SHAREHOLDERS’ EQUITY

The development of shareholders’ equity in the HORNBACH-Baumarkt Group is shown in the Changes in Shareholders’ Equity schedule for the 2001/2002 and 2002/2003 financial years respectively.

(21) Subscribed capital

The subscribed capital amounts to € 45,034,500.00. It is divided into 15,011,500 ordinary shares, each with a nominal amount of € 3.00 in the subscribed capital.

N O T E S O N T H E C O N S O L I D A T E D B A L A N C E S H E E T

The following provisions apply for the authorized and conditional capital:

The Board of Management is authorized, with the approval of the Supervisory Board of the company, to increase the registered capital of the company by up to € 6,391,148.51 by August 27, 2003 (nominal amount) by means of a single or repeated issue of new shares – ordinary shares with voting rights or non- voting preference shares – in exchange for cash contributions (Authorized Capital I).

The Board of Directors is authorized, with the approval of the Supervisory Board of the company, to in- crease the registered capital of the company by up to € 12,782,297.03 by August 27, 2003 (nominal amount) by means of a single or repeated issue of new shares – ordinary shares with voting rights or non-voting preference shares – in exchange for cash contributions or contributions in kind (Authorized Capital II). In total, therefore, the authorized capital amounts to € 19,173,445.54. This is equivalent to 42.58% of the current registered capital.

The conditional increase in the registered capital for executing the 1997 share option plan on the basis of the shareholders’ meeting of August 28, 1997 – now amounting to € 565,500.00 – is still valid (Condi- tional Capital I). A sum of € 303,000.00 of Conditional Capital I can no longer be used in view of the fact that the subscription period for the convertible bond was from May 12 to June 6, 1997 and has therefore expired.

The shareholders’ meeting held on August 26, 1999 resolved the creation of an additional Conditional Capi- tal in the total nominal amount of up to 1,500,000 ordinary shares. These shares are earmarked for the HORNBACH Share Option Plan of 1999; details on this can be found in Note 33 (Conditional Capital II). The total Conditional Capital therefore amounts to € 5,065,500.00. This is equivalent to 12.58 % of the current registered capital.

HORNBACH-Baumarkt-AG published the following notification in the Stock Exchange Gazette (Börsen- Zeitung) of August 16, 2002 in accordance with § 25, para. 1 of the German Securities Trading Act (WpHG): Hornbach Familientreuhand GmbH, Annweiler am Trifels, has notified us in accordance with § 21, para. 1 and § 22, para. 1, no. 1 of the Securities Trading Act that its voting right in HORNBACH- Baumarkt-AG exceeded the 5 % threshold on August 6, 2002 and is now equivalent to 80.29 %. This re- lates exclusively to allocable voting rights in accordance with § 22, para. 1, no. 1 of the German Securities Trading Act.

HORNBACH-Baumarkt-AG published the following notification in the Stock Exchange Gazette (Börsen- Zeitung) of August 16, 2002 in accordance with § 25, para. 1 of the German Securities Trading Act (WpHG): Kingfisher plc, London/Great Britain, has notified us in accordance with § 21, para. 1 of the German Securities Trading Act that its voting right in HORNBACH-Baumarkt-AG, Bornheim bei Landau/ Pfalz, exceeded the 5 % threshold on October 11, 2002. Kingfisher plc is now entitled to approximately 5.5 % of the voting rights in our company (826,924 ordinary shares). This relates exclusively to its own voting rights. Kingfisher held no voting rights whatsoever in HORNBACH-Baumarkt-AG prior to its acqui- sition of 826,924 voting rights.

(22) Capital reserve

The capital reserve relates to the following:

€ m Premium on the issue of shares in 1993/1994 by HORNBACH-Baumarkt-AG 128.8 Premium on convertible bonds in 1998/1999 by HORNBACH-Baumarkt-AG 0.3 Withdrawal in 1999/2000 for the Euro equalization of the subscribed capital –6.6

N O T E S O N T H E C O N S O L I D A T E D B A L A N C E S H E E T

(23) Revenue reserves

Revenue reserves relate to “statutory reserves” and “other revenue reserves”.

Foreign exchange conversion differences of € 947k (2001/2002: € 1,116k) are included in the revenue reserves.

(24) Distributable earnings and dividends

The distributable amounts relate to the retained earnings of HORNBACH-Baumarkt-AG, determined in ac- cordance with German commercial law.

The Board of Management and the Supervisory Board of HORNBACH-Baumarkt-AG proposed to the annual general meeting that the retained earnings reported on February 28, 2003 in the amount of € 13,143,340.54 should be appropriated as follows:

€ A dividend of € 0.87 on 15,011,500 ordinary shares 13,060,005.00

Balance to be carried forward to the following year 83,335.54

13,143,340.54

If a dividend of € 13,060k were to be paid after the moratorium (at present a three-year exclusion period for the enforcement of corporation tax creditors based on distribution), the corporation tax reduction would amount to € 2,175k.

(25) Financial liabilities

Financial liabilities are made up of the following items:

2002/2003 Financial Year Maturity Periods

(in € 000s) Short-term Long-term 5 years 02.28.2003

less than 1 year 1-5 years or more Total

Bonds 197 197

of which: convertible (197) (197)

Liabilities to banks 124,217 178,696 104,630 407,543 Liabilities in connection

with finance leasing contracts 695 2,302 2,197 5,194 Liabilities in connection

with financial derivatives 3,543 – – 3,543

128,455 180,998 107,024 416,477

2001/2002 Financial Year Maturity Periods

(in € 000s) Short-term Long-term 5 years 02.28.2002

less than 1 year 1-5 years or more Total

Bonds 202 202

of which: convertible – – (202) (202)

Liabilities to banks 64,516 179,696 103,101 347,313

Liabilities in connection

with finance leasing contracts 650 2,847 2,347 5,844

Bill liabilities 1,908 – – 1,908

N O T E S O N T H E C O N S O L I D A T E D B A L A N C E S H E E T

Mortgages of € 408,272 (2001/2002: € 384,206) are registered as collateral for liabilities to banks. The HORNBACH-Baumarkt-AG Group had outstanding credit lines of € 13.5 million available on Febru- ary 28, 2003 together with outstanding credit lines for letters of credit amounting to USD 6 million. The HORNBACH-Baumarkt-AG Group also has outstanding credit lines amounting to € 42.3m within the scope of collective agreements of the HORNBACH HOLDING AG Group.

In addition to existing current account liabilities at normal market conditions, the Group also has medium and long-term liabilities to banks. These are mainly fixed-interest loans and consist of the following items:

2002/2003 Financial Year Currency % Interest Maturity Amount

Agreement 02.28.2003

(including € 000s

swap)

Loans Euro 4.8 to 5.85 2006 to 2023 2,422

Mortgage loans Euro 3.53 to 7.72 2004 to 2017 278,884

CZK 6.25 to 7.98 2010 to 2015 30,466

311,772