Remuneration Policy for members of the Corporate Executive Board

The basic elements of the overall remuneration provided to our Corporate Executive Board members are (1) a base salary, (2) an annual cash incentive calculated as a percentage of the base salary and determined by comparing performance against specific objectives (3) a mid- and long-term incentive plan based on conditional share grants with employment and performance criteria and (4) a pension.

Reference peer group

The peer group used to assess the competitiveness of the overall remuneration provided to the Corporate Executive Board reflects the geographical areas in which we operate and the markets most relevant with respect to the recruitment and retention of top management for the Company. The peer group is comprised of the following companies:

Wal-Mart Stores, Inc.
Carrefour S.A.
Metro A.G.
Tesco PLC
Costco Wholesale Corporation
The Kroger Co.
Target Corporation
Safeway Inc.
Sysco Corporation
Delhaize Brothers and Co. (Delhaize Group)
Staples, Inc.

The policy uses “Total Direct Compensation” (consisting of base salary plus annual cash incentive at target level plus the long term incentive at target level projected on an annual value basis), when comparing to the reference peer group.

When comparing remuneration levels against the peer group, the composition (risk profile) of the existing remuneration will be taken into account. The target Total Direct Compensation levels will be reached by designated target levels of the mid- and long-term incentive component. The target Total Direct Compensation will typically be at the 50th percentile. In special cases the levels might move towards the 75th percentile. In the case of any adjustment, a conservative (step-by-step) approach will be followed, taking into account the composition of existing remuneration (risk profile).

Annual cash incentive plan

The Annual cash incentive program will use three equally weighted measures: net sales growth, operating margin and RoNA (“Return on Net Assets”). Our target for the annual cash incentive payout as a percentage of base salary is at 100%, contingent on full achievement of objectives, with a cap at 125% of the base salary except where pre-existing contractual arrangements exist. The Company does not disclose the required performance levels of the criteria, as these are considered commercially sensitive information.

Mid- and long-term incentive plan

Beginning in 2006, shares in the Company will be granted through a mid-term (three-year) and a long-term (five-year) conditional share grant program:

Mid-term incentive
For Corporate Executive Board members, one half of the conditional shares granted will vest after three years continued employment (with a mandatory holding period of two years following the vesting).

Long-term incentive
The other half of the conditional shares granted will vest after a performance period of five years. During this period, performance will be measured against the Total Shareholder Return (TSR, share price growth and dividends) of the same peer group used to benchmark the Corporate Executive Board remuneration levels. The number of shares that will vest depends on the ranking of the Company within the peer group. No shares will vest below the seventh position of the peer group consisting of twelve companies (including the Company). The maximum number of shares that can vest is 150% of the target number of the conditional shares granted. Should the Company reach the first position within the peer group, this maximum number of shares will vest. The following table describes the percentage of conditional shares that will vest depending on the ranking of the Company within the peer group:

Performance factor determining grant levels

Target grant values for each Corporate Executive Board member will be determined by the Supervisory Board. The grant level at target, taking into account the individual Corporate Executive Board member’s base salary and annual incentive at target, will provide a Total Direct Compensation in line with the stated policy level. The actual number of shares granted in any given year is determined by applying the performance multiple of the annual incentive criteria for the preceding year against the targeted grant level. For example, if the annual incentive multiple for a given year was 0.8 and the at target grant level was EUR 100,000, the granted value will be 0.8 * EUR 100,000 = EUR 80,000. The average share price during the six months preceding the date of grant will be used to determine the number of shares to be granted. In case, the annual incentive multiplier is zero, 50% of the grant value at target will be granted through the TSR performance related component.