NOTICE OF 2008 REGULAR MEETING OF SHAREHOLDERS

Regardless of whether you expect to attend the meeting in person, please vote your shares in one of the three ways outlined above.

Help us make a difference by eliminating paper proxy mailings to your home or business.  As permitted by rules recently adopted by the U.S. Securities and Exchange Commission, we are pleased to make this proxy statement and our annual report to shareholders available electronically via the Internet.  If you received a Notice by mail, you will not receive a printed copy of the proxy materials. You may, however, opt to receive a printed copy of our proxy materials by following the instructions for requesting such materials included in the Notice.

TABLE OF CONTENTS

BEST BUY CO., INC.

7601 Penn Avenue South

Richfield, Minnesota 55423

REGULAR MEETING OF SHAREHOLDERS — JUNE 25, 2008

GENERAL INFORMATION

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Best Buy Co., Inc. (“Best Buy,” “we,” “us,” or “our”) to be voted at our 2008 Regular Meeting of Shareholders (the “Meeting”) to be held on Wednesday, June 25, 2008, at 9:30 a.m., Central Time, at the Best Buy Corporate Campus - Theater, 7601 Penn Avenue South, Richfield, Minnesota, or at any postponement or adjournment of the Meeting. The mailing of proxy materials to shareholders will commence on or about [May 12, 2008].

Background

What is the purpose of the Meeting?

At the Meeting, shareholders will vote on the items of business outlined in the Notice of 2008 Regular Meeting of Shareholders (the “Notice”), included as the cover page to this proxy statement. In addition, management will report on our business and respond to questions from shareholders.

Why am I receiving this proxy statement and a proxy card?

You are receiving this proxy statement and a proxy card because you owned shares of Best Buy Common Stock as of April 28, 2008, the record date for the Meeting, and are entitled to vote on the items of business at the Meeting. This proxy statement describes the items that will be voted on at the Meeting and provides information on these items so that you can make an informed decision.

Who may vote?

In order to vote at the Meeting, you must be a shareholder of record of Best Buy as of April 28, 2008, the record date for the Meeting. If your shares are held in “street name” (that is, through a bank, broker or other nominee), you will receive instructions from the shareholder of record that you must follow in order for your shares to be voted as you choose.

When is the record date?

The Board has established April 28, 2008, as the record date for the Meeting.

How many shares of Best Buy Common Stock are outstanding?

As of the record date, there were [__________] shares of Best Buy Common Stock outstanding. There are no other classes of capital stock outstanding.

Voting Procedure

On what items of business am I voting?

You are being asked to vote on the following items of business:

·     The election of five Class 1 directors for a term of two years and the ratification of one Class 2 director;

·     The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 28, 2009;

·     The approval of our 2008 Employee Stock Purchase Plan;

·     The amendment to our Restated Articles of Incorporation to require a majority voting standard for the election of directors; and

·     Such other business as may properly come before the Meeting.

How do I vote?

If you are a shareholder of record (that is, if your shares are owned in your name and not in “street name”), you may vote:

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·     Via the Internet at www.proxyvote.com;

·     By telephone (within the U.S. or Canada) toll-free at 1-800-690-6903;

·     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. 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 provide in advance of the distribution of our 2008 proxy materials.

“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.

If an item comes up for vote at the Meeting, or at any postponement or adjournment of the Meeting, that is not described in the Notice, the Proxy Agents will vote the shares subject to your proxy at their discretion.

How many votes do I have?

You have one vote for each share you own, and you can vote those shares for each item of business to be addressed at the Meeting.

How many shares must be present to hold a valid Meeting?

For us to hold a valid Meeting, we must have a quorum, which means that a majority of the outstanding shares of our Common Stock that are entitled to vote are present at the Meeting. Your shares will be counted as present at the Meeting if you:

·     Vote via the Internet or by telephone;

·     Properly submit a proxy card (even if you do not provide voting instructions); or

·     Attend the Meeting and vote in person.

How many votes are required to approve an item of business?

Pursuant to our Amended and Restated By-laws, each item of business to be voted on by the shareholders requires the affirmative vote of the holders of a majority of the shares of Best Buy Common Stock present at a meeting and entitled to vote. Due to a recent change to Minnesota law, directors are to be elected by a plurality of the voting power of the shares present at a meeting, unless otherwise provided in a company’s articles of incorporation. Election by plurality means that the candidate receiving the most votes for a position will be elected. Our Restated Articles of Incorporation do not address the vote required to elect directors. Accordingly, at the Meeting, directors will be elected by a plurality.  Our Board has approved, and recommends shareholder approval of, an amendment to our Restated Articles of Incorporation to require that directors receive a majority of the votes cast in order to be elected to the Board. See Item of Business No. 4 — Approval of Amendment to Our Restated Articles of Incorporation beginning on page [__].

The election of directors and the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm are considered “routine” matters under New York Stock Exchange (“NYSE”) rules. The NYSE rules allow brokerage firms to vote their clients’ shares on routine matters if the clients do not provide voting instructions. The approval of our 2008 Employee Stock Purchase Plan and the amendment to our Restated Articles of Incorporation are considered “non-routine” matters under NYSE rules. The NYSE rules do not allow brokerage firms to vote their clients’ shares on non-routine matters in the absence of affirmative voting instructions.

If your brokerage firm votes your shares on routine matters because you do not provide voting instructions, your shares will be counted for purposes of establishing a quorum to conduct business at the Meeting and in determining the number of shares voted for or against the routine matter. If your brokerage firm lacks discretionary voting power with respect to an item that is not a routine matter and you do not provide voting instructions (a “broker non-vote”), your shares will be counted for purposes of establishing a quorum to conduct business at the Meeting, but will not be counted in determining the number of shares voted for or against the matter. Abstentions are counted as present and entitled to vote for purposes of determining a quorum and will have the same effect as votes against a proposal.

What if I change my mind after I vote via proxy?

You may revoke your proxy at any time before your shares are voted by:

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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.

Where can I find the voting results of the Meeting?

We will announce the preliminary voting results at the Meeting. We will publish the final voting results in our Quarterly Report on Form 10-Q for our second fiscal quarter ending August 30, 2008. Our Quarterly Report on Form 10-Q is required to be filed with the SEC within 40 days of the end of our fiscal quarter.

Proxy Solicitation

How are proxies solicited?

We will request that brokerage firms, banks, other custodians, nominees, fiduciaries and other representatives of shareholders forward notices and, as applicable, proxy materials and annual reports to the beneficial owners of our Common Stock. We expect to solicit proxies primarily by mail, but directors, officers and other employees of Best Buy may also solicit proxies in person, by telephone, through electronic transmission and by facsimile transmission. Directors and employees of Best Buy do not receive additional compensation for soliciting shareholder proxies.

Who will pay for the cost of soliciting proxies?

We pay all of the costs of preparing, printing and distributing proxy materials. We will reimburse brokerage firms, banks and other representatives of shareholders for reasonable expenses incurred as defined in the NYSE schedule of charges.

How can multiple shareholders sharing the same address request to receive only one set of proxy materials and other investor communications?

If you opt to continue to receive paper copies of our proxy materials, you may elect to receive future proxy materials, as well as other shareholder communications, in a single package per address. This practice, known as “householding,” is designed to reduce our printing and postage costs. To make the election, please indicate on your proxy card under “Householding Election” your consent to receive such communications in a single package per address. Once we receive your consent, we will send a single package per household until you revoke your consent by notifying our Investor Relations Department at 7601 Penn Avenue South, Richfield, MN 55423, or by telephone at (612) 291-6147. We will start sending you individual copies of notices and, as applicable, proxy materials and investor communications within 30 days of your revocation.

Can I receive the proxy materials electronically?

Yes. Shareholders who have not affirmatively opted to receive paper proxy materials through the mail will receive a notice of availability and will receive our proxy materials electronically via the Internet. Electronic delivery saves us the costs of printing and mailing these materials. We encourage our shareholders to receive proxy materials via the Internet because it reduces our expenses for shareholder meetings.  You may opt to receive paper copies of proxy materials, at no cost to you, by following the instructions we will provide in advance of the distribution of our 2008 proxy materials.

An electronic version of this proxy statement is posted on our Web site at www.BestBuy.com — select the “For Our Investors” link and then either the “SEC Filings” link or the “Corporate Governance” link.

Additional Information

Where can I find additional information about Best Buy?

Our Annual Report to Shareholders, our reports on Forms 10-K, 10-Q and 8-K, and other publicly available information should be consulted for other important information about Best Buy. You can also find additional information about Best Buy on our Web site at www.BestBuy.com.

CORPORATE GOVERNANCE AT BEST BUY

Our Board is elected by the shareholders to oversee our business and affairs. In addition, the Board advises management regarding a broad range of subjects including Best Buy strategies and operating plans. Members of the Board monitor and evaluate our business performance through regular communication with our Chief Executive Officer and other members of management, and by attending Board meetings and Board committee meetings.

The Board values effective corporate governance and adherence to high ethical standards. As such, the Board has adopted Corporate Governance Principles for our directors and our Code of Business Ethics, both of which are posted on our Web site at www.BestBuy.com — select the “For Our Investors” link and then the “Corporate Governance” link. Paper copies of these documents are available to shareholders free of charge upon request.

Board Meetings and Attendance

The Board held four regular meetings and one special meeting during the fiscal year ended March 1, 2008. Each incumbent director attended, in person or by telephone, at least 75% of the meetings of both the Board and Board committees on which he or she served. The average attendance by current directors at Board and Board committee meetings exceeded 95%. Our Board does not have a formal policy relating to Board member attendance at our regular meetings of shareholders; however, our directors generally attend the shareholders’ meeting each year. Each of the
then-serving directors attended the 2007 Regular Meeting of Shareholders.

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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 of the Audit Committee, Compensation and Human Resources Committee, Nominating, Corporate Governance and Public Policy Committee and the Finance and Investment Policy Committee 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 conducts quarterly conference calls with management and our independent registered public accounting firm prior to our earnings releases to discuss the results of our independent registered public accounting firm’s quarterly reviews and fiscal year-end audit.

Compensation and Human Resources Committee.   The responsibilities of this committee are to: (i) determine and approve our Chief Executive Officer’s compensation and benefits package; (ii) determine and approve executive and director compensation; (iii) appoint officers at the level of senior vice president and above, other than our Chief Executive Officer; (iv) oversee cash and equity-based incentive compensation and other employee benefit plans; (v) oversee our human capital policies and programs; and (vi) oversee the development of executive succession plans.

Nominating, Corporate Governance and Public Policy Committee.   This committee discharges the Board’s responsibilities related to general corporate governance, including Board organization, membership, training and evaluation. It also reviews and recommends to the Board corporate governance principles, presents qualified individuals for election to the Board, and oversees the evaluation of the performance of the Board and its committees. Finally, this committee oversees matters of public policy and social responsibility that affect us domestically and internationally. For additional information regarding our director nomination process, see Director Nomination Process on page [__].

Finance and Investment Policy Committee.   This committee advises the Board regarding our financial policies and financial condition to help enable us to achieve our long-range goals. It evaluates and monitors the: (i) protection and safety of our cash and investments; (ii) achievement of reasonable returns on financial assets within acceptable risk tolerance; (iii) maintenance of adequate liquidity to support our activities; (iv) assessment of the cost and availability of capital; and (v) alignment of our strategic goals and financial resources.

The following table shows the date each committee was established, the number of meetings held in fiscal 2008 and the names of the directors serving on each committee as of April 1, 2008:

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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.

When the Board elects to fill a vacancy on the Board, the committee will announce the open position and post any additional search criteria on our Web site at www.BestBuy.com — select the “For Our Investors” link and then the “Corporate Governance” link. Candidates recommended by shareholders, if qualified, will be considered in the same manner as any other candidate.

The Nominating Committee will then evaluate the resumes of any qualified candidates recommended by a search firm or shareholders, as well as by members of the Board. Generally, in order to be considered for nomination, a candidate must have:

·     High professional and personal ethics and values;

·     A strong record of significant leadership and meaningful accomplishments in his or her field;

·     Broad policy-making experience;

·     The ability to think strategically;

·     Sufficient time to carry out the duties of Board membership; and

·     A commitment to enhancing shareholder value and representing the interests of all shareholders.

All candidates are evaluated based on these qualification standards and the current needs of the Board.

Shareholder nominations must be accompanied by a candidate resume which addresses the extent to which the nominee meets the director qualification standards and any additional search criteria posted on our Web site. Nominations will be considered only if we are currently seeking to fill an open director position. All nominations by shareholders should be submitted as follows:

Chairman, Nominating, Corporate Governance and Public Policy Committee

c/o Mr. Joseph M. Joyce

Senior Vice President, General Counsel and Assistant Secretary

Best Buy Co., Inc.

7601 Penn Avenue South

Richfield, Minnesota, 55423

Director Independence

Pursuant to its Corporate Governance Principles, the Board has established independence standards consistent with the requirements of the SEC and NYSE corporate governance rules, as applicable. To be considered independent under the NYSE rules, the Board must affirmatively determine that a director or director nominee does not have a material relationship with Best Buy (directly, or as a partner, shareholder or officer of an organization that has a relationship with Best Buy). In addition, NYSE rules provide that no director or director nominee may be deemed independent if the director or director nominee

— has in the past three years:

·     Received (or whose immediate family member has received as a result of service as an executive officer) more than $120,000 during any 12-month period in direct compensation from Best Buy, other than director and committee fees and certain pension payments and other deferred compensation;

·     Been an employee of Best Buy;

·     Had an immediate family member who was an executive officer of Best Buy;

·     Worked on (or whose immediate family member has worked on) our audit as a partner or an employee of our internal auditors or independent registered public accounting firm; or

·     Been (or whose immediate family member has been) employed as an executive officer of another company whose compensation committee at that time included a present executive officer of Best Buy; or

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— is:

·     A partner or employee of our internal auditor or independent registered public accounting firm (or whose immediate family member is currently a partner of such firm or is employed in the audit, assurance or tax compliance practice of such firm); 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), with the exception of Messrs. Schulze, Anderson, Lenzmeier and Kaplan, 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, Rebolledo and Trestman, as well as former directors, Messrs. Bousbib and Press, are not material and do not impair the directors’ independence. For additional information regarding these relationships, see Certain Relationships and Related-Party Transactions on page [__].

George L. Mikan, III, was appointed as a Class 2 director in April 2008. 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.

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. 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 participate 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 a development in which we lease retail space was not deemed material because the amount of the annual lease payment is less than $1 million and the retail square-footage leased constitutes less than 15% of the total leaseable 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 value of the agreement was small and represented an insignificant portion of both Best Buy’s and Otis’ annual consolidated gross revenue for each of the past three fiscal years. In addition, Mr. Bousbib did not 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.

Mr. Press was president of Toyota Motor North America, the American subsidiary of Toyota Motor Corporation Ltd. During fiscal 2008, we had lease agreements with another subsidiary of Toyota. 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.  Mr. Press resigned from our Board on November 1, 2007, after accepting a position with Chrysler LLC and Cerberus Capital Management, L.P.

Executive Sessions of Non-Management and Independent Directors

In order to promote open discussion among non-management directors, the Board has a policy of conducting executive sessions of non-management directors in connection with each regularly scheduled Board meeting. The executive sessions of non-management directors are chaired by the Secretary, provided the Secretary is a non-management director. The independent directors meet in executive session during each regularly scheduled Board meeting. This session is chaired by the independent directors on a rotating basis.

Communications With the Board

Shareholders and interested parties who wish to contact the Board, any individual director, or the non-management or independent directors as a group, are welcome to do so in writing, addressed to such person(s) in care of:

Mr. Joseph M. Joyce

Senior Vice President, General Counsel and Assistant Secretary

Best Buy Co., Inc.

7601 Penn Avenue South

Richfield, Minnesota 55423

Mr. Joyce will forward all written shareholder correspondence to the appropriate Board member(s), except for spam, junk mail, mass mailings, customer complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Mr. Joyce may, at his discretion, forward certain correspondence, such as customer-related inquiries, elsewhere within Best Buy for review and possible response. Comments or questions regarding Best Buy’s accounting, internal controls or auditing matters will be referred to members of the Audit Committee. Comments or questions regarding the nomination of directors and other corporate governance matters will be referred to members of the Nominating Committee.

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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, we conducted an orientation for a new member of the Board.

Director Compensation

Overview of Director Compensation

In April of each year, the Compensation and Human Resources Committee (“Compensation Committee”) reviews the total compensation paid to non-management directors. The purpose of the review is to ensure that the level of compensation is appropriate to attract and retain a diverse group of directors with the breadth of experience necessary to perform the Board’s duties, and to fairly compensate directors for their service. The review is comprehensive and includes consideration of qualitative and comparative factors. To ensure directors are compensated relative to the scope of their responsibilities, the Compensation Committee considers: (i) the time and effort involved in preparing for Board, committee and management meetings and the additional duties assumed by committee chairs; (ii) the level of continuing education required to remain informed of broad corporate governance trends, and material developments and strategic initiatives within Best Buy; and (iii) the risks associated with fulfilling fiduciary duties. To supplement the qualitative analysis, the Compensation Committee also considers the total value of the compensation as compared with director compensation at other Fortune 100 companies and our peer group of companies, which is described in How We Determine Compensation on page [__].

Director Summary Compensation Table

The following table summarizes the compensation earned by our non-management directors and management directors that are not named executive officers (as described on page [__]), during fiscal 2008:

1                 Management directors did not receive any cash compensation for their service as directors during fiscal 2008. The cash compensation in fiscal 2008 for each of our non-management directors consisted of:

The annual retainer and the annual committee chair retainer for non-management directors who serve during only a portion of a fiscal year is prorated. All annual retainers are paid in quarterly installments.

2                 These amounts reflect the expense recognized for financial statement reporting purposes in fiscal 2008 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004),  Share-Based Payment  (“123(R)”), for stock options granted under our 2004 Omnibus Plan, as amended. The amounts reported have been adjusted to eliminate service-based forfeiture assumptions used for financial reporting purposes. The assumptions used in calculating these amounts are set forth in Note 5, Shareholders’ Equity, to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 1, 2008.

At March 1, 2008, the aggregate number of stock option awards outstanding was: Mr. Bousbib — 12,500 shares; Ms. Higgins Victor — 37,500 shares; Mr. James — 37,500 shares; Mr. Kaplan — 93,750 shares; Mr. Lenzmeier — 817,500 shares; Mr. Paull — 37,500 shares; Mr. Press — 9,375 shares; Mr. Rebolledo — 12,500 shares; Mr. Schulze — 1,965,000 shares; Ms. Tolan — 32,000 shares; Mr. Trestman — 105,750 shares; and Mr. Tyabji — 93,750 shares.

3                 We do not provide guaranteed, above-market or preferential earnings on compensation deferred under our Fourth Amended and Restated Deferred Compensation Plan (“Deferred Compensation Plan”). The options available for notional investment of deferred compensation are similar to those available under the Best Buy Retirement Savings Plan (“Retirement Savings Plan”) and are described in Non-Qualified Deferred Compensation on page [__].

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4                 For personal reasons, Mr. Bousbib decided not to stand for ratification as a director at the June 27, 2007, Regular Meeting of Shareholders.

5                 The amount includes: (a) payment of $60,000 in salary for Mr. Lenzmeier’s employment as Vice Chairman, as described below in Employment Arrangement for Allen U. Lenzmeier; (b) payment of $1,922 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) reimbursement of $1,730 for tax preparation expenses.

6                 Mr. Press 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.

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

8                 The amount includes: (a) payment of $280,769 in salary for Mr. Schulze’s employment as Chairman of the Board, as described below in Employment Arrangement for Richard M. Schulze ; (b) payment of $3,298 in matching contributions under our Retirement Savings Plan; (c) payment of $9,145 in premiums for life insurance coverage exceeding $50,000; (d)  payment of $1,000 automobile allowance (Mr. Schulze’s automobile allowance was terminated effective May 1, 2007); and (e) payment of $249 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.

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. Mr. Schulze’s responsibilities as Chairman include 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 amended arrangement, Mr. Schulze’s annual salary was reduced from $1 million to $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 receives the following benefits: (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 with Allen U. Lenzmeier, our Vice Chairman, in April 2006 and the agreement was subsequently amended in April 2007. As Vice Chairman, Mr. Lenzmeier provides consulting services to us in connection with international expansion projects. Under the arrangement, we agreed to pay Mr. Lenzmeier an annual salary of $60,000 to serve as Vice Chairman on a part-time basis. Mr. Lenzmeier is not eligible to participate in our equity-based compensation programs for employees, except our 2003 Employee Stock Purchase Plan (“ESPP”) and, if adopted, our 2008 Employee Stock Purchase Plan. 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 below. In addition, he receives the following benefits: (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 Savings Plan and Deferred Compensation Plan.

Director Equity Awards

A significant portion of director compensation is linked to our stock performance in the form of stock option grants. Each April, in connection with the Compensation Committee’s annual review of director compensation, the Compensation Committee considers a stock option award for directors. On April 8, 2008, the Compensation Committee granted to each then-serving director, other than management directors who are eligible to participate in our equity-based compensation programs for employees, an option to purchase 7,500 shares of Best Buy Common Stock at an exercise price of $42.19 per share. Mr. Schulze requested that he not be granted a long-term incentive award and that the number of options to purchase shares he would have received be contributed to a discretionary award pool to be distributed to employees. The grants were made under the Omnibus Plan, vested immediately on the grant date and can generally be exercised over a 10-year period.

The Compensation Committee also considers stock option grants for new directors at the time they are appointed to the Board. Because annual director stock option grants are made in April, special appointment-based grants are prorated based on the number of months remaining prior to the time when the Compensation Committee expects to consider the next annual director grant.

Director Stock Ownership Guidelines

The Compensation Committee has established stock ownership guidelines for our non-management directors. Each non-management director is expected to own shares of our Common Stock equivalent in value to five times their annual cash retainer. Newly appointed directors have five years from their date of appointment to achieve the expected level of stock ownership.

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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 in Non-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 under a directors’ and officers’ indemnity insurance policy.

ITEM OF BUSINESS NO. 1 — ELECTION OF DIRECTORS

General Information

Our Amended and Restated Bylaws provide that the Board may consist of a maximum of 12 directors, five of whom are designated as Class 1 directors and seven of whom are designated as Class 2 directors. Directors are elected for a term of two years, and the terms are staggered so that Class 1 directors are elected in even-numbered years and Class 2 directors are elected in odd-numbered years.

Board Structure

Our Board is committed to having a sound governance structure that promotes the best interests of all Best Buy shareholders. To that end, our Board has evaluated and actively continues to examine emerging corporate governance trends and best practices. Shareholder perspectives play an important role in that process. The level of importance afforded to shareholder perspectives by our Board is evident upon a closer review of the Board’s governance structure. Some key points regarding that structure are as follows:

·     We believe that two-year terms allow our directors to have a longer-term orientation to our business and encourage long-term, strategic thinking. At the same time, this structure holds the directors accountable to our shareholders, as the entire Board is subject to re-election as early as 53 weeks from any regular meeting of shareholders. Moreover, we believe that the two-year terms promote continuity and foster an appropriate “institutional memory” among Board members.

·     Our Board is predominantly independent. Of our 12 directors, only three are Best Buy employees (including our Chairman of the Board, who is a founder of Best Buy and a major shareholder). Further, the Board has affirmatively determined that eight of our 12 directors are independent under SEC and NYSE corporate governance rules, as applicable.

·     We have separated the roles of Chairman of the Board and Chief Executive Officer. Our Chairman focuses on Board oversight responsibilities, strategic planning and mentoring company officers. Our Chairman also periodically represents Best Buy at public functions and actively engages with employees at designated company functions. Our Chief Executive Officer focuses on the development and execution of company strategies.

·     Our Board is very active. Our directors attended, on average, over 95% of fiscal 2008 Board and Board committee meetings.

We believe our Board structure serves the interests of shareholders by balancing Board continuity and the promotion of long-term thinking with the need for director accountability.

Voting Information

You may vote for all, some or none of the nominees to be elected to the Board. However, you may not vote for more individuals than the number nominated. Each of the nominees has agreed to continue serving as a director if elected. However, if any nominee becomes unwilling or unable to serve and the Board elects to fill the vacancy, the Proxy Agents named in the proxy will vote for an alternative person nominated by the Board. Our Restated Articles of Incorporation prohibit cumulative voting, which means you can vote only once for any nominee. The affirmative vote of a plurality of the voting power of the shares present and entitled to vote at the Meeting is required to elect each director nominee.

IF YOU RETURN A PROXY CARD THAT IS PROPERLY SIGNED BUT YOU HAVE NOT MARKED YOUR VOTE, THAT PROXY WILL BE VOTED TO ELECT ALL OF THE NOMINEES.

Board Voting Recommendation

Management and the Board recommend that shareholders vote FOR the re-election of Bradbury H. Anderson, Kathy J. Higgins Victor, Allen U. Lenzmeier, Rogelio M. Rebolledo and Frank D. Trestman as Class 1 directors. If elected, each Class 1 director will hold office until the election of directors at our 2010 Regular Meeting of Shareholders and until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal.

The Board appointed George L. Mikan, III, as a Class 2 director, effective April 9, 2008. Mr. Mikan was recommended to the Board by an independent third-party search firm. Management and the Board recommend that shareholders ratify the appointment of Mr. Mikan as a Class 2 director at the Meeting. If ratified, Mr. Mikan will hold office until the election of directors at the 2009 Regular Meeting of Shareholders and until his successor has been duly elected and qualified, or until his earlier death, resignation or removal.

All of the nominees are currently members of the Board.

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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 1 Director Nominees

 (ages as of March 1, 2008)

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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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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information about the number of shares of Best Buy Common Stock beneficially owned at March 1, 2008, by our Chairman of the Board, our Chief Executive Officer, our Enterprise Chief Financial Officer (Interim) and each of our three other most highly compensated executive officers during the most recent fiscal year. The table provides similar information for each director including the director nominees, all directors and executive officers as a group, and each person we know who beneficially owns more than 5% of the outstanding shares of Best Buy Common Stock.

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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) 62,497,776 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 pledged by the trust as collateral to secure a line of credit (b) 996,756 outstanding shares registered in the name of Mr. Schulze and co-trustees, and held by them as trustees of trusts for the benefit of Mr. Schulze and his family; (c) 1,326,769 outstanding shares registered in the name of Mr. Schulze and a co-trustee, and held by them as trustees of the Sandra Schulze Revocable Trust dated June 14, 2001; (d) 950,169 outstanding shares held by a limited partnership of which Mr. Schulze is the sole general partner (Mr. Schulze has disclaimed beneficial ownership of these shares except to the extent of his monetary interest therein); (e) 252,312 outstanding shares held by a limited partnership of which a limited liability company owned by Mr. Schulze is the sole general partner (Mr. Schulze has disclaimed beneficial ownership of these shares except to the extent of his monetary interest therein); (f) 31,672 outstanding shares held by a limited partnership of which a limited liability company owned by Mr. Schulze is the sole general partner (Mr. Schulze has disclaimed beneficial ownership of these shares except to the extent of his monetary interest therein); (g) 15,270 outstanding shares registered in the name of Mr. Schulze and held by him as trustee of trusts for the benefit of the children of Mr. Schulze’s spouse (Mr. Schulze has disclaimed beneficial ownership of these shares); (h) 1,728 outstanding shares held by Mr. Schulze’s spouse (Mr. Schulze has disclaimed beneficial ownership of these shares); (i) 2,061 outstanding shares held in Mr. Schulze’s individual retirement account; (j) 1,619,438 outstanding shares owned by The Richard M. Schulze Family Foundation, of which Mr. Schulze is the sole director; (k) 74,605 outstanding shares registered in the name of JPMorgan Chase Bank (the “Trustee”), and held by the Trustee in connection with Best Buy’s Retirement Savings Plan for the benefit of Mr. Schulze; and (l) options to purchase 1,965,000 shares, which he could exercise within 60 days of March 1, 2008.

     3   The figure represents: (a) 1,606,577 outstanding shares owned by Mr. Anderson; (b) 337,839 outstanding shares held by a limited partnership of which a limited liability company owned by Mr. Anderson and his spouse is the sole general partner and of which Mr. Anderson and his spouse are limited partners individually; (c) 151,877 outstanding shares registered in the name of Mr. Anderson and a co-trustee, and held by them as trustees of a trust for the benefit of Mr. Anderson; (d) 151,877 outstanding shares registered in the name of Mr. Anderson’s spouse and a co-trustee, and held by them as trustees of a trust for the benefit of Mr. Anderson’s spouse (Mr. Anderson has disclaimed beneficial ownership of these shares); (e) 1,800 outstanding shares registered in the name of Mr. Anderson and held by him as custodian for the benefit of his children (Mr. Anderson has disclaimed beneficial ownership of these shares); (f) 12,059 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 Mr. Anderson; (g) 195,505 outstanding shares owned by the Anderson Family Foundation, of which Mr. Anderson is a director; and (h) options to purchase 1,533,750 shares, which he could exercise within 60 days of March 1, 2008.

     4   The figure represents: (a) 6,489 outstanding shares owned by Mr. Muehlbauer; (b) 1,514 outstanding shares held in Mr. Muehlbauer’s individual retirement account; (c) 907 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 Mr. Muehlbauer; and (d) options to purchase 93,091 shares, which he could exercise within 60 days of March 1, 2008.

     5   The figure represents: (a) 8,555 outstanding shares owned by Mr. Dunn; (b) 13,839 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 Mr. Dunn; and (c) options to purchase 344,886 shares, which he could exercise within 60 days of March 1, 2008.

     6   The figure represents: (a) 159,970 outstanding shares owned by Mr. Willett; (b) 603 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 Mr. Willett; and (c) options to purchase 237,627 shares, which he could exercise within 60 days of March 1, 2008.

     7   The figure represents: (a) 400 outstanding shares owned by Mr. Layden; (b) 600 outstanding shares held in Mr. Layden’s individual retirement account; (c) 843 outstanding shares held by Mr. Layden’s spouse in her individual retirement account; and (d) options to purchase 159,450 shares, which he could exercise within 60 days of March 1, 2008.

     8   The figure represents: (a) 5,730 outstanding shares owned by Ms. Higgins Victor; and (b) options to purchase 37,500 shares, which she could exercise within 60 days of March 1, 2008.

     9   The figure represents: (a) 3,500 outstanding shares owned by Mr. James; and (b) options to purchase 37,500 shares, which he could exercise within 60 days of March 1, 2008.

     10   The figure represents: (a) 63,211 outstanding shares owned by Mr. Kaplan; and (b) options to purchase 105,000 shares, which he could exercise within 60 days of March 1, 2008.

     11   The figure represents: (a) 1,582,134 outstanding shares owned by Mr. Lenzmeier; (b) 51,900 outstanding shares held by a private family foundation of which Mr. Lenzmeier and his spouse are the sole directors and officers; and (c) options to purchase 780,000 shares, which he could exercise within 60 days of March 1, 2008.

     12   Mr. Mikan joined the Board in April 2008 and did not own any shares at March 1, 2008.

     13   The figure represents: (a) 4,669 outstanding shares owned by Mr. Paull; and (b) options to purchase 37,500 shares, which he could exercise within 60 days of March 1, 2008.

     14   The figure represents options to purchase 12,500 shares, which Mr. Rebolledo could exercise within 60 days of March 1, 2008.

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     15   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.

     16   The figure represents: (a) 60,535 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 105,750 shares, which Mr. Trestman could exercise within 60 days of March 1, 2008.

     17   The figure represents: (a) 25,500 outstanding shares owned by Mr. Tyabji; and (b) options to purchase 93,750 shares, which he could exercise within 60 days of March 1, 2008.

     18   The figure represents: (a) outstanding shares and options described in the preceding footnotes; (b) 137,299 outstanding shares owned by other executive officers; (c) options granted to other executive officers to purchase 564,187 shares, which they could exercise within 60 days of March 1, 2008; and (d) 41,599 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.

     19   As 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. Capital World Investors has sole voting power over 9,991,350 shares and sole dispositive power over 54,069,200 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. has shared voting power over 25,362,621 shares and shared dispositive power over 25,603,736 shares.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and shareholders who own more than 10% of our Common Stock file initial reports of ownership with the SEC and the NYSE. They must also file reports of changes in ownership with the SEC and the NYSE. In addition, they are required by SEC regulations to provide us copies of all Section 16(a) reports that they file with the SEC. Based solely on a review of such Section 16(a) reports, management and the Board believe our directors, officers and owners of more than 10% of our outstanding equity securities complied with the reporting requirements during the fiscal year ended March 1, 2008.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Our Compensation Discussion and Analysis describes the material elements of compensation for the following groups and individuals, collectively referred to as the “named executive officers:”

“Group 1 Officers,” who are:

·      Bradbury H. Anderson, Vice Chairman and Chief Executive Officer;

·      Darren R. Jackson, former Executive Vice President — Finance and Chief Financial Officer, and former Executive Vice President — Customer Operating Groups;

·      Brian J. Dunn, President and Chief Operating Officer; and

·      Robert A. Willett, Chief Executive Officer — Best Buy International and Chief Information Officer.

“Group 2 Officers,” who are:

·      James L. Muehlbauer, Enterprise Chief Financial Officer (Interim); and

·      Kevin T. Layden, Chief Operating Officer — International.

We divided the named executive officers into two groups because the compensation programs and the circumstances and decision-making processes that determined compensation for each group were materially different. We believe that separating the named executive officers into groups based on their participation in common programs, evaluation under similar standards and other commonalities enhances the clarity and readability of our Compensation Discussion and Analysis. For fiscal 2008, Messrs. Anderson, Jackson, Dunn and Willett were included in a group because they generally participated in the same compensation programs and were evaluated under similar standards. We included Messrs. Muehlbauer and Layden in a separate group because their status as named executive officers was the result of special circumstances, they were generally subject to different evaluation standards, and they participated in compensation programs that were more narrowly tailored based on their respective positions.

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For ease of use, the Compensation Discussion and Analysis is divided into four 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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1 Special 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

1    Incentive 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:

1 The 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:

1  Mr. 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:

“Stock Options” are non-qualified stock option awards that have a term of 10 years and become exercisable over a four-year period at the rate of 25% per year, beginning one year from the date of grant. The stock option exercise price is equal to the closing price of our Common Stock on the grant date, as quoted on the NYSE.

“Performance Shares” are a type of performance-based restricted stock award that will be earned if our Common Stock achieves a certain total shareholder return (“TSR”) as compared to the TSR of companies that comprise the Standard & Poor’s 500 Index during a three-year incentive period which started on March 2, 2008 (the beginning of fiscal 2009), and ends on February 26, 2011 (the end of fiscal 2011), at which time the earned performance shares are scheduled to vest. TSR is the compound annual growth rate that shareholders receive on their investment, including both paid dividends and stock price appreciation. The following is a summary of performance share awards that may be earned based on varying levels of our TSR performance in relation to the TSR performance of the Standard & Poor’s 500 Index:

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“Restricted Stock” is another type of performance-based restricted stock award that will be earned if our fiscal 2009 EVA achieves a certain level compared with our fiscal 2009 EVA target as determined by the Compensation Committee.  The fiscal 2009 EVA target of $[___] was generally determined in the same manner as the fiscal 2008 EVA target. After the number of shares of restricted stock is determined and credited to the Group 1 Officer, the shares will be scheduled to vest on February 26, 2011 (the end of fiscal 2011), provided the Group 1 Officer remains employed with us through that date. The following is a summary of restricted stock awards that may be earned based on varying levels of our fiscal 2009 EVA performance as a percentage of our fiscal 2009 EVA target:

“Performance Units” are denominated in U.S. dollars and paid in cash upon vesting. These awards will be earned if our fiscal 2009 EVA achieves a certain level compared with our fiscal 2009 EVA target as determined by the Compensation Committee. The fiscal 2009 EVA target of $[___] was generally determined in the same manner as the fiscal 2008 EVA target. After the number of Performance Units is determined and credited to the Group 1 Officer, the Performance Units will be scheduled to vest on February 26, 2011 (the end of fiscal 2011), provided the Group 1 Officer remains employed with us through that date. The following is a summary of Performance Unit awards that may be earned based on varying levels of our fiscal 2009 EVA performance as a percentage of our fiscal 2009 EVA target:

For fiscal 2008, the Group 1 Officers, except for Mr. Anderson who did not receive an LTIP award, selected the following incentive mix choices:

Additional information regarding the LTIP awards granted to the Group 1 Officers in fiscal 2008 is included in Grants of Plan-Based Awards on page [__].

Special Long-Term Incentives.  From time to time, we grant special long-term incentives for a variety of reasons, including (i) to recognize superior performance, (ii) to provide additional incentive for the achievement of critical business objectives, and (iii) to retain exceptional executive talent. Special long-term incentives can be awarded in various forms, including time and performance-based restricted stock, and discretionary cash awards. In fiscal 2008, we granted special long-term incentive awards to Messrs. Jackson and Willett in the form of time-based restricted stock. The purpose of the award for Mr. Jackson was primarily to promote retention. For Mr. Willett, the purpose of the award was to recognize him for producing substantial business benefits through leadership of our information systems and supply chain restructuring and outsourcing strategy, as well as to promote retention. The Compensation Committee considered the impact of the special awards’ values on Messrs. Jackson and Willett’s total compensation, relative to comparable positions within our peer group of companies and the Fortune 100. Including the value of the special long-term incentive award, the total direct compensation for Messrs. Jackson and Willett was between the middle and high end of the range compared with our peer group of companies and the Fortune 100. The Compensation Committee determined that total direct compensation in that range was reasonable because of the important contributions both individuals were expected to make in executing our key business strategies. The shares underlying Mr. Jackson’s award were scheduled to vest on April 26, 2010, but were irrevocably forfeited when he terminated employment with us on December 7, 2007.  All the shares subject to Mr. Willett’s award are also scheduled to vest on April 26, 2010, provided he has been continually employed with us through that date.  Additional information regarding the special long-term incentive awards granted to Messrs. Jackson and Willett in fiscal 2008 is included in Grants of Plan-Based Awards on page [__].

Compensation for Group 2 Officers

James L. Muehlbauer

Effective as of September 20, 2007, Mr. Muehlbauer was appointed as our interim chief financial officer, pending completion of our search for a permanent chief financial officer. Mr. Muehlbauer, who had previously served as our Senior Vice President and Chief Financial Officer - Best Buy U.S., is a candidate for the permanent chief financial officer position. At the time of his appointment, the Compensation Committee approved

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additional compensation for Mr. Muehlbauer in recognition of his increased responsibilities as interim chief financial officer for the entire company. Mr. Muehlbauer’s compensation was determined through application of our Executive Compensation Framework, with emphasis on balancing his experience with external market data for comparable positions. For fiscal 2008, Mr. Muehlbauer generally received the same elements of compensation as the Group 1 Officers described in Elements of Compensation beginning on page [__]. The individual elements of Mr. Muehlbauer’s fiscal 2008 total compensation are discussed below.

Base Salary.  Mr. Muehlbauer’s base salary for fiscal 2008 of $349,763 had been set during the first fiscal quarter of the year when the base salaries of all of our executive officers were determined.  A base salary adjustment for Mr. Muehlbauer was not made at the time of his appointment as interim chief financial officer. In lieu of a base salary increase and due to the temporary nature of the position, the Compensation Committee approved a $15,000 cash bonus payment for each month Mr. Muehlbauer serves in the interim position. The amount of the monthly cash bonus payment was determined based on a review of external market data for comparable positions and in consideration of Mr. Muehlbauer’s increased job responsibilities.

Short-Term Incentive.  For fiscal 2008, Mr. Muehlbauer received a performance-based, short-term incentive award pursuant to our Corporate Short-Term Incentive Program (“Corporate STIP”). The Corporate STIP award, payable in cash, was expressed as 55% of Mr. Muehlbauer’s base salary, or Mr. Muehlbauer’s “Incentive Target Percentage.” In connection with his appointment as interim chief financial officer, Mr. Muehlbauer’s Incentive Target Percentage was increased to 100% of his base salary, based on his level of responsibility compared with similar positions in our peer group of companies and the Fortune 100, and relative to other Best Buy executive officer roles. The Corporate STIP is similar to the Executive Officer STIP, described in Short-Term Incentive on page [__], except that (i) the “Team Performance” metrics are by department and for the Finance department were based on our revenue growth and SG&A rates, and (ii) it included a third “Individual Performance” factor to compute the Incentive Multiplier. The formula below shows how Mr. Muehlbauer’s short-term incentive payment was determined for fiscal 2008:

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

1  Incentive Multiplier = Company Performance score x Team Performance score x Individual Performance score

The “Company Performance” score was based on our company’s fiscal 2008 EVA compared with a target approved by the Compensation Committee. The EVA target and the basis for its establishment were the same as for the Executive Officer STIP described in Short-Term Incentive on page [__]. For Mr. Muehlbauer, 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 for the Finance department was determined based on the average of two metrics, our company’s revenue growth and SG&A rates, measured in accordance with GAAP. Our fiscal 2008 performance against both 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 revenue growth rate and SG&A rate ranges, and corresponding Team Performance scores for Mr. Muehlbauer, were as follows:

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

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

The “Individual Performance” score was determined based on our annual performance appraisal which included an assessment of Mr. Muehlbauer’s achievement of individual goals and his demonstration of Best Buy’s values. Depending on his performance, the corresponding score could range from 0.0 to 1.2. For fiscal 2008, Mr. Muehlbauer received an Individual Performance score of [__].

To determine the Incentive Multiplier, the Company Performance, Team Performance and Individual Performance scores are multiplied. Based on

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the actual Company Performance and Team Performance scores, and Mr. Muehlbauer’s Individual Performance score, his Incentive Multiplier for fiscal 2008 was [__].

The fiscal 2008, short-term incentive payment to Mr. Muehlbauer, as determined based on the formulas described above, was as follows:

1 Does not include a $15,000 monthly cash bonus Mr. Muehlbauer received for each month he serves as our interim chief financial officer.

2 The Incentive Target Percentage for Mr. Muehlbauer was increased from 55% to 100% in connection with his appointment as our interim chief financial officer in September 2007. For fiscal 2008, the short-term incentive payment for Mr. Muehlbauer was computed proportionately based on the number of months he served in each position.

Long-Term Incentive. For fiscal 2008, Mr. Muehlbauer participated in our LTIP.  Pursuant to the “LTIP Choice” feature, Mr. Muehlbauer was 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. Our LTIP Choice feature is described in greater detail in Long-Term Incentive beginning on page [__]. Mr. Muehlbauer selected Choice #1, 100% Stock Options. At the time the award was approved, Mr. Muehlbauer had not yet been appointed as interim chief financial officer. As such, the number of Stock Options subject to the award was determined in the same manner as LTIP awards granted to our other senior vice presidents. The initial award values for senior vice presidents were determined based on a review of retail and general industry market data for comparable positions and were subject to adjustment based on the results of our talent assessment process. Additional information regarding the LTIP award granted to Mr. Muehlbauer in fiscal 2008 is included in Grants of Plan-Based Awards on page [__].

Special Long-Term Incentive. In fiscal 2008, we granted Mr. Muehlbauer a special long-term incentive award in the form of additional Stock Options. We granted the award to compensate Mr. Muehlbauer for the increased responsibility he assumed as interim chief financial officer and to strengthen the alignment of his interests with our long-term success. The amount of the award was determined based on retail and general industry market data for comparable positions.  Additional information regarding the special long-term incentive award granted to Mr. Muehlbauer in fiscal 2008 is included in Grants of Plan-Based Awards on page [__].

Kevin T. Layden

Effective as of January 4, 2008, Mr. Layden was appointed as our Chief Operating Officer - International. Prior to that, he served as President and Chief Operating Officer – Best Buy Canada.

Base Salary. Mr. Layden’s base salary at the beginning of fiscal 2008 was $773,647 and was determined during the first quarter of fiscal 2007. During the second quarter of fiscal 2008, the Compensation Committee approved a 3.5% increase in Mr. Layden’s base salary to $800,724. The increase was determined based on consideration of comparative market data for similar executive positions in Canada, the compensation levels for our other executive officers of similar rank, and the strong performance of our Canada business. However, the increase in Mr. Layden’s base salary was limited because his compensation was in the upper range of similarly ranked executive officers within the company.

Short-Term Incentive.   For fiscal 2008, Mr. Layden received a performance-based, short-term incentive award pursuant to our International Short-Term Incentive Program (“International STIP”). He received an award under the International STIP because he was serving as President and Chief Operating Officer - Best Buy Canada during the first fiscal quarter of the year when short-term incentives were awarded. Key leaders in our international segment participated in the International STIP to promote the alignment of their interests in executing our international strategy. The International STIP award, payable in cash, was expressed as 75% of Mr. Layden’s base salary, or Mr. Layden’s “Incentive Target Percentage.” The Incentive Target Percentage was determined based on Mr. Layden’s level of responsibility compared with other executive positions in the Canada market and relative to other Best Buy executive officer roles. The International STIP is similar to the Executive Officer STIP, described in Short-Term Incentive on page [__], except that (i) the “Company Performance” metric was replaced by an “International Performance” metric based on the operating profit generated by our international segment, (ii) the “Team Performance” metric was replaced by a “Canada Team Performance” metric based on operating profit and revenue for our Canada business, and (iii) it included a third “Individual Performance” factor to compute the Incentive Multiplier. The formula below shows how Mr. Layden’s short-term incentive payment was determined for fiscal 2008:

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

1  Incentive Multiplier = International Performance score x Canada Team Performance score x Individual Performance score

The “International Performance” score was determined based on the fiscal 2008 operating profit generated by our international segment compared with a target set by management and measured in accordance with generally accepted accounting principles (“GAAP”). For fiscal 2008, the international operating profit target was $123 million. For Mr. Layden to earn any portion of his short-term incentive award, our international segment had to achieve a minimum of $85 million of operating profit, or 70% of the target amount. To earn an above-target International Performance score, our international segment had to achieve at least $124 million of operating profit, or 101% of the target amount. The potential operating profit ranges and corresponding International Performance score values for fiscal 2008 were as follows:

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For fiscal 2008, the operating profit for our international segment was $162 million, which resulted in an International Performance score of [1.4].

The “Canada Team Performance” score was determined based on equally weighted operating profit and revenue metrics for our Canada business. The fiscal 2008 performance of our Canada business for each of these metrics, measured in accordance with GAAP, was compared with targets set by management. The potential Canada operating profit ranges, and corresponding score values for fiscal 2008 were as follows:

The potential Canada revenue ranges and corresponding score values for fiscal 2008 were as follows:

For fiscal 2008, our Canada business had operating profit of $208 million and revenue of $5,386 million. Based on these results, the Canada Team Performance score was computed as follows: