5 year summary - Membership - Investment - Financial Statement

The Trust provides benefits for members and their dependants, both in service and in retirement, based on the build-up of a fund of money (which is then used to purchase an annuity from an insurance company where a regular pension is paid).

The Trust:

• is open to all UK companies and their employees within the Kingfisher Group, subject to certain employee eligibility conditions;

• is governed by the Definitive Trust Deed and approved by the Inland Revenue as a Simplified Defined Contribution Scheme under the Income and Corporation Taxes Act 1988;

• is contracted-out of the State Second Pension.

This Report should be read in conjunction with the information set out in the Information Section.

Membership is open to all employees satisfying the entry qualifications set by their employer, which are broadly similar. The categories of membership within the Trust are:

Active members - currently contributing employees who are members of the Trust.

All active members are automatically members of the Kingfisher Pension Scheme only for the purpose of the lump sum payable on death. This is done in order to provide the benefit in a cost-effective way.

Men and women over a recommended age (49 for a woman and 57 for a man) will be automatically withdrawn and be reinstated in S2P unless they elect to remain in the Trust or join the final salary Kingfisher Pension Scheme, because from these ages they may not build up as high a level of benefits under the Trust up to age 60 as they could in S2P.

Deferred pensioners - active members who have left service or otherwise ceased active membership and have the right to a future pension from the Trust.

Pensioners - on retirement, members have the right to purchase an annuity with any approved provider.

* Known since 30 April 2003 as B&Q Properties Limited
** Includes former participating companies Woolworths group, Superdrug, Entertainment UK, MVC and VCI

*** The Trustees discharge their liability to provide pensions for retired members by purchasing immediate annuity policies on behalf of individual members.

All the assets of the Trust, including members’ AVCs but excluding cash required for transaction purposes, are presently invested in the range of funds managed by Eagle Star and detailed below.

The Trust’s investment objectives are set out in detail in the ‘Statement of Investment Principles’, a copy of which is available by writing to the Group Reward and Benefits Department.

Members receive an annual Benefit Statement showing how their funds are building up.

The Trust does not hold shares directly in Kingfisher plc.

THE WITH-PROFITS FUND
The with-profits concept offers the opportunity for good equity-type long-term returns, coupled with the capital security not available from direct investment.

Contributions are invested in a broad range of stocks, shares and property. All of these assets can, of course, fall in value, but the bonus structure of the With-Profits Fund ensures that the fund is able to provide steady growth with a guarantee that if the monies are left in the fund until retirement, they will only increase in value.

When shares and property do well, the bonus will be lower than the increase in the value of the fund, because some of the bonus is held back and put in reserve. In other years, when shares and property may perform poorly, the bonus may be more than the fund has actually earned because this reserve is drawn on to make sure that members receive a steady year-on-year growth.

The default fund used is the Unitised With-Profits Pension Fund of Eagle Star Life Assurance Company Limited.

As a result of continued stock market falls in 2002, Eagle Star increased the Fund’s holding in fixed interest securities to provide a more predictable return than that available from equities. In December 2002, Eagle Star announced that it would no longer be marketing its With Profit Fund as an investment option for new schemes. Following from this, the membership profile of the Fund is expected to mature over time, and Eagle Star has announced that it will continue to reduce the Fund’s exposure to equities both in the short and longer terms in order to achieve a better balance of investment return and protect guarantees.

The Trustees will continue to monitor both the fund’s performance and asset allocation to assess its continued appropriateness.

The bonus rate declared by Eagle Star has been reduced over the year to reflect market conditions. From April 2002 the annual bonus rate was 4.5%. From April 2003, the annual bonus rate has been set at 2.5%.

In addition, dependent on market conditions, there may be an additional bonus (the terminal bonus) available.

For the year just passed, Eagle Star was remunerated by an annual management charge of approximately 1% of the value of the Fund at the year end. From this latter amount, a fee was paid to the Trust for administration.

UNIT-LINKED FUNDS
Members can, if they wish, choose to invest their contributions in a range of unit-linked funds, also provided by Eagle Star, which provide a range of risk and return.

The unit-linked funds currently available are:

NO RISK FUND
Money Pension Fund

LOWER RISK FUNDS
Long Dated Gilt Pension Fund
Managed Pension Fund

MEDIUM RISK FUNDS
Environmental Opportunities Pension Fund
Equity Managed Pension Fund
UK Index Tracker Pension Fund

HIGHER RISK FUNDS
Adventurous Pension Fund

Members also have the option of investing in the Lifestyle Investment Strategy which is primarily for investors who do not wish to regularly review their investment decisions.

Members can choose to split their contributions between the Unitised With-Profits Fund and the unit-linked funds.

SOCIALLY RESPONSIBLE INVESTMENT
Under the 1995 Pensions Act, from July 2000 trustees of occupational pension schemes must state in their Statement of Investment Principles (SIP) whether or not they operate an ethical investment policy. The law requires that trustees should act in the best interests of all beneficiaries, which generally means their best financial interests.

As a result of the pooled nature of the Retirement Trust investments, the Trustee Board accepts that the investment manager has responsibility for the selection, retention and realisation of investments. The Trustee Board believes that all companies should be run in a socially responsible way, as in the long run this should contribute to the success of those companies, but equally recognises its fiduciary responsibility to act in the best financial interests of the Trust’s members. Therefore, the Trustee Board’s policy is that the extent to which social, environmental or ethical considerations may have a financial impact on the portfolio should be taken into account by the investment manager in the exercise of its delegated duties.

For Kingfisher Pension Trustee Limited