Ross Stores (ROST)

Chief Executive Officer’s 2005 Compensation

A majority of the total potential compensation for Michael Balmuth, the Company’s Vice Chairman, President and Chief Executive Officer, is in the form of an annual incentive bonus and stock plan awards that may vary in value according to the Company’s achievement of its strategic objectives. 

Salary.  Mr. Balmuth’s base salary is established by the terms of his employment agreement entered into with the Company effective May 31, 2001, and most recently amended effective May 18, 2005.  This employment agreement, as amended, extends through January 29, 2009, unless earlier extended, renegotiated or terminated by the parties and currently provides for an annual base salary of not less than $938,000.  (See “Employment Contracts, Termination of Employment and Change In Control Arrangements” for further discussion of Mr. Balmuth’s employment agreement.)

Bonus.  The annual incentive bonus portion of Mr. Balmuth’s compensation is based on the Company’s achievement of targeted pre-tax earnings, as established by the Committee.  During fiscal 2005, the Company’s results were above the minimum threshold but below the targeted pre-tax earnings goal.  As a result, Mr. Balmuth received a bonus of $613,017 for fiscal 2005.

Stock Awards.  On March 17, 2005, Mr. Balmuth was granted a nonstatutory stock option to purchase 559,246 shares of common stock with an exercise price of $28.61, the closing price on the date of grant.  That option will vest as follows:  223,699 shares vest monthly in the twelve months ending March 17, 2008 and 335,547 shares vest monthly in the twelve months ending March 17, 2009.  In addition, on March 17, 2005, Mr. Balmuth was granted a restricted stock award of 279,623 shares of common stock, which is scheduled to vest as follows:  111,850 shares vest on October 15, 2007 and 167,773 shares vest on October 15, 2008.  The equity grants made to Mr. Balmuth were based primarily on the equity value deemed necessary in the Committee’s judgment, to ensure the retention of Mr. Balmuth over the vesting period of these shares.  Other considerations, of equal weight, were his past and expected future contributions to the achievement of the Company’s strategic objectives.