Note 34
Financial statements - Notes to the consolidated financial statements
Ahold Dutch managers and employees
Compensation of key management personnel
34 FINANCIAL INSTRUMENTS, RISKS AND FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
Financial risk management
Currency risk
Interest rate risk
Several related parties of Schuitema render services in support of certain projects of franchisees and associated food
retailers serviced by Schuitema. The purchase of goods or services includes a remuneration of the board of directors of
Schuitema of EUR 2.
U.S. Foodservice had product purchasing arrangements with five Value Added Service Providers ("VASPs") that provided
varying degrees of support to U.S. Foodservice primarily in the procurement of private label and signature brand products.
As part of its normal business practice, U.S. Foodservice guaranteed some of the obligations of the VASPs to vendors relating
to purchases made on behalf of U.S. Foodservice. In 2004, U.S. Foodservice stopped doing business with all five VASPs.
In January 1994, a group of Ahold's Dutch managers and employees acquired a EUR 15 capital investment in the Dutch
Customer Fund, an independent investment fund that primarily invests all of its assets in Ahold's shares and debt. The capital
investment had previously been held by Het Weerpad B.V., an investment company of the Heijn family, founders of Ahold.
Ahold made loans to this group of managers and employees, which included some of Ahold's officers, to assist them with
their investment in the Dutch Customer Fund. In July 1996 and April 1998, additional loans were granted to Ahold's Dutch
managers and employees to purchase additional investments in the Dutch Customer Fund. Some officers participated in these
purchases. For more information on these loans, see Note 19.
For information regarding the compensation of key management personnel, see Note 8.
Ahold's primary market risk exposures relate to currency exchange rate, interest rate and commodity price fluctuations.
In order to manage the risk arising from these exposures, a variety of financial instruments may be utilized.
Ahold operates in a variety of countries throughout the world, and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the U.S. dollar. Foreign exchange risk arises from future commercial transactions
and recognized assets and liabilities. To protect the value of future foreign currency cash flows, including lease payments and
firm purchase commitments, and the value of assets and liabilities denominated in foreign currency, Ahold enters into various
financial instruments, including forward contracts and currency swaps. It is Ahold's policy to cover foreign exchange
transaction exposure in relation to existing assets, liabilities and firm commitments. Translation risk related to Ahold's foreign
subsidiaries, joint ventures and associates is not hedged.
Foreign exchange results on financing transactions and on financial assets and liabilities are presented as part of net financial
expense. Foreign exchange results arising from the purchase of goods for sale or goods and services consumed in Ahold's
operations are included in cost of sales or in the appropriate element of operating expenses, respectively. In 2005 the
Company included exchange losses of EUR 5 in operating expenses (2004: gain of EUR 3).
Ahold's interest rate risk arises primarily from its debt. To manage interest rate risk, Ahold has an interest rate management
policy aimed at reducing volatility in its interest expense and maintaining a target percentage of its debt in fixed rate
instruments. Ahold's financial position is largely fixed by long-term debt issues and derivative financial instruments such as
floating-to-fixed interest rate swaps and cross-currency floating-to-fixed interest rate swaps, which allow Ahold to maintain a
target range of floating rate debt. Occasionally Ahold may enter into fixed-to-floating interest rate swaps to hedge fair value
interest rate risk arising where fixed rate loans are in excess of the target.
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