £million (45.5) (38.9) 2008/09 . rlying (123.6) (162.5) n

– – 4.3 5.3 0.8 1.6 1.9 3.5 1.6 1.2 (2.3) (0.1) (0.2) (8.7) 46.7 46.7 29.1 £million 2009/10 112.7 104.0 29 29 Note Annual Report and Accounts 2009/10 DSG international plc – discontinued operations – non-underlying underlying Income tax expense – continuing operations Income tax expense – total Expense attributable to discontinued operations ised tax rate on underlying earnings periods due mainly to unrecogn The effective of 45% (2008/09 61%) is expected to fall in future to tax assets relating tax deferred has total unrecognised The Group of net profits. losses starting to form a lower proportion over whe million) have no time restriction losses of £105.8 million (2008/09 £96.3 million) of which £0.9 million (2008/09 £8.8 Other differences Other differences Profit / (loss) before tax – continuing operations before / (loss) Profit tax Loss before – discontinued operations 2008/09: On 4 June 2009, following an agreement in principle in April 2009, the Group agreed a settlement with HMRC in respect a settlement agreed in principle in April 2009, the Group 2009, following an agreement 2008/09: On 4 June of a dispute concerning years 1997 to 2005 as well as certain other trading arrangements in the certain historical intra group income tax a non-underlying and accordingly held in the balance sheet already exceeded the provision matters. The settlement applied to the net non-unde was in addition to the tax effects tax. This charge in current was recorded charge of £52.7 million nature. non-recurring non-underlying owing to its size and one-off as in note 4 and was treated tax described charges before tax expense is set out below: of the notional to the actual income A reconciliation tax losses of £104.5 million to time restricted tax assets relating deferred has unrecognised they can be utilised. The Group (2008/09 £87.5 million) for which the weighted average period over which they can be utilised is five years (2008/09 five years) Overseas deferred tax not recognisedOverseas deferred – continuing operations of earlier periodsAdjustment in respect – underlying Non-deductible loss on discontinued operations Non-deductible losses – non-underlying Tax on profit / (loss) at UK statutory rate of 28% / (loss) at on profit Tax Non-qualifying depreciation overseas taxation rates in effective Differences Non-deductible charges disposals Non-taxable gains on property Non-taxable other gains– Financial Statements Notes to the Consolidated Financial Statements continued

7 Tax continued (b) Deferred tax Accelerated Retirement Losses Other capital benefit carried timing allowances obligations forward differences Total £million £million £million £million £million At 4 May 2008 (3.9) 21.1 25.9 13.7 56.8 Credited to income statement 22.3 (8.5) 0.5 3.1 17.4 Credited directly to equity – 32.6 – 20.8 53.4 Currency retranslation – – 3.5 (3.5) – At 2 May 2009 18.4 45.2 29.9 34.1 127.6 Charged to income statement 14.6 (13.5) (2.1) (21.2) (22.2) Acquisitions 0.2 – – 0.1 0.3 Credited directly to equity – 43.2 – 1.3 44.5 Currency retranslation (0.2) 0.1 (0.3) 0.9 0.5 At 1 May 2010 33.0 75.0 27.5 15.2 150.7

Summary of assets and liabilities as disclosed: 2010 2009 £million £million Deferred tax assets 169.4 150.3 Deferred tax liabilities (18.7) (22.7) 150.7 127.6

Analysis of deferred tax relating to items credited / (charged) directly to equity in the period: 2009/10 2008/09 £million £million Actuarial losses on defined benefit pension schemes 43.2 32.6 Net losses / (gains) on revaluation of cash flow hedges 2.0 (0.5) Net (gains) / losses on hedges of net investments (0.8) 20.8 Unrealised (gains) / losses on investments (0.2) 0.3 Credited to comprehensive expense 44.2 53.2 Share-based payments 0.3 0.2 44.5 53.4

The recognition of trading losses carried forward is considered supportable due to the ability to offset losses against future profits. The Group has provided deferred tax of £nil (2008/09 £0.8 million) in relation to temporary differences associated with investments in subsidiaries and the income tax consequences of paying dividends. In all other cases, the Group has determined that the undistributed profits of its overseas subsidiaries will not be distributed in the foreseeable future. The deferred tax which has not been recognised for the taxes which would be payable on the undistributed earnings of the Group’s investment in subsidiaries is £nil (2008/09 £27.8 million). As a result of share disposals, allowable losses have been incurred which are available for offset against certain future chargeable gains. A deferred tax asset has not been recognised in respect of these losses as it is considered that there is insufficient evidence that chargeable gains will arise. The deferred tax asset not recognised, measured at the standard rate of 28%, is not less than £352.0 million (2008/09 £352.0 million). Where permitted, certain deferred tax assets and liabilities have been offset for financial reporting purposes.

86 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – 87 1.8 9.4 1.0 7.4 3.1 1.8 9.4 1.0 4.9 (8.4) (8.4) (1.9) (2.7) Million Pence 21.7 14.1 59.1 96.1 22.5 38.9 52.7 ights £million (27.5) (10.2) (10.2) 2008/09 202.2 179.7 (219.4) (180.5) 2,148.7 2,151.8 ing – – – 1.9 0.2 1.5 6.1 1.7 0.3 2.0 1.5 1.7 0.8 0.2 4.6 5.6 6.0 8.7 (0.4) (0.5) (0.1) 52.3 23.9 59.8 68.5 Pence Million (16.2) (33.4) (22.2) £million 2009/10 3,495.6 3,519.5 29 Note Annual Report and Accounts 2009/10 DSG international plc Continuing operations used in the calculation for earnings information for the periods prior to the R share The weighted average number of shares per in the shares the bonus element to reflect Issue, which completed on 9 June 2009, has been multiplied by an adjustment factor issued under the terms of the Rights Issue. The adjustment factor used was 1.2138. Underly based on the loss for the period attributable to equity shareholders. Basic and diluted earnings are per share / (loss) Adjustments used to determine to show the underlying performance of the Group. in order presented earnings are per share underlying earnings described further in note 4. are Adjustments (net of taxation) Underlying diluted earnings share per Discontinued operations Adjustments (net of taxation) Underlying basic earnings share per Basic earnings / (loss) per share (continuing and discontinued operations) Total Discontinued operations Diluted weighted average number of shares Basic weighted average number of shares option and ownership schemes Employee share Continuing operations Diluted earnings / (loss) per share (continuing and discontinued operations) Total Total adjustments (net of taxation) Total Underlying basic and diluted earnings Other non-underlying items Net fair value remeasurements of financial instruments Net fair value remeasurements Continuing operations Basic and diluted earnings / (loss) operations) (continuing and discontinued Total – loss after tax Discontinued operations 8 Earnings / (loss) per share 8 Earnings / (loss) Change in pension benefits Adjustments Closed businesses intangibles Amortisation of acquired charges Net restructuring Business impairment charges Other items HMRC settlement Tax on adjustments Tax Closed businesses Financial Statements Notes to the Consolidated Financial Statements continued

9 Goodwill 2010 2009 £million £million Cost At beginning of period 1,502.7 1,358.2 Additions 7.3 17.7 Disposals (28.7) (0.2) Currency retranslation 35.2 127.0 At end of period 1,516.5 1,502.7 Impairment At beginning of period 433.6 373.9 Impairment charges – 10.3 Disposals (28.1) – Currency retranslation (5.5) 49.4 At end of period 400.0 433.6 Net book value at end of period 1,116.5 1,069.1

Disposals relate mainly to closed businesses. As required by IFRS 3, goodwill is subject to annual impairment reviews. These reviews are carried out using the following criteria. An amount of goodwill is attributed to each specific acquisition. Such acquisitions are determined to be a ‘Cash Generating Unit’ (CGU) as determined by IAS 36 ‘Impairment of Assets’. The recoverable amount of each CGU is determined based on calculating its value in use. The value in use is calculated by applying discounted cash flow modelling to management’s own projections covering a five year period. Cash flows beyond the five year period are extrapolated using a long term growth rate equivalent to the relevant market’s Gross Domestic Product (GDP). The value in use is compared to the carrying amount in order to determine whether impairment has occurred. The impairment charge in 2008/09 related to Markantalo. The most significant components of goodwill relate to Elkjøp Nordic AS (Elkjøp), UniEuro S.p.A. (UniEuro) and PIXmania S.A.S. (PIXmania). In addition to management’s five year projections, the key assumptions used in calculating value in use as well as the carrying values are: 2010 2009 Key assumptions for 2010 Key assumptions for 2009 Growth rate Pre-tax risk Net book Growth rate Pre-tax risk Net book beyond adjusted value beyond adjusted value five years discount rate £million five years discount rate £million Elkjøp 3.0% 10.9% 667.4 3.0% 11.0% 610.8 UniEuro 1.0% 12.3% 144.3 1.2% 12.3% 147.3 PIXmania 1.8% 13.0% 181.7 2.1% 13.2% 185.6

The growth rate beyond five years is based on GDP for the territories in which these businesses operate. The discount rates applied to cash flows are based on the Group’s weighted average cost of capital with a risk premium reflecting the relative risks in the markets in which the businesses operate. The five year projections, which have been approved by management, have been prepared using strategic plans which incorporate the relative performance of competitors and knowledge of the current market together with management’s views on the future achievable growth in market share, impact of the Renewal and Transformation plan and profitability over the longer term. In forming these views, management draws on past experience as a measure to forecast future performance. Key assumptions used in determining the forecasts comprise sales, costs and margins. Historical amounts for both the businesses under impairment review as well as from other parts of the Group are used to generate the values attributed to these assumptions. Achievable growth in market share takes into account the anticipated success of store offerings versus competitors as well as internal and external competitor intelligence. Sensitivities A sensitivity analysis had been performed on each of the base case assumptions used for assessing the goodwill with other variables held constant. The directors have concluded that in the case of Elkjøp there are no reasonably possible changes in any key assumption which would cause the carrying amount of goodwill to exceed its value in use. In the case of UniEuro and PIXmania, it is reasonably possible that a change in a key assumption could occur and accordingly the following sensitivities are presented.

88 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 89 e e value value r Annual Report and Accounts 2009/10 Software Software Sub-total –– (14.0) – (11.3) 14.1 (25.3) 14.1 (25.3) 14.1 –– 0.3 (13.6) (11.2) – (24.8) 0.3 (24.8) 0.3 DSG international plc 0.4 0.9 (0.1) 0.8 1.2 4.6 15.1 10.7 25.8 30.4 1.6 1.3 0.6 1.9 3.5 9.5 2.0 1.4 3.4 12.9 (0.8) 1.6 (0.2) 1.4 0.6 31.156.2 72.2 48.8 44.0 116.2 25.7 147.3 74.5 130.7 87.3 121.0 69.7 190.7 278.0 62.0 63.9 22.5 86.4 148.4 88.1 133.4 67.1 200.5 288.6 26.1 69.5 44.6 114.1 140.2 £million £million £million £million £million Acquired (externally (internally other intangibles acquired) generated) intangibles Total – accelerated – accelerated – 0.5 0.2 0.7 0.7 Net book value to continuing operations (2008/09 comprise brand names. Amortisation of intangibles relates intangibles predominantly Acquired For 2008/09, non-underlying to continuing and discontinued operations, respectively). £28.9 million and £0.2 million relating to the Markantalo brand as shown in note 4. intangibles relates impairment of acquired £18.0 million) £35.4 million and £17.0 million (2009 £39.4 million and Included within the carrying amount of brand names are life of these and for which the remaining denominated PIXmania and Kotsovolos brand names, respectively to the euro relating assets is 11 years and 24 years, respectively. At 1 May 2010 At 2 May 2009 Currency retranslation Currency At 1 May 2010 Currency retranslation Currency At 2 May 2009 Additions Disposals retranslation Currency At 1 May 2010 Amortisation At 4 May 2008Charge for the period – regularNon-underlying impairment Disposals for sale to assets held Transfers At 2 May 2009 Charge for the period – regular Disposals 4.9 14.0 6.6 13.0 – 9.5 62.8 – (0.3) 23.5 36.4 – – – 28.4 99.2 (8.8) (0.3) 112.2 – (2.1) (0.3) 6.6 (10.9) (10.9) Currency retranslation Currency Cost At 4 May 2008AdditionsDisposals to assets held for sale Transfers – 78.6 (0.3) 109.8 – – – 67.7 30.9 177.5 (0.3) (9.0) 256.1 1.1 (0.3) (3.1) 32.0 (12.1) (12.1) 32.0 UniEuro in year five, whilst maintaining other of 7.9% in operating profit a decrease five year projections, of management’s In respect over the net book of £13.1 million in the value in use headroom the current would cause projections, elements of the five year of the goodwill to erode to £nil. of the goodwill to erode discount rate of 0.6% would caus adjusted in the pre-tax five years of 1.9% or an increase rate beyond in the growth A decrease 10 Intangible assets the headroom in the value in use over the net book value of the goodwill to erode to £nil. value of the goodwill to erode in the value in use over the net book the headroom PIXmania in year five, whilst maintaining othe of 13.3% in operating profit a decrease five year projections, of management’s In respect to £nil. to erode in the value in use over the net book value of the goodwill the headroom elements of the five year projections, would cause the current headroom of £30.0 million in the value in use over the net book of £30.0 million in the value in use headroom the current would cause projections, elements of the five year to £nil. of the goodwill to erode adjusted discount rate of 1.1% would caus in the pre-tax rate beyond five years of 1.8% or an increase in the growth A decrease Financial Statements Notes to the Consolidated Financial Statements continued

11 Property, plant & equipment 2010 2009 Fixtures, Fixtures, Land and fittings and Land and fittings and buildings equipment Total buildings equipment Total £million £million £million £million £million £million Cost At beginning of period 205.0 1,207.0 1,412.0 207.4 1,173.1 1,380.5 Additions 0.3 159.8 160.1 0.7 104.5 105.2 Acquisitions – 0.8 0.8 ––– Disposals (1.3) (124.8) (126.1) (6.3) (98.8) (105.1) Transfers to assets held for sale –––– (12.9) (12.9) Currency retranslation 1.8 7.2 9.0 3.2 41.1 44.3 At end of period 205.8 1,250.0 1,455.8 205.0 1,207.0 1,412.0

Depreciation At beginning of period 49.4 873.0 922.4 43.1 806.1 849.2 Charge for the period – regular 8.2 94.7 102.9 7.7 105.5 113.2 – accelerated – 3.0 3.0 – 10.6 10.6 Non-underlying impairment –––– 37.2 37.2 Disposals (0.4) (119.0) (119.4) (2.8) (92.4) (95.2) Transfers to assets held for sale –––– (12.9) (12.9) Currency retranslation 0.6 5.3 5.9 1.4 18.9 20.3 At end of period 57.8 857.0 914.8 49.4 873.0 922.4

Net book value 148.0 393.0 541.0 155.6 334.0 489.6

Included in net book value Land not depreciated 16.2 – 16.2 16.0 – 16.0 Assets in the course of construction 0.5 5.9 6.4 0.5 39.7 40.2 Assets held under finance leases 71.4 1.9 73.3 74.9 3.2 78.1

Depreciation charged in the period comprises £105.8 million and £0.1 million (2008/09 £122.0 million and £1.8 million) relating to continuing and discontinued operations, respectively. For 2008/09, non-underlying impairment included £4.0 million and £2.8 million relating to the Group’s Hungarian and Polish operations, respectively, which have been treated as discontinued as described in note 29. There have been no additions to finance leases during the year (2008/09 £2.4 million). The leased assets are pledged as security for the related finance lease liabilities. Included within disposals of fixtures and fittings are assets with a net book value of £1.3 million relating to the disposal of Poland as described in note 29.

12 Investments in associates 2010 2009 £million £million At beginning of period 29.8 29.3 Share of profit after tax 1.6 3.6 Disposals (1.9) – Acquisitions 0.6 – Dividends (4.2) (4.9) Currency retranslation 0.5 1.8 At end of period 26.4 29.8

Comprising: F-Group (40%) 25.8 28.0 Other 0.6 1.8 26.4 29.8

90 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 91 7.9 2009 2009 2009 67.5 40.9 £million £million £million (56.0) (26.6) (10.4) 2008/09 203.4 971.9 ts. rade 1,038.3 – 5.9 4.5 30.3 2010 2010 61.4 36.2 64.2 – 66.4 3.7 Current Non-current £million £million (24.0) (2.1) (44.9) (25.2) £million £million £million 2009/10 227.6 293.2269.2 13.8 11.7 103.9 22.8 508.2 68.5 972.6 1,017.5 4 Note 2010 Annual Report and Accounts 2009/10 3.0 25.0 41.7 11.1 61.157.7 9.9 5.0 (28.0) (0.2) Current Non-current £million £million 259.6231.6 7.2 7.0 395.1 58.0 22 DSG international plc Note Provision for obsolete and slow moving goods Provision Accrued income 13 Inventories debtors Trade for bad and doubtful debts Provision Investments in other associates comprise shareholdings in several different enterprises in the Nordic region, none of which are region, enterprises in the Nordic in several different shareholdings Investments in other associates comprise significant. Non-underlying impairment Finished goods and goods for resale Liabilities Net assets Balance sheet Assets Income statement Revenue tax after Profit The Group’s share of post-tax results of associates is recorded as a single line in the income statement within operating resul line in the income statement within operating as a single of associates is recorded results of post-tax share The Group’s Derivative financial instruments Additional information for selected income statement and balance sheet headings for F-Group and to which the Group’s share share and to which the Group’s sheet headings for F-Group for selected income statement and balance Additional information as follows: of 40% is applied are and other receivables approximates fair value with no concentration of credit risk. fair value with no concentration of credit approximates and other receivables by bank guarantee (2009 £9.0 million). secured no balances within other debtors which are are There Other debtors Prepayments generally on 30 to 90 day terms. The balance bearing and are non-interest are The majority of trade and other receivables with no material individual balances. The total receivables and consumer credit comprises both business to business receivables £362.4 million (2009 £471.8 million). The carrying amount of t are financial assets included within trade and other receivables 14 Trade and other receivables 14 Trade Financial Statements Notes to the Consolidated Financial Statements continued

14 Trade and other receivables continued The Group’s trade debtors included the following amounts which are past due at the end of the period and for which the Group has not provided for owing to the amounts being considered recoverable: 2010 2009 £million £million Up to six months past due 42.4 79.4 Six to 12 months past due 5.0 6.0 Over 12 months past due 5.9 5.7 53.3 91.1

Movements on the provision for bad and doubtful debts are as follows: 2010 2009 £million £million At beginning of period 26.1 25.1 Charge for the year 17.8 15.7 Utilisation of provision (16.1) (16.0) Currency retranslation 0.4 1.3 At end of period 28.2 26.1

The Group does not hold any collateral as security over receivables balances.

15 Short term investments 2010 2009 £million £million Floating rate notes 3.2 9.0 Money market deposits 5.3 – 8.5 9.0

Floating rate notes have a nominal value of £3.8 million (2009 £10.4 million) and have an average expected maturity of 2.6 years (2009 1.5 years). Money market deposits are made for varying periods of 90 to 180 days with an average maturity of 104 days. The carrying amount of money market deposits approximates their fair value. Short term investments include £nil (2009 £3.8 million) which, together with certain cash and cash equivalents, are held under trust to fund customer support agreement liabilities as disclosed in note 27.

16 Cash and cash equivalents 2010 2009 £million £million Cash at bank 161.3 88.0 Money market deposits 134.4 104.6 295.7 192.6

Cash at bank earns interest at floating rates based either on daily bank deposit rates or central bank lending rates. Money market deposits are made for varying periods of up to 90 days with an average maturity of 18 days (2009 16 days). The carrying amount of money market deposits approximates their fair value.

92 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 93 4.8 0.1 2009 teed £million y will 250.1 254.9 322.4 322.5 rther The o the and age ensuing – 4.9 2010 98.5 £million 103.4 321.4 321.4 Annual Report and Accounts 2009/10 DSG international plc Other borrowings Other borrowings Current Bank overdrafts Other borrowings 17 Borrowings Non-current Bonds 2012 6.125% Guaranteed on demand. repayable are Bank overdrafts million sterling committed include £95.0 million (2009 £250 million) which was drawn down under the £400 borrowings Current have an aver of 4.30% (2009 4.88%). These borrowings yield average effective facility (the £400 million Facility) at a weighted The £400 million Facility Facility. under the terms of the £400 million eligible for renewal are maturity of nine days (2009 62 days) and which is discussed fu facility agreement by a new revolving this will be affected has a maturity date of October 2011, however, below. (the New Facility) for £360 million. The New Facilit facility agreement credit signed a new revolving On 12 May 2010, the Group The terms and covenants attaching t the £400 million Facility. by 15 August 2010 at which time it will replace come into effect comprises UK except that the guarantee structure substantially the same as that for the £400 million Facility New Facility are under the 6.125% Guaranteed Bonds 2012 (the Bonds). closely to the arrangements it more aligning thereby Irish companies only, of the £400 million Facility was £305 million (2009 £150 million). At 1 May 2010, the available undrawn amount their fair value. approximates and overdrafts borrowings The carrying amount of current guaran are unsecured, are annually, million, paying interest denominated in sterling with a nominal value of £300 The Bonds are by DSG Retail Limited, a subsidiary undertaking, and are listed on the London Stock Exchange. Unless previously redeemed or redeemed London Stock Exchange. Unless previously listed on the and are by DSG Retail Limited, a subsidiary undertaking, in whole or in part redeemed at par on 15 November 2012. The Bonds may be and cancelled they will be redeemed purchased by DSG international the bondholder. 30 to 60 days’ notice to at their principal amount plus accrued interest plc by providing any the Bonds and In either circumstance, the Group. in the open market by any company within Bonds may also be purchased of The value of the Bonds excludes accrued interest or re-sold. coupons will be cancelled and may not be re-issued unmatured concerning£8.4 million (2009 £8.4 million), included in trade and other payables. Further information fair value, hedging and is included in note 22. to the Bonds relating profiles rate and currency interest Financial Statements Notes to the Consolidated Financial Statements continued

18 Obligations under finance leases 2010 2009 Present value Present value Minimum of minimum Minimum of minimum lease lease lease lease payments payments payments payments £million £million £million £million Amounts due: Within one year 8.3 7.1 10.0 8.6 In more than one year and not more than five years 33.8 26.1 33.9 25.2 In more than five years 139.7 66.8 167.6 67.9 181.8 100.0 211.5 101.7 Less future finance charges (81.8) – (109.8) – Present value of lease obligations 100.0 100.0 101.7 101.7 Less amounts due within one year (2.4) (2.4) (2.8) (2.8) Amounts due after more than one year 97.6 97.6 98.9 98.9

The majority of finance leases relate to properties in the UK where obligations are denominated in sterling and lease terms vary between 15 and 26 years. The effective borrowing rate on individual leases ranged between 4.57% and 8.15% (2009 between 5.61% and 8.34%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The total value of minimum sub-lease payments expected to be received under non-cancellable sub-leases was £nil (2009 £0.8 million). The fair value of the Group’s lease obligations approximates their carrying amount.

19 Trade and other payables 2010 2009 Current Non-current Current Non-current Note £million £million £million £million Trade creditors 1,001.4 6.5 988.7 – Other taxation and social security 103.2 – 100.2 – Derivative financial instruments 22 9.6 74.8 38.4 104.0 Other creditors 53.8 15.8 120.8 2.3 Accruals 293.7 73.1 193.4 84.8 Deferred income – customer support agreements 133.2 153.5 162.2 175.0 Deferred income – other 11.0 2.0 60.8 3.7 1,605.9 325.7 1,664.5 369.8

Included in other creditors and accruals is £66.1 million (2009 £97.4 million) relating to other non-financial liabilities. The total financial liabilities included in trade and other payables are £1,378.2 million (2009 £1,292.6 million). The carrying amount of trade and other payables approximates their fair value.

94 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 95 e 2009 2009 (4.2) £million (148.8) (153.0) ed ar mainly 2010 (3.3) £million (263.5) (266.8) ––– Note 5.6 1.0 6.6 21 (b) – (d) related and other Total 91.9 20.6 112.5 91.9 20.651.540.4 112.5 20.6 – 72.1 40.4 74.6 51.0 125.6 80.3 17.0 97.3 £million £million £million (46.1)(12.4) (39.8)(10.1) (7.5) (85.9) (1.1) (19.9) (11.2) Property Severance Annual Report and Accounts 2009/10 2010 DSG international plc ––– ––– 2.3 – 2.3 (6.1) – (6.1) (1.0) (0.4) (1.4) 45.8 6.0 51.8 16.3 6.0 22.3 45.8 6.029.5 51.8 – 29.5 91.9 20.6 112.5 related and other Total (41.3) (14.2) (55.5) £million £million £million Property Severance – Nordics – Nordics with assets held for sale with assets held for sale 21 Retirement and other post-employment benefit obligations 21 Retirement Additions during the period relate to restructuring charges which are described further in note 4. Property related provisions provisions related described further in note 4. Property charges which are to restructuring Additions during the period relate ting to million (2008/09 £3.2 million and £0.5 million) rela lease contracts. Included in utilisation is £nil and £0.8 comprise onerous as disposed of during the year and have been treated which were and Polish operations, respectively, Hungarian the Group’s operations. Polish to the Group’s discontinued. Disposals relate expected to be utilised within the at 1 May 2010, the majority are liabilities remaining Of the amounts included within non-current next five years. Analysed as: Current Retirement benefit obligations Retirement – UK Utilisation to income statement – non-underlying Credited associated to liabilities directly Transfers Disposals Non-current At end of period Currency retranslation Currency At beginning of period At beginning of period 20 Provisions Additions The Group operates a number of defined contribution and defined benefit pension schemes. The Group in a separate held section whose assets are The principal scheme which operates in the UK includes a funded defined benefit in assessed years and contributions are fund. The scheme is valued by a qualified actuary at least every three trustee administered the pension cost over the normal expected service lives of members. Since advice so as to spread with the actuary’s accordance 1 September 2002, the defined benefit section of the scheme has been closed to new entrants and on 30 April 2010 was closed to those active members of the defin accrual with automatic entry into the defined contribution section being offered to future to eligible employees. benefit section at that time. Membership of the defined contribution section is offered defined benefit pension schemes with assets held by a life insuranc operates two funded secured the Group region, In the Nordic made to a state pension scheme. The net pension arrangement. In addition, contributions are company as well as an unsecured remaining of £1.0 million (2008/09 £0.9 million) with the movement in the obligation comprises a charge to operating profit retranslation. to the benefits paid in the period, actuarial gains / (losses) and currency movements relating largely governed other post-employment benefits which are particul by statute, in also provides In other territories, the Group unfunded. These benefits are in Italy and Greece. (a) Defined contribution pension schemes of defined contribution schemes was £5.5 million (2008/09 £5.4 million). The pension charge in respect Financial Statements Notes to the Consolidated Financial Statements continued

21 Retirement and other post-employment benefit obligations continued (b) UK Defined benefit pension scheme – actuarial valuation and assumptions A full actuarial valuation of the scheme was last carried out as at 5 April 2007 using the projected unit method and has been used to determine the level of funding to the scheme. A further actuarial valuation as at 5 April 2010 is currently underway, however, results are not expected to be available until early in 2011/12. The Group’s contribution rate for 2009/10, agreed in consultation with the trustees’ actuaries, was 12.4% per annum of pensionable salaries (2008/09 12.5%) with the reduction representing a change in the mix of contributions between different sections of the scheme. A ‘recovery plan’ has been agreed with the trustees of the scheme whereby the Company makes twice yearly contributions of £6.0 million which commenced in June 2008 and end in December 2012. Since April 2007, the scheme has operated on a career average revalued earnings arrangement where benefits are earned for each year of pensionable service as opposed to being calculated with reference to salary near to date of retirement. The principal actuarial assumptions as at 5 April 2007 used for determining costs and contributions were: Rate per annum Discount rate for accrued benefits – Pre-retirement 6.6% – Post-retirement 5.2% Rate of increase in pensionable salaries – Up to April 2010 3.5% – Thereafter 4.5% Rate of increase to pensions – Guaranteed Minimum Pension 3.0% – Pension in excess of Guaranteed Minimum Pension 2.5% – 3.75% Inflation 3.0% Expected return on assets 6.5%

At 5 April 2007, the market value of the scheme’s investments was £688 million and, based on the above assumptions, the value of the assets was sufficient to cover 92% of the benefits accrued to members after allowing for expected future increases in earnings. The value of liabilities exceeded assets by £61.0 million. (c) UK Defined benefit pension scheme – IAS 19 The following summarises the components of net benefit expense recognised in the consolidated income statement, the funded status and amounts recognised in the consolidated balance sheet. The methodologies set out in IAS 19 are different from those used by the scheme actuaries in determining funding arrangements. (i) Principal assumptions adopted The assumptions used in calculating the expenses and obligations are set by the directors after consultation with the independent actuaries. Rates per annum 2010 2009 Discount rate 5.5% 6.7% Rate of increase in pensionable salaries 3.6% 3.8% / 4.3%* Rate of increase in pensions in payment (pre / post April 2006 accrual) 3.5% / 2.3% 3.3% / 2.5% Inflation 3.6% 3.3% * 3.8% up to April 2010 and 4.3% thereafter. The Group uses certain demographic assumptions when calculating scheme obligations which are those underlying the last formal actuarial valuation of the scheme as at 5 April 2007. In particular, post-retirement mortality has been assumed to follow the standard tables PA92 projected to calendar year 2008 in line with the ‘medium cohort’ factors set out in CMI working paper 1: ‘interim basis for adjusting the “92” series mortality projections for cohort effects’, with an allowance for future mortality improvement in line with medium cohort projection factors. Such tables represent an average expected longevity of between 87.1 years and 87.9 years for men and between 90 years and 90.7 years for women (2009 87 years for men and 89.9 years for women) for those becoming 65 at the measurement date and an extra one year of longevity for both men and women becoming 65 in 15 years’ time.

96 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – – 97 0.6 6.3 5.7 5.7 2009 2009 (6.3) (6.3) (5.7) 47.8 10.2 47.8 47.2 12.0 £million £million £million (24.8) (81.8) (24.8) (47.2) ure 2008/09 689.7 544.5 740.7 693.3 (196.1) benefits 8.6 4.7 4.8 4.8 2010 2010 (4.7) (8.0) 37.6 45.6 33.4 28.7 37.6 20.7 12.0 85.4 (27.0) (27.0) (33.4) (45.6) £million £million £million 2009/10 544.5 665.9 693.3 241.4 929.4 Annual Report and Accounts 2009/10 2009 2008 2007 2006 £million £million £million £million 544.5 689.7 688.3 590.8 (693.3) (740.7)(148.8) (726.7) (51.0) (732.5) (38.4) (141.7) DSG international plc 2010 £million 665.9 (929.4) (263.5) – special Expected return Employer contributions – regular Benefits paid Closing fair value Opening fair value Closing obligation Curtailment gain Opening obligation Changes in the present value of the defined benefit obligation: Changes in the present service cost Current Employee contributions cost Interest Actuarial losses / (gains) Benefits paid Changes in the fair value of the scheme assets: Present value of defined benefit obligations Present Fair value of plan assets Net obligation Net other finance (costs) / income Net other finance (costs) tax before to profit / (charged) credited Total Interest cost on benefit obligations Interest Current service cost (charged to underlying operating profit) service cost (charged to underlying operating Current Non-underlying curtailment / (charge) credit operating Total (ii) Amounts recognised in consolidated income statement in consolidated income (ii) Amounts recognised assets Expected return on plan contributions to its UK defined does not expect to make any further plan, the Group Other than the payments under the recovery benefit pension scheme in 2010/11. of the clos on 30 April 2010. The effect accrual of the scheme which occurred to future the closure The curtailment arises from has meant that all active members of the scheme have now become treated as deferred members. The effect of the closure is that of the closure The effect members. as deferred scheme have now become treated has meant that all active members of the other than in line with inflation. This amounts to a change in salary increases no longer entitled to future these members are of these individuals. in the ultimate liabilities in respect reduction in a one-off accruing to these members and results in the consolidated balance sheet (iii) Amounts recognised Employee contributions Actuarial gain / (loss) Financial Statements Notes to the Consolidated Financial Statements continued

21 Retirement and other post-employment benefit obligations continued Analysis of scheme assets: 2010 2009 Long term % of fair value Long term % of fair value expected rate of total expected rate of total of return £million scheme assets of return £million scheme assets Equities 8.1% 400.2 60% 8.5% 293.5 54% Property 6.4% 30.6 5% 6.7% 33.8 6% Bonds / gilts 4.6% 222.4 33% 4.9% 192.8 35% Cash 4.0% 12.7 2% 3.5% 24.4 5% 665.9 544.5

The overall expected rate of return on assets is determined based on the market prices prevailing at the balance sheet date, applicable to the period over which the obligation is to be settled. Actual return on the scheme assets was a gain of £123.0 million (2008/09 loss of £148.3 million). The actual return on other post-employment benefit scheme assets was not significant. (iv) Experience adjustments recognised in the consolidated statement of comprehensive income and expense: 2010 2009 2008 2007 2006 £million £million £million £million £million (Loss) / gain on scheme liabilities (241.4) 81.8 17.0 25.0 (45.6) Effect of change in valuation methodology – – – 18.8 – Gain / (loss) from actual less expected return on assets 85.4 (196.1) (41.7) 1.9 92.7 Actuarial (losses) / gains (156.0) (114.3) (24.7) 45.7 47.1

Cumulative actuarial (loss) / gain (261.5) (105.5) 8.8 33.5 (12.2)

(d) Sensitivities The value of the UK defined benefit pension scheme assets is sensitive to market conditions, particularly equity values. Changes in assumptions used for determining retirement benefit costs and liabilities may have a material impact on the 2010/11 income statement and the balance sheet. The main assumptions are the discount rate, the rate of inflation and the assumed mortality rate. The following table provides an estimate of the potential impacts of each of these variables if applied to the current period consolidated income statement and balance sheet. Underlying profit before tax Net deficit 2009/10 2008/09 2010 2009 Positive / (negative) effect: £million £million £million £million Discount rate: 0.25% increase 0.5 1.4 52.5 38.0 Inflation rate: 0.25% increase* (2.5) (2.6) (45.3) (32.6) Mortality rate: 1 year increase (1.9) (1.3) (33.4) (14.5) * The increase in scheme benefits provided to members on retirement is subject to an inflation cap. (e) Other post-employment benefits – IAS 19 The Group offers other post-employment benefits to employees in overseas locations. At 1 May 2010 the net obligation in relation to these benefits was £11.5 million (2009 £12.3 million). The net movement in the obligation comprises a charge to operating profit of £4.2 million (2008/09 £4.7 million) with the remaining movements relating to the benefits paid in the period and currency retranslation.

98 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 99 l e cy

ws risk ne. g of ty cilities ing, rrency o. nces ously at all ed short he and ed on st of terparties ctive and able on Annual Report and Accounts 2009/10 DSG international plc nal reviews. Group Treasury reports regularly to the Audit Committee and the Tax & Treasury Committee. The major & Treasury and the Tax to the Audit Committee regularly reports Treasury Group nal reviews. to match to the extent possible the profile of interest payments with that of its interest receipts. Taking into account the co Taking receipts. payments with that of its interest of interest to match to the extent possible the profile based the use of interest and through commissions received based credit interest hedging, further mitigation is achieved with minimised. that risks are to ensure regularly hedging instruments. Such matching is evaluated Liquidity risk to meet anticipat sufficient committed bank and other facilities policy to maintain a balance of funds, borrowings, It is Group 22 Financial instruments objectives and policies (a) Financial risk management subject to periodic independent interna and are the Board by within policies approved managed centrally are operations Treasury and exter rates), liquidi and interest exchange (movements in foreign to market risks relate is exposed risks to which the Group treasury financial instruments uses The Group evaluated regularly. to occur are most likely risks are where risk. Areas risk and credit with in accordance the period under review, with defined policies. Throughout these risks in accordance derivatives to manage was permitted. exchange or other instruments no speculative use of derivatives, foreign policy, Group set out in note 1.16. to derivatives are accounting policies in relation The Group’s Exchange rate risk assets and liabilities, overseas earnings is exposed to exchange movements on recognised and translated values The Group Norwegian kro and the euro are exposures principal translation currency assets and liabilities. The Group’s currency of foreign hedging instruments. the use of appropriate liabilities through assets with currency costs and currency other in currencies purchases arise from Such exposures exposures. is also exposed to certain transactional currency The Group the US dollar and eur are exposures principal transactional currency The Group’s of the entity. than in the functional currency hedging instruments such the use of appropriate through on such purchases exposures policy to minimise the currency It is Group one month to one year. ranging from designed to cover exposures exchange contracts. Such contracts are as forward rate risk Interest internal hedged and borrowings, of sterling cash, investments arise in respect rate risks of the Group The principal interest poli by the Group’s rate movements is mitigated to interest Potential exposure borrowings. liabilities and euro Norwegian krone and actual cash flo continuously monitors forecast In applying this policy the Group term and long term financial requirements. working capital requirements. forecast scenarios includ tested for different stress and are produced are liquidity requirements identifying the Group’s Cash forecasts given the policies in place. across customers, spread unrelated balances comprise a large number of individually small amounts from receivable The Group’s is equal to the book limited and maximum exposure Concentration of risk is therefore diverse industries and geographical areas. th policy It is Group cards. in cash or via major credit made predominantly customers are Sales to retail value of receivables. assessed customers are New credit verification procedures. subject to credit terms are customers who wish to trade on credit periodically on both a proa reviewed Such limits are limit. using an external to establish a credit which is used rating report limit. Receivable bala in excess of their existing credit basis, for example, when a customer wishes to place an order reactive believe to bad debts is not significant. Management therefore exposure that the Group’s with the result regularly monitored are for doubtful receivables. in excess of the normal provision required risk provision is no further credit that there Taking into account the cost of hedging, the Group’s policy is to match, in whole or in part, currency earnings cu is to match, in whole or in part, currency policy related with into account the cost of hedging, the Group’s Taking and used if avail also maintained facilities are of financial assets and liabilities. Uncommitted against the maturity profiles facilities is always available bas that a specific level of committed policy to ensure Treasury advantageous terms. It is Group fa borrowing rates on the Group’s in interest margins and increases in profit possible decreases but not limited to, reasonably of credit does not anticipate non-performance of counterparties and believes it is not subject to material concentration Group and the weakening of sterling against other functional currencies within the Group. and the weakening of sterling against other functional currencies risk Credit liquid funds, investments (mainly bank deposits and floating rate notes) and derivative risk on to credit exposure The Group’s equal to the book valu the risk of non-performance of counterparties, with a maximum exposure financial instruments arises from coun policy which restricts Treasury application of Group risk through to credit limits its exposure of these assets. The Group ratin rating of C and short term credit rating of Aa3, bank financial strength long term credit to those with a minimum Moody’s continu to any single financial institution. The Group exposure also has policies that limit the amount of credit P1. The Group and categories of investments. T exposures quality of counterparties, the limits placed on individual credit the credit reviews Financial Statements Notes to the Consolidated Financial Statements continued

22 Financial instruments continued Capital risk management It is the Group’s policy to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The Group is subject to certain externally imposed capital requirements in the form of banking covenants involving borrowing ratios which it met throughout the period. The Board has delegated responsibility for routine capital expenditure to a Capital Committee, which has approval responsibility for: Group long term and budgeted capital spend, setting capital assessment criteria, new store capital approval, subsidiary company funding, business acquisitions, business disposals and contingent liabilities such as guarantees. The Committee also approves routine statutory and internal delegated powers of authority in relation to capital expenditure. The Group considers the manner in which funds are distributed to shareholders by assessing the performance of the business, the level of available net funds and the short to medium term strategic plans concerning future capital spend as well as the need to meet banking covenants and borrowing ratios. Such assessment will influence the level of dividends payable as well as consideration from time to time of market purchases of the Group’s own shares. The Group monitors available net funds on a regular basis and this is affected by Free Cash Flow, one of the Group’s key performance indicators as defined further in the Strategic Summary section of the Directors’ Report (b) Fair values of financial assets and liabilities For receivables and payables classified as financial assets and liabilities in accordance with IAS 32, fair value is estimated to be equivalent to book value. These values are shown in notes 14 and 19, respectively. The categories of financial assets and liabilities and their related accounting policy are set out in notes 1.11 and 1.15. For those financial assets and liabilities which bear either a floating rate of interest or no interest, fair value is estimated to be equivalent to book value. These values are shown in note 22(d). The fair value of the Bonds is £297.0 million (2009 £216.1 million). The Bonds are carried at amortised cost, plus a fair value adjustment, as a result of the fair value hedge discussed below. Excluded from the fair value is £8.4 million (2009 £8.4 million) of accrued interest which is included in trade and other payables. Fair value of derivatives is predominantly determined using observable market data such as interest rates and foreign exchange rates. As such, derivatives are classified as ‘Level 2’ under the requirements of IFRS 7 ‘Financial Instruments: Disclosures’. Fair values of derivatives by designation 2010 Trade and other receivables Trade and other payables Current Non-current Current Non-current Total Derivatives held to: £million £million £million £million £million Hedge fair value interest rate risk – 25.0 – – 25.0 Manage the currency exposure of: Financial assets and liabilities 1.6 – (1.2) – 0.4 Net investments in overseas subsidiaries – – – (74.8) (74.8) Future transactions occurring within one year 1.4 – (8.4) – (7.0) Total derivatives 3.0 25.0 (9.6) (74.8) (56.4)

2009 Trade and other receivables Trade and other payables Current Non-current Current Non-current Total Derivatives held to: £million £million £million £million £million Hedge fair value interest rate risk – 30.3 – – 30.3 Manage the currency exposure of: Financial assets and liabilities 2.6 – (12.6) – (10.0) Net investments in overseas subsidiaries – – (24.1) (104.0) (128.1) Future transactions occurring within one year 1.9 – (1.7) – 0.2 Total derivatives 4.5 30.3 (38.4) (104.0) (107.6)

Included in derivative financial instruments are forward foreign currency contracts, options, interest rate swaps and currency swaps.

100 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders n) 101 2010 en ge air % illion ss on) hedge million 4 million truments Other Annual Report and Accounts 2009/10 83.7 117.9 25.0 226.6 67.4 2.6 7.6 77.6 (53.6) – (3.5) (57.1) (98.0) (2.0) – (100.0) sterling euro currencies Total £million £million £million £million 151.1 120.5 32.6 304.2 (149.1) (100.6) 29.1 (220.6) (148.6) (219.1) – (367.7) (300.2) (221.1) (3.5) (524.8) DSG international plc e non-interest bearing and are therefore not subject to interest rate risk. not subject to interest therefore bearing and are e non-interest d foreign exchange currency contracts. It also uses swaps and options to manage its interest rate and foreign exchan rate and foreign its interest It also uses swaps and options to manage contracts. exchange currency d foreign Floating rate Floating rate Fixed rate Fixed rate Fixed rate Net borrowings Cash and cash equivalents and short term investments: value of £250 million (2009 £300 million) of the Bonds and have the same critical terms. The fair value of interest rate swaps of the Bonds and have the same critical terms. The fair value of interest value of £250 million (2009 £300 million) asset of £30.3 million). into as fair value hedges is an asset of £25.0 million (2009 an entered in the income of £28.0 million) has been recognised rate swaps of £1.2 million (2008/09 gain A fair value loss on the interest by an equivalent fair value gain on the Bonds. statement and offset operations Hedge of net investments in foreign with a notional value of swaps in place currency exchange contracts and cross foreign had forward At 1 May 2010 the Group £200 operations. Gains designated as a hedge of the net investments in foreign million (2009 £374.0 million) which have been or losses on translation of any gains the net to equity to offset transferred of these derivatives are and losses on the retranslation into as net investment hedges is a £74.8 derivatives entered operations. The fair value of currency investments in the foreign m (c) Hedging activities by entering predominantly currencies denominated in foreign and sales arise on purchases that manages exposures The Group into forwar translation exposure. £300 millio a notional amount of £250 million (2009 rate swaps in place for the Bonds with had interest At 1 May 2010 the Group a to provide LIBOR. In order based on rate of interest rate of 6.125% and pays a floating a fixed interest it receives whereby million and gains of £3.8 during the period, losses of £15.1 of contracts which matured (2008/09 £0.2 million gain). In respect in the f to changes to hedge the exposure used rate swaps are based on LIBOR. The interest and pays a floating rate of interest loss (2008/09 £128.1 million loss). in the income statement (2008/09 £nil). was recorded No hedge ineffectiveness of financial assets and financial liabilities by currency rate profile (d) Interest The financial ins of the financial assets and liabilities of the Group. rate exposure The following table sets out the interest not included in the table ar against certain euro denominated fixed asset investments and to finance working capital £200 million (2009 £250 million) has be and to finance working capital denominated fixed asset investments against certain euro on EURIBOR. based bearing interest borrowings rate euro swapped into floating under IAS 39 as follows: designates financial instruments as hedges The Group Cash flow hedges exchange contracts in place with a notional value of £435.6 million (2009 foreign had forward At 1 May 2010 the Group £72.7 milli one ranging from expected to cover exposures as cash flow hedges. These contracts are designated and effective that are lo in equity amounts to a £7.0 million derivatives which have been deferred The fair value of these currency month to one year. (2008/09 gains of £27. respectively operating profit, out of equity into inventory and out of equity into have been transferred and gains of £13.4 million). in the income statement (2008/09 £3.0 million gain). of £0.9 million loss was recorded Hedge ineffectiveness Fair value hedges rate of 6.125 a fixed interest it receives rate swaps in place for the Bonds whereby had interest As mentioned above, the Group Borrowings: Obligations under finance leases: Financial Statements Notes to the Consolidated Financial Statements continued

22 Financial instruments continued 2009 Other sterling euro currencies Total £million £million £million £million Cash and cash equivalents and short term investments: Floating rate 36.8 75.8 (17.4) 95.2 Fixed rate 82.2 22.3 1.9 106.4 119.0 98.1 (15.5) 201.6 Borrowings: Floating rate (303.7) (269.4) (4.3) (577.4) Obligations under finance leases: Fixed Rate (98.9) (2.8) – (101.7) (402.6) (272.2) (4.3) (679.1) Net borrowings (283.6) (174.1) (19.8) (477.5)

Floating rate cash and cash equivalents and short term investments relates to cash at bank and floating rate notes. Cash at bank earns interest at floating rates based either on daily bank deposit rates or central bank lending rates. Floating rate notes have an effective yield of 1.00% (2009 1.88%). Fixed rate cash and cash equivalents and short term investments are predominantly money market deposits (as shown in note 16) and earn interest at an average effective rate of 0.54% (2009 1.04%). Floating rate borrowings include bank overdrafts and fixed rate bonds after taking into account the effect of interest rate swaps entered into by the Group. The weighted average effective interest rate on bank overdrafts approximates 1.5% (2009 3.7%). The Group’s interest rate swaps (which relate to the Bonds) have a nominal value of £250 million (2009 £300 million) receive fixed interest rates of 6.125% (2008/09 6.125%) and pay floating rates of LIBOR plus a margin which ranged from 1.59% to 3.35% (2008/09 3.04% to 7.13%). Currency swaps with a nominal value of £200 million (2009 £250 million) receive LIBOR plus a margin and pay EURIBOR plus a margin. The sterling floating rates ranged from 1.59% to 3.04% in the year (2008/09 3.04% to 6.82%) and the euro floating rates ranged from 1.73% to 3.04% (2008/09 3.03% to 6.63%). Other swaps which matured in the period exchanged Norwegian krone and sterling at fixed interest rates of 5.06% and 5.67% (2008/09 5.06% and 5.67%). The other major component of floating rate borrowings is drawings under the £400 million Facility. Interest on drawn amounts on the £400 million Facility was payable at LIBOR plus a margin of 3.75%. The commitment fee on undrawn amounts was 1.875%. A utilisation fee of 0.5% was payable on drawings greater than £200 million but less than £300 million and a rate of 1.5% on drawings greater than £300 million. The terms of the New Facility are similar, but with a utilisation fee of 0.25% being payable on drawings greater than £120 million but less than £240 million and 0.5% payable on drawings greater than £240 million. Both the £400 million Facility and the New Facility are described further in note 17. Fixed rate borrowings refer to £50 million of the Bonds whereby the remainder have been swapped into floating rate borrowings as described in note 22(c). Amounts in respect of other currencies relate to funds held within subsidiary companies, operating in the Nordic region and Central Europe. The negative cash balance in the prior year arose in a multi-currency pooled facility and is offset by positive euro balances. Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. Interest on financial instruments classified as fixed rate is fixed until the maturity of the instrument.

102 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders y. 103 3.6 2009 2010 R. ably Equity £million (39.6) ilities other e of tcomes. equity). swaps. cash specified ncludes 2.1 2010 (1.0) £million (0.2) (2.1) £million 2008/09 . As a consequence, the . As a consequence, Annual Report and Accounts 2009/10 Profit before tax before Profit Contractual undiscounted cash flows (1.2) (2.5) £million 2009/10 one year but In more than In more DSG international plc 2.5 (59.2) – (56.7) (56.4) (4.9) – – (4.9) (4.9) Within than not more than In more Carrying (98.6)(18.4) – (337.0) – – (355.4) (98.6) (321.4) (98.5) £million £million £million £million £million 892.0 242.7 – 1,134.7 1,135.9 one year five years five years Total value (889.5) (301.9) – (1,191.4) (1,192.3) (1,317.5) (30.1) (22.1) (1,369.7) (1,378.2) (1,439.4) (367.1) (22.1) (1,828.6) (1,803.0) e shown in note 18) and derivative assets and liabilities into their maturity groupings. The table i e shown in note 18) and derivative assets and liabilities into their maturity groupings. Outflows changes in the carrying value of derivative financial instruments that are not in hedging relationships arising from movements arising from not in hedging relationships financial instruments that are changes in the carrying value of derivative by changes in an not offset the income statement to the extent that they are rates and exchange rates only affect in interest underlying transaction. changes in the carrying value of derivative financial instruments designated as net investment hedges arising from movements financial instruments designated as net investment hedges arising from changes in the carrying value of derivative in equit directly in exchange rates is recorded in the income statement. The impact of movements recorded rates are in interest the balance of borrowings, investments and the derivative portfolio are all held constant for the whole year. all held constant for the whole investments and the derivative portfolio are the balance of borrowings, highly effective. assumed to be hedges are all net investment, fair value and cash flow rate of interest on fixed rate bonds is calculated after taking into account the effect rates of changes in interest the effect In combination these financial instruments are floating in nature. are In combination these financial instruments Inflows both principal and interest flows. both principal and interest Other borrowings and other payables Trade 6.125% Guaranteed Bonds 2012 Non-derivative financial liabilities Bank overdrafts ■ ■ ■ ■ ■ Change in exchange rates: US DollarEuro + 10% + 10% Positive / (negative) effect (e) Sensitivity analysis total equity to changes in tax and / (loss) before 7, shows the sensitivity of profit by IFRS required The following analysis, financial instruments as listed below monetary assets and liabilities and derivative market variables on ou actual or future of representative and 2 May 2009, and is not necessarily the position as at 1 May 2010 sensitivity reflects sensitivity to a reason hedges. The table below shows the Group’s as cash flow hedges and net investment derivatives designated Changes in exchange rates affect the Group’s profit / (loss) before tax due to changes in the value of monetary assets and liab tax due to changes before / (loss) profit the Group’s rates affect Changes in exchange in the fair valu total equity due to changes the Group’s affect instruments. Changes in exchange rates and derivative financial would A 10% decrease with other variables held constant. of US dollar and euro, key currencies Group’s possible change in the effect. have an equal and opposite (f) Liquidity risk contractual undiscounted cash flows payable under financial liabilities (excluding finance The table below analyses the Group’s lease liabilities, which ar Derivative contracts Changes in interest rates affect the Group’s profit / (loss) before tax, mainly due to the impact of floating rate borrowings, tax, mainly due to the impact of floating rate borrowings, / (loss) before profit the Group’s rates affect Changes in interest based on LIBOR and EURIBO are rate exposures principal floating rate interest Group’s and derivative financial instruments. The with all currencies), across rates (uniform in interest possible change to a reasonably The numbers below show the sensitivity rates would have a in interest A 1% increase effect. would have an equal and opposite variables held constant. A 1% decrease tax and on loss before of £4.3 million (2008/09 a £7.2 million negative effect tax and equity before on profit negative effect made in calculating the sensitivity analysis: The following assumptions were Financial Statements Notes to the Consolidated Financial Statements continued

22 Financial instruments continued 2009 Contractual undiscounted cash flows In more than one year but Within not more than In more than Carrying one year five years five years Total value £million £million £million £million £million Non-derivative financial liabilities Bank overdrafts (4.8) – – (4.8) (4.8) Other borrowings (252.1) – – (252.1) (250.2) Trade and other payables (1,244.1) (11.3) (27.6) (1,283.0) (1,292.6) 6.125% Guaranteed Bonds 2012 (18.4) (355.4) – (373.8) (322.4) (1,519.4) (366.7) (27.6) (1,913.7) (1,870.0) Derivative contracts Inflows 1,150.1 632.3 – 1,782.4 1,453.0 Outflows (1,178.0) (716.9) – (1,894.9) (1,560.6) (27.9) (84.6) – (112.5) (107.6)

The carrying value of trade and other payables includes accrued interest on the Bonds of £8.4 million (2009 £8.4 million) and interest on other borrowings of £0.4 million (2009 £1.5 million). The Group reviews regularly its available cash resources and undrawn committed borrowing facilities required to fulfil its objectives and strategy. Cash flow forecasts are prepared covering a five year period and these are updated annually. Shorter term forecasts are reviewed and monitored on a regular basis in varying degrees of granularity including, in some cases, daily review. These forecasts are used in determining both the level of borrowings required for funding purposes as well as planning for repayments of borrowings either at their maturity or sooner where practical. An appropriate level of headroom is maintained to provide against unexpected outflows or an unforeseen downturn in trading. Included in note 17 are details of committed facilities, which are also maintained and used if available on advantageous terms.

23 Share capital and reserves (a) Called up share capital 2010 2009 £million £million Authorised 4,980,252,496 (2009 4,980,252,496) ordinary shares of 2.5p each 124.5 124.5 Allotted and fully paid 3,609,937,433 (2009 1,772,442,268) ordinary shares of 2.5p each 90.2 44.3

During the period, 36,403 shares (2008/09 none) were issued in respect of options exercised under employee share option and ownership schemes. On 9 June 2009 the Group completed a Placing and Rights Issue which raised gross proceeds of £310.6 million, of which £100 million was raised by the Placing. The Placing comprised in aggregate 333,333,333 Placing Shares available for subscription at an issue price of 30 pence per Placing Share. The Rights Issue was made on the basis of five new shares for each seven eligible shares at 14 pence per new share and comprised 1,504,125,429 shares. Aggregate issue costs of the Placing and Rights Issue were £19.3 million.

104 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders s

se 105 f 2009 s 60.7 £million Number rust 2008/09 245.4) 245.4 dend T 2,233,063 – 2010 (6.7) (6.7) 27.5 27.5 £million 2009/10 Number 3,579,476 3.43p Per share Annual Report and Accounts 2009/10 ––––( –––– DSG international plc Capital –––– –––– – – – (3.2) 0.6 (2.6) – – – (52.2) (0.6) (52.8) Merger redemption Investment Hedging Revaluation reserve reserve in own shares reserve reserve Total £million £million £million £million £million £million 245.4 (386.1) 5.0 (2.3) (96.3) (23.2) (502.9) (245.4) (386.1) 5.0 (2.3) (151.7) (2.4) (537.5) in the period – each of 2.5p shares on ordinary recognised directly in equity directly recognised recognised directly in equity directly recognised is paid. The mid-market price of a share as at 1 May 2010 was 33.1 pence (2009 41.25 pence). is paid. The mid-market price of a share Investment in own shares Final dividend for 2007/08 24 Dividend paid as distributions to equity shareholders Amounts recognised Transfers Transfers their nominal value was £0.1 million (2009 £0.1 million). held had a market value of £0.9 million) and ownership trusts 25 Employee share At 1 May 2010, the ownership trust (the Trust). International Limited is the trustee of an employee share Halifax EES Trustees and senior employee to specified executive directors in the Company for the purposes of satisfying potential awards held shares Shares) Plan (PSP) and Retention and Recruitment Plan (Reward Performance Share Incentive Plan (LTIP), under the Long Term given in the Remuneration Report in section (II) (b) (ii) of the are Shares PSP and Reward schemes. Details of the LTIP, share the exerci from to increases the table below and relate is shown in held by the Trust Remuneration Report. The number of shares International Limited has waived all dividends except for a total payment of 1 penny at the time each divi Halifax EES Trustees Other comprehensive income and expense Other comprehensive Transfer At 1 May 2010 during 1999/00. which occurred reconstruction on the Group shown at 4 May 2008 and 2 May 2009 arose The merger reserve and the merger reserve above the existing Group company a new parent took the form of introducing reconstruction The Group company. of the former parent company and that of the new parent between the capital structure the difference represents arising under Section 612 of in a merger reserve which resulted a structure through The Placing and Rights Issue was effected over the the excess of the net proceeds the structure, through of the cash proceeds the Companies Act 2006. Following receipt earnings. to retained the merger reserve from capital issued was transferred nominal value of the share of a put option held by to the fair value remeasurement earnings relate between retained and other reserves 2008/09: Transfers a minority shareholder. International Limited further details Trustees in the Company held by Halifax EES shares represent held by the Group Own shares Put option exercised Put option exercised At 4 May 2008 (b) Other reserves million (2009 2,233,063 share held at 1 May 2010 had a market value of £1.2 given in note 25. The 3,579,476 shares of which are of rights under the Placing and Rights Issue. the Trusts through by buying shares Shares PSP and Reward aim is to hedge in part its obligations under the LTIP, The Company’s performance period and during the relevant reassessed The anticipated liability is regularly liability. to meet the anticipated future The costs of funding and administering the Trusts in this liability. to meet an increase when required purchased are additional shares by the net book value o reduced funds are Shareholders’ charged to the income statement in the period to which they relate. are which have not vested unconditionally. held in the Trusts shares At 2 May 2009 income and expense Other comprehensive Placing and Rights Issue (386.1) 5.0 (2.3) (148.5) (3.0) (534.9) Financial Statements Notes to the Consolidated Financial Statements continued

26 Share-based payments 2009/10 2008/09 Note £million £million Amounts charged / (credited) to operating profit Share-based payments – equity settled (a) 4.8 2.1 – cash settled (b) 0.9 (0.3) 5.7 1.8

(a) Equity settled Following the Placing and Rights Issue, the exercise price and the number of outstanding equity settled share-based payments were adjusted to reflect the dilutive effect of the Rights Issue. Share option plans Employee Share Option Scheme (ESOS) and Executive Share Option Plan (ESOP) Options are normally granted annually to executive directors and other senior executives. In September 2008, the Group adopted a new share option plan (ESOP) which replaced the existing ESOS. Options granted after this date have only been granted under the new ESOP. The ESOS and ESOP permit making awards with a market value on the date of grant of not more than twice the recipients’ salary apart from in exceptional circumstances when an award of not more than three times salary can be made. Options are also granted to other employees in the UK and overseas on the basis of management grade. Vesting of options is based upon remaining in service with the Group over a three year period, unless specific circumstances apply to a participant as determined by the Remuneration Committee. Depending on grade, vesting is also dependent on the level of growth in underlying diluted earnings per share (EPS) over a three year period. Options may be exercised up to seven years after the vesting date. Save As You Earn (SAYE) The Group offers to all of its UK and Irish employees having completed the relevant period of service, share-based savings plans whereby amounts may be contributed up to a specified limit per plan and per employee. Three year and five year plans have been offered annually, with exercise prices set at a 20% discount to the market share price on the date of grant. Exercise is conditional upon employees remaining employed by the Group for the full term of the plan unless specific circumstances apply to a participant as determined by the Remuneration Committee. Employees can choose to withdraw their contributions in full from the plan at any time, together with any interest earned. Details of equity settled share option plans outstanding during the year are as follows: 2009/10 2008/09 Weighted Weighted average average Note Number exercise price Number exercise price At beginning of period 100,219,236 £0.70 67,313,571 £1.38 Adjustment for Placing & Rights Issue 34,516,309 – –– Granted during the period (i) 137,783,431 £0.22 90,141,170 £0.36 Forfeited during the period (33,028,107) £0.49 (56,487,809) £0.97 Exercised during the period (ii) (37,385) £0.18 –– Expired during the period (3,075,720) £3.35 (747,696) £1.33

At end of period (iii),(iv) 236,377,764 £0.31 100,219,236 £0.70

No options were exercisable at the end of either period. 2010 2009 (i) weighted average fair value of options granted during the period £0.13 £0.07 (ii) weighted average share price at the date of exercise £0.36 – (iii) weighted average remaining contractual life for options outstanding 5.8 years 4.6 years (iv) range of exercise prices for options outstanding £0.09 – £2.01 £0.13 – £3.35

106 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – 107 2009 2009 2009 g 4.9% 9.5% Number £0.39 £0.18 41.0% holes 204,866 patterns 3.5 years 1.6 years 7,647,103 8,462,316 9,133,540 (3,546,386) (3,429,493) Actual – 2010 2010 2010 0% £0.12 £0.25 Number 99,344 3.0 years 1.3 years 3,219,430 9,133,540 3,290,663 (1,981,178) 13,662,455 2.6% – 2.7% Annual Report and Accounts 2009/10 78.3% – 81.2% (i) (ii) Note DSG international plc Provisionally awarded during the period awarded Provisionally The expected remaining life of the options is based on historical data and is not necessarily indicative of the actual exercise life of the options is based on historical data The expected remaining Adjustment for Placing & Rights Issue that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends. trends. of future the assumption that the historical volatility is indicative The expected volatility reflects that may occur. this assumption. from outcome may differ plans Other equity settled share Reward Sacrifice and Reward Shares PSP, Executive directors’ and senior executives’ LTIP, members of the Executive Committee and other participatin to executive directors, awarded provisionally are and PSP shares LTIP to the senior executives in September 2009 and do not have any performance conditions. offered Sacrifice options were Reward outstanding at granted at a fair value of £0.15 and 737,432 options lapsed. The number During the year 11,902,442 options were the end of the period is 11,165,010. granted to a limited number of executives in July 2008 and do not have any performance conditions. During were Shares Reward period an adjustment of 1,709,273 was made granted at a fair value of £0.29. During the current were 2008/09 6,042,751 shares of the Placing and Rights Issue and 821,108 (2008/09 1,227,824) Reward outstanding as a result Shares to the number of Reward lapsed. The number outstanding at the end of the period is 5,703,092. Shares senior executives and are based upon performance measured in terms of the Total Shareholder Return Shareholder (TSR) achieved by the in terms of the Total based upon performance measured senior executives and are to the companies year period relative Prior to 2008/09 TSR performance was based on performance over a three Company. and 2009/10 TSR performance has been based on a bespoke weighted index comprising the FTSE 100 Index. For 2008/09 retailers. comprising UK and European as follows: payments outstanding during the year are and PSP equity settled share-based Details of LTIP Forfeited during the period Expected remaining life of options Expected remaining (ii) outstanding contractual life for awards weighted average remaining (i) period during the awarded average fair value of awards weighted At end of period at end of period Exercisable Expired during the period during Expired At beginning of period Weighted average share price average share Weighted Dividend yield The fair value of equity settled share option plans granted is estimated as at the date of grant using the Binomial or Black Sc granted is estimated as at the date of grant option plans settled share The fair value of equity option pricing models taking into account the terms and conditions upon which the instruments were granted. The following table upon which the instruments were taking into account the terms and conditions option pricing models at the date prevailing 2010 and 2 May 2009 based on information models used for the periods ended 1 May lists the inputs to the of grant. Risk-free interest rate interest Risk-free Historical and expected volatility Historical and expected Financial Statements Notes to the Consolidated Financial Statements continued

26 Share-based payments continued The fair value of such other equity settled share-based payments granted is estimated as at the date of grant using the option pricing models listed below as well as taking into account the terms and conditions upon which the instruments were granted. The following table lists the inputs to the models used for the periods ended 1 May 2010 and 2 May 2009 based on information prevailing at the date of grant. 2009/10 2008/09 Reward Reward PSP Sacrifice LTIP / PSP Shares Option pricing model Monte Carlo Binominal Monte Carlo Black-Scholes Dividend yield 0% 0% 9.5% 9.5% Historical and expected volatility 81.2% 76.3% 42.5% – Risk-free interest rate 2.6% 2.2% 5.1% – Expected life of awards 3.0 years 3.0 years 3.0 years 3.0 years Weighted average share price £0.25 £0.27 £0.39 £0.39

Further information concerning share-based incentive plans specific to directors is included in the Remuneration Report in sections (II) (b) (ii) and (iii) of the Remuneration Report. (b) Cash settled Historical awards have been granted to employees on the basis of a monetary amount determined by grade and length of service. Employees must remain in employment until the vesting date which occurs on the third anniversary of the date of grant unless specific circumstances apply to a participant as determined by the Remuneration Committee. The vesting of such share-based payments for employees above a certain grade is determined based on the level of growth in EPS over a three year period. Such awards are settled in cash which is calculated based on the share price at the exercise date. The fair value of cash settled share- based payment plans is estimated as at the date of grant using the Binomial option pricing model taking into account the terms and conditions upon which the instruments were granted. No cash settled awards had vested at 1 May 2010 (2009 none). 2010 2009 £million £million Amount included within trade and other payables relating to cash settled share-based payments 1.0 0.2

(c) Additional SAYE, ESOS and ESOP information During the period the 137,783,431 options under the employee share option scheme were granted to 5,172 employees at exercise prices ranging between £0.18 and £0.37. At 1 May 2010 options outstanding for accounting purposes amounted to 236,377,764 shares (2009 100,219,236) analysed as follows: SAYE ESOS & ESOP Exercise price Exercise price Date of grant Pence Number Date of grant Pence Number 2 Mar 2005 94.83 454,171 17 Jul 2000 201.44 2,515,161 27 Feb 2006 103.54 198,312 5 Feb 2001 198.48 17,030 26 Feb 2007 99.52 1,176,762 23 Jul 2001 170.45 3,529,554 26 Feb 2008 44.54 9,683,249 15 Feb 2002 168.23 18,494 23 Jul 2009 18.32 50,267,202 22 Jul 2002 118.80 3,586,337 7 Feb 2003 75.59 40,660 6 Dec 2007 83.26 1,561,372 11 Jul 2008 27.63 76,901,531 14 Aug 2008 41.84 1,066,599 16 Dec 2008 9.20 – 10.85 7,149,733 23 Jul 2009 23.95 61,984,158 28 Sep 2009 28.43 11,902,439 07 Dec 2009 36.88 4,325,000 61,779,696 174,598,068

Options granted under the ESOS and ESOP can vest between three to 10 years subject to performance conditions, where applicable, being met. The performance conditions applicable to these schemes are set out in section (II) (b) (iii) of the Remuneration Report.

108 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – 109 4.9 1.8 (3.6) 19.9 84.5 69.0 38.3 23.3 £million (87.4) (82.2) (58.5) 2008/09 111.4 141.6 166.7 (393.6) (143.8) (125.7) (285.4) 2.3 3.3 4.6 5.7 3.0 (1.6) 19.6 25.8 14.1 39.7 (33.4) (54.7) (92.0) £million 2009/10 156.2 102.8 230.6 117.6 270.3 153.2 Annual Report and Accounts 2009/10 DSG international plc – impairment and accelerated depreciation / amortisation – impairment and accelerated depreciation – change in pension benefits Additions to non-underlying – provisions Loss on disposal of property, plant & equipment plant Loss on disposal of property, Operating profit / (loss) – continuing operations Operating profit intangibles Amortisation of acquired intangibles Amortisation of other Depreciation payment charge Share-based of associates post-tax results of Share movements in working capital Operating cash flows before Movements in working capital: in inventories Decrease in trade and other receivables / (increase) Decrease Cash generated from / (utilised by) operations – continuing operations Cash generated from Decrease in trade and other payables Decrease Utilisation of non-underlying provisions Operating profit / (loss) Operating profit operations Operating loss – discontinued 27 Notes to the cash flow statement 27 Notes to the cash operating activities net cash inflow / (outflow) from / (loss) to operating profit (a) Reconciliation of Financial Statements Notes to the Consolidated Financial Statements continued

27 Notes to the cash flow statement continued (b) Analysis of net funds / (debt) Other non-cash Currency 3 May 2009 Cash flow movements translation 1 May 2010 £million £million £million £million £million Cash and cash equivalents* 192.6 102.8 – 0.3 295.7 Bank overdrafts (4.8) 0.3 – (0.4) (4.9) 187.8 103.1 – (0.1) 290.8

Short term investments 9.0 (1.3) 0.8 – 8.5

Borrowings due within one year (250.1) 151.6 – – (98.5) Borrowings due after more than one year (322.5) – 1.1 – (321.4) Obligations under finance leases (101.7) 1.7 – – (100.0) (674.3) 153.3 1.1 – (519.9)

Net debt (477.5) 255.1 1.9 (0.1) (220.6)

Other non-cash Currency 4 May 2008 Cash flow movements translation 2 May 2009 £million £million £million £million £million Cash and cash equivalents* 365.8 (188.8) – 15.6 192.6 Bank overdrafts (2.1) (2.5) – (0.2) (4.8) 363.7 (191.3) – 15.4 187.8

Short term investments 82.0 (73.3) (0.9) 1.2 9.0

Borrowings due within one year (0.2) (249.9) – – (250.1) Borrowings due after more than one year (294.6) 0.1 (28.0) – (322.5) Obligations under finance leases (100.8) 1.7 (2.4) (0.2) (101.7) (395.6) (248.1) (30.4) (0.2) (674.3)

Net funds / (debt) 50.1 (512.7) (31.3) 16.4 (477.5)

Restricted funds, which predominantly comprise funds held under trust to fund customer support agreements were £78.9 million (2009 £67.6 million). Net debt excluding restricted funds totalled £299.5 million (2009 £545.1 million). * Cash and cash equivalents are presented as a single class of assets on the face of the consolidated balance sheet. For the purposes of the consolidated cash flow, cash and cash equivalents comprise those amounts presented on the consolidated balance sheet as cash and cash equivalents, less bank overdrafts (which are disclosed separately on the consolidated balance sheet and as disclosed in note 17).

28 Acquisitions No significant acquisitions were made other than the exercise of a put option by a majority shareholder in an associated undertaking. The acquisition in 2008/09 related to the exercise of a put option by a minority shareholder. 2009/10 2008/09 £million £million Total consideration paid for current period acquisitions 10.6 27.6 Less: cash acquired (3.6) – Total consideration, net of cash acquired 7.0 27.6

110 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – 111 Total Total d £million (38.9) (38.9) 2008/09 2008/09 er (3.0) (5.7) (8.7) €1 and Poland £million 2009/10 ––– ––– 6.95.01.3 8.0 1.2 2.4 14.9 6.2 3.7 (0.6) – (0.6) (2.2) (2.7)(1.2) (4.9) (1.9) (3.1) (1.2)(1.0) 2.0 (4.7) 0.8 (1.0) (5.7) (2.2) (0.8) (2.7) (1.8) (4.9) (3.2) (3.5) (6.7) 50.5 46.8 97.3 £million £million £million (72.0)(21.5) (63.6)(22.1) (16.8) (135.6) (22.1) (16.8) (38.3) (16.8) (38.9) (22.1) (38.9) (16.8) (38.9) (11.2) (6.1) (17.3) Hungary £million £million £million Hungary Poland Annual Report and Accounts 2009/10 Total 2009/10 DSG international plc –– 10.9––– (13.9) 10.9 –––––– (13.9) ––––––– (3.0) (3.0) –– (3.0) (3.0) (3.0) (3.0) (1.0)(1.0) (4.7) (7.7) (5.7) (8.7) £million £million £million Hungary Poland dingly classified its assets and liabilities as held for sale as at 2 May 2009 owing to the sale being highly probable und probable 2 May 2009 owing to the sale being highly and liabilities as held for sale as at dingly classified its assets Consideration Disposal fees and exit costs Loss after tax from discontinued operations Loss after tax from Tax on loss on disposal Tax Loss for the period Income tax expense Finance costs Revenue Expenses Loss after tax from discontinued operations Loss after tax from Net loss on disposals Loss after tax – discontinued operations the definitions stipulated in IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’. Assets in IFRS 5 ‘Non-current the definitions stipulated House, working with Mix Electronics operation in Poland to IDMSA Brokerage disposed of its the Group On 1 September 2009 of €1. S.A., for consideration been re-presente discontinued and the prior periods have the businesses have been classified as of the above sales, As a result shown in the Other International previously division. Both businesses were on a consistent basis. (a) Net loss on disposals as follows: The total net assets disposed were Net assets disposed Consideration and costs together to advisors. Exit costs mainly comprise asset write downs and impairments, Disposal fees mainly comprise fees payables with associated termination costs. (b) Loss after tax – discontinued operations to Hungary and Poland. discontinued operations relates The loss after tax from Operating loss tax Loss before Loss on disposal of discontinued operations of the Company. attributable to the equity shareholders All losses were Cumulative foreign exchange differences transferred from equity from transferred exchange differences Cumulative foreign Loss on disposals Provisions Provisions Inventories 29 Discontinued operations and assets held for sale 29 Discontinued operations Retail Limited for consideration of in Hungary to EW Electro disposed of its operations Group On 19 May 2009 the accor Cash and cash equivalents Other assets trade and other payables Current Financial Statements Notes to the Consolidated Financial Statements continued

29 Discontinued operations and assets held for sale (c) Cash flows from discontinued operations 2009/10 2008/09 Poland Hungary Poland Total £million £million £million £million Operating activities (8.6) (12.4) (7.2) (19.6) Investing activities – (0.2) (1.1) (1.3) Financing activities – (0.6) (0.1) (0.7) (8.6) (13.2) (8.4) (21.6)

Cash flows from investing activities relate to interest received and capital expenditure. Cash flows from financing activities relate to interest paid.

30 Capital commitments 2010 2009 £million £million Contracted for but not provided for in the accounts 21.1 12.9

31 Contingent liabilities 2010 2009 £million £million Guarantees 54.5 75.0 Other 8.1 14.2 62.6 89.2

Guarantees comprise potential obligations to financial institutions in respect of activities undertaken in the normal course of business and relate to amounts utilised under letter of credit facilities. In addition to the figures shown in the table above, contingent liabilities also exist in respect of lease covenants relating to premises assigned to third parties.

32 Operating lease commitments 2010 2009 Land and Other Land and Other buildings assets buildings assets £million £million £million £million Total undiscounted future committed payments due: Within one year 381.7 8.7 395.3 7.0 Between two and five years 1,314.3 8.3 1,379.1 3.4 After five years 1,636.7 – 1,908.8 – 3,332.7 17.0 3,683.2 10.4

Operating lease commitments represent rentals payable for retail, distribution and office properties, as well as vehicles, equipment and office equipment. Contingent rentals are payable on certain retail store leases based on store revenues. The above figures include committed payments under onerous lease contracts for which provisions or accruals exist on the balance sheet including those for closed businesses. In addition, at 2 May 2009 £22.7 million and £35.2 million related to Hungary and Poland, respectively, which form part of discontinued operations as described in note 29. Total future minimum sub-lease payments expected to be received under non-cancellable sub-leases was £32.5 million (2009 £47.0 million).

112 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders le 113 6.6 1.0 0.4 2009 sts, £million y will onal nants ture ture ure – 7.9 0.9 2010 £million €258,000 (£228,000) Annual Report and Accounts 2009/10 DSG international plc oup, is set out below. Further information about individual directors’ remuneration, share intere share remuneration, individual directors’ Further information about oup, is set out below. fect by 15 August 2010 at which time it will replace the Group’s existing £400 million Facility. The terms and cove The existing £400 million Facility. the Group’s replace fect by 15 August 2010 at which time it will e not disclosed. attaching to the New Facility are substantially the same as that for the £400 million Facility except that the guarantee struct substantially the same as that for the £400 million Facility except that the guarantee attaching to the New Facility are Termination benefits benefits Termination payment Share-based 34 Post balance sheet event (the New Facility) for £360 million. The New Facilit facility agreement credit signed a new revolving On 12 May 2010, the Group come into ef the New Facility will ma closely to the Bonds. At the earliest, aligning it more thereby comprises UK and Irish companies only, it raises additi has the ability to extend the New Facility to 15 August 2013 in the event that on 15 August 2012 and the Group 17 and 22. shown in notes Facility are finance of a minimum of £100 million by November 2011. Further details of the New Short term employee benefits The Group via its registered charitable trust, the DSG International (the Foundation), made charitable donations Foundation via its registered The Group £200,000) to the made charitable donations of £nil (2008/09 £600,000). During the period the Company of £12,000 (2008/09 concerned are the principal beneficiaries of which is the sole benefactor of the Foundation, Foundation. The Company with heritage and the environment. health and disabilities, affairs, education, community family members and Executive Committee, together with close Jean-Emile Rosenblum, members of the Steve Rosenblum and with their management In connection by the Group. a company controlled by them, own 22.0% of PIXmania, companies controlled management fees of to PIXmania, Steve Rosenblum and Jean-Emile Rosenblum received with respect roles 33 Related party transactions 33 Related party on consolidation and accordingly parties, have been eliminated related which are undertakings, between Group Transactions ar Jean-Emile Rosenblum together hold call options over additional shares (2008/09 €258,000 (£217,000)). Steve Rosenblum and 30 April 2011 and are from options can be exercised The capital held by the Group. 16.8% of the share in PIXmania representing to earnings achievement of targets related subject to certain conditions including the values of the and certain capitalisation options, Steve Rosenblum and Jean-Emile Rosenblum have certain exit rights exercisab PIXmania business. In addition to the call to their holdings in PIXmania. between July 2011 and July 2013 in relation total own a building which is occupied and leased by PIXmania. During 2009/10 Steve Rosenblum and Jean-Emile Rosenblum to this property. charged in relation of €645,000 (£570,000) (2008/09 €597,000 (£502,000)) were payments rental and key management personnel Remuneration of directors the key and members of the Executive Committee, who are executive directors, of non-executive directors, The remuneration management personnel of the Gr is given in sections (VI) to (X) of the pensions and other entitlements, which form part of these financial statements, options, share described as having been audited. Remuneration Report which are directors’ Financial Statements

Company Balance Sheet

1 May 2010 2 May 2009 3 May 2008 Note £million £million £million Non-current assets Investments C4 1,723.7 1,718.8 1,716.7 Property, plant & equipment C5 – – 0.1 Deferred tax assets C3 – – 1.0 1,723.7 1,718.8 1,717.8

Current assets Trade and other receivables C6 53.0 53.9 12.7 Income tax receivable – – 17.0 Cash and cash equivalents C7 80.7 – 40.6 133.7 53.9 70.3 Total assets 1,857.4 1,772.7 1,788.1

Current liabilities Bank overdrafts C8 – (359.9) – Borrowings C8 (95.0) (250.0) – Trade and other payables C9 (462.9) (216.9) (754.5) (557.9) (826.8) (754.5) Net current liabilities (424.2) (772.9) (684.2)

Non-current liabilities Borrowings C8 (319.7) (320.1) (289.5) (319.7) (320.1) (289.5) Total liabilities (877.6) (1,146.9) (1,044.0) Net assets 979.8 625.8 744.1

Capital and reserves Called up share capital C10 90.2 44.3 44.3 Share premium account 169.4 169.4 169.4 Investment in own shares (2.3) (2.3) (2.3) Capital reserves 5.0 5.0 5.0 Profit and loss account 717.5 409.4 527.7 Equity shareholders’ funds 979.8 625.8 744.1

The financial statements were approved by the directors on 24 June 2010 and signed on their behalf.

John Browett Nicholas Cadbury Chief Executive Group Finance Director

114 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – – 115 1.7 1.7 ended 17.0 40.6 £million (59.9) (60.3) 250.0 129.8 (532.0) (549.0) (400.5) (359.9) 52 weeks 2 May 2009 – 1.2 75.7 20.4 80.7 ended (60.6) £million 291.3 244.5 120.4 100.0 440.6 243.3 (155.0) (359.9) 52 weeks 1 May 2010 C11 C11 C11 C11 Note * * * Annual Report and Accounts 2009/10 lents’ on the face of the balance sheet, less DSG international plc

For the purposes of this cash flow statement, cash and cash equivalents comprise those items disclosed as ‘cash and cash equiva For the purposes of this cash flow statement, cash and overdrafts, which are classified within current liabilities on the face of the balance sheet. A reconciliation to the balance sheet C11. amounts is shown in note of the balance sheet. A reconciliation liabilities on the face classified within current which are overdrafts, Interest paid Interest (Decrease) / increase in borrowings due within one year due within in borrowings / increase (Decrease) Financing activities capital share Issue of ordinary in cash and cash equivalents Decrease Cash and cash equivalents at end of period * Cash and cash equivalents at beginning of period Cash and cash equivalents at beginning Equity dividends paid financing activities Net cash flows from Interest received received Interest investing activities Net cash flows from Net cash flows from operating activities Net cash flows from Operating activities / (utilised by) operations Cash generated from Income tax received Company Cash Flow Statement Flow Cash Company Investing activities Dividend received Financial Statements

Company Statement of Changes in Equity

Capital Share Merger Investment inredemption Retained Share capital premium reserves own shares reserve earnings Total equity £million £million £million £million £million £million £million At 4 May 2008 44.3 169.4 – (2.3) 5.0 527.7 744.1 Loss for the period –––––(59.7) (59.7) Equity dividends paid –––––(60.7) (60.7) Share-based payments –––––2.12.1 At 2 May 2009 44.3 169.4 – (2.3) 5.0 409.4 625.8 Profit for the period –––––57.8 57.8 Placing and Rights Issue 45.9 – 245.4 – – – 291.3 Transfer – – (245.4) – – 245.4 – Share-based payments –––––4.94.9 At 1 May 2010 90.2 169.4 – (2.3) 5.0 717.5 979.8

As permitted by Section 408 of the Companies Act 2006, no income statement for the Company is included in these financial statements. On 9 June 2009, the Company completed a Placing and Rights Issue, further details of which are shown in note C10. The Placing and Rights Issue was effected through a structure which resulted in a merger reserve arising under Section 612 of the Companies Act 2006. Following receipt of the cash proceeds through the structure, the excess of the net proceeds over the nominal value of the share capital issued was transferred from the merger reserve to retained earnings. Own shares held by the Company represent shares in the Company held by Halifax EES Trustees International Limited, further details of which are given in notes 23(b) and 25 to the Group financial statements.

116 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders – 117 1.0 to 2009 (1.0) £million n riod. st ate inancial unting he – – – 2010 £million esent its financial Annual Report and Accounts 2009/10 ecognised as an additional investment. DSG international plc easonable basis. The Company has therefore accounted for its contributions to the defined benefit accounted easonable basis. The Company has therefore e given in the parts of the directors’ Remuneration Report which are described as having been audited. Fees paid Remuneration Report which are e given in the parts of the directors’

ed tax

The deferred tax asset related to accelerated capital allowances. tax asset related The deferred At beginning of period Charged to the income statement At end of period C2 Directors’ and auditors’ remuneration C2 Directors’ f options, pensions and other entitlements, which form part of these share interests, share remuneration, Details of directors’ (b) Investments for impairment in value. stated at cost, less any provision Investments are benefits (c) Post-retirement assets and liabilities of the defined benefit section of the pension scheme to t It is not practical to allocate the underlying Company on a consistent and r a defined contribution scheme. section of the scheme as if it were the income statement charged to scheme are contributions to the defined contribution section of the pension The Company’s on an accruals basis as they become payable. statements, ar

C1 Accounting policies with UK Generally Accepted Accounting financial statements in accordance its DSG international prepared plc has historically to pr Act 2006, the Company has elected As permitted by Section 395 of the Companies Practices (UK GAAP). with International (IFRS). statements in accordance Financial Reporting Standards with International (IFRS) in accordance Standards Financial Reporting the financial statements have been prepared Accordingly Companies Act 2006 and those parts of the IFRS issued by the Internationalas adopted by the EU, Board Accounting Standards was 3 May 2008 (the Transition The transition date to IFRS for the Company under IFRS. reporting applicable to those companies of the period of comparative information. Date), being the start of InternationalIFRS 1, ‘First time adoption fir those companies adopting IFRS for the permits Reporting Standards’, Financial Notes to the Company Financial Statements Financial Company to the Notes time to take advantage of certain exemptions from the full requirements of IFRS and make certain elections in the transition pe the full requirements from time to take advantage of certain exemptions at the amounts stated under UK GAAP as at the transition its investments in subsidiaries The Company has elected to measure date to IFRS. periods. and preceding the current applied throughout Accounting policies have been consistently adequ satisfied that the Company has are the directors financial projections, on the basis of current After making due enquiry, resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concer Accordingly, future. in operational existence for the foreseeable to continue resources basis in preparing the financial statements. basis in preparing tangible currencies, payments, translation of foreign to operating leases, share-based accounting policies in relation The Company’s statements. Other acco financial in note 1 to the Group set out instruments are fixed assets, taxation and derivative financial set out below. specific to the Company are policies which are payments (a) Share-based to equity settled share- subsidiary undertakings in relation the Company has granted rights to its equity to employees of Where to the subsidiary undertakings is r based payment arrangements the contribution C3 Taxation C3 Taxation Deferr the auditors in respect of their audit of the Company were £0.1 million (2008/09 £0.1 million). of their audit of the Company were the auditors in respect Financial Statements Notes to the Company Financial Statements continued

C4 Investments Investments in subsidiary undertakings 2010 2009 £million £million Cost At beginning of period 1,718.8 1,716.7 Movement in the period 4.9 2.1 At end of period 1,723.7 1,718.8

Details of the principal subsidiary undertakings are set out in note C16.

C5 Property, plant & equipment Fixtures, fittings and equipment 2010 2009 £million £million Cost At beginning and end of period 0.5 0.5 Depreciation At beginning of period 0.5 0.4 Charge for period – 0.1 At end of period 0.5 0.5 Net book value At beginning and end of period – –

C6 Trade and other receivables 2010 2009 2008 £million £million £million Amounts due from subsidiary undertakings 15.7 13.9 11.6 Derivative financial instruments 25.0 30.3 – Other debtors 0.1 0.6 – Prepayments 9.1 9.1 1.1 Accrued income 3.1 –– 53.0 53.9 12.7

Further information on derivative financial instruments is provided in note C13. The majority of other receivables are non-interest bearing and are generally on 60 day terms. The total financial assets included within trade and other receivables are £18.9 million (2009 £14.5 million and 2008 £11.6 million). The carrying amount of trade and other receivables approximates fair value. There were no past due or impaired balances at the end of the period (2009 and 2008 £nil).

C7 Cash and cash equivalents 2010 2009 2008 £million £million £million Cash at bank 80.7 – 17.8 Money market deposits – – 22.8 80.7 – 40.6

Cash at bank earns interest at floating rates based either on daily bank deposit rates or central bank lending rates. 2008: Money market deposits were made for varying periods of up to 90 days with an average maturity of one day and earned interest at an average effective rate of 5.52%. The carrying amount of money market deposits approximates their fair value.

118 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders

y). 119 value. 2009 2008 2009 2008 2009 2008 14.6 13.5 44.3 44.3 £million £million £million £million £million £million 216.9 754.5 609.9 – 202.3 741.0 124.5 124.5 359.9250.0 – – 320.1 289.5 – 2010 2010 2010 95.0 16.3 90.2 95.0 £million £million £million 462.9 446.6 124.5 319.7 Annual Report and Accounts 2009/10 DSG international plc e capital 3,609,937,433 (2009 1,772,442,268) ordinary shares of 2.5p each shares 3,609,937,433 (2009 1,772,442,268) ordinary Authorised of 2.5p each shares 4,980,252,496 (2009 4,980,252,496) ordinary Accruals Amounts due to subsidiary undertakings 6.125% Guaranteed Bonds 2012 6.125% Guaranteed Current Current Bank overdrafts Borrowings C8 Borrowings and overdrafts C8 Borrowings C10 Share capital C10 Share Called up shar Further information on derivative financial instruments is provided in note C13. in note instruments is provided Further information on derivative financial their fair liabilities. The carrying amount of trade and other payables approximates The total shown equals the total financial Non-current Allotted and fully paid of £310.6 million, and for which proceeds completed a Placing and Rights Issue which raised gross On 9 June 2009 the Group financial statements. in note 23(a) of the Group provided further details are Bank overdrafts are subject to a pooling arrangement with other Group companies and are repayable on demand. repayable companies and are subject to a pooling arrangement with other Group are Bank overdrafts the £400 million sterling committed facility (the Facilit amounts which have been drawn down under represent borrowings Current option schemes. under employee share of options exercised issued in respect (2008/09 none) were During the period 36,403 shares C9 Trade and other payables C9 Trade Further details on both the Facility and the 6.125% Guaranteed Bonds (the Bonds) are provided in note 17 and 22 of the Group in provided 6.125% Guaranteed Bonds (the Bonds) are Further details on both the Facility and the financial statements. Financial Statements Notes to the Company Financial Statements continued

C11 Notes to the cash flow statement (a) Reconciliation of operating loss to net cash inflow / (outflow) from operating activities 2009/10 2008/09 £million £million Operating loss (7.6) (5.5)

Movements in working capital: Decrease / (increase) in trade and other receivables 2.3 (4.5) Increase / (decrease) in trade and other payables 248.6 (539.0) 250.9 (543.5)

Cash generated from / (utilised by) operations 243.3 (549.0)

(b) Analysis of net debt Other non-cash 3 May 2009 Cash flow movements 1 May 2010 £million £million £million £million Cash and cash equivalents* – 80.7 – 80.7 Bank overdrafts (359.9) 359.9 – – (359.9) 440.6 – 80.7

Borrowings due within one year (250.0) 155.0 – (95.0) Borrowings due after more than one year (320.1) – 0.4 (319.7) (570.1) 155.0 0.4 (414.7)

Net debt (930.0) 595.6 0.4 (334.0)

Other non-cash 4 May 2008 Cash flow movements 2 May 2009 £million £million £million £million Cash and cash equivalents* 40.6 (40.6) – – Bank overdrafts – (359.9) – (359.9) 40.6 (400.5) – (359.9)

Borrowings due within one year – (250.0) – (250.0) Borrowings due after more than one year (289.5) – (30.6) (320.1) (289.5) (250.0) (30.6) (570.1)

Net debt (248.9) (650.5) (30.6) (930.0)

* Cash and cash equivalents are represented as a single class of assets on the face of the balance sheet. For the purposes of the cash flow, cash and cash equivalents comprise those amounts represented on the balance sheet as cash and cash equivalents, less bank overdrafts (which are disclosed separately on the balance sheet and as disclosed in note C8).

120 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 121 lue

lities e he efits d to be ed fund. ed d to be Annual Report and Accounts 2009/10 DSG international plc e shown in notes C6 and C9, respectively. The categories of financial assets and liabi e shown in notes C6 and C9, respectively. oup financial statements. oup as set out in the Directors’ Report and in note 22 to the Group financial statements. Report and in note 22 to the Group oup as set out in the Directors’ hedging is set out in note 22(c) to the Gr to hedge fair value interest rate risk. See note C13 (c) for further details. rate risk. See note C13 (c) for further details. to hedge fair value interest included rate swaps are interest Further details on the Company’s rate exposure. interest The Company uses swaps to manage its financial statements. in note 22(d) to the Group (c) Hedging activities rate swaps. Further information on fair va rates by entering into interest that arise on interest The Company manages exposures equivalent to book value. These values ar financial statements. set out in notes 1.11 and 1.15 to the Group accounting policy are and their related value is estimate fair or no interest, bear either a floating rate of interest For those financial assets and liabilities which shown in note C13 (d). equivalent to book value. These values are rate swaps hel to interest and 2008 £nil) relating is £25.0 million (2009 £30.3 million Included in trade and other receivables (b) Fair values of financial assets and liabilities (b) Fair values of financial assets and fair value is estimated with IAS 32, in accordance and payables classified as financial assets and liabilities For receivables C13 Financial instruments and policies (a) Financial risk management objectives to the and adopts the same approach and capital risks credit rate, exchange, interest The Company is exposed to liquidity, management of these risks as the Gr C12 Post-retirement benefits C12 Post-retirement benefit and defined in the UK comprising both a defined a pension scheme for eligible employees The Company maintains administer scheme with assets held in a separate trustee The defined benefit section is a funded contribution section. with the assessed in accordance years and contributions are by a qualified actuary at least every three The scheme is valued expected service lives of members. the pension cost over the normal qualified actuaries so as to spread advice of independent has been used to determine the level unit method and projected carried out as at 5 April 2007, using the The last valuation was eligible employees. to all of the defined contribution section is offered defined benefit section at that time. Membership of funding to the scheme. A further actuarial valuation as at 5 April 2010 is currently underway, however, its results are not are its results however, underway, April 2010 is currently A further actuarial valuation as at 5 of funding to the scheme. until early 2011. expected to be available to cover 92% of the ben the value of assets to be sufficient of the defined benefit section showed The last actuarial valuation in earnings. increases section for t The valuation of the defined benefit after allowing for expected future accrued to members tax) of £263.5 million (2009 £148.8 million and 2008 deferred pension deficit (before purposes of IAS 19 showed a gross £51.0 financial statements. Group disclosed in note 21 to the million). Further particulars of the scheme are was section of the scheme has been closed to new entrants and on 30 April 2010 Since 1 September 2002, the defined benefit to those active members of th section being offered accrual with automatic entry into the defined contribution closed to future Financial Statements Notes to the Company Financial Statements continued

C13 Financial instruments continued (d) Interest rate profile of financial assets and financial liabilities by currency The following table sets out the interest rate exposure of the financial assets and liabilities of the Company. 2010 Sterling Other Total £million £million £million Cash and cash equivalents: Floating rate 80.3 0.4 80.7 Borrowings: Fixed rate (53.3) – (53.3) Floating rate (361.4) – (361.4) (414.7) – (414.7) Net borrowings (334.4) 0.4 (334.0)

2009 Sterling Other Total £million £million £million Borrowings: Floating rate (930.0) – (930.0) Net borrowings (930.0) – (930.0)

2008 Sterling Other Total £million £million £million Cash and cash equivalents: Floating rate 17.1 0.7 17.8 Fixed rate 22.8 – 22.8 39.9 0.7 40.6 Borrowings: Floating rate (289.5) – (289.5) Net borrowings (249.6) 0.7 (248.9)

Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. Interest on financial instruments classified as fixed rate is fixed until the maturity of the instrument. Fixed rate cash and cash equivalents relate to money market deposits (as shown in note C7). Fixed rate borrowings comprise the unhedged part of the Bonds. Floating rate borrowings include bank overdrafts and fixed rate bonds after taking into account the effect of interest rates swaps entered into by the Company and drawings under the £400 million sterling committed facility. The weighted average effective interest rate on bank overdrafts in 2008/09 approximated 3.7%. Further details on fixed and floating rate borrowings are shown in notes 17 and 22 to the Group financial statements.

122 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 123 2010 2009 ng held one year but In more than In more Annual Report and Accounts 2009/10 one year but In more than In more Contractual undiscounted cash flows Contractual undiscounted cash flows 6.0 18.1 24.1 30.3 (9.3) (27.8) (37.1) (39.8) (5.0) (15.4) (20.4) (19.8) Within than not more Carrying 10.3 15.2 25.5 25.0 15.3 30.6 45.9 44.8 15.3 45.9 61.2 70.1 Within than not more Carrying £million £million £million £million (18.4) (355.5) (373.9) (320.1) (95.0)(18.4) – (337.1) (355.5) (95.0) (319.7) (95.0) £million £million £million £million one year five years Total value (252.1) – (252.1) (250.0) (836.8) (355.5) (1,192.3) (1,146.9) one year five years Total value (454.0) – (454.0) (462.9) (567.4) (337.1) (904.5) (877.6) eflects the position as at 1 May 2010eflects the position as and DSG international plc oupings. The table includes both principal and interest flows. and interest oupings. The table includes both principal Inflows Inflows Outflows Outflows 6.125% Guaranteed Bonds 2012 Non-derivative financial liabilities Bank overdraftsBorrowings (359.9) – (359.9) (359.9) sensitivity analysis shows a reasonably possible change in interest rates (uniform across all currencies), with other variables all currencies), across rates (uniform in interest possible change a reasonably sensitivity analysis shows and other payables Trade and other payablesTrade (206.4) – (206.4) (216.9) 6.125% Guaranteed Bonds 2012 Non-derivative financial liabilities Borrowings (e) Sensitivity analysis rates tax and total equity to changes in interest before 7, shows the sensitivity of profit by IFRS required The following analysis, The sensitivity analysis r instruments and certain monetary items. on derivative financial 2 outcomes. of actual or future and is not necessarily representative May 2009, respectively, cash and rate borrowings, tax, mainly due to the impact of floating loss before the Company’s rates affect Changes in interest on LIBOR. The followi based are exposures rate floating rate interest principal The Company’s derivative financial instruments. have rates would in interest A 1% increase effect. would have an equal and opposite decrease constant and the corresponding and tax before on profit a £10.9 million negative effect tax and equity of £6.7 million (2008/09 before on profit a negative effect financial statements. the Group set out in note 22(e) to are used in calculating the sensitivity analysis equity). Assumptions (f) Liquidity risk payable under financial liabilities and derivative contractual undiscounted cash flows The table below analyses the Company’s assets into their maturity gr Derivative contracts Derivative contracts Financial Statements Notes to the Company Financial Statements continued

C13 Financial instruments continued 2008 Contractual undiscounted cash flows In more than one year but Within not more than Carrying one year five years Total value £million £million £million £million Non-derivative financial liabilities Trade and other payables (746.1) – (746.1) (754.5) 6.125% Guaranteed Bonds 2012 (18.4) (373.9) (392.3) (289.5) (764.5) (373.9) (1,138.4) (1,044.0)

Derivative contracts Inflows 15.3 61.2 76.5 80.6 Outflows (15.4) (61.7) (77.1) (80.6) (0.1) (0.5) (0.6) –

The carrying value of trade and other payables includes accrued interest on the Bonds of £8.4 million (2009 £8.4 million and 2008 £8.6 million) and accrued interest on other borrowings of £0.4 million (2009 £1.5 million and 2008 £nil). (g) Credit risk The Company’s exposure to credit risk is discussed in note 22 (a) to the Group financial statements. The Company’s receivable balances mainly consist of amounts due from subsidiary undertakings. Further information on the Company’s exposure to significant concentration of credit risk on receivables from subsidiary undertakings is set out in note C15.

C14 Contingent liabilities 2010 2009 2008 £million £million £million Guarantees 54.5 75.0 117.8 Other 2.8 1.8 14.1 57.3 76.8 131.9

Guarantees comprise potential obligations to financial institutions in respect of activities undertaken in the normal course of business.

C15 Related parties During the period the Company entered into transactions, in the ordinary course of business, with other related parties as follows: 2009/10 2008/09 £million £million Subsidiary undertakings Recharge of costs 10.1 14.3 Interest paid (2.1) (26.6) Dividends received 100.0 –

Recharge of costs relates to management charges for services provided to other Group companies. Included within amounts repayable to subsidiaries are loans of £431.3 million (2009 £177.7 million and 2008 £708.5 million) with maturity of one month but renewable on a rolling basis and bear interest at rates between 1.5% and 4.25% (2008/09 1.5% to 6.0%). The Company also has fixed loans of £14.2 million (2009 £20.8 million and 2008 £20.7 million) which have no maturity date and bear no interest.

124 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 125 es ity 07. 22

ed ty will gs, nd tee Annual Report and Accounts 2009/10 DSG international plc Elkjøp Nordic AS – Norway Elkjøp Nordic S.p.A. – Italy UniEuro Gigantti OY – Finland PIXmania S.A.S. – France (76.9%) PIXmania S.A.S. – France – Spain PC City Spain S.A.U. El-Giganten AS – Denmark ehensive summary of all differences between UK GAAP and IFRS, other differences would have no effect between UK GAAP and IFRS, other differences ehensive summary of all differences fect by 15 August 2010 at which time it will replace the Company’s existing £400 million Facility. The terms a The terms existing £400 million Facility. the Company’s fect by 15 August 2010 at which time it will replace , such a presentation differs from its UK GAAP equivalent. its UK GAAP from differs , such a presentation oup undertakings is attached to the latest annual return. The following information relates to those subsidiary undertakin following information relates attached to the latest annual return. The oup undertakings is ofits going forwards. ofits going forwards. Under UK GAAP, deferred tax assets are split into amounts falling due within one year and amounts falling due after more than amounts falling due within one year and amounts falling due after more split into tax assets are deferred Under UK GAAP, tax asset balances to be shown as non-current. all deferred IFRS requires one year. Under UK GAAP, specific definitions exist for cash at bank and short term investments. Under IFRS, a new category described Under UK GAAP, the UK GAAP equivalent of cash at bank and in hand. The definition of cash and cash as ‘cash and cash equivalents’ replaces short term investments into cash and cash equivalents. of certain amounts from in a reclassification equivalents results A direct subsidiary undertaking of DSG internationalA direct plc and a holding company. all of which are engaged in retail activities, whose results or financial position, in the opinion of the directors, principally affect the principally affect position, in the opinion of the directors, or financial whose results activities, engaged in retail all of which are 1 May 2010: at statements of the Group consolidated financial DSG international – UK* Holdings Limited Limited – Ireland DSG Retail Ireland UK DSG Retail Limited – El-Giganten AB – Sweden DSGi South-East Europe A.E.V.E. – Greece (99.2%) – Greece A.E.V.E. DSGi South-East Europe – Czech Republic s.r.o. World Electro (60%) Iç ve Dis TicaretTurkey AS – ElectroWorld structure comprises UK and Irish companies only, thereby aligning it more closely to the Bonds. At the earliest, the New Facili aligning it more thereby comprises UK and Irish companies only, structure covenants attaching to the New Facility are substantially the same as that for the £400 million Facility except that the guaran substantially the same as that for the £400 million Facility except covenants attaching to the New Facility are the event that it rais on 15 August 2012 and the Company has the ability to extend the New Facility to 15 August 2013 in mature ■ ■ 2 by the change. unaffected funds as at 2 May 2009 and 3 May 2008 are May 2009 and shareholders’ of financial statements (a) Presentation in 20 of Financial Statements’ as revised with IAS 1 ‘Presentation in accordance presented The primary financial statements are as a primary is now presented as a note under UK GAAP, presented which was previously The statement of changes in equity, statement. under UK GAAP. required This was not previously a statement of cash flows to be presented. IAS 1 requires (b) Reclassifications on either net assets effect changes to the balance sheet. Such changes have no the key presentational The following reflects or pr in notes 17 and shown of the New Facility are additional finance of a minimum of £100 million by November 2011. Further details or no significant effect on the net loss or shareholders’ funds of the Company. The Company’s loss after tax for the period end The Company’s funds of the Company. on the net loss or shareholders’ or no significant effect * operate in their country undertakings owned. All Group wholly undertakings are Unless otherwise indicated, principal subsidiary C17 Financial information under International Financial Reporting Standards Financial Reporting Standards C17 Financial information under International set out below. accounting policies are the Company’s between UK GAAP and IFRS affecting The key differences While this is not a compr C16 Principal subsidiary undertakings C16 Principal subsidiary A lead to a statement of excessive length. undertakings would full list of all Group consider that to give full particulars The directors of Gr of incorporation. Although similar financial statements. to the Group will come into ef C18 Post balance sheet events (the New Facility) for £360 million. The New Facil facility agreement credit On 12 May 2010, the Company signed a new revolving Information for Shareholders

Five Year Record

Consolidated income statement 2009/10 2008/09 2007/08 2006/07 2005/06 £million £million £million £million £million Underlying revenue(1) 8,531.6 8,180.2 8,292.2 7,730.1 6,875.9 Percentage change 4.3% (1.4)% 7.3% 12.4% Underlying operating profit(1) / EBIT(2) 133.2 83.0 217.5 291.0 299.3 Underlying net finance (costs) / income(1) (42.7) (26.9) 13.0 21.6 26.5 Underlying profit before tax(1) 90.5 56.1 230.5 312.6 325.8 Percentage change 61.3% (75.7)% (26.3)% (4.0)% Closed businesses (0.2) (14.1) (15.9) (5.5) (5.8) Acquired intangible amortisation (4.6) (4.9) (4.4) (4.7) (1.8) Net restructuring costs and business impairment charges (5.6) (59.1) (20.7) (55.4) (22.4) Business impairment charges – (96.1) (364.2) (115.1) – Other items – 1.9 – – (4.1) Changes in pension benefits 33.4 – – 4.7 – Profit on sale of investment – – 1.7 – 2.9 Net fair value remeasurements (0.8) (7.4) (6.2) (10.5) 10.3 Profit / (loss) before tax – continuing operations 112.7 (123.6) (179.2) 126.1 304.9 Income tax expense (46.7) (56.8) (66.0) (77.3) (88.2) Profit / (loss) after tax – continuing operations 66.0 (180.4) (245.2) 48.8 216.7 (Loss) / profit after tax – discontinued operations (8.7) (38.9) (14.5) (46.4) (5.0) Profit / (loss) for the period 57.3 (219.3) (259.7) 2.4 211.7

Underlying diluted earnings per share (pence)(1) 1.5p 1.0p 7.4p 10.1p 10.4p Percentage change 50.0% (86.5)% (26.7)% (2.9)% Dividends per ordinary share (pence) – – 5.45p 8.87p 8.45p

Consolidated cash flow 2009/10 2008/09 2007/08 2006/07 2005/06 £million £million £million £million £million Underlying profit before tax(1) 90.5 56.1 230.5 312.6 325.8 Closed businesses profit before tax (0.2) (14.1) (15.9) (5.5) (5.8) Depreciation and amortisation 128.6 134.7 136.2 136.8 131.0 Working capital movements 39.7 (285.4) 8.1 (15.1) 15.4 Taxation (31.9) (35.7) (53.1) (100.8) (85.0) Net capital expenditure (164.6) (129.9) (123.6) (108.0) (78.4) Other (34.0) (65.7) (48.9) 15.8 (33.7) Free Cash Flow before restructuring items(3) 28.1 (340.0) 133.3 235.8 269.3 Net restructuring and other one-off items (45.7) (64.2) (37.6) (63.6) 33.9 Free Cash Flow(4) (17.6) (404.2) 95.7 172.2 303.2

Closing net (debt) / funds (220.6) (477.5) 50.1 224.9 439.6 Less restricted funds(5) (78.9) (67.6) (66.5) (111.2) (193.5) Unrestricted net (debt) / funds(5) (299.5) (545.1) (16.4) 113.7 246.1

126 DSG international plc Annual Report and Accounts 2009/10 Business Overview Strategic Summary Performance Review Corporate Governance Financial Statements Information for Shareholders 127 Annual Report and Accounts 2009/10 d, where applicable, discontinued operations. d, where 9.0 82.0 185.9 232.6 2009 2008 2007 2006 (4.8)(2.8) (2.1) (1.5) (5.7) (1.0) – (0.5) structuring and business impairment charges and 26.0 26.8 22.6 9.3 13.2 – – – £million £million £million £million (72.1) (46.2) (32.7)(98.9) (27.7) (99.3)(40.4) (101.5) (51.1) (100.1) (18.4) (10.8) (14.4) – – – 584.9 853.5 1,304.3 1,423.7 584.9558.9 853.5 1,304.3 826.7 1,423.7 1,281.7 1,414.4 148.4489.6248.6 143.9 531.3 154.7 127.7 580.6 144.2 109.7 641.4 192.6 187.0 365.8 440.5 617.5 971.9516.5 1,093.1 1,030.6 501.7 873.4 409.9 370.4 (250.1) (0.2) (2.9)(362.3)(322.5) (77.5) (8.8) (294.6)(153.0) 197.5(392.5) (290.4) (54.0) 344.8 (384.2) (301.1) (38.4) (354.1) (141.7) (393.1) 3,658.9 3,856.8 3,976.5 4,119.6 1,069.1 984.3 1,057.1 1,087.6 1,955.7 1,814.2 1,909.6 2,025.7 1,690.0 2,042.6 2,066.9 2,093.9 (1,722.5) (2,070.1) (1,827.1) (1,712.1) (3,074.0) (3,003.3) (2,672.2) (2,695.9) (2,052.3) (2,120.1) (1,869.4) (1,749.1) (1,007.3) (883.2) (802.8) (946.8) – – DSG international plc 8.5 2010 (4.9) (2.4) 28.6 (98.5) (22.3) (97.6) (29.5) £million 846.5 130.7 541.0 253.8 295.7 972.6 397.0 875.1 875.1 (107.2) (321.4) (266.8) (344.4) 3,715.8 1,116.5 2,042.0 1,673.8 (1,652.9) (1,781.0) (1,059.7) (2,840.7) other one-off non-recurring items, profits on sale of investments and net fair value remeasurements of financial instruments an on sale of investments and net fair value remeasurements items, profits non-recurring other one-off income tax and net capital expenditure. liabilities. held under trust to fund customer support agreement as held for sale Equity shareholders’ funds Equity shareholders’ (2) profit. EBIT comprises underlying operating (3) items includes dividend payments to minority shareholders. restructuring Cash Flow before Free (4) special pension net finance (costs) / income, contributions, operations before operations and comprises net cash flow generated from to continuing Cash Flow relates Free (5) comprise funds funds which predominantly and exclude restricted net (debt) / funds comprise cash and cash equivalents, short term investments and borrowings Unrestricted Total equity Total Notes: (1) intangibles, net re of closed businesses, amortisation of acquired of trading results exclude the effects Underlying figures Equity minority interests Total liabilities Total Net assets Provisions Current liabilities Current Bank overdrafts Other borrowings Obligations under finance leases liabilities Other current (liabilities) / assets Net current liabilities Non-current Borrowings Obligations under finance leases benefit obligations Retirement liabilities Other non-current Provisions Assets held for sale assets Total Cash and cash equivalents Other non-current assets Other non-current Non-current assets Non-current Goodwill Consolidated balance sheet Consolidated balance Intangible assets assets Tangible Liabilities directly associated with assets classified Liabilities directly Current assets Current Inventories assets Other current Short term investments Information for Shareholders

Shareholder Information

Registered office ShareGift Maylands Avenue, Hemel Hempstead, Hertfordshire HP2 7TG. The Orr Mackintosh Foundation operates a charity share Registered No. 3847921. www.dsgiplc.com donation scheme for shareholders with small parcels of shares whose value makes it uneconomic to sell them. Details of the Registrars and transfer office scheme are available on the ShareGift website, www.sharegift.org IRG plc, Northern House, Woodsome Park, Fenay Bridge, Huddersfield, West Yorkshire HD8 0GA. Tel: 0871 664 0300 Financial calendar (calls cost 10p per minute plus network extras; lines are open Annual General Meeting 8 September 2010 8.30am – 5.30pm Monday to Friday). If calling from abroad Interim results announcement 25 November 2010 the number is +44 20 8639 3399. The website address is 2010/11 Interim Statement publication January 2011 www.capitaregistrars.com Joint brokers Citigroup Global Markets, JP Morgan Cazenove. Alternative Format Shareholder enquiries If you would like this Annual Shareholders can access shareholding details over the internet via our Registrars secure portal at www.capitashareportal.com Report and Accounts or any As well as checking name, address and shareholding details other shareholder documentation in the Shareholder Help section, you can download change of address, dividend mandate and stock transfer forms. This is in an alternative format, a secure site and you will need to register first. Please follow the simple instructions on the website. So that the system can please send a request to validate your enquiries an Investor Code is required. This is [email protected] a numerical account number and can be found on both your share certificate and your dividend tax counterfoil. Share dealing service Online and telephone share dealing services are available through our Registrars, providing easy access and simple to use services. There is no need to pre-register and the facilities allow you to trade in ‘real time’ and at a known price which will be given to you at the time you give your instruction. In order to deal via these facilities you will need your Investor Code (see above) as well as stating your surname, full postcode and date of birth. Details of the online dealing service are available on www.capitadeal.com and the telephone dealing service is on 0871 664 0454 (calls cost 10p per minute plus network extras). Lines are open Monday to Friday 8am to 4.30pm. Cazenove operates a postal share dealing service for private investors who wish to buy or sell the Company’s shares. Details are available from Cazenove. Tel: 020 7155 5328. CREST The Company’s shares are traded on CREST. CREST is a voluntary system which enables shareholders to hold and transfer their shareholdings electronically rather than by paper. Shareholders holding shares in this way can opt to receive their dividends through the CREST system. Unsolicited mail The Company is obliged to make its share register available to third parties on payment of a prescribed fee. This may result in shareholders receiving unsolicited mail. If you wish to limit the receipt of unsolicited mail you should write to: The Mailing Preference Service, FREEPOST 22, London W1E 7ER or register on their website at www.mpsonline.org.uk

128 DSG international plc Annual Report and Accounts 2009/10 Index

Page Page Page A F P Accounting policies 69-75 Finance costs / income 83 Pensions 95-98 Accounting estimates Finance leases 94 PSP / Performance and judgements 74, 75 Financial instruments 99-104 share plan 54, 55,107, 108 Acquired intangibles 89 Free Cash Flow 32, 33, 67 Placing and Rights Issue 104 Acquisitions 110 Funding 33, 93 Post balance sheet event 113 Amortisation 79, 89 Property losses 34, 76, 77 Associates 90, 91 G Property, plant & equipment 90 Audit committee 49, 50 Going concern 44 Provisions 95 Auditors’ remuneration 80 Goodwill 88, 89 Auditors’ report 63 R H Related party transactions 113 B Health and Safety 37, 38 Remuneration report 52-61 Balance Sheet (Group) 66 Renewal and Board of Directors 40 I Transformation plan 15-19 Borrowings and borrowing facilities 93 Income statement 64 Reward Shares 55, 107, 108 Brands 89 Intangible assets 89 Reward Sacrifice 53, 60 Inventories 91 Risk factors 22, 23 C Capital commitments 112 K S Capital expenditure 79, 90 Key Performance Indicators 21 Segmental analysis 75-79 Cash and cash equivalents 92 Selling space 13 Cash flow statement (Group) 67 L Share-based payments 106-108 Colleagues 36, 37 LTIP / Long term Share capital 104 Community 39 incentive plan 54, 55, 107, 108 Shareholder information 128 Company financial statements 114-125 Short term investments 92 Contingent liabilities 112 M Statement of comprehensive Corporate governance 45-48 Market / Marketplace 20 income and expense 65 Customer Plan 2-19 Store numbers 13 N Subsidiary undertakings 125 D Nominations committee 51 Deferred tax 86 Non-underlying items 69, 81, 82 T Depreciation 79, 90 Tax 84-86 Directors’ remuneration 58 O TSR (Total Shareholder Return) 57 Directors’ interests 57, 59, 60 Operating lease charges 80 Trade and other payables 94 Directors’ report index 42 Operating lease commitments 112 Trade and other receivables 91, 92 Discontinued operations 111, 112 Outlook 19 Treasury policy 99, 100

E U Earnings / loss per share 87 Underlying definition 69 Employee numbers 84 Environment 38, 39 Executive Committee 41

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DSG international plc Annual Report and Accounts 2009/10 129 DSG international plc DSG international Annual Report and Accounts 2009/10

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