Ross Stores (ROST)

Tax and Accounting-Related Matters

We maintain a mix of executive compensation programs, some which are performance-based and others of which are time-based to create a strong retention tool for key executives. The Compensation Committee has reviewed the deductibility of the Company's executive compensation structure in light of the current tax law. We believe that compensation resulting from previously granted stock options will be fully deductible when an option is exercised. We also believe that payments under the Incentive Compensation Plan will be fully deductible. Future performance-based equity awards are also expected to be fully deductible. Salary, sign-on bonuses, guaranteed bonuses and certain other cash compensation costs related to the Company's NEOs may not be fully deductible under Section 162(m) of the Internal Revenue Code (“Section 162(m)”) to the extent that, when added to other non-exempt compensation for that particular executive, the total exceeds $1 million and qualify for deductibility. Time-based restricted stock awards also do not qualify as performance-based compensation and, therefore, may not be fully deductible to the extent the share value upon vesting, when added to other non-exempt compensation for a particular executive, exceeds the $1 million limit in any tax year. During fiscal 2008, the Company estimates the impact from compensation paid to NEOs that was not deductible under Section 162(m) reduced net earnings by $2.7 million and cash flows by $2.8 million.

Tax and Accounting-Related Matters

We maintain a mix of executive compensation programs, some which are performance-based and qualify for deductibility under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), and others of which are time-based to create a strong retention tool for key executives. The Compensation Committee has reviewed the Company's executive compensation structure in light of the current tax law. We believe that compensation resulting from previously granted stock options will be fully deductible when an option is exercised. We also believe that payments under the Incentive Compensation Plan will be fully deductible. Future performance-based equity awards are also expected to be fully deductible. Salary, sign-on bonuses, guaranteed bonuses and certain other cash compensation costs related to the Company's NEOs may not be fully deductible to the extent that, when added to other non-exempt compensation for that particular executive, the total exceeds $1 million. Time-based restricted stock awards also do not qualify as performance-based compensation and, therefore, may not be fully deductible to the extent the share value upon vesting, when added to other non-exempt compensation for a particular executive, exceeds the $1 million limit in any tax year. During fiscal 2007, the Company estimates the impact from compensation paid to NEOs that was not deductible under Section 162(m) reduced net earnings by $2.4 million and cash flows by $1.6 million.

Tax and Accounting-Related Matters

We maintain a mix of executive compensation programs, some which are performance-based and qualify for deductibility under IRS Rule 162(m), and others of which are time-based to create a strong retention tool for key executives. The Compensation Committee has reviewed the Company’s executive compensation structure in light of the current tax law. We believe that compensation resulting from previously issued stock option grants will be fully deductible when an option is exercised. We also believe that payments under the Incentive Compensation Plan will be fully deductible. Future performance-based equity awards are also expected to be fully deductible. Salary, sign-on bonuses, guaranteed bonuses and certain other cash compensation costs related to the Company’s NEOs may not be fully deductible to the extent that, when added to other non-exempt compensation for that particular executive, the total exceeds $1 million. Time-based restricted stock awards also do not qualify as performance-based compensation and, therefore, may not be fully deductible to the extent the share value upon vesting, when added to other non-exempt compensation for a particular executive, exceeds the $1 million limit in any tax year.

During fiscal 2006, the Company estimates the impact from compensation paid to NEOs that was not deductible under IRC Section 162(m) as described above reduced net earnings by $2.1 million and cash flow by $3.3 million.