CalPERS To Vote Proxy against Safeway Directors.

Business Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--April 7, 2004

Citing shareholders' losses of $20 billion, conflicts of interest and lack of responsiveness to shareholders, the California Public Employees' Retirement System (CalPERS) today announced that it is withholding

CalPERS will withhold votes against Chairman and Chief Executive Officer Steven Burd as well as directors Robert MacDonnell and William Tauscher, said Rob Feckner, Investment Committee Chairman.

"Our evaluation of Safeway is based on our long-standing proxy voting guidelines which call for withhold votes when companies fail to respond to shareholder proposals; when board members have conflicts of interest; and when the financial interests of our members are affected by poor long-term performance," Feckner said. "We respectfully suggest the continued leadership of Messrs. Burd, MacDonnell and Tauscher is not in investors' best interests."

Under Burd's leadership, Safeway has experienced nearly $1 billion in losses in the last two years and wiped out $20 billion in shareholder value since 2001. Its share price has declined by 60%, four times that of the Standard & Poors 500 index. Safeway was on the list of the top 25 worst performers among the Wall Street Journal's list of 1,000 major U.S. companies for the five year period ended December 31, 2003.

    The vote to withhold was based on the following specifics:

    1) the Board ignored a majority shareholder vote in 2003 to
       expense stock options;

    2) MacDonnell and Tausher sit on the audit committee, a committee
       which allowed the external auditor to perform non-audit work;

    3) Director MacDonnell's independence is compromised because he
       has a conflicting business relationship with Safeway from his
       affiliation with Kohlberg Kravis Roberts & Company, which took
       Safeway private in 1986.

"We support the efforts of the coalition of other pension funds who are like minded and who are working together to encourage investors to withhold votes," Feckner added. "We have come to the same conclusion - that it is time for shareholders to deliver a strong message that Safeway needs new leadership." The Safeway shareholder meeting will be held on May 20, 2004.

CalPERS is the 31st largest shareholder of Safeway, with 2.7 million shares valued at $57 million. CalPERS is the nation's largest public pension fund, with assets of more than $166 billion. The System provides retirement and health benefits to more than 1.4 million state and local public agency employees and their families. For more information on CalPERS, visit www.calpers.ca.gov.