Re agenda item 6: Remuneration Report 2023/24 including Audit Report

HORNBACH Holding AG & Co. KGaA

Group

2023/24

Remuneration Report

2023/24 Remuneration Report

HORNBACH Holding AG & Co. KGaA is a publicly listed company with the legal form of a partnership limited by shares (Kommanditgesellschaft auf Aktien - "KGaA"). Pursuant to § 162 of the German Stock Corporation Act (Aktiengesetz - "AktG"), the "management and supervisory boards of the listed company […] are required to prepare a clear and understandable report each year on the remuneration granted and owed to each individual current or former member of the management and supervisory boards of the company and of companies within the same group (§ 290 of the German Commercial Code (Handelsgesetzbuch - "HGB")). As a KGaA, HORNBACH Holding AG & Co. KGaA has a Supervisory Board, but does not have a Board of Management. The management of HORNBACH Holding AG & Co. KGaA is instead incumbent on the unlisted company HORNBACH Management AG as the General Partner. HORNBACH Management AG has a Supervisory Board and a Board of Management.

The Supervisory Board of HORNBACH Holding AG & Co. KGaA and the General Partner HORNBACH Management AG compiled a remuneration report pursuant to § 162 AktG for the first time for the 2021/22 financial year. The Annual General Meeting of HORNBACH Holding AG & Co. KGaA on July 7, 2023 approved the most recent remuneration report for the 2022/23 financial year with a majority of 98.41% of the votes cast. The Supervisory Board of HORNBACH Holding AG & Co. KGaA and the General Partner HORNBACH Management AG have again compiled a remuneration report pursuant to § 162 AktG for the 2023/24 financial year. This report on the on one hand presents the remuneration granted and owed to each individual current and former member of the Supervisory Board of HORNBACH Holding AG & Co. KGaA. On the other hand, it voluntarily presents the remuneration granted and owed to each current and former member of the Board of Management and Supervisory Board of HORNBACH Management AG. Moreover, the report explains the principles underlying the remuneration systems for members of the Board of Management and the Supervisory Boards of HORNBACH Holding AG & Co. KGaA and HORNBACH Management AG.

1. Remuneration of members of Board of Management of HORNBACH Management AG

1. Overview of remuneration system for Board of Management of HORNBACH Management AG
   The remuneration of the Board of Management for the 2023/24 financial year is based on the remuneration system adopted by the Supervisory Board of HORNBACH Management AG on December 18, 2019, which took effect as of March 1, 2020. This was amended by a resolution adopted on February 24, 2023, which took effect as of March 1, 2023 (the "remuneration system of HORNBACH Management AG"). An overview of this system is presented below.
   The remuneration of members of the Board of Management comprises fixed and variable components. Fixed remuneration components for the members of the Board of Management are the fixed annual salary, ancillary benefits, and the company pension scheme. The variable components are one-year variable remuneration ("OVR") and multiyear variable remuneration ("MVR"). Furthermore, the remuneration system lays down share ownership guidelines ("SOG") for members of the Board of Management.
   The MVR presented in this remuneration report as granted long-term variable remuneration, which was allocated as of March 1, 2020, is based on the remuneration system originally adopted on December 18, 2019. The performance criteria for this MVR are additionally presented extensively and transparently in Section 2.2.1 b).
   When contractually determining remuneration, the Supervisory Board also accounts for a market comparison. Upon the most recent revision to remuneration in 2020, the market comparison was based on remuneration paid at SDAX companies (except HORNBACH Holding AG & Co. KGaA). The derivation of the amounts of remuneration was based on the criteria of sales, number of employees, and market capitalization. No amendments have since been made to the target amounts of remuneration.

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Remuneration	Assessment basis / parameter
component
Fixed remuneration components

Fixed annual salary

Ancillary benefits

Company pension scheme

in 12 equal monthly instalments at the end of each calendar month

• Private use of a company car
• Accident insurance
• Employer grants to health and nursing care insurance
• Grant to voluntary pension insurance or, alternatively, to contributions to a life insurance policy amounting to 50% of the respectively valid pension insurance rate up to the amount of the assessment ceiling
• D&O insurance at the expense of HORNBACH Holding AG & Co. KGaA

Divergent rules apply in some cases for members of the Board of Management who are simultaneously members of the Board of Management of HORNBACH Baumarkt AG and already entitled to the respective ancillary benefit due to their employment relationship at that company.

Plan type: Defined contribution commitment

Contribution: Half-yearly pension contribution amounting to 12.5% of fixed gross annual salary

Variable remuneration components

One-year variable remuneration (OVR)

Plan type:	Target bonus
Target amount:	-	Chief Executive Officer: € 265,000
	-	Members of Board of Management: € 60.000

Cap:

Performance criteria:

Assessment period: Payment date:

200% of target amount

• Sales (40%), free cash flow (30%) and EBT (30%) of HORNBACH Holding AG & Co. KGaA (figures taken from consolidated financial statements)
• Modifier (0.8-1.2)

One year (prospective)

Month in which consolidated financial statements of HORNBACH Holding AG & Co. KGaA for respective financial year are approved, at latest month thereafter.

Objective: To provide an incentive for the Board of Management to focus its activities on the growth strategy pursued by the company and to incentivize the ongoing increase in the company's earnings strength and internal financing potential.

Multiyear variable remuneration (MVR)

Plan type:

Target amount:

Cap:

Performance criteria:

Performance period: Payment date:

Performance cash plan

• Chief Executive Officer: € 425,000
• Members of Board of Management: € 100,000

The target amount of the MVR tranche exceeds the OVR target amount 200% of target amount

• Relative TSR (25%) of HORNBACH Holding AG & Co. KGaA
• ROCE premium over WACC (50%) of HORNBACH Holding AG & Co. KGaA and
• ESG criteria (25%)
• Modifier (0.8-1.2)

Four years (prospective)

Month in which consolidated financial statements for final financial year in four-year performance period are approved, at latest month thereafter.

Objective: To create long-term incentives to generate an adequate return for shareholders, also by comparison with the market, and to present and promote in the remuneration system for the Board of Management all aspects of sustainably profitable value creation resulting from entrepreneurial actions.

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Remuneration	Assessment basis / parameter
component
Other provisions
SOG	- Obligation to use 50% of MVR payment amount to acquire shares
	in HORNBACH Holding AG & Co. KGaA.
	- SOG target: 150% of one fixed gross annual salary for Chief Executive Officer; 100% of one
	fixed gross annual salary for regular member of Board of Management.
	- Shares to be held for duration of activity on Board of Management.
	The share ownership guideline (SOG) is intended in particular to align the remuneration
	structure to the company's permanent business success. The obligation to acquire and hold
	shares links the remuneration of the Board of Management to the share price performance of
	HORNBACH Holding AG & Co. KGaA, which in turn reflects the company's inherent earnings
	strength.
Maximum	- Cap on total remuneration payable by HORNBACH Management AG for a financial year (total
remuneration	of fixed annual salary, variable remuneration components, company pension scheme, and
	ancillary benefits), irrespective of payment date.
	- Chief Executive Officer: € 2,040,000; regular members of Board of Management: € 520,000
	each
	- If remuneration exceeds the maximum amount, the MVR payment amount is reduced for the
	respective grant year.
Malus and clawback	- The Supervisory Board may reduce the OVR and/or MVR payment amounts by up to 100% in
regulations	the event of improper conduct on the part of a member of the Board of Management during the
	assessment period ("Malus").
	- Claim to repayment of OVR and/or MVR in the event of objectively erroneous consolidated
	financial statements ("clawback").

By resolution dated February 24, 2023, the Supervisory Board amended the remuneration system at HORNBACH Management AG with effect as of March 1, 2023 and included ESG criteria as new non-financial performance criteria in the MVR. MVR was allocated for the first time on the basis of the amended remuneration system in the 2023/24 financial year. Detailed report on this MVR will be provided in the remuneration report for the 2026/27 financial year. The ESG criteria are weighted at 25% alongside the existing financial performance criteria of ROCE premium over WACC (new weighting of 50% from the 2023/24 financial year, replacing previous weighting of 75%) and total shareholder return (weighting unchanged at 25%) (for further details, please see 2.2.1 b) ff) (1)).

Outlook for the 2024/25 financial year

By resolution dated February 22, 2024, the Supervisory Board adopted minor amendments to the ESG criteria agreed in the MVR. These take effect as of March 1, 2024 (please see Section 2.2.1 b) ff) (2)).

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1. Remuneration of incumbent members of Board of Management of HORNBACH Management AG in 2023/24 financial year

1. Members of Board of Management of HORNBACH Management AG in 2023/24 financial year

The following individuals were members of the Board of Management of HORNBACH Management AG in the 2023/24 financial year:

• Albrecht Hornbach, member of Board of Management and Chief Executive Officer since October 9, 2015
• Karin Dohm, member of Board of Management since January 1, 2021
• Herr Erich Harsch, member of Board of Management since June 1, 2023

In principle, the remuneration paid to members of the Board of Management of HORNBACH Management AG is also deemed as settlement for activities at subsidiaries and shareholdings.

Albrecht Hornbach is Chair of the Supervisory Boards of HORNBACH Baumarkt AG and HORNBACH Immobilien AG. He receives additional remuneration for his activity as Chair of the Supervisory Board of HORNBACH Baumarkt AG.

Karin Dohm has been a member of the Board of Management of HORNBACH Baumarkt AG since January 1, 2021. In addition to her remuneration as a member of the Board of Management of HORNBACH Management AG, in the 2023/24 financial year Karin Dohm also received remuneration as a member of the Board of Management of HORNBACH Baumarkt AG.

Alongside his function as a member of the Board of Management and Chief Executive Officer of HORNBACH Baumarkt AG, since June 1, 2023 Erich Harsch has also been a member of the Board of Management of HORNBACH Management AG. In addition to his remuneration as a member of the Board of Management of HORNBACH Management AG, in the 2023/24 financial year Erich Harsch also received remuneration as a member of the Board of Management of HORNBACH Baumarkt AG.

The remuneration system applicable at HORNBACH Baumarkt AG in the 2023/24 financial year is based on the same principles as the remuneration system at HORNBACH Management AG (see Section I above). It comprises the same remuneration components and refers to the same performance criteria with the same weightings - merely based in this case on corresponding references to HORNBACH Baumarkt AG. The remuneration system of HORNBACH Baumarkt AG was approved by the Annual General Meeting of HORNBACH Baumarkt AG on July 9, 2020. Upon application by HORNBACH Baumarkt AG, the Frankfurt Stock Exchange withdrew its approval for shares in HORNBACH Baumarkt AG to be traded on the Regulated Market of the Frankfurt Stock Exchange as of the conclusion of February 28, 2022, as a result of which the stock market listing of HORNBACH Baumarkt AG was discontinued pursuant to § 3 (2) AktG ("delisting"). By resolution adopted on February 17, 2022 the Supervisory Board therefore adapted the remuneration system for members of the Board of Management of HORNBACH Baumarkt AG such that, to the extent that their remuneration was previously based on the share price of HORNBACH Baumarkt AG, such remuneration would from March 1, 2022 refer to the value of the share of HORNBACH Holding AG & Co. KGaA. Furthermore, by analogy with the amendment made to the remuneration system at HORNBACH Management AG, on February 23, 2023 the Supervisory Board of HORNBACH Baumarkt AG adopted a resolution amending the remuneration system for members of the Board of Management of HORNBACH Baumarkt AG in order to integrate ESG targets as a new third performance criteria in MVR with effect as of March 1, 2023 (for information about the key ESG criteria also applicable to MVR at HORNBACH Baumarkt AG, please see a)I.1.1.1b)ff)(2)). By resolution dated February 20, 2024, the Supervisory Board of HORNBACH Baumarkt AG amended the ESG criteria agreed in the MVR by analogy with the amendment at HORNBACH Management AG; this amendment takes effect as of March 1, 2024).

The disclosures provided on the remuneration granted and owed in the 2023/24 financial year include disclosures on the remuneration at HORNBACH Baumarkt AG.

2. Remuneration granted and owed in 2023/24 financial year

Pursuant to § 162 (1) Sentence 1 AktG, the remuneration report must report on the remuneration granted and owed to each individual member of the Board of Management in the past financial year. The terms used are based on the following understanding of the concepts:

• The term "granted" refers to "the actual payment of the remuneration component"
• The term "owed" refers to "all legally existent liabilities for remuneration components that are due for payment but which have not yet been settled".

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In this remuneration report, those variable remuneration components for which the assessment period expired in the year under report, meaning that the activity underlying the respective component of variable remuneration has been fully performed, are viewed as actually granted.

2.1. Tabular overview

The remuneration tables below present the remuneration for the assessment period ending on February 29, 2024 as being granted and owed. Accordingly, the following components are reported as remuneration granted in the 2023/24 financial year:

• The basic salary paid in the 2023/24 financial year
• The ancillary benefits granted in the 2023/24 financial year
• The OVR paid at the beginning of the 2024/25 financial year for the 2023/24 financial year
• The MVR paid at the beginning of the 2024/25 financial year for the performance period from March 1, 2020 to February 29, 2024.

As HORNBACH Management AG is not in arrears with the payment of remuneration components, none of the remuneration components presented in the tables are owed.

Albrecht Hornbach

Chief Executive Officer

		2023/24		2022/23
	in €		in %1	in €		in %
Fixed remuneration components
Basic salary	480,000		36	480,000		60
Ancillary benefits	33,669		3	33,061		4
Total in €		513,669		513,061
Variable remuneration
components
One-year variable remuneration	2,600		0	291,500		36
(OVR)
Multiyear variable remuneration	820,000		61	-		-
(MVR)
Total - remuneration granted and		1,336,269		804,561
owed in €
Pension expenses2 in €		120,000		120,000
Total remuneration including		1.456.269		924.561
pension expenses in €
Maximum remuneration at		2,040,000		2,040,000
HORNBACH Management AG in €
Clawback pursuant to § 162 (1)		-		-
Sentence 2 No. 4 AktG

1. The percentages stated in this and subsequent tables on remuneration for the Board of Management denote the respective share of total remuneration granted and owed in the respective financial year.
2. The pension expenses stated in this and subsequent tables on remuneration for the Board of Management are disclosed as service cost pursuant to IAS 19. Service cost pursuant to IAS 19 does not constitute "granted or owed" remuneration as defined in § 162 (1) Sentence 1 AktG, as it was not actually received by the member of the Board of Management in the year under report.

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Karin Dohm

CFO

		2023/24		2022/23
	in €		in %	in €		in %
Fixed remuneration
components
Basic salary at HORNBACH	112,000		16	112,000		12
Management AG
Basic salary at HORNBACH	450,000		63	450,000		49
Baumarkt AG
Ancillary benefits at	19,618		3	19,198		2
HORNBACH Baumarkt AG
Total in €		581,618		581,198
Variable remuneration
components
One-year variable
remuneration (OVR) at	600		0	66,000		7
HORNBACH Management AG
One-year variable
remuneration (OVR) at	0		0	275,000		30
HORNBACH Baumarkt AG
Multiyear variable
remuneration (MVR) at	31,0003		4	-		-
HORNBACH Management AG
Multiyear variable
remuneration (MVR) at	101,0004		14	-		-
HORNBACH
Baumarkt AG
Total - remuneration granted		714,218		922,198
and owed in €
Pension expenses at
HORNBACH Management AG		28,000		28,000
in €
Pension expenses at
HORNBACH Baumarkt AG		112,500		112,500
in €
Total remuneration including		854,718		1,062,698
pension expenses in €
Maximum remuneration at
HORNBACH Management AG		520,000		520,000
in €
Maximum remuneration at
HORNBACH Baumarkt AG		1,822,500		1,822,500
in €
Clawback pursuant to § 162 (1)		-			-
Sentence 2 No. 4 AktG

1. As Karin Dohm has been a member of the Board of Management of HORNBACH Management AG since January 1, 2021, the multiyear variable remuneration (MVR) in the 20/21 tranche has been calculated on a time-apportioned basis for 59 days.
2. As Karin Dohm has been a member of the Board of Management of HORNBACH Baumarkt AG since January 1, 2021, the multiyear variable remuneration (MVR) in

the 20/21 tranche has been calculated on a time-apportioned basis for 59 days.

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Erich Harsch

		2023/24		2022/23
	in €		in %	in €		in %
Fixed remuneration components
Basic salary at HORNBACH	84,000		5	-		-
Management AG
Basic salary at HORNBACH Baumarkt	506,2505		33	-		-
AG
Ancillary benefits at HORNBACH	30,5846		2	-		-
Baumarkt AG
Total in €		620,834		-
Variable remuneration components
One-year variable remuneration (OVR)	400		0	-		-
at HORNBACH Management AG7
One-year variable remuneration (OVR)	0		0	-		-
at HORNBACH Baumarkt AG
Multiyear variable remuneration (MVR)	0		0	-		-
at HORNBACH Management AG
Multiyear variable remuneration (MVR)	935,0008		60	-		-
at HORNBACH Baumarkt AG
Total - remuneration granted and		1,556,234		-
owed in €
Pension expenses at HORNBACH		21,000		-
Management AG in €
Pension expenses at HORNBACH
Baumarkt AG		126,5639		-
in €
Total remuneration including		1,703,797		-
pension expenses in €
Maximum remuneration at		520,000		-
HORNBACH Management AG in €
Maximum remuneration at		2,703,750		-
HORNBACH Baumarkt AG in €
Clawback pursuant to § 162 (1)		-		-
Sentence 2 No. 4 AktG

1. Erich Harsch has been a member of the Board of Management of HORNBACH Management AG since June 1, 2023. As a result, the basic salary, ancillary benefits, pension expenses, and one-year variable remuneration (OVR) at HORNBACH Baumarkt AG in the 2023/24 financial year have been stated on a time-apportioned basis for 9 months.
2. See Footnote 5
3. See Footnote 5
4. The payment amount from the multi-year variable remuneration (MVR) at HORNBACH Baumarkt AG for the performance period from 2020/21 to 2023/24 is reported in its full amount as remuneration granted for the 2023/24 financial year, as Erich Harsch was a member of the Board of Management of HORNBACH Baumarkt AG for the whole 2020/21 financial year.
5. See Footnote 5

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2.2. Explanatory notes

2.2.1. Performance criteria for variable remuneration

1. Performance criteria for one-year variable remuneration (OVR)
2. 1. Overview of OVR
      OVR is a performance-related bonus with a one-year assessment period. In the first step, OVR is dependent on key financial performance criteria at HORNBACH Holding AG & Co. KGaA. In the second step, the Supervisory Board may apply a modifier to account for the performance of the individual member of the Board of Management, the collective performance of the overall Board of Management, and the achievement of relevant non-financial targets.

The target amount for OVR amounts to € 265,000 per financial year for the CEO and to € 60,000 per financial year for regular members of the Board of Management. The payment amount for the OVR may range between € 0 (minimum amount) and € 530,000 (CEO) and € 120,000 (regular members of Board of Management).

1. Financial performance criteria
   The three financial performance criteria used to calculate the amount of OVR remuneration paid are: sales, which are weighted at 40%, and free cash flow and earnings before taxes ("EBT"), both of which are weighted at 30%. This on the one hand provides an incentive for the Board of Management to focus its activities on the growth strategy pursued by the company. On the other hand, it provides an incentive for continually increasing the company's earnings strength and internal financing potential. The figures are based on those reported in the approved and audited consolidated financial statements of HORNBACH Holding AG & Co. KGaA for the respective financial year.
   The Supervisory Board of HORNBACH Management AG sets targets for the individual financial performance criteria before the beginning of the respective financial year. Upon the conclusion of the financial year, total target achievement is calculated on the basis of target achievement in the individual financial performance criteria. To determine target achievement for the three financial performance criteria, for each criterion the Supervisory Board of HORNBACH Management AG compares the actual value upon expiry of the financial year with the actual value for the previous year (strategic growth rate). For the 2023/24 financial year, the Supervisory Board stipulated the following targets and determined the following levels of target achievement:

Sub-target	Weighting	Threshold	Target value	Maximum	Actual value	Target
		(0%)	(100%)	value (200%)	(2023/24)	achievement
Sales	40%	€ 6.2 billion	€ 6.5 billion	€ 6.8 billion	€ 6.16 billion	0%
Free cash flow	30%	€ 230 million	€ 290 million	€ 350 million	€ 232 million	3.22 %
EBT	30%	€ 230 million	€ 260 million	€ 290 million	€ 179 million	0%
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1. Modifier
   To supplement the financial performance criteria, the Supervisory Board of HORNBACH Management AG stipulates criteria for the modifier, generally before the beginning of the respective financial year. By way of the modifier, the Supervisory Board can assess the performance of the individual member of the Board of Management, the performance of the overall Board of Management, and the achievement of non-financial targets, such as stakeholder and ESG (Environment, Social, Governance) targets, in each case referring to HORNBACH Management AG and HORNBACH Holding AG & Co. KGaA. Before the beginning of the financial year, the Supervisory Board defined the following criteria for the modifier for the 2023/24 financial year:
   The collective performance of the Board of Management, specifically:
2. • Sharpening the instruments needed to better understand customers' needs and corresponding further development of service portfolio in interconnected retail ("ICR")
   • Development in market share
   • Change management in the context of migration to a new enterprise resource planning
     ("ERP") system
   • Measures to analyze potential for reductions in Scopes 1 and 2; and

the non-financial target

• Further development in sustainability concepts and targets (non-tradable goods, Scope 3, corporate volunteering).

The individual modifier is determined by the Supervisory Board of HORNBACH Management AG at its due discretion. The modifier generally amounts to 1.0 and may be adjusted to a value between 0.8 and 1.2 if the financial performance criteria alone do not adequately reflect the performance of the member of the Board of Management. For the 2023/24 financial year, the Supervisory Board set the modifier at 1.0.

1. Calculation of OVR payment amount
   The target amount of OVR is paid if target achievement amounts to 100%.
   If the employment relationship of the member of the Board of Management begins or ends in the current financial year, the target amount is proportionately reduced on a pro rata temporis basis as of the beginning or end of the employment relationship. The same applies by analogy to periods in which the member of the Board of Management, while still employed, has no claim to remuneration. If the employment relationship ends, the OVR is calculated for the current financial year in accordance with general provisions governing the OVR and paid at the regular date. All claims to OVR relating to a current assessment period, i.e. a current financial year, lapse without replacement or compensation in the following "bad leaver" cases: The employment contract with the member of the Board of
   Management ends prior to expiry of the assessment period due to extraordinary termination by HORNBACH Management AG for a compelling reason pursuant to § 626 of the German Civil Code (Bürgerliches Gesetzbuch - "BGB") for which the member of the Board of Management is responsible; the appointment of the member of the Board of Management ends before expiry of the assessment period due to the appointment as a member of the Board of Management being revoked as a result of a gross breach of duty, or the appointment of the member of the Board of Management ends before expiry of the assessment period due to his or her resigning, without such resignation being caused by a breach of duty on the part of HORNBACH Management AG or by ill health on the part of the member of the Board of Management or of a close family member.
   Based on the target achievements, the (rounded) payment amount for the OVR is calculated as follows:
   OVR payment amount for CEO: € 265,000 (target amount) x [target achievement for sales of 0% x 40% + target achievement for free cash flow of 3.22% x 30% + target achievement for EBT of 0% x 30%] x modifier of 1.0 = € 2,600
   OVR payment amount for regular members of Board of Management: € 60,000 (target amount) x [target achievement for sales of 0% x 40% + target achievement for free cash flow of 3.22% x 30% + target achievement for EBT of 0% x 30%] x modifier of 1.0 = € 600

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