The Change to Win Investment Group, which works with the pension plans of four major U.S. unions, said Tesco should set up a committee of non-executive directors to review its strategy for Fresh & Easy, which does not recognize unions.

It wants this committee to issue a report "that discloses the metrics and timeframe" the Tesco board will use to evaluate the division's future performance.

It has submitted amendments to this effect to Tesco's report and accounts ahead of the company's annual meeting in Cardiff on June 29 and said if the board rejected its proposals it would advise shareholders to vote against the resolution to receive the report and accounts.

"This proposal is union-motivated and follows several years of union opposition in the U.S. Change to Win is not a shareholder, and does not speak for shareholders," a Tesco spokeswoman said.

"Fresh & Easy continues to grow and innovate and is showing positive sales momentum. We are confident the business is moving in the right direction."

Earlier this year, Tesco chief executive Philip Clarke rejected shareholder calls to pull the plug on Fresh & Easy.

He said at the time he did not expect the chain to break even until its 2013/14 year, compared with the end of 2012/13 previously.

On Monday, Tesco reported underlying sales growth at Fresh & Easy slowed to 3.6 percent in its first quarter from 12.3 percent in the fourth quarter.

Tesco shares were down 0.1 percent at 305 pence at 0850 GMT.

(Reporting by James Davey; Editing by Dan Lalor)

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