Internal control

For this purpose, Ahold is in the process of implementing a single, enterprise-wide Ahold Business Control Framework ("ABC Framework"). The ABC Framework will encompass internal control policies, procedures, instructions and guidelines for all Ahold group companies.

The ABC Framework is based on the recommendations of the Committee of Sponsoring Organizations of the Treadway Commission (COSO - Internal Control Integrated Framework). The aim of these recommendations is to provide a reasonable level of assurance concerning internal control. It should be noted that in line with the COSO framework, also the ABC Framework's level of assurance does not provide certainty as to the realization of objectives, nor can it prevent all inaccuracies, errors, instances of fraud or non-compliance with laws and regulations.

The transition process to convert to one-company controls initially focuses on financial reporting controls. With respect to financial reporting Ahold has developed uniform control standards applicable to all of our arenas. These cover a variety of financial control and reporting topics such as financial closing process, property, plant and equipment and lease accounting, capital investments and disposals, contracts and agreements, vendor allowances and the compliance with our accounting manual. The ABC Framework will gradually be extended with one-company policies and controls over operational and strategic processes and internal controls over compliance with laws and regulations, based on the right balance between one-company system controls and the necessary flexibility to support and control local operational excellence, customer driven innovation and achieve compliance with relevant local laws and regulations.

In 2005 Ahold continued the project that was started in 2004 to prepare for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act (the "Sarbanes Oxley Act" or "Sox"). We have performed various procedures for the preparation for the SOx 404 evaluations that we will be required to complete for the first time as of December 31, 2006. During 2005, we have made significant progress in the preparation of design documentation and testing of operating effectiveness of internal controls over financial reporting. On the other hand, it should be noted that the status of SOx activities by the end of 2005 varies per arena, and certain required aspects for the SOx 404 evaluation have yet to be completed. The Corporate Executive Board expects that the control deficiencies identified through this process in 2005 can be solved timely through the current remediation program.

Monitoring

Ahold uses a comprehensive business planning and performance review process to monitor its performance. This consists of a coherent set of instruments, which cover adoption of strategy, budgeting and reporting of current and projected results. Business performance is assessed with respect to both financial and non-financial targets.

Following formal internal control requirements, the Sarbanes-Oxley Act in the U.S. and the Dutch Corporate Governance Code, Ahold carried out an extensive exercise on the design, documentation and functioning of processes related to financial reporting. Each quarter, management is required to confirm by means of a letter of representation that compliance is maintained with, among others, Ahold's Global Code of Professional Conduct and Ethics, fraud prevention and detection procedures, control standards and disclosure requirements.

Management is responsible for managing risks associated with business activities and for compliance with relevant local laws and regulations, following normal reporting lines to senior management. Authority limits for arena and operating company management have been established. This system requires relevant management levels to obtain approval from a higher level of authority for a number of matters and provides appropriate information to senior management.

The Disclosure and Compliance Committee assists the CEO and CFO in fulfilling their responsibilities to ensure that Ahold makes timely and accurate disclosures. The Disclosure and Compliance Committee meets, reviews, discusses and reports quarterly on disclosure related issues. The objective is to ensure that all disclosures made by Ahold are accurate, complete and timely and fairly present the financial condition and the results of operations in all material aspects.

Internal Audit at Ahold helps ensure that the integrity and effectiveness of Ahold's system of control is maintained and continuously improved through risk-based, regular objective, independent and critical evaluations. Internal Audit monitors the internal controls of Ahold to provide the Corporate Executive Board and the Supervisory Board, through its Audit Committee, with reasonable assurance on the reliability of financial reporting, compliance with relevant law and regulations, safeguarding of resources and effectiveness and efficiency of operations. Also, Internal Audit monitors the effectiveness of associated corrective actions, through follow-up on specific previous audit reports and review of the effectiveness of Management Internal Control Reports and similar monitoring instruments.

Ahold has implemented an internal control issue monitoring process which tracks the progress and remediation status of internal control issues. This relates to improvements in operational, compliance and financial controls, identified by both internal and external sources. In this process, audit findings from internal and external audit, as well as issues brought forward by management via the letters of representation, are summarized and the progress and remediation status are reported each period.

Changes in controls over financial reporting

During the course of the closing and the annual audit of our 2004 financial statements two material weaknesses and a number of reportable conditions under the interim standards of the U.S. Public Company Accounting Oversight Board, as well as other internal control issues were identified. The 2004 material weaknesses related to our accounting for income tax provisions and to our US GAAP financial statement reconciliation process.

We have committed, and will continue to commit, considerable resources to our efforts to improve and strengthen our internal controls. We believe we have taken and are taking adequate steps to strengthen our internal controls.

We have concluded that as of the end of the period covered by this annual report the above mentioned material weaknesses no longer exist.

Evaluation of disclosure controls and procedures

As of the end of the period covered by this annual report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's CEO and the Company's CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures, pursuant to Rule 13a-15 promulgated under the Exchange Act.

Disclosure controls and procedures are those designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to ensure that the information is accumulated and communicated to our management, including our CEO and our CFO, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives.

Based on the evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by Ahold in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods specified in the SEC's rules and forms.

Compliance with provision II.1.4 of the Dutch Corporate Governance Code

Except as indicated in the section "Corporate governance - Compliance with Dutch Corporate Governance Code" of this Annual Report, we apply all of the relevant provisions of the Dutch Corporate Governance Code. Provision II.1.4 of this code requires management to assess the adequacy of the internal risk management and control systems.

The concept of internal risk management and control systems as used in the Dutch Corporate Governance Code varies significantly from the concept of disclosure controls and procedures under the Exchange Act and the related SEC rules referred to above.

Based on our evaluation of the operation of our internal risk management and internal control systems, the Corporate Executive Board is of the opinion that the internal controls over financial reporting provide a reasonable level of assurance that the financial reporting does not contain any material inaccuracies. Also, the Corporate Executive Board is of the opinion that there are no indications that the internal risk management and internal control systems have not operated properly in the year under review or will not operate properly in the current year. This evaluation and the current status have been discussed with the external auditor, the Audit Committee and the full Supervisory Board.

As regards risks other than financial reporting risks, including operational/strategic and legislative/regulatory risks, reference is made to the most important risk factors inherent in our businesses and our objectives as listed in the "Risk Factors" section and to the preceding paragraphs on "Ahold Business Control Framework" and "Monitoring" in this annual report.

In view of the above the Corporate Executive Board is of the opinion that it is in compliance with the requirements of provision II.1.4 of the Dutch Corporate Governance Code, taking into account the recommendation of the Corporate Governance Code Monitoring Committee on the application thereof. Since the internal controls over financial reporting throughout the organization are under review in light of our future obligations pursuant to Section 404 of the Sarbanes-Oxley Act, the opinion stated above by the Corporate Executive Board does not imply an assessment on those internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.