In 2006, the stock markets latched seamlessly onto the superb performance seen in the previous year. The upward trend on global stock exchanges came to a halt in May due to the substantial rise in crude oil prices in the preceding months and to concerns regarding interest rate rises. However, the subsequent period of correction, which led to highly volatile movements in share prices on the large capital markets, did not last for long. The rise in share prices in the second half of 2006 was a reflection of strong company earnings figures, lively merger and acquisitions activities, and favorable economic developments in Germany and Europe. Moreover, the US economy proved to be in more robust state than had widely been expected.

Following its annual low of just under 5,300 points (June 13, 2006), the German Stock Index (DAX) rose consistently, breaking through the 7,000 points barrier on February 26, 2007 – a level last achieved in 2000. During the reporting period from March 1, 2006 to February 28, 2007, the DAX rose by 14.5 %, before turbulence on the Asian stock exchanges and reports of a US mortgage crisis triggered a period of increasing jitters at international financial centers.

The share of HORNBACH-Baumarkt-AG (ISIN DE0006084403) outperformed the overall market by a considerable margin in the 2006/2007 financial year. With an increase of 28.0 %, our share topped the performances reported for the DAX (plus 14.5 %), MDAX (plus 15.3 %), and SDAX (18.4 %). The share witnessed a racing start in the first six trading weeks of the reporting period, with above-average levels of demand. However, having peaked more than 30 % above its value on March 1 (€ 36.35), the Baumarkt share was unable to maintain these initial gains. The decline in the share price was accompanied by wintry weather conditions, in some cases extreme, which impeded the DIY business across large parts of Europe well into April. The correction on the stock markets in the months of May and June also did not fail to leave its mark on our share. The placement of larger-scale parcels of shares as a result of share options being exercised within the framework of our share option programs in June and July also exerted slight pressure on the performance of our share.

On August 15, 2006, the HORNBACH-Baumarkt share reached its annual low of € 32.10 in Xetra trading. After this, the share rapidly regained ground. The performance of the share was subsequently boosted by positive reports on the course of business and the marked pick-up in the sales performance of our DIY megastores with garden centers in the second half of the reporting period. Not only that, investors began to pay greater attention to those consumer stocks with the potential to benefit from the effect of purchases being brought forward in advance of the sales tax increased scheduled to take effect in Germany in January 2007. With its concept, tailored as it is to larger-scale renovation and construction projects, HORNBACH received increased attention from investors. Moreover, the ongoing economic upturn, which also benefited the German construction industry for the first time in many years, also provided investors with a positive impression of our future business prospects.

Following a brief pause to catch breath at the end of December, our share headed for its annual high, which was recorded at € 50.29 (Xetra) on February 1, 2007, its highest price for 13 years. Following profit taking, the stock concluded the financial year (February 28, 2007) at € 46.51 and thus 28.0 % higher than on March 1, 2006.

The 2006/2007 financial year saw a marked increase in the daily average number of HORNBACH-Baumarkt shares traded on the stock exchange. An average of more than 1,500 shares was traded per day in Xetra trading, equivalent to an increase of almost 20 % on the previous year. Daily floor trading volumes at the Frankfurt Stock Exchange even rose by 66 % to more than 600 shares. This was attributable on the one hand to the further increase in awareness of our Group and to international investors stepping up their search for attractive consumer stocks. On the other hand, the share’s liquidity was further boosted by the issue of new shares within the framework of our share option programs. Thanks to the pleasing performance of the share, subscription rights relating to the 1997 and 1999 share option plans at HORNBACH-Baumarkt-AG were exercised during the 2006/2007 financial year. This resulted in the creation of a total of 305,800 new shares, leading the number of non-par ordinary shares to increase from 15,200,320 to 15,506,120.

Our investor relations activities once again provided shareholders, analysts, the financial media, and the general public with prompt information on the performance of HORNBACH-Baumarkt-AG in the past financial year. All quarterly reports, annual reports, press releases, and additional financial information were published on the internet communications platform of the HORNBACH Group (www.hornbach-group.com), where we have pooled all of our information and services for shareholders and press representatives. This separate site for corporate communications thus complements the product-related and marketing content available at HORNBACH’s internet site at www.hornbach.com.

The annual general meeting, the annual results press conference, analysts’ conferences, and meetings with investors in Germany and abroad gave HORNBACH the opportunity to maintain its dialog with the capital markets. Moreover, we also draw on personal contacts with the media in order to present the objectives and strategy of our company within the framework of interviews. We achieved a further substantial increase in our presence in the most important financial media in the past financial year. In doing so, we outlined the specific details of our concept, our market position, and the further growth prospects for the Group, as well as our current performance figures.

In the focus of value investor
With its DIY megastores with garden centers across Europe and its concept tailored to project customers, HORNBACH has a clear focus on organic growth. Its concept has proven to be successful on an international basis. Our share is particularly interesting for value investors with a long-term perspective. These investors see sustainable growth potential for HORNBACH, particularly in view of the opportunity profile set out in greater detail in the management report.

The share of HORNBACH-Baumarkt-AG (ISIN DE0006084403) represents a solid long-term investment with a high intrinsic value and a stable dividend. Of around 15.5 million ordinary shares in HORNBACH-Baumarkt-AG, 78.4 % were held by its parent company, HORNBACH HOLDING AG, at the reporting date on February 28, 2007 (2005/2006: 79.4 %), while 16.3 % (2005/2006: 15.2 %) were owned by independent shareholders. The British retail group Kingfisher plc, with which HORNBACH entered a strategic alliance at the end of 2001, holds 5.3 % of the shares. In line with the index system of the German stock exchange, HORNBACH-Baumarkt-AG is admitted for trading in the Prime Standard (a subsection of the official market involving additional admissions requirements). The company’s listing in the Prime Standard obliges it to meet a high level of transparency standards.