Business overview

Our operations in the U.S. represented approximately 74% of our consolidated net sales in 2005. In addition to our principal activities, some subsidiaries finance, develop and manage store sites and shopping centers primarily to support our retail operations. For a list of our significant subsidiaries, see the information in Note 38 to our consolidated financial statements included in this annual report.

Food retail business

We have organized most of our food retail business into arenas, which operate supermarkets under local brand names. In addition, Schuitema N.V., which is a consolidated subsidiary, is part of our food retail business in the Netherlands. Our retail sales consist of retail chain consumer sales, sales to franchise stores and sales to associated stores. Franchise stores typically operate under the same format as, and are not distinguishable from, Ahold-operated stores. Franchisees generally purchase merchandise from us, pay a franchise fee and receive various support services, including management support and training, marketing support and administrative assistance. Operators of associated stores generally pay us fees but operate as independent retailers and may use various store formats. These stores also have more flexibility in terms of product lines and pricing, but we provide them with support services. Our retail business generally experiences an increase in net sales in the fourth quarter of each year, primarily as a result of the holiday season.

Stop & Shop/Giant-Landover Arena

This arena, headquartered in Quincy, Massachusetts, is comprised primarily of the following entities:

• The Stop & Shop Supermarket Company LLC ("Stop & Shop"), acquired in 1996, which has a market area consisting of Massachusetts, Connecticut, Rhode Island, New Jersey, New York and New Hampshire.
• Giant of Maryland LLC ("Giant-Landover"), acquired in 1998, which has a market area consisting of Maryland, Virginia, Delaware and the District of Columbia.
• Peapod, LLC ("Peapod"), acquired in 2000-2001, which provides an Internet-based home shopping and grocery delivery service as an integrated service of the Stop & Shop/Giant-Landover Arena, along with service to the metropolitan areas of Chicago, Illinois and Milwaukee, Wisconsin.

This arena operated the following retail locations as of January 1, 2006:

This arena also operated the following other properties as of January 1, 2006:

Giant-Carlisle/Tops Arena

This arena, headquartered in Carlisle, Pennsylvania, is comprised primarily of the following entities:

• Giant Food Stores, LLC ("Giant-Carlisle"), acquired in 1981, which has a market area consisting of Pennsylvania, Maryland, Virginia and West Virginia.
• Tops Markets, LLC ("Tops"), acquired in 1991, which has a market area consisting of northern New York, northeast Ohio and northern Pennsylvania.

This arena operated the following retail locations as of January 1, 2006:

This arena also operated the following other properties as of January 1, 2006:

Albert Heijn Arena

This arena, headquartered in Zaandam, the Netherlands, is comprised primarily of the following entities:

• Albert Heijn B.V. ("Albert Heijn"), established in 1887, which operates food retail stores and has a market area consisting of the Netherlands. Albert Heijn also operates Albert, which provides an Internet-based home shopping and grocery delivery service as an integrated service of the Albert Heijn Arena.
• Gall & Gall B.V. ("Gall & Gall"), acquired in 1974, which operates wine and liquor stores and has a market area consisting of the Netherlands.
• Etos B.V. ("Etos"), acquired in 1974, which operates stores specializing in health and beauty care and, in certain stores, prescription drugs and has a market area consisting of the Netherlands.
• Ahold Coffee Company B.V. ("ACC"), acquired in 1971, which supplies coffee mainly to Ahold's subsidiaries.

This arena operated the following retail locations as of January 1, 2006:

This arena also operated the following other properties as of January 1, 2006:

Central Europe Arena

This arena, headquartered in Prague, the Czech Republic, is comprised primarily of the following entities:

• Ahold Czech Republic, a.s. ("Ahold Czech Republic"), established in 1991, which has a market area consisting of the Czech Republic.
• Ahold Polska Sp. z o.o. ("Ahold Polska"), established as a joint venture in 1995 and acquired fully in 1999, which has a market area consisting of Poland.
• Ahold Retail Slovakia, k.s. ("Ahold Slovakia"), established in 2001, which has a market area consisting of Slovakia.

This arena operated supermarkets under the name "Albert" and hypermarkets and compact hypermarkets under the name "Hypernova," operating the following retail locations as of December 31, 2005:

This arena also operated the following other properties as of January 1, 2006:

Schuitema

Ahold acquired a 73.2% interest in Schuitema N.V. ("Schuitema") in 1988. Schuitema, headquartered in Amersfoort, the Netherlands, is a consolidated subsidiary which is a retail and wholesale company that owns and operates supermarkets and also provides retail support services to independent retailers and associated stores operating under the trade name "C1000." Schuitema has a market area consisting of the Netherlands.

Schuitema operated the following retail locations as of January 1, 2006:

Foodservice business

U.S. Foodservice

U.S. Foodservice, headquartered in Columbia, Maryland, is the second-largest broadline foodservice distributor in the U.S. based on 2005 net sales. U.S. Foodservice provides its products and services to approximately 250,000 customers. We estimate the total foodservice market in the U.S. at approximately USD 160 billion per year in sales. This is a widespread and fragmented market with numerous smaller distributors on a local and regional level, as well as a limited number of national foodservice distributors. U.S. Foodservice's operations cover a geographic area in which over 95% of the U.S. population resides.

U.S. Foodservice, acquired in 2000, focuses on supplying food and related products to:

• "Broadline" customers, which includes independent restaurants, healthcare providers, hospitality customers, governmental entities, educational institutions and other foodservice customers.
• "Multi-Unit" customers, which includes primarily national and regional casual dining and quick service restaurant chains.

No single customer accounted for more than 10% of U.S. Foodservice's net sales in 2005.

U.S. Foodservice operated the following properties as of January 1, 2006:

Group Support Office

Our Group Support Office activities are primarily comprised of the following functions:

• Ahold Group Support Office, which is our corporate headquarters in Amsterdam, the Netherlands and which has offices in Braintree, Massachusetts.
• Ahold Finance Group (Suisse), located in Geneva, Switzerland, which primarily provides our treasury operations and related controlling and corporate functions.

The Group Support Office activities operated the following properties as of January 1, 2006:

Joint ventures and associates

In addition to our consolidated subsidiaries, we also have interests in food retail and foodservice operations through our investments in joint ventures and associates. Our share in income of joint ventures and associates is included in our consolidated statements of operations. As of January 1, 2006, we had interests in two significant entities that we accounted for as unconsolidated joint ventures and associates: ICA AB and Jerónimo Martins Retail.

ICA AB

In April 2000, we acquired a 50% partnership interest in ICA AB ("ICA"), which in turn owns the ICA group. In November 2004, we increased our interest in ICA to 60%. The other 40% interest in ICA is held by Hakon Invest AB, a Swedish company listed on the Stockholm Stock Exchange. Under our shareholders agreement with Hakon Invest AB, our 60% shareholding interest in ICA does not entitle us to unilateral decision making authority over ICA, because the agreement provides that strategic, financial and operational decisions will be made only on the basis of mutual consent.

ICA is an integrated food retail and wholesale group, headquartered in Stockholm, Sweden. As of December 31, 2005, ICA served over 2,500 retailer-owned and company-operated supermarkets, neighborhood stores, hypermarkets and discount stores in Sweden, Norway and, through a joint venture, in the Baltic states. ICA also provides consumer financial services in Sweden through its bank.

ICA is comprised primarily of the following entities:

• ICA Sverige AB ("ICA Sverige"), which is a wholesaler supplying retailer-owned stores and a limited number of company-operated stores under the "ICA" brand name in Sweden.
• ICA Norge AS ("ICA Norge"), which operates company-owned stores and supplies both franchise and associated stores under the "ICA" and "RIMI" brand names in Norway.
• ICA Meny AB ("ICA Meny"), which is a food supplier to restaurants, the catering sector and convenience stores in Sweden and in Norway. On February 22, 2006, ICA announced its intention to sell ICA Meny.
• ICA Banken AB ("ICA Banken"), which is a bank that provides limited consumer financial services in Sweden.
• Etos AB ("Etos"), which operates stores that sell health and beauty care products in Sweden, mainly in the Stockholm area.

ICA has two 50/50 joint ventures:

• Rimi Baltic AB ("Rimi Baltic"), which is a joint venture with Kesko Livs Ab that operates discount stores, supermarkets and hypermarkets in Latvia, Estonia and Lithuania under various brand names.
• Netto Marknad AB ("Netto"), which is a joint venture with Dansk Supermarked that operates discount stores in Sweden under the brand name "Netto."

ICA operated the following retail locations as of December 31, 2005:

JMR

In 1992, we became a 49% partner in Jerónimo Martins Retail ("JMR") with Gestão de Empresas de Retalho, SGPS, S.A. JMR, headquartered in Lisbon, Portugal, owns Pingo Doce, a major supermarket chain, and the Feira Nova hypermarket chain, both in Portugal. Under the terms of our shareholders' agreement, we share equal voting power in JMR with Gestão de Empresas de Retalho, SGPS, S.A.

JMR operated the following retail locations as of December 31, 2005:

Sources of supplies

Our food retail and foodservice businesses purchase from over 10,000 independent sources and our businesses are not dependent on any individual supplier or supply contract. Our purchases fall into one of two categories: for-resale purchases and not-for-resale purchases. For-resale purchases are those where the products purchased are intended for resale to our customers. Not-for-resale purchases are those where the products and services purchased are not intended for resale to our customers. For-resale purchases make up the majority of our purchases. The for-resale sources of supply consist generally of corporations selling brand name, A-brand and private brand products, independent private brand suppliers and perishable goods vendors. Products are purchased at multiple levels within our organization, including at local operating companies and regional and continental (U.S. and European) purchasing organizations. We have been able to organize most of the retail purchasing at a regional and continental level.

Environmental matters

Our operations are governed by environmental laws and regulations in the countries in which we have operations, including those concerning the discharge, storage, handling and disposal of hazardous or toxic substances. We believe that we possess all of the material permits required for the conduct of our operations and that our current operations are in material compliance with all applicable environmental laws and regulations.

We use hazardous substances and generate hazardous wastes in some of our operations. Under the U.S. Federal Comprehensive Environmental Responsibility, Compensation and Liability Act ("CERCLA") and similar state laws, generators of hazardous wastes may be jointly and severally liable for the clean-up of releases of hazardous wastes from the facilities to which the generator sent those wastes for disposal. However, we are not aware of any asserted or threatened claims against us relating to any such offsite disposal location.

Clean-up of hazardous substances or petroleum releases to soil or groundwater is taking place at certain of our facilities. At other of our facilities, studies have shown that soil and groundwater have been impacted by gasoline or petroleum constituents. The relevant regulatory agencies have, however, not required remediation at those sites. In addition, certain of our facilities are located on premises that are currently or were formerly gasoline stations or other industrial sites at which contamination from prior operations may be located, but there have been no environmental investigations to determine the condition of those sites. Having reviewed the applicable law, the terms of indemnification agreements with the previous operators of the facilities or the terms of our leases with the property owners or our tenants, we believe that some of the clean-up costs associated with the facilities described in this paragraph will be allocated to prior owners or operators of those facilities or to the current owners or tenants of the properties upon which the facilities are located. We do not believe that any clean-up costs associated with those facilities that are allocated to us will materially impact our financial position.

Government regulation

U.S. regulations

As a marketer and distributor of food products in the U.S., we are subject to regulation by numerous federal, state and local regulatory agencies. At the federal level, we are subject to the Federal Food, Drug and Cosmetic Act, the Bioterrorism Act and regulations promulgated by the U.S. Food and Drug Administration (the "FDA"). The FDA regulates manufacturing and holding requirements for foods, over-the-counter drug products and pharmaceuticals, specifies the standards of identity for certain foods and prescribes the format and content of certain information required to appear on food product labels.

For certain product lines, we are also subject to the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable Agricultural Commodities Act, the Country of Origin Labeling Act and regulations promulgated thereunder by the U.S. Department of Agriculture (the "USDA"). The USDA imposes standards for product quality and sanitation, including the inspection and labeling of meat and poultry products and the grading and commercial acceptance of produce shipments from our vendors.

Money order and wire transfer services offered by our stores are subject to regulations promulgated under the USA PATRIOT Act, which is administered by the U.S. Department of the Treasury. Our lottery, alcohol and tobacco sales and operations are regulated at the federal and state level.

We and our products are also subject to state and local regulation through such measures as the licensing of our facilities, enforcement by state and local health agencies of state and local standards for our products and facilities and regulation of our trade practices in connection with the sale of our products. Our advertising, weights and measures of products, as well as other marketing, labeling and consumer protection issues, are regulated by state agencies and state attorney general offices, which have jurisdiction over state consumer protection statutes and antitrust statutes.

Our pharmacy operations are subject to federal, state and local regulations and licensing, including state pharmacy boards, Medicaid and Medicare reimbursement regulations and third-party insurance regulations, as well as the Health Insurance Portability and Accountability Act and regulations promulgated by the U.S. Department of Health & Human Services. Our premises are generally inspected at least annually by federal and/or state authorities. These facilities are also subject to inspections and regulations issued pursuant to the Occupational Safety and Health Act by the U.S. Department of Labor, which require us to comply with certain manufacturing, health and safety standards to protect our employees from accidents and to establish hazard communication programs to transmit information about the hazards of certain chemicals present in certain products we distribute.

We are also subject to regulation by numerous federal, state and local regulatory agencies. Our store operations and real estate operations are subject to zoning, environmental and building regulations, as well as laws that prohibit discrimination in employment on the basis of disability, including the Americans with Disabilities Act, and other laws relating to accessibility and the removal of barriers. Our workers' compensation and workers' compensation self-insurance are subject to regulation by state regulatory agencies. In addition, our captive insurance company, The MollyAnna Company ("MollyAnna"), which insures our operating companies for losses relating to self-insurance, is regulated by the Insurance Division of the State of Vermont. Because our securities are publicly traded in the U.S., we are also subject to the rules and regulations promulgated by the SEC, including those promulgated under the Sarbanes-Oxley Act. In addition, we are subject to the provisions of the U.S. Foreign Corrupt Practices Act relating to the maintenance of books and records and antibribery.

Dutch regulations

As in other jurisdictions, we are subject to various legislative provisions in the Netherlands relating to our products, facilities, health and safety of our employees, antitrust matters, privacy matters, our relationship with franchisees, taxation of foreign earnings and earnings of expatriate personnel and use of local employees and vendors, among others.

We are subject to Dutch zoning regulations, which restrict retailers from opening large retail outlets just outside of towns or in rural areas in order to protect retailers in town centers, thereby preserving the traditional retail structure in these towns. Similar regulations apply in certain other European countries in which we have operations.

As an employer in the Netherlands, we are subject to various labor laws that set employment practice standards for workers, including occupational health and safety standards.

The legislative provisions relating to privacy matters impose certain obligations on us and restrict us in the use of personal data (for example, in the use of customer data for, and obtained in the context of, customer loyalty programs or in direct marketing activities).

Regulations in other jurisdictions

We operate our business in the U.S and in a number of countries in Europe and accordingly, are subject to a wide variety of national and EU laws and regulations governing standards for our products and facilities, health and safety of our employees, currency conversions and repatriation, taxation of foreign earnings and earnings of expatriate personnel and use of local employees and vendors, among others. Within the EU, our business is also subject to and restricted by EU rules, including directives and regulations. To the extent these rules have "direct effect," they must be applied by the authorities of the member states even if they have not yet been implemented in national law. EU regulations set minimum standards that must be applied by all EU member states. In many cases, the authorities of the member states are free to set higher standards to the extent these apply equally to all products and producers from all EU member states.