Ross Stores (ROST)

Compensation Benchmarking and Peer Group Analysis

A range of competitive and peer group information and benchmarking on executive compensation is reviewed by the Company and the Compensation Committee on a periodic basis. The peer companies chosen can vary for each of the executive positions.

In fiscal 2006, an independent compensation consulting firm, Towers Perrin (the “Consultant”), was retained by the Committee to assist in its review of key elements of our executive compensation programs and to recommend any appropriate modifications. The Consultant provided market data advice to the Compensation Committee with respect to competitive practices and the amounts and nature of compensation paid to executive officers at other companies operating in similar competitive environments. The Consultant collected benchmark data on a number of off-price, department store, discount store, specialty store, and apparel and home goods retailers that it believed had similar business models, competitive challenges and/or operating and financial characteristics when compared to the Company. The Consultant provided an assessment of competitive positioning for each of the Company’s executive officer compensation packages, including base salary, annual incentive target, long-term equity and total overall compensation vis-à-vis the level of compensation for executive officers performing similar job functions in companies in their relevant peer group. Going forward, this analysis is expected to provide a reference point for fiscal 2007 discussions of compensation for our executive officers. This review did not impact fiscal 2006 compensation.

The Consultant also provided an opinion on the Company’s various compensation programs and assisted in the development of alternative performance-based approaches to executive rewards. Based on this process, the Compensation Committee concluded that it is in the best interests of the Company and its stockholders to transition beginning in 2007 from the use of stock option grants to the use of performance-based equity awards as part of the longer term component of future compensation packages for all executive officers except the CEO.