High-quality and responsible corporate governance are accorded high priority at HORNBACH-Baumarkt-AG.The German Corporate Governance Code incorporates the principal legal requirements in respect of themanagement and supervision of German publicly listed stock corporations and contains nationally andinternationally recognized standards of good and responsible corporate management. HORNBACH-Baumarkt-AG is in compliance with the amended version of the Code published in June 2006, with thefollowing exceptions: the setting of an age limit for members of the Supervisory Board, the disclosure ofthe compensation of members of the Board of Management and the Supervisory Board on an individualbasis and the setting of parameters of comparison for the share option plan.

At their meeting on November 28, 2006, the Board of Management and Supervisory Board of HORNBACH-Baumarkt-AG submitted their statement in respect of the recommendations of the German CorporateGovernance Code pursuant to Section 161 of the German Stock Corporation Act (AktG) and made thisstatement available to shareholders on the company's homepage. The complete statement can be foundstarting on Page 24 of this report.

The Supervisory Board of HORNBACH-Baumarkt-AG consists of 12 members and, in line with the German Codetermination Act (MitBestimmG), includes equal numbers of shareholder and employeerepresentatives. In the event of a parity of votes in the Supervisory Board, the Chairman of theSupervisory Board has the decisive vote in the second round, should renewed voting also produce aparity. The Supervisory Board monitors the management of the company and accompanies the Board of Management in an advisory capacity. It appoints the members of the Board of Management,dismisses them and is responsible for the conclusion, amendment and termination of employmentcontracts with members of the Board of Management. Any measures proposed by the Board ofManagement which could have a fundamental impact on the net asset, financial or earnings situationof the company require the prior consent of the Supervisory Board. The Code of Procedure for theSupervisory Board contains a catalog of the transactions and measures requiring consent. TheSupervisory Board may at any time resolve to extend or reduce the list of such transactions.

The members of the Supervisory Board are exclusively obliged to safeguard the interests of the company.They are not dependent on any assignments or instructions. They may not pursue any personal interestswhen making decisions, neither may they exploit business opportunities available to the company fortheir personal benefit. The members of the Supervisory Board are obliged to disclose any conflicts ofinterest to the Chairman of the Supervisory Board, especially any conflicts of interest arising due totheir fulfilling any advisory, executive or supervisory role at customers, suppliers, lenders or otherbusiness partners of the company. Any conflicts of interest in relation to a member of the SupervisoryBoard which are substantial and not merely temporary shall result in a termination of the respectiveSupervisory Board mandate. No conflicts of interests arose during the year under report. Advisoryagreements and other service or work contracts to be concluded between a member of the SupervisoryBoard and the company require the prior consent of the Supervisory Board. The Supervisory Board hasestablished the following committees:

	Mediation Committee
	Personnel Committee
	Audit Committee

The members of the respective committees are listed here.

The Board of Management of HORNBACH-Baumarkt-AG has a Chairman and consisted of five membersuntil March 31, 2006. One member of the Board of Management retired from his position as ofMarch 31, 2006. In the period from April 1, 2006 until November 30, 2006, the Board of Management consisted of four members. Since December 1, 2006, the Board of Management has once againconsisted of five members. The Board of Management of HORNBACH-Baumarkt-AG has a self-imposedCode of Procedure. Its members are jointly responsible for the management of the company's business.The Board of Management provides timely and comprehensive information to the Supervisory Board on aregular basis. This information includes all questions of relevance to the company in respect of itscorporate strategy, planning, business development, financial and earnings position, risk situation andrisk management. Furthermore, it presents the group investment, financial and earnings budgets to theSupervisory Board both for the forthcoming financial year and for the medium term (five years). TheChairman of the Board of Management provides immediate report to the Chairman of the SupervisoryBoard of any significant events which are of material relevance for any assessment of the situation anddevelopment of the company, as well as of its management. Transactions and measures requiring theconsent of the Supervisory Board are presented to the Supervisory Board in good time. Members of theBoard of Management are obliged to disclose any conflicts of interest to the Supervisory Board withoutdelay and to inform the other members of the Board of Management of such conflicts. Members of theBoard of Management may only pursue secondary occupations, in particular Supervisory Boardmandates outside the Group, with the consent of the Chairman of the Supervisory Board.

The shareholders of HORNBACH-Baumarkt-AG exercise their rights, including their voting rights, at the annual general meeting. They are informed at regular intervals of all significant dates by means of the financial calendar published in the annual report, in the quarterly reports and on the homepage of the company. The annual general meeting is generally chaired by the Supervisory Board Chairman.

The financial statements of the HORNBACH-Baumarkt-AG Group are compiled in accordance with International Financial Reporting Standards (IFRS). The separate financial statements of HORNBACH-Baumarkt-AG are compiled in accordance with the German Commercial Code (HGB). In line with legal requirements, the auditor is elected by the annual general meeting. The Audit Committee prepares the Supervisory Board proposal to the annual general meeting with regard to the auditor to be elected. HORNBACH-Baumarkt-AG has a risk management system which is continuously developed and updated to account for any changes in underlying conditions. The functionality of the risk management system is reviewed by the auditors.

The company's shareholders, all capital market participants, financial analysts, investors, shareholder associations and the media are provided with up-to-date information at regular intervals on the situation of the company and any material alterations in its business situation. The internet constitutes the principal means of communication for such information. All individuals active on behalf of the company and who thereby have access to insider information are informed of their obligations with regard to insider law.

The situation and results of HORNBACH-Baumarkt-AG are reported by means of:

	Quarterly reports
	The annual report
	The annual results press conference
	Telephone conferences with international financial analysts and investors
	Events with financial analysts and investors in Germany and abroad.

The dates of relevance to the company's regular financial reporting activities have been summarized in the financial calendar published on the internet communications platform of the HORNBACH Grup at www.hornbach-group.com. In addition to these regular reporting activities, any facts arising at HORNBACH-Baumarkt-AG which are not publicly known and which are likely to have a significant influence on the price of the company's share are published in the form of ad-hoc announcements.

The members of the Board of Management and of the Supervisory Board of HORNBACH-Baumarkt-AG, as well as individuals closely related to such members, are required by Section 15a of the German Securities Trading Act (WpHG) and by Point 6.6 of the German Corporate Governance Code to disclose any transactions involving shares in the company or financial instruments based on such shares.

During the year under report, the company was not notified of any transactions undertaken by persons in management positions or by individuals closely related to such persons pursuant to Section 15a of the German Securities Trading Act (WpHG) (Directors' Dealings).

Reference is made to the separate compensation report within the group management report in respect of the compensation of the Board of Management and the Supervisory Board.