Remuneration report

This report to shareholders provides information on the remuneration and share interests of all Kingfisher Group Directors, and the criteria by which that remuneration has been determined. It has been prepared in accordance with the Directors' Remuneration Report Regulations 2002 and the applicable Listing Rules.

The Remuneration Committee

The Remuneration Committee is responsible for the broad policy on senior executives' pay and remuneration. It sets the actual levels of all elements of the remuneration of all Executive Directors of the Company and for the Chief Executives of B&Q UK, Castorama France and Brico Dépôt. The Committee also oversees the administration of Kingfisher's employee share schemes and determines the level of fees for the Chairman of the Board. The Committee's Terms of Reference are available at www.kingfisher.com.

The Committee aims to ensure that senior executives (including Executive Directors of the Company) are rewarded for their contribution to Kingfisher and are motivated to enhance returns to shareholders. It advises the Board on the remuneration framework and policy for such senior executives and, once formally endorsed by the full Board, it applies the policy.

The Committee is chaired by John Nelson and comprises a further two independent Non-Executive Directors, Michael Hepher and Margaret Salmon; all three of whom have been members for at least two years. The Chairman of the Board and the Group Chief Executive are invited to attend meetings of the Committee but not when their own arrangements are considered.

The Committee consults with shareholders to ensure their views are understood and taken into account in the work of the Committee, particularly in relation to changes in Kingfisher employee share scheme arrangements, such as those that are proposed currently, and wider trends in UK remuneration issues.

The Committee met seven times during the year. Much of the Committee's work over the past year has concerned the proposed changes to the Kingfisher Incentive Scheme (KIS) arrangements for senior executives and Executive Directors, as described in more detail later in this report, and overseeing the required pension scheme changes as a result of the tax changes announced two years ago, to ensure that the costs of any changes were cash neutral to the Company.

Advice

During the year the Committee sought the advice of Kingfisher's Group Director of Human Resources, Tony Stanworth, until his retirement in June 2005 and then his successor, Tony Williams, and was supported by the Company Secretary, Helen Jones. The Committee has also appointed the following external advisors:

• New Bridge Street Consultants LLP (NBSC) provides advice on the ongoing operation of employee and executive share plans together with advice on executive remuneration;
• Allen & Overy LLP provides legal advice to the Committee on contracts and for other employment and remuneration issues in relation to Executive Directors and senior executives. Allen & Overy LLP does not advise the Company separately on any legal matters.

NBSC currently also provides advice to the Company on the technical aspects of the operation of the shares element in the KIS as well as the ShareSave and Executive option schemes.

Additionally, Towers Perrin is requested by the Company to provide advice periodically on market positioning of remuneration for executives (and Non-Executive Director fee levels) in the UK and overseas.

Information subject to audit

The following sections of the Remuneration Report are audited:

• 'Components of Executive Directors' Remuneration – Annual bonus and long term incentives' – the summary of performance criteria upon which the award or exercise of share options are conditional;
• 'Executive Directors' remuneration table' and notes;
• 'Savings-related share option scheme';
• 'KIS Share Awards';
• 'Closed Incentive plans' – except for compliance with guidelines on dilution limits;
• 'Directors pension benefits'; and
• 'Non-Executive Directors' remuneration table' and notes.

Remuneration policy for Executive Directors

The Committee intends that Executive Director remuneration, both in terms of base salary and total remuneration, should be competitive by reference to the individual experience of the executive concerned, the role fulfilled, internal relativities and the markets in which the Company competes. This is designed to promote business success through the recruitment, retention and motivation of the highest quality executives. This policy is consistently applied across the Group for the remuneration of the Executive Directors and senior executives.

Components of Executive Directors' remuneration

Salaries and benefits

Salaries are reviewed annually in August, taking into account criteria such as market conditions affecting executive remuneration, affordability, the level of increases awarded to staff generally and the individual's contribution. In addition, the Company provides a range of additional benefits, including life and medical insurances, membership of a Company pension scheme, subsidised staff canteen, staff discount card, 30 working days holiday per year and a company car or cash allowance.

With effect from 1 August 2005, Gerry Murphy, Ian Cheshire and Duncan Tatton-Brown were awarded base salary increases of 2.3%, 25.0% and 21.2% per annum respectively. During the year Ian Cheshire became the Chief Executive of B&Q, Kingfisher's largest business, and Duncan Tatton-Brown, having been Group Finance Director for one year, took on additional responsibilities during his second year. These increases were, therefore, reflective of changed responsibilities, size of role and the market for each role. The increase for Gerry Murphy reflected general inflation.

A similar market-driven approach was taken with other salary increases awarded to management, administrative staff and store staff in the UK. Overall the increases for the management, administrative and store staff averaged just over 3%, with awards ranging from 3%-6.2%. Increases in France averaged around 3%, with the range being 2%-5.5%.

Year on year the total base salary bill for Executive Directors fell, in absolute terms, from £1,695,000 to £1,642,400 (3.1%) and increased by £147,400 in total (from £1,495,000) when comparing the salaries of the same roles. The total costs including benefits and cash bonuses fell, in absolute terms, from £2,687,100 to £2,133,500 (20.6%) and from £2,313,300 to £2,133,500 (7.8%) when comparing the same roles.

The current base salaries of the Executive Directors are:

Gerry Murphy £885,000
Ian Cheshire £425,000
Duncan Tatton-Brown £400,000

The following fees for acting as Non-Executive Directors of companies not part of the Kingfisher Group were earned and retained by the individual:

Gerry Murphy £36,161
Ian Cheshire £42,000
Duncan Tatton-Brown £20,497

Annual bonus and long-term incentives

The KIS comprises the Kingfisher Annual Cash Incentive Scheme 2003 (KIS Cash scheme) and the Kingfisher Incentive Share Scheme 2003 (KIS Shares scheme). Under these arrangements, senior executives may receive a performance-related cash bonus under the KIS Cash scheme. This is matched by a contingent share award under the KIS Shares scheme equal in value at the time of the award to the cash bonus. The contingent share award must be held for three years before it vests, with the shares being subject to forfeiture should the executive leave Kingfisher during the three-year deferral period as a result of voluntary resignation or dismissal for cause.

The number of shares conditionally awarded may be increased by up to 40% (multiplier award) depending on the relative Total Shareholder Return ('TSR') performance of the Company against the constituents of the FTSE 100 over the three-year period following the year for which the bonus was earned. At above median performance, 10% of these shares will vest, increasing on a straight-line basis to 40% at above upper quartile performance. In addition, the Committee must also be satisfied that the TSR performance is reflective of underlying performance for such awards to vest. TSR was selected as the most appropriate measure as it is robust, aligns executives' interests with those of shareholders and is generally favoured by the Company's major shareholders. The FTSE 100 was chosen as the comparator group because there is a general lack of directly quoted home improvement businesses against which to compare the Company's TSR specifically and because major shareholders, when consulted previously, indicated their preference for the chosen comparator group. NBSC independently carries out the relevant TSR calculations for the Committee.

Awards under the existing KIS result in up to approximately 63% of Executive Directors' annual remuneration opportunity (excluding pensions) being performance-related and, under the proposed new remuneration arrangements, will be approximately 70%; an approach that is appropriate for Kingfisher as a dynamic international retailer.

Substantial awards under the KIS Cash scheme and the KIS Shares scheme are only payable to executives on achievement of demanding performance targets as agreed with the Committee at the beginning of each year, based on Kingfisher's strategic and financial planning process and the economic and competitive environment in which the Company and its principal businesses operate. Assuming target performance is fully achieved, each component is valued at 60% of base salary for Executive Directors, giving a combined value equivalent to 120% of salary. In years when Kingfisher achieves performance significantly in excess of target this combined value can increase to 165%. The Committee has discretion to adjust awards (up or down) where it concludes that a particular individual's contribution warrants a different level of award (but subject to the maximum combined level, before the operation of the multiplier explained below, of 165% of base salary).

If an executive does not work for Kingfisher throughout the whole of the financial year, the Committee has the discretion to determine the appropriate level of payment under the KIS Cash scheme for that year.

Where Kingfisher terminates an executive's contract without notice or without proper cause, or on retirement, then, reflecting the fact there will be no entitlement to awards under the KIS Shares scheme, the executive may receive a cash replacement of the equivalent value of the KIS Shares scheme award, pro rata for the period of the financial year he was employed, subject to the discretion of the Committee to decide the appropriate level of such bonus.

Review of the KIS

Background
With the KIS having been in operation for three years, the Committee decided to conduct a full review of the operation of the KIS in light of experience, to assess the extent to which the original objectives were being met and to consider the extent to which improvements could be made in the context of developments in remuneration practices over the period.

The key objectives of the KIS structure when it was introduced were its simplicity, resulting from rewards being primarily based on individually tailored annual bonus targets, the benefits of paying a sizeable proportion of the earned bonus in shares, and a clear and increasing alignment with shareholders' interests with a retentive effect over the three year vesting period for executives. The Committee continues to believe that these should be the guiding principles for the Company's incentive structure.

The review confirmed that, to a significant extent, the KIS continued to satisfy most of its objectives. However, while other companies also updated their arrangements and provided for a significant proportion of the annual bonus to be delivered in the form of shares, it is clear that most other companies have coupled that approach with a stand-alone performance share plan. Because the entire incentive at Kingfisher is driven from the annual bonus and there is no separate long-term incentive award, the current structure fails to provide sufficient retention incentive for executives in consecutive years when little or no bonus is earned, as can happen in a cyclical downturn.

Annual bonus and deferred bonus shares
To address this, the Committee's proposed solution is to decouple the annual bonus from the long-term incentive element by removing the multiplier element from the KIS and replacing it with annual awards of performance shares in a manner which is much more consistent with general FTSE 100 practice.

The proposed new structure involves a slight shift in emphasis away from the annual bonus, although the annual bonus remains the principal element of the incentive package.

The proposal involves an increase in the expected value of the incentive package for on-target performance to bring it up to median on-target incentive levels for FTSE 100 companies. It should be noted that this will be the first increase in the expected value of the package in six years.

This proposal includes the introduction of a new Performance Share Plan (PSP) for which formal shareholder approval is being requested at the AGM in May 2006. The PSP is summarised in detail in the Notice of AGM.

Under the proposed structure, on-target annual bonus potential for Executive Directors will be reduced to 90% of salary (from 120% of salary) with a reduced maximum potential of 150% of salary (from 165% of salary) which will continue to be payable only against stretching performance targets (as explained further below). Up to one-third of any bonus earned will be paid as deferred shares, reduced from the current limit of 50%.

Deferred bonus shares will vest on the third anniversary of grant or earlier for a 'good leaver' (as determined by the Committee) or following a change of control. Deferred bonus shares will be forfeited by leavers if dismissed for cause or, in normal circumstances, following a voluntary resignation. For future awards of deferred bonus shares (and PSP awards), consistent with developments in best practice, awards will receive a dividend roll-up calculated on the basis of a notional purchase of shares on the ex-dividend date using that day's closing mid-market price.

At the end of the three year period, the executive can sell sufficient vested deferred bonus shares (and shares released under the PSP) to pay the tax liability arising on vesting, but no other shares can be sold until the value of his shareholding equates to the share ownership targets explained further below.

The PSP

The PSP will be a stand alone plan under which provisional awards of Performance Shares are granted each year to selected senior executives. Performance Shares will be provisionally awarded at six-monthly intervals following the publication of the annual and half yearly results. The first such award would be made following the AGM in May 2006 and the second in September 2006. In future years, awards would normally be made in March/April and September/October.

Performance Shares would normally vest three years from the award date, provided that the executive is still employed by the Group and Kingfisher's TSR performance was above median for the FTSE 100 during the three year period. No vesting would occur at or below median performance. In addition, as currently, for awards to vest, the Committee must also be satisfied that the TSR performance is reflective of underlying performance for such awards to vest.

Initially, the maximum annual Performance Shares vesting for above upper quartile performance under the plan would be worth, at grant, 125% of a participant's salary (subject to the discretion of the Committee to award a different level within the normal plan limit of 200%; although there is no current intention to exceed 125%) reducing to 31.25% vesting for just above median performance.

The Committee's view on the new structure

The Committee believes that the new incentive structure is appropriate because:

• it continues to align the interests of executives with those of shareholders through a continued emphasis on equity based incentives;
• a suitable (and unchanged) level of performance related pay continues to be available in cash;
• while the new proposals do add slightly to overall complexity, the arrangements remain relatively simple and continue to provide the necessary alignment with shareholders' interests;
• the annual award of performance shares will provide the Company with a more conventional incentive structure that will provide a better 'lock-in' of key executives;
• overall incentive potential will be market competitive in terms of quantum;
• the structure will continue to be weighted towards the achievement of stretching, individually targeted, annual bonus measures;
• the structure will be reflective of best practice in relation to exercisability on a change of control or general early leaver events and in relation to the dividend roll-up on vested shares.

The Committee also confirms that the TSR relative to the FTSE 100 remains the most appropriate performance measure for Kingfisher.

Share Ownership Guidelines

The Committee has established formal Share Ownership Guidelines which prohibit Executive Directors selling shares obtained through the plans (except to meet tax obligations) until they hold shares worth at least one times base salary (two times for the Group Chief Executive). The Committee believes that this, together with the KIS Shares scheme deferral period, will provide a longer-term retention mechanism and mean that, over time, executives will have a significant personal interest in Kingfisher shares. The Committee believes these arrangements align executives' and shareholders' interests effectively and encourage a long-term view of performance.

Shareholder approval is sought on the following proposals which form the basis of two ordinary resolutions being put to shareholders at the AGM:

• A resolution to amend the current KIS approved in 2003 by providing for the removal of the multiplier award facility and the inclusion of a provision to credit awards with an amount in shares representing the deemed reinvestment of dividends; and
• A resolution to approve the stand-alone PSP.

Key performance targets

For Kingfisher Executive Directors and senior executives at the corporate centre, the key performance targets for the annual bonus applicable to the KIS Cash scheme and the KIS Shares scheme for the financial year ended 28 January 2006 focused on:

1. Group profit after tax;
2. Group return on invested capital;
3. Total Group sales growth; and
4. Individual targets.

Ian Cheshire, having divisional responsibilities, was judged against Group profit after tax for 25% of his total bonus potential with the remaining 75% potential being assessed on the International division's total sales growth and return on invested capital as well as his personal individual targets.

For the financial year ended 28 January 2006, the bonus payments for each of the Executive Directors are set out in the table in the section Executive Directors' Remuneration Overview.

Because none of the financial targets set at the beginning of the year were reached at the Group level, no bonus payments in respect of any financial targets were made to Gerry Murphy or Duncan Tatton-Brown. However, a relatively small proportion of their overall bonus opportunity is separately measured by reference to the achievement of specific objectives and tasks and a proportion of that element was paid, the details of which (including the value of the KIS shares) are set out in the Executive Directors' remuneration overview.

Ian Cheshire's bonus is based on the targets set at the beginning of the year in relation to his International divisional responsibilities. The details, including the value of the KIS shares, are set out in the Executive Directors' remuneration overview.

In respect of the financial year ending 3 February 2007, the key performance targets for Gerry Murphy and Duncan Tatton-Brown are:

1. Group return on invested capital
2. Group cash generation
3. Group profit after tax; and
4. Individual targets.

For Ian Cheshire, 25% of his bonus will be on Group profit after tax with 75% being targeted in respect of B&Q UK's performance on:

1. Return on invested capital
2. Cash generation; and
3. Individual targets.

Apart from the ShareSave Option Scheme, all other option and incentive arrangements have been discontinued, but awards made in previous years will vest over time, in accordance with the rules governing the various plans. The details are shown in the section entitled Executive Directors' remuneration overview.

The Committee has been advised by NBSC that this remuneration structure is competitive but not excessive when compared with relevant external benchmarks and the Committee is satisfied that there is an appropriate balance between the different elements of pay (including the split between fixed and variable pay).

Executive Directors' service contracts

All Executive Directors and UK senior executives have service contracts terminable by no more than 12 months notice by either side, with no different arrangements applying in the event of termination following a change of control. For senior executives not employed from the UK, the same principles apply, but there are local laws and regulations which mean it is possible that, subject to length of service and reasons for termination, more than 12 months' notice has to be given. The full details of the Executive Directors' contracts are summarised below.

The contracts for Gerry Murphy, Ian Cheshire and Duncan Tatton-Brown provide that termination payments would be paid on a phased basis at a monthly rate of 15% of annual salary for a maximum of 12 months. Lower amounts are payable if the Director commences lower paid employment during the 12 month period and payments cease immediately when employment providing the same or higher value remuneration is started.

To reflect the arrangements entered into on his appointment, Gerry Murphy would, in addition, continue to receive for the same period a monthly Funded Unapproved Retirement Benefit Scheme (FURBS) pension contribution or Earnings Cap supplement at a reduced rate of 30% of his monthly salary above the Earnings Cap (see pensions paragraph below).

	Date of last contract	Notice period
Gerry Murphy	16/03/04	12 months
Ian Cheshire	16/03/04	12 months
Duncan Tatton-Brown	16/03/04	12 months

All Executive Directors' contracts terminate automatically upon reaching normal retirement age, currently 60, although this will need reviewing when the Age Discrimination Act comes into force in October 2006.

Kingfisher allows each Director (and senior executives), other than Gerry Murphy, to accept and hold one non-executive role outside the Group. Gerry Murphy's contract allows him to take two non-executive roles with the consent of the Chairman, but, in accordance with the Combined Code requirements, only one FTSE 100 directorship. To date he has only held one non-executive appointment at any one time. All appointments are subject to conflict checks.

Pension provision

Scheme details
Gerry Murphy, Ian Cheshire and Duncan Tatton-Brown joined Kingfisher after the introduction of the Earnings Cap and are members of the main funded arrangement which was available to all UK employees who joined the Group prior to 1 April 2004, the Kingfisher Pension Scheme, which provides a pension on retirement at age 60 of 1/60th of base salary up to the Earnings Cap for each year of pensionable service. In the event of death during employment, dependants would receive a pension and a lump sum from the scheme (relating to the employee's contributions during the period of membership) and life insurance equal to four times the amount of the Earnings Cap. On leaving the employment of the Group before retirement, they would become entitled to a deferred pension.

All three Executive Directors accrue benefits in Kingfisher's final salary pension scheme on earnings up to the limit of the Earnings Cap. This limit is set to fall away on 6 April 2006 (‘A' day) as a result of announced tax changes but, to avoid escalation of costs, the Company has introduced a scheme Earnings Cap broadly in line with the Government set Earnings Cap.

Gerry Murphy's pension arrangements also include a contribution to a FURBS of £181,720 for the year to 28 January 2006 (which, when aggregated with the Earnings Cap supplement and detailed in note 1 to the table below, gives a total combined pension supplement of 40% of his salary above the Earnings Cap). The provision of a FURBS will be reviewed in the light of the impending changes to pension provision required by the Finance Act 2004. However the total contribution percentage will not change and the Committee's stated position, as outlined in the 2004/05 Annual Report is, and remains, that there is no intention to increase the Company's costs of pension provision as a result of the introduction of the new regime post A day.

Duncan Tatton-Brown and Ian Cheshire were already salary capped with a salary supplement paid (10%). The introduction of our Scheme Specific Earnings Cap means there are no changes proposed to their pension arrangements as a result of the tax changes being introduced to pensions.

Under the Kingfisher Pension Scheme Gerry Murphy's benefits accrue at the same rate as those for Ian Cheshire and Duncan Tatton-Brown.

Executive Directors' remuneration overview

	Total remuneration
£ thousands	Base salary	Total benefits1	Cash bonus	20062	2005
Total benefits include Earnings Cap Supplements of £126,280 for Gerry Murphy, £29,163 for Ian Cheshire and £26,583 for Duncan Tatton-Brown; medical, life and permanent health insurances, and a cash allowance in lieu of a company car. For the contingent shares award under the KIS Shares scheme in relation to the financial year ended 28 January 2006, see below. In March 2005 after completion of last year's report, both Gerry Murphy and Duncan Tatton-Brown commuted part of their prospective cash bonus to accrue greater pension benefit. No additional liability is incurred by the Company. See Shareholder return for further information.
Executive Directors
Gerry Murphy3	875.0	166.0	55.8	1,096.8	1,335.1
Ian Cheshire	396.6	52.6	141.4	590.6	489.5
Duncan Tatton-Brown3	370.8	50.1	25.2	446.1	488.7
Total	1,642.4	268.7	222.4	2,133.5	2,313.3

KIS share awards

Name	Contingent shares held at start of year	Number of contingent shares awarded in year – before TSR Multiplier2	Award price per share	Market price per share on date awarded	Number of contingent shares at end of year – before TSR Multiplier2	Number of contingent shares at end of year – assuming maximum TSR Multiplier2 achieved	Vesting date4	Lapse date
Where the award is the subject of the TSR Multiplier, awards at the beginning of the year include the maximum shares that might vest on achieving the maximum TSR Multiplier effect. At the start of the year ended 28 January 2006 only the award to Gerry Murphy included a TSR Multiplier, of 88,579 shares. Once the contingent award is made in respect of the bonus earned, the only qualifying condition to receive the award before the application of the TSR Multiplier is to be in the employment of the Company at the vesting date. To receive further shares under the application of the TSR Multiplier, the TSR over the three year period following the year for which the bonus was earned must be above the median for the comparator group (FTSE 100 index). Read further details of the TSR Multiplier. Unlike the other Executive Directors, Gerry Murphy did not receive the normal (and final) grant of options in April 2003. Consequently his contingent share award under the KIS made in April 2004 is subject to the TSR Multiplier. We disclosed in last year's Remuneration report that these share awards under the KIS Shares scheme would be made in early 2005, in respect of the financial year ended 29 January 2005. These share awards are structured as nominal cost options (on payment in aggregate of a maximum of £1). They will normally vest from April 2008 and will be exercisable within the period of six months starting from the vesting date. As the first vesting date for any of the awards is 28 April 2007 and no Executive Director has left the Company none of the awards vested during the year.
Gerry Murphy	310,0271		288.5p	286.0p			28/04/07	28/10/07
		116,8223	286.92p	285.5p	338,270	473,577	06/04/08	06/10/08
Ian Cheshire	86,088		288.5p	286.0p			28/04/07	28/10/07
		39,6853	286.92p	285.5p	125,773	141,647	06/04/08	06/10/08
Duncan Tatton- Brown	44,412		288.5p	286.0p			28/04/07	28/10/07
		44,9133	286.92p	285.5p	89,325	107,290	06/04/08	06/10/08
Total	440,527	201,420			553,368	722,514

In addition, as explained above, awards of contingent shares are due to be awarded on 10 April 2006, vesting in April 2009, to Gerry Murphy, Ian Cheshire and Duncan Tatton-Brown under the KIS Shares scheme to the value of £55,800, £141,400 and £25,200, respectively at the average mid-market price over the period 5 April to 7 April 2006. As provided under the KIS Share scheme rules, these share awards can increase by up to 40% depending on the Company's TSR performance over the next three years. As the share awards will be made after publication of the accounts for the financial year ended 28 January 2006, the detail will be disclosed fully in next year's Annual Report.

ShareSave option scheme

A UK ShareSave Option Scheme will continue to be open to all eligible employees, including Executive Directors. As is the case with all savings-related share option schemes open to all employees, there are no performance criteria provisions.

Number of options
	At start of year	Granted during year	Exercised during year	Cancelled during year	At end of year	Option price (pence)	Date from which exercisable	Lapse date
Gerry Murphy	6,733	–	–	6,733	–	245.40	01/12/09	01/06/10
	–	5,324	–	–	5,324	175.60	01/12/08	01/06/09
Ian Cheshire	6,019	–	–	–	6,019	157.00	01/12/05	01/06/06
Duncan Tatton- Brown	3,861	–	–	3,861	–	245.40	01/12/07	01/06/08
		5,324	–	–	5,324	175.60	01/12/08	01/06/09
Total	16,613	10,648	–	10,594	16,667

Share awards to Gerry Murphy – agreed in 2002 as part of his recruitment arrangements

Type of award	At start of year	Awarded during year	Market price of shares when award made	Qualifying conditions	Vesting date4,5	At end of year
These share-based awards were agreed as part of the terms of Gerry Murphy's recruitment as Group Chief Executive and were fully disclosed in 2003/04. In accordance with the terms of his appointment the value of the award was £360,000 as of the date of his appointment, reflecting the value of benefits foregone on leaving his previous employer to join the Group. The number of shares awarded was based on the Company's share price of 192.5p on that date (3 February 2003). Awards were granted on 17 April 2003 when the share price was 239.17p (pre the seven for eight consolidation in July 2003). This and the matching shares number were erroneously shown in the table to the Remuneration Report for 2004/05 as a post consolidated number of 163,636 and 480,905 shares respectively at an equivalent value per share, of 273.34p and as with other share awards and options granted prior to the Kesa demerger with vesting post the demerger, these were not in fact consolidated. No Matching Shares vest for below median performance. 561,039 is the maximum number of Matching Shares which may vest for upper quartile TSR performance over the three-year performance period reducing to one-third for median performance. Since the year end the TSR performance has been calculated and, as median performance has not been reached, no Matching Shares will vest. If Gerry Murphy's employment terminates before any vesting date by reason of death, injury, ill health, early termination by Kingfisher (other than for cause) or resignation for ‘good reason' (as defined in his service contract), then the Investment Shares will vest at that date and, subject to the discretion of the Committee in certain limited circumstances, such of the Matching Shares as can be treated as vested, taking into account TSR performance up to the date of cessation of his employment, but reduced on a time pro-rated basis. As the awards are structured as nominal cost options (on payment in aggregate of a maximum of £1) they can be exercised within a six month period starting from the vesting date. Following an investment of a further £288,332 in the shares of the Company by Gerry Murphy, up to a further 301,476 matching shares, which vest for upper quartile TSR performance over the three-year performance period reducing to one-third (100,492) for median performance, were awarded on 6 April 2005 at a price of 286.92p when the market price of the shares was 285.5p.
Investment Shares	187,0131,2		239.17p	Part of recruitment	01/02/06	187,013
Potential Matching Shares	Between nil and:	–	239.17p	TSR of median to	01/02/06	561,0393
	561,0392			upper quartile
	285,960	Up to	286.0p	compared to	27/04/07	285,908
	–	301,4766	286.92p	FTSE 100	06/04/08	301,476
	Up to 776,868	Up to 301,4766	n/a		n/a	1,078,344

No variations to the terms and conditions of the awards were made during the year and no awards vested or lapsed during the year. No further awards under this arrangement will be made.

Closed incentive plans

There are two further long-term incentive plans, the Executive Share Option Scheme and the Kingfisher Incentive Plan (KIP), which are now closed and under which no further awards will be made but where there are amounts from prior awards which may still become exercisable or due at the end of their respective vesting periods, performance cycles or deferral periods. Any such amounts will vest or be paid, before the plans are wound up. The full details of each can be found in previous Annual Reports.

The outstanding awards are as follows:

Executive Share Options
The Executive Share Option Scheme closed in June 2003. The last grants were made on 17 April 2003. Other than those granted to Gerry Murphy, the options vest from three to 10 years of the grant date subject to the satisfaction of a performance condition which generally requires the Earnings Per Share (EPS) of the Company to have increased over a three-year period by Retail Price Index (RPI) plus 6%.

The criteria were set and approved by shareholders when the scheme was established in 1993 and were judged at the time to be appropriate criteria. The options granted to Gerry Murphy were part of the terms of his recruitment and have the same performance criteria except that he has agreed that they can only be tested on the third anniversary of grant or, if not satisfied, on the fourth anniversary of grant (from a fixed base).

In the period 30 January 2005 to 28 January 2006, the highest and lowest market price for Kingfisher shares was 312.25p and 201.0p respectively. The market price at close of business on 27 January 2006 was 242.5p.

Number of options
	At start of year	Grant- ed during year	Exer- cised during year	Lapsed during year	At end of year	Option price (pence)	Date from which exer- cisable	Lapse date
Phantom Options of 91,350 were granted to Ian Cheshire in addition to these options at the same price, with the same performance conditions and over the same maturity periods. On exercise only the cash equivalent to any gain will be paid and disclosed as remuneration at that time.
Gerry Murphy	12,612	–	–	–	12,612	237.85	17/04/06	17/04/13
	1,332,773	–	–	–	1,332,773	237.85	17/04/06	17/04/13
	1,345,385	–	–	–	1,345,385
Ian Cheshire	45,489	–	–	–	45,489	395.69	26/10/04	26/10/08
	30,520	–	–	–	30,520	589.76	01/04/04	01/04/09
	74,346	–	–	–	74,346	393.43	17/04/04	17/04/10
	69,991	–	–	–	69,991	357.18	25/09/04	25/09/10
	126,231	–	–	–	126,231	209.93	26/09/04	26/09/11
	91,3501	–	–	–	91,350	290.08	09/04/05	09/04/12
	164,144	–	–	–	164,144	194.95	08/10/05	08/10/12
	134,538	–	–	–	134,538	237.85	17/04/06	17/04/13
	736,609	–	–	–	736,609
Duncan Tatton- Brown	72,272	–	–	–	72,272	209.93	26/09/04	26/09/11
	26,151	–	–	–	26,151	290.08	09/04/05	09/05/12
	43,600	–	–	–	43,600	194.95	08/10/05	08/10/12
	35,736	–	–	–	35,736	237.85	17/04/06	17/04/13
	177,759	–	–	–	177,759

KIP

	Type of award	At start of year	Award- ed during year	Laps- ed during year	Date & market price of shares when award made	Vesting date of award made1	Vested during year	Balance remaining to vest
Subject to remaining in employment at Kingfisher until the date the awards become receivable. Vested on 18 March 2005 when the market price was 300.0p, giving a value on vesting of £45,243 in respect of Duncan Tatton-Brown and £40,302 in respect of Ian Cheshire.
Duncan Tatton- Brown	Matching	15,081	–	–	March 2002	March 2005	15,0812	–
	shares				290.0p
	for deferred cash bonus	26,571	–	–	March 2003 238.5p	March 2006	–	26,571
Ian Cheshire
	Matching	13,434		–	March 2002	March 2005	13,4342	–
	shares for deferred cash bonus				290.0p

No awards lapsed during the year nor were there any variations to the terms and conditions of the awards.

Dilution limits

Kingfisher share plans comply with recommended guidelines on dilution limits and the Company has always operated within these limits. Assuming none of the extant options lapse and will be exercised and having included all exercised options under the scheme since 1993 the Company has utilised 4% of the 10% in 10 years and 2.6% of the 5% in 10 years in accordance with the Association of British Insurers (ABI) guidance on dilution limits. This also allows for the share awards under the KIS granted in 2004 and 2005, although there are currently sufficient existing shares held in the ESOP to cover the KIS awards.

Directors' pension benefits

The following table shows details required under both Schedule 7A to the Companies Act 1985 and the Listing Rules as they apply to Kingfisher for the year ended 28 January 2006.

In respect of the Companies Act, the details shown represent:

• accrued pension benefits at the relevant dates (payable from age 60);
• the increase in the amount of accrued pension during this year;
• the transfer value amounts as at 29 January 2005 and 28 January 2006;
• the increase in transfer value between those dates, net of member contributions paid.

	Directors' remuneration report regulations 2002						Additional listing rules
Name	Age	Years of service	Increase in accrued pension	Accrued  pensions		Increase in transfer value £000 (net of	Transfer  value1		Increase in accrued pension £000 pa (net of	Pension cost
Accrued pensions and transfer values as at 29 January 2005 have been restated to include employer contributions made in March 2004 (by way of bonus surrender) of £18,569 (Gerry Murphy), £15,000 (Ian Cheshire) and £20,000 (Duncan Tatton-Brown). Accrued pensions and transfer values as at 28 January 2006 include further employer contributions made in March 2005 (also by way of bonus surrender) of £38,869 (Gerry Murphy) and £30,000 (Duncan Tatton-Brown). As stated on in the Directors' Remuneration Overview, a contribution of £181,720 (2005 £176,331) was made to a FURBS.
				20062	20051	director's	2006	2005	inflation/	2006	2005
			£000 pa	£000 pa	£000 pa	contri- butions)	£000	£000	revalu- ation)	£000	£000
Gerry Murphy3	50	3	6	11	5	61	123	54	5	54	30
Ian Cheshire	46	7	2	15	13	24	145	114	2	8	24
Duncan Tatton- Brown	41	5	7	17	10	45	116	64	6	37	25

Remuneration policy for Non-Executive Directors

The Board determines the fees paid to Non-Executive Directors under a policy which seeks to recognise the time commitment, responsibility and technical skills required to make a valuable contribution to an effective Board. For the year ended 28 January 2006 Non-Executive Directors were paid an annual fee of £42,000 for their services as members of the Board plus, where appropriate, the following additional fees:

Deputy Chairman and Senior Independent Director (John Nelson)	£13,000
Chairman of the Audit Committee (Phil Bentley)	£10,000
Chairman of the Remuneration Committee (John Nelson)	£8,000
Chairman of the Social Responsibility Committee (Margaret Salmon)	£2,750

The Non-Executive Directors' fees were last reviewed in late 2003 and increased to their current levels on 1 February 2004. It is expected the fees will be reviewed during 2006.

The Chairman's fees are set by reference to his time commitment and relevant benchmark data. Peter Jackson will be remunerated as a Non-Executive Director until he assumes the role of Chairman. As Chairman he will receive a fee of £275,000 p.a. The fee reflects the fact that no contribution to secretarial support is to be provided.

Non-Executive remuneration

	Total remuneration1
	2006	2005
	£000	£000
Non-Executive Directors are only paid fees.
Francis Mackay	250	250
Peter Jackson	3.5	–
John Nelson	63	63
Phil Bentley	52	52
Michael Hepher	42	42
Hartmut Krämer	42	42
Margaret Salmon	44.75	45
Total	497.25	494

Non-Executive Directors have letters of engagement instead of service contracts. The Chairman's letter of engagement allows for six months' notice up to the age of 65 when the appointment ends without the need for notice. Other Non-Executive Directors are appointed for an initial period of three years. Their position can be revoked without compensation at any time at the discretion of the Company.

The letters of engagement for Phil Bentley and Hartmut Krämer, were reviewed in 2005/06, following completion of their first three year term, and formally renewed on 10 February 2006.

	Date of last letter	Unexpired term	Total length of service
Francis Mackay	14/01/05	19 months	4 years and 5 months
John Nelson	16/03/05	22 months	4 years and 2 months
Phil Bentley	10/02/06	31 months	3 year and 5 months
Hartmut Krämer	10/02/06	32 months	3 year and 4 months
Michael Hepher	19/01/05	5 months	8 years and 7 months
Margaret Salmon	12/03/04	5 months	8 years and 7 months

Shareholder return

The Company's TSR (share price growth plus dividends paid) for the five years to 28 January 2006 is shown in the graph below, which plots the value of £100 invested in Kingfisher over the last five financial years, assuming shares awarded in Woolworths and Kesa, when demerged, were sold and the proceeds re-invested in Kingfisher shares. The other line on the graph shows the performance of the FTSE 100 Index over the same period.

The Company chose the FTSE 100 Index as an appropriate comparator for this graph because the Company has been a constituent of that index throughout the period and its constituents are used as the comparator group for the multiplier awards under the KIS Shares Scheme.

By order of the Board
John Nelson
Chairman, Remuneration Committee

20 March 2006