Annual report and financial statements 2008

Chairman's foreword

This is my final report to you as Chairman, and I’m pleased to report that while the market has become tougher in the second half, it has been a good year for M&S. Profits are up; our plan remains firmly on track; and we end 2007/08 as a stronger, more competitive business than for many years. As a result, we report an increase in your dividend of 23% to 22.5p and an increase in adjusted earnings per share (EPS) of 7.9% to 43.6p.

The work done over the last four years in getting the basics right has enabled us to deliver good results despite difficult conditions. However, the trading environment remains uncertain and we need the right management in place to take us forward.

For these reasons, the Board concluded that it would be in the best interests of the business to retain Sir Stuart Rose in a leadership role until 2011. We also wanted to prepare for a smooth transition to a new Chief Executive before Stuart’s eventual departure, and more generally, to ensure continuity in a business that has experienced a great deal of change in recent years.

We decided that these objectives could best be achieved by Stuart taking up the position of Executive Chairman. He explains in his statement how this will enable him to continue to drive the business forward, while giving others greater scope to demonstrate their talents and leadership ability.

Although the decision to retain Stuart until 2011 has received widespread support, there has been some criticism of combining the roles of Chairman and Chief Executive. We remain strongly of the view that this was the only practical way to secure his extended term, and is the right decision for M&S. As I explained in detail in the letter sent to all shareholders on 3 April 2008, we have put in place a number of safeguards to mitigate the governance concerns arising from Stuart’s new role. These include the appointment of Sir David Michels as independent Deputy Chairman and the search for a new independent non-executive director is underway. We have introduced annual voting for Stuart’s reappointment starting this year, and are also considering recruiting a further new independent non-executive director. To see a copy of this letter go to marksandspencer.com/thecompany

You may notice certain changes to this year’s report, resulting from the new Companies Act 2006. Shareholders were given a choice of formats in which to receive our report, and we were pleased that so many have opted to read it online, enabling us to reduce our environmental impact. With greater emphasis on online reporting, we’ve created this much improved website.

I have enjoyed my time with M&S. Significant progress has been made as the business has continued to be transformed in the eyes of customers, employees and the wider world. I am confident that our strong Board, and plan for long-term growth, puts M&S on course for a successful future.

Lord Burns

Chairman

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Lord Burns, Chairman

Lord Burns

Your dividend

22.5p

Total dividend

8.3p

Interim dividend

14.2p

Final dividend