PROPOSAL 5

STOCKHOLDER PROPOSAL REGARDING USE OF RULE 10(b)5-1 TRADING PLANS

The American Federation of State, County & Municipal Employees, 1625 L. Street, NW, Washington, DC, which owns 2,886 shares of our Common Stock, has given notice that it intends to present the following proposal for consideration at the Annual Meeting:

Resolved, that stockholders of Safeway urge the board of directors (the “Board”) to adopt a policy regarding the use of prearranged trading plans for senior executives adopted to make use of the safe harbor from insider trading liability contained in the Securities and Exchange Commission’s Rule 10b5-1 (“10b5-1 Plans”), including the following principles:

SUPPORTING STATEMENT

We believe that 10b5-1 plans, with proper safeguards, can serve a useful function. These plans, which are supposed to eliminate executives’ discretion over transactions in company stock, allow executives to diversify their holdings to meet legitimate personal needs while reducing the risk of insider trading liability.

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Concern has been raised recently, however, that executives may be abusing 10b5-1 plans. A study by Stanford’s Alan Jagolinzer found evidence that trades executed within 10b5-1 plans were more lucrative for the insiders than trades executed by insiders at the same firms who had not adopted 10b5-1 plans, and that early terminations of 10b5-1 plans are associated with impending disclosures of negative news. Jagolinzer concluded that insiders with 10b5-1 plans engage in “some level of strategic trade” despite the rule’s purpose. (Alan Jagolinzer, “SEC Rule 10b5-1 and Insiders’ Strategic Trade,” at 9-11 (Sept. 2007) (available on www.ssrn.com ); see also “Insiders with a Curious Edge,” Business Week (Dec. 18, 2006))

Linda Chatman Thomsen, director of the SEC’s Division of Enforcement, stated in a March 2007 speech that the Jagolinzer study “raises the possibility that plans are being abused in various ways to facilitate trading on inside information. We’re looking at that – hard.” (Mar. 8, 2007 speech to the Corporate Counsel Institute, available at http://www.sec.gov/news/speech/2007/spch0308071ct2.htm )

The suggested elements of the policy would help ensure that 10b5-1 plans are not abused. The limitations on amendment and early termination and the waiting period would constrain senior executives’ ability to trade (or terminate a plan and thus refrain from trading) based on material nonpublic information. The disclosure-related principles aim to increase transparency regarding 10b5-1 plans. Requiring that the broker handling 10b5-1 plan trades not handle other trades for an executive minimizes the likelihood that the executive will inadvertently communicate material nonpublic information to the broker. We believe such a policy would be useful here at Safeway, where Chairman and CEO Steven Burd has adopted several 10b5-1 plans over the years and sold $47.7 million in company stock in 2007.

We urge stockholders to vote for this proposal.

Board Recommendation

Our Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:

The Board believes the concerns raised in the proponent’s supporting statement regarding the misuse of inside information by executive officers, and many of the enumerated principles contained in the proposal, are adequately addressed by SEC rules, by existing criminal and civil legal prohibitions against insider trading and by our insider trading policies and restrictions. Pursuant to Section 16 of the Securities Exchange Act of 1934, our executive officers already must report on Forms 4 any transactions in our stock, whether through a 10b5-1 trading plan or otherwise, within two business days of the completion of such transactions. These filings are available for review by our stockholders on our Web site at www.safeway.com/investor_relations and the SEC Web site at www.sec.gov . We comply with all existing legal requirements regarding the adoption and use of 10b5-1 trading plans. If the proponent is concerned about the potential misuse of these plans, the proponent should more appropriately address these concerns to the SEC.

Further, we have already implemented a number of the enumerated principles contained in the proposal. Prior to adoption of a 10b5-1 trading plan by an executive officer, Safeway’s legal department must review and sign off on the proposed plan. The legal department specifically looks for a requirement that at least 30 days must elapse between adoption or amendment of a 10b5-1 trading plan and trading under the plan. Likewise, any amendment of an executive’s 10b5-1 trading plan requires legal department sign-off. To date, amendments or terminations of 10b5-1 trading plans by our executive officers have been rare. During the last five years, only one of our executive officers has amended a 10b5-1 trading plan (and in each case the amendment occurred during an open trading window period and at least three months elapsed between the date of the amendment and the first sale of shares pursuant to the amendment), and none of our executive officers has terminated a 10b5-1 trading plan. In accordance with our insider trading policy, described in more detail below, an executive may adopt or amend a 10b5-1 trading plan only during an open trading window period and only if the executive is not then in possession of material nonpublic information about Safeway or our securities.

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The Board believes the restrictions included in the proponent’s proposed policy regarding the use of 10b5-1 plans by senior executives, particularly the principle that an executive may not trade in our stock outside of a 10b5-1 plan, would impede our ability to recruit or retain talented executives and would therefore be detrimental to the interests of our stockholders. Similar to other companies of comparable size across all industries, we have adopted certain benefit plans through which executives, and other employees, may purchase our Common Stock. The Safeway Stock Fund portion of our 401(k) Plan allows participants to invest portions of their retirement savings in our Common Stock. Both the Safeway Employee Stock Purchase Plan and our Direct Stock Purchase and Dividend Reinvestment Plan allow participants to invest a portion of their wages or salary in our Common Stock on a regular basis. The Board believes these plans not only provide executives and employees with valuable benefits, which helps us attract and retain talented executives by offering compensation and benefits packages that are comparable to those provided by companies competing for executive talent, but also encourage executives and employees to purchase our Common Stock, which helps further align their interests with the interests of our stockholders. The proposal’s proposed restriction that would prevent an executive from trading in our stock outside a 10b5-1 plan would preclude executives from participating in these benefits plans and would put us at a significant competitive disadvantage in attracting or retaining executive talent.

We also have a strict insider trading policy applicable to all employees, including executives, that prohibits employees from buying or selling our securities, or entering into derivative transactions with respect to our securities, at a time when the employee is in possession of material nonpublic information about Safeway or our securities. In addition to other restrictions, the policy provides that each of our executive officers, directors and key employees must pre-clear any and all transactions in our securities (including the adoption of a 10b5-1 trading plan) with our General Counsel or Trading Compliance Officer. Additionally, this strict pre-clearance requirement extends to spouses and children of an executive officer, director or key employee and to any other person with whom an executive officer, director or key employee may have a direct or indirect pecuniary interest in any of our equity securities owned by them. The Board believes our insider trading policy, with its restrictions on trading and strict pre-clearance requirements, successfully ensures that executive officers comply with insider trading laws while allowing us to attract and retain talented executive officers by offering competitive benefits plans.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “AGAINST” THE ADOPTION OF THIS STOCKHOLDER PROPOSAL, and your Proxy will be so voted unless you specify otherwise.

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GENERAL

Stockholder Proposals for 2009 Proxy Statement

Stockholder proposals for inclusion in the 2009 Proxy Statement must be received at our principal executive offices on or before December 4, 2008. In addition, all stockholder proposals for inclusion in the 2009 Proxy Statement must comply with the requirements of SEC Rule 14a-8 under the Securities Exchange Act of 1934. Our By-Laws provide that stockholders desiring to nominate a director or bring any other business before the stockholders at an annual meeting must notify our Corporate Secretary in writing 50 to 75 days before the meeting (or, if less than 65 days’ notice or prior public disclosure of the meeting date is given, within 15 days after such notice was mailed or publicly disclosed, whichever first occurs). Such notice must set forth certain information specified in our By-Laws.

Fiscal Year 2007 Annual Report

Our Annual Report to Stockholders for the fiscal year ended December 29, 2007 is being mailed to all stockholders of record with this Proxy Statement.

By Order of the Board of Directors,

Robert A. Gordon

Secretary

Dated: April 2, 2008

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SAFEWAY

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Electronic Voting Instructions

You can vote by Internet or telephone! Available 24 hours a day, 7 days a week!

Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.

VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.

Proxies submitted by the Internet or telephone must be received by 9:00 p.m., Pacific time, on May 13, 2008.

Vote by Internet

• Log on to the Internet and go to www.investorvote.com/swy

• Follow the steps outlined on the secured Web site.

Vote by telephone

• Call toll-free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for the call. • Follow the instructions provided by the recorded message.

Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.

Annual Meeting Proxy Card

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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.

A Election of Directors — The Board of Directors recommends a vote FOR the listed nominees.

1. Nominees: For Against Abstain

01—Steven A. Burd [] [] []

04—Paul Hazen [] [] []

07—Douglas J. Mackenzie [] [] []

10—William Y. Tauscher [] [] []

For Against Abstain

02—Janet E. Grove [] [] []

05—Frank C. Herringer [] [] []

08—Kenneth W. Oder [] [] []

11—Raymond G. Viault [] [] []

For Against Abstain +

03—Mohan Gyani [] [] []

06—Robert I. MacDonnell [] [] []

09—Rebecca A. Stirn [] [] []

B Proposals — The Board of Directors recommends a vote FOR Proposal 2.

2. Ratification of appointment of Deloitte & Touche LLP as the

Company’s independent registered public accounting firm for fiscal year 2008.

For Against Abstain[] [] []

The Board of Directors recommends a vote AGAINST Proposals 3, 4 and 5.

For Against Abstain

3. Stockholder proposal requesting cumulative voting. [] [] []

4. Stockholder proposal requesting stockholder approval of future

SERPs or individual retirement arrangements for senior executives. [] [] []

5. Stockholder proposal requesting adoption of a policy regarding

use of Rule 10b5-1 trading plans by senior executives. [] [] []

IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A – D ON BOTH SIDES OF THIS CARD.

C Authorized Signatures — This section must be completed for your vote to be counted. — Please date and sign below.

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) — Please print date below.

Signature 1 — Please keep signature within the box.

Signature 2 — Please keep signature within the box.

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1 U P X 0 1 6 7 0 3 1

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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.

Proxy — Safeway Inc.

For the Annual Meeting - May 14, 2008