5 year summary - Membership - Investment Objectives - Financial Statement

The Scheme provides benefits, related to salary and length of service, by means of a trust which is independent of the participating companies' financial affairs.

During the Scheme year under review, the Scheme:

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

• was governed by the Definitive Trust Deed and Rules and approved by the Inland Revenue under the Income and Corporation Taxes Act 1988 as an exempt approved scheme;

• was contracted-out of the State Second Pension (S2P).

This Report should be read in conjunction with the information set out on pages 6 to 11 of our main Report & Accounts PDF.

Membership is open to all employees of UK companies within the Kingfisher Group who satisfy the entry qualifications set by their employer, which are broadly similar.

There are three categories of membership within the Scheme:

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

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

Pensioners - members who have retired and are in receipt of a pension and dependants who are in receipt of a pension following the death of a member.

The Scheme's present investment objectives can be briefly stated as being to achieve a return on the Scheme's assets over the longer-term that exceeds the growth of the Scheme's liabilities (due to increases in salaries and price inflation) consistent with an acceptable degree of risk measured in terms of variability in funding level (defined as ‘assets divided by liabilities').

The Scheme's investment objectives together with full details of the investment process, is set out in the ‘Statement of Investment Principles', a copy of which is available by writing to the Group Pensions Department. The Statement is currently being revised following the addition of the money purchase section from 1 April 2004.

The charts below illustrate the current investment strategy both by asset type and investment manager. Further details of the investment objectives and performance of each manager can be found on page 27.

Investment Strategy and Custody of the Scheme's investments
Investment Performance Review
Financial Statement for the period ended 31 March 2003

* Wellington Management replaced Clay Finlay from 3 November 2003.

Investment Strategy

The strategy to achieve the investment objectives involves the Scheme's assets being spread across a number of asset classes and geographic areas. This diversified spread of assets is designed to deliver the scheme's required investment performance in a risk controlled manner.

The Investment Committee selects the appropriate managers, for each particular asset class, who are given specific objectives to achieve. The type of managers employed include both ‘passive' (indextracking) managers as well as active managers (who are expected to produce higher investment performance than the index-tracking managers over the longer-term, but with greater fluctuations in their returns over the shorter-term).
The target asset allocation is as follows:

The Scheme does not hold shares directly in Kingfisher plc.

The phased allocation to property to ensure the Scheme obtains the most favourable terms continues.

Custody of the Scheme's Investments
Although the Trustee Board has delegated day-to-day management of the Scheme's investments to external managers, the custody (safekeeping) of most of these assets is presently carried out independently of the managers by State Street Bank and Trust Company.

Corporate Governance
The Scheme has instructed its investment managers to, whenever possible, exercise voting rights attaching to investments. While in the majority of circumstances the managers are instructed to exercise their professional judgement on how the ‘vote’ is exercised, in potentially contentious situations the Investment Committee is consulted. To assist in this process, the Scheme subscribes to the voting service operated by the National Association of Pension Funds which gives information about matters on which shareholders are asked to vote.

The Investment Committee regularly reviews how the investment managers exercise the Scheme's voting rights and continues to monitor the debate on corporate governance and the role shareholders should play.

Investment Performance Review

The performance of the Scheme's investments is measured against the scheme
specific benchmark and other UK pension schemes of various sizes by an independent external measurement service, the Combined Actuarial Performance Services (CAPS) investment survey. Taking all portfolios together, the return achieved by the Scheme during the year to 31 March 2004 was 19.2%, outperforming the scheme specific benchmark (17.7%) by 1.5%.

Reviewing performance over the longer periods is more relevant to the Scheme's
long-term objectives. Over three and five year periods, the annual returns were
-0.5% and 0.8% compared to the average of -1.6% and -0.4% respectively. These
returns reflect the following equity markets during this period.

For Kingfisher Pension Trustee Limited

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