We remain focused on our business model, lowering our cost base and reinvesting the savings to improve our customer proposition. lr" s Group financial review 27 3.6% Ahold at a glance Business review Governance The food retail sector has been undergoing major changes, turning a strong focus to Fresh, convenience and omni-channel. These developments are taking place in an environment that continues to be highly competitive, with customers remaining value-oriented and focused on price and promotion in all of our markets. Under these market conditions, our strategic promise to be a better place to shop is helping us focus on the right priorities by improving quality, service and value for our customers while developing our formats and accelerating our online business. Our continuous efforts have started to bear fruit, with sales trends stronger in the second half of the year. However, cautious consumer spending kept volume growth under pressure and, combined with our investments in price improvements and low inflation, resulted in modest sales growth. Net sales in 2014 were €32.8 billion, up 0.5% compared to 2013. At constant exchange rates, net sales grew 0.8%. Our net sales increased primarily due to new store openings, including the acquisition of 49 SPAR stores in the Czech Republic and the impact from 15 stores in the Netherlands that were converted in 2014 as part of the agreement to transfer 82 stores from Jumbo. In addition, we continued remodeling and expanding our stores. Identical sales growth was negative in all three segments. Both our grocery and general merchandise online businesses continued to grow by double-digits. Our online businesses contributed 3.9% to Ahold's net sales in 2014 (2013: 3.3%). Tight cost management remains a core part of our business model. By the end of 2014, we exceeded our three-year (2012-2014) €600 million cost savings program, having delivered €865 million. This enabled us to continue to invest in our competitive position and, at the same time, our businesses benefited from optimized store processes and improved sourcing. In Europe, as part of our Simplicity program, we implemented a reorganization of our head office support roles to improve efficiency. In addition, we streamlined Albert Heijn's commercial organization to enable a greater focus on improving quality and value for our customers and to successfully introduce new products, especially in Fresh. Ongoing initiatives from our Simplicity program, which will be re-invested in our customer proposition, are expected to deliver €350 million of cost savings in 2015. Ahold Annual Report 2014 Despite a successful savings program in 2014, our underlying operating margin was 3.9%, down from 4.2% in 2013, primarily due to investments in value and growth in our main markets and deleverage of fixed costs resulting from soft sales trends. Underlying operating income (which excludes impairments, gains on the sale of assets, restructuring and related charges, and other unusual items listed below) was €1,267 million in 2014, down €112 million or 8.1% (down 8.0% at constant exchange rates). Operating income was €1,250 million, up €11 million or 0.9% compared to 2013. We remain committed to maintaining a balance between investing in profitable growth, returning cash to our shareholders, and reviewing opportunities for debt reduction. In 2014, we returned €2.7 billion cash to shareholders through the completion of our €2 billion share buyback program, €1 billion capital reduction and reverse stock split, and a 7% increase in our dividend. This helped us to move toward our capital structure guidelines for liquidity (€2 billion) and debt leverage (ratio of around 2 times). During the year, we entered into a settlement agreement and paid $297 million (€241 million) to resolve a class action relating to the pricing practices of Ahold's former subsidiary U.S. Foodservice (referred to as "Waterbury litigation" in Note 34 of the Financial statements in this Annual Report), Consistent strong cash Row generation has enabled our continued investment in growth, with capital expenditure of €1 billion during the year including the acquisition of the SPAR business. We will continue to look for ways to simplify our business in order to reduce costs and expect that ongoing investments in our customer proposition and further development of our formats and assortment will result in improved sales trends. Net sales million 32,682 32,615 32,774 29,353 30,098 u 4.6% 5.5% 2.0% 0.8% 2010 2011 2012 2013 2014 Net sales - Net sales growth at constant exchange rates Online sales million 1.26/ 1,086 830 3.9% 1 1.5% 2.5% 2010 2011 2012* 2013 2014 Online sales Contribution to Ahold's net sales During 2012 Ahold acquired bol.com Underlying operating income million 1,376 J 1,377 1,412 1,379 1,267 4.7% 4.6% 4.3% 4.2% 3.9% 2010 2011 2012 2013 2014 Underlying operating income Underlying operating margin

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