Annual Report and Accounts 2013/14

Progress report on our Creating the Leader strategy

Helping people have bet ter homes

Kingfisher plc is Europe's leading home improvement retail group and the third largest in the world, with over 1,120 stores in nine countries in Europe and Asia. Its main retail brands are B&Q, Castorama, Brico Dépôt and Screwfix. Kingfisher also operates the Koçtas¸ brand, a 50% joint venture, in Turkey with the Koç Group.

Strategic Report

01 Key highlights
02 Kingfisher at a glance
04 Chairman's statement
05 Group Chief Executive's statement
06 Our business model
08 Our strategy Creating the Leader & Key Performance Indicators (KPIs)
18 Sustainability: Becoming Net Positive
20 Financial Review
28 Risks

Governance

32 Board of directors
34 Senior management
35 Corporate governance
47 Directors' remuneration report
69 Directors' report
71 Directors' statement of responsibility

Accounts

72 Independent auditors' report to the members of Kingfisher plc
76 Consolidated income statement
77 Consolidated statement of comprehensive income
78 Consolidated statement of changes in equity
79 Consolidated balance sheet
80 Consolidated cash flow statement
81 Notes to the consolidated financial statements
120 Company balance sheet
121 Notes to the Company financial statements
134 Group five year financial summary
135 Shareholder information
IBC Glossary

Our online reporting

Increasing numbers of our shareholders are choosing to receive their annual report online, which helps us reduce the impact on the environment through lower paper usage. The online version, available at www.kingfisher.com, enables you to download the report to your computer desktop and access supplementary content, such as video interviews with the Group Chief Executive and Group Finance Director.

If you have a smartphone or tablet device, use the links and QR codes in this printed copy to take you to that part of the online report or Kingfisher's corporate website.

For the online report homepage go to http://annualreport.kingfisher.com/2013-14

Strategic Report Key highlights

£759m +9.8% Profit before taxation (£m)

Contribution to Group sales (£bn) Contribution to Group retail

23.4p Adjusted basic earnings per share* (p)

Full year dividend (p)

£710m +25.9% Profit for the year (£m)

10/11

11/12

12/13

13/1 4

23.4

profit (£m)

30.0p +24.5% Basic earnings per share (p)

Property (at market value† ) (£bn)

** Excludes Turkey.

Our purpose

Our purpose is to make it easier for customers to have better and more sustainable homes.

This approach will unlock more customer demand and grow our business to the benefit of all our shareholders – Kingfisher will be a more valuable business for our shareholders and a better partner for our suppliers; we will provide a more secure, and brighter, future for our colleagues and a more sustainable business for our local communities.

products under one roof, Castorama France is one of the leading home improvement retailers in France. Like B&Q, Castorama targets retail customers and DIYers and has an emphasis on style and inspiration for homemakers. In Poland and Russia there is a bigger emphasis on projects, as the home improvement market is at an earlier stage of its development.

Key figures*

Total sales £11.1bn

Employees 79,000

* All figures as at 1 February 2014.

Adjusted pre-tax profit

£744m

Stores 1,124

Our brands

B&Q is the largest home improvement and garden centre retailer in the UK and Ireland offering around 40,000 products for the homemaker, occasional to serious DIYers, and trade professionals. In China, the business is adapted to the local preference for a 'Do-it-for-Me', model. It specialises in the fitting out and decoration of new apartments. With up to 50,000

In both France and Spain, Brico Dépôt is primarily aimed at serious DIYers and professional builders. It operates a low-price format which offers customers a choice of 10,000 products available in larger product quantities. The same format is now being introduced into Romania.

Screwfix is the UK's largest omnichannel supplier of trade tools, accessories and hardware to trade professionals and serious DIY enthusiasts. In addition to its catalogue and website, Screwfix operates stores across the UK.

Koçtas¸, Kingfisher's joint venture in Turkey, is now the number one home improvement retailer in the country. Its stores are aimed at mainstream consumers, homemakers and occasional to serious DIYers.

Kingfisher Group Executive

Kingfisher's Group Executive team meets monthly and is responsible for the overall strategic decision-making of the Group. It is supported by the One Team Board, more information about which can be found on page 34.

Sir Ian Cheshire Group Chief Executive

Guy Colleau CEO Kingfisher Sourcing & Offer

Kevin O'Byrne CEO B&Q UK & Ireland

Philippe Tible CEO Castorama & Brico Dépôt brands

Steve Willett CEO Group Productivity & Development

Karen Witts Group Finance Director

Our operating countries

Kingfisher is Europe's largest home improvement retailer with over 1,120 stores in nine countries.

A snapshot of our businesses and our markets is set out in the table below.

Our markets

France

Country	Population (m)*	Households (m)*	Market position**	GDP growth 2014 estimated (%)§	Market brand	Store numbers	Selling space ('000s m2 )	Employees (full time equivalent)
France	63	27	2	0.9		105	1,118	11,322
						109	608	6,875

UK & Ireland
Country	Population (m)*	Households (m)*	Market position**	GDP growth 2014 estimated (%)§	Market brand	Store numbers	Selling space ('000s m2 )	Employees (full time equivalent)
UK	62	28	1	2.4		360†	2,570†	21,146‡
						335	23	4,375
Ireland	4.5	2	–	1.8

Other International

Country	Population (m)*	Households (m)*	Market position**	GDP growth 2014 estimated (%)§	Market brand	Store numbers	Selling space ('000s m2 )	Employees (full time equivalent)
Poland	38	15	1	2.4		72	529	10,197
China	1,348	427.5	–	7.5		39	319	3,997
Spain	46.5	18	2	0.6		24	142	1,371
Russia	143	53	3	2.0		20	185	2,648
Romania	21	7.5	3	2.2		15	156	1,037
Turkey	74	19	1	3.5		45	216	3,333
					Total	1,124	5,866	66,301

Store numbers, selling space and employee data as at 1 February 2014.

* Source: The Economist Pocket World in Figures 2014. ** Source: Kingfisher estimates.

† Including Ireland.

‡ Including Ireland and Kingfisher Future Homes.

§ Source: International Monetary Fund.

Strategic Report Chairman's statement

"I am delighted to announce the start of a programme to return surplus capital to our shareholders, in addition to the annual dividend, the first such programme in Kingfisher's 32-year history."

Daniel Bernard Chairman

It has been another difficult year for retailers, due to the challenging economic environment which has affected several of the markets in which Kingfisher operates. In France, our biggest market, high levels of unemployment and higher taxes have led to consumer uncertainty, with customers opting to save more rather than spend more. In the UK, we saw a tough start to the year but an improvement as the year progressed, helped by falling unemployment and positive signs in the housing market.

Despite this weak economic backdrop, Kingfisher was able to deliver some growth, with adjusted pre-tax profits increasing by 4.1% on the previous year to £744 million. We generated £559 million of free cash flow and strengthened our balance sheet, finishing the year with net cash of £238 million. As a result, the Board recommended an increase in the full year dividend of 4.7%, making a total of 9.9p. I am also delighted to announce the start of a programme to return surplus capital to our shareholders, in addition to the annual dividend, the first such programme in Kingfisher's 32-year history.

Highlights of the year included another very strong performance from Screwfix in the UK, which continued to expand fast, opening its 300th outlet during the year. B&Q had a more difficult year and so the B&Q management team was strengthened in order to better position the business for the opportunities that any improvement in the economy should provide. In France, Castorama grew its share of a market that was slightly down during the year, and we continued to expand the Brico Dépôt brand, with new stores in France and Spain, as well as the acquisition of 15 stores in Romania, Kingfisher's first new market since 2006.

We continued to make good progress with our strategic agenda, Creating the Leader, which aims to position Kingfisher as a clear leader in home improvement retailing. Many of the short-term benefits of this programme have been used to support our results in a weaker than anticipated economic environment, including improving prices for customers in our major markets of France, the UK and Poland.

Further progress was made on our sustainability agenda through Kingfisher's Net Positive plan, with achievements in responsibly sourced timber, energy usage and community projects. You can read more about these initiatives in the Chief Executive's statement on page 5 and the Net Positive section on pages 18 to 19.

We are committed to diversity among our workforce and there is further information on our diversity policies and metrics on pages 18 to 19, 37 and 69.

As always, I would like to thank our 79,000 staff for their hard work during the year. In a people business such as retailing their contribution is vital, and it is through them that we can achieve Kingfisher's purpose of helping our customers have better homes and better lives.

Daniel Bernard

Chairman

Key highlights

Adjusted pre-tax profit

£744m +4.1%

Adjusted basic earnings per share

23.4p +4.9%

Basic earnings per share

Full year dividend

9.9p +4.7%

Group Chief Executive's statement

"Our prospects remain bright, giving us confidence to invest in the business and expand into new markets, whilst also commencing a programme to return surplus capital to shareholders."

Sir Ian Cheshire

Group Chief Executive

To watch a video interview with Sir Ian Cheshire go to http://annualreport.kingfisher.com/2013-14/strategic report/ceo-statement.html

Although the economic environment was difficult, Kingfisher made good progress during the year. After an extremely difficult first quarter, which was affected by poor spring weather, the environment improved as the year progressed. The economic backdrop was generally soft across Europe for much of the year, particularly in France, our most significant market. However, our self-help programme enabled us to grow profits and improve our balance sheet strength, whilst also investing in lower prices and improved convenience for our customers. We therefore finished the year in good shape.

We have continued to make good progress with our Creating the Leader strategy, which has supported short-term trading results whilst also building Kingfisher's longer-term future. As well as emphasising our affordability credentials through price initiatives, we have continued to make home improvement easier for customers through an improved online offer at B&Q in the UK & Ireland and upgraded websites in Turkey, China, Brico Dépôt France and Spain.

Further progress was made in sharing our best ranges across more of our businesses, with particular progress in own brand paint. In October we held our inaugural One Team Product Show in Lille where 10,000 of our new product ranges were unveiled to 6,000 store colleagues from around the Group. Expansion continued with more than 80 new stores opened across Kingfisher, including 60 at our Screwfix business. Screwfix had another excellent year, growing sales by more than 17% (on a 52 week basis) and creating nearly 900 jobs, whilst continuing to develop its industry-leading online operations. Kingfisher continues to work more closely as a networked organisation, with further investment in our One Team Academy, which provides training modules for senior management.

At Kingfisher we are also committed to making a positive contribution to society and the planet as we grow our business. Through our Net Positive programme we help our customers to create more sustainable homes, while improving efficiency and opening up new sources of revenue for our companies. We made good progress this year towards many of our ambitious targets in timber, energy use and new community engagement projects. See pages 18 to 19 for more details.

Looking ahead, we will continue to drive our Creating the Leader programme this year. Our key priorities will include starting the roll-out of our omnichannel programmes across the Group (allowing customers to shop with us in any way they prefer – via shops, the internet or catalogues). In addition we will extend our sourcing programmes and initiate a four-year Group-wide IT change programme. This will involve replacing our physical infrastructure and software to enable a step change in our customers' shopping experience.

We are also seeking organic growth in our selling space of 2% (71 new stores), including two new country entries, Brico Dépôt into Portugal and Screwfix into Germany.

Importantly, we will focus our portfolio to maximise our economic returns, including the disposal of our stake in the Hornbach business following our decision to expand into the Romanian and German markets where Hornbach operates. In China, our B&Q business is now stable and so we are now looking for a strategic partner to help grow the business and replicate the successful partner approach in Turkey.

B&Q UK & Ireland has performed resiliently during the economic downturn, growing profits in a declining market. Looking ahead, with its customers and market

evolving very quickly B&Q has set about redoubling its efforts to achieve future growth and continued success. Following the strengthening of the B&Q management team in October 2013 under the direct leadership of Kevin O'Byrne, B&Q is working towards simplifying its business to make it more agile in the marketplace. The business aims to grow sales and economic profit, for example by delivering an improved omnichannel experience for customers, an optimised store footprint and driving footfall with better targeted marketing and more competitive pricing.

Given the success of the last six years in improving our balance sheet and cash generation, and having successfully resolved an outstanding French tax case, I am delighted that we are able to announce a multi-year programme of additional capital returns. This will be in addition to the annual dividend and will start during 2014/15 with around £200 million. At this level Kingfisher would have the flexibility to continue reinvesting in the business, pay a healthy dividend and capitalise on valueenhancing consolidation opportunities.

As we start the new financial year, we are well placed to benefit from a pick-up in consumer spending as Europe's economies return to growth. Our prospects remain bright, giving us confidence to invest in the business and actively manage our portfolio, including expanding into new markets, whilst also commencing a programme to return surplus capital to our shareholders.

Sir Ian Cheshire

Group Chief Executive

Our unique contribution as a business is to harness our home improvement experience, our heritage as a leader in sustainability and our scale and sourcing capability to bring new, more sustainable and more affordable products to market. This means our customers can have better homes, the planet's resources can be protected and we generate value for our people, communities and shareholders.

What we do

Kingfisher is a retailer of home improvement products and services.

The vast majority of our sales take place through our 1,124 stores in nine countries across Europe and in China. Increasingly we are also selling via the internet.

How we do it – our Net Positive ambitions

In the broadest sense our business creates value for society in a number of ways. We help people to have better homes for themselves and their families and we have a long heritage of helping them do this in a more sustainable way. We operate in the heart of local communities, supporting local projects, positively impacting the environment and importantly providing local employment. Over 79,000 people work in our businesses and many more work for our suppliers. And we contributed £1.71 billion in 2013/14 to the economies in which we operate through taxes borne and collected. We aim to do more than minimise our impact; instead we aspire to have a positive impact on the world. We call this approach Net Positive and we believe this gives us a 'licence to operate' for the long-term (see pages 18 to 19 for more information).

Financial value

This section concentrates on the financial value that we create – that is, the cash we generate. Cash is the life-blood of any business as it can be reinvested to keep a business healthy and growing, and is also used to reward the owners who bear all the investment risk. For Kingfisher maximising our cash generation in a responsible way means maximising sales and minimising costs whilst observing key behaviours – responsibility, honesty, passion, openness and adaptability. The better we are at this the more cash we generate and the more value we create for our people, our shareholders and society at large.

Maximising sales

We believe home improvement is an attractive retail sector as spending on the home is a key priority for householders.

As a specialist in this area we aim to provide a wide product choice and expert advice while using our international strength and capability to bring new, more sustainable and more affordable products to market. There are four key areas we focus on in order to maximise sales:

Customers

We aim to have mass appeal with a compelling choice of products and services so that we can capture a large share of the home improvement market. We recognise that 'one size does not fit all' and so we have adapted our customer offer to best suit the different needs of the Do-it-Yourself (DIY) customer, the Do-it-for-Me (DFM) customer and the professional tradesman.

People

Retail is a people business and it is particularly true in our sector as customers often need help and advice when shopping for home improvement products and services. We aim to recruit and retain diverse and talented teams to serve our customers and we prioritise investment in their training and development.

Products

We use our scale and international reach to find the world's best products and make them available to customers in their local market. The rate of innovation in home improvement tends to be slower than in other retail sectors, such as electricals or clothing, and so we are increasingly deploying our international scale and experience to work with suppliers to stimulate innovation and create better, more sustainable and affordable products.

Channels

We want to make home improvement as easy as possible for our customers and this includes giving them as wide a choice as possible of ways to shop with us.

As well as having local stores with extended opening hours we increasingly offer home delivery and 'click & collect' via the internet. This type of retailing is called omnichannel and our most advanced business in this area is Screwfix in the UK.

Minimising costs

The biggest cost in our business is buying the products that we sell to our customers.

Our suppliers benefit from the huge scale that we can offer them as one of the largest buyers of home improvement products in the world. The certainty of large scale orders means they can operate their businesses more efficiently and these benefits are shared between the manufacturer and Kingfisher – helping to minimise our costs.

The next major cost is selling and distribution, principally the cost of running our stores, the cost of getting products to our stores and the cost of our people. We are constantly working on a rolling programme of cost efficiencies and productivity initiatives to minimise these costs sustainably.

Cash generated

The net result of maximising our sales whilst minimising our costs is the optimisation of the cash we generate each year. Over the last six years we have generated £5.5 billion of operating cash flow from our business model.

We have strengthened our balance sheet by eliminating our financial net debt and we have reinvested £1.7 billion in modernising and expanding our store network and upgrading our IT and supply chain infrastructure to underpin our future prospects. And we have returned £1.0 billion to our shareholders as annual dividends. Over the same period our market value has grown from £3.4 billion to £8.8 billion.

Our strategy for delivering this, known as Creating the Leader, is on pages 8 to 17, including Key Performance Indicators (KPIs) and progress to date.

To view and download the business model go to http://annualreport.kingfisher.com/2013-14/strategic-report/our-business-model.html

Page Heading EAS IER COMMON CREATING THE LEADER

Our markets

We currently operate in nine countries, spanning nearly 600 million households.

Our research shows that spending on home improvement is a key priority for householders, making this an attractive sector for retailers. It is also attractive because of the relatively small number of well-known manufacturer brands. This means a specialist home improvement retailer provides a vital role for the consumer by offering a wide product choice and expert advice. We can offer a high proportion of own brand product, achieve economies of scale and have a more defensible position against online or generalist operators when compared with other retail segments. Read more about our business model on pages 6 to 7.

Our strategy

Our unique contribution as a business to our customers is that we can harness our home improvement experience, our heritage as a leader in sustainability and our international scale and sourcing capability to bring new, more sustainable and more affordable products to market.

This means our customers can have better homes, the planet's resources can be protected and we generate value for our people, communities and shareholders.

By also providing our customers with project advice and new shopping channels to complement our stores, we will make it easier for them to adapt their homes to their evolving needs. Our shorthand for describing this purpose is Better Homes, Better Lives.

The next phase of our development towards this vision – Creating the Leader – builds on the success of the previous phase known as Delivering Value, which has repositioned Kingfisher as a stronger business in the attractive home improvement market.

COMMON ONE TEAM Helping people have bet ter homes

Creating the Leader: Self-help initiatives

Four Themes	Eight Steps	Key Performance Indicators (KPIs)
EASIER	1. Making it easier for customers to improve their home	• Like-for-like sales growth (LFL)
	2. Giving our customers more ways to shop	• Unique web users
	For more information see pages 10 to 11.
COMMON	3. Building innovative common brands	• % of Group sales direct sourced
	4. Driving efficiency and effectiveness everywhere	• % of Group sales that are common
	For more information see pages 12 to 13.	• Retail profit margin
EXPAND	5. Growing our presence in existing markets	• Kingfisher Economic Profit (KEP)*
	6. Expanding in new and developing markets	* A measure of profit after a charge for the capital used
	For more information see pages 14 to 15.	by the business. (See page 24.)
ONE TEAM	7. Developing leaders and connecting people	• Group employee engagement scores
	8. Sustainability: becoming Net Positive	• Net Positive sustainability dashboard
	For more information see pages 16 to 17.

Financial benefits

Predicting the potential retail profit benefits from this programme today, when we don't know the economic conditions or competitive landscape we will face in the future, is very difficult. However, whatever the conditions, we believe our efforts will drive higher LFL sales, higher gross margin and more cost

efficiencies than would have been delivered without this programme. In total we estimate that this would create an additional £300 million of annualised retail profit in the fifth year (2016/17), net of price reinvestment and based on the size of the business and market conditions in 2011/12.

Strategic Report Creating the leader Strategic Report Creating the Leader

EASIER AFFORDABLE CONFIDENCE TECHNOLOGY RANGE HELPFUL ADVICEAVAILABILITY EDUCATIONCHOICE

Our key steps

1. Making it easier for customers to improve their home
1. Giving our customers more ways to shop

What we did in 2013/14

Emphasised our affordability credentials:

Launched 'handy prices' marketing campaign in B&Q
Invested in pricing in Castorama France and Poland
Rolled out Brico Dépôt 'back to basics' marketing campaign
Extended Brico Dépôt France and Spain programme of 'arrivages' (one-off special buys) to Turkey and Poland
Launched UK Enterprise Finance Guarantee scheme for tradesmen

Extended our omnichannel offer:

Upgraded B&Q online offer (www.diy.com), including 20,000 extra products for home delivery (using Screwfix omnichannel infrastructure)
Preparatory work to extend TradePoint (B&Q's trade-only offer) website to main shop floor categories – e.g. kitchens – continues
Launched upgraded websites in Turkey, China, Brico Dépôt France and Spain. Work to upgrade Poland's website continues
Trialled 'click & collect' in Castorama France and in Turkey

Strategic Report Governance Accounts

CONVENIENT RESEARCH AVAILABILITY EDUCATIONCHOICE OMNICHANNEL

Key Performance Indicators (KPIs)

Like-for-like sales 13/14

11/12

+1.3%

+1.3% Unique web users (m) Monthly Moving Annual Average

Key future priorities

Going forward from 2014/15, we are replacing the longer list of detailed milestones in favour of a summarised version that better highlights the key wider Group priorities within the Creating the Leader framework.

Our key priority in 2014/15 is to:

• Extend omnichannel capabilities across the Group +0.7%

TradePoint's updated website is now transactional on 14,000 products. Further updates will include main shop floor categories

B&Q's improved online offer includes 20,000 extra products for home delivery

Strategic Report Creating the leader Strategic Report Creating the Leader

COMMON WORLD'S BEST PRODUCTS LOCAL MARKETS SCALE EXCLUSIVE BRANDS CUSTOMER UNIQUE CHOICE EFFICIENCY INNOVATION INTERNATIONAL

Our key steps

1. Building innovative common brands
1. Driving efficiency and effectiveness everywhere

What we did in 2013/14

Product:

Launched energy-efficient 'iQE' Group brand
Extended common paint ranges
− Rolled out 'Colours' Group own-brand paint into Russia and Spain
− Commenced roll out of new 'Colours' own-brand emulsion paint range across B&Q UK & Ireland (in 120 stores) and Castorama France (all 105 stores completed)
− Launched exclusive 'Valspar' mixing desk paint into B&Q UK & Ireland (now in 120 stores) and China
Launch of 'Site' workwear into Brico Dépôt France now planned during 2014/15 following 'arrivages' (one-off special buys) trial during 2013/14
Held inaugural European product show, attended by 6,000 store and buying colleagues from the UK and France
Achieved 9% common (up from 8% in 2012/13) and 20% direct sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality over quantity
Extended French common supplier contracts to the wider Castorama and Brico Dépôt brands division

Efficiency:

Upweighted distribution centre and cross-docking capability in Poland, Spain and Turkey
SG&A(1) optimisation from media buying programmes across the UK and France. Achieved c.£40m total savings from Group SG&A initiatives since the start of Creating the Leader
Extended Brico Dépôt shelf-ready packaging from 20% to 32%
Rolled out France and Spain all-staff bonus programmes to Poland (linked to individual store sales and profit growth)
Undertook IT process mapping analysis at Castorama France in readiness for Group-wide IT programme
(1) Selling, general & administrative expenses.

SCALE CHOICE EFFICIENCY LOCAL TASTE INTERNATIONALEXCLUSIVE DIVERSE PRODUCTIVITY

Key Performance Indicators (KPIs)

Products direct sourced

		% of total sales
--	--	------------------	--	--

13/14		20
12/13		19
11/12	15

Common product sales

% of total sales

13/14	9
12/13	8
11/12 2

Retail profit margin

%

13/14	7.2*
12/13	7.4
11/12	8.1

* The reduction in retail profit margin reflects difficult economic conditions in Europe and our decision to improve prices for customers in our major markets.

Key future priorities

Our key priorities in 2014/15 are to:

Extend sourcing programmes (e.g. new cross-Group MacAllister power and hand tools and Blooma BBQs)
Start four-year Group-wide IT programme, consistent with our ongoing capital expenditure plans

Kingfisher's inaugural European product show was held in October 2013 involving 6,000 colleagues from the UK and France

Blooma BBQs, one of our Group own brands, feature dishwasher safe and reversible grills

Group own-brand MacAllister has developed a new drill with a light for easy use in confined spaces

Strategic Report Creating the leader Strategic Report Creating the Leader

EXPAND GROWTH HIGHER RETURNS TRADE FLEXIBILITY INFILL CONSUMER REACH AMBITION BIG BOX INTERNATIONAL CAPABILITY LOCAL EXPERTISE

Our key steps

1. Growing our presence in existing markets
1. Expanding in new and developing markets

What we did in 2013/14

Existing markets:

Opened 84 net new stores ahead of original target of 68 stores including UK 62 (principally Screwfix outlets), France 7, Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4 'Koçtas¸ Fix' outlets), representing 3% space growth
Revamped and extended four Castorama France stores
B&Q UK store rightsizing update
− First freehold store deal completed with a grocer last year
- − Store reduced in size by 50%; sales density improvement of 75%
- − Non-operational space sold to grocer in February 2014 at a good return for £32 million
− An additional store has received planning permission and seeking planning permission for another 16

New and developing markets:

Bought 15 stores in Romania, which contributed an additional 2% space growth. In total, Group space growth was 5%
Evaluated Screwfix international opportunities announcing a four-store pilot in Germany in summer 2014 and the launch of a country-wide website with next-day delivery

KINGFISHER ECONOMIC PROFIT AMBITION NEW TERRITORIES INTERNATIONAL CAPABILITY

Key Performance Indicators (KPIs)

**Kingfisher Economic Profit (KEP)*(£m)**

13/14		74
12/13	44
11/12

* See page 24.

Key future priorities

Our key priorities in 2014/15 are:

Organic growth of 2% (71 net new stores, of which 54 are Screwfix outlets) including entering two new markets
To actively manage the portfolio including completing the disposal of Hornbach and looking for a strategic partner for B&Q China (see the Group CEO's statement on page 5)
To continue to capitalise on consolidation opportunities (as we did in Romania)

Kingfisher acquired Bricostores' 15 stores in Romania in 2013/14. They will be rebranded under the Brico Dépôt banner

Castorama France revamped two of its stores, including this one in Dunkerque

Screwfix opened 60 new stores in the year, taking the total to 335

Strategic Report Creating the leader Strategic Report Creating the Leader

ONE TEAM DEVELOPING LEADERS NET POSITIVE DIVERSITY RECRUITMENTAMBITION COLLABORATION ACADEMY HARNESS

Our key steps

1. Developing leaders and connecting people
1. Sustainability: becoming Net Positive

What we did in 2013/14

People:

• Continued to extend the Kingfisher One Academy

Net Positive:

Published first Net Positive report and appointed Richard Gillies from Marks and Spencer Group plc as Group Sustainability Director, to lead the Net Positive agenda (see www.kingfisher.com/netpositive)
Over 1,400 Kingfisher employees shared an estimated gain of £10 million following the maturity of the ShareSave scheme in December 2013

DEVELOPING LEADERS ACADEMY CONNECTING PEOPLE ENGAGEMENT SKILLS MOBILITY TALENTRETENTION POSITIVE IMPACT

Key Performance Indicators (KPIs)

Engagement scores

Gallup Q12 survey (out of 5)*

13/14	3.95
12/13	3.91
11/12	3.96

Sales of products with eco-credentials % of total sales**

13/14	21
12/13	20
11/12	20

13/14 £2.3bn (eco-product sales) 12/13 £2.1bn (eco-product sales) 11/12 £2.2bn (eco-product sales)

* Based on a wider sample of employees with over 70,000 staff invited to participate in 2013/14. The 2012/13 figure of 4.11 for the leadership group rose to 4.25 in 2013/14.

** For full information go to www.kingfisher.com/netpositive/reporting

Key future priorities

Our key priorities in 2014/15 are to:

People:

Increase focus on talent management
Continue to develop Kingfisher One Academy with new programmes

Net Positive:

Establish processes to accelerate Net Positive innovation and to apply what we learn across the Group
Further integrate Net Positive into our Operating Company business plans

The Kingfisher One Academy ran 10 programmes for the Group's top 200 leaders in 2013/14

The first report covering our performance against our Net Positive targets was published in June 2013

Kingfisher achieved Business in the Community's Corporate Responsibility Index Platinum Big Tick in the 2013 survey. We are also included in two socially responsible indices, the FTSE4Good and Dow Jones Sustainability Index.

Becoming Net Positive

Net Positive is how we make a positive contribution to society while creating a more successful business.

Our Net Positive Approach

By becoming Net Positive we are making it easier for our customers to enjoy homes that are better and more sustainable. By operating in a Net Positive way we aim to become carbon positive, waste nothing, be restorative to the environment, and have a positive impact on people and communities. This will enable us to create sustained value for our business and stakeholders. It is making our business stronger, generating new streams of revenue and reducing our costs. For example, we have saved at least £30 million over three years through improved recycling and energy efficiency at our stores and operations.

We have 50 ambitious targets. Our Group-level priorities – timber, energy, innovation and communities – are areas where we believe we can have the most significant impact.

Our Net Positive priorities:

Timber

Timber is an essential raw material for our business. Through responsible sourcing, we aim to safeguard future supplies at an affordable price while protecting and enhancing forests. This makes it easier for customers to make more sustainable choices.

In 2013/14, 87% of the timber (by volume) used in our products was responsibly sourced (89% 2012/13). This decrease reflects our work during 2013/14 to improve the quality and scope of our data, which identified a number of products not previously included in the data scope. B&Q UK achieved 100% responsibly sourced timber in its products in 2011.

During 2013 B&Q developed a responsibly sourced sandpaper range, which will bring it to 100% responsible sourcing for both timber and paper products. Screwfix, Brico Dépôt Spain and Brico Dépôt France have all achieved over 90% responsible timber and paper sourcing.

We have launched forest projects that are enhancing biodiversity and safeguarding forests or woodlands by getting local communities involved. Brico Dépôt Spain, for example, launched two projects during 2013 that support reforestation and enable school children and employees to take part in forest conservation. Protecting and improving forests helps to ensure a resilient and sustainable timber supply chain for the future.

Energy

Our energy saving products and services help customers to reduce their bills and create more comfortable homes. Our customers are now saving almost 7 TWh (terawatt-hours*) every year through the energy saving products they've purchased from us since 2011/12. We estimate this could save our customers over £450 million every year (based on the average UK household energy bill).

We reduced the energy intensity (kWh/m2 ) of our property portfolio by 8% from our 2010/11 baseline through measures such as the introduction of energy efficient LED lighting in stores and distribution centres. New stores built to eco-design principles opened at several Operating Companies including Moulins (Brico Dépôt France) and Marseille (Castorama France).

We reduced total Greenhouse Gas (GHG) emissions by 5% from our 2010/11 baseline (see table on page 19).

Innovation

Sales of products with eco-credentials (those with a lower environmental impact) totalled 21% of total sales revenue, against our 2020 target of 50%. 'Best-inclass' eco-products (our most innovative eco-products) accounted for 5% of sales.

We have an ambition to develop 'closed loop' products and supply chains, so that the raw materials used in our ranges can be continually reused, repurposed and recycled. This will enable us to reduce costs and waste, and access new, more sustainable sources of materials.

We launched our own closed loop calculator in 2013. This practical tool enables us to assess and improve the closed loop credentials of our products.

Using the calculator we have identified products in our ranges with 'closed loop credentials'. These include the 'Infinite' kitchen worktop developed by Castorama France from waste wood, which is lighter and more water resistant than traditional worktops (see www.kingfisher.com/netpositive/infinite).

Communities

It is important to us that we invest in projects that help people to acquire practical home improvement skills and that improve the lives of those living in the communities near to our stores and within our supply chain.

A number of our community projects address this ambition. For example, to inspire the next generation of home improvers, Castorama Poland runs free DIY classes for school children, reaching 47,000 young people since 2012/13, while B&Q UK supported projects to help Scouts get their DIY badge.

Key highlights

Timber

87%

Responsibly sourced timber in our products in 2013/14

7 TWh Energy saved for customers since 2011/12

Energy

Innovation

£2.3bn Eco-product sales in 2013/14

Communities

530 Community projects since 2012/13

Annual Report and Accounts 2013/14 Annual Report and Accounts 2013/14 We have supported 530 community projects since 2012/13. Many Operating Companies also have company-wide programmes. Screwfix, for example, has launched the Screwfix Foundation, a new charity that will raise funds to fix, repair, maintain and improve properties and community facilities for those in need.

Other issues

We work on improving our performance in three important areas: Employees, including creating a diverse workforce and improving health and safety performance; Suppliers, including the standards we set through our Code of Conduct for Factory Working Conditions; and the Environment, including reducing waste and water use, protecting biodiversity and phasing out harmful chemicals. Areas of focus during 2013/14 included:

Human Rights

We take steps to protect the human rights of people affected by our business, in line with the UN Universal Declaration of Human Rights and the UN Guiding Principles on Business and Human Rights. This commitment applies to all our interactions with our stakeholders, including employees, suppliers and communities. During 2013, we commissioned a specialist consultancy to assess how well our business practices align with the Guiding Principles in the areas of supply chain, communities, human resources and partners. We are using the feedback and the results of a wider Net Positive policy review to further strengthen our policies relating to human rights. Our Code of Conduct for Factory Working Conditions (see www.kingfisher.com/netpositive/code) sets out the human rights standards we expect supplier factories to meet. We monitor the compliance of key suppliers with our Code and in 2013/14 we audited over 500 suppliers and factories.

Diversity

By creating an inclusive culture and diverse workforce we benefit from a wide range of skills, experience and perspectives. This improves customer insight, widens our talent pool and enables better decision-making. We encourage diversity in all its forms. During 2013/14, women made up 27% of the Kingfisher Board, 18% of senior managers(1) and 39% of our total workforce (see the Directors' Report on page 69 for more information).

How we manage sustainability

Net Positive is a core part of our Creating the Leader corporate strategy, with the Group Sustainability Director reporting directly to the Group Chief Executive. Our Operating Companies are taking the lead in implementing Net Positive. Each has a three-year plan for how they will contribute to our Net Positive goals, with targets for their business. By making Net Positive part of how our companies work, we will ensure that our activities are relevant and meaningful in each of our markets and that our companies are able to maximise the benefits for their customers and their businesses.

We launched our One Academy Net Positive executive education module during 2013/14, designed to further improve understanding of Net Positive among our most senior leaders.

We established the Net Positive Advisory Council in 2013, a group of senior external experts in different aspects of sustainability, who will provide advice, insight and challenge to help us progress towards Net Positive.

Further information

Our Net Positive Report is published annually at www.kingfisher.com/netpositive. The 2013/14 report will be published in June 2014.

(1) Includes the One Team Leadership Group and directors of the Group's subsidiary companies. The figure rises to 20% when excluding subsidiary directors.

Senior Management

Total workforce (FTE)

Greenhouse Gas Emissions (tonnes of CO2e)*

	Baseline 10/11	12/13	13/14	Progress towards target / Change
GHG emissions from the combustion of fuel and operation of facilities	154,953	150,244	160,223	na
GHG emission from the purchase of electricity, heat and steam	305,082	295,084	278,665	na
Total GHG emissions (2020 target = 25% reduction)	460,035	445,328	438,888	(5%)‡
GHG emissions per m2 of floor space	66.6	60.3	59.0	na

Methodology: Our GHG emissions have been calculated using UK government (DEFRA) emissions factors. Our data covers our material impacts: emissions from property energy use, dedicated delivery fleets and business travel by road. Our Net Positive Report contains further details of our GHG emissions, including data on scope 3 emissions. Our target is set against a baseline year of 2010/11. The 2013/14 Net Positive report will be published in June 2014.

* Our Net Positive data, including our Greenhouse Gas data, covers all our Operating Companies and 50% of our Koçtas¸ Joint Venture. ‡

Reductions are measured against our baseline year 2010/11.

Strategic Report Financial Review

Karen Witts Group Finance Director

To watch a video interview with Karen Witts, go to http://annualreport.kingfisher.com/2013-14/strategic-report/financial-review.html

A summary of the reported financial results for the year ended 1 February 2014 is set out below:

	2013/14	2012/13	Increase
Sales		£11,125m £10,573m	+5.2%
Adjusted pre-tax profit	£744m	£715m	+4.1%
Profit before taxation after exceptional items Adjusted basic earnings	£759m	£691m	+9.8%
per share	23.4p	22.3p	+4.9%
Dividends	9.9p	9.46p	+4.7%

A reconciliation of statutory profit to adjusted profit is set out below:

2013/14 £m	2012/13 £m	Increase
759	691	+9.8%
(17)	26
742	717	+3.5%
2	(2)
744	715	+4.1%

Profit and EPS including all exceptional items for the year ended 1 February 2014 are set out below:

	2013/14	2012/13	Increase
Profit after tax	£710m	£564m	+25.9%
Basic EPS	30.0p	24.1p	+24.5%

For glossary of terms used in the Financial Review see the inside back cover.

Overview

Statutory profit after tax increased by 25.9% in the year to £710 million. The statutory results for the year have benefited significantly from exceptional items which add £17 million to profit before tax, £131 million to profit after tax and 5.5p to basic earnings per share. For comparative purposes adjusted measures are therefore presented. The exceptional items are detailed further below.

The Group's financial reporting year ends on the nearest Saturday to 31 January. The current year is for the 52 weeks ended 1 February 2014 with the comparative financial year being for the 53 weeks ended 2 February 2013. This only impacts the UK & Ireland businesses with all of the other businesses reporting on a calendar basis as a result of local requirements. The effect of the 53rd week on the prior year results of the Group is the inclusion of an additional £72 million sales and an immaterial benefit to retail profit.

Total sales grew by 3.5% on a constant currency 52 week basis and increased by 5.2% to £11.1 billion (2012/13: £10.6 billion) on a reported rate basis. On a like-for-like basis, Group sales were up 0.7%. During the year, a net additional 91 new stores were opened, including 60 Screwfix outlets and 15 acquired stores in Romania, taking the store network to 1,079 stores (excluding 45 Turkey JV stores).

Retail profit before exceptional items increased by £27 million to £805 million (2012/13 restated: £778 million), including a £24 million favourable foreign exchange movement representing a 0.7% increase on a constant currency basis.

Trading Review by Major Geography

France
Sales £m	2013/14	2012/13	% Total Change Reported	% Total Change Constant currency	% LFL Change
France	4,423	4,194	+5.5%	+0.8%	(1.2)%

Retail profit £m	2013/14	2012/13	% Change Reported	% Change Constant currency
France	396	397	(0.4)%	(4.7)%

All trading commentary below is in constant currencies.

Kingfisher France

Kingfisher France sales grew by 0.8% (-1.2% LFL) to £4,423 million in soft markets impacted by weak consumer confidence. Across the two businesses, seven net new stores were opened and four were revamped, adding around 4% new space.

Gross margins were down 30 basis points, with ongoing selfhelp initiatives offset by higher price promotional activity across both businesses. Continued focus on cost control, including lower levels of variable pay, resulted in retail profit down 4.7% compared to last year.

Castorama total sales grew by 2.3% (+0.5% LFL) to £2,469 million. According to Banque de France data, sales for the home improvement market were down 1.4%. Castorama benefited from its innovative 'Do-it-Smart' approach aimed at making home improvement projects easier for customers. LFL sales of indoor products were up around 1% with sales of new kitchen, bathroom and storage ranges performing particularly well. Sales of outdoor seasonal products were down around 1%.

Brico Dépôt total sales declined by 1.0% (-3.0% LFL) to £1,954 million. According to Kingfisher estimates, sales for the comparable market, which more specifically targets trade professionals and heavy DIYers, were down around 2%. Brico Dépôt benefited from self-help initiatives which continued to progress well. These included new ranges introduced last year (e.g. kitchen, bathroom and power tool ranges) and more 'arrivages' (rolling one-off special buys), reinforcing Brico Dépôt's value credentials.

UK & Ireland

Sales £m	2013/14	2012/13	% Total Change Reported	% Total Change Constant currency 52 week basis	% LFL Change
UK & Ireland	4,363	4,316	+1.0%	+2.7%	+1.1%
Retail profit £m	2013/14	2012/13	% Change Reported	% Change Constant currency
UK & Ireland	238	231	+3.3%	+3.4%

All trading commentary below is in constant currencies and % movements on a 52 week basis.

Note: 2012/13 retail profit comparatives restated by £3 million to reflect reclassification of pension administrative expenses from finance costs to retail profit, as per the amended IAS 19.

Kingfisher UK & Ireland

Kingfisher UK & Ireland total sales were up 2.7% (+1.1% LFL) to £4,363 million supported by a strong performance from Screwfix and encouraging early signs in the smaller tradesman market, offset by a slower underlying retail market.

Kingfisher UK & Ireland delivered retail profit growth of 3.4% to £238 million. Gross margins were up 10 basis points with the benefits from ongoing self-help initiatives offset by investment in pricing across both businesses. A strong focus on operating cost efficiencies continued.

B&Q UK & Ireland's total sales were up 0.4% (+0.1% LFL) to £3,698 million. Sales of outdoor products were up around 2%. Sales of indoor products were down around 1%. TradePoint continues to progress with sales up around 7% compared to last year.

In Ireland, following the conclusion of the Examinership process in May 2013, one store was closed and significant rent reductions achieved across the remaining stores. The business returned to break even in the second half of the year.

The market for the UK's leading home improvement retailers was up 3.8%, including seasonal ranges up 5.0%, following record adverse weather last year. On a comparable basis, B&Q UK & Ireland sales were up 1.7% and including Screwfix, up 4.1%.

Strengthened management team

B&Q is a strong brand with the market leading position in the attractive UK home improvement market. Despite a very challenging housing and economic backdrop for the last six years, during which its market declined around 12% (as per Kingfisher estimates – BCG commissioned report), Kingfisher UK & Ireland delivered broadly flat sales and achieved profit growth of 50% by exploiting the UK trade market opportunity, delivering a number of self-help initiatives whilst continuing to invest in B&Q's stores and infrastructure. Looking ahead, its customers and market are evolving very quickly and B&Q UK & Ireland has set about redoubling its efforts to achieve future growth and continued success.

In October 2013, Kevin O'Byrne, an executive director of Kingfisher plc, assumed direct leadership of B&Q UK & Ireland. He subsequently further strengthened the B&Q UK & Ireland board with the appointment of three executives from the fast growing, highly successful Screwfix business (Steve Willett, previously Screwfix CEO; David Lowther, Supply Chain; and Guy Eccles, HR) and the appointment of two senior executives from outside Kingfisher (Chris Moss as Marketing Director, formerly Virgin, Orange and 118 118; and more recently Darren Blackhurst as Commercial Director, formerly Tesco, ASDA and Matalan).

This significantly strengthened management team has made an encouraging early start, working towards two key aims:

1. Re-energising the business. Examples of priorities include improving store navigation and customer communication, and driving footfall with better targeted marketing.
1. Simplifying the business and growing sales and economic profit to make it more agile in the market place and more efficient. Examples of priorities include delivering a seamless and efficient omnichannel experience for customers, optimising the store footprint, reducing complexity in the end-to-end supply chain, thereby reducing costs to support lower prices, and undertaking a detailed review of all the 19 categories across our stores, focusing on customer needs and business models.

Financial Review continued

Screwfix grew total sales by 17.6% (+7.3% LFL) to £665 million, benefiting from a strong promotional programme, extended opening hours, the continued roll out of new outlets and the successful introduction of a mobile 'Click, Pay & Collect' offer last year. Sixty outlets were opened, taking the total to 335.

The market for the smaller tradesman was up around 2%.

Other International

Sales £m	2013/14	2012/13	% Total Change Reported	% Total Change Constant currency	% LFL Change
Other International	2,339		2,063 +13.3% +10.5%		+3.4%

Retail profit £m	2013/14	2012/13	% Change Reported	% Change Constant currency
Other International	171		150 +14.2% +11.4%

All trading commentary below is in constant currencies.

Other International total sales increased by 10.5% (+3.4% LFL) to £2,339 million driven by the acquisition of Romania, LFL growth in Poland, Russia and China and new store openings. Retail profit increased by 11.4% to £171 million primarily driven by Poland.

During the year 15 net new stores were opened, two in Poland, one in Russia, four in Spain and eight in Turkey(1). Including the acquisition of 15 additional stores in Romania in Q2, 17% net new space was added compared to last year.

Sales in Poland were up 3.9% (+1.2% LFL) to £1,109 million reflecting new store openings. Gross margins were up 60 basis points with self-help initiatives more than offsetting investment in pricing which annualised during Q2. Productivity initiatives largely offset cost inflation resulting in a 10.9% increase in retail profit to £123 million.

In Russia sales grew by 9.2% (+8.0% LFL) to £453 million benefiting from new store openings. LFL sales were up 10.5% in H1 though slower in H2 (+5.8% LFL). Retail profit was £15 million (2012/13: £16 million reported retail profit) reflecting higher pre-opening and advertising costs compared to last year. In Turkey, Kingfisher's 50% JV, Koçtas¸, grew sales by 8.0% (+5.0% LFL) to £332 million reflecting new store openings. Retail profit contribution was up 24.4% to £11 million.

Brico Dépôt Spain sales grew by 16.4% (-3.1% LFL) to £284 million reflecting new store openings offset by a difficult market. Retail profit was £1 million (2012/13: £1 million reported retail profit). Bricostore Romania, acquired in Q2, contributed sales of £72 million and retail profit of £1 million.

Hornbach, in which Kingfisher had a 21% economic interest(2), contributed £26 million to retail profit (2012/13: £26 million reported retail profit).

B&Q China sales increased by 8.0% (+8.7% LFL) to £421 million benefiting from additional promotional activity. The retail loss was £6 million (2012/13: £9 million reported loss) largely relating to costs on the new format store trial which opened in March 2013.

(1) Including four Koçtas¸ 'Fix' outlets.

(2) Following the disposal of the Group's unlisted shares in Hornbach, going forward the Group will no longer record its share of Hornbach's results within retail profit.

Interest

The net interest income for the year was £23 million, compared with a restated prior year charge of £1 million. A breakdown of this is shown below.

	2013/14	2012/13 (restated)
	£m	£m
Underlying net interest	(2)	(3)
FFVR	(2)	2
Exceptional items	27	–
Statutory net interest	23	(1)

The principal movement in net interest is driven by the release of a £27 million exceptional repayment supplement provision on the Kesa demerger French tax case (see exceptional items below).

Profit before tax increased by 9.8% to £759 million. After removing the impact of exceptional items and fair value remeasurements, adjusted pre-tax profit grew by 4.1% to £744 million.

Profit after tax for the year was £710 million (2012/13: £564 million). This resulted in the Group recording a basic EPS of 30.0p in the year (2012/13: 24.1p).

Taxation

The effective corporation tax rate, excluding exceptional and prior year items is 26% this year compared with 27% in 2012/13. The overall rate of tax includes the impact of exceptional items and prior year adjustments. The impact of such items reduced the rate from 26% to 6% (2012/13: 18%) reflecting the positive decision in the Kesa demerger French tax case (see exceptional items below), the impact on deferred taxes of the further 3% fall in the UK rate and the release of prior year provisions either reassessed or time expired.

Kingfisher's effective tax rate is sensitive to the blend of tax rates and profits in the Group's various jurisdictions. The adjusted effective rate of tax, calculated on profit before exceptional items, prior year tax adjustments and the impact of rate changes, is 26% (2012/13: 27%). This is higher than the UK statutory rate because of the amount of Group profit that is earned in higher tax jurisdictions and because no future benefit is assumed for losses incurred in overseas jurisdictions such as China.

Effective tax rate calculation	Profit £m	Tax £m	2013/14 %	2012/13 %
Profit before tax and tax thereon	759	49	6	18
Exceptional items	(17)	114
Prior year items
and rate changes	–	27
Total – adjusted	742	190	26	27

The effective rate of tax is lower than in 2012/13 as a result of the mix of profits and tax rate changes in some of the countries in which we operate. The most significant rate changes in 2013/14 were the UK statutory tax rate falling from 24% to 23% regarding current year profits and from 23% to 20% regarding deferred tax, offset by an increase in the French tax rate from 36% to 38%.

The tax rates for this financial year and the expected rates for next year are as follows:

Jurisdiction	Statutory tax rate 2014/15	Statutory tax rate 2013/14
UK	21%	23%
France	34.4% – 38.0%	34.4% – 38.0%
Poland	19%	19%
Rest of Europe	0% – 34%	0% – 34%
Asia	16.5% – 25%	16.5% – 25%

Tax contribution

Kingfisher makes a significant economic contribution to the countries in which it operates. In 2013/14 it contributed £1.71 billion in taxes it both pays and collects for these governments. The Group pays tax on its profits, its properties, in employing 79,000 people, in environmental levies, in customs duties and levies as well as other local taxes. The most significant taxes it collects for governments are the sales taxes charged to its customers on their purchases (VAT) and employee payroll related taxes. Taxes paid and collected together represent Kingfisher's total tax contribution which is shown below:

Total tax contribution	1.71	1.60
Taxes collected	0.97	0.90
Taxes borne	0.74	0.70
Total taxes paid as a result of Group operations	2013/14 £bn	2012/13 £bn

Kingfisher participates in the Total Tax Contribution survey that PwC perform for the Hundred Group of Finance Directors. The 2013 survey ranked Kingfisher 31st for its Total Tax Contribution in the UK. In 2013, 101 companies contributed to the survey.

Taxation governance and risk management

The Kingfisher Code of Conduct applies high standards of professionalism and integrity which underpin the Group's approach to tax policy, strategy and governance, which is Board approved. Our core tax objective is to pay the right amount of tax at the right time and to comply with all relevant tax legislation in all Group entities. The Kingfisher Group undertakes its activities, and pays tax in the countries in which it operates, in compliance with the local and worldwide tax rules. In all countries where it has activities, it has the staff, premises and other assets required to run its business there. The responsibility for tax policy and management of tax risks lies with the Group Finance Director and the Group Tax Director who engage regularly with the main Board and the Audit Committee on all tax matters.

We manage the tax that we pay and the risks that arise having regard to the interests of all stakeholders including our investors, our customers, our staff and the governments and communities in the countries in which we operate. Tax risks can arise from changes in law, differences in interpretation of law and the failure to comply with the applicable rules and procedures. We manage and control these risks through local management, the tax professionals we employ and using advice from reputable professional firms. Where disputes arise with the authorities these are dealt with promptly in a professional open and constructive manner.

Exceptional items

	2013/14 £m Gain/ (charge)	2012/13 £m Gain/ (charge)
Kesa demerger French tax case –
repayment supplement	27	–
Net impairment of investment
in Hornbach	(14)	–
Acquisition and integration costs	(5)	–
Ireland restructuring	7	(21)
UK restructuring	–	(16)
Net pension gain	–	11
Gain on disposal of properties	2	–
	17	(26)
Tax on exceptional items	(4)	1
Kesa demerger French tax case	118	–
Net exceptional items	131	(25)

In the year the Group booked net post-tax exceptional income of £131 million (2012/13: £25 million charge).

Kingfisher paid €138 million tax to the French tax authorities in the year ended 31 January 2004 as a consequence of the Kesa Electricals demerger and recorded this as an exceptional tax charge. Following a successful appeal Kingfisher received a refund totalling €169 million from the French tax authorities in September 2009. The French tax authorities appealed this decision with the final level of court finding in Kingfisher's favour in July 2013. This decision removed any uncertainty over the position and resulted in an exceptional credit of £145 million (€169 million), of which £27 million has been recognised in interest and £118 million in taxation.

In 2013/14 Kingfisher acquired Bricostore in Romania and announced its intention to pilot four Screwfix outlets in Germany in 2014. At the same time Kingfisher undertook a review of its strategic investment in Hornbach, which has operations in both of these markets. On 31 January 2014 the Group decided to divest its equity stake in Hornbach and also waive its right to appoint directors to the Hornbach board.

This decision has impacted the 2013/14 financial statements by changing the basis on which the Group accounts for its shareholding, resulting in a net £14 million exceptional loss with the investment being impaired to its market value of £198 million and reclassified as an asset held for sale. In 2013/14 the Group recorded a £14 million pre-exceptional profit in relation to its share of Hornbach's results, comprising £26 million of retail profit less £12 million share of interest and tax.

Following the end of the 2013/14 financial year, on 24 March 2014 Kingfisher agreed to sell all the shares it holds in Hornbach Holding AG and Hornbach-Baumarkt AG which together formed its 21.2% stake in Hornbach, for approximately £195 million. The stakes in the listed Hornbach Holding preference shares and Hornbach Baumarkt have been sold to international institutional investors in an 'accelerated bookbuilding' by Berenberg Bank. The Hornbach family have agreed to buy the non-listed ordinary shares in Hornbach Holding AG.

Acquisition and integration costs of £5 million principally comprise costs of acquiring and integrating the Bricostore Romania business.

The current year also includes an exceptional credit of £7 million for Ireland restructuring, reflecting the release of provisions recorded in January 2013 when B&Q Ireland entered into an Examinership process. Following the conclusion of this process in May 2013, only one store was closed rather than the potential of five, with over 600 jobs saved.

Earnings per share

Basic earnings per share (EPS) have increased by 24.5% to 30.0p (2012/13: 24.1p). On a more comparable basis, removing the impact of exceptional items, financing fair value remeasurements and the effect of prior year tax adjustments, adjusted basic earnings per share increased by 4.9% to 23.4p (2012/13: 22.3p).

	Earnings £m	2013/14	Earnings £m	2012/13
Basic earnings per share	709	30.0p	564	24.1p
Net exceptional items	(131)	(5.5)p	25	1.1p
Prior year tax items and rate changes	(27)	(1.1)p	(66)	(2.8)p
FFVR (net of tax)	1	–	(1)	(0.1)p
Adjusted earnings per share	552	23.4p	522	22.3p

Dividends

The Board has proposed a final dividend of 6.78p which results in a full year dividend of 9.9p, an increase of 4.7% (2012/13: 9.46p). The final dividend maintains full year dividend cover on adjusted earnings at 2.4 times (2012/13: 2.4 times).

Going forward, the Group continues to aim to move towards a medium-term annual dividend cover of around 2.5 times. At this level, the Board believes the dividend will continue to be prudently covered by earnings and free cash flow and remain consistent with the capital needs of the business.

The final dividend for the year ended 1 February 2014 will be paid on 16 June 2014 to shareholders on the register at close of business on 16 May 2014, subject to approval of shareholders at the Annual General Meeting, to be held on 12 June 2014. A dividend reinvestment plan (DRIP) is available to shareholders who would prefer to invest their dividends in the shares of the Company. The shares will go ex-dividend on 14 May 2014. For those shareholders electing to receive the DRIP the last date for receipt of electing is 23 May 2014.

Economic returns

Management are focused on Kingfisher Economic Profit (KEP) as a main measure of return on capital. It is used in the capital investment process, to assess performance and drive returns in strategic plans. KEP is derived from the concept of Economic Value Added representing earnings after a charge for the annual cost of capital employed in the business. Earnings are defined as adjusted post-tax profit, excluding interest, property lease costs and exceptional items. A charge is then deducted by applying the weighted average cost of capital (WACC) to capital employed. For the purposes of consistency both WACC and capital employed are lease adjusted. Leases are capitalised based on an estimate of their long-term property yields. In order to focus on controllable factors both WACC and long-term property yields are based on those in place when KEP was introduced.

	2013/14 £m	2012/13 £m	Increase £m
Kingfisher Economic
Profit (KEP)	74	44	30

For comparison purposes, WACC rates and long-term yields are based on rates that existed when the measure was introduced in 2011.

Geographic divisional return

Kingfisher's underlying KEP by geographic division is set out below. The divisional invested capital excludes central goodwill of £2.4 billion.

Total	11.1		12.2		74	44
Goodwill & Central			2.4	20%	(126)	(138)
Other International	2.3	20%	1.5	12%	46	37
France	4.4	40%	2.4	20%	137	150
UK	4.4	40%	5.9	48%	17	(5)
	Sales £bn	of Group sales %	Capital (IC) £bn	of Group IC %	2013/14 2012/13
		Proportion	Invested	Proportion		Returns £m KEP

Free cash flow

A reconciliation of free cash flow is set out below:

£m (restated) 718 264 (178)






(42)
762
(4)
(129)
(316)
17
330
(221)

–
(10)

–
99
(88)

27
38

(1) Other non-cash items includes depreciation and amortisation, impairment losses, share-based compensation charge, share of post-tax results of JVs and associates, pension operating cost and profit/loss on retail disposals.

(2) Includes dividends received from JVs and associates, issue of shares and exceptional items (excluding property disposals).

Net cash at the end of the year was £238 million (2012/13: £38 million net cash).

Free cash flow of £559 million was generated in the year, an increase of £229 million year on year primarily due to the movement in working capital. This is a combination of LME and week 53 impacts in the prior year, the reversal of a higher stock position last year ahead of an early Easter and Chinese New Year, and a higher level of showroom deposits at the year end, following a solid kitchens, bedrooms & bathrooms trading strategy for B&Q UK in Q4.

During the year free cash flow generated was utilised by the dividend being increased to £224 million, the acquisition of Bricostore Romania and an additional £24 million to acquire 6 million shares to cover existing share incentive schemes, thereby avoiding dilution of current shareholders.

Capital expenditure

Gross capital expenditure for the year was £304 million (2012/13: £316 million) with a further £63 million invested on Bricostore Romania. A total of £12 million of proceeds from disposals was received during the year (2012/13: £17 million).

The Group has a rigorous approach to capital allocation and authorisation. The process includes:

An annual strategic planning process based on detailed medium-term plans for all businesses for the next three years. This process drives the key strategic capital allocation decisions and the output is reviewed by the Board;
A capital approval process through a capital expenditure committee, attended by the Group Chief Executive, Group Finance Director, CEO Group Productivity and Development, Group Property Director and Group General Counsel. The committee is delegated to review all projects above £0.75 million and to sign-off the projects between £0.75 million and £15.0 million (including the capitalised value of lease commitments);
Projects above £15.0 million are required to be approved by the Board. All projects above £0.75 million are notified to the Board;
Clear investment criteria including KEP and NPV (Net Present Value) and challenging hurdle rates for IRR (Internal Rate of Return) and DPB (Discounted PayBack);
An annual post-investment review process to undertake a full assessment of all projects above £0.75 million which were completed in the last 2 to 4 years. The findings of this exercise are considered by both the capital expenditure committee and the Board and used to inform the assumptions for similar project proposals going forward;
An annual review of KEP by store is performed which drives plans to improve the returns of weaker stores, and develop lessons from higher returning stores.

Financial risk management

Kingfisher's treasury function has primary responsibility for managing certain financial risks to which the Group is exposed, details of which are provided in note 24 of the Group Financial Statements.

Management of balance sheet and liquidity risk and financing

The Group finished the year with £238 million of net cash on the balance sheet. However, the Group's overall leverage is more significant when including capitalised lease debt that in accordance with accounting standards does not appear on the balance sheet. The ratio of the Group's lease adjusted net debt (capitalising leases at 8 times annual rent) to EBITDAR is 2.3 times as at the year end. At this level the Group has financial flexibility whilst retaining an efficient cost of capital.

A reconciliation of lease adjusted net debt to EBITDAR is set out below:

Lease adjusted net debt to EBITDAR	2.3x	2.4x
Lease adjusted net debt	3,382	3,442
Property operating lease rentals (8x)(1)	3,520	3,480
Pension position	100	–
Financial (net cash)	(238)	(38)
EBITDAR	1,464	1,419
Property operating lease rentals	440	435
EBITDA	1,024	984
	2013/14 £m	(restated) £m
		2012/13

(1) Kingfisher believes 8x is a reasonable industry standard for estimating the economic value of its leased assets.

Kingfisher aims to maintain its solid investment grade credit rating whilst investing in the business where economic returns are attractive and paying a healthy annual dividend to shareholders. After satisfying these key aims and taking into account the economic and trading outlook, any surplus capital would be returned to shareholders.

Taking all these factors into account, in addition to increasing the annual dividend by 5% (to an estimated £234 million) the Board has approved a multi-year programme of additional capital returns to shareholders, starting with around £200 million during the financial year 2014/15. At this level we will retain flexibility to continue reinvesting in the business, paying a healthy dividend and capitalising on value enhancing consolidation opportunities (as we did in Romania).

The timing and mechanism for this capital return will be kept under review to ensure we maximise value creation for our shareholders. Updates will be given with our interim and full year results.

Kingfisher regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash flow forecast for the next three years, determining the level of debt facilities required to fund the business, planning for repayments of debt at its maturity and identifying an appropriate amount of headroom to provide a reserve against unexpected outflows.

Kingfisher has a £200 million committed bank facility maturing in August 2016, which remained undrawn at the year end.

The terms of the US Private Placement note agreement and the committed bank facility require only that the ratio of Group operating profit, excluding exceptional items, to net interest payable must be no less than 3:1 for the preceding 12 months at half year and full year ends. At the year end the Group's ratio was significantly higher than this requirement.

The maturity profile of Kingfisher's debt is illustrated at: www.kingfisher.com/debtmaturity

Kingfisher deposits surplus cash with a number of banks with the strongest short-term credit ratings and with money market funds which have the strongest, AAA, credit rating and offer same day liquidity. A credit limit for each bank or fund is agreed by the Board covering the full value of deposits and the fair value of derivative contracts. The credit risk is reduced further by spreading the investments and derivative contracts across several counterparties. At the year end, the Group had a total of around £500 million of cash deposited with banks and in money market funds. The highest cash deposit with a single counterparty was £50 million.

The Group has entered into interest rate derivative contracts to convert the fixed rate payable on its bonds and US Private Placement notes to a floating rate of interest. The floating interest rates paid by the Group under its financing arrangements are based on LIBOR and EURIBOR plus a margin. The margins were not changed during the year.

Capital risk management

The Group's objectives when managing capital are:

To safeguard the Group's ability to continue as a going concern and retain financial flexibility in order to continue to provide returns for shareholders and benefits for other stakeholders; and
To maintain a solid investment grade credit rating of BBB.

The Group manages its capital by:

Continued focus on free cash flow generation;
Setting the level of capital expenditure and dividend in the context of current year and forecast free cash flow generation;
Rigorous review of capital investments and post investment reviews to drive better returns; and
Monitoring the level of the Group's financial and leasehold debt in the context of Group performance and its credit rating.

Kingfisher Insurance Limited, a wholly owned subsidiary, is subject to minimum capital requirements as a consequence of its insurance activities. The Group complied with the externally imposed capital requirements during the year.

Acquisitions

On 31 May 2013, the Group acquired 100% of Bricostore Romania, a home improvement business operating 15 stores including eight freeholds. Kingfisher paid £35 million of cash consideration and acquired £7 million of cash with Bricostore Romania. In addition, debt of £35 million was acquired with the business, which was immediately settled, resulting in a total amount invested of £63 million. Goodwill of £18 million has been recognised on acquisition.

The year end results include seven months' trading of Bricostore Romania, in which it contributed sales of £72 million and a retail profit of £1 million. Since acquisition, Romania traded under its acquired brand Bricostore. In March 2014, two stores were converted into the Brico Dépôt format.

Property

The Group owns a significant property portfolio, most of which is used for trading purposes. A valuation was performed for internal purposes in November 2013 with the portfolio valued by external professional valuers. Based on this exercise, on a sale and leaseback basis with Kingfisher in occupancy, the value of property is £3.5 billion at year end (2012/13: £3.6 billion). This is compared to the net book value of £2.8 billion (2012/13: £2.9 billion) recorded in the financial statements.

Pensions

At the year end, the Group had a net deficit of £100 million (2012/13: £nil) in relation to defined benefit pension arrangements of which a £29 million deficit (2012/13: £71 million surplus) is in relation to the UK Scheme. The adverse movement is driven by UK scheme actuarial losses following the inclusion of updated membership data from the 2013 triennial funding valuation, partially offset by employer contributions in the year.

The approach used to prepare the pension valuation is in line with current market practice and international accounting standards, and has been applied consistently. This accounting valuation is very sensitive to a number of assumptions and market rates which are likely to fluctuate in the future. To aid understanding of the impact that changes to the assumptions could have on the reported UK pension position, we have included sensitivity analysis as part of the pension disclosure in note 27 of the Group Financial Statements. Further details of key assumptions are also contained within the note (see page 111).

The Group has adopted a revised pensions accounting standard in the year. This has resulted in a reclassification of £3 million of administrative costs of running the UK scheme from interest to retail profit in both the current and prior years.

In the prior year, and following consultation with the active members, the UK final salary pension scheme was closed to future benefit accrual and replaced by an enhanced defined contribution scheme offered to all UK employees. Auto-enrolment of eligible employees into this scheme commenced in the year, with around two-thirds of all UK employees now participating.

Strategic Report Approval

The Strategic Report, including the Risk report on pages 28 to 31, is approved for and on behalf of the Board by:

Sir Ian Cheshire

Group Chief Executive 24 March 2014

Given the scale of our businesses, the Board of directors recognises that the nature, scope and potential impact of our key business and strategic risks are subject to constant change. As such, the Board has implemented the necessary framework to ensure that it has sufficient visibility of the Group's key risks and the opportunity to regularly review the adequacy and effectiveness of our mitigating controls and strategies.

During the year the Board has also considered the nature and level of risk that we are prepared to accept in order to deliver our business strategies and has reviewed and approved our internal statement of risk appetite. This describes both the current and desired levels of acceptable risk, supported by high level qualitative risk statements, ensuring that risks are proactively managed to the level desired by the Board.

The Corporate governance report on page 45 describes the systems and processes through which the directors manage and mitigate risks. The Board considers that the principal risks to achieving its strategic aims are set out below.

Easier
Strategic aim	Group risks	Mitigation
Making it easier for our customers to improve their home	Our 'Easier' initiatives fail to deliver demand and value due to a lack of rigorous change management	Across our markets we are committed to ensuring that our stores and online fulfilment channels are aligned with our desire to optimise our customers' retail experience. To support this we continue to evolve and innovate across our product ranges, formats and customer offer.
	disciplines, capabilities and resources.	However, changes are only implemented once we have completed an appropriate level of planning and testing, relative to the risk. In addition, we ensure for any such changes that the assumptions and insight that support the introduction of new products or services will deliver the benefits to both our customers and our shareholders.
Giving our customers more	Our investment in systems and supply chain	We continue to invest in new systems and technologies to support the business including:
ways to shop	platforms fails to deliver the anticipated benefits.	• Warehouse management, forecasting and replenishment technologies to ensure we maximise operational agility and optimise the flow of product in order to meet customer demand;
		• Optimising distribution and logistics platforms to ensure we can deliver products via the most efficient routes to market;
		• The delivery of leading edge web architectures and platforms to provide a compelling online offer, including the options to deliver enhanced 'click, pay and collect' functionality, across smartphone and tablet-based applications; and
		• We are investing in our financial and operational systems to develop a Group wide IT solution across our Operating Companies.
		All investments are evaluated and monitored via the project management methodologies in place across the Operating Companies. Post investment reviews are performed on all investments over £0.75 million after 12 months to assess the benefits achieved (see the Financial Review on page 25 for more information).
	As customers change the way they shop we fail to adapt our business model to these changes.	Across our businesses we recognise both the threats and opportunities presented by omnichannel retailing and are taking the necessary steps to ensure we remain competitive in our respective markets.
		Key Performance Key future priorities We continue to invest in omnichannel technologies and take learnings from our businesses which have well developed models e.g. Screwfix.
		Indicators (KPIs) Going forward from 2014/15, we are Within B&Q we are developing a platform which will be rolled out to the rest of the replacing the longer list of detailed Group to offer alternative channels for customers. milestones in favour of a summarised
		version that better highlights the key Our investment in the IT strategy project should provide systems and capabilities wider Group priorities within the to respond to the changing ways in which customers shop.
		Creating the Leader framework. We are developing plans for each Operating Company to address how the business Our key priority in 2014/15 is to: model needs to be adapted to cope with changes in consumer behaviour in each of our markets. • Extend omnichannel capabilities

Common
Strategic aim	Group risks	Mitigation
Building innovative common brands	We fail to unlock the Strategic Report potential to generate Creating the leader further shareholder value through the optimisation	The development of common brands and synergies remains a priority across the organisation. We aim to offer customers a product range which is differentiated from that of our competitors through innovation and exclusivity. To increase and maximise scale efficiencies we:
	of combined purchasing and commercial synergies, while retaining accountability at our Operating Companies.	• Are carrying out customer insight research to ensure that we understand customer buying behaviours, habits and our product insight across all of our businesses. In addition, we are ensuring that we are able to identify specific opportunities to drive the optimal, and most profitable, outcomes from our common buying decisions;
		• Are implementing common range reviews across our larger Operating Companies. Performance of the ranges and brands is tracked and strategies updated accordingly;
		• Have four sourcing offices focused on selected ranges; and
		• Are working with our vendors to ensure we achieve the best value for our customers.
	We fail to create enough	We view innovation as an area of future growth. We have an innovation team

innovation opportunities to sufficiently differentiate that is working with our suppliers to ensure that we develop and deliver innovative products to our customers. We recognise that this is an area where we need to do further work to maximise the opportunities and we are working with our Operating Companies to put plans in place.

Efficiency:

Expand

our product offer.

Strategic aim	Group risks	Mitigation
Growing our presence in existing markets	Our investments in new Strategic Report store formats, customer Creating the leader markets and customer proposition strategies fail to stimulate increased consumer spend and do Our key steps not deliver the desired like-for-like sales growth 3. Building innovative in our mature markets. common brands	Despite the ongoing challenges of global austerity programmes and their impact on consumer confidence, we are committed to re-investing in our mature markets to maintain market share and to ensure market leadership.
		We continue to invest in our existing store portfolio while seeking to minimise its cost base and optimise sales densities. Where there are opportunities to expand What we did in 2013/14 and innovate we will do so using a combination of existing and new formats. We will pursue low risk market entry and new flexible store format strategies based Product: on the utilisation of current Operating Company skills and resources. We take the • Launched energy-efficient 'iQE' Group brand learnings from trials and ensure these are adopted across the Group in future projects. We continue to invest in our omnichannel strategy. • Extended common paint ranges
	Uncertainty surrounding the resilience of the global 4. Driving efficiency economy and volatility in the eurozone continues to impact both consumer and effectiveness confidence and the	With continuing market volatility and uncertainty across all of the economies in − Rolled out 'Colours' Group own-brand paint into Russia and Spain which we operate, particularly within the eurozone, we continue to monitor − Commenced roll out of new 'Colours' own-brand emulsion paint potential exposures and risks and provide effective risk management solutions range across B&Q UK & Ireland (in 120 stores) and Castorama to both our businesses and our strategic suppliers. These include: France (all 105 stores completed)
		• The provision of supply chain finance programmes to support strategic suppliers; − Launched exclusive 'Valspar' mixing desk paint into B&Q UK
	everywhere long-term sustainability and capabilities of our supplier base.	& Ireland (now in 120 stores) and China • Support from a strong portfolio of international banking partners that provide flexibility, access to funding and reliable local retail cash and card payment • Launch of 'Site' workwear into Brico Dépôt France now planned during processing services; 2014/15 following 'arrivages' (one-off special buys) trial during 2013/14
		• Diversification of cash holdings across a number of financial institutions with the • Held inaugural European product show, attended by 6,000 store and strongest short-term credit rating; and buying colleagues from the UK and France
		• Achieved 9% common (up from 8% in 2012/13) and 20% direct • An appropriate and prudent mix of hedging policies, cash deposits and debt sourcing (up from 19% in 2012/13) reflecting a re-emphasis of quality financing to minimise the impact of foreign exchange currency volatility on over quantity the Group.
		• Extended French common supplier contracts to the wider Castorama We have also assessed a number of alternative scenarios in relation to the volatility and Brico Dépôt brands division and uncertainty within the eurozone.

Expand continued
Strategic aim	Group risks	Mitigation
Expanding in new and developing markets	Our investments in Strategic Report overseas expansion fail Creating the leader to deliver sufficient sales	We continually review and assess opportunities for expansion, in terms of both online and bricks and mortar retail, across all of the territories and regions in which we operate.
	and profits.	Country and market entry strategies are based on the application of a proven operating model and supported by the Operating Company with the most relevant experience, capabilities and capacity to successfully lead a market entry strategy.
		We also ensure that any proposed acquisition or market entry strategy is subject to an appropriate level of challenge and due diligence from both the Group Executive and specialist Group functions which may include the Tax, Treasury, Legal, Group Finance and Group Risk and Internal Audit functions. This due diligence is also supported by external and independent advisers when necessary.
		Following an acquisition, integration plans are prepared and monitored at divisional and Group levels. Existing management teams are supplemented with Group resources to monitor and assist with the integration.
		We monitor the political and economic risks of operating in new and developing markets.

Strategic aim	Group risks	Mitigation
Developing leaders and connecting	We do not make the Strategic Report necessary investment in Creating the leader our people to ensure that	Across our businesses we are developing our talent, building our leadership capability and connecting our people through intelligent networks. Specific examples of this include:
people	we have the appropriate calibre of staff, skills and experience.	• The continued investment in the development of our senior leaders through the Kingfisher One Academy, including the 2020 Leadership Programme and the development of networks across our businesses;
	Our key steps	• Focused development activities for our store-based colleagues, including the roll out of national apprenticeship schemes across our UK and French businesses, and an increased focus on how we support and recognise the role of our What we did in 2013/14 customer advisers across the organisation; and
	5. Growing our presence in existing markets	• Recognition of the importance of ensuring a constant flow of developing talent Existing markets: through structured graduate and management trainee programmes, providing • Opened 84 net new stores ahead of original target of 68 sustainable career development paths supported by new and innovative reward stores including UK 62 (principally Screwfix outlets), France 7, and bonus frameworks (see www.kingfisher.com/people). Poland 2, Russia 1, Spain 4, Turkey 8 (including a trial of 4
Sustainability: Becoming Net Positive	We fail to deliver our sustainability targets 6. Expanding in new and due to not integrating our sustainability plan into the developing markets day to day operations of the business.	'Koçtas¸ Fix' outlets), representing 3% space growth • Our commitment to sustainability remains one of Kingfisher's key values and across the organisation we continue to ensure that we engage and take advice • Revamped and extended four Castorama France stores from our expert partners (WWF, BioRegional and Forum for the Future); • B&Q UK store rightsizing update
		• As part of our business planning process we set and annually review − First freehold store deal completed with a grocer last year sustainability plans for each Operating Company;
		− Store reduced in size by 50%; sales density • Monthly Board reports monitor the progress of our largest Operating Companies improvement of 75% in achieving their sustainability targets; − Non-operational space sold to grocer in February
		• Data is reported annually to the Group and signed off by the local Boards; 2014 at a good return for £32 million
		− An additional store has received planning permission • Within each Operating Company responsibility has been assigned to a team or individual for the delivery of the sustainability targets. Meetings of the Corporate and seeking planning permission for another 16 Social Responsibility teams are held twice a year to exchange best practice and New and developing markets: progress common projects; • Bought 15 stores in Romania, which contributed an additional
		• Our Net Positive Advisory Council provides an external review of our processes 2% space growth. In total, Group space growth was 5% as well as technical support and advice (see page 19). • Evaluated Screwfix international opportunities – announcing

Operational Risks

Strategic aim	Risk	Mitigation
Pricing	A lack of perceived Strategic Report price competitiveness,	Significant investment in pricing to reinforce and communicate our value credentials. This is supported by:
	particularly when compared to more discount based or online	• The use of improved customer insight and analytical tools to optimise product ranging and pricing strategies;
	competitors, would affect our ability to maintain	• Increased margin flexibility through partnerships with strategic vendors and the leveraging of Group buying opportunities; and
	or grow market share.	• More targeted use of online and mass media tools to communicate and reinforce price perception (for example, price comparison websites, such as www.kitchen-compare.com and www.bathroomcompare.com in the UK).
Key supplier resilience and continuity	Key product suppliers lack the necessary resilience or disaster recovery	We continue to support our strategic suppliers through a combination of relationship management, and ongoing supplier vulnerability assessments, supported by supplier financing programmes where appropriate.
	capabilities to manage the impact of ongoing global economic volatility or the increasing impacts of extreme weather cycles and patterns on their operations and extended supply chains.	We also seek to ensure continuity of supply through the expansion of our own brand programmes and dual sourcing strategies where possible and commercially viable. Ongoing investment in our sourcing offices outside of Asia, notably in Poland and Turkey, also provides increased flexibility for our sourcing strategies.
Health & safety	We fail to maintain a safe environment for our customers and store colleagues, which results in a major incident or fatality that is directly attributable to a failure in our health and safety management systems. Our markets	With 79,000 employees and millions of customers visiting our stores each week, robust health and safety systems are a priority. The Board is committed to creating and sustaining a safe environment for both our staff and customers and regularly reviews and challenges health and safety performance, standards and targets across our businesses.
		As regulatory requirements vary from country to country, each Operating Company is required to designate a director with specific responsibility for health and safety. This person is then responsible for ensuring that a written health and safety policy is communicated and that appropriate health and safety arrangements are in place to protect our employees and customers and that we comply with local Our strategy regulatory requirements.
	We currently operate in nine	Our unique contribution as a The Group Health and Safety Committee sets the policy and standards for the Group.
	countries, spanning nearly 600 million households.	Compliance is monitored across our businesses through a programme of self business to our customers is certification and health and safety audits, with issues reported through local Audit that we can harness our home Committees and escalated to the Group Executive, Group Audit Committee or Board where necessary (see the Governance report on page 36). improvement experience, our
Environmental or ethical failure	Our research shows that spending on home improvement Kingfisher's reputation is a key priority for householders, making this an attractive and brand are affected by a major environmental or ethical failure, a significant corporate fraud or material non compliance with legislative or regulatory requirements resulting in punitive or custodial procedures. on pages 6 to 7.	Both employees and suppliers working for or with Kingfisher must conduct heritage as a leader in sustainability themselves according to our minimum standards of ethics and behaviours as sector for retailers. It is also attractive because of the relatively defined by our Code of Conduct. Responsibility for compliance with our Code and our international scale and small number of well-known manufacturer brands. This means of Conduct rests with each Group Operating Company Chief Executive and a specialist home improvement retailer provides a vital role for sourcing capability to bring new, appropriate resources are available to our businesses to ensure that both staff the consumer by offering a wide product choice and expert and suppliers are aware of, and comply with, the Code and that our businesses advice. We can offer a high proportion of own brand product, more sustainable and more can manage the legislative or regulatory challenges presented by their achieve economies of scale and have a more defensible position respective jurisdictions (see www.kingfisher.com/netpositive/code). affordable products to market. against online or generalist operators when compared with other retail segments. Read more about our business model This means our customers can have better homes, the planet's resources can be protected and we generate value

The Board is made up of a non-executive Chairman, four executive directors and six non-executive directors who have overall collective responsibility for the direction of the Company. The role and composition of the Board is set out on page 36 of the Governance section. directors and six non-executive directors who have overall collective responsibility for the direction of the Company. The role and composition of the Board is set out on page 36 of the Governance section.

Daniel Bernard Chairman Current directorships: Joined the Board as Deputy Chairman in May 2006 before being appointed

Current directorships: Joined the Board as Deputy Chairman in May 2006 before being appointed Chairman on 3 June 2009. He is President of Provestis, his own investment company, and since January 2010, has been Chairman of MAF Retail Group, Dubai. He has also been Senior Advisor of TowerBrook Capital Partners since October 2010. He is a non-executive director of Alcatel Lucent and Capgemini and Phase Eight Ltd. He is also President a member of the Advisory Board of HEC. of the HEC Business School Foundation in Paris and Chairman on 3 June 2009. He is President of Provestis, his own investment company, and since January 2010, has been Chairman of MAF Retail Group, Dubai. He has also been Senior Advisor of TowerBrook Capital Partners since October 2010. He is a non-executive director of Alcatel Lucent and Capgemini and Phase Eight Ltd. He is also President a member of the Advisory Board of HEC. Expertise and experience: Daniel provides considerable retailing experience and expertise to the Kingfisher of the HEC Business School Foundation in Paris and

Expertise and experience: Daniel provides considerable retailing experience and expertise to the Kingfisher Board. He was Chairman and Chief Executive of Carrefour, the Paris-based retail group and world's second largest retailer, from 1992 to 2005. Prior to Carrefour, he was Chief Operating Officer of METRO, Germany's leading international retailer. He was previously a non-executive director of Compagnie de St Gobain until June 2006. Board. He was Chairman and Chief Executive of Carrefour, the Paris-based retail group and world's second largest retailer, from 1992 to 2005. Prior to Carrefour, he was Chief Operating Officer of METRO, Germany's leading international retailer. He was previously a non-executive director of Compagnie de St Gobain until June 2006.

Sir Ian Cheshire Group Chief Executive Current directorships: Appointed to the Board in June 2000 and as Group Chief Executive in January 2008.

Current directorships: Appointed to the Board in June 2000 and as Group Chief Executive in January 2008. He is also Senior Independent Director of Whitbread plc, lead non-executive member on the Department for Work and Pensions Board, Chair of the Prince of Wales' Corporate Leaders Group on Climate Change, and President of the Business Disability Forum. In October 2012, Ian became the Chairman of the British Retail Consortium. He is also Senior Independent Director of Whitbread plc, lead non-executive member on the Department for Work and Pensions Board, Chair of the Prince of Wales' Corporate Leaders Group on Climate Change, and President of the Business Disability Forum. In October 2012, Ian became the Chairman of the British Retail Consortium. Expertise and experience: Ian was previously Chief Executive, B&Q UK from June 2005. He

Expertise and experience: Ian was previously Chief Executive, B&Q UK from June 2005. He was appointed Chief Executive International and Development in September 2002, Chief Executive of e-Kingfisher in May 2000 and was Group Director of Strategy & Development. Before joining Kingfisher he worked for a number of retail businesses including Sears plc where he was Group Commercial Director. was appointed Chief Executive International and Development in September 2002, Chief Executive of e-Kingfisher in May 2000 and was Group Director of Strategy & Development. Before joining Kingfisher he worked for a number of retail businesses including Sears plc where he was Group Commercial Director.

Karen Witts Group Finance Director Current directorships: Appointed to the Board in October 2012. She is a non-executive director

Current directorships: Appointed to the Board in October 2012. She is a non-executive director of Imperial Tobacco Group PLC. of Imperial Tobacco Group PLC. Expertise and experience: Karen provides additional recent relevant finance expertise to the Board. She was

Expertise and experience: Karen provides additional recent relevant finance expertise to the Board. She was previously Chief Financial Officer, Africa, Middle East, Asia and Asia Pacific for Vodafone plc. From 1999 to 2010 she worked at BT plc, most recently as Chief Financial Officer, BT Retail and Managing Director Enterprises and before that as Managing Director Operations, Openreach. She is a chartered accountant and has experience in finance and management roles at companies such as Paribas, Diageo, Mars Electronics, The Observer Newspaper and Ernst & Whinney. previously Chief Financial Officer, Africa, Middle East, Asia and Asia Pacific for Vodafone plc. From 1999 to 2010 she worked at BT plc, most recently as Chief Financial Officer, BT Retail and Managing Director Enterprises and before that as Managing Director Operations, Openreach. She is a chartered accountant and has experience in finance and management roles at companies such as Paribas, Diageo, Mars Electronics, The Observer Newspaper and Ernst & Whinney.

Andrew Bonfield Non-Executive Director Current directorships: Appointed to the Board in February 2010. He is Finance Director of National Grid

Current directorships: Appointed to the Board in February 2010. He is Finance Director of National Grid plc. He is also a committee member of the Hundred Group of Finance Directors. plc. He is also a committee member of the Hundred Group of Finance Directors. Expertise and experience: Andrew brings significant current finance experience to the Kingfisher Board.

Expertise and experience: Andrew brings significant current finance experience to the Kingfisher Board. He was previously Chief Financial Officer of Cadbury plc and prior to that he was Chief Financial Officer of Bristol-Myers Squibb from 2002 to 2007, Finance Director of BG Group plc from 2001 to 2002 and Chief Financial Officer of SmithKline Beecham Plc from 1999 to 2000 during an 11 year period with the pharmaceuticals group. He was previously Chief Financial Officer of Cadbury plc and prior to that he was Chief Financial Officer of Bristol-Myers Squibb from 2002 to 2007, Finance Director of BG Group plc from 2001 to 2002 and Chief Financial Officer of SmithKline Beecham Plc from 1999 to 2000 during an 11 year period with the pharmaceuticals group.

Pascal Cagni Non-Executive Director Current directorships: Appointed to the Board in November 2010. He is an independent director of the

Current directorships: Appointed to the Board in November 2010. He is an independent director of the supervisory board of Vivendi. supervisory board of Vivendi. Expertise and experience: Pascal provides the Board with expertise in the field of digital and online retailing.

Expertise and experience: Pascal provides the Board with expertise in the field of digital and online retailing. He was formerly Vice President and General Manager of Apple Europe, Middle-East, India and Africa, and was with Apple for ten years in a variety of roles. His previous experience includes roles at NEC, Compaq and Booz Allen Hamilton. He has also held the position of non-executive director on the board of Egg Banking plc, the online banking arm of Prudential plc, from 2002 to 2006 and on the board of Atari, the computer games company. He was formerly Vice President and General Manager of Apple Europe, Middle-East, India and Africa, and was with Apple for ten years in a variety of roles. His previous experience includes roles at NEC, Compaq and Booz Allen Hamilton. He has also held the position of non-executive director on the board of Egg Banking plc, the online banking arm of Prudential plc, from 2002 to 2006 and on the board of Atari, the computer games company.

Clare Chapman Non-Executive Director Current directorships: Appointed to the Board in December 2010. She is currently Group People

Current directorships: Appointed to the Board in December 2010. She is currently Group People Director of BT. Director of BT. Expertise and experience: Clare brings significant human resources expertise to the Kingfisher Board.

Expertise and experience: Clare brings significant human resources expertise to the Kingfisher Board. She was previously the Director General of Workforce, for the NHS and Social Care and was also a nonexecutive director of TUI Travel plc and Chairman of its Remuneration Committee. Her previous experience also includes Group HR Director of Tesco plc from 1999 to 2006 and HR Vice President of Pepsi Cola's West and Central European operations from 1994 to 1999. She was previously the Director General of Workforce, for the NHS and Social Care and was also a nonexecutive director of TUI Travel plc and Chairman of its Remuneration Committee. Her previous experience also includes Group HR Director of Tesco plc from 1999 to 2006 and HR Vice President of Pepsi Cola's West and Central European operations from 1994 to 1999.

Kevin O'Byrne CEO B&Q UK & Ireland

Current directorships: Appointed to the Board as Group Finance Director in October 2008, and became CEO, B&Q and Koçta s¸ brands in October 2012 responsible for the Group's businesses in China, Turkey, the UK and investment in Germany. He assumed direct leadership of B&Q UK & Ireland in October 2013, and is Deputy Chairman of Kingfisher's joint venture in Turkey, Koçta s¸. He was also a director of Hornbach Holdings AG. He is the Senior Independent Director and Chairman of the Audit Committee of Land Securities Group plc.

Expertise and experience: Previously he was Group Finance Director, a role he held from 2008 to 2012. He previously worked for Dixons Retail plc from 2002 to 2008 where he was Group Finance Director. Before this he was European Finance Director at Quaker Oats Limited.

Philippe Tible CEO Castorama & Brico Dépôt brands

Current directorships: Appointed to the Board in October 2012.

Expertise and experience: Philippe was appointed CEO Castorama & Brico Dépôt brands after nine years with the Group. He previously spent four years as Chief Executive of Kingfisher France. Prior to this he spent five years as CEO of Castorama France. He holds responsibility for the Castorama and Brico Dépôt businesses in France, Poland, Romania, Russia and Spain. He previously held senior roles at DIY retailer Leroy Merlin and furniture retailer Conforama.

Audit Committee

Remuneration Committee

Nomination Committee

See pages 35 to 68 for further details.

Anders Dahlvig Non-Executive Director

Current directorships: Appointed to the Board in December 2009. He is a director of Oriflame Cosmetics AB, H&M Hennes & Mauritz AB and Axel Johnson AB; and is Chairman of The New Wave Group and a member of the Advisory Board of Lund University Business School. He is also a director of Resurs Bank AB and Pret a Manger Limited.

Expertise and experience: Anders brings extensive commercial retailing expertise to the Board. He was previously Chief Executive and President of The IKEA Group from 1999 to 2009, having spent 26 years with the company. Prior to becoming Chief Executive, he was Vice President of IKEA Europe from 1997 to 1999 and Managing Director of IKEA UK from 1993 to 1997.

Janis Kong Non-Executive Director

Current directorships: Appointed to the Board in December 2006. She is a non-executive director of Portmeirion Group PLC, NetworkRail and TUI Travel plc. She is also a non-executive director of Copenhagen Airports A/S.

Expertise and experience: Janis provides important experience to the Kingfisher Board. She was previously a non-executive director of The Royal Bank of Scotland Group Plc and, until her retirement in March 2006, was a director of BAA plc and Chairman of Heathrow Airport Ltd for five years as well as being Chairman of Heathrow Express. Prior to that she was Managing Director of Gatwick Airport and has held a number of operational roles within BAA during her 33-year career with the company.

Mark Seligman Senior Independent Director

Current directorships: Appointed to the Board in January 2012. He is a non-executive director of BG Group plc, where he is also Chairman of the Audit Committee. He serves as an alternate member of the Panel on Takeovers and Mergers, is a member of the Regional Growth Fund advisory panel and nonexecutive deputy Chairman of G4S, where he is also Chairman of the Audit Committee.

Expertise and experience: Mark provides substantial expertise to the Kingfisher Board in the field of finance. He was a senior adviser at Credit Suisse. He began his career at Price Waterhouse and spent over 30 years in the City, including senior roles at SG Warburg, BZW and Credit Suisse First Boston. At Credit Suisse he was Deputy Chairman Europe from 1999 to 2005 and later Chairman UK Investment Banking from 2003 to 2005.

In addition to the Kingfisher plc Board, the Group Executive is responsible for the overall strategic decision-making of the Group.

The One Team Board, made up of Operating Company CEOs and senior directors at Group level, is responsible for implementing the strategy and fulfilling our Better Homes, Better Lives mission.

Group Executive

Sir Ian Cheshire Group Chief Executive

Guy Colleau CEO, Group Sourcing and Offer

Kevin O'Byrne CEO, B&Q UK and Ireland

Philippe Tible CEO, Castorama and Brico Dépôt brands

Steve Willett CEO, Group Productivity and Development

Karen Witts Group Finance Director

Benedikt Benenati Group Internal Communications Director

Richard Gillies Group Sustainability Director

Andrew Livingston CEO, Screwfix

Marc Ténart Finance Director, Castorama and Brico Dépôt brands

Tanguy Dewavrin CEO, Castorama Poland

Vincent Guffroy CEO, Castorama Russia

Christophe Mistou Group Commercial Sourcing Director

Clare Wardle Group General Counsel

Alexandre Falck CEO, Brico Dépôt France

Ian Harding Group Communications Director

Alp Özpamukçu CEO, Koçtas¸

Evelyn Gardiner Group Human Resources Director

Jacques Hayaux du Tilly CEO, B&Q China

Ian Playford Group Property Director

Pascal Gil CEO, Brico Dépôt Spain

Véronique Laury CEO, Castorama France

Alain Souillard CEO, Brico Dépôt brand, International

Corporate governance

"Maintaining and promoting the highest standards of corporate governance remains central to my role as Chairman and I believe the changes implemented during the year have enhanced the framework governing the Group's operations."

Daniel Bernard Chairman

Dear Shareholder

I am pleased to present the Company's Corporate Governance report for the year ended 1 February 2014.

Over a number of years, the Board of Kingfisher plc has put in place a robust, efficient and effective governance framework and associated systems by which the whole Group is governed and reviewed. This report aims to provide a clear explanation of those arrangements which we consider to be essential for the longterm success of the Company and the continued promotion of the highest standards of Corporate Governance across the Kingfisher Group.

It is the role of the Board to support, advise and where necessary provide appropriate challenge to the executive team. I believe that the Kingfisher Board, with its vast experience and diversity of expertise, assists the Company in delivering its strategy and maximising shareholders' long-term interests, whilst conducting itself in line with the Group's Code of Conduct, which mandates minimum standards of behaviour for employees and suppliers of the Group. Our Code of Conduct can be found within the Net Positive section of our website www.kingfisher.com.

The Company is required to review its operations annually by reference to the UK Corporate Governance Code ('the Code'). Last year I advised that the Company was confident of reporting compliance with the revised September 2012 edition of the Code and a statement of compliance with the Code is set out on page 36.

During the year, we have enhanced and formalised elements of our governance framework to ensure compliance with the Code and also the Large and Medium-sized Companies and Groups (Accounts and Reports) (amendment) Regulations 2013 ('the Regulations') which requires us to report in a different way to previous years. The most significant reporting changes have occurred within the Directors' Remuneration Report and are fully detailed within that report which can be found on pages 47 to 68.

An additional change to reporting requires a statement from the Company's directors that we consider the Annual Report and Accounts, when taken as a whole, to be fair, balanced and understandable. During the year, the Board requested that the Audit Committee advise on the statement and conduct such

activities to support the directors in reaching that conclusion. A fuller description of the activities of the Audit Committee in this area can be found on pages 42 to 45, along with other additional disclosures required in respect of how the Committee addressed the key issues it considered during the year.

The Board constantly reviews its governance framework, adjusting where necessary the roles, structure and accountabilities of its mechanisms of governance. During the year, the governance structure below the Board and primary committee level was again reviewed to ensure the correct and accurate flow of information and responsibility. The review included a full review of the terms of reference of the Group Executive Committee, the Kingfisher Capital Expenditure Committee and the Financial Initiatives, Tax and Treasury Committee, and, where necessary, these were amended to reflect the operations of those committees and the authorities delegated to them. As part of the review, in order to make the governance structure below primary committee level more relevant and agile, the focus on trading and operational matters was transferred to the Group Executive Committee and the implementation of strategy is now the focus of the One Team Board. In addition, a Health and Safety Committee, with the remit to review health and safety matters across the Group as a whole and better enable the sharing of best practice, was established. A Disclosure Committee was also established to formalise the review and verification of the Group's full, half-year and quarterly announcements of results.

The revised Group governance structure, together with an overview of each of these Committees, is set out on pages 40 to 46.

Maintaining and promoting the highest standards of corporate governance remains central to my role as Chairman and I believe the changes implemented during the year have enhanced the framework governing the Group's operations. I am pleased to endorse this Report, which I believe demonstrates how, through its actions, the Board and its Committees fulfil their governance responsibilities and how the Board works proactively to embed good governance practices across the Group on an ongoing basis.

Daniel Bernard

Chairman 24 March 2014

Compliance with the UK Corporate Governance Code

Kingfisher is subject to, and has reviewed, its operations and governance framework to ensure that it reflects the principles of the UK Corporate Governance Code, published by the Financial Reporting Council (the FRC) and available on their website, www.frc.org.uk. The edition of the Code, published in September 2012, applied throughout the financial year ended 1 February 2014. In accordance with the Listing Rules of the UK Listing Authority, the Board confirms that, throughout the year ended 1 February 2014, and as at the date of this report, the Company has complied with the provisions set out in Section 1 of the Code, save for as set out below.

Provision D.1.1 provides that grants under long-term incentive schemes should normally be phased rather than awarded in one large block.

As reported in our 2011/12 annual report, the Company set stretching long-term targets for management as part of the Creating the Leader phase of Kingfisher's strategy. The Remuneration Committee approved awards under the Performance Share Plan (the 'Plan') of up to 500% of base salary.

The award was higher than the normal award of 200% but in making it the Committee took into account the fact that no further awards would be made under the Plan until the financial year 2014/15, and felt that it created a better focus on a single performance period aligned to the next phase of the Group's strategy, rather than the more commonly used overlapping performance periods.

Leadership

The role of the Board

The Board's primary responsibility is to promote the long-term success of the Company and deliver sustainable shareholder value. The Board has ultimate responsibility for the management, direction and performance of the Group, and leads and controls the Group's business. The Board is also responsible for ensuring appropriate resources are in place to achieve its strategy and deliver sustainable performance. Through authorities delegated to its Committees, the Board directs and reviews the Group's operations within an agreed framework of controls, allowing risk to be assessed and managed within agreed parameters. The Board is collectively accountable to the Company's shareholders for the proper conduct and success of the business.

The Board's powers are set out in the Company's Articles of Association, which are available to view on its website, and may be amended by a special resolution of its members. The Board may exercise all powers conferred on it by the Articles, in accordance with the Companies Act 2006 and other applicable legislation.

The Board has established a formal schedule of matters reserved for its approval, and has delegated other specific responsibilities to its principal committees: the Audit, Remuneration and Nomination Committees. These are clearly defined within the written terms of reference of the respective committees. Information on the responsibilities and work of each of the Board's committees is set out on pages 42 to 68.

During the year, as part of its annual review process, the matters reserved for the Board were reviewed, and where necessary amended to reflect best practice. The schedule of matters reserved for the Board includes the consideration and approval of:

the Group's overall strategy, medium-term plans and annual budgets;
financial statements and Group dividend policy, including recommendation of the final dividend;
major acquisitions, disposals and capital expenditure;
major changes to the capital structure including tax and treasury management;
major changes to accounting policies or practices;
the Group's corporate governance and compliance arrangements;
the system of internal control and risk management policy;
the Group's risk appetite statements; and
review of management development strategy.

Composition of the Board

The Board is made up of the non-executive Chairman, four executive directors and six non-executive directors. The current balance of the Board's skills, experience and knowledge, together with regular briefings by executives below Board level, ensures that views, perceptions and discussions are not dominated by any one specific view. The structure, size and composition of the Board is continually reviewed to ensure it remains suitable for the needs of the business.

There is an established, formal, rigorous and transparent procedure for the selection and appointment of new directors to the Board, and this is described in the Nomination Committee Report on page 46. At the Annual General Meeting to be held on 12 June 2014, shareholders will be asked, in accordance with Principle B.7.1 of the Code, to re-appoint all their directors.

Role of the non-executive directors

Non-executive directors provide a strong, independent and external insight to the Board and its Committees, and have a wealth of experience and business knowledge from other sectors and industries. The terms and conditions of appointment of each of the non-executive directors are available for inspection at the Company's registered office and will also be available for inspection at the Annual General Meeting.

At its meeting in January 2014, the Board considered the independence of each of the non-executive directors (other than the Chairman, who was deemed independent by the Board at the date of his appointment) against the criteria specified in the Code, and concluded that each remained fully independent of management and free from any relationship that could interfere with the exercise of their independent judgement.

Role of the Senior Independent Director

Since his appointment in January 2012, Mark Seligman has acted as Senior Independent Director (SID), supporting the Chairman, and is available for approach or representation from significant shareholders who feel they are unable to raise issues with the Chairman, Group Chief Executive or Group Finance Director. In accordance with the FRC guidelines, the role of the SID is formally set out in writing, and available on the Company's website.

Roles of the Chairman and Group Chief Executive

The roles and responsibilities of the Chairman and Group Chief Executive are separate and clearly defined. As part of the annual review process, the written roles of the Chairman and Group Chief Executive were reviewed to ensure they remained compliant with, and took account of, best practice developments, and were in line with FRC guidance. The written roles for both are available to view on the Company's website.

In accordance with best practice, the Chairman is responsible for the overall operation, leadership and governance of the Board, setting the tone and style of Board discussions, and creating the conditions for overall Board and individual director effectiveness. He is also responsible for ensuring that all members of the Board develop an understanding of the views of major shareholders, that there is an open dialogue with shareholders, and that the Chairmen of the Board's principal committees are available to answer shareholder questions at the Annual General Meeting.

The Group Chief Executive is responsible for executive management of the Group's business, consistent with the strategy and commercial objectives agreed by the Board. He leads the Group Executive team in effecting decisions of the Board and its Committees, and is responsible for the maintenance and protection of the reputation of the Company and its subsidiaries. The Group Chief Executive is also responsible for promoting and conducting the affairs of the Group with the highest standards of integrity, probity and corporate governance.

Company Secretary

The Company Secretary acts as Secretary to the Board and its committees and, with the consent of the Board, may delegate responsibility for the management of the committees to other suitably qualified staff. The Company Secretary is responsible for ensuring that good quality information flows from executive management to the Board and its committees and that correct Board procedures are followed. She advises the Board on corporate governance matters and facilitates the inductions of new directors and assists in providing professional development as required. All directors have access to the advice and services of the Company Secretary, and her appointment and removal is one of the matters reserved to the Board. The Board also has access to the Group General Counsel for legal and compliance advice.

Diversity on the Board

In September 2011, the Board announced its approach to diversity. The statement, which is available on the Company's website, confirmed that the Board is committed to ensuring directors of the Company possess and demonstrate a broad balance of skills, experience, independence, knowledge and diversity, including gender diversity. In order to maintain the appropriate balance of skills, experience and knowledge on the Board, the Nomination Committee considers each prospective candidate on their individual merits, regardless of gender, age, race, nationality, religion or disability, in the belief that balanced and diverse Boards are effective. The Board is committed to maximising the benefits of a diverse workforce to deliver real sustainable benefits for the Group and its shareholders. The Board remains committed to this statement.

Charts demonstrating the gender split at Board level, Senior Management level, and for the workforce as a whole can be found on page 19.

Effectiveness

Board meetings

The Board holds regular scheduled meetings throughout the year and unscheduled supplementary meetings as and when necessary. These meetings are structured to allow open discussion. At each meeting the Board receives certain regular reports which include an update from the Group Chief Executive, current trading/finance (including liquidity) reports from the Group Finance Director, capital expenditure approvals and reports from the Company Secretary (including governance, legal, insurance and risk updates), people-related updates from the Group Human Resources Director and Net Positive progress updates and public affairs updates from the Group Sustainability Director.

All directors participate in discussing strategy, trading and financial performance, and risk management of the Group. Comprehensive briefing papers are circulated to all directors approximately one week before each meeting in digital format. Should a director be unable to attend a particular meeting, they are provided with all relevant briefing papers and are given the opportunity to discuss any issues with the Chairman or the Group Chief Executive and, where possible, participate by telephone for critical discussions and approvals on specific matters.

The Board generally meets at the Group's head office in London but holds at least one meeting each year overseas. During the year under review, the Board held a meeting in Marseille, France where it reviewed the Brico Dépôt and Castorama brands and visited a number of stores in the area. It is the Board's intention to hold one off-site meeting within the UK in the coming year, to receive presentations from the UK Executive team, and also conduct at least one meeting outside the UK in a country in which the Group operates.

The Chairman and the non-executive directors meet regularly without executive directors being present.

The Chairman maintains regular contact with the SID.

Corporate governance continued

Activities during the year

During the year, in addition to its regular business, the Board:

received a progress update on the Group's Net Positive strategy;
reviewed and approved the Group's renewed IT programme and processes;
reviewed the Group's risk profile and reviewed the Group risk appetite statement;
considered the Group's capital structure and cash position;
considered post-investment reviews of capital expenditure projects over three years;
reviewed and approved the Group's Health and Safety action plan for 2014;
reviewed the Group's anti-bribery and corruption policies and procedures to ensure continued compliance with the UK Bribery Act; and
received regular strategic presentations from management and held 'deep dive' discussions with management of the Group's Operating Companies, information technology and Group sourcing management.

Board evaluation

To ensure that they continue to be effective and each director remains committed to their role and has sufficient time to manage their commitment to their roles, the Board and its committees conduct a review of their performance each year. In accordance with provision B.6.2. of the Code, the Board commissioned an externally facilitated evaluation during the year under review. The evaluation was conducted by Geoffrey Shepheard of ICSA Board Evaluation ('ICSA'). Mr Shepheard and ICSA are both completely independent and, other than having conducted a similar evaluation in 2010, have no connection with the Company.

The evaluation was carried out in November and December 2013 and Mr Shepheard conducted one-to-one interviews with each member of the Board, the Group Executive Committee and the Company Secretary. Each interview lasted approximately two hours and covered topics agreed in advance of the process with the Chairman and Company Secretary. The topics were as follows:

Board responsibilities;
Oversight;
Board meetings;
Support for the Board;
Board composition;
Working together; and
Outcome and achievements.

As part of the interview process, interviewees were also encouraged to raise any issues which they considered were pertinent to the process, and following each meeting, the interviewee was provided with a short synopsis of the facilitator's understanding of the interview and an opportunity for further comment was provided.

A report on the findings of the evaluation process was prepared by ICSA and presented to the Board at its meeting in January 2014.

The report concluded that the review had been extensive and the Board was assessed as being in the upper quartile of FTSE companies on governance. The report was positive about the overall performance of the Board and recognised continued improvement since the last external review conducted in 2010. No significant issues were highlighted and the evaluation indicated that the Board continued to work efficiently and effectively, that the contribution of each director and their interaction with each other was good and that the non-executive directors offered robust challenge where appropriate.

As a result of the evaluation, a number of actions were agreed and will be implemented in the 2014/15 financial year:

review of format and timing of strategy days;
review of annual standing agenda schedule for meetings of the Nomination Committee; and
continuing improvement of the quality of information and papers submitted to the Board.

As part of the evaluation process, the Group Chief Executive carried out a performance review of the executive directors. The non-executive directors, led by the SID, conducted a performance review of the Chairman in respect of the financial year.

The Board has confirmed that the contribution of each of the directors continues to be effective and that shareholders should be supportive of their re-appointment to the Board.

The Board will continue to review its procedures, effectiveness and development in the year ahead, and the Chairman will use the output of the ICSA evaluation in his individual meetings with directors during the year.

Board and Committee meeting attendance

The following table shows the number of years each director has served on the Board as at the financial year end, and their attendance at the scheduled Board and Committee meetings:

	Tenure in years	Board	Audit Committee	Remuneration Committee	Nomination Committee
Daniel Bernard	7	8/8	–	5/5	1/1
Andrew Bonfield	4	8/8	4/4	5/5	1/1
Pascal Cagni	3	8/8	–	–	1/1(1)
Clare Chapman	3	8/8	–	5/5	1/1(1)
Ian Cheshire	13	8/8	–	–	–
Anders Dahlvig	4	8/8	3/4	–	1/1
Janis Kong	7	8/8	4/4	5/5	1/1
Kevin O'Byrne	5	8/8	–	–	–
Mark Seligman	2	8/8	4/4	–	1/1
Philippe Tible	1	8/8	–	–	–
Karen Witts	1	8/8	–	–	–

(1) Directors were not present during the part of the meeting where their own reappointment was considered.

Induction, information and professional development

All new directors appointed to the Board receive an induction pack as part of their comprehensive induction programme tailored to their experience, background and particular areas of focus. The induction programme is designed to develop directors' knowledge and understanding of the Group's operations and culture.

The induction programme includes:

individual one-to-one meetings with the Chairman, the Group Chief Executive, the Group Finance Director and other directors;
site visits to the Group's stores and those of its competitors;
meetings with management of the Group's Operating Companies and other senior management; and
if required, external training courses at the Group's expense.

In accordance with best practice, the Chairman considers and addresses the development needs of the Board as a whole, if any, and ensures that each director updates their individual skills, knowledge and expertise.

During the year, the Company Secretary arranged for the Group's corporate lawyers to provide an update session on the duties and responsibilities of directors of a UK listed company. Amongst other topics, the training covered Listing Rules compliance and the control and release of inside information, and provided case studies and practical situations for the directors to consider.

Detailed updates have also been provided on the new reporting requirements contained within this year's Annual Report and Accounts, and, in particular, the new remuneration regulations and the fair, balanced and understandable statement directors have been required to make.

Subsequent training in specific aspects of the Group's businesses is provided to directors, when requested, or regularly as part of site visits. Directors are briefed on issues at Board and Committee meetings and have full and timely access to relevant information ahead of each meeting.

The Board also receives regular reports and feedback from discussions with the Company's institutional shareholders and are informed of any issues or concerns raised by them. This process allows directors to develop necessary understanding of the views of these shareholders and also enables the Board to judge whether investors have a sufficient understanding of the Group's objectives. In addition to planned development and briefings, each director is expected to take responsibility for identifying their own individual needs and to take necessary steps to ensure that they are adequately informed about the Group and their responsibilities as a director. The Board is confident that all its members have the requisite knowledge, ability and experience to perform the functions required of the directors of a listed company. There is also an agreed procedure whereby directors may take independent professional advice at the Group's expense in the furtherance of their duties.

Conflicts of interest

Each director has a duty under the Companies Act 2006 to avoid a situation where he or she may have a direct or indirect interest that conflicts with the interests of the Company. The Company has robust procedures in place to identify, authorise and manage such conflicts of interest, and these procedures have operated effectively during the year.

A register of directors' situational and transactional conflicts is maintained by the Company Secretary and reviewed by the Board on a regular basis and directors have a continuing duty to update the Board with any changes to their conflicts of interest. Following review, the Board confirmed that there were no situations of which they were aware which would, or potentially could, give rise to conflicts with the interests of the Company, other than those that might arise from directors' other appointments, which are set out in the directors' biographies on pages 32 to 33.

Corporate governance continued

Relations with shareholders

The Company is committed to communicating its strategy and activities clearly to its shareholders and, to that end, maintains an active dialogue with investors through a planned programme of investor relations activities. The investor relations programme includes:

formal presentations of preliminary and interim results;
Q1, Q2 pre-close and Q3 trading statements with conference calls at Q2 and Q3;
regular meetings between institutional investors and senior management to ensure that the investor community receives a balanced and complete view of the Group's performance and the issues faced by the Group;
hosting investors' and analysts' sessions at which senior managers from relevant Operating Companies deliver presentations which provide an overview of their individual businesses;
responding to enquiries from shareholders through the Company's investor relations team;
regular meetings between institutional investors and analysts and the Group Chief Executive and Group Finance Director to discuss business performance; and
a comprehensive investor relations section on the Company's website.

The Chairman, the Senior Independent Director and the chairmen of the Board's committees are available to meet major investors on request. The Senior Independent Director has a specific responsibility to be available to shareholders who have concerns, and for whom contact with the Chairman, Group Chief Executive or Group Finance Director has either failed to resolve their concerns, or for whom such contact is inappropriate.

The Chairman of the Remuneration Committee consulted with major shareholders on the comprehensive review of the Company's remuneration arrangements and took on board their views when proposing the design and policy changes detailed within the Directors' Remuneration Report on pages 47 to 68.

Annual General Meeting

The principal means of communication with private investors is by electronic communications and through the Annual General Meeting, which is attended by all the Company's directors, and allows all shareholders present the opportunity to question the Chairman and the directors, as well as the chairmen of the Board's Committees. After the Annual General Meeting, shareholders have the opportunity to meet informally with directors. A summary business presentation is given at the Annual General Meeting before the Chairman deals with the formal business of the meeting. At the Annual General Meeting in June 2014, the Chairman will use his discretion to call for a poll on all resolutions. The results of the poll in relation to all resolutions will be disclosed to those in attendance at the meeting, published on the Company's website and announced to the London Stock Exchange shortly after the conclusion of the Annual General Meeting.

Committees

The Board has delegated authority to its principal committees to carry out certain tasks as defined in each committee's respective terms of reference. The written terms of reference in respect of the Audit, Remuneration and Nomination Committees are available on the Company's website. The Board is satisfied that the terms of reference for each of these committees satisfy the requirements of the Code. The terms of reference of the principal committees are reviewed on an ongoing basis.

The minutes of committee meetings are made available to all directors on a timely basis. In addition, at each Board meeting, the chairmen of the principal committees provide the Board with a brief synopsis of the work carried out by their committee, if any, between Board meetings.

In addition to the principal committees, the Board is supported by the work of the Group Executive Committee and its subcommittees. Together these committees form a fundamental element of the Company's corporate governance framework. The Group's governance structure and a brief explanation of the work of the Group Executive Committee and the other management committees is set out below:

Organisation and Governance Structure

Group Executive Committee

The responsibilities, structure and composition of the Group Executive Committee were reviewed during the year. The Committee consists of the executive directors, the CEO Group Productivity and Development, and the CEO Group Sourcing and Offer. The Committee meets formally ten times a year under the chairmanship of the Group Chief Executive. The members' details are set out on page 34.

The Committee's primary focus is the strategic direction of the Group. In addition, the Committee monitors top talent within the business and reviews key items requiring formal Board approval, including dividend planning, key projects and strategic capital expenditure decisions.

In accordance with its formal terms of reference, the Group Executive Committee is also responsible for reviewing and making recommendations to the Board on:

strategic and business plans of individual businesses;
the Group's capital structure and funding;
strategic capital expenditure proposals, major acquisitions or disposals of businesses;
the Group's key risks;
management development and senior executive succession plans; and
the Group's Net Positive programme.

During the year, the Committee met ten times and, in addition to its standing agenda, reviewed:

the Group's branding strategies and Group procurement and sourcing arrangements;
operating budgets and monthly trading performance;
the Group's IT strategy and planning;
the strategy for embedding sustainability into Group behaviours; and
HR proposals for management development and succession planning.

One Team Board

The One Team Board consists of the Group Executive Committee, the CEOs of each of the Group's Operating Companies and other senior Group employees who report directly to members of the Group Executive Committee. The primary purpose of the Board, which meets four times a year, is the implementation of Group Strategy and the day to day management of the Group's businesses. At its meetings, the One Team Board considers performance against strategy and budget and reviews Group-wide people-related activities.

Kingfisher Capital Expenditure Committee

The Capital Expenditure Committee is responsible for reviewing and approving all capital expenditure projects relating to property and non-property proposals in excess of an agreed threshold of £0.75m, which is reviewed periodically.

The decisions of the Committee are reported to the Board following each meeting, and the Committee will review and make recommendations to the Board regarding all projects exceeding its agreed approval threshold of £15m. The Committee comprises the Group Chief Executive, Group Finance Director, Group Property Director, CEO Group Productivity and Development, the Group General Counsel, and the Head of Property Finance.

Financial Initiatives, Tax and Treasury Committee

The primary purpose of the Committee is to monitor compliance with policies and control issues relating to Group Finance, and to review key proposals from Group Finance, Treasury, Tax and Secretariat functions, and, where appropriate, recommend certain initiatives for approval of the Board. The Committee comprises the Group Finance Director, Group Finance and Planning Director, Group Treasurer, Group Tax Director, Head of Group Pensions, Group General Counsel, Company Secretary and Group Audit and Risk Management Director.

Disclosure Committee

The primary purpose of the Committee is to ensure that information to be disclosed by the Company in its reports is properly identified, recorded, processed, summarised and reported to senior management of the Company and to the Audit Committee. The Committee assists in ensuring that disclosures fairly represent the financial position of the Company and the Group and, in the case of the Annual Report and Accounts, ensure that when taken as a whole, they are fair, balanced and understandable and provide shareholders with the information needed to assess performance, business model and strategy. The Committee comprises the Group Finance Director, Group Finance and Planning Director, Group Company Secretary, Group Chief Accountant, Group Communications Director and Group General Counsel.

Group Health and Safety Committee

The Committee's primary purpose is to review the management of health and safety risks across the Group and monitor performance on, and compliance with, Group policies, procedures and practices in relation to all aspects of health and safety with the aim of providing safe environments for employees, customers, suppliers and contractors and driving continuous improvements. The Committee comprises the Group General Counsel, the Director of Risk & Compliance, a regional representative of each of Kingfisher's Divisions and the Group Property Services Director. The Group Finance Director has Board responsibility for health and safety and attends meetings of the Committee on a regular basis and delegates day to day oversight to the Group General Counsel as Chairman of the Committee.

Details of each of the Board's principal committees, including membership, are set out in the following reports.

Corporate governance continued

Audit Committee Report

Andrew Bonfield

Dear Shareholder

I am pleased to present the report of the Audit Committee for 2013/14.

During the year under review, the Committee was required to carry out its duties in line with the revised UK Corporate Governance Code ('the Code'). The Committee reviewed its operations in relation to the Code and where necessary amended its actions and terms of reference to reflect any changes.

Last year, in anticipation of the changes to the Code, this report included enhanced disclosure in a number of areas, including the assessment of the effectiveness of the external auditors and the external audit process. In this report the Committee is required to include a description of those significant issues considered by it during the year and, as such, further detail is provided later in this report.

The Board has asked the Committee to oversee the process for determining whether the Annual Report and Accounts, when taken as a whole, is fair, balanced and understandable, and further description of this process is also contained later in the report.

The Committee is appointed by the Board from amongst its non-executive directors, and its principal duties are to provide effective oversight and governance of the internal control and risk management processes of the Company, to review the financial statements and related accounting policies, review the effectiveness of the internal and external audit functions and provide updates and recommendations to the Board.

In addition to the activities outlined above, during the year, the Committee continued the analysis of the Company's risks and associated mitigating controls and focused on compliance, financial governance and internal audit functions. It maintained its good working relationship with the Group Audit and Risk Management Director, the Group Finance and Planning Director, the Company Secretary and the Group's external auditor, Deloitte LLP. The Committee maintained, reviewed and where necessary amended its standing agenda, which is linked to the Group's financial calendars.

In order to improve the understanding of their operations, during the year the Committee received in-depth presentations from management of the Group's Operating Companies, including the key strategic risks impacting each business. The Committee considered and reviewed the Group's adequate procedures in relation to bribery and corruption, the provision of a whistleblowing service and approved accounting judgements in relation to the Group's investment in Hornbach.

A fuller description of the operations of the Committee is set out below. I will be available at the Annual General Meeting to answer any questions about the work of the Committee.

For and on behalf of the Committee

Andrew Bonfield

Chairman of the Audit Committee 24 March 2014

Committee composition

The Audit Committee comprises four non-executive directors:

Andrew Bonfield (Chairman)
Anders Dahlvig
Janis Kong
Mark Seligman

All Committee members are considered independent in accordance with provision B.1.1 of the UK Corporate Governance Code.

Audit Committee meeting attendance

	From	Attendance
Andrew Bonfield (Chairman)	11/02/2010	4 of 4
Anders Dahlvig	16/12/2009	3 of 4
Janis Kong	11/02/2011	4 of 4
Mark Seligman	01/01/2012	4 of 4

Duties

In accordance with its terms of reference, the Audit Committee is required, amongst other things, to:

monitor the integrity of the financial statements of the Group;
review, understand and evaluate the Group's internal financial risk, and other internal controls and their associated systems;
monitor and review the effectiveness of the Group's internal audit function on an annual basis;
oversee the relationship with the external auditor, making recommendations to the Board in relation to their appointment, remuneration and terms of engagement;
agree the scope of both the external and internal auditor's annual audit programme and review the output; and
monitor and review the external auditor's independence, objectivity and effectiveness and to approve the policy on the engagement of the external auditor to supply non-audit services.

The Committee's terms of reference were reviewed during the year and following amendment to reflect the changes to the Code, in particular in relation to oversight of the fair, balanced and understandable nature of content in the Annual Report and Accounts, are considered fit for purpose and reflect best practice. The terms of reference are available on the Company's website (www.kingfisher.com).

Governance

In accordance with the requirements of provision C.3.1 of the UK Corporate Governance Code, Andrew Bonfield is designated as the Committee member with recent and relevant financial experience. All other members of the Audit Committee are deemed to have the necessary ability and experience to understand financial statements. The attendance by members at Committee meetings is set out on page 42.

All members of the Committee receive appropriate induction, in addition to the induction which all new directors receive. The induction programme includes an overview of the business, its financial dynamics and risks. New Committee members also obtain access to the Group's operations and staff, and all members of the Committee undertake ongoing training as required.

The Committee is required, under its terms of reference, to meet at least three times a year. During the year, the Committee met four times. The Committee has a standing agenda linked to events in the Group's financial calendar for consideration at each meeting, and within the annual audit cycle, to ensure that its work is in line with the requirements of the Code. At the invitation of the Committee, the Chairman of the Board and the Group Chief Executive attended all meetings, as did the Group Finance Director, Group Audit and Risk Management Director, Group Finance and Planning Director and the external auditor. Private meetings were also held with the external and internal auditors at which management were not present.

The effectiveness of the Audit Committee was considered as part of the external Board evaluation detailed on page 38. At its meeting in January 2014, the Committee considered the contents of the review and concluded that the evaluation had found the Committee to operate effectively and provide robust challenge to the business. It was agreed that no specific actions were required by the Committee as a result of the review.

Detailed below is the key work undertaken by the Committee during the year under review and up to the date of this Annual Report.

Activities of the Audit Committee during the year Internal controls and risk

The Committee received and considered reports during the year from the Group's external auditor, Deloitte LLP, and the Group's internal audit function on the work they had undertaken in reviewing and auditing the Group, in order to assess the quality and effectiveness of the internal control system.

The Committee considered reports on the output from the Group-wide process used to identify, evaluate and mitigate risks and reviewed the annual report on the Group's systems of internal control and their effectiveness, and reported the results of the review to the Board. Further information on the Group's risk management and internal control procedures can be found on page 45.

As part of the Committee's continuing programme to increase its awareness of the Group's operations and to understand the implementation of Operating Company control processes, the Committee met with, and received presentations from, the senior management of Operating Companies in the UK (B&Q and Screwfix), China, Russia, Turkey, Poland and Romania. The significant matters the Committee considered in the year included:

Internal audit perform store audits in each of our Operating Companies. As part of this work, control issues relating to health and safety processes were identified across the Group. The issues have been isolated instances of non-compliance with our health and safety procedures. Action plans have been put in place to address these issues. An initiative has also been launched by the Group Chief Executive to raise awareness of the importance of health and safety and how non-compliance will not be tolerated. This is supported by the Group Health and Safety Committee. The Committee was satisfied that the necessary steps were being taken to improve the standards of health and safety across the Group.
several control issues were raised in B&Q China during the year in relation to non-compliance with health and safety policies, compliance with new social payment regulations and store operational controls. The Committee considered papers detailing the steps being taken locally and at Group level to improve the situation. Project teams have been established to address these issues and these are supported by Group resources. The Committee concluded that the issues would be rectified by rigorous control of process management and the monitoring of the projects by fortnightly governance meetings. Progress is reported to the Committee regularly.

In addition, the Committee continued to monitor the progress on the standardisation and improvement of the Group's internal control processes, in a number of key areas.

The Committee reviewed the operation of the Group whistleblowing helpline which allows employees within the Group and its suppliers to make disclosures about alleged financial and operational improprieties. The 'SpeakUp' service was reviewed along with arrangements to acknowledge, investigate and close down reports at the Committee's meeting in January 2014 and, having considered the output from the service, and the number, location and type of incidents reported, the Committee concluded that the Group continued to maintain adequate mechanisms for recording disclosures.

Financial reporting and significant financial issues During the year, the Committee formally reviewed the Company's annual and interim financial statements and associated announcements. The reviews considered significant accounting principles, policies and practices and their appropriateness, financial reporting issues and significant judgements made. The Committee also considered whether the 2013/14 Annual Report and Accounts are fair, balanced and understandable, having received input and guidance from the Disclosure Committee.

Corporate governance continued

In conducting these reviews, the Committee considered the work and recommendations of the Group finance function and received reports from the Group's external auditor on their findings, including any control observations relevant to their audit work. The significant reporting matters the Committee considered in the year are detailed below:

the Committee considered the carrying value of goodwill to determine whether any impairment had been suffered. The Committee reviewed the significant financial assumptions used, including validity of cash flow projections and the selection of appropriate discount and long-term growth rates;
the Committee considered the treatment of exceptional items, which are presented as exceptional to help provide an indication of the Group's underlying business performance;
the Committee reviewed significant judgemental provisions and accruals held, including those in respect of tax, legal, property and inventory risks; and
the Committee considered the judgements made by management in concluding that the Group ceased to have the ability to exercise significant influence over the Hornbach businesses. The Committee was satisfied that this conclusion, the balance sheet classification and measurement, and the resulting net exceptional loss were appropriate.

Group Internal Audit

The Committee considered and reviewed updates from the internal audit programme at each of its meetings during the year. Reports from the internal audit function to the Committee included updates on the Group's risk management systems, findings from reviews, and reviews of the remit, organisation, annual plan and resources of the internal audit function. During the year, the Committee reviewed the effectiveness of the internal audit function. The review was conducted using an internal questionnaire with input from the function's key stakeholders within the Group, in addition to the Committee. No significant issues were highlighted by the review.

External Audit

During the year, the Committee agreed the approach and scope of the audit work to be undertaken by the external auditor, Deloitte LLP, and undertook an assessment of their qualification, expertise and resources, independence and the effectiveness of the external audit process. The Committee also reviewed and agreed the terms of engagement, the fees, and areas of responsibility and the work to be undertaken by the external auditor, and agreed the fees payable in respect of the 2013/14 audit work. Details of the amounts paid to the external auditor for their audit services are given in note 7 to the accounts on page 92. In addition, the external auditor provided the Committee with a schedule of each matter on which there was an initial difference between them and management in relation to the accounting treatment, and with the final decisions on these issues.

During the year, the Committee considered the effectiveness and independence of the external auditor. In consideration of its effectiveness, the Committee reviewed the experience and expertise of the audit team, the fulfilment of the agreed audit plan and any variations to it, feedback from the Group's businesses and the contents of the external audit report.

In considering the independence of the external auditor, the Committee received a statement of independence from the auditor, a report describing their arrangements to identify, report and manage any conflicts of interest, and reviewed the extent of non-audit services provided to the Group. The Committee concluded that it is satisfied with the effectiveness and independence of the external auditor.

In addition to their statutory duties, the services of Deloitte LLP are also engaged where, as a result of their position as external auditor, they either must, or are best placed to, perform the work in question. This is primarily work in relation to matters such as shareholder circulars, Group borrowings, tax advice, regulatory filings and certain business acquisitions and disposals. Other work is awarded on the basis of competitive tendering.

The Committee reviewed and approved the scope of non-audit services provided and proposed by the external auditor to ensure that there was no impairment of independence and objectivity, and subsequently monitored the non-audit work performed to ensure it was within policy guidelines.

The Group has a policy on the use of its external auditor for non-audit work and this is regularly reviewed. The external auditor is precluded from engaging in non-audit services that would compromise their independence or violate any laws or regulations affecting their appointment as external auditor. The approval of the Chairman of the Committee is required prior to awarding contracts for non-audit services to the external auditor, where in excess of specified amounts. The Group's policy on the use of the external auditor for non-audit work can be found on the Group's website.

During the year, Deloitte LLP charged the Group £1.8m (2012/13: £1.6m) for audit and audit-related services and a further £0.4m (2012/13: £0.4m) for non-audit services.

The Committee reviews and makes recommendations to the Board with regard to the reappointment of the external auditor. In doing so, the Committee takes into account auditor independence and audit partner rotation. Deloitte LLP were appointed as external auditor in 2009/10 following a formal tender process. Panos Kakoullis was appointed lead audit partner at that time and will step down following the conclusion of the 2013/14 audit process, when he will be replaced by Richard Muschamp. Richard will serve as lead audit partner until the external audit contract is put out to tender, which will be in 2019 at the latest. During the year under review, Deloitte also replaced the lead audit partner for B&Q UK. The Committee noted provision C.3.7 of the Code in relation to audit tendering and has taken into account the UK Competition Commission's recent decision to introduce mandatory audit tendering at ten-year intervals, in making the decision to tender the external audit contract by 2019 at the latest.

The Committee has recommended to the Board that Deloitte LLP be proposed for re-appointment by shareholders as the Company's external auditor at the forthcoming Annual General Meeting. As a result of its work during the year, the Committee has concluded that it acted in accordance with its terms of reference and has ensured the independence and objectivity of the external auditor.

Accountability, Risk Management and Internal Control Internal control

The Board has overall responsibility for the Group's system of internal control, which is designed to safeguard the assets of the Group and ensure the reliability of the financial information for both internal use and external publication, and to comply with the Turnbull guidance and the Code.

The Board confirms that it has reviewed the effectiveness of the internal control system, including financial, operational and compliance controls and risk management in accordance with the Code, for the period from 2 February 2013 to the date of approval of this Annual Report and Accounts 2013/14.

If significant losses were to be incurred during the year as a result of a failure of controls, a detailed report would be provided to the Audit Committee and the Board. The Board confirms that no significant weaknesses were identified in relation to the review carried out during the year and therefore, no remedial action was required.

The Board has approved a set of policies, procedures and frameworks for effective internal control. The Group has procedures for the delegation of authorities for significant matters, to ensure approval is sought at the appropriate level. These procedures are subject to regular review and provide an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss.

The responsibility for designing, operating and monitoring the system and the maintenance of effective control is delegated to the management of each of the Group's Operating Companies. The Group's risk management and reporting process helps Group management to identify, assess, prioritise and mitigate risk. Management at each Operating Company has responsibility for the identification and evaluation of the significant risks applicable to their business and any mitigating actions to be taken. The Group Executive Committee reviews, identifies and evaluates the risks that are significant at a Group level, as well as the mitigating actions against those risks. These are then considered by the Board. The types of risks identified included both strategic and material operational risks and are detailed on pages 28 to 31 of the report.

Management is required to apply judgement in evaluating the risks facing the Group in achieving its objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of those risks materialising, in identifying the Group's ability to reduce the incidence and impact on the business of risks that do materialise, and in ensuring the costs of operating particular controls are proportionate to the benefit provided.

Monitoring

There are clear processes for controlling and monitoring the system of internal control and reporting any significant control failings or weaknesses together with details of corrective action. These include:

an annual planning process and regular financial reporting, comparing results with plan and the previous year on a monthly and cumulative basis;
written reports from the Group Chief Executive and Group Finance Director submitted at each Board meeting;
Operating Company management report formally to the Audit Committee on a regular basis on the control environment in their business and actions taken to maintain or improve the environment as appropriate; and
reports and presentations to the Board on certain areas of specialist risk. These include treasury, insurance, tax and pensions.

A formal bi-annual certification is provided by the CEO and Finance Director of each Operating Company stating that appropriate internal controls were in operation and confirming compliance with Group policies and procedures. Any weaknesses are highlighted and the results are reviewed by Operating Company management, the Group Audit and Risk Management Director, the Group Finance and Planning Director, the Audit Committee and the Board. The internal audit function monitors and selectively checks the results of this exercise, ensuring that representations made are consistent with the results of its work during the year.

The internal audit function follows a planned programme of reviews that are aligned to the Group's risks. The function:

works with the Operating Companies to develop, improve and embed risk management tools and processes into their business operations;
reports directly to the Audit Committee and has the authority to review any relevant part of the Group;
oversees the operation of the individual Operating Companies' audit committees; and
provides the Audit Committee and the Board with objective assurance on the control environment across the Group.

Risk appetite

During the year, the Board also considered the nature and level of risk that it was prepared to accept in order to deliver business strategies, and has reviewed and approved the Group's internal statement of risk appetite. This describes both the current and desired levels of acceptable risk, supported by high level qualitative risk statements, ensuring that risks are proactively managed to the level desired by the Board.

Nomination Committee Report

Daniel Bernard

Committee composition

The Committee comprises the Chairman and all the nonexecutive directors and meets periodically as required. External advisers may be invited to attend meetings when particular issues are to be considered. During the year the Committee met once. The members of the Nomination Committee are:

Daniel Bernard (Chairman)
Andrew Bonfield
Pascal Cagni
Clare Chapman
Anders Dahlvig
Janis Kong
Mark Seligman

Nomination Committee meeting attendance

	From	Attendance
Daniel Bernard (Chairman)	24/05/2006	1/1
Andrew Bonfield	11/02/2010	1/1
Pascal Cagni	17/11/2010	1/1
Clare Chapman	02/12/2010	1/1
Anders Dahlvig	19/12/2009	1/1
Janis Kong	08/12/2006	1/1
Mark Seligman	01/01/2012	1/1

Directors did not attend those parts of the meeting where their own reappointment was considered.

Duties

The primary objective of the Nomination Committee is to review the composition of the Board and plan for its refreshment as applicable with regard to composition, balance and structure. The Committee is also asked to lead, on behalf of the Board, the selection process for new Board appointments and to make recommendations in respect of such appointments while maintaining an appropriate balance of diversity and skills. In accordance with its terms of reference, the Nomination Committee is required to:

review the structure, size and composition of the Board and make recommendations to the Board, as appropriate;
identify the balance of skills, knowledge, diversity and experience on the Board and nominate candidates to fill Board vacancies;
review the time commitment required from the non-executive directors;
consider succession planning, taking into account the challenges and opportunities facing the Group and the future skills and expertise needed on the Board; and

• review the leadership needs of the organisation, both executive and non-executive, with a view to ensuring the continued ability of the organisation to compete effectively in the marketplace.

The Committee's terms of reference were reviewed during the year and were amended in line with best practice and are available on the Company's website (www.kingfisher.com).

Activities during the year

During the year, the Committee considered the reappointment of Clare Chapman and Pascal Cagni, following the expiry of their initial three-year terms of appointment as directors. The Committee concluded that both directors continued to provide the necessary balance of skills and experience to the Board, including considerable Human Resources and Remuneration experience, and in-depth IT and ecommerce knowledge. The Committee therefore recommended to the Board that each be reappointed as a director of the Company for an additional three-year term.

At its meeting in October 2013, the Committee considered a talent and succession review presented by the Group HR Director, which outlined succession planning and talent pipeline considerations across the entire Kingfisher Group in support of the Group's Creating the Leader strategy.

Following the reappointment of Ms Chapman and Mr Cagni, and a review of the Board and its Committees, the Committee firmly believes that the current composition represents a strong, well balanced and diverse Board. The Board membership is made up of specialists in retail, technology, finance and human resources, and possesses considerable knowledge, experience and skills to meet the current and future requirements of the Group. The Chairman will be available at the Annual General Meeting to answer any questions about the work of the Committee.

Daniel Bernard

Chairman of the Nomination Committee 24 March 2014

Directors' Remuneration Report

"During the year the Committee conducted a comprehensive review of executive remuneration arrangements to ensure they are aligned to long-term shareholder value creation."

Clare Chapman

Chairman of the Remuneration Committee

To download the Remuneration Report go to http://annualreport.kingfisher.com/2013-14/governance.html

Annual Statement from the Chairman of the Remuneration Committee

Dear Shareholder

I am pleased to present the 2013/14 Directors' Remuneration Report on behalf of the Board.

As required by the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the rest of this remuneration report is split into two sections:

The directors' remuneration policy which sets out the Company's proposed policy on directors' remuneration for the three years from the 2014 Annual General Meeting (the 'Remuneration Policy'). The Remuneration Policy will be subject to a binding shareholder vote at this year's AGM and thereafter at least every three years.
The annual report on remuneration sets out the payments made to directors and details the link between Group performance and remuneration for the 2013/14 financial year (the 'Annual Remuneration Report'). The Annual Remuneration Report together with this letter will be subject to an advisory shareholder vote at this year's AGM.

Changes to the layout of the Directors' Remuneration Report are intended to improve transparency and demonstrate how the remuneration arrangements are aligned with the Group's strategy.

Outcome 2013/14

2013/14 proved to be another challenging year for retailers but although the economic environment was difficult, Kingfisher made solid progress, with profit increased and like-for-like sales growth delivered. Further information regarding the Group's performance during the year can be found in the Strategic Report on pages 1 to 31. This results in bonus payments being awarded for performance between threshold and on-target levels. As a result, bonuses in respect of performance were between 24% and 36% of maximum which were similar to the previous year.

The 2011 Performance Share Plan vesting percentage is determined by the 2013/14 EPS result and the 2011/12 to 2013/14 cumulative KEP result. EPS was below the required threshold but KEP was within the target range, resulting in an overall award of 31% of maximum. The awards will vest in two equal tranches in June 2014 and June 2015.

2013/14 Remuneration Review

During the year, the Committee conducted a thorough and comprehensive review of the Group's executive remuneration arrangements. The focus of this review was to ensure that the overall executive remuneration structure supports the Creating the Leader strategy and is aligned to long-term shareholder value creation. The review also considered the structure of a new long-term incentive plan to replace the Kingfisher Incentive Share Scheme and the Performance Share Plan. The rules of the new plan will be submitted to shareholders for approval at the AGM in 2014.

Our major shareholders were consulted as part of this review to ensure that we took on board their views on the proposed changes to our remuneration structure.

Following this thorough review, the Committee is satisfied that the Group's executive remuneration arrangements create a strong link between competitive pay and performance. The Committee agreed to propose a number of changes to the Group's executive remuneration policy to strengthen alignment with long-term sustainable performance by increasing deferral, extending malus provisions and raising shareholding requirements. The specific changes are:

Annual bonus deferral for executive directors to be increased to 50% (from 33%);
Reverting to annual grants under the proposed new long-term incentive plan, at the level of 200% of salary, with the flexibility in future to award up to 250% for the Group Chief Executive, subject to stretching performance targets;
Increased shareholding requirements to 300% of salary for the Group Chief Executive and 200% of salary for other executive directors; and
Extension of malus provisions to include instances of reputational damage linked to executive actions.

The full proposed Remuneration Policy is set out on pages 49 to 58.

At our 2013 AGM, 98% of shareholders voted in favour of our Directors' Remuneration Report. I very much hope you will support the Remuneration Policy and 2013/14 Annual Remuneration Report at our forthcoming meeting. I will be available at the AGM in June to answer any questions about the work of the Committee.

Clare Chapman

Chairman of the Remuneration Committee 24 March 2014

Directors' Remuneration Report continued

At a Glance

In this section, we summarise the purpose of our Remuneration Policy and its linkage to our strategic objectives, and we highlight the performance and remuneration outcomes for 2013/14. More detail can be found in the Remuneration Policy and Annual Remuneration Report.

How has the structure changed year-on-year?

Proposed changes to Remuneration Policy

Component value	Operation of the component Maximum potential		Performance metrics used, weighting and time period applicable
Base salary	no difference	no difference	n/a
Benefits	no difference	no difference	n/a
Annual bonus	33% of 2013/14 annual bonus will be deferred for three years.	no difference, maximum opportunity remains at 200% of base salary.	In 2013/14 the annual bonus was based on the following metrics:
	50% of the 2014/15 annual bonus will be deferred for three years under the new plan.		• Profit 30% • Relative LFL sales 30% • Sourcing & Productivity 20% • Personal performance 20%
LTIP	Following the one-off award of 500% of base salary made in 2011 under the PSP, no awards were made in 2012 or 2013. Annual awards will be made in future.	No awards were made in 2013/14. In future awards will be granted on an annual basis at a maximum of 200% of base salary (with flexibility to award up to 250% of salary for the Group Chief Executive).	No award was made in 2013/14

How have we performed against our performance objectives?

Outcomes achieved as a % of Maximum

Performance Measure	Target	Actual	Sir Ian Cheshire	Kevin O'Byrne	Philippe Tible	Karen Witts
Profit before tax	£765m	£744m	0%	–	–	0%
Retail operating profit	–	–	–	5%	0%	–
Like for like sales	3.3%	0.7%	15%	–	–	15%
Divisional like for like sales	–	–	–	10%	15%	–
Sourcing and productivity	–	–	58%	71%	17%	58%
Personal objectives	–	–	80%	85%	78%	85%
Totals			32%	36%	24%	33%
Bonus receivable £'000			532.7	453.9	239.4	319.8

Performance Measure	Threshold – 15 % vesting	Maximum – 100% vesting	Actual	% of maximum achieved.
Earnings per share (EPS)	25.8p	31.2p	23.4p	0%
Kingfisher Economic Profit (KEP)	£229m	£386m	£288.4m	62.2%
Total				31.1%

Single total figure of remuneration for executive directors 2013/14

Total	2,453.1	92.9	1,604.0	4,993.2	806.6	9,949.8
Karen Witts	484.5	26.3	319.8	607.2	103.1	1,540.9
Philippe Tible	509.3	11.7	297.6	1,072.5	320.0	2,211.1
Kevin O'Byrne	627.0	24.3	453.9	1,404.0	123.1	2,632.3
Ian Cheshire	832.3	30.6	532.7	1,909.5	260.4	3,565.5
Executive Directors	Salary £'000	Taxable benefits £'000	Bonus £'000	LTIP £'000	Pension £'000	Total £'000

The key principles of our Remuneration Policy are to:

provide executive directors with a remuneration package that recognises the experience of the individual concerned and the value created;
ensure performance-related remuneration constitutes a substantial proportion of the remuneration package;
ensure executive directors' interests are aligned with shareholders' by delivering rewards in shares, and requiring a significant personal holding in Kingfisher shares in accordance with the Group's ownership policy;
be competitive in the talent markets in which the Group operates;
be fair, transparent and straightforward to understand; and
ensure remuneration principles apply consistently throughout the Group, and where practical are translated into local practice at the appropriate organisational level.

Remuneration Policy

The Remuneration Policy set out in this section is intended to apply for three years from the date of the 2014 AGM, subject to shareholder approval. Where the forward-looking policy differs from the policy that was in operation in 2013/14, we have provided explanations of these differences. The Remuneration Committee (the 'Committee') will review the Remuneration Policy on an annual basis to ensure that it remains aligned to the Creating the Leader strategy and is appropriately positioned relative to the market. There is no current intention to revise the policy more frequently than every three years. Where a material change to policy is considered, the Group will consult with its major shareholders prior to submitting the revised policy to all shareholders for approval.

The Remuneration Policy will be displayed on the Group's website www.kingfisher.com immediately after the 2014 AGM.

The Remuneration Policy is designed to attract, retain and motivate executives of the highest quality, incentivising them to deliver exceptional business performance aligned with the interests of shareholders, and to deliver the Group's Creating the Leader strategy. The Remuneration Policy continues to ensure that a significant element of executive directors' remuneration remains 'at risk'.

The key principles of the Remuneration Policy are to:

provide executive directors with a remuneration package that recognises the experience of the individual concerned and the value created;
ensure that performance-related remuneration constitutes a substantial proportion of the remuneration package;
ensure that executive directors' interests are aligned with shareholders by delivering rewards in shares and requiring a significant personal holding in Kingfisher shares in accordance with the Group's share ownership policy;
be competitive in the talent markets in which the Group operates;
be fair, transparent and straightforward to understand; and
ensure remuneration principles apply consistently throughout the Group, and where practical are translated into local practice at the appropriate organisational level.

The Committee is satisfied that this Remuneration Policy strikes an appropriate balance between the fixed and variable elements of remuneration, and between promoting short and long-term business objectives.

Future Remuneration Policy

Element and purpose	Operation	Maximum opportunity	Assessment of performance
Base salary
Base salary reflects the individual's role, experience and contribution to the Group and is set at levels that support the recruitment and retention of executive directors of the calibre required by the Group.	Base salaries are set with reference to two primary comparator groups; i) FTSE 25-75 excluding financial services organisations, and ii) FTSE100 retailers and privately held retailers which are considered to be of a similar size and market capitalisation to the Group. The Committee also takes account of pay levels in other large European retailers. Alternative peer groups may need to be referenced depending on the domicile of individual executive directors outside the UK. The Committee does not apply a strict mathematical approach to the market data, which it considers to be only one relevant input. Instead, the Committee has regard to its overall assessment of appropriate levels of salary, within the benchmark range taking into account the market, economic conditions, affordability, the level of increases awarded to employees generally and the individual's performance, contribution and experience.	Whilst there is no prescribed or formulaic maximum, the annual increase will normally not exceed the level awarded to the general workforce. Higher increases may be made where there have been significant changes in the responsibility and accountability in a role, or where there are large variances to the market, for example in the case of a recently appointed executive director appointed on a salary below the market median. Any significant increases will be fully explained.	Individual performance is an important factor considered by the Committee when reviewing base salary each year.
	Salaries are reviewed, but not necessarily adjusted, annually. Out of cycle reviews may

be conducted in exceptional circumstances if determined appropriate by the Committee. Base salaries are paid monthly in cash.

Directors' Remuneration Report continued

Future remuneration policy continued

Element and purpose	Operation	Maximum opportunity	Assessment of performance
Benefits
Benefits are provided to assist executive directors in the performance of their roles and are designed to be competitive and cost effective.	The Group may provide pension contributions (set out below), a company car or cash alternative, allowance for financial planning, medical insurance, and life assurance cover. Other benefits may be provided from time to time if considered reasonable and appropriate by the Committee, to include items such as relocation allowances, and will be explained in the next Annual Remuneration Report. The Group pays the cost of providing benefits on a monthly basis or as required for one-off events such as financial planning advice. Store discount may be offered to all directors on the same basis as offered to other Group employees.	Maximum levels of benefit provision are: • Car allowance £25,000 per annum • Private medical insurance on a family basis • Life assurance cover of 4x base salary • Financial planning at £2,500 per annum There are a number of variables and unknowns impacting the maximum payable in the event of relocation; however, the Committee would pay no more than is necessary in such situations. Store discount of up to 20% is offered.	None
		By exception, death in service cover for Kevin O'Byrne is provided at 7x base salary. The additional 3x cover is funded by him through an equivalent 0.25% reduction in his pension cash allowance.
All-employee share plans
To enable investment in UK-based executive directors may participate in shares in Kingfisher on the a tax approved all-employee scheme (Sharesave) under which they make monthly savings over a same terms as other UK period of three or five years, that may be used to based employees. buy Kingfisher shares at a discounted price when the scheme matures. They may also choose to withdraw their savings at the end of the savings period or at any time during the savings contract.		The maximum monthly limit for the Sharesave plan is currently £250 per month. The maximum monthly amount an individual may invest in partnership shares is currently £125 per month. The SIP also allows the award of free and matching shares up to the limits	None
	UK-based executive directors may also participate in the Share Incentive Plan (SIP). Designed to promote employee share ownership, the SIP enables participants to make monthly investments in Kingfisher shares.	set by the Government. The Group may increase the amounts that can be saved or invested under the Sharesave and SIP plans in line with any increases authorised by the UK Government for approved plans.
Pension
To provide retirement	Pension provision for executive directors (with the exception of Philippe Tible) is by way of	For the defined contribution scheme or cash allowance, the maximum	None

benefits and support retirement planning in a tax efficient way through

a competitive scheme.

the exception of Philippe Tible) is by way of contributions to a defined contribution scheme. A cash allowance is available to those who choose not to participate in the defined contribution scheme as a result of having applied for protection upon exceeding or getting close to Lifetime Allowance limits. For executive directors who choose to remain in the scheme, to avoid total member and employer contributions exceeding the Annual Allowance (£40,000 for the tax year 2014/15), employer contributions can be paid as a taxable cash allowance on a cost neutral basis to the Company.

A French non-contributory defined benefit arrangement is in operation for Philippe Tible as divisional CEO of Castorama and Brico Dépôt. or cash allowance, the maximum annual pension contribution is 30% of base salary for the Group Chief Executive and 20% of base salary for other UK-based executive directors.

For the defined benefit arrangement in which the divisional CEO of Castorama and Brico Dépôt, Philippe Tible participates, the pension notionally accrues at a value of 1.5% of final pensionable pay for each year of service, with crystallisation of the pension being conditional upon him retiring from the Company.

Annual bonus

To incentivise executive directors to achieve or exceed annual financial, strategic and personal objectives set by the Committee at the start of each financial year. The deferred element of the annual bonus is intended to support longer-term shareholder alignment and retention.

Annual bonuses are paid after the end of the financial year to which they relate.

50% of the annual bonus is paid in cash shortly after the financial year end. The remaining 50% of the annual bonus is deferred for three years in Kingfisher shares. Vesting of these shares is not subject to performance conditions and no match is applied. Shares delivered on the exercise of an award attract additional dividend shares calculated on the basis of the re-investment back into shares of the dividend that would have been received had the shares been beneficially held.

The Committee has the discretion to adjust the bonus outcome if the pure application of a formula is not felt to produce an appropriate result in light of overall underlying performance. In particular the Committee has the discretion to adjust payments downwards if profits have fallen. Any adjustment made using this discretion will be explained.

Malus may be applied whereby part or all of an unvested deferred bonus award may be reduced (including, if appropriate, reduction to zero) in the event of financial misstatement, serious reputational damage, or material misconduct in individual cases.

Deferred bonus awards will vest in full in the event of a change of control of the Company.

Long-term incentive plan

To incentivise executive directors to achieve superior returns for shareholders and drive shareholder alignment and retention of executives over the performance period of the awards.

Performance conditions are aligned with shareholder interests and the Group's strategic objectives.

Awards will be granted annually under the Kingfisher Incentive Share Plan, subject to a three-year vesting period and stretching performance conditions.

Shares delivered on the exercise of an award attract additional dividend shares calculated on the basis of the re-investment back into shares of the dividend that would have been received had the shares been beneficially held.

The Committee has the discretion to adjust the LTIP outcome if the pure application of a formula is not felt to produce an appropriate result in light of overall underlying performance.

Malus may be applied whereby part or all of an unvested long-term incentive award may be reduced (including, if appropriate, reduction to zero) in the event of financial misstatement, serious reputational damage, or material misconduct in individual cases.

In the event of a change of control of the Company, awards will vest subject to assessment of performance up to the date of change of control and will be reduced on a time pro-rated basis unless the Committee considers that such a reduction is inappropriate.

Element and purpose Operation Maximum opportunity Assessment of performance

The on-target and maximum annual bonus payable are 100% and 200% of base salary respectively.

The level of payment at threshold is set on an annual basis but will not exceed 25%.

The specific measures, targets and weighting may vary from year to year in order to align with the Group's strategy, but always with a substantial proportion based on key financial metrics. For the 2014/15 financial year, 60% of the annual bonus is linked to key financial metrics, 20% is related to KPIs for which there is a particular focus during the year in question; examples would include Group sourcing and productivity. 20% is for personal performance based on achievement of personal objectives and contribution to the One Team strategy, including behaviours.

Where executive directors have specific management accountability for the results of one or more Operating Companies they may, in addition to, or as a substitute for Group targets, also have targets related to the performance of those businesses.

The actual performance targets set are not disclosed at the start of the financial year, as they are considered to be commercially sensitive.

The maximum annual award is 200% for executive directors, with the flexibility to award up to 250% for the Group Chief Executive. The Group Chief Executive's award in 2014/5 will be 200%.

25% of the award vests for threshold performance.

Awards vest based on performance over three years against performance measures chosen by the Committee to align with business and strategic priorities. For the 2014/5 financial year the measures for executive directors are:

50% EPS

50% Kingfisher Economic Profit (KEP)

The Committee may adjust the performance measures attaching to awards and the weighting of these measures if it feels this will create greater alignment with business and strategic priorities.

A significant change to the measures used would only be adopted following consultation with major shareholders.

www.kingfisher.com www.kingfisher.com

Directors' Remuneration Report continued

Future remuneration policy continued
--------------------------------------	--	--	--	--

Element and purpose	Operation	Maximum opportunity	Assessment of performance
Profit sharing arrangements Participation Scheme To enable French employees to share in the financial success of the French businesses	Philippe Tible participates in this scheme as an employee of a French company on the same terms as all French employees. The Participation scheme is a mandatory scheme based on a legal requirement for a proportion of the Castorama and Brico Dépôt France profits to be distributed to employees. It is paid in cash shortly after the financial year end, although the scheme provides the option to defer the payment for a period of five years to receive certain taxation exemptions.	Under the Participation Scheme the maximum opportunity is set by the French government. There are two limits set which are based on a multiple of the Annual Social Security ceiling (PASS). This is updated each year but for 2014 stands at €37,548. These limits are: The maximum salary that the award level as a % of salary is applied to is 4x PASS (€150,192) The maximum possible payment is 0.75x PASS (€28,161)	The award level is determined as a proportion of profits as set with reference to the minimum required by the French government and a more favourable formula that has been agreed with the French Works Council. Over the last five years the award level as a % of salary (up to the salary cap) has remained within the 5% – 7% range. On Philippe Tible's actual salary the award levels have been less than 2% of salary.
Interessement Scheme To enable French employees to share in the financial success of growth in the French businesses	Philippe Tible participates in this scheme as an employee of a French company on the same terms as all French employees. This scheme creates a profit pool which is divided by the cost of wages and salaries to determine an award level as a % of salary. Payments are made in cash on a quarterly basis although the scheme provides the option to defer the payment for a period of five years to receive certain taxation exceptions.	Since the design is in the form of a profit pool, there is no set cap as such. However, the award level for Philippe Tible has not exceeded 20% of salary historically.	The profit pool is based on a formula which is linked to a proportion of the sales and profit growth.
Shareholding requirements To ensure alignment of interests of executive directors and shareholders over the long-term.	Executive directors are required to build a significant shareholding in the Company before the fifth anniversary of the date of their first award under a qualifying share plan. Consideration will be given to extending the five-year time frame in the event that share awards vesting from deferred bonus shares or the LTIP alone do not provide enough shares to meet the shareholding requirement. Unvested deferred bonus awards are not included in the assessment of the holding requirement until the transfer of beneficial ownership to the executive director at the end of the three-year deferral period. Nil-cost options which have vested but the executive has yet to exercise are considered to count towards the shareholding.	Group Chief Executive: shareholding of 300% of base salary. Other executive directors: shareholding of 200% of base salary.	None
Legacy Awards Performance Share Plan ('PSP')	A one-off exceptional award of 500% of base salary was granted under the PSP in 2011. This award was granted to create focus on a single three-year period of the Creating the Leader strategy. The awards vest in two equal tranches in June 2014 and June 2015. On exercise, additional dividend shares are added to the award, with a value equivalent to the value of dividends reinvested into shares from the date of grant to the date of transfer. Malus may be applied to unvested awards, if the Committee determines that the grant of awards was not justified. Certain awards granted prior to 2011 have vested but have not been exercised and therefore remain outstanding.	500% of base salary for all executive directors.	Awards are subject to stretching performance targets, 50% based on EPS and 50% on KEP. Following completion of the financial year, the vesting percentage has been determined by the Committee at 31% of the maximum award level, subject to continued employment.

Element and purpose	Operation	Maximum opportunity	Assessment of performance
Kingfisher Incentive Share Scheme ('KISS')	Under the KISS, executive directors defer 33% of their Annual Bonus into Kingfisher shares. Awards are deferred for three years and are subject to forfeiture should the executive leave the Group before the vesting date. Malus may be applied to unvested awards, if the Committee determines that the grant of awards was not justified. On exercise, additional dividend shares are added to the award, with a value equivalent to the value of dividends	33% of the Annual Bonus at the time of award, plus additional dividend shares accrued from the date of grant to the date of transfer.	None
	reinvested into shares from the date of grant to the date of transfer.
	Awards were granted annually under the KISS and will be granted in 2014 in respect of the 2013/14 annual bonus.
	Awards will vest in full in the event of a change of control of the Company.
Company Share Option Plan ('CSOP')	An HMRC approved share option plan was used to grant awards with a value up to a limit of £30,000. The option price was determined at the time of grant by reference to the market price immediately before the date of grant.	Up to £30,000	None
	The options are linked to an underpinning KISS Award and the two awards must be exercised simultaneously. On exercise, the proceeds of the underpinning KISS Award are used to fund the exercise price of the CSOP Award.
Chairman and non
executive director fees To attract and retain a Chairman and non-executive directors of the calibre required by the Group.	The fees paid to the Chairman are determined by the Committee, while the fees of the non-executive directors are determined by the Board with affected persons absenting themselves from the discussions as appropriate.	Aggregate annual fees paid to the Chairman and non-executive directors are limited by the Company's Articles of Association, which may be varied by special	None
	The Committee reviews the Chairman's fees annually.	resolution of the shareholders. The current limit contained within the
	The Chairman's fees are determined with reference to time commitment and relevant benchmark market data.	Articles of Association is £1 million and it is proposed that this be
	Contributions may be made towards the cost of running the Chairman's office.	increased to £1.75 million at the AGM in 2014, to allow sufficient headroom for future increases.
	The Board determines non-executive directors' fees under a policy which seeks to recognise the time commitment, responsibility and technical skills required to make a valuable contribution to an effective Board.	Contributions towards the cost of running the Chairman's office will not exceed £60,000 per annum and are included within the
	A base fee is paid to all non-executive directors and additional fees are also paid to the Senior Independent Director and the Chairmen of the Audit and Remuneration Committees.	aggregate fees set out above.
	The Board annually reviews fees paid to non-executive directors against those in similar companies and taking into account the time commitment expected of them.
	Fees are paid monthly.
	The Chairman and the non-executive directors do not participate in any of the Company's performance-related pay programmes and do not receive pension benefits.
	The Chairman and the non-executive directors are not entitled to any compensation for loss of office.
	The Chairman and the non-executive directors do not receive any other benefits with the exception of store discount of up to 20%.

Directors' Remuneration Report continued

Element and purpose	Operation	Maximum opportunity	Assessment of performance
Approach to recruitment remuneration	When hiring a new executive director, or making internal promotions to the Board, the Committee will in principle apply the same policy as for existing executive directors, as detailed in the Remuneration Policy. The rationale for the package offered will be explained in the next Annual Remuneration Report.	Normal Awards The normal maximum incentive opportunity on recruitment will be in line with the Remuneration Policy for executive directors. Additional LTIP Award	None
	Base salary would be set at an appropriate level to recruit the best candidate based on their skills, experience and current remuneration.	Under the plan rules, the Committee may, on the recruitment of an executive
	Benefits would be in line with normal policy and may include, where appropriate, relocation benefits or other benefits reflective of normal market practice in the territory in which the executive director is employed.	director, make an additional one off performance linked award under the long-term incentive plan of up to an equal face value to the normal policy award (i.e. up to
	Normal incentive awards would be made under the annual bonus plan and long-term incentive plan in line with the Remuneration Policy.	250% of base salary for the Group Chief Executive and 200% of base salary for the other executive
	For internal promotions any commitments made prior to appointment may continue to be honoured as the executive is transitioned to the new remuneration arrangements.	directors). This provision is normally used to pro-rate incoming executives into recently awarded long-term incentive plan cycles.
	The Committee would be mindful of best practice guidelines in considering whether any enhanced LTIP or other award was necessary on recruitment in order to secure the preferred candidate (e.g. to buy out awards forgone from the incoming executive's previous employer). The Committee's policy is to seek to avoid buying out awards forgone. Normally the Committee would seek only	Buy-out Award The Committee normally seeks to avoid explicitly buying out awards forgone at a previous employer, preferring instead to make long term incentive plan awards as set out above.
	to make performance-related awards under the long-term incentive plan, for example by pro-rating them into recently awarded plan cycles to ensure alignment with existing executive directors. However, each case will need to be considered on its own facts at the particular time such awards are made. If a buy-out award would be required, the Committee would aim to reflect the nature, timing and value of an award forgone in any replacement award which may be in the form of a restricted stock or performance-related award as appropriate. The Committee would aim to minimise	Where, in exceptional circumstances, buy-out awards are made, they are not subject to a formal maximum, although would be designed to reflect only the value forgone or less. In establishing the appropriate value of any buy-out the Committee would also take into account the value of any additional long-term incentive plan award made
	the cost to the Company.	on joining.

Future remuneration policy continued

The Committee will operate the Kingfisher Incentive Share Plan (which will be subject to shareholder approval at the AGM in June 2014) and the Group's legacy plans (the Performance Share Plan, Kingfisher Incentive Share Scheme and Company Share Option Plan) (together the 'Plans') in accordance with the rules of those Plans and where relevant with the UKLA Listing Rules.

In addition to the discretions set out as part of this Remuneration Policy, the rules provide the Committee with discretion in certain matters regarding the administration and operation of these Plans, including, but not limited to the following:

the impact of a change of control or restructuring;
any adjustments to performance conditions or awards required as a result of a corporate event (such as a transaction, corporate restructuring event, special dividend or rights issue);
the operation of malus provisions; and
minor administrative matters to improve the efficiency of operation of the plans or to comply with local tax law or regulation.

The Committee retains certain discretions in relation to the Annual Bonus Plan, which include but are not limited to:

the determination of and timing of any bonus payment;
the impact of a change of control or restructuring;
any adjustments required as a result of a corporate event (such as a transaction, corporate restructuring event, special dividend or rights issue)

In relation to the Plans and the Annual Bonus Plan, the Committee retains the ability to amend the performance conditions and/or measures in respect of any award or payment if one or more event(s) have occurred which would lead the Committee to consider that it would be appropriate to do so, provided that such an amendment would not be materially less difficult to meet.

If the Committee used any of the discretions set out above these would, where relevant, be disclosed in the next Annual Remuneration Report and the views of major shareholders may also be sought.

Discretion in relation to the Group's All-Employee Share Plans (Sharesave and Share Incentive Plan) would be exercised within the parameters of the HMRC and the UKLA Listing Rules.

Notes to the future remuneration policy table

Annual bonus

The performance conditions are set annually based on the metrics the Committee feels are most appropriate for the business. Like-for-like sales is a key metric in the Creating the Leader strategy, and Profit Before Tax ensures that this sales growth is delivered in a way that creates value for shareholders. Other strategic KPIs are chosen to support particular objectives for the year, and the individual component enables outstanding contributions to be incentivised and rewarded.

Annual bonus targets are set with reference to internal budgets and analyst consensus forecasts, with maximum pay-out requiring performance well ahead of budget.

Long-term incentive plan

The Committee believes that long-term incentive plan measures should be aligned to shareholder value while providing line of sight to management, so that they are meaningful and incentivising. EPS growth is a key measure of our success in growing value for shareholders over time, while KEP balances profit growth with efficient use of our balance sheet.

The setting of LTIP targets takes into account analyst consensus forecasts, internal projections, and the levels of performance required over the long-term to deliver absolute value appreciation for shareholders.

Differences in remuneration policy for all employees

All employees are entitled to base salary and benefits and may also receive bonus, pension, profit share and share awards which vary according to local jurisdiction and market practice. The maximum provision and incentive opportunity available are determined by the seniority and responsibility of the role.

Provision	Policy
Notice period	12 months' notice by either the director or the Company for Sir Ian Cheshire, Kevin O'Byrne and Karen Witts. Three months' notice for Philippe Tible.
Remuneration	As described in this report.
Cash benefits	Car allowance (as an alternative to a company car) and pension benefit.
Non-cash benefits	The Company provides a range of additional benefits, including private medical insurance on a family basis, death in service cover equal to four times base salary, a subsidised staff canteen, a staff discount card, allowance for financial planning and 30 working days' holiday per year.
Expenses	Reimbursement of reasonably incurred costs in accordance with their duties.
Non-compete	During employment and for 12 months after leaving. In respect of Philippe Tible, an amount equal to 50% of annual salary and car benefit must be paid to him on a monthly basis if his employment is terminated by the Company. This amount is standard under French law in order to ensure that the non-compete provision is enforceable.
Contractual termination payment Executive directors	In the case of resignation, no payments on departure will be made on termination, even if by mutual agreement the notice period is cut short. If notice is served by the Company in full, no other payments should be due on departure. For any period of notice period not served, the payment takes the form of liquidated damages, which pays the departing executive 8.3% of salary per month for the remainder of their notice period. These monthly payments are subject to mitigation. The maximum payment post departure would be one times base salary.
	If notice is served by either party, the executive director may continue to receive base salary, benefits and pension for the duration of their notice period, during which time the executive director may continue their duties or be assigned a period of garden leave. The Group's policy is that payments for termination will not exceed 12 months' base salary.
	The terms of the phased payment clauses in the service contracts of Sir Ian Cheshire and Kevin O'Byrne were consistent with the governance guidelines at the time the contracts were put in place. In circumstances where the Company terminates their agreements, they will receive phased payments of 15% and 12% of base salary respectively for a maximum of 12 months from the date of termination subject to mitigation.
	The termination clause in Philippe Tible's contract is determined by the collective convention which applies to all French employees. A termination payment would be made up of two parts (i) the dismissal indemnity which is 3% of annual remuneration per year of service and (ii) a payment for any unpaid notice which would be a maximum of three months' remuneration. The current combination cost based on years of service to date is approximately one times base salary. Remuneration for this purpose consists of base salary, car benefit and cash bonus award.
	In the event of a settlement agreement, the Committee may agree payments it considers reasonable in settlement of legal claims. This may include an entitlement to compensation in respect of their statutory rights under employment protection legislation in the UK or in other jurisdictions. The Committee may also include in such payments reasonable reimbursement of professional fees in connection with such agreements.

Service contracts and policy on payment for loss of office

Directors' Remuneration Report continued

Provision	Policy
Contractual Termination payment	Non-executive directors are appointed under letters of engagement. Appointments have historically been for an initial period of three years and invitations to act for subsequent three-year terms are subject to a review of performance, and taking into account the need to progressively refresh the Board.
continued Chairman and non-executive directors	The appointment may be terminated by either party giving the other not less than three months' prior written notice, unless terminated earlier in accordance with the Company's Articles of Association, and the Company has no obligation to pay compensation when their appointment terminates.
Leaver provisions for annual bonus	If notice is served by either party, the executive director may receive bonus payments in cash on a pro-rated basis from the start of the financial year up to the date of termination of employment, based on the determination of the results at the year-end against targets set.
	In the event that an executive director ceases to be employed during or shortly after the financial year and before the date of the annual bonus award, the Committee has the discretion to make a bonus payment and determine the basis upon which it is made and its value taking into account the individual circumstances of the departure. If the executive ceases employment as a result of a reason defined as a good leaver (which includes ill-heath or retirement), then the normal approach would be to award a time pro-rated bonus in cash based on the actual results against the performance measures set once they have been determined following the end of the financial year. In the case of resignation, no bonus award will be made.
Leaver provisions for share incentives	The rules of the Kingfisher Incentive Share Plan (which will be subject to shareholder approval at the AGM in June 2014) and the Group's legacy plans (the Performance Share Plan, Kingfisher Incentive Share Scheme and Company Share Option Plan) (together the 'Plans') set out the treatment that will be applied to awards and options if a participant leaves the Group before the end of the vesting period. A summary of the treatment is set out below:
	Long-Term Incentive Awards (granted under the Kingfisher Incentive Share Plan ('KISP') from 2014 onwards and the Performance Share Plan ('PSP')) Awards will normally lapse upon cessation of employment (with the exception of unvested awards granted under the KISP, which lapse on the date of notice of termination of employment), except in certain circumstances as described below. In determining the extent to which awards should vest when an executive departs, the Committee will consider all the facts of the executives departure, including their performance and the extent to which the departure is at the instigation of the Company.
	If an executive director ceases to be employed as a result of a reason defined as a good leaver within the rules of the KISP or the PSP, which includes ill-health, retirement or any other reason at the discretion of the Committee, then the awards will vest on the normal vesting date, but will be adjusted on a time pro-rated basis (unless the Committee decides, acting fairly and reasonably, that such an adjustment would be inappropriate). The Committee retains the discretion to reduce further awards granted under the KISP to reflect any personal performance issues. If the award is structured as a nil-cost option, it will normally be exercisable for a period of six months from the normal vesting date (unless the Committee determines that it may vest on the date of cessation). In circumstances where the participant ceases to be employed as a result of death, then the award will vest on the date the Company is notified and, if the award is structured as a nil-cost option, then it will be exercisable for a period of twelve months from the date of notification. The Committee will determine the vesting of the award based upon the performance conditions attached to the awards and a reduction in the number of shares on a time pro-rated basis (unless the Committee decides, acting fairly and reasonably, that such an adjustment would be inappropriate).
	In the event of a takeover or other corporate event (such as the winding-up of the Company), awards will vest on the date of notification, but will be adjusted on a time pro-rated basis (unless the Committee decides, in its absolute discretion, that such an adjustment would be inappropriate) and in the case of an award structured as a nil-cost option, will be exercisable for a period of one month from the date of notification.
	Deferred Bonus Awards (granted under the KISP from 2015 onwards and the KISS up to 2014) Awards granted under the KISS lapse if the executive director resigns or is dismissed for cause. In all other circumstances, the award will vest in full on the date of cessation of employment and will remain exercisable for a period of six months (12 months in the case of death).
	Deferred Bonus Awards which will be granted under the KISP from 2015 onwards will lapse if the executive director resigns or is dismissed for cause. If an executive director ceases to be employed as a result of a reason defined as a good leaver which includes ill-health, disability or any other reason at the discretion of the Committee, then the awards will vest on the normal vesting date. If the award is structured as a nil-cost option, it will be exercisable for a period of six months from the normal vesting date. In circumstances where the participant ceases to be employed as a result of death, then the award will vest in full on the date the Company is notified and, if the award is structured as a nil-cost option, then it will be exercisable for a period of twelve months from the date of notification.
	In the event of a takeover or other corporate event (such as the winding-up of the Company), awards will vest on the date of notification and in the case of an award structured as a nil-cost option, will be exercisable for a period of one month from the date of notification.
	Company Share Option Plan ('CSOP') The CSOP is an HMRC approved share option plan. Options granted under the CSOP are linked to an underpinning deferred bonus award granted under the KISS and the two must be exercised simultaneously. Options granted under the CSOP will normally lapse upon cessation of employment. If an executive director ceases to be employed as a result of a reason defined as a good leaver within the rules of the CSOP, which include injury, disability or the sale or transfer of the business or company that employs them the option will vest on the cessation of employment and will be exercisable for a period of six months. If the executive director leaves due to retirement, the award will vest on the normal vesting date or if the cessation of employment is within six months of the normal vesting date it will vest on the date of cessation.

Service contracts and policy on payment for loss of office continued

Statement of Implementation of Remuneration Policy in 2013/14

The differences between the Remuneration Policy for 2013/14 and the policy on which shareholders will vote at the 2014 AGM are set out below.

Component value	Operation of the component	Maximum potential	Performance metrics used, weighting and time period applicable
Base salary	no difference	no difference	n/a
Benefits	no difference	no difference	no difference
Annual bonus	33% of 2013/14 annual bonus will be deferred for three years. 50% of the 2014/15 annual	no difference, maximum opportunity remains at 200% of base salary.	In 2013/14 the annual bonus was based on the following metrics: • Profit 30%
	bonus will be deferred for three years under the new plan.		• Relative LFL sales 30%
			• Sourcing & Productivity 20%
			• Personal performance 20%
LTIP	Following the one-off award of 500% of base salary made in 2011 under the PSP, no awards were made in 2012 or 2013. Annual awards will be made in future.	No awards were made in 2013/14. In future awards will be granted on an annual basis at a maximum of 200% of base salary (with flexibility to award up to 250% of salary for the Group Chief Executive).	No award was made in 2013/14

Statement of consideration of employment conditions elsewhere in the Group

The Committee invites the Group HR Director to present at its meeting the proposals for salary increases for the employee population generally and on any other changes to remuneration policy within the Group. The Group HR Director consults with the Committee on the KPIs for the executive directors' bonuses and the extent to which these should be cascaded to other employees. The Committee has oversight of all LTIP awards across the Group.

The Committee is provided with data on the remuneration structure for all One Team Board members, approves the policy on share award levels for all employees and uses this information to ensure that there is consistency of approach throughout the Group.

The Company did not consult with employees when drafting the Directors' Remuneration Policy.

Directors' service contracts/letters of appointment

Current directors	Date of service contract / letter of appointment	Expiry of current term	Length of service at 1 February 2014
Daniel Bernard	24/05/2006	30/06/2015	7 years
Andrew Bonfield	11/02/2010	15/12/2015	4 years
Pascal Cagni	17/11/2010	16/11/2016	3 years
Clare Chapman	02/12/2010	01/12/2016	3 years
Sir Ian Cheshire	28/01/2008	Rolling	13 years
Anders Dahlvig	16/12/2009	15/12/2015	4 years
Janis Kong	08/12/2006	06/12/2015	7 years
Kevin O'Byrne	01/10/2008	Rolling	5 years
Mark Seligman	01/01/2012	31/12/2014	2 years
Philippe Tible	01/10/2012	Rolling	1 year
Karen Witts	01/10/2012	Rolling	1 year

Directors' Remuneration Report continued

Illustrations of the application of the Remuneration Policy

The tables and charts below provide estimates of the potential total future remuneration for each executive director in respect of the remuneration opportunity granted to them in 2014/15. Potential outcomes based on different performance scenarios are provided for each executive director. The scenarios do not take into account share price appreciation or dividends.

The total remuneration for each of the executive directors that could result from the Remuneration Policy in 2014/15 under three different performance levels is shown below.

Total Remuneration Performance Charts

Sir Ian Cheshire		Philippe Tible
Value of package (£m)	£4,530,291	Value of package (£m)	£3,056,504
Maximum 19% 1% 6% 37%	37%	Maximum 17% 1% 10%	38% 34%
Target 30% 1% 9% 30% 30%	£2,832,291	Target 26% 1% 16% 30%	27% £1,950,211
Below 75% 3% 22% £1,134,291 Threshold		Below 61% 1% 38% £813,355 Threshold
Kevin O'Byrne		Karen Witts
Value of package (£m)	£3,349,897	Value of package (£m)	£2,756,325
Maximum 19% 1% 4% 38%	38%	Maximum 19% 1% 4%	38% 38%

Target 31% 1% 6% 31% 31%	£2,070,817	Target 31% 1% 6% 31%	31% £1,706,325

Notes

Base salary as at 1 February 2014.

Benefits: Estimate based upon benefits received during 2013/14 and recorded in the single figure table of remuneration.

Pension: based upon pension of 30% of base salary for Sir Ian Cheshire and of 20% of base salary for Kevin O'Byrne and Karen Witts. Philippe Tible's pension is based on that for 2013/14.

Below threshold performance would result in the payment of the fixed elements of pay only.

On-target performance is the level of performance required to deliver 50% of the maximum annual bonus and 50% of the full LTIP award.

On-target for the Participation Scheme £8,500, maximum £23,900.

On-target for the Interessement Scheme 10% of salary, maximum 20% of salary.

Maximum performance would result in the maximum bonus payment and 100% vesting of the LTIP award.

Performance scenarios

Below threshold	On-target	Maximum
• Only the fixed pay elements (base salary, benefits and pension) of the package are earned.	• Fixed pay elements plus on-target Annual Bonus plus on-target LTIP vesting.	• Fixed pay elements plus maximum Annual Bonus plus maximum LTIP award vesting.
• Minimum performance targets for the Annual Bonus and LTIP are not achieved, therefore no payments will be made and LTIP awards will lapse.	• Annual Bonus on-target performance is achieved, resulting in a bonus of 50% of maximum – 100% of base salary.	• Annual Bonus at maximum, resulting in a bonus of 100% of maximum – 200% of base salary.
	• For the LTIP, the on-target vesting level is 50% of maximum – 100% of base salary.	• LTIP maximum is 200% of base salary.

Annual Remuneration Report

Single total figure of remuneration for each director (Audited)

The following table shows a single figure of remuneration in respect of directors' qualifying services for the financial years 2013/14 and 2012/13.

		Base salary and fees £'000		Taxable benefits £'000		Bonus £'000(5)	LTIP £'000(6)			Pension £'000		Total £'000
	2013/14		2012/13 2013/14 2012/13		2013/14	2012/13	2013/14	2012/13		2013/14 2012/13	2013/14	2012/13
Executive Directors
Sir Ian Cheshire	832.3	816.0	30.6	30.8	532.7	502.7		1,909.5 1,157.6				260.4 310.1(8) 3,565.5 2,817.2(7)
Kevin O'Byrne	627.0	600.0	24.3	24.9	453.9	345.6	1,404.0	832.0		123.1 117.9	2,632.3 1,920.4
Philippe Tible(2)	509.3	436.1	11.7	11.2	297.6(3)	398.6(3)	1,072.5	862.8		320.0 306.0	2,211.1 2,014.7
Karen Witts(1)	484.5	158.3	26.3	8.7	319.8	97.5	607.2	–	103.1	31.7	1,540.9	296.2
Total		2,453.1 2,010.4	92.9		75.6 1,604.0	1,344.4		4,993.2 2,852.4		806.6 765.7	9,949.8 7,048.5
Chairman and non executive directors
Daniel Bernard(2)(4)	472.4	443.7									472.4	443.7
Andrew Bonfield	81.2	80.0									81.2	80.0
Pascal Cagni	61.2	60.0									61.2	60.0
Clare Chapman	76.2	75.0									76.2	75.0
Anders Dahlvig	61.2	60.0									61.2	60.0
Janis Kong	61.2	60.0									61.2	60.0
Mark Seligman	78.6	77.4									78.6	77.4
Total	892.0	856.1									892.0	856.1

(1) Karen Witts joined the Group on 1 October 2012 and her remuneration for 2012/13 was prorated accordingly.

(2) Philippe Tible's remuneration and the fees paid to Provestis in respect of the provision of Daniel Bernard as Chairman, are paid in euros and are converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant year (2013/14: £1:€1 1782). .

(3) Includes payments in relation to Interessement and Participation schemes in France (£58,190). The 2012/13 figure has been restated to include Interessement and Participation schemes payments not included within prior year disclosure (£51,846).

(4) Fees for the provision of Daniel Bernard as Chairman are paid to a service company, Provestis, which also receives a contribution towards the cost of running the Chairman's office in Paris of €61,800 (£52,456). The 2012/13 figure has been restated to include the contribution for office costs in 2012/13 (£50,144).

(5) The annual bonus will be paid in April 2014 for the financial year 2013/14. One third of the bonus awarded will be deferred under the KISS into Kingfisher shares for three years and will be available to vest in April 2017.

(6) The LTIP value is based upon the 2011 PSP awards which are due to vest in June 2014 and June 2015, based upon performance over the three financial years ending 1 February 2014. The award has been valued using the average Kingfisher share price over the three months to 31 January 2014 (380.31p).

(7) Excludes £8,888, included in the 2012/13 report which represented the net equivalent gain following the exercise of phantom options awarded in April 2002 and exercised in 2012.

(8) The prior year comparison for Sir Ian Cheshire's pension contribution has been restated to include the increase in transfer value (net of director's contributions) on the defined benefit pension scheme.

Directors' Remuneration Report continued

Notes to the single total figure of remuneration for each director (Audited)

Base salary and fees

Executive directors' salaries were increased with effect from 31 January 2013. Base salaries for 2013/14 and 2012/13 are shown below.

		Base salary £'000
	As at 3 Feb 2013	As at 29 Jan 2012	% increase
Sir Ian Cheshire	832.3	816.0	2.0%
Kevin O'Byrne(1)	627.0	600.0	4.5%
Philippe Tible(2)	509.3	436.1	9.0%(3)
Karen Witts	484.5	475.0	2.0%

(1) The increase in Kevin O'Byrne's base salary reflected the broadening of his role as CEO of the B&Q division and responsibility for the Group's joint ventures.

(2) The increase in Philippe Tible's base salary was in recognition of the expansion of his role as executive director of the Company. His remuneration is paid in euros and is converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant year.

(3) The percentage increase is depicted in constant currency and reflects the increase in Philippe Tible's base salary from €550,000 to €600,000.

The Chairman and non-executive directors' fees were increased with effect from 1 February 2013. Fee rates for 2013/14 and 2012/13 are shown below.

	Fees £'000
	As at 3 Feb 2013	As at 29 Jan 2012	% increase
Chairman(1)	472.4	443.7	2%
Non-executive director fee	61.2	60.0	2%
Senior Independent Director	17.4	17.4	0%
Chairman of Audit Committee	20.0	20.0	0%
Chairman of Remuneration Committee	15.0	15.0	0%

(1) Fees for the provision of the Chairman are paid in euros and converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant year. The percentage increase for the Chairman is depicted in constant currency.

Taxable benefits

The benefits provided to executive directors for both 2013/14 and 2012/13 included car benefit (or cash allowance), private medical insurance, death in service cover and financial advice.

Annual bonus

The executive directors' targets for the 2013/14 bonus were based on both financial targets and individual objectives as set out in the tables below, with annual bonus payments determined by reference to performance over the financial year ending 1 February 2014. For the financial targets achievement is calculated on a straight-line basis between start to earn and target and between target and maximum.

Group profit before tax at constant exchange rates grew modestly year-on-year, but was behind the Threshold level of performance and so no bonus was paid on this element. Retail operating profit performance for B&Q and Koçtas¸ brands was just above Threshold and so warranted a small bonus payment on this element for Kevin O'Byrne.

Like-for-like sales growth was below target as we faced significant sector-wide declines in a number of our markets. However, in a number of our markets we grew market share even if absolute levels of like-for-like sales growth were below target. Overall this performance resulted in a level of payment modestly above Threshold.

In the face of challenging trading conditions the Group made good productivity improvements at the level of store productivity but also in identifying and delivering cost savings across the Group. As a result our productivity targets were slightly exceeded, leading to a payment between Target and Maximum.

Similarly good progress was achieved on our sourcing strategy where synergies and improvements in direct sourcing and own brand sourcing resulted in the Group as a whole being just above the target level of payment on this measure.

Personal components of bonus reflected generally strong performance against personal objectives and contribution to the One Team behaviours.

Measure	Profit before tax/retail	operating profit Like-for-like sales	KPI (Sourcing and productivity)	Personal performance
Weighting at maximum bonus	30%	30%	20%	20%

Outcomes achieved as a % of Maximum

Performance Measure	Target		Actual Sir Ian Cheshire	Kevin O'Byrne	Philippe Tible	Karen Witts
Profit before tax(1)	£765m	£744.0m	0%	–	–	0%
Retail operating profit(2)	–	–	–	5%	0%	–
Like for like sales(3)	3.3%	0.7%	15%	–	–	15%
Divisional like for like sales(2)	–	–	–	10%	15%	–
Sourcing and productivity(4)	–	–	58%	71%	17%	58%
Personal objectives	–	–	80%	85%	78%	85%
Totals			32%	36%	24%	33%
Bonus receivable £			532.7	453.9	239.4	319.8

(1) The award level was determined after removing any impact of exchange rate variations. Once the favourable exchange rate movement had been removed from the results, the award level was determined as nil.

(2) Retail operating profit and divisional like-for-like sales, measured at the business unit level, are considered commercially confidential and are therefore not disclosed. (3) The targets were set based on absolute like-for-like performance, with the ability for the Committee to use its judgement in adjusting awards up and down taking

into account like-for-like out-turn versus local market and any consequent improvement or deterioration in market share.

(4) Sourcing and productivity included measures related to cost price reduction and cost savings achieved from additional opportunities not included in the budget. These measures are considered commercially confidential and are therefore not disclosed.

Long-term incentive plan

The LTIP amount included in the 2013/14 single figure table is the PSP award granted in 2011. Vesting is dependent upon performance over the three financial years ending 1 February 2014 and continued employment up to the vesting date in June 2014. The performance against performance targets is set out below.

Performance Measure	Threshold – 15 % vesting	Maximum – 100% vesting	Actual	% of maximum achieved.
Earnings per share (EPS)	25.8p	31.2p	23.4p	0%
Kingfisher Economic Profit (KEP)	£229m	£386m	£288.4m	62.2%
Total				31.1%

KEP is defined in the Financial Review on page 24.

As the awards had not vested at the date this report was finalised, the average share price for the last three months of the financial year (380.31p) has been used to determine the value for the purposes of the single figure total. The awards held by executive directors were as follows:

2011 PSP awards	Number of shares awarded	Number of dividend shares applied	Number of shares vesting	Value of shares vesting
Sir Ian Cheshire	1,502,043	111,548	502,079	£1,909,457
Kevin O'Byrne	1,104,443	82,018	369,175	£1,404,009
Philippe Tible(2)	851,440	54,914	282,018	£1,072,543
Karen Witts(1)	498,857	14,240	159,653	£607,176

(1) Karen Witts received an award on joining the Group on 1 October 2012 based upon 285% of her base salary. The award was time pro-rated equivalent to the 500% award the other executive directors received in June 2011.

(2) An additional award was made to Philippe Tible in May 2012 in recognition of the expansion of his role and to bring him in line with the other executive directors who received awards of 500% compared to Mr Tible's initial award of 375%.

For all participants, the vesting of awards have been estimated as if the full award were released and was available for exercise. However, 50% of the award will vest and will be available for exercise in June 2014 with the remaining 50% to vest and be available to directors in June 2015.

Directors' Remuneration Report continued

Directors' pension plan benefits

The Company operates a defined contribution pension plan for executive directors based in the United Kingdom.

Sir Ian Cheshire's defined contribution pension arrangement provides a Company contribution of 30% of his base salary, and Kevin O'Byrne's and Karen Witts' arrangements provide a Company contribution of 20% of base salary. The Company operates a policy to limit pension contributions during the tax year up to the Annual Allowance, with the excess being directed into a taxable monthly cash payment. Following pension and tax legislation changes which took effect in 2012 and which reduced the lifetime allowance from £1.8 million to £1.5 million, the Company has offered a fully taxable cash alternative, at no additional cost to the Company, to executive directors wishing to exit the defined contribution scheme completely.

Kevin O'Byrne has chosen to receive his Company pension contributions as a taxable monthly cash supplement in full.

Philippe Tible is a member of a separate Group defined benefit pension scheme, for which eligibility requires him to retire with the Kingfisher Group. He has now met the age criteria of 62 in this scheme to retire and for the pension to crystallise. Based upon 11 years' service, the pension accrued is valued at £3.3m. The increase in the value of his pension over the course of the financial year is £320,000 as shown in the single figure table. These figures are based on a crystallised pension and have not been discounted in any way for the risk of forfeiture.

The following table shows details required under the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 as they apply to Kingfisher for the year ended 1 February 2014.

The value of the increase in pension savings over the year is split between:

Defined benefit arrangements the additional value achieved in the year based on the 'HMRC methodology'
Defined contribution arrangements the cash value of any employer contributions over the year.

Source of remuneration	Pension arrangement	Changes in pension savings £'000
Sir Ian Cheshire
Final Salary	Defined benefit	2
Money Purchase Plan	Defined contribution	0
Payment in lieu of retirement benefits	n/a	258.4

Sir Ian Cheshire ceased to accrue future benefits in the Final Salary section on 30 June 2012. Under that scheme, Sir Ian's normal retirement age is 65 and his accrued pension figure at 1 February 2014 was £34,077.

The increase in Sir Ian Cheshire's defined benefit arrangement is because the 'HMRC methodology' increases the opening pension (2 February 2013) with the change in the CPI index whereas the closing pension (1 February 2014) includes an increase at 1 April 2013 based on the change in the RPI index. Note that there have been no member contributions payable in respect of the Final Salary section since 30 June 2012.

The defined contribution figure above represents employer contributions to the Money Purchase Plan over the year in question. Member contributions of £52,000 were paid on behalf of Sir Ian Cheshire through salary sacrifice.

The following table shows the employer contributions made to the defined contribution scheme, or cash alternative in relation to service during the financial year to 1 February 2014:

£'000		Cash alternative(1)
	2013/14	2012/13
Sir Ian Cheshire(2)	258.4	230.7
Kevin O'Byrne	123.1	114.6
Karen Witts(3)	103.1	31.7

(1) Following pension and tax legislation changes, effective 6 April 2011, tax relief on the value of pension contributions and defined benefit accrual has been limited to £50,000 p.a. The Company has offered, as an alternative to contributions into the defined contribution pension scheme, a taxable cash payment to the executive directors at no additional cost to the Company.

(2) The payments to Sir Ian Cheshire in 2013/14 and 2012/13 include a goodwill payment received following the closure of the Kingfisher defined benefit scheme and his transfer to the Kingfisher defined contribution scheme. These payments were offered to all members of the scheme on the same terms.

(3) Member contributions under the Kingfisher defined contribution pension scheme of £54,000 were paid on behalf of Karen Witts through salary sacrifice.

Outside appointments for executive directors

Subject to the rules governing conflicts of interest, the Company is supportive of its executive directors holding non-executive roles outside the Group as it recognises that such roles can broaden their experience and knowledge, which can be of benefit to the Group. Subject to the Committee's agreement, any fees may be retained by the individual.

Kevin O'Byrne is a non-executive director, Senior Independent Director and Chairman of the Audit Committee of Land Securities Group plc, and during the year was paid £63,750, £10,000 and £17,500 per annum respectively for fulfilling these roles and he retains these fees.

Sir Ian Cheshire is a non-executive director, member of the Remuneration Committee and Senior Independent Director of Whitbread plc, and is paid £55,000, £5,000 and £10,000 per annum respectively for fulfilling these roles and he retains these fees. In addition, Sir Ian Cheshire is lead non-executive member of the Department for Work and Pensions Board, for which he waives his fee.

Karen Witts became a non-executive director of Imperial Tobacco Group plc following the end of the financial year and will be paid £72,500 per annum for fulfilling this role. She will retain her fee for this role.

Scheme interests awarded during the financial year (Audited)

Options and awards over shares were made during the year ended 1 February 2014 under the KISS and the CSOP. KISS awards were made in respect of the executive directors' annual bonus earned for the performance during 2012/13 and are deferred for three years. The only qualifying condition for the options and awards to vest is for the director to be in the employment of the Company at the vesting date.

Name	Number of shares	Face value of award £	Market value of shares at date of grant p(2)	Vesting date	Lapse date

Sir Ian Cheshire	57,603	171,196	297.2	11/04/2016	10/04/2020
Kevin O'Byrne	39,605	117,706	297.2	11/04/2016	10/04/2020
Philippe Tible	41,780	124,170	297.2	11/04/2016	10/04/2020
Karen Witts KISS Award	864	2,568	297.2	11/04/2016	10/04/2020
Karen Witts CSOP Option(1)	10,313	30,650	297.2	11/04/2016	10/04/2020

(1) The option was granted at an option price of 290.87p calculated by reference to the average closing price of Kingfisher plc shares for the three dealing days immediately before the date of grant.

(2) The market price of shares was determined by reference to the closing price of Kingfisher plc shares on the date of grant (11 April 2013).

Included as an element of the KISS award, Karen Witts was granted options under the CSOP, a HMRC approved plan. The CSOP is underpinned in part by a matching fixed value element of the KISS share awards granted on the same day. On exercise, the proceeds of part of the KIS share award are used to fund the exercise price of the CSOP award. The total value of the KISS share award is unchanged.

Dilution limits

Kingfisher's share plans contain limits that set out the quantum of newly issued shares that may be used to satisfy awards granted under those plans. These limits are in line with the current Association of British Insurers (ABI) guidance on headroom limits which provide that overall dilution under all plans should not exceed 10% over a ten-year period in relation to the Company's issued share capital, with a further limitation of 5% in any ten-year period on executive plans. The Company has always operated within these limits. The Committee regularly monitors the position and prior to the making of any award considers the effect of potential vesting of options or share awards to ensure that the Company remains within these limits. Any awards which are required to be satisfied by market purchased shares are excluded from such calculations. No treasury shares were held or utilised in the year ended 1 February 2014.

Payments to past directors and payments for loss of office

No payments were made to past directors or for loss of office during the year.

Directors' Remuneration Report continued

Statement of directors' shareholding and share interests (Audited)

All executive directors are required to build up a significant shareholding in the Company within five years from the date of their first award under a qualifying plan as described in the section on Remuneration Policy on page 52. Unvested deferred bonus awards are not included when assessing holding requirements until the transfer of beneficial ownership at the end of the deferral period. Current shareholdings are summarised in the following table. Calculations are based on a share price of £3.696 (being the closing price on 31 January 2014).

	Shares held			Awards over shares
	Number of shares owned outright		Vested but not	Unvested(3) and subject to continued	Unvested and subject to performance	Shareholding	Current shareholding
	2013/14	2012/13	exercised	employment	conditions	required (% of salary)	(% of salary)	Requirement met
Executive directors
Sir Ian Cheshire	2,348,088	1,147,527	–	434,067	1,613,591	300%	1042%	Yes
Kevin O'Byrne	141,431		141,431 1,393,280	320,049	1,186,461	200%	519%	Yes
Philippe Tible	589,461	104,968	–	246,901	906,354	200%	427%	Yes
Karen Witts	58,283(2)	58,186	–	24,664	513,097	200%	44.5%	n/a(1)
Non-executive directors
Daniel Bernard	121,717	120,766
Andrew Bonfield	10,000	10,000
Pascal Cagni	30,570	30,000
Clare Chapman	6,990	6,990
Anders Dahlvig	75,000	75,000
Janis Kong	24,000	24,000
Mark Seligman	15,000	15,000

(1) Karen Witts has until 16 October 2017 to achieve the shareholding requirement, being five years from the date of her first award under a qualifying scheme.

(2) Between 1 February 2014 and the date of this report, Karen Witts acquired an additional 63 partnership shares under the Kingfisher Share Investment Plan (SIP).

(3) For UK based directors, this includes options granted under the CSOP, a HMRC approved plan and the CSOP underpin award, a matching fixed value element of the KISS award granted on the same day as the KISS. Also included are options under the HMRC approved sharesave scheme.

As potential beneficiaries under the Kingfisher Employee Benefit Trust (the 'Trust'), Sir Ian Cheshire, Kevin O'Byrne, Philippe Tible and Karen Witts are deemed to have an interest in the Company's ordinary shares held by the Trust. The Trust held 10,043,624 ordinary shares at 1 February 2014.

Nil-cost options which have vested but have yet to be exercised are considered to count towards the shareholding requirement, other than any such shares that correspond to the estimated income tax and national insurance contributions that would arise on their exercise.

Non-executive directors do not have a shareholding requirement but are encouraged to hold shares in the Company.

Scheme interests exercised during financial year (Audited)

Name	Number of shares	Exercise price p	Market value of shares at date of exercise p	Gain on exercise of options £'000
Sir Ian Cheshire
ESOS 2003 award	134,538	237.8	288.3	67.9
KISS 2010 award	269,779	nil	288.7	777.9
PSP 2008 matching award	1,299,886	nil	292.7	3,805.2
PSP 2009 award	328,726	nil	297.7	962.3
PSP 2010 award	368,413	nil	324.8	1,196.7
Kevin O'Byrne
PSP 2008 award	665,000	nil	292.7	1,946.7
Philippe Tible
ESOS 2003 award	52,105	237.8	288.3	26.3
KISS 2010 award	132,368	nil	411.2	544.3
PSP 2010 award	274,602	nil	326.7	920.3(1)

(1) Gain includes 247,224 shares transferred to Philippe Tible on 15 May 2013 at a market price of 326.7 pence per share and 27,378 shares exercised and sold on 11 September 2013 at a price of 411.2 pence per share.

The graph below shows Kingfisher's total shareholder return ('TSR') for the five years to 1 February 2014 which assumes that £100 was invested in Kingfisher on 1 February 2009. The Company chose the FTSE100 Index as an appropriate comparator for this graph as Kingfisher has been a constituent of that index throughout the period.

Group Chief Executive's pay in last five financial years

Year	2009/10	2010/11	2011/12	2012/13	2013/14
Group Chief Executive's total single figure £'000	3,067.8	5,350.8	8,628.3	2,817.2	3,565.5
Bonus % of maximum awarded %	98.7	83.8	93.5	30.8	32.0
LTIP % of maximum vesting %	44.6	100.0	98.9	50.0	31.1

Percentage change in remuneration of director undertaking the role of Group Chief Executive

The table below shows how the percentage change in the Group Chief Executive's salary, benefits and bonus between 2012/13 and 2013/14 compared with the average percentage change in the average of each of those components for all full-time equivalent employees based in the UK. The UK employee workforce was chosen as a suitable comparator group as Sir Ian Cheshire is based in the UK (albeit with a global role and responsibilities) and pay changes across the Group vary widely depending on local market conditions.

	Group Chief Executive		All employees
	To 1 February 2014 £'000	Percentage change 2013/14 vs 2012/13	Percentage change 2013/14 vs 2012/13
Base salary	832.3	2.0%	2.0%
Taxable benefits	30.6	-0.6%	-1.0%
Annual bonus	532.7	6.0%	71.8%
Total	1,395.6 3.4%		6.3%

The decrease in benefits is driven by a reduction in the private medical cover premium, rather than a reduction in the benefits offered.

The significant annual bonus % increase for all UK employees is driven off a relatively low base for 2012/13, hence this does not impact the overall increase significantly.

Relative importance of spend on pay

The table below shows the relative importance of spend on employee remuneration when compared with distributions to shareholders.

£m	2013/14	2012/13	Percentage change
Overall expenditure on pay	1,587	1,577	0.6%
Dividends paid in the year	224	221	1.4%

Directors' Remuneration Report continued

Statement of implementation of Remuneration Policy in the following financial year

The Remuneration Policy will be implemented with effect from the AGM in 2014 in line with policy as follows:

Base salary and fees

	Base salary and fees £'000
	As at 1 Feb 2014 As at 1 Feb 2013	% increase
Sir Ian Cheshire	849.0	832.3	2%
Kevin O'Byrne	639.5	627.0	2%
Philippe Tible	519.5	509.3	2%
Karen Witts	525.0	484.5	8%
Chairman	480.8	472.4	2%
Non-executive director fee	62.4	61.2	2%
Senior Independent director	17.4	17.4	0%
Chairman of Audit Committee	20.0	20.0	0%
Chairman of Remuneration Committee	15.0	15.0	0%

Philippe Tible's remuneration and the fees paid to Provestis in respect of the provision of Daniel Bernard as Chairman, are paid in euros and are converted to sterling for the purpose of the table at the average exchange rate over the course of the relevant year.

The increase awarded to Karen Witts was based on the intention to bring her up to the market median position as she develops into her role, and gains more experience as a Group Financial Director.

Benefits

Implemented in line with policy.

All employee share plans

Implemented in line with policy.

Pension

Implemented in line with policy.

Annual bonus

Implemented in line with policy.

Weighting of annual bonus for 2014/15

Profit before tax 30%
Like-for-like sales 30%
Cashflow 20%
Personal objectives 20%

At the threshold level of performance, the award will be 10% of maximum.

Profit before tax is calculated on the basis of budgeted exchange rates and excludes exceptional items according to the judgement of the Committee.

Like-for-like sales is set as an absolute target, but the Committee applies judgement in measuring the outcome against target, taking into account sales growth against the local market out-turn and any consequent increase or decrease in market share.

Cashflow excludes capital expenditure, but the Committee may apply judgement to ensure that the measure has not been met at the expense of investment.

Any exchange rate upsides/downsides will be removed from the results when determining award levels, since they are deemed to be outside the executive directors' control.

Long-term incentive plan

Implemented in line with policy.

Performance measures for long-term incentives to be awarded in 2014/15

Performance measure	Threshold – 25% vesting	Maximum – 100% vesting
Earnings per share – compound annual growth up to 2016/17	4%	11.5%

The EPS growth targets have been set to be consistent with market practice in the FTSE100 and in particular the retail sector. The intention is to operate this range consistently over the policy period. The Threshold level of performance provides for real growth, which is considered suitably challenging in what remains an uncertain economic environment, but sets an achievable level of performance to ensure participants place value on the plan and are motivated by it. The Maximum performance level ensures that full vesting is only achieved for outstanding double-digit performance over the three-year period, well in excess of typical industry growth rates.

Performance targets also include a KEP measure. KEP targets are calibrated to be consistent with the EPS growth targets, recognising that in weaker performance scenarios offsetting capital efficiencies should be identified, whereas stronger performance scenarios may allow increased capital investment. KEP is defined in the same way as set out in the Financial Review.

Consideration by the directors of matters relating to directors' remuneration

The Committee has delegated responsibility from the Board for reviewing and approving the remuneration of the executive directors and the members of the Group Executive and for setting the remuneration package for the Chairman. The Committee also has oversight of the remuneration policy and packages for other senior members of staff.

Members of the Committee

The Committee comprised the following independent non-executive directors during the financial year to 1 February 2014.

	From	Attendance
Clare Chapman (Chairman)	16/02/2011	5/5
Daniel Bernard	03/06/2009	5/5
Andrew Bonfield	17/06/2010	5/5
Janis Kong	08/12/2006	5/5

At the invitation of the Committee, except where their own remuneration was being discussed, the following people attended meetings and provided advice to the Committee: Sir Ian Cheshire (Group Chief Executive), Karen Witts (Group Finance Director), Evelyn Gardiner (Group HR Director), Louise Bentham (Head of Group Reward) and Kathryn Hudson (Company Secretary).

Activities

During 2013/14 the Committee:

agreed the performance targets for the annual bonus in the financial year and monitored progress against those targets;
agreed the operation of the long-term incentive plans and policy for executive share plan awards to new recruits, and promotions, including the level of individual awards and performance conditions;
agreed the award level of the 2012/13 annual bonus;
agreed the vesting levels of the 2010 PSP;
recommended the 2012/13 Directors' Remuneration Report for endorsement by the Board and subsequent approval by shareholders;
reviewed the Group's remuneration strategy; and
reviewed the Group's Executive Remuneration Policy prior to recommending it for approval by shareholders.

Directors' Remuneration Report continued

Advisers to the Remuneration Committee

The Committee has authority to obtain the advice of external independent remuneration consultants and is solely responsible for their appointment, retention and termination. In February 2013, following a robust tender process, the Committee appointed PricewaterhouseCoopers LLP as its principal adviser. During the financial year to 1 February 2014, the following external advisers provided services to the Committee. Unless otherwise stated, the advisers have no other connection with the Group, and the Committee firmly believes that the advice received was, and continues to be, objective and independent:

PricewaterhouseCoopers LLP (PwC)

PwC provided the Committee with executive remuneration advice, including the operation of employee and executive share plans. PwC is a member of the Remuneration Consultants Group (the professional body for executive remuneration consultants) and provided certain other services to the Group. Total fees for advice provided to the Committee during the year were £195,000 of which £91,000 related to the comprehensive review of executive remuneration conducted during the year.

Allen & Overy LLP (A&O)

A&O provided legal advice to the Committee on service and employment contracts, and for other employment and remuneration issues. A&O also provides advice to the Group on other legal matters.

Statement of voting at the Annual General Meeting

At the Annual General Meeting (the 'AGM') on 13 June 2013 the annual advisory votes on the remuneration report were cast as follows:

	Votes for (and percentage of votes cast)		Votes against (and percentage of votes cast)				Proportion of share capital voting	Shares on which votes were withheld
Resolution
Remuneration report for year ended 2 February 2013	1,585,211,665	97.66%	38,040,731	2.34%	68.41%	116,857,614

The Remuneration Policy contained within this report will be subject to a binding vote by shareholders at the AGM on 12 June 2014. The Annual Remuneration Report will be subject to an advisory vote at the same meeting. The Chairman of the Committee will be available at the meeting to answer any questions about the work of the Committee.

The 2014/15 Annual Remuneration Report will include details of the binding vote on the Remuneration Policy.

For and on behalf of the Committee

Clare Chapman

Chairman of the Remuneration Committee 24 March 2014

Directors' report

The Company is required by the Companies Act 2006 to present a Directors' Report for the financial year ended 1 February 2014. It is also required to report on its compliance with the UK Corporate Governance Code (the 'Code') for the year and provide certain disclosures in respect of the United Kingdom Listing Authority's (the UKLA) Disclosure and Transparency and Listing Rules. The report, together with the Corporate Governance report on pages 35 to 41 the Audit Committee report on pages 42 to 45, and the Directors' Remuneration Report on pages 47 to 68 are incorporated into this Directors' Report by reference, and when taken together with cross references to disclosures elsewhere in the Annual Report and Accounts, fulfil the Company's disclosure requirements.

Strategic Report

The Companies Act 2006 requires the Company to present a fair review of the operations of the business during the year to 1 February 2014 and the position of the Company at year end along with the principal risks and uncertainties faced. The Strategic Report of the Company, which includes the Group's Key Performance Indicators, a statement on Corporate Responsibility, a Financial Review including financial and capital risk, is detailed on pages 1 to 31 and is incorporated by reference and deemed to form part of this report.

Dividends

The directors recommend a final dividend of 6.78p (2012/13: 6.37p) per ordinary share amounting to £160m (2012/13: £150m) to be paid on 16 June 2014 to members appearing on the Register at the close of business on 16 May 2014. Together with the interim dividend of 3.12p (2012/13: 3.09p) per ordinary share, amounting to £74m (2012/13: £73m), paid on 15 November 2013, the total dividend for the financial year ended 1 February 2014 will be 9.90p (2012/13: 9.46p) per ordinary share, amounting to £234m (2012/13: £224m).

The Kingfisher Employee Benefit Trust has waived all dividends payable by the Company in respect of the ordinary shares held by it. The total dividends waived in the year to 1 February 2014 were in aggregate £1.1m.

Directors

Full biographical details of the current directors are set out on pages 32 and 33. In accordance with the principles of the UK Corporate Governance Code, all directors will retire and be submitted for re-appointment at the AGM in 2014.

Directors' indemnity arrangements

The Company has provided qualifying third-party deeds of indemnity for the benefit of each director and former director who held office during the 2013/14 financial year. The Company has also purchased and maintained Directors' and Officers' liability insurance throughout 2013/14. Neither the indemnities nor the insurance provides cover in the event that the director concerned is proved to have acted fraudulently.

Directors' interests

Details of directors' remuneration, service contracts and interests in the Company's shares and share options are set out in the Directors' Remuneration Report on pages 47 to 68. No director had a material interest at any time during the year in any derivative or financial instrument relating to the Company's shares.

Principal risk identification and management

The principal risks and uncertainties facing the Group have been reviewed by the Board and are shown in the Risks section on pages 28 to 31. The Risks section also provides information on the performance of the Board in actively managing those risks, to allow assessment of how the directors have performed their statutory duty to promote the success of the Company.

Employees

The commitment of the Group's employees is vital to ensure that high standards of customer care and service are maintained throughout the business. The Group is fully committed to treating its employees and customers with dignity and respect, and to valuing diversity. It is Group policy to:

ensure there is no discrimination in employment on the grounds of race, gender, age, disability, marital status, sexual orientation or religious belief;
implement measures in stores to ensure a level of customer service for disabled people equivalent to that offered to non-disabled people; and
maintain a mechanism which customers and employees can use to give feedback on the Group's performance and ensure that all customer comments are analysed, responded to and acted upon.

A breakdown of employee gender diversity, as required by the Companies Act 2006, can be found on page 19 the Net Positive section of the Strategic Report and forms part of the Directors' Report disclosures. During the year B&Q UK continued its long-established policy of promoting age diversity, with around a quarter of its employees aged over 50. in

The Group's statement on employee development is set out in the People section of the Company's website (www.kingfisher.com).

There are a number of communication channels in place to help employees to develop their knowledge of, and enhance their involvement with, the Group. These channels include engagement surveys, briefing groups, internal magazines and newsletters that report on business performance and objectives, community involvement and other applicable issues. Directors and senior management regularly visit stores and discuss matters of current interest and concern with employees.

Greenhouse Gas Emissions

The Group is required to state the annual quantity of emissions in tonnes of CO2 equivalent from activities for which the Group is responsible. Details of our emissions for the year ended 1 February 2014 and the actions the Group is taking to reduce their impact are set out within the Sustainability section of the Strategic Report on pages 18 and 19 and form part of this Directors' Report.

Political donations

The Board annually seeks and obtains shareholders' approval to enable the Group to make donations or incur expenditure in relation to EU political parties, other political organisations or independent election candidates under section 366 of the Companies Act 2006.

The Group made no political donations during the year (2012/13: £nil). As with previous annual approvals, the Group has no intention of changing its current policy and practice of not making political donations. The Board seeks the approval on a precautionary basis to avoid any unintentional breach of the relevant provisions. Shareholder approval will be sought at this year's AGM to renew this authority; further details are provided in the Notice of AGM.

Significant agreements – change of control

There are a number of agreements that take effect, alter or terminate upon a change of control of the Company following a takeover bid, such as bank loan agreements, Medium Term Note ('MTN') documentation, private placement debt and employee share plans. None of these are deemed to be significant in terms of their potential impact on the business of the Group as a whole except for:

the £200 million credit facility dated 8 July 2011 between the Company, HSBC Bank plc (as the facility agent) and the banks named therein as lenders, which contains a provision such that in the event of a change of control any lender may, if they so require, notify the agent that they wish to cancel their commitment whereupon the commitment of that lender will be cancelled and all their outstanding loans, together with accrued interest, will become immediately due and payable; and
the US\$297 million US Private Placement notes, issued pursuant to a note purchase agreement dated 24 May 2006 by the Company to various institutions, which contains a provision such that in the event of a change of control, the Company is required to make an offer to the holders of the US Private Placement notes to prepay the principal amount of the notes together with interest accrued.

The Company does not have agreements with any director or officer that would provide compensation for loss of office or employment resulting from a takeover, except that provisions of the Company's share incentive schemes may cause options and awards granted under such schemes to vest on a takeover.

Share capital

Details of the Company's issued share capital are set out in note 28 to the consolidated financial statements. All of the Company's issued ordinary shares are fully paid up and rank equally in all respects.

The rights and obligations attaching to the Company's ordinary shares, in addition to those conferred on their holders by law, are set out in the Company's Articles of Association, copies of which can be obtained from the Company's website. The holders of ordinary shares are entitled to receive the Company's Annual Report and Accounts, to attend and speak at general meetings of the Company, to appoint proxies and to exercise voting rights.

There are no restrictions on the transfer of ordinary shares or on the exercise of voting rights attached to them, except (i) where the Company has exercised its right to suspend their voting rights or to prohibit their transfer following the omission of their holder or any person interested in them to provide the Company with information requested by it in accordance with Part 22 of the Companies Act 2006 or (ii) where their holder is precluded from exercising voting rights by the Financial Services Authority Listing Rules or the City Code on Takeovers and Mergers.

The Company has a Sponsored Level 1 American Depositary Receipt ('ADR') programme in the United States.

Authority to allot shares

At the AGM in 2013, shareholders approved a resolution to give the directors authority to allot shares up to an aggregate nominal value of £124,279,699. In addition, shareholders approved a resolution to give the directors authority to allot up to a nominal amount of £248,559,398 in connection with an offer by way of a rights issue in accordance with ABI guidance. If this additional allotment authority were used, the ABI guidance would be followed. The directors have no present intention to issue ordinary shares, other than pursuant to employee share incentive schemes. These resolutions remain valid until the conclusion of this year's AGM when resolutions will be proposed to renew these authorities.

Authority to purchase own shares

At the AGM in 2013, shareholders approved a resolution for the Company to make purchases of its own shares to a maximum number of 237,261,243 ordinary shares, being approximately 10% of the issued share capital. This resolution remains valid until the conclusion of this year's AGM. As at 24 March 2014, the directors have not used this authority. In order to retain maximum flexibility, a resolution will be proposed at this year's AGM to renew this authority. It is the Company's current intention that shares acquired under this authority will be cancelled.

Financial instruments

The Group's financial risk management objectives and policies are set out in note 24 to the financial statements on pages 107 to 109. Note 24 also details the Group's exposure to foreign exchange, interest, credit and liquidity risks. These notes are included by reference and form part of this report.

Major shareholders

As at 24 March 2014, the Company had been notified of the following interests in its shares:

	Number of ordinary shares held	% of total voting rights
The Capital Group Companies Inc.	139,479,920	6.05%

Annual General Meeting

The 2014 Annual General Meeting of the Company will be held on 12 June 2014 at the Hilton London Paddington Hotel, Paddington at 11.00am. A full description of the business to be conducted at the meeting is set out in the separate Notice of Annual General Meeting.

By order of the Board

Kathryn Hudson

Company Secretary 24 March 2014

Directors' statement of responsibility

Going concern

The directors confirm that, after reviewing expenditure commitments, expected cash flows and borrowing facilities, they have a reasonable expectation that Kingfisher plc (the 'Company') and the Kingfisher group of companies (the 'Group') have adequate resources to continue in operational existence for the next financial year and the foreseeable future. For this reason they continue to adopt the going concern basis in preparing these financial statements. Further details of the Group's liquidity are provided in the financial review on page 20.

Disclosure of information to auditors

Each person who is a director at the date of approval of this report confirms that: so far as he or she is aware, there is no relevant audit information (as defined by section 418 of the Companies Act 2006) of which the Company's auditors are unaware; and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Responsibility for preparing financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

• UK company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the parent Company financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
follow applicable UK Accounting Standards (except where any departures from this requirement are explained in the notes to the parent Company financial statements); and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group financial statements in accordance with IAS 1, 'Presentation of Financial Statements', the directors are required to:

select suitable accounting policies and then apply them consistently;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and
make an assessment of the Group's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

The directors confirm that to the best of their knowledge:

the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
The Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

By order of the Board

Kathryn Hudson

Company Secretary 24 March 2014

Independent Auditor's Report to the members of Kingfisher plc

Opinion on financial statements of Kingfisher plc

In our opinion:

the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 1 February 2014 and of the Group's profit for the 52 weeks then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The financial statements comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated and Parent Company balance sheets, the consolidated cash flow statement and the related notes 1 to 38 for the Group and 1 to 15 for the Parent Company financial statements. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union.

The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Going concern

As required by the Listing Rules we have reviewed the directors' statement on page 71 that the Group is a going concern. We confirm that:

we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
we have not identified any material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group's ability to continue as a going concern.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team:

Subject	Nature of risk	How the scope of our audit responded to the risk
Inventories	Assessing net realisable value is an area of significant judgement, in particular with regards to the estimation of provisions for slow-moving and obsolete inventory.	We focused on the valuation of year end inventory levels, including challenging judgements taken regarding obsolescence. Inventory provisioning has been assessed using historic stock performance and compared to the Group provision recognised. Our procedures included assessing the adequacy of, and movements in, inventory provisions held by recalculating a sample of items included within the provision to ensure appropriate basis of valuation.
Supplier rebates	Assessing the timing of recognition of rebate income earned from suppliers, including adherence to contractual terms, is an area of complexity. The subsequent recoverability of amounts due from suppliers is also an area of management judgement.	We reviewed agreements with suppliers and adherence to terms to assess whether sufficient evidence to support the recognition of rebate income exists. We circularised a sample of suppliers where the outstanding balances were significant at the year end in order to assess recoverability.

Subject	Nature of risk	How the scope of our audit responded to the risk
Property	As a result of the diverse property portfolio across the Group, there are several technically complex or judgemental aspects of property accounting and accounting for leases across the Group, including: • The assessment of carrying values of freehold stores; • accounting for store closure costs; and • other property related provisions, including onerous leases.	For leasehold property, we focused our work on the identification of complex or unusual lease contracts to assess whether they were appropriately accounted for under IAS 17: 'Leases'. We also performed procedures to identify leases which could be considered onerous – for example, we reviewed the properties currently under lease, and identified those which may be vacant or underutilised, or where properties are sublet whether the estimated rental income leads to an onerous contract.
		For freehold properties, we reviewed management's assessment of carrying values, challenged key assumptions used in, and performed sensitivity analysis on, the impairment models where indicators of impairment were identified.
		We considered the assumptions used by management in estimating store closure costs and challenged the timing of recognition of associated provisions.
Goodwill and intangible assets	Determining the appropriate carrying value of goodwill and intangible assets requires management to make significant estimates. Cash generating units are reviewed for impairment using a value in use model, as described in note 12 to the financial statements.	We reviewed the assumptions used in the impairment model for goodwill and intangible assets, including comparison of the input assumptions to externally and internally derived data, as well as forming our own assessments, and challenged the key inputs used, including specifically the operating cash flow projections, discount rates, and long-term growth rates. We considered the sensitivity of the model to changes in key assumptions.
		We also considered the adequacy of the Group's disclosures in respect of impairment testing and whether disclosures about the sensitivity of the outcome of the impairment assessment to changes in key assumptions properly reflected the risks inherent in the assumptions.
Taxation	Due to the estimation uncertainty as referred to in the Critical Accounting Estimates and Judgements in the Consolidated Financial Statements at page 88 in respect of settlements with tax authorities around the world, assessing the Group's exposure to	We considered all significant taxation exposures across the Group, including challenging the estimates and judgements made by management when calculating the income tax payable in each territory and the associated provisions held.
	significant tax risks and the level of provisions recognised is a judgemental area.	We reviewed correspondence with taxation authorities in significant locations, as well as reviewing the support or opinions received from external counsel and other advisers where management has relied on such opinions to make assumptions on the level of taxation payable.

The Audit Committee's consideration of risks is set out on page 43.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters.

Independent Auditor's Report to the Members of Kingfisher Plc continued

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

We determined materiality for the Group to be £35 million, which is below 5% of adjusted pre-tax profit, and below 1% of equity. We use adjusted pre-tax profit to exclude the effect of volatility due to exceptional items from our determination.

We agreed with the Audit Committee that we would report to them all audit differences in excess of £700,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our Group audit scope focused primarily on all significant trading entities and the Group head office, and included B&Q UK, Castorama France, Brico Dépôt France, Castorama Poland, Castorama Russia, B&Q China, Screwfix, Brico Dépôt Spain, Bricostore Romania and the Koçtas¸ joint venture. These locations represent the principal business units and account for 99% of the Group's revenue, 98% of the Group's profit before tax after taking into account the allocation of central sourcing costs, and 97% of the Group's net assets. The locations in scope were selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Our audit work at these locations was executed at levels of materiality applicable to each individual entity which were lower than Group materiality. The entities which are out of our scope are primarily individually insignificant cost entities, the Hornbach investment and other smaller operations.

The Group audit team continued to follow a programme of planned visits that has been designed so that the Senior Statutory Auditor visits locations considered the most significant each year. For the remaining locations where Group audit work is performed but no visit is carried out, the Senior Statutory Auditor has discussed and challenged the key areas of judgement with the lead audit partner of the relevant component in the current year, and a senior member of the Group engagement team has visited the location. We also held regional planning briefings, attended by the component auditors from each of the eleven locations discussed above, at which we discussed developments in the Group relevant to our audit, including risk assessment and audit procedures to respond to the risks identified.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors' remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made or the part of the Directors' Remuneration Report to be audited is not in agreement with the accounting records and returns. We have nothing to report arising from these matters.

Corporate Governance Statement

Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the company's compliance with nine provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.

Our duty to read other information in the Annual Report Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:

materially inconsistent with the information in the audited financial statements; or
apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or
otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team, strategically focused second partner reviews and independent partner reviews.

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the Parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Panos Kakoullis

Senior statutory auditor for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor

London 24 March 2014

Accounts Consolidated income statement

Year ended 1 February 2014

		2013/14			2012/13 (Restated – note 2)
		Before	Exceptional		Before	Exceptional
		exceptional	items		exceptional	items
£ millions	Notes	items	(note 5)	Total	items	(note 5)	Total
Continuing operations:
Sales	4	11,125	–	11,125	10,573	–	10,573
Cost of sales		(7,005)	–	(7,005)	(6,618)	–	(6,618)
Gross profit		4,120	–	4,120	3,955	–	3,955
Selling and distribution expenses		(2,883)	2	(2,881)	(2,768)	(17)	(2,785)
Administrative expenses		(550)	–	(550)	(525)	(9)	(534)
Other income		37	2	39	36	–	36
Share of post-tax results of joint ventures
and associates	17	22	(14)	8	20	–	20
Operating profit		746	(10)	736	718	(26)	692
Analysed as:
Retail profit	4	805	(10)	795	778	(26)	752
Central costs		(42)	–	(42)	(42)	–	(42)
Share of interest and tax of joint ventures
and associates		(17)	–	(17)	(18)	–	(18)
Finance costs		(12)	–	(12)	(16)	–	(16)
Finance income		8	27	35	15	–	15
Net finance income/(costs)	6	(4)	27	23	(1)	–	(1)
Profit before taxation	7	742	17	759	717	(26)	691
Income tax expense	9	(163)	114	(49)	(128)	1	(127)
Profit for the year		579	131	710	589	(25)	564
Attributable to:
Equity shareholders of the Company				709			564
Non-controlling interests				1			–
				710			564
Earnings per share	10
Basic				30.0p			24.1p
Diluted				29.7p			23.8p
Adjusted basic				23.4p			22.3p
Adjusted diluted				23.2p			22.0p

The proposed final dividend for the year ended 1 February 2014, subject to approval by shareholders at the Annual General Meeting, is 6.78p per share.

Strategic Report Governance Accounts

Consolidated statement of comprehensive income

Year ended 1 February 2014

£ millions	Notes	2013/14	2012/13
Profit for the year		710	564
Actuarial losses on post-employment benefits	27	(127)	(29)
Tax on items that will not be reclassified		65	(18)
Total items that will not be reclassified subsequently to profit or loss		(62)	(47)
Currency translation differences
Group		(210)	122
Joint ventures and associates		(25)	8
Transferred to income statement	5	(31)	–
Cash flow hedges
Fair value losses		(4)	(14)
Losses/(gains) transferred to inventories		9	(8)
Tax on items that may be reclassified		2	4
Total items that may be reclassified subsequently to profit or loss		(259)	112
Other comprehensive income for the year		(321)	65
Total comprehensive income for the year		389	629

Attributable to:
Equity shareholders of the Company		388	629
Non-controlling interests		1	–
		389	629

Accounts Consolidated statement of changes in equity

Year ended 1 February 2014

				Attributable to equity shareholders of the Company
			Own		Other
	Share	Share	shares	Retained	reserves		Non-controlling	Total
£ millions	capital	premium	held	earnings	(note 29)	Total	interests	equity
At 3 February 2013	373	2,204	(60)	3,106	525	6,148	8	6,156
Profit for the year	–	–	–	709	–	709	1	710
Other comprehensive income
for the year	–	–	–	(62)	(259)	(321)	–	(321)
Total comprehensive income
for the year	–	–	–	647	(259)	388	1	389
Share-based compensation	–	–	–	7	–	7	–	7
New shares issued under
share schemes	–	5	–	–	–	5	–	5
Own shares issued under
share schemes	–	–	49	(41)	–	8	–	8
Own shares purchased	–	–	(24)	–	–	(24)	–	(24)
Dividends	–	–	–	(224)	–	(224)	–	(224)
At 1 February 2014	373	2,209	(35)	3,495	266	6,308	9	6,317
At 29 January 2012	372	2,199	(134)	2,869	413	5,719	8	5,727

Profit for the year	–	–	–	564	–	564	–	564
Other comprehensive income
for the year	–	–	–	(47)	112	65	–	65
Total comprehensive income
for the year	–	–	–	517	112	629	–	629
Share-based compensation	–	–	–	9	–	9	–	9
New shares issued under
share schemes	1	5	–	–	–	6	–	6
Own shares issued under
share schemes	–	–	74	(68)	–	6	–	6
Dividends	–	–	–	(221)	–	(221)	–	(221)
At 2 February 2013	373	2,204	(60)	3,106	525	6,148	8	6,156

Consolidated balance sheet

At 1 February 2014

£ millions	Notes	2013/14	2012/13
Non-current assets
Goodwill	12	2,417	2,399
Other intangible assets	13	222	166
Property, plant and equipment	14	3,625	3,748
Investment property	15	50	66
Investments in joint ventures and associates	17	32	289
Post-employment benefits	27	–	71
Deferred tax assets	25	12	17
Derivatives	23	40	55
Other receivables	19	15	18
		6,413	6,829
Current assets
Inventories	18	2,054	2,083
Trade and other receivables	19	590	545
Derivatives	23	5	33
Current tax assets		15	9
Cash and cash equivalents	20	535	398
Assets held for sale	34	208	–
		3,407	3,068
Total assets		9,820	9,897
Current liabilities
Trade and other payables	21	(2,486)	(2,430)
Borrowings	22	(94)	(99)
Derivatives	23	(27)	(17)
Current tax liabilities		(175)	(289)
Provisions	26	(8)	(35)
		(2,790)	(2,870)
Non-current liabilities
Other payables	21	(86)	(115)
Borrowings	22	(230)	(332)
Derivatives	23	–	(12)
Deferred tax liabilities	25	(251)	(303)
Provisions	26	(46)	(38)
Post-employment benefits	27	(100)	(71)
Total liabilities		(713) (3,503)	(871) (3,741)

Net assets	4	6,317	6,156
Equity
Share capital	28	373	373
Share premium		2,209	2,204
Own shares held		(35)	(60)
Retained earnings		3,495	3,106
Other reserves	29	266	525
Total attributable to equity shareholders of the Company		6,308	6,148
Non-controlling interests		9	8
Total equity		6,317	6,156

The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:

Sir Ian Cheshire Karen Witts

Group Chief Executive Group Finance Director

Accounts

Consolidated cash flow statement

Year ended 1 February 2014

£ millions	Notes	2013/14	2012/13
Operating activities
Cash generated by operations	31	976	730
Income tax paid		(142)	(129)
Net cash flows from operating activities		834	601
Investing activities
Purchase of businesses, net of cash acquired	33	(28)	–
Purchase of property, plant and equipment, investment property and intangible assets	4	(304)	(316)
Disposal of property, plant and equipment, investment property and intangible assets		12	17
Interest received		8	18
Dividends received from joint ventures and associates		11	10
Net cash flows from investing activities		(301)	(271)
Financing activities
Interest paid		(12)	(18)
Interest element of finance lease rental payments		(4)	(4)
Repayment of bank loans		(89)	(31)
Repayment of Medium Term Notes and other fixed term debt		(33)	(162)
Receipt on financing derivatives		6	–
Capital element of finance lease rental payments		(13)	(12)
New shares issued under share schemes		5	6
Own shares issued under share schemes		8	6
Own shares purchased		(24)	–
Dividends paid to equity shareholders of the Company		(224)	(221)
Net cash flows from financing activities		(380)	(436)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts		153	(106)
Cash and cash equivalents and bank overdrafts at beginning of year		398	485
Exchange differences		(17)	19
Cash and cash equivalents and bank overdrafts at end of year	32	534	398

Notes to the consolidated financial statements

1 General information

Kingfisher plc ('the Company'), its subsidiaries, joint ventures and associates (together 'the Group') supply home improvement products and services through a network of retail stores and other channels, located mainly in the United Kingdom, continental Europe and China.

The Company is incorporated in the United Kingdom. The nature of the Group's operations and its principal activities are set out in the Strategic Report on pages 1 to 31.

The address of its registered office is 3 Sheldon Square, Paddington, London W2 6PX.

The Company is listed on the London Stock Exchange.

These consolidated financial statements have been approved for issue by the Board of Directors on 24 March 2014.

2 Principal accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated. A prior year restatement as a result of the amendments to IAS 19 (revised), 'Employee benefits', is described in section a of this note.

a. Basis of preparation

The consolidated financial statements of the Company, its subsidiaries, joint ventures and associates are made up to the nearest Saturday to 31 January each year, except as disclosed in note 17 and in note 4 of the Company's separate financial statements. The current financial year is the 52 weeks ended 1 February 2014 ('the year' or '2013/14'). The comparative financial year is the 53 weeks ended 2 February 2013 ('the prior year' or '2012/13'). The 53 weeks in the prior year only impacted the UK and Ireland businesses with all of the other businesses reporting on a calendar basis as a result of local requirements.

The directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements for the year ended 1 February 2014. Refer to the Directors' statement of responsibility on page 71.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS') and those parts of the Companies Act 2006 applicable to companies reporting under IFRS and therefore the consolidated financial statements comply with Article 4 of the EU IAS legislation.

The following new standards, amendments and interpretations, which are mandatory for the first time for the financial year ended 1 February 2014, are relevant and material for the Group:

IAS 1 (amended), 'Presentation of items of other comprehensive income' (effective from 1 July 2012);
IAS 19 (revised), 'Employee benefits' (effective from 1 January 2013);
IFRS 7 (amended), 'Disclosures Offsetting financial assets and financial liabilities' (effective from 1 January 2013);
IFRS 13, 'Fair value measurement' (effective from 1 January 2013).

The impact on the Group of the application of the above standards is as follows:

The amendments to IAS 1, 'Presentation of items of other comprehensive income', require items presented in 'other comprehensive income' to be grouped by those items that may be reclassified subsequently to profit or loss and those that will never be reclassified, together with their associated income tax. The amendments have been applied retrospectively and the presentation of items of comprehensive income has been adjusted accordingly.
IAS 19 (revised), 'Employee benefits', amends the accounting for employment benefits and the Group has applied it retrospectively in accordance with the transition provisions of the standard. The impact on the Group has been in the following areas:
The standard replaces the interest cost on the defined benefit obligation and the expected return on plan assets with a single net interest expense or income based on the net defined benefit asset or liability and the discount rate, measured at the beginning of the year. There is no change to determining the discount rate; this continues to reflect the yield on high-quality corporate bonds. For the current and comparative year, the Group's reported profit before taxation was not impacted as the expected rate of return on assets at the start of the current and prior year was the same as the discount rate for the UK scheme, the Group's principal defined benefit pension plan.
The revised standard also requires administrative costs of running the UK scheme to be reclassified from net finance costs to operating costs. For the current year the Group's reported operating profit is £3m lower and net finance income £3m higher than they would have been prior to the adoption of IAS 19 (revised). For the year ended 2 February 2013 the Group's reported operating profit is £3m lower and net finance costs £3m lower than previously reported.
IFRS 7 (amended), 'Disclosures Offsetting financial assets and financial liabilities', amended the required disclosures surrounding the effect or potential effect of netting arrangements, including rights of set-off associated with recognised financial assets and liabilities, on the Group's financial position.
IFRS 13, 'Fair value measurement', has impacted the measurement of fair value for certain financial assets and liabilities as well as introducing new disclosures.

Notes to the consolidated financial statements continued

2 Principal accounting policies continued

The following amendments and interpretations, which are mandatory for the first time for the financial year ended 1 February 2014, are either not currently relevant or not material for the Group:

IFRS 1 (amended), 'First time adoption' on government loans (effective from 1 January 2013);
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment entities;
Annual improvements to IFRSs 2009-2011 (effective from 1 January 2013);
IFRIC 20 'Stripping Costs in the Production Phase of a Surface Mine';
Amendments to IFRS 1 Government Loans.

At the date of authorisation of these financial statements, the following new standards, amendments and interpretations, which have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 9, 'Financial instruments' (effective from 1 January 2018);
IFRS 10, 'Consolidated financial statements' (effective from 1 January 2014);
IFRS 11, 'Joint arrangements' (effective from 1 January 2014);
IFRS 12, 'Disclosure of interests in other entities' (effective from 1 January 2014);
IAS 27 (revised), 'Separate financial statements' (effective from 1 January 2014);
IAS 28 (revised), 'Investments in associates and joint ventures' (effective from 1 January 2014);
IAS 32 (amendment), 'Financial instruments: Presentation' on offsetting financial assets and financial liabilities (effective from 1 January 2014).

The directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the use of valuations for certain financial instruments, share-based payments and post-employment benefits. A summary of the Group's principal accounting policies is set out below.

The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates and assumptions. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving critical accounting estimates and judgements, which are significant to the consolidated financial statements, are disclosed in note 3.

Use of non-GAAP measures

In the reporting of financial information, the Group uses certain measures that are not required under IFRS, the Generally Accepted Accounting Principles ('GAAP') under which the Group reports. Kingfisher believes that retail profit, adjusted pre-tax profit, effective tax rate, adjusted post-tax profit and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These and other non-GAAP measures such as net debt/cash are used by Kingfisher for internal performance analysis and incentive compensation arrangements for employees. The terms 'retail profit', 'exceptional items', 'adjusted', 'effective tax rate' and 'net debt/cash' are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.

Like-for-like ('LFL') sales growth is defined as the constant currency, year-on-year sales growth for stores that have been open for more than a year.

Retail profit is defined as continuing operating profit before central costs (principally the costs of the Group's head office), exceptional items, amortisation of acquisition intangibles and the Group's share of interest and tax of joint ventures and associates.

The separate reporting of non-recurring exceptional items, which are presented as exceptional within their relevant income statement category, helps provide an indication of the Group's underlying business performance. The principal items which are included as exceptional items are:

non-trading items included in operating profit such as profits and losses on the disposal, closure or impairment of subsidiaries, joint ventures, associates and investments which do not form part of the Group's trading activities;
profits and losses on the disposal of properties; and
the costs of significant restructuring and incremental acquisition integration costs.

The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and prior year tax items (including the impact of changes in tax rates on deferred tax). Financing fair value remeasurements represent changes in the fair value of financing derivatives, excluding interest accruals, offset by fair value adjustments to the carrying amount of borrowings and other hedged items under fair value hedge relationships. Financing derivatives are those that relate to underlying items of a financing nature.

2 Principal accounting policies continued

The effective tax rate represents the effective income tax expense as a percentage of continuing profit before taxation excluding exceptional items. Effective income tax expense is the continuing income tax expense excluding tax on exceptional items and tax adjustments in respect of prior years and the impact of changes in tax rates on deferred tax.

Net debt/cash comprises borrowings and financing derivatives (excluding accrued interest), less cash and cash equivalents and current other investments.

b. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company, its subsidiaries, joint ventures and associates.

(i) Subsidiaries

Subsidiary undertakings are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. Subsidiary undertakings acquired are recorded under the acquisition method of accounting and their results included from the date of acquisition. The results of subsidiaries which have been disposed are included up to the effective date of disposal.

The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the noncontrolling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. Prior to 31 January 2010, losses exceeding the non-controlling interest in the equity of a subsidiary were required to be attributed to the parent; the resulting deficit balances were not restated following amendment to IAS 27, 'Consolidated and separate financial statements'.

The excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisitiondate fair value of any previous equity interests in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of acquired subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(ii) Joint ventures and associates

Joint ventures are entities over which the Group has joint control, with a third party, to govern the financial and operating activities of that entity. The equity method is used to account for the Group's investments in joint ventures.

Associates are entities over which the Group has the ability to exercise significant influence but not control, generally accompanied by a shareholding of between 20% and 50% of the voting rights. The equity method is used to account for the Group's investments in associates.

Under the equity method investments are initially recognised at cost. The Group's investments in joint ventures and associates include goodwill (net of any accumulated impairment losses) identified on acquisition.

The Group's share of post-acquisition profits or losses is recognised in the income statement within operating profit, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group's share of losses equals or exceeds its interest, including any other long-term receivables, the Group does not recognise any further losses, unless it has incurred obligations or made payments on behalf of the joint venture or associate.

Unrealised gains on transactions between the Group and its joint ventures and associates are eliminated to the extent of the Group's interest. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures and associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

The equity method of accounting is discontinued from the date an investment ceases to be a joint venture or associate, that is the date on which the Group ceases to have joint control or significant influence over the investee or on the date it is classified as held for sale.

c. Foreign currencies

(i) Presentation and functional currencies

The consolidated financial statements are presented in Sterling, which is the Group's presentation currency. Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (i.e. its functional currency).

(ii) Transactions and balances

Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the date of the transaction or, for practical reasons, at average monthly rates where exchange rates do not fluctuate significantly.

Notes to the consolidated financial statements continued

2 Principal accounting policies continued

Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at the rates of exchange at the balance sheet date. Exchange differences on monetary items are taken to the income statement. Exceptions to this are where the monetary items form part of the net investment in a foreign operation or are designated and effective net investment or cash flow hedges. Such exchange differences are initially deferred in equity.

(iii) Group companies

The balance sheets of overseas subsidiary undertakings are expressed in Sterling at the rates of exchange at the balance sheet date. Profits and losses of overseas subsidiary undertakings are expressed in Sterling at average exchange rates for the period. Exchange differences arising on the retranslation of foreign operations, including joint ventures and associates, are recognised in a separate component of equity.

On consolidation, exchange differences arising from the retranslation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is sold, such exchange differences recorded since 1 February 2004 are recognised in the income statement as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the rates of exchange at the balance sheet date. Goodwill arising prior to 1 February 2004 is denominated in Sterling.

Principal rates of exchange against Sterling:

	2013/14		2012/13
	Average rate	Year end rate	Average rate	Year end rate
Euro	1.18	1.22	1.23	1.15
US Dollar	1.57	1.64	1.59	1.57
Polish Zloty	4.95	5.17	5.13	4.79
Chinese Renminbi	9.62	9.97	10.01	9.80

d. Revenue recognition

Sales represent the supply of home improvement products and services. Sales exclude transactions made between companies within the Group, Value Added Tax, other sales-related taxes and are net of returns, trade and staff discounts.

Sales of in-store products are generally recognised at the point of cash receipt. Where award credits such as vouchers or loyalty points are provided as part of the sales transaction, the amount allocated to the credits is deferred and recognised when the credits are redeemed and the Group fulfils its obligations to supply the awards.

For delivered products and services, sales are recognised either when the product has been delivered or, for installation income, when the service has been performed. Sales from delivered products and services represent only a small component of the Group's sales as the majority relates to in-store purchases of products.

Other income is generally composed primarily of external rental income and profits and losses on disposal of assets. Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.

e. Rebates

Rebates received from suppliers mainly comprise volume related rebates on the purchase of inventories.

Volume related rebates are recognised based on actual purchases in the period as a proportion of total purchases forecast over the rebate period where it is probable the rebates will be received and the amounts can be estimated reliably.

Rebates relating to inventories purchased but still held at the balance sheet date are deducted from the carrying value so that the cost of inventories is recorded net of applicable rebates. Such rebates are credited to the income statement when the goods are sold.

f. Dividends

Interim dividends are recognised when they are paid to the Company's shareholders. Final dividends are recognised when they are approved by the Company's shareholders.

g. Intangible assets

(i) Goodwill

Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognised. Such benefits include future synergies expected from the combination and intangible assets not meeting the criteria for separate recognition.

Goodwill is carried at cost less accumulated impairment losses. Goodwill is not amortised and is tested annually for impairment by assessing the recoverable amount of each cash generating unit or groups of cash generating units to which the goodwill relates. The recoverable amount is assessed by reference to the net present value of expected future pre-tax cash flows ('value-in-use') or fair value less costs to sell if higher. The discount rate applied is based upon the Group's weighted average cost of capital with appropriate adjustments for the risks associated with the relevant cash generating unit or groups of cash generating units. When the recoverable amount of the goodwill is less than its carrying amount, an impairment loss is recognised immediately in the income statement which cannot subsequently be reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(ii) Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of two to ten years.

www.kingfisher.com 85 www.kingfisher.com 85

2 Principal accounting policies continued

Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, which are expected to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development, employee and consultancy costs and an appropriate portion of relevant overheads. These costs are amortised over their estimated useful lives of two to ten years. Costs associated with identifying, sourcing, evaluating or maintaining computer software are recognised as an expense as incurred.

h. Property, plant and equipment

(i) Cost

Property, plant and equipment held for use in the business are carried at cost less accumulated depreciation and any provisions for impairment.

Properties that were held at 1 February 2004 are carried at deemed cost, being the fair value of land and buildings as at the transition date to IFRS. All property acquired after 1 February 2004 is carried at cost.

(ii) Depreciation

Depreciation is provided to reflect a straight line reduction from cost to estimated residual value over the estimated useful life of the asset as follows:

Freehold land	– not depreciated
Freehold and long leasehold buildings – over remaining useful life
Short leasehold land and buildings	– over remaining period of the lease
Fixtures and fittings	– between 4 and 20 years
Computers and electronic equipment	– between 3 and 5 years
Motor cars	– 4 years
Commercial vehicles	– between 3 and 10 years

Long leaseholds are defined as those having remaining lease terms of more than 50 years. Asset lives and residual values are reviewed at each balance sheet date.

(iii) Impairment

Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future pre-tax cash flows ('value-in-use') of the relevant cash generating unit or fair value less costs to sell if higher. The discount rate applied is based upon the Group's weighted average cost of capital with appropriate adjustments for the risks associated with the relevant cash generating unit. Any impairment in value is charged to the income statement in the period in which it occurs.

(iv) Disposal

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement. Sales of land and buildings are accounted for when there is an unconditional exchange of contracts.

(v) Subsequent costs

Subsequent costs are included in the related asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

All other repairs and maintenance are charged to the income statement in the period in which they are incurred.

i. Leased assets

Where assets are financed by leasing agreements which give rights approximating to ownership, the assets are treated as if they had been purchased outright. The amount capitalised is the lower of the fair value or the present value of the minimum lease payments during the lease term at the inception of the lease. The assets are depreciated over the shorter of the lease term or their useful life. Obligations relating to finance leases, net of finance charges in respect of future periods, are included, as appropriate, under borrowings due within or after one year. The finance charge element of rentals is charged to finance costs in the income statement over the lease term.

All other leases are operating leases and the rental payments are generally charged to the income statement in the period to which the payments relate, except for those leases which incorporate fixed minimum rental uplift clauses. Leases which contain fixed minimum rental uplifts are charged to the income statement on a straight line basis over the lease term.

Where a lease is taken out for land and buildings combined, the buildings element of the lease may be capitalised as a finance lease if it meets the criteria for a finance lease, but the land element will in most cases be classified as an operating lease. If the contracted lease payments are not split between land and buildings in the lease contract, the split is made based on the market values of the land and buildings at the inception of the lease.

Incentives received or paid to enter into lease agreements are released to the income statement on a straight line basis over the lease term.

j. Investment property

Investment property is property held by the Group to earn rental income or for capital appreciation. The Group's investment properties are carried at cost less depreciation and provision for impairment. Depreciation is provided on a consistent basis with that applied to property, plant and equipment.

k. Capitalisation of borrowing costs

Interest on borrowings to finance the construction of properties held as non-current assets is capitalised from the date work starts on the property to the date when substantially all the activities which are necessary to get the property ready for use are complete. Where construction is completed in parts, each part is considered separately when capitalising interest. Interest is capitalised before any allowance for tax relief.

l. Inventories

Inventories are carried at the lower of cost and net realisable value, on a weighted average cost basis.

Trade discounts and rebates received are deducted in determining the cost of purchase of inventories. Cost includes appropriate attributable overheads and direct expenditure incurred in the normal course of business in bringing goods to their present location and condition. Costs of inventories include the transfer from equity of any gains or losses on qualifying cash flow hedges relating to purchases.

Notes to the consolidated financial statements continued

2 Principal accounting policies continued

Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. Write downs to net realisable value are made for slow moving, damaged or obsolete items and other events or conditions resulting in expected selling prices being lower than cost. The carrying value of inventories reflects known and expected losses of product in the ordinary course of business.

m. Employee benefits

(i) Post-employment benefits

The Group operates various defined benefit and defined contribution pension schemes for its employees, some of which are required by local legislation. A defined benefit scheme is a pension scheme which defines an amount of pension benefit which an employee will receive on retirement. A defined contribution scheme is a pension scheme under which the Group usually pays fixed contributions into a separate entity. In all cases other than some of the legally required schemes, a separate fund is being accumulated to meet the accruing liabilities. The assets of each of these funds are either held under trusts or managed by insurance companies and are entirely separate from the Group's assets.

The asset or liability recognised in the balance sheet in respect of defined benefit pension schemes is the fair value of scheme assets less the present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds which are denominated in the currency in which the benefits will be paid and which have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are credited or charged to the statement of comprehensive income as they arise.

For defined contribution schemes, the Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

(ii) Share-based compensation

The Group operates several equity-settled, share-based compensation schemes. The fair value of the employee services received in exchange for the grant of options or deferred shares is recognised as an expense and is calculated using Black-Scholes and stochastic models. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or deferred shares granted, excluding the impact of any non-market vesting conditions. The value of the charge is adjusted to reflect expected and actual levels of options vesting due to non-market vesting conditions.

n. Taxation

The income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year.

Taxable profit differs from profit before taxation as reported in the income statement because it excludes items of income or expense which are taxable or deductible in other years or which are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences or unused tax losses can be utilised. Deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill in a business combination. Deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, joint ventures and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Current and deferred tax are calculated using tax rates which have been enacted or substantively enacted by the balance sheet date and are expected to apply in the period when the liability is settled or the asset is realised.

Current and deferred tax are charged or credited to the income statement, except when they relate to items charged or credited directly to equity, in which case the current or deferred tax is also recognised directly in equity.

Current and deferred tax assets and liabilities are offset against each other when they relate to income taxes levied by the same tax jurisdiction and when the Group intends to settle its current tax assets and liabilities on a net basis.

o. Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate which reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

p. Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or the Group has substantially transferred the risks and rewards of ownership. Financial liabilities (or a part of a financial liability) are derecognised when the obligation specified in the contract is discharged or cancelled or expires.

2 Principal accounting policies continued

Financial assets and liabilities are offset only when the Group has a currently enforceable legal right to set-off the respective recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

(i) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks and other short-term highly liquid investments with original maturities of three months or less.

(ii) Borrowings

Interest bearing borrowings are recorded at the proceeds received, net of direct issue costs and subsequently measured at amortised cost. Where borrowings are in designated and effective fair value hedge relationships, adjustments are made to their carrying amounts to reflect the hedged risks. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are amortised to the income statement using the effective interest method.

(iii) Other investments

Other investments include bank deposits, government bonds and other short-term investments with original maturities of more than three months. Investments classified as 'availablefor-sale' under IAS 39, 'Financial instruments: Recognition and measurement', are initially measured at fair value, with subsequent changes in fair value recorded directly in equity. Any dividends received are recognised in the income statement. On disposal, the accumulated fair value adjustments recognised in equity are transferred to the income statement.

(iv) Trade receivables

Trade receivables are initially recognised at fair value and are subsequently measured at amortised cost less any provision for bad and doubtful debts.

(v) Trade payables

Trade payables are initially recognised at fair value and are subsequently measured at amortised cost.

(vi) Derivatives and hedge accounting

Where hedge accounting is not applied, or to the extent to which it is not effective, changes in the fair value of derivatives are recognised in the income statement as they arise. Changes in the fair value of derivatives transacted as hedges of operating items and financing items are recognised in operating profit and net finance costs respectively.

Derivatives are initially recorded at fair value on the date a derivative contract is entered into and are subsequently carried at fair value. The accounting treatment of derivatives and other financial instruments classified as hedges depends on their designation, which occurs at the start of the hedge relationship. The Group designates certain financial instruments as:

a hedge of the fair value of an asset or liability or unrecognised firm commitment ('fair value hedge');
a hedge of a highly probable forecast transaction or firm commitment ('cash flow hedge'); or
a hedge of a net investment in a foreign operation ('net investment hedge').

Fair value hedges

For an effective hedge of an exposure to changes in fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding entry being recorded in the income statement. Gains or losses from remeasuring the corresponding hedging instrument are recognised in the same line of the income statement.

Cash flow hedges

Changes in the effective portion of the fair value of derivatives that are designated as hedges of future cash flows are recognised directly in equity, with any ineffective portion being recognised immediately in the income statement where relevant. If the cash flow hedge of a firm commitment or forecast transaction results in the recognition of a non-financial asset or liability, then, at the time it is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the non-financial asset or liability. For hedges that result in the recognition of a financial asset or liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss.

Net investment hedges

Where the Group hedges net investments in foreign operations through foreign currency borrowings, the gains or losses on the retranslation of the borrowings are recognised directly in equity. If the Group uses derivatives as the hedging instrument, the effective portion of the hedge is recognised in equity, with any ineffective portion being recognised immediately in the income statement. Gains and losses accumulated in equity are recycled through the income statement on disposal of the foreign operation.

In order to qualify for hedge accounting, the Group documents in advance the relationship between the item being hedged and the hedging instrument. The Group also documents and demonstrates an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge has been and will be highly effective on an ongoing basis. The effectiveness testing is re-performed at each period end to ensure that the hedge remains highly effective.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the highly probable forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts, and the host contracts are not carried at fair value with unrealised gains or losses reported in the income statement.

q. Assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.

Notes to the consolidated financial statements continued

2 Principal accounting policies continued

Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale.

Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. This excludes financial assets, deferred tax assets and assets arising from employee benefits, which are measured according to the relevant accounting policy.

Property, plant and equipment and intangible assets are not depreciated once classified as held for sale. The group ceases to use the equity method of accounting from the date on which an interest in a jointly controlled entity or an interest in an associate becomes held for sale.

3 Critical accounting estimates and judgements

The preparation of consolidated financial statements under IFRS requires the Group to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

Impairment of goodwill and other assets

As required, the Group applies procedures to ensure that its assets are carried at no more than their recoverable amount. The procedures, by their nature, require estimates and assumptions to be made. The most significant are set out below.

The Group is required, on at least an annual basis, to test whether goodwill has suffered any impairment. As part of this testing the recoverable amounts of cash generating units have been determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows expected to arise from the continuing operation of the cash generating unit and the choice of suitable discount and longterm growth rates in order to calculate the present value of the forecast cash flows. Actual outcomes could vary significantly from these estimates. Further information on the impairment tests undertaken, including the key assumptions, is given in note 12.

Property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount of an asset or a cash generating unit is determined as the higher of fair value less costs to sell and value-in-use, calculated on the basis of management's assumptions and estimates.

At each reporting date the Group is required to assess whether there is objective evidence that its investments in associates and joint ventures may be impaired. This requires estimates of the investments' recoverable amounts, including present values of the Group's share of future cash flows.

Inventories

As inventories are carried at the lower of cost and net realisable value this requires the estimation of the eventual sales price of goods to customers in the future. A high degree of judgement is applied when estimating the impact on the carrying value of inventories of factors such as slow moving items, shrinkage, damage and obsolescence. The quantity, age and condition of inventories are regularly measured and assessed as part of range reviews and inventory counts undertaken throughout the year and across the Group. Refer to note 18 for further information.

Income taxes

The Group is subject to income taxes in numerous jurisdictions and there are many transactions for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgement may therefore be required in determining the provision for income taxes in each territory. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts which were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. These adjustments in respect of prior years are recorded in the income statement or directly in equity as appropriate. Refer to notes 9 and 25 for further information.

Restructuring provisions

The Group carries a number of provisions in relation to historical and ongoing restructuring programmes. The most significant part of the provisions is the cost to exit stores and property contracts. The ultimate costs and timing of cash flows are dependent on exiting the property lease contracts on the closed stores and subletting surplus space. Refer to note 26 for further information.

Post-employment benefits

The present value of the defined benefit liabilities recognised on the balance sheet is dependent on a number of assumptions including interest rates of high quality corporate bonds, inflation and mortality rates. The net interest expense or income is dependent on the interest rates of high quality corporate bonds. The assumptions are based on the conditions at the time and changes in these assumptions can lead to significant movements in the estimated obligations. To help the reader understand the impact of changes in the key assumptions, a sensitivity analysis is provided in note 27.

Investment in Hornbach

During the year a number of developments have occurred in respect of our strategic investment in Hornbach. This has required judgement to be exercised surrounding the ability of the Group to exercise significant influence over Hornbach based on accounting definitions, and therefore the appropriateness of continuing to account for the investment as an associate. Following the decision to waive the right to appoint directors to the board, the Directors have judged that the Group ceased to have the ability to exercise significant influence from 31 January 2014. Further judgements have been required in assessing the classification of the investment as an asset held for sale, the valuation as at 1 February 2014 and whether it should be classified as a discontinued operation, the latter not being judged appropriate given its size relative to the Group as a whole. Refer to notes 17 and 34 for further information.

4 Segmental analysis

Income statement

	2013/14
			Other International
£ millions	UK & Ireland	France	Poland	Other	Total
Sales	4,363	4,423	1,109	1,230	11,125
Retail profit	238	396	123	48	805
Exceptional items					(10)
Central costs					(42)
Share of interest and tax of joint ventures and associates					(17)
Operating profit					736
Net finance income					23
Profit before taxation					759

			2012/13 (Restated)
			Other International
£ millions	UK & Ireland	France	Poland	Other	Total
Sales	4,316	4,194	1,029	1,034	10,573
Retail profit	231	397	107	43	778
Exceptional items					(26)
Central costs					(42)
Share of interest and tax of joint ventures and associates					(18)
Operating profit					692
Net finance costs					(1)
Profit before taxation					691

The current financial year is the 52 weeks ended 1 February 2014 with the comparative financial year being the 53 weeks ended 2 February 2013. This only impacts the UK & Ireland businesses with all of the other businesses reporting on a calendar basis as a result of local requirements. The effect of the 53rd week on the results of the Group in 2012/13 was the inclusion of an additional £72m sales and an immaterial benefit to retail profit.

Balance sheet

	2013/14
			Other International
£ millions	UK & Ireland	France	Poland	Other	Total
Segment assets	1,356	1,364	563	611	3,894
Central liabilities					(232)
Goodwill					2,417
Net cash					238
Net assets					6,317

	2012/13
			Other International
£ millions	UK & Ireland	France	Poland	Other	Total
Segment assets	1,458	1,443	600	620	4,121
Central liabilities					(402)
Goodwill					2,399
Net cash					38
Net assets					6,156

Notes to the consolidated financial statements continued

4 Segmental analysis continued

Other segmental information

£ millions		2013/14
			Other International
	UK & Ireland	France	Poland	Other	Central	Total
Capital expenditure	90	127	24	63	–	304
Depreciation and amortisation	127	84	19	30	1	261
Impairment losses(1)	2	–	–	–	–	2
Non-current assets(2)	3,246	1,970	565	518	15	6,314

£ millions	2012/13
		Other International
	UK & Ireland	France	Poland	Other	Central	Total
Capital expenditure	125	93	49	43	6	316
Depreciation and amortisation	133	72	14	26	3	248
Impairment losses	8	–	–	–	–	8
Non-current assets(2)	3,332	1,984	584	459	20	6,379

(1) Impairment losses exclude the exceptional impairment of the investment in Hornbach of £45m.

(2) Non-current assets comprise goodwill, other intangible assets, property, plant and equipment and investment property.

The operating segments disclosed above are based on the information reported internally to the Board of Directors and Group Executive. This information is predominantly based on the geographical areas in which the Group operates and which are managed separately. The Group only has one business segment being the supply of home improvement products and services.

The 'Other International' segment consists of Poland, China, Spain, Russia, Romania, the associate Hornbach and the joint venture Koçtas¸ in Turkey. Poland has been shown separately due to its significance.

Central costs principally comprise the costs of the Group's head office. Central liabilities comprise unallocated head office and other central items including pensions, interest and tax.

5 Exceptional items

£ millions	2013/14	2012/13
Included within selling and distribution expenses
Acquisition and integration costs	(5)	–
Ireland restructuring	7	(21)
UK restructuring	–	4
	2	(17)
Included within administrative expenses
UK restructuring	–	(20)
Net pension gain	–	11
	–	(9)
Included within other income
Profit on disposal of properties	2	–
	2	–
Included within share of post-tax results of joint ventures and associates
Net impairment of investment in Hornbach	(14)	–
	(14)	–
Included within finance income
Kesa demerger French tax case – repayment supplement income	27	–
	27	–
Exceptional items before tax	17	(26)
Tax on exceptional items	(4)	1
Kesa demerger French tax case	118	–
Exceptional items	131	(25)

5 Exceptional items continued

Acquisition and integration costs of £5m principally comprise costs of acquiring and integrating the Bricostore Romania business.

The exceptional credit of £7m for Ireland restructuring reflects the release of provisions recorded in January 2013 when B&Q Ireland entered into an Examinership process. It successfully exited Examinership in May 2013 with the closure of only one store.

A net impairment loss of £14m has been recognised in the year on the Group's investment in Hornbach. This comprises a loss of £45m on remeasurement of the investment to fair value, offset by a £31m gain on the transfer from reserves of cumulative foreign exchange gains since transition to IFRS and is discussed further in note 17.

A £27m repayment supplement provision and £118m taxation provision related to the Kesa demerger French tax case have been released in the year. Refer to note 9 for further details.

6 Net finance income/(costs)

£ millions	2013/14	2012/13 (Restated)
Bank overdrafts and bank loans	(3)	(8)
Medium Term Notes and other fixed term debt	(3)	(7)
Finance leases	(4)	(4)
Financing fair value remeasurements	(2)	2
Capitalised interest	–	1
Finance costs	(12)	(16)
Cash and cash equivalents	6	15
Net interest income on defined benefit pension schemes	2	–
Kesa demerger French tax case – repayment supplement income (note 9)	27	–
Finance income	35	15
Net finance income/(costs)	23	(1)

Medium Term Notes and other fixed term debt interest includes net interest income accrued on derivatives of £12m (2012/13: £15m income) and amortisation of issue costs of borrowings of £1m (2012/13: £1m).

Capitalised interest relates to central borrowings and is calculated by applying a capitalisation rate of 1.2% (2012/13: 1.6%) to expenditure on qualifying assets.

Financing fair value remeasurements comprise a net loss on derivatives, excluding accrued interest, of £41m (2012/13: £10m gain), offset by a net gain from fair value adjustments to the carrying value of borrowings and cash of £39m (2012/13: £8m loss).

Notes to the consolidated financial statements continued

7 Profit before taxation

The following items of revenue have been credited in arriving at profit before taxation:

£ millions	2013/14	2012/13
Sales	11,125	10,573
Other income	39	36
Finance income	35	15
Revenue	11,199	10,624
The following items of expense/(income) have been charged/(credited) in arriving at profit before taxation:
£ millions	2013/14	2012/13
Operating lease rentals
Minimum lease payments – Property	440	435
Minimum lease payments – Equipment	42	35
Sublease income	(16)	(17)
	466	453
Rental income received on investment property	(7)	(6)
Amortisation of other intangible assets(1)	31	27
Depreciation of property, plant and equipment and investment property
Owned assets	220	212
Under finance leases	10	9
Impairment of property, plant and equipment and investment property	2	8
Impairment of investment in Hornbach (note 17)	45	–
(Gain)/loss on disposal
Land and buildings and investment property	(2)	–
Fixtures, fittings and equipment	3	4
Other intangible assets	–	1
Inventories: write down to net realisable value	32	16
Trade and other receivables: write down of bad and doubtful debts	4	4
(1) Of the amortisation of other intangible assets charge, £2m (2012/13: £1m) and £29m (2012/13: £26m) are included in selling and distribution expenses and administrative expenses respectively.
Auditor's remuneration
£ millions	2013/14	2012/13
Fees payable for the audit of the Company and consolidated financial statements	0.3	0.3
Fees payable to the Company's auditor and their associates for other services to the Group:
The audit of the Company's subsidiaries pursuant to legislation	1.5	1.3
Audit fees	1.8	1.6
Audit-related assurance services	0.1	0.1
Other taxation advisory services	0.1	0.1
Other assurance services	0.1	0.1
Other services	0.1	0.1

Details of the Group's policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than another supplier and how the auditor's independence and objectivity were safeguarded are set out in the Audit Committee Report on page 44. No services were provided pursuant to contingent fee arrangements.

Non-audit fees 0.4 0.4 Auditor's remuneration 2.2 2.0

Strategic Report	Governance	Accounts

8 Employees and directors

£ millions	2013/14	2012/13
Wages and salaries	1,279	1,276
Social security costs	265	258
Post-employment benefits
Defined contribution	27	17
Defined benefit (service cost only)	9	17
Share-based compensation	7	9
Employee benefit expenses	1,587	1,577

Number thousands	2013/14	2012/13
Stores	71	72
Administration	5	5
Average number of persons employed	76	77

The average number of persons employed excludes employees in the Group's joint ventures and associates.

Remuneration of key management personnel

£ millions	2013/14	2012/13
Short-term employee benefits	6.6	5.2
Post-employment benefits	1.0	1.4
Share-based compensation	0.1	1.3
	7.7	7.9

Key management consists of the Board of Directors and the Group Executive.

Further detail with respect to the Directors' remuneration is set out in the Directors' Remuneration Report on pages 47 to 68. Other than as set out in the Directors' Remuneration Report, there have been no transactions with key management during the year (2012/13: £nil).

9 Income tax expense

£ millions	2013/14	2012/13
UK corporation tax
Current tax on profits for the year	47	47
Adjustments in respect of prior years	(7)	(13)
	40	34
Overseas tax
Current tax on profits for the year	131	128
Kesa demerger French tax case	(118)	–
Other adjustments in respect of prior years	(11)	(54)
	2	74
Deferred tax
Current year	16	18
Adjustments in respect of prior years	–	5
Adjustments in respect of changes in tax rates	(9)	(4)
	7	19
Income tax expense	49	127

Notes to the consolidated financial statements continued

9 Income tax expense continued

Factors affecting tax charge for the year

The tax charge for the year differs from the standard rate of corporation tax in the UK of 23% (2012/13: 24%). The differences are explained below:

£ millions	2013/14	2012/13
Profit before taxation	759	691
Profit multiplied by the standard rate of corporation tax in the UK of 23% (2012/13: 24%)	175	166
Share of post-tax results of joint ventures and associates	(2)	(5)
Net (income)/expenses not (chargeable)/deductible for tax purposes	(16)	6
Temporary differences:
– Net gains on property	(3)	(3)
– Losses not recognised	9	11
Foreign tax rate differences	31	18
Adjustments in respect of prior years	(136)	(62)
Adjustments in respect of changes in tax rates	(9)	(4)
Income tax expense	49	127

The effective rate of tax on profit before exceptional items and excluding prior year tax adjustments and the impact of changes in tax rates on deferred tax is 26% (2012/13: 27%). Tax on exceptional items for the year is a credit of £114m, £118m of which relates to prior year items. In 2012/13 tax on exceptional items was a credit of £1m, with no amount relating to prior year items. The effective tax rate calculation is set out in the Financial Review on page 23.

The overall tax rate for the year is 6% (2012/13: 18%) reflecting the release of a £118m exceptional tax provision following the successful resolution of the Kesa demerger French tax case.

Kingfisher paid €138m tax to the French tax authorities in the year ended 31 January 2004 as a consequence of the Kesa Electricals demerger and recorded this as an exceptional tax charge. Kingfisher appealed successfully against this tax liability and as a result received €169m from the French tax authorities in September 2009, representing a refund of the €138m and €31m of repayment supplement. The French tax authorities appealed this decision and the hearing took place in May 2011 with the Court of Appeal finding in Kingfisher's favour. In July 2013 the Conseil d'Etat, France's ultimate court, found in favour of Kingfisher regarding the Kesa demerger tax case, which concluded the matter. Whilst a refund was received from the French tax authorities following the first positive decision in 2009, the Group continued to provide against the risk while litigation was ongoing. A £27m repayment supplement provision and £118m taxation provision related to the case have subsequently been released and treated as exceptional.

In addition to the amounts charged to the income statement, tax of £67m has been credited directly to equity (2012/13: £14m charge), of which a £19m credit (2012/13: £6m credit) is included in current tax and a £48m credit (2012/13: £20m charge) is included in deferred tax.

Impact of changes in tax rates

The UK corporation tax rate fell from 24% to 23% from 1 April 2013 and will fall to 21% from 1 April 2014 and then to 20% from 1 April 2015. As all these rates have been enacted by the balance sheet date, their impact has been fully reflected in this Annual Report and Accounts.

10 Earnings per share

	2013/14				2012/13
		Weighted average			Weighted average
	Earnings £ millions	number of shares millions	Earnings per share pence	Earnings £ millions	number of shares millions	Earnings per share pence
Basic earnings per share	709	2,363	30.0	564	2,339	24.1
Effect of dilutive share options		19	(0.3)		34	(0.3)
Diluted earnings per share	709	2,382	29.7	564	2,373	23.8
Basic earnings per share	709	2,363	30.0	564	2,339	24.1
Exceptional items before tax	(17)		(0.7)	26		1.1
Tax on exceptional and prior year items	(141)		(6.0)	(67)		(2.8)
Financing fair value remeasurements	2		0.1	(2)		(0.1)
Tax on financing fair value remeasurements	(1)		–	1		–
Adjusted basic earnings per share	552	2,363	23.4	522	2,339	22.3
Diluted earnings per share	709	2,382	29.7	564	2,373	23.8
Exceptional items before tax	(17)		(0.7)	26		1.1
Tax on exceptional and prior year items	(141)		(5.9)	(67)		(2.8)
Financing fair value remeasurements	2		0.1	(2)		(0.1)
Tax on financing fair value remeasurements	(1)		–	1		–
Adjusted diluted earnings per share	552	2,382	23.2	522	2,373	22.0

Basic earnings per share is calculated by dividing the profit for the year attributable to equity shareholders of the Company by the weighted average number of shares in issue during the year, excluding those held in the Employee Share Ownership Plan Trust ('ESOP') which for the purpose of this calculation are treated as cancelled.

For diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where both the exercise price is less than the average market price of the Company's shares during the year and any related performance conditions have been met.

11 Dividends

£ millions	2013/14	2012/13
Dividends to equity shareholders of the Company
Final dividend for the year ended 2 February 2013 of 6.37p per share (28 January 2012: 6.37p per share)	150	148
Interim dividend for the year ended 1 February 2014 of 3.12p per share (2 February 2013: 3.09p per share)	74	73
	224	221

The proposed final dividend for the year ended 1 February 2014 of 6.78p per share is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

Notes to the consolidated financial statements continued

12 Goodwill

£ millions
Cost
At 3 February 2013						2,524
Additions						18
Exchange differences						(1)
At 1 February 2014						2,541
Impairment
At 3 February 2013						(125)
Exchange differences						1
At 1 February 2014						(124)
Net carrying amount
At 1 February 2014						2,417
Cost
At 29 January 2012						2,521
Exchange differences						3
At 2 February 2013						2,524
Impairment
At 29 January 2012						(124)
Exchange differences						(1)
At 2 February 2013						(125)
Net carrying amount
At 2 February 2013						2,399
During the year the Group acquired the Bricostore Romania companies resulting in additions to goodwill of £18m. Refer to note 33.
Impairment tests for goodwill
Goodwill has been allocated for impairment testing purposes to groups of cash generating units ('CGUs') as follows:
£ millions	UK	France	Poland	China	Romania	Total
At 1 February 2014
Cost	1,798	520	81	124	18	2,541
Impairment	–	–	–	(124)	–	(124)
Net carrying amount	1,798	520	81	–	18	2,417
At 2 February 2013
Cost	1,798	520	81	125	–	2,524
Impairment	–	–	–	(125)	–	(125)

The recoverable amounts of these groups of CGUs have been determined based on value-in-use calculations. The groups of CGUs for which the carrying amount of goodwill is deemed significant are the UK, France, Poland and Romania.

Net carrying amount 1,798 520 81 – – 2,399

All CGU value-in-use calculations are considered to have been valued using level 3 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement'.

12 Goodwill continued

The Board has reviewed a sensitivity analysis, including the use of prior year discount and growth rates, and does not consider that a reasonably possible change in the assumptions used in the value-in-use calculations would cause the carrying amounts of the CGUs to exceed their recoverable amounts. The key assumptions used for value-in-use calculations are set out below.

Assumptions

The cash flow projections are based on approved financial budgets and strategic plans covering a three year period. These are based on both past performance and expectations for future market development.
Key drivers in the plans are like-for-like ('LFL') sales, margin and operating profit percentage. LFL sales projections take into consideration both external factors such as market expectations, and internal factors such as trading plans.
Cash flows beyond this three year period are calculated using a growth rate which does not exceed the long-term average growth rate for retail businesses operating in the same countries as the CGUs.
The weighted average cost of capital, used to discount future cash flows, is calculated using a combination of the cost of debt, leases and equity, weighted according to an estimate of the CGU's capital gearing. A risk adjustment is also made for the country in which the CGU operates.

The pre-tax risk adjusted discount rates and long-term growth rates used are as follows:

	2013/14
Annual % rate	UK	France	Poland	Romania
Discount rate	8.9	10.5	10.2	12.7
Long-term growth rate	3.0	2.6	3.3	3.7

	2012/13
Annual % rate	UK	France	Poland	Romania
Discount rate	8.9	9.6	10.5	n/a
Long-term growth rate	2.8	2.3	3.5	n/a

Notes to the consolidated financial statements continued

13 Other intangible assets

£ millions	Computer software	Other	Total
Cost
At 3 February 2013	414	9	423
Acquisition of subsidiaries	–	1	1
Additions	86	2	88
Disposals	(7)	–	(7)
Exchange differences	(3)	–	(3)
At 1 February 2014	490	12	502
Amortisation
At 3 February 2013	(253)	(4)	(257)
Charge for the year	(30)	(1)	(31)
Disposals	5	–	5
Exchange differences	3	–	3
At 1 February 2014	(275)	(5)	(280)
Net carrying amount
At 1 February 2014	215	7	222
Cost
At 29 January 2012	343	9	352
Additions	72	–	72
Disposals	(3)	–	(3)
Exchange differences	2	–	2
At 2 February 2013	414	9	423
Amortisation
At 29 January 2012	(226)	(3)	(229)
Charge for the year	(26)	(1)	(27)
Disposals	1	–	1
Exchange differences	(2)	–	(2)
At 2 February 2013	(253)	(4)	(257)
Net carrying amount
At 2 February 2013	161	5	166

None of the Group's other intangible assets have indefinite useful lives.

ategic Renort

Strategic Report Governance Accounts

14 Property, plant and equipment

		Fixtures,
£ millions	Land and buildings	fittings and equipment	Total
Cost
At 3 February 2013	3,180	2,540	5,720
Additions	85	135	220
Acquisition of subsidiaries	55	5	60
Disposals	(12)	(29)	(41)
Exchange differences	(148)	(64)	(212)
At 1 February 2014	3,160	2,587	5,747
Depreciation
At 3 February 2013	(396)	(1,576)	(1,972)
Charge for the year	(51)	(178)	(229)
Impairment losses	(1)	(1)	(2)
Disposals	3	29	32
Exchange differences	16	33	49
At 1 February 2014	(429)	(1,693)	(2,122)
Net carrying amount
At 1 February 2014	2,731	894	3,625

Cost
At 29 January 2012	3,049	2,375	5,424
Additions	88	171	259
Disposals	(19)	(42)	(61)
Transfers to investment property	(12)	–	(12)
Exchange differences	74	36	110
At 2 February 2013	3,180	2,540	5,720
Depreciation
At 29 January 2012	(345)	(1,412)	(1,757)
Charge for the year	(46)	(174)	(220)
Impairment losses	(1)	(7)	(8)

Disposals Exchange differences	5 (9)	37 (20)	42 (29)
At 2 February 2013	(396)	(1,576)	(1,972)

Net carrying amount
At 2 February 2013	2,784	964	3,748
Assets in the course of construction included above at net carrying amount
At 1 February 2014	44	34	78
At 2 February 2013	81	46	127

Assets held under finance leases included above at net carrying amount At 1 February 2014	18	33	51
At 2 February 2013	19	34	53

The amount of borrowing costs capitalised in property, plant and equipment in the year has been £nil (2012/13: £1m). The cumulative total of borrowing costs included at the balance sheet date, net of depreciation, is £27m (2012/13: £27m). Notes to the consolidated financial statements continued

14 Property, plant and equipment continued

Land and buildings are analysed as follows:

		2013/14
£ millions	Freehold	Long leasehold	Short leasehold	Total	Total
Cost	2,436	134	590	3,160	3,180
Depreciation	(152)	(6)	(271)	(429)	(396)
Net carrying amount	2,284	128	319	2,731	2,784

Included in land and buildings is leasehold land that is in effect a prepayment for the use of land and is accordingly being amortised on a straight line basis over the estimated useful life of the assets. The net carrying amount of leasehold land included in land and buildings at 1 February 2014 is £254m (2012/13: £240m).

The Group does not revalue properties within its financial statements. A valuation exercise is performed for internal purposes annually in November by independent external valuers. Based on this exercise the value of property is £3.4bn (2012/13: £3.5bn). The key assumption used in calculating this is the estimated yields.

All the property, plant and equipment market valuations are considered to have been determined by level 2 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement'.

15 Investment property

£ millions
Cost
At 3 February 2013	79
Disposals	(3)
Transfers to assets held for sale	(10)
Exchange differences	(6)
At 1 February 2014	60
Depreciation
At 3 February 2013	(13)
Charge for the year	(1)
Disposals	1
Exchange differences	3
At 1 February 2014	(10)
Net carrying amount At 1 February 2014	50
Cost
At 29 January 2012	67
Additions	3
Transfers from property, plant and equipment	12
Exchange differences	(3)

At 2 February 2013	79
Depreciation
At 29 January 2012	(12)
Charge for the year	(1)

At 2 February 2013 66

A property valuation exercise is performed for internal purposes annually as described in note 14. Based on this exercise the fair value of investment property is £77m (2012/13: £121m). All the investment properties held by the Group at fair value are considered to have fair values determined by level 2 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement'.

16 Subsidiaries

A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in note 4 of the Company's separate financial statements.

17 Investments in joint ventures and associates

£ millions
At 3 February 2013	289
Share of post-tax results – before impairment	22
Share of post-tax results – exceptional impairment	(45)
Dividends	(11)
Transfers to assets held for sale	(198)
Exchange differences	(25)
At 1 February 2014	32
At 29 January 2012	271
Share of post-tax results	20
Dividends	(10)
Exchange differences	8
At 2 February 2013	289

Following this decision, the Group concluded it had lost the ability to exercise significant influence over the Hornbach businesses, despite maintaining a 21% equity interest at the balance sheet date. This conclusion was reached based on the Group ceasing to participate in the significant financial and operating policy decisions made by Hornbach. On 31 January 2014 the Group's investment was written down to its fair value of £198m, resulting in an exceptional impairment loss of £45m being recognised in the consolidated income statement. The impairment loss is included within the Group's share of post-tax results, however this excludes an exceptional transfer from reserves of cumulative foreign exchange gains since transition to IFRS of £31m.

The Hornbach investment and retail profit contribution is included in the Other International reporting segment. In 2013/14 the Group recorded a £14m pre-exceptional profit in relation to its share of Hornbach's post-tax results, comprising £26m of retail profit less £12m share of interest and tax.

Due to active marketing of the shares at the balance sheet date, the investment was reclassified as an asset held for sale – refer to note 34. Following the end of the 2013/14 financial year, on 24 March 2014 Kingfisher agreed to sell all the shares it holds in Hornbach Holding AG and Hornbach-Baumarkt AG which together formed its 21.2% stake in Hornbach for approximately £195m.

No goodwill is included in the carrying amount of investments in joint ventures and associates (2012/13: £nil).

Details of the remaining significant joint ventures and associates are shown below:

Country of incorporation	% interest held	Class of shares owned	Main activity

Turkey	50%	Ordinary	Retailing

France	49%	Ordinary	Finance

(1) Owing to local conditions, this company prepares its financial statements to 31 December.

Notes to the consolidated financial statements continued

17 Investments in joint ventures and associates continued

Aggregate amounts relating to joint ventures and associates:

		2013/14			2012/13
£ millions	Joint ventures	Associates	Total	Joint ventures	Associates	Total
Non-current assets	21	2	23	28	269	297
Current assets	47	81	128	56	303	359
Current liabilities	(35)	(69)	(104)	(47)	(211)	(258)
Non-current liabilities	(13)	(2)	(15)	(8)	(101)	(109)
Share of net assets	20	12	32	29	260	289
Sales	166	631	797	165	605	770
Operating expenses	(155)	(603)	(758)	(156)	(576)	(732)
Operating profit	11	28	39	9	29	38
Net finance costs	(3)	(6)	(9)	(3)	(7)	(10)
Profit before taxation	8	22	30	6	22	28
Income tax	(1)	(7)	(8)	(1)	(7)	(8)
Share of post-tax results before impairment	7	15	22	5	15	20
Exceptional impairment	–	(45)	(45)	–	–	–
Share of post-tax results	7	(30)	(23)	5	15	20

18 Inventories

£ millions	2013/14	2012/13
Finished goods for resale	2,054	2,083

The cost of inventories recognised as an expense and included in cost of sales for the year ended 1 February 2014 is £6,461m (2012/13: £6,093m).

19 Trade and other receivables

£ millions	2013/14	2012/13
Non-current
Prepayments	11	13
Property receivables	2	2
Other receivables	2	3
	15	18
Current
Trade receivables	64	50
Provision for bad and doubtful debts	(9)	(11)
Net trade receivables	55	39
Property receivables	3	3
Prepayments	137	135
Other receivables	395	368
	590	545
Trade and other receivables	605	563

Other receivables principally comprise rebates due from suppliers.

The fair values of trade and other receivables approximate to their carrying amounts. Refer to note 24 for information on the credit risk associated with trade and other receivables.

Strategic Report	Governance	Accounts

20 Cash and cash equivalents

£ millions	2013/14	2012/13
Cash at bank and in hand	238	268
Short-term deposits	297	130
	535	398

Short-term deposits comprise bank deposits and investments in money market funds, fixed for periods of up to three months. The fair values of cash and cash equivalents approximate to their carrying amounts.

The Group enters into multi-currency net overdraft facilities and cash pooling agreements with its banks. These agreements and similar arrangements generally enable the counterparties to offset overdraft balances against available cash in the ordinary course of business and/or in the event that the counterparty is unable to fulfil its contractual obligations.

21 Trade and other payables

£ millions	2013/14	2012/13
Current
Trade payables	1,403	1,370
Other taxation and social security	227	227
Deferred income	220	168
Accruals and other payables	636	665
	2,486	2,430
Non-current
Accruals and other payables	86	115
Trade and other payables	2,572	2,545

Accruals include allowance for customer returns, representing the estimate of future sales returns at the year end.

The fair values of trade and other payables approximate to their carrying amounts.

22 Borrowings

£ millions	2013/14	2012/13
Current
Bank overdrafts	1	–
Bank loans	3	54
Medium Term Notes and other fixed term debt	75	32
Finance leases	15	13
	94	99

Non-current
Bank loans	11	14
Medium Term Notes and other fixed term debt	172	266
Finance leases	47	52
	230	332
Borrowings	324	431

Notes to the consolidated financial statements continued

22 Borrowings continued

Bank overdrafts and loans

Bank overdrafts are repayable on demand. Current bank loans mature within the next 12 months. Both are arranged at floating rates of interest.

Non-current bank loans have an average maturity of three years (2012/13: three years) and are arranged at fixed rates of interest with an effective interest rate of 2.8% (2012/13: 3.8%).

At the year end, there were no drawn amounts under Chinese Renminbi committed facilities and therefore a nil effective borrowing rate (2012/13: 6.2%). These facilities are unsecured (2012/13: assets worth RMB 1.6 billion (£163m) secured a bank facility in China, which matured in 2013).

Medium Term Notes and other fixed term debt

Medium Term Notes ('MTNs') were issued in prior years under the Group's €2,500m MTN programme and further notes issued as a US Private Placement ('USPP').

					2013/14	2012/13
£ millions	Principal outstanding	Maturity date	Coupon	Effective interest rate	Carrying amount	Carrying amount
US Dollar USPP	–	24/05/13(1)	6.14%	6.1%	–	32
Sterling MTN	£73m	15/12/14(2)	5.63%	5.8%	75	78
US Dollar USPP	\$68m	24/05/16(1)	6.30%	6.3%	45	49
US Dollar USPP	\$179m	24/05/18(1)	6.40%	6.4%	127	139
					247	298

(1) \$247m swapped to floating rate Sterling based on 6 month LIBOR plus a margin using a cross-currency interest rate swap. \$50m was repaid at maturity in May 2013.

(2) Swapped to floating rate Euro based on 3 month EURIBOR plus a margin using a cross-currency interest rate swap.

The Group values its MTNs and USPP on an amortised cost basis, adjusted for fair value gains and losses (based on observable market inputs) attributable to the risk being hedged in designated and effective fair value hedge relationships.

The carrying amounts of the MTNs and USPP have been impacted both by exchange rate movements and fair value adjustments for interest rate risk. At 1 February 2014, the cumulative effect of interest rate fair value adjustments is to increase the Group's MTNs and USPP carrying amounts by £25m (2012/13: £38m increase).

The USPP contains a covenant requiring that, as at the end of each semi-annual and annual financial reporting period, the ratio of operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding 12 month period. The Group has complied with this covenant for the year ended 1 February 2014.

Finance leases

The Group leases certain of its buildings and fixtures and equipment under finance leases. The average lease term maturity for buildings is seven years (2012/13: seven years) and for fixtures and equipment is two years (2012/13: two years). Certain building leases include a clause to enable upward revision of the rental charge to prevailing market conditions.

Future minimum lease payments under finance leases, together with the present value of minimum lease payments, are as follows:

	2013/14		2012/13
£ millions	Present value of payments	Minimum payments	Present value of payments	Minimum payments
Less than one year	15	17	13	15
One to five years	28	39	30	42
More than five years	19	26	22	31
Total	62	82	65	88
Less amounts representing finance charges		(20)		(23)
Present value of minimum lease payments		62		65

The interest rates inherent in the finance leases are fixed at the contract date for the lease term. The weighted average effective interest rate on the Group's finance leases is 8.4% (2012/13: 8.5%).

Strategic Renor

22 Borrowings continued

	Fair value
£ millions	2013/14	2012/13
Bank overdrafts	1	–
Bank loans	16	69
Medium Term Notes and other fixed term debt	254	307
Finance leases	79	86
Borrowings	350	462

Where available, market values have been used to determine the fair values of borrowings. Where market values are not available or are not reliable, fair values have been calculated by discounting cash flows at prevailing interest and foreign exchange rates. This has resulted in a mix of Level 1 and Level 2 inputs as defined by IFRS 13 'Fair value measurements' being used to value the borrowings of the Group.

23 Derivatives

The net fair value of derivatives by hedge designation at the balance sheet date is:

£ millions	2013/14	2012/13
Fair value hedges	33	69
Cash flow hedges	(8)	(14)
Net investment hedges	–	(18)
Non-designated hedges	(7)	22
	18	59
Non-current assets	40	55
Current assets	5	33
Current liabilities	(27)	(17)
Non-current liabilities	–	(12)
	18	59
The Group holds the following financial instruments at fair value:
£ millions	2013/14	2012/13

Cross currency interest rate swaps	42	63
Foreign exchange contracts	3	25
Derivative assets	45	88

£ millions	2013/14	2012/13
Cross currency interest rate swaps	(9)	(12)
Foreign exchange contracts	(18)	(17)
Derivative liabilities	(27)	(29)

The fair values are calculated by discounting future cash flows arising from the instruments and adjusted for credit risk. These fair value measurements are all made using observable market rates of interest, foreign exchange and credit risk.

All the derivatives held by the Group at fair value are considered to have fair values determined by level 2 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement'. There are no non-recurring fair value measurements nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy.

At 1 February 2014 net derivative assets included in net cash amount to £27m (2012/13: £71m net derivative assets).

Notes to the consolidated financial statements continued

23 Derivatives continued

Fair value hedges

Fair value hedges comprise interest rate swap contracts that convert fixed rate debt issued under the Group's Medium Term Note programme and the US Private Placement to floating rate liabilities, along with certain cross-currency swaps. At 1 February 2014 the Sterling equivalent amount of such contracts is £307m (2012/13: £261m). During the year, cross-currency interest rate swaps have expired to coincide with repayments of underlying debt. The Sterling equivalent amount of those expired swaps (at year end exchange rates) was £31m.

Cash flow hedges

Forward foreign exchange contracts hedge currency exposures of forecast inventory purchases. At 1 February 2014 the Sterling equivalent amount of such contracts is £419m (2012/13: £441m). The associated fair value gains and losses will be transferred to inventories when the purchases occur during the next 12 months. Losses of £9m (2012/13: £8m gains) have been transferred to inventories for contracts which matured during the year.

Net investment hedges

Cross-currency interest rate swaps hedge currency exposures of overseas investments. At 1 February 2014 the Sterling equivalent amount of such contracts is £nil (2012/13: £90m).

Non-designated hedges

The Group has entered into certain derivatives to provide a hedge against fluctuations in the income statement arising from balance sheet positions. At 1 February 2014 the Sterling equivalent amount of such contracts is £813m (2012/13: £1,062m). These have not been accounted for as hedges, since the fair value movements of the derivatives in the income statement offset the retranslation of the balance sheet positions. These include short-term foreign exchange contracts.

The Group has reviewed all significant contracts for embedded derivatives and none of these contracts has any embedded derivatives which are not closely related to the host contract and therefore the Group is not required to account for these separately.

Kingfisher enters into netting agreements with counterparties to manage the credit and settlement risks associated with over-thecounter derivatives. These netting agreements and similar arrangements generally enable the Group and its counterparties to settle cashflows on a net basis and set-off liabilities against available assets in the event that either party is unable to fulfill its contractual obligations.

Offsetting of derivative assets:

			Net amounts of	Gross amounts of
		Gross amounts	derivative assets	derivatives not
	Gross amounts of	offset in the	presented in the	offset in the
	recognised	consolidated	consolidated	consolidated
£ millions	derivative assets	balance sheet	balance sheet	balance sheet	Net amount
At 1 February 2014	45	–	45	(27)	18
At 2 February 2013	88	–	88	(29)	59

Offsetting of derivative liabilities:

			Net amounts of derivative	Gross amounts of
		Gross amounts	liabilities	derivatives not
	Gross amounts of	offset in the	presented in the	offset in the
	recognised	consolidated	consolidated	consolidated
£ millions	derivative liabilities	balance sheet	balance sheet	balance sheet	Net amount
At 1 February 2014	(27)	–	(27)	27	–
At 2 February 2013	(29)	–	(29)	29	–

24 Financial risk management

Kingfisher's treasury function has primary responsibility for managing certain financial risks to which the Group is exposed. The Board reviews the levels of exposure regularly and approves treasury policies covering the use of financial instruments required to manage these risks. Kingfisher's treasury function is not run as a profit centre and does not enter into any transactions for speculative purposes.

In the normal course of business the Group uses financial instruments including derivatives. The main types of financial instruments used are Medium Term Notes and other fixed term debt, bank loans and deposits, money market funds, interest rate swaps, commodity swaps and foreign exchange contracts.

Interest rate risk

Borrowings arranged at floating rates of interest expose the Group to cash flow interest rate risk, whereas those arranged at fixed rates of interest expose the Group to fair value interest rate risk. The Group manages its interest rate risk by entering into certain interest rate derivative contracts which modify the interest rate payable on the Group's underlying debt instruments, principally the Medium Term Notes and other fixed term debt.

Currency risk

The Group's principal currency exposures are to the Euro, US Dollar and Polish Zloty. The Euro and Polish Zloty exposures are operational and arise through the ownership of retail businesses in France, Spain, Ireland and Poland. In particular, the Group generates a substantial part of its profit from the Eurozone, and as such is exposed to the economic uncertainty of its member states. The Group continues to monitor potential exposures and risks, and consider effective risk management solutions.

Balance sheet Euro translation exposure is currently hedged by maintaining a proportion of the Group's debt in Euro. It is the Group's policy not to hedge the translation of overseas earnings into Sterling. In addition, the Group has significant transactional exposure arising on the purchase of inventories denominated in US Dollars, which it hedges using forward foreign exchange contracts. Under Group policies, the Group companies are required to hedge committed inventory purchases and a proportion of forecast inventory purchases arising in the next 12 months, and this is monitored on an ongoing basis.

Kingfisher's policy is to manage the interest rate and currency profile of its issued debt using derivative contracts. The effect of these contracts on the Group's net debt/cash is as follows:

	Sterling		Euro		US Dollar		Other
£ millions	Fixed	Floating	Fixed	Floating	Fixed	Floating	Fixed	Floating	Total
At 1 February 2014
Net cash before fair value adjustments and financing derivatives	(111)	175	(28)	99	(150)	78	–	173	236
Fair value adjustments to net cash	(3)	–	–	–	(22)	–	–	–	(25)
Financing derivatives	75	(763)	–	201	173	233	–	108	27
Net cash	(39)	(588)	(28)	300	1	311	–	281	238
At 2 February 2013
Net cash before fair value adjustments and financing derivatives	(114)	91	(39)	135	(188)	3	103	14	5
Fair value adjustments to net cash	(6)	–	–	–	(32)	–	–	–	(38)
Financing derivatives	78	(1,064)	–	192	222	315	–	328	71
Net cash	(42)	(973)	(39)	327	2	318	103	342	38

Notes to the consolidated financial statements continued

24 Financial risk management continued

Financial instruments principally affected by interest rate and currency risks, being the significant market risks impacting Kingfisher, are borrowings, deposits and derivatives. The following analysis illustrates the sensitivity of net finance costs (reflecting the impact on profit) and derivative cash flow hedges (reflecting the impact on other comprehensive income) to changes in interest rates and foreign exchange rates.

	2013/14	2012/13
	Net finance	Net finance
	costs	costs
	Income/	Income/
£ millions	(costs)	(costs)
Effect of 1% rise in interest rates on net finance costs
Sterling	(6)	(10)
Euro	3	3
US Dollar	3	3
Polish Zloty	2	3

Due to the Group's hedging arrangements and offsetting foreign currency assets and liabilities, there is no significant impact on profit from the retranslation of financial instruments.

	2013/14	2012/13
£ millions	Derivative cash flow hedges Increase	Derivative cash flow hedges Increase
Effect of 10% appreciation in foreign exchange rates on derivative cash flow hedges
US Dollar against Sterling	17	18
US Dollar against Euro	20	21

The impact of changes in foreign exchange rates on cash flow hedges results from retranslation of forward purchases of US Dollars used to hedge forecast US Dollar purchases of inventories. The associated fair value gains and losses are deferred in equity until the purchases occur. See note 23 for further details. The retranslation of foreign currency borrowings and derivatives designated as hedges of net investments in foreign operations is reported in equity and offset by the retranslation of the hedged net investments.

The sensitivity analysis excludes the impact of movements in market variables on the carrying amount of trade and other payables and receivables, due to the low associated sensitivity, and are before the effect of tax. It has been prepared on the basis that the Group's debt, hedging activities, hedge accounting designations, and foreign currency proportion of debt and derivative contracts remain constant, reflecting the positions at 1 February 2014 and 2 February 2013 respectively. As a consequence, the analysis relates to the position at those dates and is not necessarily representative of the years then ended. In preparing the sensitivity analysis it is assumed that all hedges are fully effective.

The effects shown above would be reversed in the event of an equal and opposite change in interest rates and foreign exchange rates.

24 Financial risk management continued

Liquidity risk

The Group regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash flow forecast for the next three years, determining the level of debt facilities required to fund the business, planning for repayments of debt at its maturity and identifying an appropriate amount of headroom to provide a reserve against unexpected outflows.

The following table analyses the Group's non-derivative financial liabilities and derivative assets and liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. It excludes trade and other payables due to the low associated liquidity risk. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest) and as such may differ from the amounts disclosed on the balance sheet.

	Less than					More than
£ millions	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years	Total
At 1 February 2014
Bank overdrafts	(1)	–	–	–	–	–	(1)
Bank loans	(3)	(2)	(3)	(4)	(2)	–	(14)
Medium Term Notes and other fixed term debt	(86)	(10)	(49)	(7)	(112)	–	(264)
Finance leases	(17)	(15)	(11)	(7)	(6)	(26)	(82)
Derivatives – receipts	86	10	49	7	112	–	264
Derivatives – payments	(87)	(2)	(39)	(3)	(99)	–	(230)
At 2 February 2013
Bank loans	(55)	(4)	(2)	(4)	(5)	–	(70)
Medium Term Notes and other fixed term debt	(47)	(87)	(10)	(52)	(7)	(117)	(320)
Finance leases	(15)	(16)	(12)	(8)	(6)	(31)	(88)
Derivatives – receipts	47	87	10	52	7	117	320
Derivatives – payments	(30)	(93)	(2)	(39)	(2)	(98)	(264)

At 1 February 2014 the Group has an undrawn revolving committed facility of £200m which matures in August 2016. The £200m facility contains a covenant requiring that, as at the end of each annual and semi-annual financial reporting period, the ratio of operating profit to net interest payable, excluding exceptional items, should not be less than 3 to 1 for the preceding 12 month period. The Group has complied with this covenant for the year ended 1 February 2014.

Credit risk

The Group deposits surplus cash with a number of banks with the strongest short-term credit ratings and with money market funds which have AAA credit ratings and offer same day liquidity. A credit limit for each counterparty is agreed by the Board covering the full value of deposits and the fair value of derivative contracts. The credit risk is reduced further by spreading the investments and derivative contracts across several counterparties. At 1 February 2014, the highest total cash investment with a single counterparty was £50m (2012/13: £39m).

The Group's exposure to credit risk at the reporting date is the carrying value of cash at bank and short-term deposits and the fair value of derivative assets.

No further credit risk provision is required in excess of the normal provision for bad and doubtful debts as the Group has a low concentration of credit risk in respect of trade receivables. Concentration of risk is limited as a result of low individual balances with short maturity spread across a large number of unrelated customers.

At 1 February 2014, trade and other receivables that are past due but not provided against amount to £50m (2012/13: £41m), of which £4m (2012/13: £3m) are over 120 days past due.

Refer to note 36 for details on guarantees provided by the Group.

Capital risk

Capital risk management disclosures are provided in the Financial Review on page 27.

Notes to the consolidated financial statements continued

25 Deferred tax

£ millions	2013/14	2012/13
Deferred tax assets	12	17
Deferred tax liabilities	(251)	(303)
	(239)	(286)

Deferred tax assets and liabilities are offset against each other when they relate to income taxes levied by the same tax jurisdiction and when the Group intends to settle its current tax assets and liabilities on a net basis.

					Post
	Accelerated tax	Gains on			employment
£ millions	depreciation	property	Provisions	Tax losses	benefits	Other	Total
At 3 February 2013	(136)	(132)	20	8	(57)	11	(286)
Acquisition of subsidiaries	–	(3)	–	–	–	–	(3)
(Charge)/credit to income statement	(24)	17	2	–	2	(4)	(7)
(Charge)/credit to equity	–	–	(1)	–	51	(2)	48
Exchange differences	9	4	(2)	(1)	(1)	–	9
At 1 February 2014	(151)	(114)	19	7	(5)	5	(239)
At 29 January 2012	(115)	(144)	33	7	(30)	3	(246)
(Charge)/credit to income statement	(17)	14	(15)	1	(2)	–	(19)
(Charge)/credit to equity	–	–	–	–	(27)	7	(20)
Exchange differences	(4)	(2)	2	–	2	1	(1)
At 2 February 2013	(136)	(132)	20	8	(57)	11	(286)

At the balance sheet date, the Group has unused tax losses of £221m (2012/13: £243m) available for offset against future profits. A deferred tax asset has been recognised in respect of £22m (2012/13: £24m) of such losses. No deferred tax asset has been recognised in respect of the remaining £199m (2012/13: £219m) due to the unpredictability of future profit streams. Included in unrecognised tax losses are tax losses arising in China of £181m (2012/13: £187m) which can be carried forward only in the next one to five years.

No deferred tax liability is recognised on temporary differences of £3,331m (2012/13: £2,980m) relating to the unremitted earnings of overseas subsidiaries and joint ventures. This is because the earnings are continually reinvested by the Group and therefore no tax is expected to be payable on them in the foreseeable future.

26 Provisions

£ millions	Onerous property contracts	Restructuring	Total
At 3 February 2013	21	52	73
Acquisition of subsidiaries	11	–	11
Charge/(credit) to income statement	2	(5)	(3)
Utilised in the year	(4)	(22)	(26)
Exchange differences	(1)	–	(1)
At 1 February 2014	29	25	54
Current liabilities	4	4	8
Non-current liabilities	25	21	46
	29	25	54

Within the onerous property contracts provisions, Kingfisher has provided against future liabilities for properties sublet at a shortfall and long-term idle properties, along with properties acquired on acquisition of subsidiaries at above-market rents. Such provisions exclude those related to restructuring programmes which are included in the restructuring provisions. The provisions are based on the present value of future cash outflows relating to rent, rates and service charges.

Restructuring provisions include the estimated costs of the UK, Ireland and China restructuring programmes. The provisions have been discounted to reflect the time value of money and the risks associated with the specific liabilities.

The ultimate costs and timing of cash flows related to the above provisions are largely dependent on exiting the property lease contracts and subletting surplus space.

27 Post-employment benefits

The Group operates a variety of post-employment benefit arrangements covering both funded and unfunded defined benefit schemes and defined contribution schemes. The most significant defined benefit and defined contribution schemes are in the UK. The principal overseas defined benefit schemes are in France, where they are mainly retirement indemnity in nature, and the principal overseas defined contribution scheme is in China. The overseas schemes are not material in relation to the Group as a whole.

Defined contribution schemes

Costs for the Group's defined contribution pension schemes, at rates specified in the individual schemes' rules, are as follows:

£ millions	2013/14	2012/13
Charge to operating profit	27	17

From July 2012 an enhanced defined contribution pension scheme was offered to all UK employees. Eligible UK employees have been automatically enrolled into the scheme from 31 March 2013.

Defined benefit schemes

The Group's principal defined benefit arrangement is its funded, final salary pension scheme in the UK. This scheme was closed to new entrants from April 2004 and was closed to future benefit accrual from July 2012.

The scheme operates under trust law and is managed and administered by the Trustee on behalf of members in accordance with the terms of the Trust Deed and Rules and relevant legislation. The Trustee Board consists of ten Trustee directors, made up of five employer appointed directors, one independent director and four member nominated directors. The Trustee Board delegates day-to-day administration of the scheme to the Group Pensions Department of Kingfisher plc.

The main risk to the Group is that additional contributions are required if investment returns and demographic experience is worse than expected. The scheme therefore exposes the Group to actuarial risks, such as longevity risk, currency risk, inflation risk, interest rate risk and market (investment) risk. The Trustee Board regularly reviews such risks and mitigating controls, with a risk register being formally approved on an annual basis. The assets of the scheme are held separately from the Group and the Trustee's investment strategy includes a planned medium-term de-risking of assets, switching from return-seeking to liability-matching assets. Other de-risking activities have included the scheme acquiring an interest in a property partnership, as set out further below.

A full actuarial valuation of the scheme is carried out every three years by an independent actuary for the Trustee and the last full valuation was carried out as at 31 March 2013.

Following this valuation and in accordance with the scheme's Statement of Funding Principles, the Trustee and Kingfisher have agreed annual employer contributions of £36m from April 2014. The contribution schedule has been derived with reference to a funding objective that targets a longer-term, low risk funding position in excess of the minimum statutory funding requirements. This longer-term objective is based on the principle of the scheme reaching a point where it can provide benefits to members with a high level of security, thereby limiting its reliance on the employer for future support. The Company monitors the scheme funding level on a regular basis and will review with the scheme Trustee at future valuations the continued appropriateness of the repayment schedule currently in place.

The Trust Deed provides Kingfisher with an unconditional right to a refund of surplus assets assuming the full settlement of plan liabilities in the event of a plan wind-up.

UK scheme interest in property partnership

In 2010/11, the Group established a partnership, Kingfisher Scottish Limited Partnership ('Kingfisher SLP'), as part of an arrangement with the UK scheme Trustee to address an element of the scheme deficit and provide greater security to the Trustee. The partnership interests are held by the Group and by the scheme, the latter resulting from investments of £78m and £106m made by the Trustee in January and June 2011 respectively. These investments followed Group contributions of the same amounts into the scheme. In accordance with IAS 19, 'Employee benefits', the investments held by the scheme in Kingfisher SLP do not represent plan assets for the purposes of the Group's consolidated financial statements. Accordingly the reported pension position does not reflect these investments.

UK property assets with market values of £83m and £119m were transferred, in January 2011 and June 2011 respectively, into the partnership and leased back to B&Q plc. The Group retains control over these properties, including the flexibility to substitute alternative properties. The Trustee has a first charge over the properties in the event that Kingfisher plc becomes insolvent. The scheme's partnership interest entitles it to the majority of the income of the partnership over the 20 year period of the arrangement. The payments to the scheme by Kingfisher SLP over this term are reflected as Group pension contributions on a cash basis. At the end of this term, Kingfisher plc has the option to acquire the Trustee's partnership interest in Kingfisher SLP.

The Group has control over the partnership and therefore it is consolidated in these Group financial statements. Accordingly, advantage has been taken of the exemptions provided by Regulation 7 of the Partnerships (Accounts) Regulations 2008 from the requirements for preparation, delivery and publication of the partnership's accounts.

Strategic Report Governance Accounts

Notes to the consolidated financial statements continued

27 Post-employment benefits continued

Income statement

		2013/14			2012/13 (Restated)
£ millions	UK	Overseas	Total	UK	Overseas	Total
Amounts charged/(credited) to operating profit
Current service cost	2	7	9	13	4	17
Administration costs	3	–	3	3	–	3
Exceptional curtailment gain	–	–	–	(27)	–	(27)
	5	7	12	(11)	4	(7)
Amounts charged/(credited) to net finance costs
Net interest (income)/expense	(4)	2	(2)	(2)	2	–
Total charged/(credited) to income statement	1	9	10	(13)	6	(7)

Of the net charge to operating profit, a £8m charge (2012/13: £14m charge restated) and £4m charge (2012/13: £21m credit restated) are included in selling and distribution expenses and administrative expenses respectively. Actuarial gains and losses have been reported in the statement of comprehensive income.

In the prior year, the closure to future accrual resulted in an exceptional non-cash curtailment gain of £27m, representing the one-off reduction in accounting liabilities as benefits were no longer linked to future salary increases other than in line with inflation.

Balance sheet

	2013/14			2012/13
£ millions	UK	Overseas	Total	UK	Overseas	Total
Present value of defined benefit obligations	(2,135)	(92)	(2,227)	(1,994)	(93)	(2,087)
Fair value of scheme assets	2,106	21	2,127	2,065	22	2,087
(Deficit)/surplus in scheme	(29)	(71)	(100)	71	(71)	–

Movements in the surplus or deficit are as follows:

	2013/14			2012/13 (Restated)
£ millions	UK	Overseas	Total	UK	Overseas	Total
Surplus/(deficit) in scheme at beginning of year	71	(71)	–	25	(40)	(15)
Current service cost	(2)	(7)	(9)	(13)	(4)	(17)
Administration costs	(3)	–	(3)	(3)	–	(3)
Curtailment gain	–	–	–	27	–	27
Net interest income/(expense)	4	(2)	2	2	(2)	–
Net actuarial (losses)/gains	(131)	4	(127)	(7)	(22)	(29)
Contributions paid by employer	32	1	33	40	1	41
Exchange differences	–	4	4	–	(4)	(4)
(Deficit)/surplus in scheme at end of year	(29)	(71)	(100)	71	(71)	–

Movements in the present value of defined benefit obligations are as follows:

	2013/14			2012/13
£ millions	UK	Overseas	Total	UK	Overseas	Total
Present value of defined benefit obligations at beginning of year	(1,994)	(93)	(2,087)	(1,902)	(60)	(1,962)
Current service cost	(2)	(7)	(9)	(13)	(4)	(17)
Curtailment gain	–	–	–	27	–	27
Interest expense	(90)	(3)	(93)	(84)	(3)	(87)
Actuarial (losses)/gains – changes in financial assumptions	(8)	5	(3)	(80)	(18)	(98)
Actuarial gains – changes in demographic assumptions	16	–	16	–	–	–
Actuarial losses– experience adjustments	(120)	(1)	(121)	–	(4)	(4)
Contributions paid by employees	–	–	–	(5)	–	(5)
Benefits paid	63	1	64	63	1	64
Exchange differences	–	6	6	–	(5)	(5)
Present value of defined benefit obligations at end of year	(2,135)	(92)	(2,227)	(1,994)	(93)	(2,087)

The calculation of the current year UK defined benefit obligation allows for the detailed membership data provided for the funding valuation as at 31 March 2013. It therefore incorporates a number of experience adjustments since the previous valuation as at 31 March 2010.

27 Post-employment benefits continued

The present value of UK scheme defined benefit obligation is 62% (2012/13: 62%) in respect of deferred members and 38% (2012/13: 38%) in respect of current pensioners.

The weighted average duration of the UK scheme obligations at the end of the year is 21 years (2012/13: 20 years).

Movements in the fair value of scheme assets are as follows:

	2013/14			2012/13 (Restated)
£ millions	UK	Overseas	Total	UK	Overseas	Total
Fair value of scheme assets at beginning of year	2,065	22	2,087	1,927	20	1,947
Administration costs	(3)	–	(3)	(3)	–	(3)
Interest income	94	1	95	86	1	87
Actuarial (losses)/gains – actual return less interest income	(19)	–	(19)	73	–	73
Contributions paid by employer	32	1	33	40	1	41
Contributions paid by employees	–	–	–	5	–	5
Benefits paid	(63)	(1)	(64)	(63)	(1)	(64)
Exchange differences	–	(2)	(2)	–	1	1
Fair value of scheme assets at end of year	2,106	21	2,127	2,065	22	2,087

The fair value of scheme assets is analysed as follows:

		2013/14				2012/13
£ millions	UK	Overseas	Total	% of total	UK	Overseas	Total	% of total
Government bonds	741	–	741	35%	722	–	722	35%
Corporate bonds	650	–	650	31%	645	–	645	31%
UK equities	73	–	73	3%	158	–	158	7%
Overseas equities	443	–	443	20%	394	–	394	19%
Property	32	–	32	2%	70	–	70	3%
Cash and other	167	21	188	9%	76	22	98	5%
Total fair value of scheme assets	2,106	21	2,127	100%	2,065	22	2,087	100%

All UK scheme assets have quoted prices in active markets, except for £157m (2012/13: £92m) of property and other assets. Interest rate and inflation rate swaps are employed in the UK scheme to complement the use of fixed and index-linked bonds for liability risk management purposes and are included in the Corporate bonds category above.

The estimated amount of total contributions to be paid to the UK and overseas pension schemes by the Group during the next financial year is £36m.

Principal actuarial valuation assumptions

The assumptions used in calculating the costs and obligations of the Group's defined benefit pension schemes are set by the Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and changes in these assumptions can lead to significant movements in the estimated obligations, as illustrated in the sensitivity analysis.

The UK scheme discount rate is based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for the difference in term between iBoxx and scheme liabilities.

	2013/14		2012/13
Annual % rate	UK	Overseas	UK	Overseas
Discount rate	4.4	3.2	4.6	2.8
Price inflation	3.3	2.0	3.3	2.0
Rate of pension increases	3.1	–	3.3	–
Salary escalation	n/a	2.3	n/a	2.5

For the UK scheme, the mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics and experience of the membership of the scheme from 2010 to 2013. The base mortality assumptions have been derived by adjusting standard mortality tables (SAPS tables) projected forward to 2013 using the 'CMI 2013' core projection improvement factors, as published by the UK actuarial profession. In addition, allowance has been made for future increases in life expectancy. The allowance is in line with CMI 2013 improvements subject to a long-term rate of 1.25% pa for males and 1.0% pa for females. These improvements take into account trends observed within the scheme over the past decade and general population trends.

Notes to the consolidated financial statements continued

27 Post-employment benefits continued

The assumptions for life expectancy of UK scheme members are as follows:

Years	2013/14	2012/13	2010 funding valuation
Age to which current pensioners are expected to live (60 now)
– Male	86.7	86.7	86.4
– Female	87.3	87.4	87.1
Age to which future pensioners are expected to live (60 in 15 years' time)
– Male	87.4	87.4	87.1
– Female	88.6	89.0	88.7

The following sensitivity analysis for the UK scheme shows the estimated impact on the obligation resulting from changes to key actuarial assumptions, whilst holding all other assumptions constant.

Assumption	Change in assumption	Impact on defined benefit obligation
Discount rate	Increase/decrease by 0.1%	Decrease/increase by £43m
Price inflation	Increase/decrease by 0.1%	Increase/decrease by £38m
Rate of pension increases	Increase/decrease by 0.1%	Increase/decrease by £38m
Mortality	Increase in life expectancy by one year	Increase by £68m

Due to the asset-liability matching investment strategy, the above impacts on the obligations of changes in discount rate and price inflation would be significantly offset by movements in the fair value of the scheme assets.

28 Share capital

	Number of ordinary shares millions	Ordinary share capital £ millions
At 3 February 2013	2,372	373
New shares issued under share schemes	4	–
At 1 February 2014	2,376	373
At 29 January 2012	2,369	372
New shares issued under share schemes	3	1
At 2 February 2013	2,372	373

Ordinary shares have a par value of 155 /7 pence per share.

29 Other reserves

£ millions	Cash flow hedge reserve	Translation reserve	Other	Total
At 3 February 2013	(8)	374	159	525
Currency translation differences
Group	–	(210)	–	(210)
Joint ventures and associates	–	(25)	–	(25)
Transferred to income statement	–	(31)	–	(31)
Cash flow hedges
Fair value losses	(4)	–	–	(4)
Losses transferred to inventories	9	–	–	9
Tax on other comprehensive income	(2)	4	–	2
Other comprehensive income for the year	3	(262)	–	(259)
At 1 February 2014	(5)	112	159	266
At 29 January 2012	7	247	159	413
Currency translation differences
Group	–	122	–	122
Joint ventures and associates	–	8	–	8
Cash flow hedges
Fair value losses	(14)	–	–	(14)
Gains transferred to inventories	(8)	–	–	(8)
Tax on other comprehensive income	7	(3)	–	4
Other comprehensive income for the year	(15)	127	–	112
At 2 February 2013	(8)	374	159	525

The 'other' category of reserve represents the premium on the issue of convertible loan stock in 1993 and the merger reserve relating to the acquisition of Darty in 1993.

30 Share-based payments

	2013/14		2012/13
	Options Number	Weighted average exercise price £	Options Number	Weighted average exercise price £
Outstanding at beginning of year	62,167,023	0.39	89,247,441	0.33
Granted during the year(1),(2)	6,279,763	1.37	12,292,718	0.50
Forfeited during the year	(9,569,630)	0.27	(12,013,719)	0.31
Exercised during the year	(20,753,532)	0.33	(27,359,417)	0.27
Outstanding at end of year	38,123,624	0.61	62,167,023	0.39
Exercisable at end of year	2,731,735	0.41	6,253,122	0.29

(1) The charge to the income statement for the years ended 1 February 2014 and 2 February 2013 in respect of share-based payments includes the first year's charge of the 2014 and 2013 Kingfisher Incentive Share Scheme ('KISS') grants respectively, based on the bonus for the year. Since grants under the KISS are made following the year end to which the first year of charge relates, it is not possible to give the number of options granted until after the year end.

(2) The weighted average exercise price for options granted during the year represents a blend of nil price KISS, Performance Share Plan and discounted Sharesave options (see below).

Notes to the consolidated financial statements continued

30 Share-based payments continued

Information on the share schemes is given in note 14 of the Company's separate financial statements.

Options have been exercised on a regular basis throughout the year. On that basis, the weighted average share price during the year, rather than at the date of exercise, is £3.53 (2012/13: £2.81). The options outstanding at the end of the year have exercise prices ranging from £nil to £3.15 and a weighted average remaining contractual life of 2.9 years (2012/13: 3.1 years).

The Group recognised a total expense of £7m in the year ended 1 February 2014 (2012/13: £9m) relating to equity-settled sharebased payment transactions.

The fair value of share options and deferred shares is determined by independent valuers using Black-Scholes and stochastic option pricing models. The inputs of the principal schemes into these models are as follows:

	Date of grant	Share price at grant £	Exercise price £	Expected life(2) years	Expected volatility(3) %	Dividend yield %	Risk free rate %	Fair value(4) £
Kingfisher Incentive Share Scheme(1)	12/04/11	2.60	–	7.0	–	–	–	2.60
	06/05/11	2.80	–	7.0	–	–	–	2.80
	25/04/12	2.96	–	7.0	–	–	–	2.96
	11/04/13	2.97	–	7.0	–	–	–	2.97
Performance Share Plan	05/05/10	2.33	–	7.0	–	–	–	2.33
	05/05/10	2.33	–	7.0	46.7%	–	1.5%	1.30
	21/10/10	2.47	–	7.0	–	–	–	2.47
	12/04/11	2.60	–	7.0	–	–	–	2.60
	17/06/11	2.65	–	7.0	–	–	–	2.65
	21/10/11	2.63	–	7.0	–	–	–	2.63
	03/05/12	2.91	–	7.0	–	–	–	2.91
	16/10/12	2.81	–	7.0	–	–	–	2.81
	25/04/13	3.10	–	7.0	–	–	–	3.10
	22/10/13	3.74	–	7.0	–	–	–	3.74
UK and International	29/10/08	1.09	1.09	5.5	30.8%	4.9%	3.8%	0.10
Sharesave	03/11/09	2.24	1.72	5.5	36.4%	2.4%	2.9%	0.38
	28/10/10	2.39	1.87	3.5	44.3%	2.3%	1.1%	0.53
	28/10/10	2.39	1.87	5.5	37.3%	2.3%	1.9%	0.39
	26/10/11	2.64	1.99	3.5	39.1%	2.9%	0.9%	0.54
	26/10/11	2.64	1.99	5.5	37.6%	2.9%	1.4%	0.42
	19/10/12	2.85	2.17	3.5	25.9%	3.3%	0.4%	0.45
	19/10/12	2.85	2.17	5.5	37.6%	3.3%	0.9%	0.49
	22/10/13	3.74	3.15	3.5	23.3%	2.5%	0.9%	0.49
	22/10/13	3.74	3.15	5.5	33.6%	2.5%	1.6%	0.59

(1) The Kingfisher Incentive Share Scheme includes the Company Share Option Plan ('CSOP') element of the KISS awards. Details of the CSOP element of the award are set out in the Director's Remuneration Report.

(2) Expected life is disclosed based on the UK schemes. For the KISS and PSP schemes in the UK, the expiry date is 7 years from the date of grant. Expiry of overseas KISS schemes and CSOP is 6 months from the date of vesting. Expiry of overseas PSP schemes is 1 year from the date of vesting.

(3) Expected volatility was determined for each individual award, by calculating the historical volatility of the Group's share price (plus reinvested dividends) immediately prior to the grant of the award, over the same period as the vesting period of each award, adjusted by expectations of future volatility.

(4) The fair values of UK and International Sharesave awards granted on or before 1 January 2009 have been restated to reflect the 17 January 2008 amendment to IFRS 2 on vesting conditions and cancellations.

31 Cash generated by operations

£ millions	2013/14	2012/13 (Restated)
Operating profit	736	692
Share of post-tax results of joint ventures and associates	(8)	(20)
Depreciation and amortisation	261	248
Impairment losses	2	8
Loss on disposal of property, plant and equipment, investment property and intangible assets	1	5
Share-based compensation charge	7	9
Increase in inventories	(31)	(191)
Increase in trade and other receivables	(60)	(6)
Increase in trade and other payables	118	19
Movement in provisions	(29)	14
Movement in post-employment benefits	(21)	(48)
Cash generated by operations	976	730

Annual Report and Accounts 2013/14 Annual Report and Accounts 2013/14

32 Net cash

£ millions	2013/14	2012/13
Cash and cash equivalents	535	398
Bank overdrafts	(1)	–
Cash and cash equivalents and bank overdrafts	534	398
Bank loans	(14)	(68)
Medium Term Notes and other fixed term debt	(247)	(298)
Financing derivatives	27	71
Finance leases	(62)	(65)
Net cash	238	38

Net cash/(debt) at beginning of year 38 (88) Net increase/(decrease) in cash and cash equivalents and bank overdrafts 153 (106)


Repayment of bank loans 89 31
Repayment of Medium Term Notes and other fixed term debt 33 162
Receipt on financing derivatives (6)
Capital element of finance lease rental payments 13 12
Cash flow movement in net cash 282 99
Borrowings acquired (35)
Exchange differences and other non-cash movements (47) 27
Net cash at end of year 238 38

33 Acquisitions

£ millions

On 31 May 2013, the Group acquired 100% of the share capital of the Bricostore Romania companies from Group Bresson, a French retail company. Consideration of £51m comprised £35m cash and a further £16m non-cash element, representing the obligation to assume a liability of the vendor.

Goodwill of £18m has been recognised on provisional net assets of £33m, representing a strategic premium to strengthen the Group's position in Eastern Europe and anticipated synergies that will arise from the acquisition.

Provisional fair value amounts recognised of identifiable assets acquired and liabilities assumed
Other intangible assets	1
Property, plant and equipment	60
Inventories	29
Trade and other receivables	22
Cash and cash equivalents	7
Trade and other payables	(34)
Current tax liabilities	(3)

Trade and other receivables	22
Cash and cash equivalents	7
Trade and other payables	(34)
Current tax liabilities	(3)
Deferred tax assets	1
Deferred tax liabilities	(4)
Borrowings	(35)
Provisions	(11)
Total identifiable net assets acquired	33
Goodwill	18
Total consideration	51

The acquisition amounts recorded in the consolidated cash flow statement for the year are:

£ millions
Cash consideration	(35)
Cash acquired	7
Purchase of businesses, net of cash acquired	(28)

Immediately following the acquisition, Kingfisher settled Bricostore Romania's borrowings of £35m (included within repayment of loans in the cash flow statement).

Accounts

Notes to the consolidated financial statements continued

33 Acquisitions continued

Acquisition related fees of £2m have been charged in the consolidated income statement in the year.

Owing to local conditions, Bricostore Romania prepares its financial statements to 31 December. In the period from 31 May 2013 to 31 December 2013, it contributed sales of £72m and a retail profit of £1m. If the acquisition had occurred at the start of the financial year, the Group's sales would have been £11,163m and Group operating profit, after exceptional items, would have been £734m for the year ended 1 February 2014.

34 Assets held for sale

£ millions	2013/14	2012/13
Assets held for sale	208	–

Assets held for sale include the Group's investment in Hornbach of £198m, which was subsequently agreed to be sold on 24 March 2014 for approximately £195m (see note 17). It also includes a UK freehold property asset of £10m, which was subsequently sold on 4 February 2014 for £32m.

The investment in Hornbach is measured based on the 31 January 2014 market price of the shares of Hornbach Holding AG and Hornbach-Baumarkt AG which are listed on the German Stock Exchange, along with the sale price agreed after the balance sheet date for the unlisted shares in Hornbach Holding AG.

The fair value of the investment in Hornbach has been determined using a mixture of level 1 and level 2 inputs as defined by the fair value hierarchy of IFRS 13, 'Fair value measurement'.

35 Commitments

Operating lease commitments

The Group is a lessee of various retail stores, offices, warehouses and plant and equipment under lease agreements with varying terms, escalation clauses and renewal rights.

The Group is also a lessor and sub-lessor of space with freehold and leasehold properties respectively. Lease arrangements under which rental payments are contingent upon sales, other performance or usage are not significant for the Group.

Undiscounted total future minimum rentals payable under non-cancellable operating leases are as follows:

£ millions	2013/14	2012/13
Less than one year	460	461
One to five years	1,571	1,589
More than five years	2,347	2,637
	4,378	4,687

Undiscounted total future minimum rentals receivable under non-cancellable operating leases are as follows:

£ millions	2013/14	2012/13
Less than one year	31	32
One to five years	101	100
More than five years	104	118
	236	250

The total of future minimum operating sublease receipts expected to be received is £197m (2012/13: £203m).

Capital commitments

Capital commitments contracted but not provided for by the Group amount to £31m (2012/13: £36m).

36 Contingent liabilities

The Group has arranged for certain guarantees to be provided to third parties in the ordinary course of business. Of these guarantees, only £1m (2012/13: £1m) would crystallise due to possible future events not wholly within the Group's control.

The Group is subject to claims and litigation arising in the ordinary course of business and provision is made where liabilities are considered likely to arise on the basis of current information and legal advice.

37 Related party transactions

During the year, the Company and its subsidiaries carried out a number of transactions with related parties in the normal course of business and on an arm's length basis. The names of the related parties, the nature of these transactions and their total value are shown below:

	2013/14		2012/13
£ millions	Income/ (expense)	Receivable/ (payable)	Income/ (expense)	Receivable/ (payable)
Transactions with Koçtas¸ Yapi Marketleri Ticaret A.S. in which the Group
holds a 50% interest
Provision of employee services	(0.1)	–	(0.2)	(0.1)
Commission and other income	1.2	0.6	0.8	0.4
Transactions with Hornbach Holding A.G. in which the Group holds a 21% interest
Commission and other income	0.3	–	0.9	0.1
Transactions with Crealfi S.A. in which the Group holds a 49% interest
Provision of employee services	0.1	–	0.1	–
Commission and other income	7.1	0.4	4.3	0.3
Transactions with Kingfisher Pension Scheme
Provision of administrative services	0.8	0.1	1.4	0.1

Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists in force with non-related parties.

The remuneration of key management personnel is given in note 8.

Other transactions with the Kingfisher Pension Scheme are detailed in note 27.

38 Post balance sheet events

Certain assets classified as held for sale were disposed of subsequent to the balance sheet date, refer to note 34 for further detail.

Accounts

Company balance sheet

At 1 February 2014

£ millions	Notes	2013/14	2012/13
Fixed assets
Tangible fixed assets	3	–	–
Investments	4	7,101	6,978
		7,101	6,978
Current assets
Debtors due within one year	5	3,259	3,414
Debtors due after more than one year	5	44	62
Cash at bank and in hand		153	124
		3,456	3,600
Current liabilities
Creditors: amounts falling due within one year	6	(5,539)	(5,669)
Net current liabilities		(2,083)	(2,069)
Total assets less current liabilities		5,018	4,909
Non-current liabilities
Creditors: amounts falling due after more than one year	7	(172)	(278)
Provisions for liabilities	8	(7)	(7)
		(179)	(285)
Net assets excluding net pension asset		4,839	4,624
Net pension asset	9	–	–
Net assets		4,839	4,624
Capital and reserves
Called up share capital	11	373	373
Share premium account	12	2,209	2,204
Other reserves	12	711	711
Profit and loss account	12	1,546	1,336
Equity shareholders' funds	13	4,839	4,624

The financial statements were approved by the Board of Directors on 24 March 2014 and signed on its behalf by:

Sir Ian Cheshire Group Chief Executive Karen Witts

Group Finance Director

1 Principal accounting policies

The financial statements of Kingfisher plc ('the Company') are made up to the nearest Saturday to 31 January each year.

The directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Company to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the financial statements for the year ended 1 February 2014. Refer to the Directors' statement of responsibility on page 71.

The financial statements have been prepared under the historical cost convention, as modified by the use of valuations for certain financial instruments, share-based payments and pensions, and are prepared in accordance with applicable accounting standards in the United Kingdom and the Companies Act 2006.

The Company's financial statements are included in the consolidated financial statements of Kingfisher plc. As permitted by section 408 of the Companies Act 2006, the profit and loss account and statement of total recognised gains and losses are not presented. The Company has taken advantage of the exemption from preparing a cash flow statement under the terms of FRS 1, 'Cash flow statements'. The Company is exempt under the terms of FRS 8, 'Related party disclosures', from disclosing related party transactions with wholly owned subsidiaries of Kingfisher plc. The Company has taken advantage of the exemption to provide financial instrument disclosures under the terms of FRS 29, 'Financial instruments: Disclosures'.

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated.

a. Foreign currencies

Principal rate of exchange against Sterling:

Euro	2013/14	2012/13
Year end rate	1.22	1.15

b. Tangible fixed assets

Tangible fixed assets are carried in the balance sheet at cost less accumulated depreciation and any provisions for impairment. Depreciation is provided to reflect a straight line reduction from cost to estimated residual value over the estimated useful life of the asset as follows:

Fixtures and fittings	– between 4 and 20 years
Computers and electronic equipment	– between 3 and 5 years
Motor cars	– 4 years

Tangible fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of value-in-use and net realisable value. Any impairment in value is charged to the profit and loss account in the period in which it occurs.

c. Investments

Investments in subsidiaries and associates are included in the balance sheet at cost, less any provisions for impairment.

d. Operating leases

Rentals under operating leases are charged to the profit and loss account in the period to which the payments relate. Incentives received or paid to enter into lease agreements are released to the profit and loss account on a straight line basis over the lease term or, if shorter, the period to the date on which the rent is first expected to be adjusted to the prevailing market rate.

e. Employee benefits

(i) Pensions

The Company operates defined benefit and defined contribution pension schemes for its employees. A defined benefit scheme is a pension scheme that defines an amount of pension benefit that an employee will receive on retirement. A defined contribution scheme is a pension scheme under which the Company usually pays fixed contributions into a separate entity. In all cases a separate fund is being accumulated to meet the accruing liabilities. The assets of each of these funds are either held under trusts or managed by insurance companies and are entirely separate from the Company's assets.

The asset or liability recognised in the balance sheet in respect of defined benefit pension schemes is the fair value of scheme assets less the present value of the defined benefit obligation at the balance sheet date, together with an adjustment for any past service costs not yet recognised. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds which are denominated in the currency in which the benefits will be paid and which have terms to maturity approximating to the terms of the related pension liability.

A net pension asset is only recognised to the extent that it is recoverable either through reduced future contributions or through agreed refunds from the scheme.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are credited or charged directly to the profit and loss reserve as they arise.

Past service costs are recognised immediately in the profit and loss account, unless the changes to the pension scheme are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight line basis over the vesting period.

For defined contribution schemes, the Company has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

(ii) Share-based compensation

The Group operates several equity-settled, share-based compensation schemes for the employees of the Company and its subsidiaries using the Company's equity instruments.

Notes to the Company financial statements continued

1 Principal accounting policies continued

The fair value of the Company's employees' services received in exchange for the grant of options or deferred shares is recognised as an expense and is calculated using Black-Scholes and stochastic models. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or deferred shares granted, excluding the impact of any non-market vesting conditions. The value of the charge is adjusted to reflect expected and actual levels of options vesting due to non-market vesting conditions.

The fair value of the compensation given to subsidiaries in respect of share-based compensation schemes is recognised as a capital contribution over the vesting period. The capital contribution is reduced by any payments received from subsidiaries in respect of these schemes.

(iii) Employee Share Ownership Plan Trust ('ESOP') The ESOP is a separately administered discretionary trust. Liabilities of the ESOP are guaranteed by the Company and the assets of the ESOP mainly comprise shares in the Company.

Own shares held by the ESOP are deducted from equity shareholders' funds and the shares are held at historical cost until they are sold. The assets, liabilities, income and costs of the ESOP are included in both the Company's and the consolidated financial statements.

f. Deferred tax

Provision is made for deferred tax using the incremental provision approach and is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws substantively enacted at the balance sheet date.

Deferred tax is recognised in respect of timing differences that have originated but not reversed by the balance sheet date subject to the following:

deferred tax is not recognised on the revaluation of nonmonetary assets such as property unless a binding sale agreement exists at the balance sheet date. Where rollover relief is available on an asset, deferred tax is not recognised;
deferred tax is recognised on unremitted earnings of overseas subsidiaries and associates only where dividends are accrued as receivable or there is an intention to remit these in the foreseeable future;
deferred tax assets are recognised to the extent that they are regarded as recoverable. Assets are regarded as recoverable when it is regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted; and
deferred tax is not recognised on permanent differences.

g. Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

h. Financial instruments

Financial assets and financial liabilities are recognised on the Company's balance sheet when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or the Company has substantially transferred the risks and rewards of ownership. Financial liabilities (or a part of a financial liability) are derecognised when the obligation specified in the contract is discharged or cancelled or expires.

(i) Borrowings

Interest bearing borrowings are recorded at the proceeds received, net of direct issue costs and subsequently measured at amortised cost. Where borrowings are in designated and effective fair value hedge relationships, adjustments are made to their carrying amounts to reflect the hedged risks. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are amortised to the profit and loss account using the effective interest method.

(ii) Trade creditors

Trade creditors are initially recognised at fair value and are subsequently measured at amortised cost.

(iii) Derivatives and hedge accounting

Where hedge accounting is not applied, or to the extent to which it is not effective, changes in the fair value of derivatives are recognised in the profit and loss account as they arise.

Derivatives are initially recorded at fair value on the date a derivative contract is entered into and subsequently carried at fair value. The accounting treatment of derivatives classified as hedges depends on their designation, which occurs at the start of the hedge relationship. The Company designates certain derivatives as a hedge of the fair value of an asset or liability ('fair value hedge').

For an effective hedge of an exposure to changes in fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding entry being recorded in the profit and loss account. Gains or losses from remeasuring the corresponding hedging instrument are also recognised in the profit and loss account.

In order to qualify for hedge accounting, the Company documents in advance the relationship between the item being hedged and the hedging instrument. The Company also documents and demonstrates an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge has been and will be highly effective on an ongoing basis. The effectiveness testing is re-performed at each period end to ensure that the hedge remains highly effective.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting.

Strategic Report	Governance	Accounts

2 Profit and loss account disclosures

The audit fee for the Company and the consolidated financial statements is disclosed in note 7 of the Kingfisher plc consolidated financial statements. Fees payable to Deloitte LLP and their associates for audit and non-audit services to the Company are not required to be disclosed because the Group financial statements disclose such fees on a consolidated basis. Details of the Company's policy on the use of auditors for non-audit services, the reasons why the auditor was used rather than another supplier and how the auditor's independence and objectivity were safeguarded are set out in the Audit Committee Report on page 44.

Dividend disclosures are provided in note 11 of the Kingfisher plc consolidated financial statements.

£ millions	2013/14	2012/13
Wages and salaries	20	21
Social security costs	3	3
Pensions
Defined contribution	2	2
Defined benefit (service cost only)	–	1
Share-based compensation	1	7
Employee benefit expenses	26	34
Number	2013/14	2012/13
Average number of persons employed
Administration	157	172

Directors' remuneration and details of share option exercises are disclosed in the Directors' remuneration report on pages 47 to 68. Total Directors' remuneration for the year is £6m (2012/13: £4.6m).

3 Tangible fixed assets

	Fixtures,
	fittings and
£ millions	equipment
Cost
At 3 February 2013	4
At 1 February 2014	4
Depreciation
At 3 February 2013	(4)
At 1 February 2014	(4)
Net carrying amount
At 2 February 2013	–
At 1 February 2014	–

Notes to the Company financial statements continued

4 Investments

£ millions	Investments in Group undertakings
At 3 February 2013	6,978
Additions	135
Capital contributions given relating to share-based payments	10
Contributions received relating to share-based payments	(22)
At 1 February 2014	7,101

Additions to investments in Group undertakings represent £135m (2012/13: £nil) of capital injections into a subsidiary undertaking as part of Group restructuring activities undertaken.

The Directors consider that to give the full particulars of all subsidiary undertakings would lead to a statement of excessive length. In accordance with Section 410(2)(a) of the Companies Act 2006, the information below relates to those Group undertakings at the financial year end whose results or financial position, in the opinion of the Directors, principally affect the figures of the consolidated financial statements of Kingfisher plc. Details of all subsidiary undertakings will be annexed to the next Annual Return of Kingfisher plc to be filed at Companies House.

	Country of incorporation and operation	% interest held and voting rights	Class of share owned	Main activity
			Ordinary &
B&Q plc	Great Britain	100%	special(1)	Retailing
B&Q Properties Limited	Great Britain	100%	Ordinary	Property investment
Halcyon Finance Ltd(2)	Great Britain	100%	Ordinary	Finance
Kingfisher Information Technology Services (UK) Limited(2)	Great Britain	100%	Ordinary	IT services
Screwfix Direct Limited	Great Britain	100%	Ordinary	Retailing
Sheldon Holdings Limited(2)	Great Britain	100%	Ordinary	Holding company
Zeus Land Investments Limited	Great Britain	100%	Ordinary	Holding company
B&Q Ireland Limited	Ireland	100%	Ordinary	Retailing
Brico Dépôt S.A.S.(3)	France	100%	Ordinary	Retailing
Castorama Dubois Investissements S.C.A.(3),(4)	France	100%	Ordinary	Holding company
Castorama France S.A.S.(3)	France	100%	Ordinary	Retailing
Eurodépôt Immobilier S.A.S.(3)	France	100%	Ordinary	Property investment
Immobilière Castorama S.A.S.(3)	France	100%	Ordinary	Property investment
Kingfisher France S.A.S.(3)	France	100%	Ordinary	Holding company
B&Q Asia Holdings Ltd(5)	Hong Kong	100%	Ordinary	Holding company
Kingfisher Asia Limited	Hong Kong	100%	Ordinary	Sourcing
B&Q (China) B.V.(5)	Netherlands	100%	Ordinary	Holding company
Castim Sp.z.o.o.(3)	Poland	100%	Ordinary	Property investment
Castorama Polska Sp.z.o.o.(3)	Poland	100%	Ordinary	Retailing
Castorama RUS LLC(6)	Russia	100%	Ordinary	Retailing
Bricostore Romania S.A. (6)	Romania	100%	Ordinary	Retailing
Euro Dépôt España S.A.U.(3)	Spain	100%	Ordinary	Retailing

(1) The special shares in B&Q plc are owned 100% by Kingfisher plc and are non-voting.

(2) Held directly by Kingfisher plc.

(3) Owing to local conditions, these companies prepare their financial statements to 31 January.

(4) Castorama Dubois Investissements S.C.A. is 100% owned, of which 46% is held directly by Kingfisher plc.

(5) Holding companies for the Group's Chinese retailing operations, which have a 31 December year end.

(6) Owing to local conditions, this company prepares its financial statements to 31 December.

Strategic Rep

Strategic Report Governance Accounts

5 Debtors

£ millions	2013/14	2012/13
Amounts falling due within one year
Owed by Group undertakings	3,178	3,314
Corporation tax	76	71
Derivatives	3	28
Other debtors	2	1
	3,259	3,414
Amounts falling due after more than one year
Derivatives	40	55
Deferred tax assets	4	7
	44	62

6 Creditors: amounts falling due within one year

£ millions	2013/14	2012/13
Medium Term Notes and other fixed term debt	75	32
Derivatives	14	1
Owed to Group undertakings	5,413	5,600
Other taxation and social security	1	1
Accruals and other payables	36	35
	5,539	5,669

7 Creditors: amounts falling due after more than one year

£ millions	2013/14	2012/13
Borrowings
Medium Term Notes and other fixed term debt	172	266
	172	266
Derivatives	–	12
	172	278
Borrowings fall due for repayment as follows:
One to two years	–	78
Two to five years	172	49
More than five years	–	139
	172	266

8 Provisions for liabilities

£ millions	Onerous property contracts
At 3 February 2013	7
Charge to income statement	1
Utilised in the year	(1)
At 1 February 2014	7

Within the onerous property contracts provision, the Company has provided against future liabilities for all properties sublet at a shortfall and long-term idle properties. The provision is based on the present value of future cash outflows relating to rent, rates and service charges.

Notes to the Company financial statements continued

9 Net pension asset

The Company participates in both a funded defined benefit scheme and a funded defined contribution scheme.

Defined contribution scheme

Pension costs for the defined contribution scheme, at rates specified in the scheme's rules, are as follows:

£ millions	2013/14	2012/13
Charge to operating profit	2	2

From July 2012 an enhanced defined contribution scheme has been offered to all Company employees. Eligible Company employees have been automatically enrolled into the defined contribution scheme from 31 March 2013.

Defined benefit scheme

Kingfisher plc is one of a number of Group companies that participate in the Kingfisher Pension Scheme, and therefore the Company has accounted for its share of the scheme assets and liabilities. The valuation of the scheme has been based on the most recent actuarial valuation as at 31 March 2013 and has been updated to 1 February 2014.

In the prior year the UK final salary pension scheme was closed to future benefit accrual with effect from July 2012. The closure to future accrual resulted in an exceptional non-cash curtailment gain of £1m, representing the one-off reduction in accounting liabilities as benefits are no longer linked to future salary increases other than in line with inflation. Furthermore, it resulted in a full provision against the net surplus being recognised at the curtailment date. This exceptional non-cash asset restriction loss of £6m reflected the requirements under UK accounting standards, which restrict the amount of surplus that can be recognised following the closure to future accrual of benefits.

In 2010/11 and 2011/12 the Company entered into two phases of a property partnership arrangement with the scheme Trustee to address an element of the scheme deficit. Further details on this arrangement are given in note 27 of the consolidated financial statements. The reported pension position, before provision for asset restriction, reflects the Company's share of the resulting scheme asset.

Profit and loss account
£ millions	2013/14	2012/13
Amounts charged/(credited) to operating profit
Current service cost	–	1
Curtailment gain	–	(1)
Asset restriction loss	–	6
	–	6
Amounts charged/(credited) to net finance costs
Interest on defined benefit obligation	3	3
Expected return on pension scheme assets	(3)	(3)
	–	–
Total charged to profit and loss account	–	6
Balance sheet
£ millions	2013/14	2012/13
Present value of defined benefit obligation	(63)	(59)
Fair value of scheme assets	68	67
Net pension asset before provision for asset restriction	5	8
Provision for asset restriction	(5)	(8)
Net pension asset	–	–

Movements in the net pension asset are as follows:

	Defined benefit	Scheme		Provision for asset
£ millions	obligation	assets	Total	restriction	Net
At 3 February 2013	(59)	67	8	(8)	–
Interest on defined benefit obligation	(3)	–	(3)	–	(3)
Expected return on pension scheme assets	–	3	3	–	3
Actuarial (losses)/gains	(3)	(1)	(4)	3	(1)
Contributions paid by employer	–	1	1	–	1
Benefits paid	2	(2)	–	–	–
At 1 February 2014	(63)	68	5	(5)	–

9 Net pension asset continued

£ millions	Defined benefit obligation	Scheme assets	Total	Provision for asset restriction	Net
At 29 January 2012	(55)	62	7	–	7
Current service cost	(1)	–	(1)	–	(1)
Curtailment gain	1	–	1	–	1
Asset restriction loss	–	–	–	(6)	(6)
Interest on defined benefit obligation	(3)	–	(3)	–	(3)
Expected return on pension scheme assets	–	3	3	–	3
Actuarial (losses)/gains	(3)	3	–	(2)	(2)
Contributions paid by employer	–	1	1	–	1
Benefits paid	2	(2)	–	–	–
At 2 February 2013	(59)	67	8	(8)	–

The fair value of scheme assets is analysed as follows:

		2013/14		2012/13
	£ millions	% of total	£ millions	% of total
Equities	15	22%	16	24%
Bonds	41	61%	40	60%
Property	1	1%	2	3%
Other	11	16%	9	13%
Total fair value of scheme assets	68	100%	67	100%

The actual return on pension scheme assets is as follows:

£ millions	2013/14	2012/13
Actual return on pension scheme assets	2	6

The estimated amount of contributions expected to be paid to the pension scheme by the Company during the next financial year is £1m.

Amounts for current and previous four years

£ millions	2013/14	2012/13	2011/12	2010/11	2009/10
Present value of defined benefit obligation	(63)	(59)	(55)	(45)	(49)
Fair value of scheme assets	68	67	62	47	44
Net pension asset/(liability) before provision for asset restriction	5	8	7	2	(5)
Provision for asset restriction	(5)	(8)	–	–	–
Net pension asset/(liability)	–	–	7	2	(5)
Changes in assumptions underlying present value of defined benefit obligation	–	(3)	(8)	2	(6)
Percentage of defined benefit obligation	–	5%	15%	(4%)	12%
Experience (losses)/gains arising on defined benefit obligations	(3)	–	–	2	–
Percentage of defined benefit obligation	5%	–	–	(4%)	–
Actual return less expected return on pension scheme assets	(1)	3	9	–	1
Percentage of scheme assets	(1%)	4%	15%	–	2%
Provision for asset restriction – movement recognised in the profit and loss reserve	3	(2)	–	–	–
Total (losses)/gains recognised in the profit and loss reserve in the year	(1)	(2)	1	4	(5)
Cumulative losses recognised in the profit and loss reserve	(16)	(15)

Notes to the Company financial statements continued

9 Net pension asset continued

Principal actuarial valuation assumptions

The assumptions used in calculating the costs and obligation of the defined benefit pension scheme are set by the Directors after consultation with independent professionally qualified actuaries. The assumptions are based on the conditions at the time and changes in these assumptions can lead to significant movements in the estimated obligation.

The discount rate is based on the yield on the iBoxx over 15 year AA-rated Sterling corporate bond index adjusted for the difference in term between iBoxx and scheme liabilities. The overall expected rate of return on scheme assets reflects market expectations at the valuation date of long-term asset returns and the mix of assets in the scheme.

Annual % rate	2013/14	2012/13
Discount rate	4.4	4.6
Price inflation	3.3	3.3
Rate of pension increases	3.1	3.3

% rate of return	2013/14	2012/13
Equities	7.2	7.6
Bonds	3.7	3.5
Property	6.5	5.9
Other	4.5	4.7
Overall expected rate of return	4.7	4.7

The mortality assumptions used in the actuarial valuations have been selected with regard to the characteristics and experience of the membership of the scheme from 2010 to 2013. The base mortality assumptions have been derived by adjusting standard mortality tables (SAPS tables) projected forward to 2013 using the 'CMI 2013' core projection improvement factors, as published by the UK actuarial profession. In addition, allowance has been made for future increases in life expectancy. The allowance is in line with CMI 2013 improvements subject to a long-term rate of 1.25% pa for males and 1.0% pa for females. These improvements take into account trends observed within the scheme over the past decade and general population trends.

The assumptions for life expectancy of the scheme members are as follows:

Years	2013/14	2012/13	2010 funding valuation
Age to which current pensioners are expected to live (60 now)
– Male	86.7	86.7	86.4
– Female	87.3	87.4	87.1
Age to which future pensioners are expected to live (60 in 15 years' time)
– Male	87.4	87.4	87.1
– Female	88.6	89.0	88.7

10 Commitments

Operating lease commitments

The Company is a lessee of offices under lease agreements with varying terms, escalation clauses and renewal rights.

Annual commitments under non-cancellable operating leases are as follows:

£ millions	2013/14	2012/13
Less than one year	–	–
One to five years	–	–
More than five years	3	3
	3	3

	Number of ordinary shares millions	Ordinary share capital £ millions
At 3 February 2013	2,372	373
New shares issued under share schemes	4	–
At 1 February 2014	2,376	373
At 29 January 2012	2,369	372
New shares issued under share schemes	3	1
At 2 February 2013	2,372	373

Ordinary shares have a par value of 155 /7 pence per share.

12 Reserves

£ millions	Share premium account	Other reserves	Profit and loss account	Total
At 3 February 2013	2,204	711	1,336	4,251
Profit for the year	–	–	440	440
Actuarial losses on defined benefit pension scheme	–	–	(1)	(1)
Share-based compensation	–	–	1	1
Capital contributions given relating to share-based payments	–	–	10	10
New shares issued under share schemes	5	–	–	5
Own shares issued under share schemes	–	–	8	8
Own shares purchased	–	–	(24)	(24)
Dividends	–	–	(224)	(224)
At 1 February 2014	2,209	711	1,546	4,466

The other reserves represent the premium on the issue of convertible loan stock in 1993 and the merger reserve relating to the acquisition of Darty.

The value of own shares deducted from the profit and loss reserve at 1 February 2014 is £35m (2012/13: £60m).

13 Reconciliation of movement in equity shareholders' funds

£ millions	2013/14	2012/13
Profit for the year	440	8
Dividends	(224)	(221)
	216	(213)
Actuarial losses on defined benefit pension scheme	(1)	(2)
Share-based compensation	1	7
Capital contributions given relating to share-based payments	10	71
New shares issued under share schemes	5	6
Own shares issued under share schemes	8	6
Own shares purchased	(24)	–
Net increase/(decrease) in equity shareholders' funds	215	(125)
Equity shareholders' funds at beginning of year	4,624	4,749
Equity shareholders' funds at end of year	4,839	4,624

Notes to the Company financial statements continued

14 Share options

The Company operates a number of share incentive plans including the Kingfisher Incentive Share Scheme ('KISS'), Kingfisher Retention Share Scheme, Kingfisher Performance Share Plan, Store Management Incentive Share Scheme and Sharesave plans in the UK, Ireland and overseas.

A summary of options is detailed below.

	2013/14		2012/13
	Options Number	Weighted average exercise price £	Options Number	Weighted average exercise price £
Outstanding at beginning of year	21,815,585	0.04	30,966,831	0.08
Granted during the year(1),(2)	1,213,771	0.18	3,013,615	0.09
Forfeited during the year	(4,061,019)	0.05	(1,988,084)	0.11
Exercised during the year	(6,368,940)	0.02	(10,176,777)	0.15
Outstanding at end of year	12,599,397	0.07	21,815,585	0.04
Exercisable at end of year	1,581,128	0.02	4,756,463	0.02

(1) The charge to the profit and loss account for the years ended 1 February 2014 and 2 February 2013 in respect of share-based payments includes the first year's charge of the 2014 and 2013 Kingfisher Incentive Share Scheme.

(2) The weighted average exercise price for options granted during the year represents a blend of nil price KISS, Performance Share Plan and discounted Sharesave options.

Options have been exercised on a regular basis throughout the year. On that basis, the weighted average share price during the year, rather than at the date of exercise, is £3.53 (2012/13: £2.81). The options outstanding at the end of the year have exercise prices ranging from nil to £3.15 and a weighted average remaining contractual life of 3.9 years (2012/13: 4.3 years).

A full list of outstanding options granted by the Company to the Group employees, which includes those held by the Executive Directors, is shown below. The Executive Directors' awards are disclosed in the Directors' Remuneration Report on pages 47 to 68.

Exercise Shares under Exercisable price option option Date of grant from £ number number Kingfisher Incentive Share Scheme 21/04/09 21/04/12 – 61,967 207,009 06/04/10 06/04/13 – 281,952 2,198,684 05/05/10 05/05/13 – 22,305 5,126,662 12/04/11 12/04/14 – 3,355,824 3,763,341 06/05/11 06/05/14 – 492,244 646,141 25/04/12 25/04/15 – 3,865,650 4,388,519 11/04/13 11/04/16 – 1,863,737 – 9,943,679 16,330,356 Restricted Awards (granted under the Kingfisher Incentive Share Scheme) 06/04/10 21/04/11 – – 42,190 06/04/10 21/04/12 – 65,835 – 06/04/10 21/04/13 – – 19,762 24/08/10 24/08/13 – – 23,095 18/01/11 09/06/13 – – 6,815 21/02/11 01/06/12 – – 12,533 21/02/11 01/06/13 – 21,268 – 21/02/11 01/06/14 – 4,557 4,557 21/02/11 01/06/15 – 1,709 1,709 26/04/11 21/04/12 – – 25,569 03/01/12 21/05/13 – – 6,344 03/01/12 31/05/14 – 10,300 10,300 16/10/12 16/01/14 – 5,975 5,975 22/10/13 22/10/14 – 32,834 – 55,375 245,952 Kingfisher Performance Share Plan 01/02/08 01/02/12 – – 1,299,709 21/04/08 21/04/12 – 106,417 867,504 01/10/08 01/10/11 – 89,652 745,856 01/10/08 01/02/12 – 760,642 745,856 01/10/08 01/10/12 – 303,212 – 21/04/09 21/04/12 – 76,490 412,486 30/10/09 21/04/12 – 2,579 2,509 05/05/10 05/05/13 – 313,741 8,240,710 21/10/10 21/04/12 – 12,944 28,586 21/10/10 05/05/13 – 72,128 42,456 12/04/11 05/05/13 – – 164,945 17/06/11 17/06/14 – 7,061,836 8,264,108 17/06/11 17/06/15 – 6,927,122 8,242,011 21/10/11 05/05/13 – – 22,095 21/10/11 17/06/14 – 103,016 142,346 21/10/11 17/06/15 – 103,021 142,351 03/05/12 17/06/14 – 360,056 424,398 03/05/12 17/06/15 – 380,601 424,407 16/10/12 17/06/14 – 526,995 583,611 16/10/12 17/06/15 – 527,002 583,619 25/04/13 17/06/14 – 65,820 – 25/04/13 17/06/15 – 65,264 – 22/10/13 22/10/16 – – 105,069 17,630,723 31,712,447			2013/14	2012/13
				Shares under

Notes to the Company financial statements continued

14 Share options continued

				2013/14	2012/13
		Exercisable from	Exercise price £	Shares under option number	Shares under option number
	Date of grant
Kingfisher Retention Share Scheme	21/04/08	21/04/12	–	–	145,000
				–	145,000
Store Management Incentive Share Scheme	21/04/09	21/04/12	–	88,000	231,000
				88,000	231,000
UK, Ireland and International Sharesave	01/11/07	01/12/12	1.55	–	139,052
	29/10/08	01/12/13	1.09	631,044	3,116,385
	03/11/09	01/12/12	1.72	–	371,226
	03/11/09	01/12/14	1.72	1,009,170	1,087,075
	28/10/10	01/12/13	1.87	235,571	1,285,330
	28/10/10	01/12/15	1.87	536,050	599,082
	26/10/11	01/12/14	1.99	2,475,062	2,862,161
	26/10/11	01/12/16	1.99	471,008	530,998
	19/10/12	01/12/15	2.17	1,978,663	2,275,239
	19/10/12	01/12/17	2.17	419,519	467,618
	22/10/13	01/12/16	3.15	2,067,578	–
	22/10/13	01/12/18	3.15	582,182	–
				10,405,847	12,734,166
Executive, International Executive	17/04/03	17/04/06	2.38	–	436,215
and Phantom Share Option Schemes	17/04/03	17/04/07	2.38	–	331,890
				–	768,105
Total				38,123,624	62,167,026

The Kingfisher Incentive Share Scheme ('KISS') and Performance Share Plan are described as part of the Directors' Remuneration Report on pages 47 to 68.

Restricted Awards are granted as one-off compensatory awards granted under the rules of the KISS. They are granted as nil cost options, as with the KISS, but do not accrue dividends until after they are exercised. Vesting dates may vary according to individual grants.

Certain employees, excluding directors, have been granted contingent share awards under the Kingfisher Retention Share Scheme. The last awards granted under this scheme vested in 2012. These awards do not accrue dividends during the vesting period.

The Store Management Incentive Share Scheme provided awards to store managers in 2009 with vesting dates of April 2011 and April 2012. There were performance conditions based on store standards and awards lapsed if not maintained throughout the performance period. These awards do not accrue dividends during the vesting period.

Under the UK Sharesave scheme, eligible UK employees have been invited to enter into HMRC approved savings contracts for a period of three or five years, whereby shares may be acquired with savings under the contract. The option price is the average market price over three days shortly before the invitation to subscribe, discounted by 20%. Options are exercisable within a six month period from the conclusion of a three or five year period. The Irish and International Sharesave plans, which operate along similar lines to the UK Sharesave scheme, include eligible employees in Ireland and certain overseas locations.

The last grant of options under the Executive, International Executive and Phantom Share Option Scheme were in April 2003. Under these schemes, participants received a bi-annual grant of options based on their position in the Group. These options are normally exercisable from the third anniversary of the date of the grant (up to the tenth anniversary), except where the performance conditions have not been met. The performance conditions for all options have now been met. On the exercise of Phantom Share Options, participants receive in cash the increase in value of the allocated number of shares in the Company. All options granted under these schemes have either now been exercised or have lapsed.

The rules of all schemes include provision for the early exercise of options in certain circumstances.

14 Share options continued

The Employee Share Ownership Plan Trust ('ESOP Trust')

The ESOP Trust is funded by an interest free loan from the Company of £82m (2012/13: £95m) to enable it to acquire shares in Kingfisher plc. The shares are used to satisfy options awarded under the KISS, Performance Share Plan, Kingfisher Retention Share Scheme and Store Management Incentive Share Scheme.

The ESOP Trust's shareholding at 1 February 2014 is 10 million shares (2012/13: 21 million shares) with a nominal value of £2m (2012/13: £3m) and a market value of £37m (2012/13: £57m). Dividends on these shares were waived for the interim and final dividends.

15 Related party transactions

During the year, the Company carried out a number of transactions with related parties in the normal course of business and on an arm's length basis. The names of the related parties, the nature of these transactions and their total value are shown below:

	2013/14		2012/13
£ millions	Income/ (expense)	Receivable/ (payable)	Income/ (expense)	Receivable/ (payable)
Transactions with Koçtas¸ Yapi Marketleri Ticaret A.S. in which the Group holds a 50% interest
Provision of employee services	(0.1)	–	(0.1)	–
Commission and other income	0.6	0.4	0.3	0.2
Transactions with Kingfisher Pension Scheme
Provision of administrative services	0.8	0.1	1.4	0.1

Services are usually negotiated with related parties on a cost-plus basis. Goods are sold or bought on the basis of the price lists in force with non-related parties.

Directors' remuneration and details of share option exercises are disclosed in the Directors' Remuneration Report on pages 47 to 68.

Other transactions with the Kingfisher Pension Scheme are detailed in note 9.

Accounts Group five year financial summary

£ millions	2009/10 52 weeks	2010/11 52 weeks	2011/12 52 weeks	2012/13 53 weeks(1)(2)	2013/14 52 weeks(1)
Income statement
Sales	10,503	10,450	10,831	10,573	11,125
Retail profit	664	762	882	778	805
Central costs	(41)	(41)	(43)	(42)	(42)
Share of interest and tax of joint ventures and associates	(17)	(17)	(20)	(18)	(17)
Operating profit before exceptional items	606	704	819	718	746
Net finance costs before financing fair value remeasurements and exceptional items	(59)	(34)	(12)	(3)	(2)
Adjusted pre-tax profit	547	670	807	715	744
Exceptional items	17	(6)	(12)	(26)	17
Financing fair value remeasurements	2	7	2	2	(2)
Profit before taxation	566	671	797	691	759
Income tax expense	(181)	(180)	(158)	(127)	(49)
Profit for the year	385	491	639	564	710
Balance sheet
Goodwill and other intangible assets	2,465	2,481	2,520	2,565	2,639
Property, plant and equipment and investment property	3,636	3,664	3,722	3,814	3,675
Assets held for sale	–	–	–	–	208
Investments in joint ventures and associates	234	259	271	289	32
Other net current liabilities(3)	(648)	(576)	(290)	(128)	(19)
Post-employment benefits	(198)	(58)	(15)	–	(100)
Other net non-current liabilities(3)	(284)	(324)	(393)	(422)	(356)
Capital employed	5,205	5,446	5,815	6,118	6,079
Equity shareholders' funds	4,945	5,452	5,719	6,148	6,308
Non-controlling interests	10	8	8	8	9
Net debt/(cash)	250	(14)	88	(38)	(238)
Capital employed	5,205	5,446	5,815	6,118	6,079
Other financial data
Like-for-like sales growth	(1.5%)	(0.9%)	1.3%	(2.9%)	0.7%
Effective tax rate	30%	29%	28%	27%	26%
Basic earnings per share (pence)	16.5	21.0	27.5	24.1	30.0
Adjusted basic earnings per share (pence)	16.4	20.5	25.1	22.3	23.4
Dividend per share (pence)	5.5	7.07	8.84	9.46	9.9
Gross capital expenditure(4)	256	310	450	316	304
Number of stores	831	856	955	1,025	1,124

(1) Like-for-like sales growth in 2012/13 was calculated by comparing 53 weeks against the equivalent 53 weeks of the prior year. Like-for-like sales growth in 2013/14 is calculated by comparing 52 weeks against the equivalent 52 weeks of the prior year. This only impacts the UK & Ireland businesses with all of the other businesses reporting on a calendar basis. The effect of the 53rd week on the results of the Group in 2012/13 was the inclusion of an additional £72m sales and an immaterial benefit to retail profit.

(2) 2012/13 has been restated for IAS 19 (revised), 'Employee benefits', resulting in the reclassification of £3m of pension administration costs from net finance costs to retail profit.

(3) Other net current liabilities and other net non-current liabilities reported above exclude any components of net debt/(cash).

(4) Excluding business acquisitions.

Annual General Meeting

The Annual General Meeting of Kingfisher plc will be held on Thursday, 12 June 2014 at 11.00am at the Paddington London Hilton Hotel, 146 Praed Street, London W2 1EE.

Financial calendar

The proposed financial calendar for 2014/15 is as follows:

29 May 2014
24 July 2014
10 September 2014
25 November 2014
March 2015

Registrar

Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Telephone: 0870 702 0129 Website: http://www.investorcentre.co.uk

Shareholder enquiries

Any queries that shareholders have regarding their shareholdings, such as a change of name or address, transfer of shares, lost share certificates or dividend cheques, should be referred to the Registrar using the contact details above. A Shareholder Helpline is available on UK business days between 8.30am and 5.30pm and contains an automated self-service functionality which is available 24 hours a day.

Share dealing facilities

Shareholders have the opportunity to buy or sell Kingfisher plc shares using a share dealing facility operated by the Registrar.

Telephone share dealing: Commission is 1%, plus £35; stamp duty at 0.5% is payable on purchases. The service is available from 8.00am to 4.30pm Monday to Friday excluding bank holidays. Telephone: 0870 703 0084.
Internet share dealing: Commission is 1%, subject to a minimum charge of £30; stamp duty at 0.5% is payable on purchases. The service is available to place orders out of market hours. Simply log onto http://www.investorcentre.co.uk. Terms and conditions of both of these services can be obtained by calling 0870 702 0129.

Unauthorised brokers (boiler room scams)

Kingfisher plc is legally obliged to make its share register available to the general public. Consequently some shareholders may receive unsolicited mail, including correspondence from unauthorised investment companies. We are aware that some shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based brokers who target UK shareholders offering to sell what often turn out to be worthless or high risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports. Details of any share dealing facilities that the Company endorses will be included in Company mailings.

Share price history

	£ per ordinary share*		Dollars per ADR**
Financial year	High	Low	High	Low
2013/14	4.20	2.71	9.34	8.40
2012/13	3.14	2.54	9.98	7.81
2011/12	2.87	2.17	9.34	6.91
2010/11	2.72	1.96	8.16	5.93
2009/10	2.47	1.18	8.24	3.15

* Based on the daily closing price of Kingfisher plc shares on the London Stock Exchange.

** Based on the daily closing price of Kingfisher plc ADRs in the Over-the-Counter (OTC) market.

Dividend

The interim dividend for the financial year ended 1 February 2014 of 3.12p per share was paid on 15 November 2013. The table below provides the payment information for the final dividend of 6.78p per share, subject to shareholder approval at the Annual General Meeting on 12 June 2014:

Ex-dividend date	14 May 2014
Record date	16 May 2014
Final date for return of DRIP mandate forms/currency elections	23 May 2014
Euro exchange rate notification	27 May 2014
Payment date and DRIP purchase	16 June 2014

Payment methods

Shareholders can elect to receive their dividends in a number of ways:

Cheque: Dividends will automatically be paid to shareholders by cheque, which will be sent by post to the shareholder's registered address;
BACS: Dividends can be paid by mandate directly to a UK bank or building society account through the BACS system. This method of payment reduces the risk of your cheque being intercepted or lost in the post. Shareholders wishing to receive their dividends in this way can update their mandate instructions at www.investorcentre.co.uk or should complete a dividend mandate form and return it to the Registrars;
Dividend Reinvestment Plan (DRIP): The Company also offers shareholders a DRIP, whereby shareholders can use their cash dividend to buy additional shares in the Company. Shareholders can apply online at www.investorcentre.co.uk or complete a mandate form and return it to the address shown above; and
Global Payments Service: This service, provided by the Registrar enables shareholders to have dividend payments paid directly into their bank account in their chosen local currency. To view terms and register, please visit www.computershare.com/uk/investor/GPS.

Shareholder information continued

American Depositary Receipt (ADR)

The Company has a Sponsored Level 1 ADR programme in the United States. Each ADR represents two Kingfisher shares.

Electronic communication

Shareholders who have not yet elected to receive shareholder documentation in electronic form can sign up by visiting www.investorcentre.co.uk/ecomms and registering their details. When registering for electronic communications, shareholders will be sent an email each time the Company publishes statutory documents, providing a link to the information.

Electing for electronic communications does not mean that shareholders cannot obtain hard copy documents. Should shareholders require a paper copy of any of the Company's shareholder documentation, they should contact the Registrar at the address stated under the section headed 'Registrar'.

Corporate website

Shareholders are encouraged to visit Kingfisher's corporate website (www.kingfisher.com). The website includes information about the Company, its strategy and business performance, latest news and press releases and approach to corporate governance. The Investor Relations section is a key tool for shareholders, with information about Kingfisher's share price, financial results, shareholders meetings and dividends. This section also contains frequently asked questions and copies of the current and past annual reports.

Kingfisher has an Investor Relations app for the iPad. The app provides access to the latest share price information, corporate news, financial reports, presentations, corporate videos and earnings webcasts both online and offline. It is updated with the latest financial information at the same time as the corporate website. To discover more, download it free from the App store.

Document viewing

Shareholders will have the opportunity to view certain documentation as outlined in the Notice of Annual General Meeting from at least 15 minutes prior to the meeting, until its conclusion. The rules of the Kingfisher Incentive Share plans and the Articles of Association of the Company and other documentation referred to in this Annual Report can be viewed at the registered office during normal business hours.

Company Secretary and Registered Office

Kathryn Hudson Kingfisher plc 3 Sheldon Square Paddington London W2 6PX

Telephone: +44 (0)20 7372 8008 Fax: +44 (0)20 7644 1001 www.kingfisher.com

Registered in England and Wales Registered Number 01664812

Forward-looking statements

Certain statements included in this Annual Report and Accounts are forward-looking and should be considered, amongst other statutory provisions, in light of the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995. All statements other than historical facts may be forward-looking statements. Such statements are therefore subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied because they relate to future events. These forward-looking statements include, but are not limited to, statements relating to the Company's expectations around the Company's programme known as Creating the Leader and its associated eight steps.

Forward-looking statements can be identified by the use of relevant terminology including the words: 'believes', 'estimates', 'anticipates', 'expects', 'intends', 'plans', 'goal', 'target', 'aim', 'may', 'will', 'would', 'could' or 'should' or, in each case, their negative or other variations or comparable terminology and include all matters that are not historical facts. They appear in a number of places throughout this Annual Report and Accounts and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, changes in tax rates, liquidity, prospects, growth, strategies and the businesses we operate.

Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements include, but are not limited to, global economic business conditions, monetary and interest rate policies, foreign currency exchange rates, equity and property prices, the impact of competition, inflation and deflation, changes to regulations, taxes and legislation, changes to consumer saving and spending habits; and our success in managing these factors.

Consequently, our actual future financial condition, performance and results could differ materially from the plans, goals and expectations set out in our forward-looking statements. Reliance should not be placed on any forward-looking statement. The forward-looking statements contained herein speak only as of the date of this Annual Report and the Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

Glossary

Adjusted measures are before exceptional items, financing fair value remeasurements, amortisation of acquisition intangibles, related tax items and tax on prior year items including the impact of rate changes on deferred tax. A reconciliation to statutory amounts is set out in the Financial Review (pages 20 to 27).

Banque de France data includes relocated and extended stores.

Brico Dépôt comparable market is a rolling 12 month average of Banque de France (60%) and I+C (www.iplusc.com) trade data (40%) February 2013 – January 2014.

Common means two or more operating companies selling the same product or a similar product but from the same supplier where the same product is not possible due to market / legal reasons (e.g. electrical extension cable which is the same supplier but with different electrical sockets).

Constant currency 13 week basis In the UK & Ireland Kingfisher reports each financial year up to the nearest Saturday to 31 January. In 2012/13 this resulted in a 14 week fourth quarter.

Constant currency change 52 week basis In the UK & Ireland Kingfisher reports each financial year up to the nearest Saturday to 31 January. In 2012/13 this resulted in a 53 week year.

EBITDA (earnings before interest, tax, depreciation and amortisation) which is calculated as Retail profit less central costs and before depreciation and amortisation.

EBITDAR (earnings before interest, tax, depreciation, amortisation and property operating lease rentals) which is calculated as Retail profit less central costs, before depreciation and amortisation and property operating lease rentals.

France consists of Castorama France and Brico Dépôt France.

Free cash flow represents cash generated from operations less the amount spent on tax, interest and capital expenditure during the year (excluding acquisitions). A reconciliation from operating profit (before exceptional items) is set out in the Financial Review (pages 20 to 27).

FFVR (financing fair value remeasurements) represents changes in the fair value of financing derivatives, excluding interest accruals, offset by fair value adjustments to the carrying value of borrowings and other hedged items under fair value hedge relationships.

KEP (Kingfisher Economic Profit) represents earnings after a charge for the annual cost of capital employed in the business. A definition is provided in the Financial Review (pages 20 to 27).

LFL stands for like-for-like sales growth which represents the constant currency, year-on-year sales growth for stores that have been open for more than a year.

LME is the legislative change shortening payment terms in France, implemented over the three years to 2012.

Market for the UK's leading home improvement retailers Kingfisher estimate for the UK RMI (Repairs, Maintenance & Improvement) market incorporates GfK data, which includes new space but which excludes B&Q Ireland and private retailers e.g. IKEA and other smaller independents. It is on a cash sales basis and is adjusted for discounts.

Net cash comprises borrowings and financing derivatives (excluding accrued interest), less cash and cash equivalents and current other investments.

Omnichannel – allowing customers to shop with us in any way they prefer (via shops, the internet or catalogues).

Other International consists of China, Poland, Romania, Russia, Spain, Turkey (Koçtas¸ JV) and Hornbach in Germany.

Retail profit is operating profit stated before central costs, exceptional items, amortisation of acquisition intangibles and the Group's share of interest and tax of JVs and associates. 2012/13 Group and UK retail profit comparatives restated by £3 million to reflect reclassification of pension administrative expenses from finance costs to retail profit in the UK, as per the amended IAS 19.

Sales Joint Venture (Koçtas¸ JV) and Associate (Hornbach) sales are not consolidated.

Smaller tradesman market Kingfisher estimate for the UK smaller tradesman market is a weighted average incorporating 70% trade (using the most recent public data available for the big trade merchants as a proxy) and 30% DIY (using the UK RMI (Repairs, Maintenance & Improvement) GfK large chain (shed) data).

TradePoint B&Q UK & Ireland's trade-only offer.

UK & Ireland consists of B&Q in the UK & Ireland and Screwfix.

Kingfisher is included in two socially responsible indices, the FTSE4Good and Dow Jones Sustainability Indexes. We also achieved Business in the Community's Corporate Responsibility Index Platinum Big Tick in the 2013 survey.

This document is printed on UPM Fine Offset, a paper containing virgin fibre sourced from well-managed, responsible, FSC® certified forests.

100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled.

Printed by Park Communications on FSC® certified paper. Park is an EMAS certified company and its Environmental management System is certified to ISO 14001.

Designed and produced by Black Sun Plc www.blacksunplc.com

Kingfisher plc, 3 Sheldon Square, Paddington, London W2 6PX Telephone: +44 (0)20 7372 8008 www.kingfisher.com

AI assistant

Kingfisher PLC — Annual Report 2013

4675_10-k_2014-02-01_9184b040-f052-4aca-bcc2-efceadc019e2.pdf

Contents

Strategic Report

Governance

Accounts

Our online reporting

Strategic Report Key highlights

£759m +9.8% Profit before taxation (£m)

Our purpose

Our purpose is to make it easier for customers to have better and more sustainable homes.

Key figures*

Our brands

Kingfisher Group Executive

Our operating countries

Our markets

France

Strategic Report Chairman's statement

Key highlights

Group Chief Executive's statement

Sir Ian Cheshire

Sir Ian Cheshire

What we do

How we do it – our Net Positive ambitions

Financial value

Maximising sales

Customers

People

Products

Channels

Minimising costs

Cash generated

Page Heading EAS IER COMMON CREATING THE LEADER

Our markets

Our strategy

COMMON ONE TEAM Helping people have bet ter homes

Creating the Leader: Self-help initiatives

Financial benefits

EASIER AFFORDABLE CONFIDENCE TECHNOLOGY RANGE HELPFUL ADVICEAVAILABILITY EDUCATIONCHOICE

Our key steps

What we did in 2013/14

Emphasised our affordability credentials:

Extended our omnichannel offer:

CONVENIENT RESEARCH AVAILABILITY EDUCATIONCHOICE OMNICHANNEL

Key Performance Indicators (KPIs)

+1.3% Unique web users (m) Monthly Moving Annual Average

Key future priorities

Our key priority in 2014/15 is to:

Strategic Report Creating the leader Strategic Report Creating the Leader

COMMON WORLD'S BEST PRODUCTS LOCAL MARKETS SCALE EXCLUSIVE BRANDS CUSTOMER UNIQUE CHOICE EFFICIENCY INNOVATION INTERNATIONAL

Our key steps

What we did in 2013/14

Product:

Efficiency:

SCALE CHOICE EFFICIENCY LOCAL TASTE INTERNATIONALEXCLUSIVE DIVERSE PRODUCTIVITY

Key Performance Indicators (KPIs)

Common product sales

Retail profit margin

Key future priorities

Our key priorities in 2014/15 are to:

Strategic Report Creating the leader Strategic Report Creating the Leader

EXPAND GROWTH HIGHER RETURNS TRADE FLEXIBILITY INFILL CONSUMER REACH AMBITION BIG BOX INTERNATIONAL CAPABILITY LOCAL EXPERTISE

Our key steps

What we did in 2013/14

Existing markets:

New and developing markets:

KINGFISHER ECONOMIC PROFIT AMBITION NEW TERRITORIES INTERNATIONAL CAPABILITY

Key Performance Indicators (KPIs)

Kingfisher Economic Profit (KEP)*(£m)

Key future priorities

Our key priorities in 2014/15 are:

Strategic Report Creating the leader Strategic Report Creating the Leader

ONE TEAM DEVELOPING LEADERS NET POSITIVE DIVERSITY RECRUITMENTAMBITION COLLABORATION ACADEMY HARNESS

Our key steps

What we did in 2013/14

People:

Net Positive:

DEVELOPING LEADERS ACADEMY CONNECTING PEOPLE ENGAGEMENT SKILLS MOBILITY TALENTRETENTION POSITIVE IMPACT

Key Performance Indicators (KPIs)

Kingfisher PLC Annual Report 2013

**Kingfisher Economic Profit (KEP)*(£m)**