COMPENSATION OF DIRECTORS

      During the calendar year ending December 31, 2002,2003, and was set at 6.95 percent for the calendar year ending December 31, 2004. Each outside directors were paid $50,000. At least one-halfdirector also received 1,951 Shares on June 6, 2003. The Chair of the retainer was paid in Wal-Mart stock or stock units. The ChairpersonsAudit Committee of the Board committees received an additional retainer of $3,000. Outside$15,000, the Chair of the CNGC received an additional retainer of $10,000, and the Chair of the Strategic Planning and Finance Committee of the Board (“SPFC”) received an additional retainer of $10,000. Through June 5, 2003, outside directors were paid $1,500 per day, not exceeding 30 days, for additional work performed on behalf of the Board. Under this policy, one director was paid $1,500 during this period. Directors were not paid for meeting attendance but were reimbursed for expenses incurred in attending the meetings.

 In June 2002, each outside director also received options to purchase 5,512 shares of Company stock to link his or her compensation more closely to the interests of shareholders. The exercise price for the stock options is $54.43, and they vest one year from the date of grant and have a term of ten years.

During the fiscal year ended January 31, 2003,2004, Jack C. Shewmaker received the following benefits from the Company: monitoring of a home security system;system, long-distance telephone service;service, and a membership at the Company’s fitness center. Mr. Shewmaker also received health and life insurance coverage through June 2003, for which he remittedreimbursed the fullCompany for the premiums.

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BOARD MEETINGS

BOARD MEETINGS

The Board held four regular meetings and threefour telephonic meetings during the past fiscal year to review significant developments affecting the Company, engage in strategic planning, and act on matters requiring Board approval. For the fiscal year ended January 31, 2003,2004, each incumbent director other than John T. Chambers, attended at least 75%75 percent of the Board meetings and the meetings of committees on which he or she served.

BOARD COMMITTEES

Board Committees

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RELATED-PARTY TRANSACTIONS

      Frank Robson held various ownership interests in six store locations leased by Wal-Mart. Mr. Robson is the brotherWal-Mart’s Audit Committee consists of Helen R. Walton, a beneficial ownerfour directors, all of more than 5% of Wal-Mart stock. The Company paid rents and maintenance fees of $1,771,019 under the leases for the fiscal year ended January 31, 2003. The Company believes that these amountswhom are competitive with rents and maintenance fees that would be paid to a third party to lease similar space.

      During the past fiscal year, Manhattan Products, Inc., which is owned by members of former director Stephen Friedman’s family, had sales to Wal-Mart of $13,436,000. The Company believes that the amounts paid to Manhattan Products in these transactions were competitive with amounts that would be paid to third parties in similar transactions.

      During the past fiscal year Springdale Card & Comic Wholesale, which is owned“independent” as defined by the son of director David D. Glass, had sales to the Company of $1,882,000. The Company believes that the amounts paid to Springdale Card & Comic Wholesale in these transactions were competitive with amounts that would be paid to third parties in similar transactions.

      Rollin L. Ford, an Executive Vice Presidentapplicable listing standards of the Company, isNYSE and the son-in-lawapplicable rules of Donald G. Soderquist, a former director of the Company. For fiscal year 2003, the Company paid Mr. Ford a salary of $321,154 and a bonus of $325,000. Mr. Ford also received a grant of options to purchase 13,598 shares of the Company’s common stock at an exercise price of $47.80 on January 31, 2003.

      Greg B. Penner, a Senior Vice President of the Company, is the son-in-law of S. Robson Walton, a director of the Company and beneficial owner of more than 5% of Wal-Mart stock. For fiscal year 2003, the Company paid Mr. Penner a salary of $211,861 and a bonus of $212,500. Mr. Penner also received an award of 5,644 shares of restricted stock on June 3, 2002, and received a grant of options to purchase 9,153 shares of the Company’s common stock at an exercise price of $47.80 on January 31, 2003.

      Timothy E. Coughlin, a Regional Loss Prevention Director of the Company, is the brother of Thomas M. Coughlin, Executive Vice President and President and Chief Executive Officer of Wal-Mart Stores Division and SAM’S CLUB USA. Thomas M. Coughlin is also a director of the Company. For fiscal year 2003, the Company paid Timothy E. Coughlin a salary of $78,077 and a bonus of $18,864. Timothy E. Coughlin also received a grant of options to purchase 658 shares of the Company’s common stock at an exercise price of $47.80 on January 31, 2003.

      Michael L. Grimm, a merchandise buyer for the Company, is the son of Thomas R. Grimm, former President and Chief Executive Officer of SAM’S CLUB. For fiscal year 2003, the Company paid Michael L. Grimm a salary of $71,543 and a bonus of $17,170. Michael L. Grimm also received a grant of options to purchase 599 shares of the Company’s common stock at an exercise price of $47.80 on January 31, 2003.

      In June 2002, the Board approved a transaction between the Company and Walton Enterprises, L.P., including entering into a registration rights agreement under which the Company agreed to register for resale 16,000,000 shares of Wal-Mart stock on behalf of Walton Enterprises, L.P. and certain other named parties (collectively referred to as the "Parties"). Walton Enterprises, L.P. is the entity through which the Walton family holds the majority of its Wal-Mart stock. Directors S. Robson Walton and John T. Walton, along with Helen R. Walton, Jim C. Walton, and Alice L. Walton, share voting and dispositive power with respect to all shares held by Walton Enterprises, L.P. as general partners of Walton Enterprises, L.P., and they beneficially own more than 5% of Wal-Mart stock. On December 13, 2002, the Company registered 16,000,000 shares on behalf of the parties, which registration statement became effective on December 27, 2002. Walton Enterprises, L.P. paid on behalf of the Company or reimbursed the Company for expenses in the total amount of $100,299, which includes the registration fee paid to the Securities and Exchange Commission and related legal, financial printer and accounting fees incurred in connection with the registration statement and subsequent prospectus supplement. Of the 16,000,000 shares registered, Walton Enterprises, L.P. distributed on December 19, 2002, 8,096,226 shares to the Helen R. Walton Nonqualified Charitable Remainder Trust ("Trust"), and 7,143,515 shares to the Walton Family Charitable Support Foundation, Inc. ("Foundation"(“SEC”). Members of the Walton family established the Trust and the Foundation as part of their charitable planning. The remaining 760,259 shares registered will not be sold pursuant to the registration statement.

AUDIT COMMITTEE REPORT

      Wal-Mart’s Audit Committee consists of three directors, each of whom is "independent" as defined by the current listing standards of the New York Stock Exchange. The members of the Committee are M. Michele Burns, Stanley C. Gault, Roland A. Hernandez, who is the Committee’s chairperson,Audit Committee Chair, and J. Paul Reason. The Audit Committee is governed by a written charter adopted by the Board. Given the current trends in corporate governance, recent legislation by Congress, and the proposed New York Stock Exchange corporate governance listing standards, the Audit Committee and the Board recently adopted a revised Audit Committee charter in March 2003. A copy of the revisedcurrent Audit Committee charter is attached to this proxy statement as Exhibit A, and is available on ourthe corporate website at www.walmartstores.com. in the Corporate Governance section of the Investor Relations webpage.

Wal-Mart’s management is responsible for Wal-Mart’s internal controls and financial reporting, including the preparation of Wal-Mart’s consolidated financial statements. Wal-Mart’s independent auditors areauditor is responsible for auditing Wal-Mart’s annual consolidated financial statements in accordance with auditing standards generally accepted auditing standardsin the United States and ensuring that the financial statements fairly present Wal-Mart’s results of

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operations and financial position.position in accordance with accounting principles generally accepted in the United States. The independent auditorsauditor is also are responsible for issuing a report on those financial statements. The Audit Committee monitors and oversees these processes. The Audit Committee annually recommends to the Boardis responsible for its approval an independent accounting firm to beselecting and overseeing Wal-Mart’s independent auditors. Beginning with the June 6, 2003 shareholders’ meeting, ratification of the Board’s approval of the independent auditorsauditor, which is being sought. Ernst & Young LLP is Wal-Mart’s current independent auditor.LLP.

As part of the oversight processes, the Audit Committee regularly meets with management of the Company, the Company’s outside auditors,auditor, and Wal-Mart’sthe Company’s internal auditors. The Audit Committee often meets with these groups in closed sessions. Throughout the year, the Audit Committee had full access to management and the outside and internal auditors for the Company. To fulfillIn the course of fulfilling its responsibilities, the Audit Committee did, among other things, the following:

•

•

•

•

•

•

• recommended that the Board select

•

The Audit Committee submits this report:

M. Michele Burns

Stanley C. Gault

Roland A. Hernandez, Chairperson
Chair

J. Paul Reason

CORPORATE GOVERNANCE

BOARD AND COMMITTEE GOVERNING DOCUMENTS

The Board has adopted Corporate Governance Guidelines, and the Audit Committee, the CNGC, the SPFC, the Stock Option Committee (the “SOC”), and the Executive Committee of the Board have adopted charters, which you may review on the corporate website at www.walmartstores.com in the Corporate Governance section of the Investor Relations webpage. The Audit Committee Charter is attached to this proxy statement as Exhibit A. In addition, these documents also are available in print to any shareholder who requests a copy from the Wal-Mart Investor Relations Department.

COMMUNICATIONS WITH THE BOARD

The Board welcomes communications from shareholders. Shareholders may write to the Board at Wal-Mart Stores, Inc. Board of Directors, c/o J. Michael Bradshaw, Board of Directors Liaison, 702 Southwest 8^th Street, Bentonville, Arkansas 72716-0215. Shareholders also may e-mail the Board at directors@wal-mart.com. Any communications to the independent directors may be e-mailed to independentdirectors@wal-mart.com. Communications with the non-management directors may be e-mailed to nonmanagementdirectors@wal-mart.com, and communications with individual directors should be addressed to the full name of the director as listed in this proxy statement followed by “@wal-mart.com.” For example, shareholders may e-mail S. Robson Walton, Chairman of the Board, by e-mailing srobsonwalton@wal-mart.com.

A company of Wal-Mart’s size receives an exceptional number of inquiries regarding a range of subjects each day. As a result, the Board is not able to respond to all shareholder inquiries directly. Therefore, the Board, in consultation with the Company, has developed a process to assist it with managing inquiries directed to the Board.

Letters and e-mails directed to the Board, independent directors, and non-management directors are reviewed by the Company to determine whether a response on behalf of the Board is appropriate. While the Board oversees management, it does not participate in day-to-day management functions or business operations, and is not normally in the best position to respond to inquiries with respect to those matters. Thus, the Company will direct those types of inquiries to the appropriate associate within the Company for a response. Responses to letters and e-mails by the Company on behalf of the Board, independent directors, or non-management directors are maintained by the Company and are available for any director’s review.

If a response on behalf of the Board, independent directors, or non-management directors is appropriate, the Company gathers any information and documentation necessary for answering the inquiry and provides the information and documentation as well as a proposed response to the appropriate director. The Company also may attempt to communicate with the shareholder for any necessary clarification. S. Robson Walton reviews and approves responses on behalf of the Board, and Stanley C. Gault, presiding director, reviews and approves the responses on behalf of the independent directors and non-management directors. In certain situations, Mr. Walton or Mr. Gault may respond directly to a shareholder’s inquiry.

For inquiries forwarded to individual directors, each director has provided instructions for responding to those inquiries. Currently, all directors have requested that the Company review letters and e-mails, gather any information or documentation necessary to respond to the inquiry, and propose a response. The director will review the proposed response and either direct the Company to send such response on behalf of the director, or the director may choose to respond directly to the shareholder.

Certain circumstances may require that the Board depart from the procedures described above, such as the receipt of threatening letters or e-mails or voluminous inquiries with respect to the same subject matter. The Board, nevertheless, does consider shareholder questions and comments important, and endeavors to respond promptly and appropriately.

PRESIDING DIRECTOR

Stanley C. Gault currently serves as the presiding director of executive sessions of the non-management directors and independent directors. When Mr. Gault retires from the Board in June 2004, the Board will appoint another independent director to preside over the executive sessions of the non-management directors and independent directors.

NOMINATION PROCESS FOR DIRECTOR CANDIDATES

The CNGC is, among other things, responsible for identifying and evaluating potential candidates and recommending candidates to the Board for nomination. The Committee is governed by a written charter, a copy of which can be found in the Corporate Governance section of the Investor Relations webpage of our corporate website at www.walmartstores.com.

The CNGC regularly reviews the composition of the Board and whether the addition of directors with particular experiences, skills, or characteristics would make the Board more effective. When a need arises to fill a vacancy, or it is determined that a director possessing particular experiences, skills, or characteristics would make the Board more effective, the CNGC initiates a search. As a part of the search process, the CNGC may consult with other directors and members of senior management, and may hire a search firm to assist in identifying and evaluating potential candidates.

The CNGC has retained SpencerStuart as its director candidate search consultant. In that capacity, SpencerStuart seeks out candidates who have the experiences, skills, and characteristics that the CNGC has determined are necessary to serve as a member of Wal-Mart’s Board. SpencerStuart researches the background of all candidates, conducts extensive interviews with candidates and their references, and then presents the most qualified candidates to the CNGC and the Company’s management.

When considering a candidate, the CNGC reviews the candidate’s experiences, skills, and characteristics. The Committee also considers whether a potential candidate will otherwise qualify for membership on the Board, and whether the potential candidate would likely satisfy the independence requirements of the NYSE.

Candidates are selected on the basis of outstanding achievement in their professional careers, broad experience, wisdom, personal and professional integrity, their ability to make independent, analytical inquiries, and their experience with and understanding of the business environment. With respect to the minimum experiences, skills, or characteristics necessary to serve on the Board, the CNGC will only consider candidates who:

In addition, at least a majority of the Board must be independent as determined by the Board under the guidelines of the NYSE listing standards, and at least one member of the Board should have the qualifications and skills necessary to be considered an “Audit Committee Financial Expert” under Section 407 of the Sarbanes-Oxley Act of 2002, as defined by the rules of the SEC.

All potential candidates are interviewed by the Chief Executive Officer (the “CEO”), the Chairman of the Board, and the Chair of the CNGC, and may be interviewed by other directors and members of senior management as desired and as schedules permit. The CNGC then meets to consider and approve the final candidates, and either makes its recommendation to the Board to fill a vacancy, add an additional member, or recommends a slate of candidates to the Board for nomination for election to the Board. The selection process for candidates is intended to be flexible, and the CNGC, in the exercise of its discretion, may deviate from the selection process when particular circumstances warrant a different approach.

John D. Opie was appointed to the Board on August 13, 2003, and Christopher J. Williams is not currently serving on the Board. Mr. Opie and Mr. Williams have been nominated for election to the Board at the 2004 Annual Shareholders’ Meeting and were recommended to the CNGC by the Chairman of the Board, the CEO, non-management directors, SpencerStuart, and other executive officers.

S. Robson Walton and John T. Walton are members of a group that beneficially own more than five percent of the Shares. Any participation by them in the nomination process was considered to be in their capacities as directors of the Company, and not as recommendations from security holders that beneficially own more than five percent of the Shares.

Shareholders may recommend candidates by writing to the Secretary of Wal-Mart Stores, Inc., 702 Southwest 8^th Street, Bentonville, Arkansas 72716-0215. The recommendation must include the following information:

c.

A statement as to whether or not, during the past ten years, the candidate has been convicted in a criminal proceeding (excluding traffic violations) and, if so, the dates, the nature of the conviction, the name or other disposition of the case, and whether the individual has been involved in any other legal proceeding during the past five years;

All candidates nominated by a shareholder pursuant to the requirements above will be submitted to the CNGC for its review, which may include an analysis of the candidate from the Company’s management.

AUDIT COMMITTEE FINANCIAL EXPERT

Wal-Mart’s Board has determined that M. Michele Burns is an “Audit Committee Financial Expert” as that term is defined in Item 401(h) of Regulation S-K promulgated by the SEC, and is “independent” from Wal-Mart’s management as that term is defined in Item 7(d)(3)(iv) of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.

AUDIT COMMITTEE PRE-APPROVAL POLICY

To ensure the independence of the Company’s independent auditor and to comply with applicable securities laws, listing standards, and the Audit Committee charter, the Audit Committee is responsible for reviewing, deliberating and, if appropriate, pre-approving all audit, audit-related, and non-audit services to be performed by the Company’s independent auditors. For that purpose, the Audit Committee has established a policy and related procedures regarding the pre-approval of all audit, audit-related, and non-audit services to be performed by the Company’s independent auditor (the “Policy”).

The Policy provides that the Company’s independent auditor may not perform any audit, audit-related, or non-audit service for the Company, subject to those exceptions that may be permitted by applicable law, unless: (1) the service has been pre-approved by the Audit Committee, or (2) the Company engaged the independent auditor to perform the service pursuant to the pre-approval provisions of the Policy. In addition, the Policy prohibits the Audit Committee from pre-approving certain non-audit services that are prohibited from being performed by the Company’s independent auditor by applicable securities laws. The Policy also provides that the Corporate Controller will periodically update the Audit Committee as to services provided by the independent auditor. With respect to each such service, the independent auditor provides detailed back-up documentation to the Audit Committee and the Corporate Controller.

Pursuant to its Policy, the Audit Committee has pre-approved certain categories of services to be performed by the independent auditor and a maximum amount of fees for each category. The Audit Committee annually re-assesses these service categories and the associated fees. Individual projects within the approved service categories have been pre-approved only to the extent that the fees for each individual project do not exceed a specified dollar limit, which amount is re-assessed annually. Projects within a pre-approved service category with fees in excess of the specified fee limit for individual projects may not proceed without the specific prior approval of the Audit Committee (or a member to whom pre-approval authority has been delegated). In addition, no project within a pre-approved service category will be considered to have been pre-approved by the Audit Committee if the project causes the maximum amount of fees for the service category to be exceeded, and the project may only proceed with the prior approval of the Audit Committee (or a member to whom pre-approval authority has been granted) to increase the aggregate amount of fees for the service category.

At least annually, the Audit Committee designates a member of the Audit Committee to whom it delegates its pre-approval responsibilities. That member has the authority to approve interim requests as set forth above within the defined, pre-approved service categories, as well as interim requests to engage the Company’s independent auditor for services outside the Audit Committee’s pre-approved service categories. The member has the authority to pre-approve any audit, audit-related, or non-audit service that falls outside the pre-approved service categories, provided that the member determines that the service would not compromise the independent auditor’s independence and the member informs the Audit Committee of his or her decision at the Audit Committee’s next regular meeting.

CODE OF ETHICS FOR THE CEO AND SENIOR FINANCIAL OFFICERS

You may review Wal-Mart’s Code of Ethics for the CEO and Senior Financial Officers on the corporate website at www.walmartstores.com in the Corporate Governance section of the Investor Relations webpage. This Code of Ethics supplements the Company’s Statement of Ethics, which is applicable to all associates.

BOARD ATTENDANCE AT ANNUAL SHAREHOLDERS’ MEETINGS

The Board has adopted a policy stating that all directors are expected to attend annual shareholders’ meetings. While the Board understands that there may be situations that prevent a director from attending an annual shareholders’ meeting, the Board strongly encourages all directors to make attendance at all annual shareholders’ meetings a priority. All directors nominated by the Board for election to the Board in 2003, as well as all directors who did not stand for re-election, attended the Annual Shareholders’ Meeting held on June 6, 2003.

SUBMISSION OF SHAREHOLDER PROPOSALS

If you want to present a proposal for possible inclusion in the Company’s 2005 Proxy Statement pursuant to the SEC’s rules, send the proposal to Thomas D. Hyde, Secretary of the Company, 702 S.W. 8^th Street, Bentonville, Arkansas 72716-0215, by registered, certified, or express mail. Proposals must be received on or before Thursday, December 16, 2004.

Shareholders who want to bring business before the 2005 Annual Shareholders’ Meeting other than through a shareholder proposal pursuant to the SEC’s rules must notify the Secretary of the Company in writing and provide the information required by the provision of the Company’s By-laws dealing with shareholder proposals. The notice must be delivered to or mailed and received at the principal executive offices of the Company not less than 75 nor more than 100 days prior to the date of the 2005 Annual Shareholders’ Meeting, unless less than 85 days’ notice or public disclosure of that date is given or made, in which case the shareholder’s notice must be received by the close of business on the tenth day after the notice or public disclosure of the date of the 2005 Annual Shareholders’ Meeting is made or given. The requirements for such notice are set forth in the Company’s By-laws, a copy of which can be found in the Corporate Governance section of the Investor Relations webpage of our corporate website at www.walmartstores.com. In addition, the By-laws were filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 1994. That document is located in the SEC’s Public Reference Room in Washington, D.C. in the Securities and Exchange Commission’s file no. 1-6991.

OTHER MATTERS

The Company is not aware of any other matters that will be considered at the Annual Shareholders’ Meeting. If any other matters are properly raised at the Annual Shareholders’ Meeting, the proxy holders will vote the Shares as to which they hold proxies at their discretion.

EXECUTIVE COMPENSATION

COMPENSATION, NOMINATING AND
GOVERNANCE COMMITTEE REPORT

ON EXECUTIVE COMPENSATION

Compensation Philosophy:    The Company’s executive compensation program is designed to: (1) provide fair compensation to executives based on their performance and contributions to the Company;Company, (2) provide incentives to attract and retain key executives;executives, and (3) instill a long-term commitment to the Company and develop pride and a sense of Company ownership, all in a manner consistent with shareholders’ interests.

The Compensation, NominatingCNGC reviews and Governance Committee (the "Committee") setsapproves the compensation of the Company’s Chief Executive Officer, as well asPresident and CEO and the other executive officerofficers who servesserve as a membermembers of the Board.Board, and approves the compensation of the other executive officers who are subject to Section 16(a) of the Securities Exchange Act of 1934, as amended (“Section 16 Officers”). As a part of its oversight of the Company’s compensation programs, the CommitteeCNGC also reviews and approves the compensation of the Company’s other executive officers.members of the Executive Committee of the Company who are not Section 16 Officers.

The compensation package of all executive officers has three main parts: (1) base salary, which is reviewed annually; (2) equity compensation consisting of stock options and, for certain executives, restricted stock; and (3) annual incentive payments

under the Company’sWal-Mart Stores, Inc. Management Incentive Plan, as amended.amended (the “MIP”). Other elements of the Company’s executive compensation package include a Deferred Compensation Plan,deferred compensation plan, a profit sharing and 401(k) Plan,plan (effective in 2003, the Company’s profit sharing plan and 401(k) plan were merged into one plan), a Profit Sharing Plan,supplemental executive retirement plan, and a Supplemental Executive Retirement Plan ("SERP").stock purchase plan.

Under Wal-Mart’sthe Wal-Mart Stores, Inc. Officer Deferred Compensation Plan (the "Plan"“ODC Plan”), executivesofficers, including executive officers, may defer up to 100%100 percent of their base salary and annual MIP incentive awards. Interest accrues on amounts deferred at aan interest rate set annually by the Committee.CNGC which, for the 2003 and 2004 ODC Plan years described below, was based on the ten-year treasury rate plus 270 basis points. The CNGC set the interest rate at 6.73 percent for the 2004 ODC Plan year, which began on April 1, 2003, and ended on March 31, 2004. The CNGC set the interest rate at 6.85 percent for the 2003 ODC Plan year, which began on April 1, 2002, and ended on March 31, 2003.

The ODC Plan provides an incentive payment as a reward for participants who have remained with the Company and participated in the ODC Plan for ten or more consecutive years. After ten years from the initial year of deferral of compensation, the Company credits the executive’s deferral account with an increment ("20% Increment") equal to 20%20 percent of the sum of the principal amount deferred (up(limited to 20%a maximum of 20 percent of base salary) plus accrued interest (“20% Increment”) in each of the first six years after the executive’s initial deferral. In the eleventh and subsequent years, the 20% Increment is credited based on the amount deferred five years earlier. In addition, after the

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fifteenth year from the initial deferral under the ODC Plan, the Company credits the executive’s deferral account with 10%ten percent of the principal amount deferred (up(limited to 20%a maximum of 20 percent of base salary) plus accrued interest ("(“10% Increment"Increment”) in each of the first six years after the executive’s initial deferral. In the sixteenth and subsequent years, the 10% Increment is credited based on the amount deferred ten years earlier.

 Company executives

As of March 31, 2004, 236 officers, including ten executive officers, were participating in the ODC Plan. The executive officers have deferred a total of $13.0 million in salary and $23.4 million in annual incentive payments under the MIP, as of March 31, 2004. The total amount of all compensation deferred under the ODC Plan by executive officers, as of March 31, 2004, including salary, incentive payments under the MIP, and the 20% and 10% Increments (plus interest accrued on these amounts), is $52.4 million, with the earliest contributions included in that amount beginning in 1978.

In addition, all associates, including executive officers, are eligible to participate in the Company’s 401(k)Wal-Mart Stores, Inc. Supplemental Executive Retirement Plan and its Profit Sharing Plan, which are defined contribution retirement plans. The Profit Sharing Plan’s assets are primarily invested in Company stock. In addition, executives are eligible to participate in(the “SERP”). With the Company’s SERP, under which amounts that ordinarily would be contributed by the Company tounder the Wal-Mart Profit Sharing and 401(k) Plan or the Profit Sharing Plan,(the “PS and 401(k) Plan”), but for the limitation on compensation and the maximum limitations on allocations under the Internal Revenue Code or due to the executive’s deferral under the ODC Plan, are credited to the participant’s account in the SERP (the limit on compensation used in calculating contributions to the Company’s defined contribution plans was $200,000 for the fiscal year ending January 31, 2003)2004). These amounts are credited with earnings or charged with losses as if they were credited to the participant’s account inprofit sharing portion of the Profit SharingPS and 401(k) Plan. The SERP account is payable in a lump sum after termination of employment and is not eligible for the special tax treatment that payments from the Profit Sharing PlanPS and 401(k) Plan receive.

The Committee’sCNGC’s executive compensation philosophy is that a majority of overall compensation should be in long-term, at-risk equity to focus management on the long-term interests of shareholders and to align further the interests of the executive officers with the Company’s long-term goals. Accordingly, in determining or approving the compensation of the Company’s executive officers, the CommitteeCNGC generally places less emphasis on base salary and employee benefits than on annual incentives and equity-based compensation.

The executive compensation package generally is targeted to place executive officers’ total compensation in the top quartile of a select group of peer retail companies, assuming maximum performance goals are achieved by the Company. This select group of peer retail companies consists of several retailers in the United States from various retail segments (other than the Company), ranked by total sales (the "Peer“Peer Group Survey"Survey”). In addition, the Company’s executive compensation package is generally targeted to be at approximately the median for the top U.S. 50 companies (other than the Company) ranked by market capitalization (the "Top 50"“Top 50”), assuming maximum performance goals are achieved by the Company. The Peer Group Survey does not include all of the same companies that are included in the S&P 500 Retailing Peer Index in the stock performance graph because the CommitteeCNGC believes that it is more appropriate to compare compensation of executive officers of the Company with that of executives in comparable companies based on both size and industry. Moreover, the Company is a key component of the S&P 500 Retailing Peer Index and the Committee believes that it is more appropriate to make comparisons for compensation purposes to a more independent (and yet comparable) group that excludes the Company.

For information on compensation paid to executives in comparable positions in the Peer Group Survey and the Top 50, the CommitteeCNGC reviewed data obtained from outside compensation consultants. In setting or approving compensation of the Company’s executive officers, the CommitteeCNGC reviews and considers the allocation of total compensation (among salary, annual incentive payments, and equity compensation components) paid by companies in the Peer Group Survey and the Top 50. However, the CommitteeCNGC makes a subjective judgment as to the appropriate allocation of total compensation among the various components in implementing its philosophy of providing a substantial portion of executive compensation in equity.

Base Salary:    Base salaries of Company executives are set with reference to the Company’s performance for the prior fiscal year and upon a subjective evaluation of each executive’s contribution to that performance. In evaluating overall Company performance, the primary focus is on the Company’s financial performance for the year as measured by net income, total sales, comparable store sales, return on shareholders’ equity, and other financial factors. Other criteria, including equal employmentdiversity performance and whether the Company conducted its operations in accordance with the business and social standards expected byof its associates, shareholders, and the communities in which it operates, also are also considered.

Equity Compensation:    Stock options generally are granted annually under Wal-Mart’sthe Wal-Mart Stores, Inc. Stock Incentive Plan of 1998 (“SIP”) to link executives’ compensation to the long-term financial success of the Company, as measured by stock performance. Options generally have an exercise price equal to the closing price of Company stocka Share on the date of grant and have a ten-year term. They typically vest in equal annual installments, beginning one year from the date of grant. Options granted on or after January 28, 2000, vest in five annual installments.

The CommitteeCNGC establishes awards of options to executive officers of the Company.for Section 16 Officers. The total number of option sharesoptions awarded to each executive generally is based on a dollar amount divided by the option’s exercise price. The dollar amount is the product of the executive’s base salary multiplied by a percentage. The percentage is determined by the CommitteeCNGC based on a subjective evaluation of the portion of compensation paid in equity at companies in the Peer Group Survey and the Top 50, individual performance, Company objectives, and the objective of providing long-term, at-risk compensation as a substantial portion of total compensation. The CNGC also may make special stock option grants as a reward for performance or to induce an executive to become associated with or to remain with the Company.

In addition to stock options, the CommitteeCNGC from time to time awards restricted stock under Wal-Mart’s Stock Incentive Plan of 1998.the SIP to Section 16 Officers. Awards may be made to provide incentives to enhanceincentivize certain executives in the job performance of certain executivestheir jobs, or to induce themcertain executives to become associated with or to remain with the Company. The decision to grant awards of

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restricted stock, as well as the size of each award and the vesting schedule, is made by the CommitteeCNGC based on the factors discussed in the prior paragraph.

Incentive Payments:    Annual incentive payments are made under Wal-Mart’s Management Incentive Plan of 1998,the MIP, upon achievement of pre-established performance goals selectedderived from a variety of performance measures available under the plan.MIP. For the fiscal year ended January 31, 2003,2004 (“fiscal year 2004”), annual incentive payments were based on improvements in pre-tax profits.

The CommitteeCNGC assigned incentive payment levels as a percentage of base salary for achievement of the pre-tax profit performance goals for the 2003 fiscal year.year 2004. These incentive payment levels were tied respectively to the achievement of threshold, business plan, and maximum performance objectives. Incentive payment levels ranging from a low of 35.7%35.7 percent of base salary at the threshold performance level to a high of 275%350 percent at the maximum level were payable under the plan to the executive officers. Unless the CommitteeCNGC otherwise provides when the performance goals are established, if the Company fails to achieve its threshold performance target, no incentive award will be paid to any executive.

With respect to the Company’s corporate executive officers, performance goals were based on overall corporate performance. For divisional executives, performance goals were based on a combination of corporate and divisional performance, with 50%50 percent of the incentive payment based on Company performance and 50%50 percent based on performance of the division for which the executive officer was responsible.

For the fiscal year ended January 31, 2003,2004, corporate pre-tax profits met 100% ofexceeded the maximum profit improvement target set by the Committee.CNGC. Associates whose performance goals are not based on divisional results received 100 percent of the maximum payout. Associates in the International Division and SAM’S CLUB Division also received 100 percent of the maximum payout as those divisions met their maximum performance goals. The Wal-Mart Stores Division did not meet theits maximum pre-tax profit improvement target, though it exceeded threshold performance levels. As a result, incentive payments were madeassociates in March 2003 at the maximum levels set by the Committee except that associates of the SAM’S CLUBWal-Mart Stores Division only received 50%81.9 percent of the maximum incentive payment.

An additional incentive payment was available for fiscal year 2004 under the MIP if the Company and divisions achieved certain average inventory turns goals set by the CNGC. Certain executive officers and all the named executive officers, including H. Lee Scott, Jr., President and CEO, were not eligible for the additional incentive payment. If the Company and divisions met or exceeded the threshold for their pre-tax profit performance goals, and the Company and divisions met or exceeded their average inventory turns goals, an additional incentive payment would have been made in the amount of 15 percent of any incentive payment earned as a result of meeting or exceeding the threshold pre-tax profit performance goals. The Company did not meet its average inventory turns goals for fiscal year 2004, so neither the eligible executive officers nor other MIP participants received this additional incentive payment.

Compensation of the President and Chief Executive Officer:    Mr. Scott’sThe base salary as Chief Executive Officerof Mr. Scott was set at $1,150,000,$1,200,000, effective March 23, 2002.22, 2003. On March 6, 2002, heJanuary 5, 2004, Mr. Scott was granted an option to purchase 521,634 shares of Company stock630,413 Shares at an exercise price of $60.90$52.12 under Wal-Mart’s Stock Incentive Plan of 1998the SIP relating to the Company’s performance during thefiscal year 2004. Additionally, on January 31, 2002 fiscal year. On January 9, 2003, he was also granted an option to purchase 605,327 shares of Company stock at an exercise price of $51.92 under the Stock Incentive Plan of 1998 relating to the Company’s performance during the January 31, 2003 fiscal year. On March 7, 2002,5, 2004, Mr. Scott received an award of 107,527 shares of restricted stock. On January 9, 2003, Mr. Scott also received an award of 125,193128,550 shares of restricted stock which relates to compensation for fiscal year 2004.under the SIP.

The Committee’sCNGC’s determination of the compensation package for Mr. Scott is consistent with the overall compensation philosophy for other executive officers of the Company.officers. Mr. Scott’s compensation is weighted heavily to long-term and at-risk forms of compensation that provide a greater link between the Company’s long-term strategy and Mr. Scott’s compensation. Particularly with respect to the long-term incentive component of Mr. Scott’s compensation, the CommitteeCNGC considered objective factors, including the Company’s performance and relative shareholder return, the value of similar incentive awards to chief executive officers at comparable companies in the Peer Group Survey, as well as competitive levels of compensation for chief executive officers managing operations of similar size, complexity and performance level, and the awards granted to Mr. Scott in prior years. In determining the amount of Mr. Scott’s base salary, as well as the number of shares of restricted stock and stock options to be granted, the CommitteeCNGC also considered certain subjective factors, including Mr. Scott’s general knowledge of the retail business, his contribution to the Company’s past business success, and the Committee’sCNGC’s belief that Mr. Scott has the vision and managerial capability to oversee the Company’s continued growth into the foreseeable future.

Mr. Scott also received an incentive payment of $3,162,500$4,200,000 under Wal-Mart’s Management Incentive Plan of 1998.the MIP. The incentive payment was based on the Company’s achievement of the maximum level of pre-tax profit performance goals established by the CommitteeCNGC and was paid in the current fiscal year but relates to performance in theduring fiscal year ended January 31, 2003.2004.

Deductibility of Compensation:    Internal Revenue Code Section 162(m) provides that compensation in excess of $1 million paid to certain executive officers is not deductible unless it is performance-based. Neither base salary nor restricted stock qualify as performance-based compensation under Section 162(m). It is the policy of the CommitteeCNGC periodically to review and consider whether particular compensation and incentive payments to the Company’s executives will be deductible for federal income tax purposes. A significant portion of the Company’s executive compensation will satisfysatisfies the requirements for deductibility under Internal Revenue Code Section 162(m). However, the CommitteeCNGC retains the ability to evaluate the performance of the Company’s executives, including the chief executive officer,CEO, and to pay appropriate compensation, even if it may result in the non-deductibility of certain compensation under federal tax law.

The Compensation, Nominating and Governance CommitteeCNGC submits this report:

 James W. Breyer

Dawn G. Lepore
      Elizabeth A. Sanders

John D. Opie

Jose H. Villarreal, ChairpersonChair

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SUMMARY COMPENSATION

Summary Compensation

This table shows the compensation paid during each of the Company’s last three fiscal years paid to Wal-Mart’s Chief Executive OfficerCEO and the four other most highly compensated executive officers, based on compensation earned during the fiscal year ended January 31, 2003.2004.