·      Via the Internet atwww.proxyvote.com;

·      By telephone (within the U.S. or Canada) toll-free at1-800-690-6903;

·      By signing and returning the enclosed proxy card; or

·      By attending the Meeting and voting in person.

If you wish to vote by Internet or telephone, you must do so before 11:59 p.m., Eastern Time, on Tuesday, June 24, 2008.23, 2009. After that time, Internet and telephone voting will not be permitted, and a shareholder wishing to vote, or revoke an earlier proxy, must submit a signed proxy card or vote in person.

In accordance with the new rules of the U.S. Securities and Exchange Commission (“SEC”), we are sending all shareholders who have not affirmatively opted to receive paper materials, all of their proxy materials via the Internet. However, you may opt to receive paper copies of proxy materials, at no cost to you, by following the instructions we will providecontained in advancethe Notice of the distribution of our 2008 proxy materials.Internet Availability.

“Street name” shareholders who wish to vote at the Meeting will need to obtain a proxy form from the institution that holds their shares of record.

How are my voting instructions carried out?

When you vote via proxy, you appoint Richard M. Schulze and Elliot S. Kaplan (the “Proxy Agents”) as your representatives at the Meeting. The Proxy Agents will vote your shares at the Meeting, or at any postponement or adjournment of the Meeting, as you have instructed them on the proxy card. If you return a properly executed proxy card without specific voting instructions, the Proxy Agents will vote your shares in accordance with the Board’s recommendations. With proxy voting, your shares will be voted regardless of whether you attend the Meeting. Even if you plan to attend the Meeting, it is advisable to vote your shares via proxy in advance of the Meeting in case your plans change.

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·      Submitting a later-dated proxy prior to the Meeting (by mail, Internet or telephone);

·      Voting in person at the Meeting; or

·      Providing written notice to Best Buy’s Secretary at our principal office.

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Committees of the Board

The Board has the following four committees:

·      Audit Committee;

·      Compensation and Human Resources Committee;

·      Nominating, Corporate Governance and Public Policy Committee; and

·      Finance and Investment Policy Committee.

The charters for each of the Audit Committee, Compensation and Human Resources Committee, Nominating, Corporate Governance and Public Policy Committee and the Finance and Investment Policy CommitteeBoard committees are posted on our Web site at www.BestBuy.com — select the “For Our Investors” link and then the “Corporate Governance” link. The charters include information regarding the committees’ composition, purpose and responsibilities. Paper copies of these documents are available to shareholders free of charge upon request.

The Board has determined that all members of the Audit Committee, Compensation and Human Resources Committee, and Nominating, Corporate Governance and Public Policy Committee are independent directors as defined under the SEC and NYSE corporate governance rules, as applicable.

The Board committees have responsibilities as follows:

Audit Committee.This committee discharges the Board’s oversight responsibility to Best Buy’s shareholders and the investment community regarding: (i) the integrity of our financial statements and financial reporting processes; (ii) our internal accounting systems and financial and operational controls; (iii) the qualifications and independence of our independent registered public accounting firm; (iv) the performance of our internal audit function and our independent registered public accounting firm; and (v) our compliance with ethics programs, including our Code of Business Ethics, and legal and regulatory requirements.

In carrying out these duties, this committee maintains free and open communication between the Board, our independent registered public accounting firm, our internal auditors and management. This committee meets with management, our internal audit staff and our independent registered public accounting firm at least quarterly. In addition, this committee

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*                                            Chairman

Director Nomination Process

The Nominating, Corporate Governance and Public Policy Committee (“Nominating Committee”) is responsible for screening and recommending to the full Board director candidates for nomination. The Nominating Committee will often engage a third-party search firm to assist in identifying appropriate candidates to consider as additions to our Board. When there is an opening on the Board, the Nominating Committee will also consider nominations received from our shareholders, provided that proposed candidates meet the requisite director qualification standards discussed below.

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— is:

·A partner of our internal auditor or independent registered public accounting firm, or an employee of our internal auditor or independent registered public accounting firm personally working on our audit (or whose immediate family member is currently a partner of such firm or is employed in the audit, assurance or tax compliance practice ofby such firm)firm to personally work on our audit); or

·An employee (or has an immediate family member who is an executive officer) of another company that makes payments to Best Buy, or receives payments from Best Buy, for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues.

Under our director independence standards described above, the Board has determined that each director (including former directors Ari Bousbib and James E. Press)director Mary A. Tolan), with the exception of Messrs. Schulze, Anderson, Kaplan, Lenzmeier and Kaplan,Schulze, is independent. The Board based these determinations primarily on a review of the responses of the directors to questions regarding employment and compensation history, affiliations, and family and other relationships, and on discussions with our directors. The Board also reviewed the relationships between Best Buy and companies with which our directors are affiliated and determined that the relationships with affiliates of current directors Messrs. Mikan, Paull, RebolledoTrestman and Trestman, as well as former directors, Messrs. Bousbib and Press,Tyabji are not material and do not impair the directors’ independence. For additional information regarding these relationships, seeCertain Relationships and Related-Party Transactions on page [__][].

George L.Mr. Mikan, III, was appointed as a Class 2 director insince April 2008.2008, is executive vice president and chief financial officer of UnitedHealth Group Incorporated (“UnitedHealth”). Since 2003, we have had a health benefit services agreement with UnitedHealth Group Incorporated.  Mr. Mikan is executive vice president and chief financial officer of UnitedHealth. The amounts we have paid to UnitedHealth, most of which are for employee medical and pharmaceutical costs administered on our behalf by UnitedHealth, were an insignificant portion of the annual consolidated revenue of each of the companies for each of the past three fiscal years. In addition, Mr. Mikan did not participate in negotiating or executing our agreement.agreement with UnitedHealth.

Mr. Paull is the former corporate senior executive vice president and chief financial officer of McDonald’s, Inc.  From time to time, we have purchases from and sales to McDonald’s.Trestman has been a director since 1984. We have also periodically had co-marketing agreements with McDonald’s.  The amounts involved represented an insignificant portion of the annual consolidated gross revenue of each of the companies for each of the past three fiscal years. In addition, Mr. Paull did not participatelease retail space in negotiating or executing our agreements.

Our vendor agreement with Pepsi Bottling Group, Inc., of which Mr. Rebolledo was chairman of its Mexican subsidiary, does not constitute a material transaction. We purchase Pepsi products for resale in our corporate and retail locations and Pepsi Bottling Group purchases products and gift cards from our Business to Business group. The amounts involved represented an insignificant portion of the consolidated gross revenue of both companies for each of the past three fiscal years. In addition, Mr. Rebolledo did not participate in negotiating or executing our agreements.

Mr. Trestman’s and his son-in-law’s interest in areal estate development in which we lease retail spaceMr. Trestman and his son-in-law have an interest. Their interest in the development was not deemed material to Mr. Trestman’s independence because the amount of theour annual lease payment is less than $1 million and the retail square-footage leased constitutes less than 15% of the total leaseableleasable square-footage in the development. In addition, Mr. Trestman did not participate in negotiating or executing our lease agreement.

During fiscal 2008, we had an elevator service and preventative maintenance agreement with Otis Elevator Company, of which Mr. Bousbib is president. The agreement was deemed not material because it was entered into prior to Mr. Bousbib’s membership on the Board and because the valueTyabji, a director since 1998, has served as chairman of the agreement was small andboard of directors of Jasper Wireless, Inc. (“Jasper”) since November 2008. We purchase wireless data connectivity services from Jasper for our private label mobile navigation devices. We paid $2 million to Jasper in fiscal 2009, which represented an insignificant portionapproximately 10% of both Best Buy’s and Otis’ annual consolidated grossits recognized revenue for eachthe year. Mr. Tyabji is not an employee of the past three fiscal years. In addition, Mr. BousbibJasper, nor did nothe participate in negotiating or executing our agreement with Otis.  Mr. Bousbib did not stand for ratification as a director at our 2007 Regular Meeting of Shareholders.Jasper.

Mr. Press was presidentBoard Composition

The Board is committed to highly effective corporate governance that reflects the interests of Toyota Motor North America,our shareholders, customers and employees. To ensure a diversity of perspectives, the American subsidiaryBoard seeks a balance of Toyota Motor Corporation Ltd. During fiscal 2008,internal experience and external independent expertise.  This combination of perspectives also helps to ensure that we had lease agreementssustain our corporate culture, which is a cornerstone of our legacy and a key competitive advantage. In addition, the Board has diligently focused on the

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Director Orientation and Continuing Education

Our Nominating Committee oversees the orientation and continuing education of our directors. Director orientation familiarizes directors with our strategic plans; significant financial, accounting and risk management issues; compliance programs and other controls; policies; principal officers and internal auditors; and our independent registered public accounting firm. The orientation also addresses Board procedures, directors’ responsibilities, Corporate Governance Principles and our Board committee charters.

We also offer continuing education programs to assist the directors in maintaining their expertise in these areas. In addition, our directors have the opportunity to attend commercial director education seminars related to the director’s committee assignment(s) or to the work of the Board. In fiscal 2008,2009, we conducted an orientation for aone new member of the Board and conducted one continuing education session for the Board.

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4                                            For personal reasons, Mr. Bousbib decided not to stand for ratificationKhosla was appointed as a Class 2 director at the June 27, 2007, Regular Meeting of Shareholders.effective October 15, 2008.

5                                            The amount includes: (a) payment of $60,000 in salary for Mr. Lenzmeier’s employment as Vice Chairman, as described below inEmployment Arrangement for Allen U. Lenzmeier; (b) payment of $1,922$2,100 in matching contributions under our Retirement Savings Plan; (c) payment of $1,000 automobile allowance (Mr. Lenzmeier’s automobile allowance was terminated effective May 1, 2007); (d) payment of $72 in premiums for executive long-term disability insurance; and (e)(d) reimbursement of $1,730$2,000 for tax preparation expenses.expenses and (e) payment of $166 in tax gross-ups.

6                                            Mr. PressMikan was appointed as a Class 2 director effective December 20, 2006.  Mr. Press terminated his service with the Board on November 1, 2007, after accepting a new position with Chrysler LLC and Cerberus Capital Management, L.P.April 9, 2008.

7                                            Mr. Schulze requested that he not be granted a long-term incentive award and that options to purchase the number of options to purchase shares he would have received be contributed to a discretionary award pool to be distributed to our employees.

8                                            The amount includes: (a) payment of $280,769$150,000 in salary for Mr. Schulze’s employment as Chairman of the Board, as described below inEmployment Arrangement for Richard M. Schulze; (b) payment of $3,298$5,250 in matching contributions under our Retirement Savings Plan; (c) payment of $9,145$9,144 in premiums for life insurance coverage exceeding $50,000; and (d) payment of $1,000 automobile allowance (Mr. Schulze’s automobile allowance was terminated effective May 1, 2007); and (e) payment of $249$260 in premiums for executive long-term disability insurance. Not reflected in the amount are the following benefits Mr. Schulze received from third-parties in connection with his relationship with Best Buy: (a) satellite TV service; and (b) cellular phone equipment and service.

9For professional reasons, Ms. Tolan resigned from the Board of Directors on August 14, 2008. Her resignation was effective immediately.

10Mr. Vittecoq was appointed as a Class 1 director effective September 26, 2008.

Employment Arrangement for Richard M. Schulze

In April 2007, we entered into an amended employment arrangement with Richard M. Schulze, a founder of Best Buy, and our former Chief Executive Officer, and our current Chairman of the Board.Board and our former CEO. Mr. Schulze’s responsibilitiesSchulze is responsible as Chairman includefor Board oversight, corporate strategic planning and mentoring company officers. Mr. Schulze also periodically represents Best Buy at public functions and actively engages with employees at designated company functions. Under the amendedPursuant to our employment arrangement with Mr. Schulze’sSchulze, he received an annual salary was reduced from $1 million toof $150,000 for as long as he is physically and mentally proficient to act as Chairman, subject to his election as a director by our shareholders. The arrangement allows for annual increases based on the consumer price index. Mr. Schulze is not eligible to participate in our equity-based compensation programs for employees. However, he is eligible to receive options to purchase the same number of shares granted to non-management directors, as described in Director Equity Awards on page [__][]. In addition, he receiveswe provided the following benefits:benefits to Mr. Schulze in fiscal 2009: (i) reimbursement of all business-related expenses, including travel, entertainment, room and board; (ii) eligibility for Mr. Schulze and his spouse to participate in health benefit programs generally available to our employees; (iii) office facilities at our corporate campus, including full administrative support services; and (iv) eligibility to participate in our Retirement Savings Plan and Deferred Compensation Plan.

Employment Arrangement for Allen U. Lenzmeier

We entered into an employment arrangement withIn fiscal 2009, Allen U. Lenzmeier, oura Vice Chairman, in April 2006 and the agreement was subsequently amended in April 2007. As Vice Chairman, Mr. Lenzmeier providesprovided consulting services to us in connection with our international expansion projects. Under thePursuant to our employment arrangement with Mr. Lenzmeier, we agreed to paypaid Mr. Lenzmeier an annual salary of $60,000 to serve as Vice Chairmanwork on a part-time basis. Mr. Lenzmeier iswas not eligible to participate in our equity-based compensation programs for employees, except our 20032008 Employee Stock Purchase Plan (“ESPP”) and, if adopted, our 2008 Employee Stock Purchase Plan.. However, he is eligible to receivereceived options to purchase the same number of shares granted to non-management directors, as described inDirector Equity Awards below. In addition, he receiveswe provided the following benefits:benefits to Mr. Lenzmeier in fiscal 2009: (i) reimbursement of all business-related expenses, including travel, entertainment, room and board; (ii) office facilities at our corporate campus, including administrative support services; and (iii) eligibility to participate in our Retirement

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Deferred Compensation Plan

Each calendar year, we offer directors the right to defer up to 100% of their annual and committee chair retainers under our Deferred Compensation Plan which is described inNon-Qualified Deferred Compensation Plan on page [__][]. No company contributions or matching contributions are made for the benefit of directors under the Deferred Compensation Plan.

Other Benefits

We reimburse all directors for travel and other necessary business expenses incurred in performance of their services for us. In addition, we extend coverage to all directors are covered under a directors’ and officers’ indemnity insurance policy.

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Nominees and Directors

There are no family relationships among the nominees or between any nominees and any of our other directors.

ITEM OF BUSINESS NO. 1.1

Class 12 Director Nominees

 (ages(ages as of March 1, 2008)February 28, 2009)

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ITEM OF BUSINESS NO. 1.2

Nominee for Ratification as Class 2 Director— Term expires in 2009

 (age as of March 1, 2008)

Nominees for Class 2 Directors— Terms expire in 2009

 (ages as of March 1, 2008)

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*                                            Less than 1%.

1                                            The business address for all directors and executive officers is 7601 Penn Avenue South, Richfield, Minnesota 55423.

2                                            The figure represents: (a) 62,497,77660,035,576 outstanding shares registered in the name of Mr. Schulze and a co-trustee, and held by them as trustees of a trust for the benefit of Mr. Schulze, of which up to $150 million aggregate amount of shares have been

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1516   ��                                    The figure represents: (a) 5,500 outstanding shares owned by Ms. Tolan; and (b) options to purchase 37,500 shares, which she could exercise within 60 days of March 1, 2008.

16The figure represents: (a) 60,53570,535 outstanding shares owned by Mr. Trestman; (b) 25,000 outstanding shares registered in the name of Mr. Trestman’s spouse as trustee of an irrevocable family trust (Mr. Trestman has disclaimed beneficial ownership of these shares); and (c) options to purchase 105,750101,250 shares, which Mr. Trestman could exercise within 60 days of March 1, 2008.February 28, 2009.

17                                        The figure represents: (a) 25,50048,000 outstanding shares owned by Mr. Tyabji; and (b) options to purchase 93,75078,750 shares, which he could exercise within 60 days of March 1, 2008.February 28, 2009.

18The figure represents options to purchase 3,750 shares, which Mr. Vittecoq could exercise within 60 days of February 28, 2009.

19                                        The figure represents: (a) outstanding shares and options described in the preceding footnotes; (b) 137,299143,931 outstanding shares owned by other executive officers;officers, including 51,710 shares owned by David J. Morrish, a named executive officer, who voluntarily terminated his employment with us effective February 28, 2009, pursuant to our Voluntary Separation Program, described on page []; (c) options granted to other executive officers to purchase 564,187539,323 shares, which they could exercise within 60 days of March 1, 2008;February 28, 2009, including 52,018 shares owned by Mr. Morrish; and (d) 41,59910,529 outstanding shares registered in the name of the Trustee, and held by the Trustee in connection with Best Buy’s Retirement Savings Plan for the benefit of other executive officers.

19As reported on the owner’s most recent Schedule 13G that reported beneficial ownership as of December 31, 2007. Capital Research Global Investors has sole voting power over 14,498,600 shares and sole dispositive power over 29,338,450 shares.

20                                        As reported on the owner’s most recent Schedule 13G that reported beneficial ownership as of December 31, 2007.2008. Capital WorldResearch Global Investors has sole voting power over 9,991,35013,393,000 shares and sole dispositive power over 54,069,20022,170,850 shares.

21                                        As reported on the owner’s most recent Schedule 13G that reported beneficial ownership as of December 31, 2007. The Goldman Sachs Group, Inc.2008. Capital World Investors has sharedsole voting power over 25,362,6217,851,350 shares and sharedsole dispositive power over 25,603,73640,486,680 shares.

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For ease of use, the Compensation Discussion and Analysis is divided into fourthree sections:

Compensation Philosophy, Objectives and Process

“Total Rewards” Philosophy.  We believe our success depends on employees at all levels using their unique strengths, experiences and ideas to foster innovation and build strong customer relationships. While our compensation and benefit programs are important tools in attracting and retaining talented employees, we also believe that non-monetary factors such as work environment, learning and development opportunities, and relationships between employees and managers are critical to provide a rewarding employee experience. Collectively, these elements comprise our “Total Rewards” philosophy. We believe this company-wide approach to attracting, motivating and retaining talent is a competitive advantage.

Our Total Rewards philosophy seeks to:

·      Provide employees with a greater choice of rewards that are most valued by them;

·      Differentiate rewards to individuals, based on their contributions;

·      Encourage and recognize experimentation, entrepreneurship and innovation; and

·      Reward employee contributions for achieving strong financial and non-financial results.

We implement the Total Rewards philosophy by employing broad-based programs that are designed to align employee interests and create a common vision of success.

Compensation Objectives.  Our compensation program and policies serve the following objectives:

·      Reward employees for creating shareholder value and for comparative performance against external benchmarks;

·      Align long-term employee and shareholder interests;

·      Motivate employees to achieve short-term financial, operational, customer and employee outcomes that materially contribute to the sustainable, long-term health of Best Buy;

·      Attract talent necessary to develop new capabilities and enhance existing competencies; and

·      Maintain a flexible compensation structure that provides for potential wealth accumulation for superior growth or achieving key strategic objectives.

How We Determine Compensation.   The Compensation Committee is responsible for determining and approving executive compensation. In addition, the Compensation Committee oversees the development, evaluation and approval of incentive compensation, equity-based and other employee benefit plans for all employees, including our executive officers. The Compensation Committee is authorized to delegate to management certain responsibilities regarding our employee compensation and benefit plans, as specified in the Compensation Committee’s charter, which is posted on our Web site at www.BestBuy.com — select the “For Our Investors” link and then the “Corporate Governance” link.

The Compensation Committee established and annually reviews our Total Rewards philosophy and our compensation objectives, and oversees the design, competitiveness and effectiveness of compensation programs for our executive officers. At the beginning of each fiscal year, our Human Resources leadership team (“HR”) provides the Compensation Committee with compensation recommendations for the executive officers. The HR presentation includes an analysis prepared in support of the recommendations. The analysis includes a summary of the results of our application of our “Executive Compensation Framework” to each of our executive officers. Our “Executive Compensation Framework” includes a variety of internal and external factors, and is described in greater detail below. The internal factors are generally applied and analyzed by HR. HR has engaged a third-party compensation consultant, Towers Perrin, a global professional services firm, to assist in the development of compensation data that is used to facilitate the application and analysis of the external factors. The Compensation Committee reviews the recommendations with The Delves Group, an independent compensation consulting firm retained by the Compensation Committee, and discusses them with HR. The Compensation Committee’s review is comprehensive and includes consideration of many factors, including: (i) the alignment of the proposed compensation with our Total Rewards philosophy; (ii) the alignment of the proposed

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compensation with our compensation objectives; (iii) the overall value of the compensation package, relative to internal factors and external benchmarks; and (iv) our decision not to offer supplemental compensation, benefits, perquisites and protections commonly extended to executive officers of other large companies. The process for evaluating the named executive officers’ compensation packages based on internal factors, external benchmarks and the lack of supplemental compensation is described in greater detail below.

Executive Compensation Framework.  For fiscal 2008, the total direct compensation of our Group 1 Officers and Mr. Muehlbauer was determined by applying our Executive Compensation Framework to each individual. The determination of Mr. Layden’s fiscal 2008 compensation was not based on our Executive Compensation Framework and is discussed in Compensation for Group 2 Officers — Kevin T. Layden beginning on page [__]. Our Executive Compensation Framework consists of a set of internal and external factors that allow for a comprehensive, multi-faceted evaluation of total compensation based on each individual’s personal attributes and talents, and objective external market data. The factors are not required to carry equal weight, but are all considered in determining the compensation recommendation for each individual. We believe that the diversity of the factors included in our Executive Compensation Framework and our flexibility in their application allows us to attribute appropriate value to each individual and enhances our ability to develop compensation packages that (i) further our compensation objectives, (ii) further one or more of our strategic initiatives, (iii) maximize each individual’s perceived value of his or her total compensation, and (iv) produce the highest return on our compensation investment.

For fiscal 2008, the internal and external factors that comprised our Executive Compensation Framework were as follows:

We assessed the internal factors contained in the Executive Compensation Framework for Messrs. Muehlbauer, Jackson, Dunn and Willett, based on the results of our annual talent assessment process and a review of executive profiles developed for succession planning purposes. The talent assessment process included an evaluation of each individual’s performance and demonstration of Best Buy’s values relative to their peers. The individual profiles were developed through a comprehensive process, which included discussions with the Chief Executive Officer, the individuals’ peers, third-party executive coaches and each individual personally. The profiles contain analyses and information regarding factors similar to the internal factors contained in the Executive Compensation Framework. The internal factors were applied to Mr. Anderson based on an evaluation of his performance conducted by the Board.

We applied the external factors to each Group 1 Officer and Mr. Muehlbauer based on a review of publicly-available compensation data for our peer group of companies and the Fortune 100. We also considered actions taken by companies with which we compete for executive talent. We use available information and monitor actions taken by our peers to evaluate market trends and to assess the overall competitiveness of our executive compensation levels. We do not, however, seek to establish total direct compensation that falls within a prescribed range relative to our peer group of companies or the Fortune 100. In addition, the Compensation Committee may use our peer group of companies to evaluate:

·           The cost of the total direct compensation paid to our named executive officers;

·           The relationship between our financial performance and compensation paid to our named executive officers; and

·           The relative difficulty of our incentive performance targets.

The Compensation Committee annually evaluates the composition of our peer group of companies using revenue, financial, industry and other selection criteria. For fiscal 2008, the criteria used to determine the peer group of companies included:

·          Revenue of $5 billion or more;

·          Five-year growth rate of 10% or more based on economic profit, total shareholder return, revenue, net earnings and/or earnings per share measures;

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·          Industry representation primarily weighted in the wholesale and retail sectors; and

·          Companies that are leaders in one or more of the following areas:

·      Employer of choice;

·      Customer service excellence;

·      Admiration within their industry;

·      Preferred brand(s);

·      Track record of innovation; and

·      One-third of revenues outside of the United States.

The selection criteria were intended to establish guidelines to assist in determining the composition of our peer group. As such, the Compensation Committee, in some cases, used its discretion to select companies that did not meet each of the criteria. Generally, these companies included those that compete directly with us or otherwise possessed traits that we considered imperative for success. We used lists published by Business Week and Fortune magazines to identify companies recognized as top employers, innovators, customer service providers, and other qualitative factors, for purposes of applying our selection criteria. Based on our comprehensive review, our peer group for fiscal 2008 and at the time compensation was determined for our named executive officers was comprised of the following companies:

·          Amazon.com, Inc.

·          Apple Inc.

·          Circuit City Stores, Inc.

·          Costco Wholesale Corporation

·          Dell Inc.

·          eBay Inc.

·          FedEx Corporation

·          Harley-Davidson, Inc.

·          Lowe’s Companies, Inc.

·          Nordstrom, Inc.

·          Staples, Inc.

·          Starbucks Corporation

·          Target Corporation

·          The TJX Companies, Inc.

·          Toyota Motor Corporation

·          Wal-Mart Stores, Inc.

·          Walgreen Co.

·          The Walt Disney Company

·          Whole Foods Market, Inc.

·          Yahoo! Inc.

Certain Benefits and Perquisites.  In addition to our evaluation of total compensation under the Executive Compensation Framework, we also considered that many companies offer the following supplemental compensation, benefits, perquisites and protections to their executive officers:

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·           Employment agreements;

·           Severance or change-in-control agreements;

·           Pension plan benefits;

·           Supplemental retirement plan benefits;

·           Executive life insurance benefits; and

·           Country club memberships.

During fiscal 2008, we did not provide these types of compensation, benefits and perquisites to our named executive officers because they are contrary to our culture and are not consistent with our compensation objectives. Because many of the items listed above are linked to base salary and short-term incentive pay, our decision not to provide them generally reduces the amount of total compensation received by our named executive officers relative to other large companies. Additional information regarding the benefits and perquisites available to the named executive officers is included in Perquisites and other Benefits on page [__].

Role of Independent Compensation Consultant in Determining Compensation.  The Compensation Committee reviews HR’s executive compensation recommendations with The Delves Group, an independent compensation consulting firm retained by the Compensation Committee. The Compensation Committee believes that this review helps ensure that HR’s compensation recommendations are in line with our stated objectives and reasonable when compared to the market for executive talent. In addition, the engagement of an independent consultant enhances the overall independence of the Compensation Committee’s decision-making. The Delves Group reports directly to the Compensation Committee and does not provide any consulting or other services to Best Buy.

Role of Management Compensation Consultant in Determining Compensation.  HR has engaged a third-party compensation consultant, Towers Perrin, a global professional services firm, to assist in the development and analysis of external compensation data that is used to facilitate HR’s executive compensation recommendations to the Compensation Committee. At the request of HR and with the consent of the Compensation Committee, a representative of Towers Perrin regularly attends meetings of the Compensation Committee to address matters directly related to the engagement, including questions regarding external market data and related analyses. Towers Perrin reports directly to HR and does not engage with the Compensation Committee, except at the request and under the direction of HR.

Role of Executive Officers in Determining Compensation.  With the exception of rating the individual performance and assessing the talent of his direct reports, which may impact their cash compensation or annual long-term incentive awards, our Chief Executive Officer does not participate in or otherwise influence HR’s compensation recommendations for either himself or our executive officers.  Our Chief Executive Officer is, however, generally present when HR presents compensation recommendations (except for recommendations regarding his compensation) for our executive officers to the Compensation Committee and provides his perspective regarding the recommendations.  Our other executive officers do not participate in the development of compensation recommendations or the approval process.

Summary of Compensation and Benefit Programs.  We maintain a variety of compensation and benefit programs in which our executive officers and other selected employees participate. These programs include, but are not limited to, our 2004 Omnibus Stock and Incentive Plan, as amended (“Omnibus Plan”); our Executive Officer Short-Term Incentive Program (“Executive Officer STIP”); our Long-Term Incentive Program (“LTIP”); our Deferred Compensation Plan; our Retirement Savings Plan; and our 2003 Employee Stock Purchase Plan (“ESPP”).

Compensation for Group 1 Officers

Elements of Compensation.  The fiscal 2008 compensation for our Group 1 Officers included the following elements:

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1Special long-term incentive awards were granted only to Messrs. Jackson and Willett during fiscal 2008.

Analysis of Compensation Elements for Group 1 Officers

Base Salary.  The Compensation Committee generally determines base salary levels for the Group 1 Officers and other executive officers early in the fiscal year, with changes becoming effective during the first quarter of each fiscal year. The base salaries for the Group 1 Officers that became effective in the first quarter of fiscal 2008 were established based on an assessment of each Group 1 Officer under our Executive Compensation Framework. For fiscal 2008, the changes in base salaries for the Group 1 Officers and the key factors considered were as follows:

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Short-Term Incentive.  For fiscal 2008, the Group 1 Officers received performance-based, short-term incentive awards pursuant to our Executive Officer STIP. The Executive Officer STIP awards, payable in cash, were expressed as a percentage ranging from 125% to 200% of each Group 1 Officer’s base salary, called the “Incentive Target Percentage.” The Incentive Target Percentage for each Group 1 Officer was determined based on application of our Executive Compensation Framework, with particular emphasis placed on the internal job ranking of each position. We emphasized internal job ranking because we believe that it is important that a higher percentage of cash compensation be linked to our performance for higher ranking positions. In addition, we considered the value of total cash compensation in light of the external factors described in Base Salary, above, to ensure that we remain competitive in the market for executive talent. Based on actual performance compared with specific goals, the Group 1 Officers could earn zero to two times their Incentive Target Percentage. We call this factor the “Incentive Multiplier.” The purpose of the Incentive Multiplier is to modify the incentive payout based on actual performance compared with targets approved by the Compensation Committee. The performance results are translated to company and team performance scores, which are then multiplied to determine the Incentive Multiplier. The formula below shows how the short-term incentive payments were determined for fiscal 2008:

Base Salary x Incentive Target Percentage x Incentive Multiplier1= Incentive Payout

1Incentive Multiplier = Company Performance score x Team Performance score

The “Company Performance” score was determined based on our company’s Economic Value Added, or EVA^® (“EVA”) performance for fiscal 2008 compared with a target approved by the Compensation Committee. We believe the use of EVA as a primary incentive factor demonstrates our commitment to linking executive compensation with increasing shareholder value. EVA measures the amount by which our after-tax profits, after certain adjustments, exceed our cost of capital. Certain unplanned events, such as acquisitions and the effect of accounting changes, are excluded for purposes of determining EVA. The EVA target for fiscal 2008 was established based on historical company performance and target-setting practices, as well as investor and market expectations. Based on an analysis of those factors, our fiscal 2008 EVA target was $465 million, equivalent to approximately 15% growth in our earnings per share. For the Group 1 Officers to earn any portion of the short-term incentive awards, the company had to achieve a minimum of $326 million of EVA, or 70% of the target amount. To earn an above-target Company Performance score, the company had to achieve at least $472 million of EVA, or 101% of the target amount. The potential EVA ranges and corresponding Company Performance score values for fiscal 2008 were as follows:

For fiscal 2008, our actual EVA performance was [$438] million, which resulted in a Company Performance score of [1.0].

The “Team Performance” score was determined based on the average of the following company metrics: (i) operating income rate; (ii) revenue growth rate; and (iii) selling, general and administrative expenses (“SG&A”) rate, all measured in accordance with generally accepted accounting principles (“GAAP”). Our fiscal 2008 performance against each of these metrics was compared with targets approved by the Compensation Committee. The Team Performance targets were derived from the overall EVA objective described above. For fiscal 2008, the potential operating income rate, revenue growth rate and SG&A rate ranges, and corresponding Team Performance scores were as follows:

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For fiscal 2008, our operating income rate was 5.4%, our revenue growth rate was 11.4% and our SG&A rate was 18.5%. Based on these results, the Team Performance score was computed as follows:

1The Team Performance score was computed as the average of the scores for all three metrics.

To determine the Incentive Multiplier, the Company Performance and Team Performance scores are multiplied. Based on the actual Company Performance and Team Performance scores, the Incentive Multiplier for fiscal 2008 was [0.85].

The fiscal 2008 short-term incentive payments to our Group 1 Officers, as determined based on the formulas described above, were as follows:

1Mr. Jackson did not receive an Incentive Payout because he terminated employment with us prior to the end of fiscal 2008.

Long-Term Incentive.  Pursuant to our LTIP, established under the Omnibus Plan, we make annual long-term incentive awards to our Group 1 Officers and other eligible employees. For fiscal 2008, our Group 1 Officers, except for Mr. Anderson (who requested that he not be granted a long-term incentive award and that the options to purchase shares that he would have received be contributed to a discretionary award pool to be distributed to employees who are not otherwise eligible to receive LTIP awards) were able to select from among four long-term incentive mix choices, which included combinations of stock options, restricted stock and performance-based awards that are settled in stock or cash. We call this our “LTIP Choice” feature. Each of the incentive mix choices were of substantially similar economic value, but had different risk and reward profiles due to varying performance metrics and award characteristics. The award choices are described in greater detail below.

We decided to offer LTIP Choice to our Group 1 Officers because it aligns with our Total Rewards philosophy to provide a greater choice of rewards that are most valued by them. We believe that this approach maximizes the perceived value of the award by the recipient, promotes retention and increases motivation to achieve company objectives. Under LTIP Choice, an initial award value, denominated in stock options, was determined for each participating Group 1 Officer. For fiscal 2008, the value of LTIP awards for the Group 1 Officers was lower compared with awards approved in the prior fiscal year, and was below the median value compared with our peer group of companies and the Fortune 100. The decrease was the result of our decision to direct a greater percentage of overall long-term incentive awards to our store managers in recognition of their significant role in developing relationships with our customers. The initial LTIP award values for the Group 1 Officers were reviewed and approved by the Compensation Committee. The value of each award was convertible, at pre-established exchange rates, by the Group 1 Officers into the following long-term incentive mix choices: