US shareholders

Important U.S. Tax Information for Kesa Electricals Demerger

The following information is provided to assist U.S. shareholders who received shares of Kesa Electricals plc (Kesa) on 7 July 2003. It should be read in conjunction with the discussion of U.S. tax consequences of the demerger in paragraph 7 of part 5 of the circular to shareholders dated 17 June 2003 (Circular). Kingfisher plc (Kingfisher) accepts no responsibility for any use made of the following information and urges U.S. shareholders to consult a professional advisor as to how they report receipt of Kesa shares for U.S. tax purposes.

1. Basis Allocation

As explained in the Circular, if the demerger qualifies as tax-free for U.S. federal income tax purposes, U.S. shareholders will be required to allocate some of their tax basis in Kingfisher shares to the Kesa shares received. This allocation would be based on the relative fair market values of the Kingfisher and Kesa shares immediately after the demerger. U.S. federal income tax law does not specify any particular formula for determining relative values, but Kingfisher believes that a reasonable method would be to use the averages of the high and low trading prices on 7 July 2003 (the first trading day after the demerger).

The following table includes information about the high and low trading prices on the London Stock Exchange on 7 July 2003, as reported on the Daily Official List, and the resulting basis allocation under this method.

Stock High Low High-Low Average Shares Per 1000 Pre-Demerger Shares Allocation of Basis Percentage
Kingfisher 288.25p 270.75p 279.50p 875 86.3%
Kesa 202.00p 186.50p 194.25p 200 13.7%

Example

Before the demerger, a U.S. shareholder held 2,000 Kingfisher shares with an aggregate U.S. tax basis of $8,000. Following the demerger and the share consolidation, the shareholder holds 1,750 Kingfisher shares and 400 Kesa shares.

Under this method, the U.S. tax basis of the 1,750 Kingfisher shares would be:

(279.50x1750)
(194.25x400) + (279.50x1750)
x $8000 = $6904
(i.e. 86.3%)

The U.S. tax basis for 400 Kesa shares would be:

(194.25x400)
(194.25x400) + (279.50x1750)
x $8000 = $1096
(i.e. 13.7%)

2. Form of Statement To Be Attached To Tax Return

As also explained in the Circular, a U.S. Shareholder treating the demerger as tax-free would be required to attach an information statement to its U.S. federal income tax return for its taxable year that includes 7 July 2003.

Attached is a sample form of statement U.S. which shareholders and their advisors may find useful.