Ross Stores (ROST)

Executive Officers’ 2004 Compensation

Salary.  Base salaries for executive officers are initially determined by competitive requirements to recruit the executive.  Salaries are then reviewed annually with recommended adjustments made based upon competitive market information relating to salary levels, the individual performance of each executive officer and his/her relative contribution in achieving the Company’s strategic goals.  During 2004, the average increase in base salaries for all executive officers as a group was 4.5%.

Annual Incentive Bonus.  The Company’s Incentive Compensation Plan was originally adopted by the Board of Directors effective May 1987, and was most recently approved by the Company’s stockholders in 2001.  The Incentive Compensation Plan is designed to allow management to share in the Company’s success based on the Company’s attainment of specified target levels of pre-tax earnings.  At the commencement of each fiscal year, the Committee determines the incentive awards payable at target levels of pre-tax earnings that may be achieved by the Company.  Such awards are expressed as a percentage of year-end base salary and are payable in the form of cash bonuses after fiscal year-end pursuant to this formula, subject to an overriding limitation on the maximum dollar amount that may be paid to any participant.  Potential awards now range from 0% to 150% of executive officers’ base salaries, based on the actual level of pre-tax earnings achieved each year relative to the targeted goal, as well as the position of the executive officer.

The Incentive Compensation Plan for Fiscal 2004 provided for awards to executive officers that, at the targeted pre-tax earnings goal, ranged from 55% to 75% of base salary.  During fiscal 2004, the Company’s results were below the targeted pre-tax earnings goal and also below the threshold at which any payment under the Plan would be made.  As a result, there were no payments made under the Plan for fiscal 2004 to any executive officer.  Actual awards over the last three fiscal years have ranged from 0% to 101% of executive officers’ base salaries as a group.

Stock Award Programs.  In fiscal year 2004, the Company’s executive officers were eligible for restricted stock awards and stock option grants under the 2004 Equity Incentive Plan, the 1988 Restricted Stock Plan and the Prior Option Plans (the “Equity Plans”). Restricted stock awards and stock option grants under the Equity Plans are executive compensation vehicles that have two important objectives: (i) to align the financial interests of the Company’s stockholders and the executive officers by providing incentives that focus management’s attention on the successful long-term strategic management of the business and appreciation in stockholder value; and (ii) to recruit, motivate and retain a high-performing group of senior and middle managers.

The Committee approves the granting of restricted stock and stock option awards to executive officers under the Equity Plans.  The levels of stock option awards granted to executive officers under the Equity Plans is based on the following factors: the executive officer’s position, past and expected future contributions to the achievement of the Company’s strategic objectives, existing stock ownership position and the level of previous stock awards.  The levels of restricted stock awards granted to executive officers under the Equity Plans are determined primarily by the retentive value of the grant necessary to retain key executives over the long term and to protect the Company against outside offers of employment to key individuals, as well as the factors listed for stock option awards.  The officers must satisfy vesting requirements in order to retain their stock.

All stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock on the date of grant.  These awards provide value to the executive officers only when and to the extent that the value of the Company’s common stock appreciates over the value on the date of grant.  All stock option awards made in fiscal 2004 to executive officers under the Equity Plans have a term of ten years and generally vest monthly in progressively increasing annual increments over a three or four year period.