About REI

Dear REI members:

Your board of directors continues to recognize that scrutiny of corporate governance is at an all-time high, with particular interest in the way in which boards handle the oversight of executive compensation. To meet one of its fundamental duties, REI's board provides co-op members with REI's philosophy statement on executive compensation and information about total compensation earned by REI's most highly paid executives.

REI was founded as a co-op in 1938 with 23 original members. Today, the co-op structure enables REI to reach outdoor enthusiasts throughout the country, to return a substantial portion of our profits to members (never failing to do so in our 70-year history), and to give back to our communities in significant ways. While the retail world has become increasingly competitive, REI has continued to prosper, thanks to an excellent employee team, a dedicated and talented management team, and the diligence of your board.

Pay that helps attract and retain the best people is vital to REI's success. While not the only or primary reason individuals come to work for REI, competitive pay practices are essential attributes of a responsible, progressive employer like REI. And, competitive pay applies to all employees, including executive management.

In setting employee compensation, the board (through its Compensation Committee) compares REI to similar companies within the retail industry. With the advice and assistance of an independent compensation consultant, the board regularly reviews REI compensation information to evaluate the competitiveness of REI's pay practices. In setting the compensation levels for REI's leadership positions, the board targets the median rates of compensation at competitive peer companies that are in the retail industry and close to REI's size and complexity.

As part of our commitment to good governance, the board publishes information on the total compensation of REI's top four highest paid employees. This group is the CEO, the CFO (who is also the Chief Administrative Officer), and two senior vice presidents. You can find the details of REI's executive compensation by following this link.

The annual compensation for members of REI's Board of Directors is set using the same process as that followed for all REI employees, with the exception that the directors' annual retainer is set below industry median. In addition to annual compensation, members of the board receive the same product discount privileges as those enjoyed by all REI employees. You can find the details of REI's board compensation by following this link.

As we serve the co-op in the role of directors, we remain REI members and customers first and foremost. Like you, we want REI to be a successful, responsible and enduring cooperative. REI's long-term success is both our focus and our responsibility.

On behalf of the entire board, thank you for your support of REI. Feel free to correspond with us on this, or any matter, at board@rei.com.

Sincerely yours,

Anne Farrell
Chairman