SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.[ ])
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
THE LIMITED, INC.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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(4) Date Filed:
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[The Limited LOGO]
April 20, 2001
Dear Stockholder:
You are cordially invited to attend our 2001 annual meeting of
stockholders to be held at 9:00 a.m., Eastern Daylight Time, on May 21, 2001,
at our offices located at Three Limited Parkway, Columbus, Ohio. Our Investor
Relations telephone number is (614) 415-7076 should you require assistance in
finding the location of the meeting. The formal Notice of Annual Meeting of
Stockholders and Proxy Statement are attached. I hope that you will be able to
attend and participate in the meeting, at which time I will have the
opportunity to review the business and operations of The Limited.
The matters to be acted upon by our stockholders are discussed in the
Notice of Annual Meeting of Stockholders. It is important that your shares be
represented and voted at the meeting. Accordingly, after reading the attached
Proxy Statement, would you kindly sign, date and return the enclosed proxy card
or vote by telephone or by Internet as described on the enclosed proxy card.
Your vote is important regardless of the number of shares you own.
Sincerely yours,
LOGO
Leslie H. Wexner
Chairman of the Board
[LOGO]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 21, 2001
April 20, 2001
TO OUR STOCKHOLDERS:
We are pleased to invite you to attend our 2001 annual meeting of
stockholders to:
o Elect four directors to serve for terms of three years.
o Vote on a proposal to amend the Company's Certificate of
Incorporation to increase the number of shares of Common Stock that
the Company is authorized to issue from 500,000,000 to 1,000,000,000.
o Transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 30, 2001 may vote
at the meeting.
Your vote is important. Stockholders of record can give proxies by calling
a toll-free telephone number, by using the Internet or by mailing their signed
proxy cards. Whether or not you plan to attend the meeting, please vote by
telephone or Internet or sign, date and return the enclosed proxy card in the
envelope provided. Instructions are included on your proxy card. You may change
your vote by submitting a later dated proxy (including a proxy via telephone or
the Internet) or by attending the meeting and voting in person.
By Order of the Board of Directors
[LOGO]
Leslie H. Wexner
Chairman of the Board
PROXY STATEMENT TABLE OF CONTENTS
Information About the Annual Meeting and Voting........................... 2
Election of Directors..................................................... 4
Nominees and directors.................................................... 4
Information concerning the Board of Directors............................. 6
Committees of the Board of Directors...................................... 6
Security ownership of directors and management............................ 8
Amendment To Increase Authorized Number of Shares......................... 10
Executive Compensation.................................................... 12
Summary compensation table................................................ 12
Long-term incentive plan awards........................................... 14
Stock options............................................................. 14
Compensation of directors................................................. 15
Employment agreements with certain executive officers..................... 16
Section 16(a) beneficial ownership reporting compliance................... 16
Report of the Compensation Committee...................................... 18
Compensation philosophy................................................... 18
Principal compensation elements........................................... 20
CEO compensation.......................................................... 20
Stockholder Return Graph.................................................. 21
Share Ownership of Principal Stockholders................................. 22
Report of The Audit Committee............................................. 23
Independent Public Accountants............................................ 24
Other Matters............................................................. 24
Stockholder Proposals..................................................... 24
Solicitation Expenses..................................................... 25
Appendix A................................................................ A-1
Appendix B................................................................ B-1
1
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
The Board of Directors of The Limited, Inc. is soliciting your proxy to
vote at our 2001 annual meeting of stockholders (or at any adjournment of the
meeting). This proxy statement summarizes the information you need to know to
vote at the meeting. "We", "our", "The Limited" and the "Company" refer to The
Limited, Inc.
We began mailing this proxy statement and the enclosed proxy card on or
about April 20, 2001 to all stockholders entitled to vote. The Limited's 2000
Annual Report, which includes our financial statements, is being sent with this
proxy statement.
Date, time and place of meeting
Date: May 21, 2001
Time: 9:00 a.m., Eastern Daylight Time
Place: Three Limited Parkway
Columbus, Ohio
Shares entitled to vote
Stockholders entitled to vote are those who owned The Limited common stock
(which we refer to throughout this proxy statement as "Common Stock") at the
close of business on the record date, March 30, 2001. As of the record date,
there were [ ] shares of Common Stock outstanding. Each share of Common Stock
that you own entitles you to one vote.
Voting your proxy
Whether or not you plan to attend the annual meeting, we urge you to vote.
Stockholders of record can give proxies by calling a toll-free telephone
number, by using the Internet or by mailing their signed proxy cards. The
telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly. If you are voting by mail, please complete, sign and date the
enclosed proxy card and return it promptly in the envelope provided. If you are
voting by telephone or the Internet, please use the telephone or Internet
voting procedures set forth on the enclosed proxy card. Returning the proxy
card or voting via telephone or the Internet will not affect your right to
attend the meeting and vote.
The enclosed proxy card indicates the number of shares that you own.
Voting instructions are included on your proxy card. If you properly fill
in your proxy card and send it to us or vote via telephone or the Internet in
time to vote, one of the individuals named on your proxy card (your "proxy")
will vote your shares as you have directed. If you sign the proxy card or vote
via telephone or the Internet but do not make specific choices, your proxy will
follow the Board's recommendations and vote your shares:
o "FOR" the election of four nominees for director (as described on
page 4).
o "FOR" the proposal to amend our Certificate of Incorporation to
increase the number of shares of Common Stock that The Limited is
authorized to issue from 500,000,000 to 1,000,000,000 (as described
on page 10).
If any other matter is properly presented at the meeting, your proxy will
vote in accordance with his or her best judgment. At the time this proxy
statement went to press, we knew of no other matters to be acted on at the
meeting.
2
Revoking your proxy
You may revoke your proxy by:
o submitting a later dated proxy (including a proxy via telephone or
the Internet),
o notifying our Secretary in writing before the meeting that you have
revoked your proxy, or
o voting in person at the meeting.
Voting in person
If you plan to attend the meeting and vote in person, a ballot will be
available when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring an account statement or letter
from the nominee indicating that you were the beneficial owner of the shares on
March 30, 2001, the record date for voting.
Appointing your own proxy
If you want to give your proxy to someone other than the individuals named
as proxies on the proxy card, you may cross out the names of those individuals
and insert the name of the individual you are authorizing to vote. Either you
or that authorized individual must present the proxy card at the meeting.
Quorum requirement
A quorum of stockholders is necessary to hold a valid meeting. The
presence in person or by proxy at the meeting of holders of shares representing
one-third of the votes of the Common Stock entitled to vote constitutes a
quorum. Abstentions and broker "non-votes" are counted as present for
establishing a quorum. A broker non-vote occurs on an item when a broker is not
permitted to vote on that item absent instruction from the beneficial owner of
the shares and no instruction is given.
Vote necessary to approve proposals to be voted on
Item* Vote Necessary*
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Election of directors Directors are elected by a plurality of the
votes represented by the shares of Common
Stock present at the meeting in person or by
proxy. This means that the director nominee
with the most affirmative votes for a
particular slot is elected for that slot.
Amendment to Certificate of Approval of an amendment to the Company's
Incorporation to increase the Certificate of Incorporation to increase the
number of authorized shares number of authorized shares of Common Stock
requires the affirmative vote of a majority
of the outstanding stock entitled to vote
thereon.
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* Under New York Stock Exchange rules, if your broker holds your shares in its
name, your broker is permitted to vote your shares on these items even if it
does not receive voting instructions from you.
3
ELECTION OF DIRECTORS
Our Board of Directors has nominated four directors for election at the
annual meeting. If you elect the four nominees, they will hold office for a
three-year term expiring at the 2004 annual meeting or until their successors
have been elected. All nominees are currently serving on our Board of
Directors, with Ms. Hailey having been appointed to the Board on March 1, 2001.
Your proxy will vote for each of the nominees unless you specifically
withhold authority to vote for a particular nominee. If any nominee is unable
to serve, your proxy may vote for another nominee proposed by the Board. We do
not know of any nominee of the Board who would be unable to serve as a director
if elected.
Stockholders wishing to nominate directors for election may do so by
delivering to the Secretary of the Company, no later than fourteen days before
the annual meeting, a notice stating (a) the name, age, business address and,
if known, residence address of each nominee proposed in the notice, (b) the
principal occupation or employment of each nominee and (c) the number of shares
of Common Stock of the Company beneficially owned by each nominee. No person
may be elected as a director unless he or she has been nominated by a
stockholder in this manner or by the Board of Directors.
The Board of Directors recommends the ELECTION of all of the following
nominees of the Board of Directors:
Nominees and directors
Nominees of the Board of Directors for election at the 2001 annual
meeting.
Eugene M. Freedman Director since 1995 Age 69
Mr. Freedman has been Senior Advisor and Director of Monitor Clipper
Partners, Inc. ("Monitor Clipper"), a private equity firm, since January 2000.
Since 2001, he has been Senior Advisor of Monitor Company Group Limited
Partnership, an international business strategy and consulting firm. He was
Managing Director of Monitor Clipper from 1997 to 1999 and Senior Advisor and
Director of Monitor Company Inc. from 1995 to 2000. Until October 1994, and for
more than five years prior thereto, Mr. Freedman was a partner of Coopers &
Lybrand, where he served as Chairman and Chief Executive Officer of Coopers &
Lybrand LLP, U.S. ("C & L, U.S.") since October 1991 and as Chairman of Coopers
& Lybrand, International ("C & L, Int.") since 1992. During The Limited's 2000
fiscal year, the successor of C & L, U.S., PricewaterhouseCoopers LLP ("PwC"),
served as The Limited's independent public accountants. The amount of
compensation paid by The Limited to PwC for such services was less than 1% of
The Limited's and PwC's consolidated gross revenues for their 2000 fiscal
years. Mr. Freedman is also a director of Bernard Technologies, Inc., e-Studio
Live, Inc., iAskWeb, Inc., Pathmark Stores, Inc., and Wheelhouse Corporation,
Inc.
V. Ann Hailey Director since 2001 Age 50
Ms. Hailey has been Executive Vice President and Chief Financial Officer
of The Limited since August 1997. Prior to joining The Limited, Ms. Hailey was
Senior Vice President and Chief Financial Officer of The Pillsbury Co. from
1994 to 1997 and was Vice President, Finance & Planning for Nabisco Specialty
Products Division from 1992 to 1994. Ms. Hailey was appointed to the Board of
The Limited on March 1, 2001.
David T. Kollat Director since 1976 Age 62
Dr. Kollat has been Chairman of 22, Inc., a management consulting firm,
since 1987. He is also a director of Cone Mills, Inc., Consolidated Stores
Corporation, Cooker Restaurant Corporation, Select Comfort, Inc. and Wolverine
World Wide, Inc.
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Leslie H. Wexner Director since 1963 Age 63
Mr. Wexner has been Chief Executive Officer since he founded The Limited
in 1963, and Chairman of the Board for more than five years. Mr. Wexner has
also been the Chairman of the Board and Chief Executive Officer of Intimate
Brands, Inc. ("Intimate Brands"), a subsidiary of The Limited, since 1995. Mr.
Wexner is also a director of Hollinger International, Inc. and Hollinger
International Publishing, Inc. Mr. Wexner is the husband of Abigail S. Wexner.
Directors whose terms continue until the 2002 annual meeting.
Leonard A. Schlesinger Director since 1996 Age 48
Mr. Schlesinger has been Executive Vice President and Chief Operating
Officer of The Limited since March 2001 and was Executive Vice President,
Organization, Leadership and Human Resources of The Limited from October 1999
until March 2001. Mr. Schlesinger was a Professor of Sociology and Public
Policy and Senior Vice President for Development at Brown University from 1998
to 1999. He also was the George F. Baker, Jr. Professor of Business
Administration at Harvard Business School ("Harvard") from 1988 to 1998 and
served as the Senior Associate Dean and Director of External Relations at
Harvard from July 1994 until October 1995.
Donald B. Shackelford Director since 1975 Age 68
Mr. Shackelford has been Chairman of the Board of Fifth Third Bank,
Central Ohio, a banking business, since 1998. Mr. Shackelford was Chairman of
the Board and Chief Executive Officer of State Savings Bank from 1972 to 1998.
He was Chairman of the Board and Chief Executive Officer of State Savings Co.
for five years ending in 1997. Mr. Shackelford is also a director of Fifth
Third Bancorp., Intimate Brands and Progressive Corporation.
Martin Trust Director since 1978 Age 66
Mr. Trust has been President and Chief Executive Officer of Mast
Industries, Inc., a wholly-owned subsidiary of The Limited, for more than five
years. He is also a director of Iosota, Inc. and Staples, Inc.
Raymond Zimmerman Director since 1984 Age 68
Mr. Zimmerman has been Chairman of the Board of 99(cent) Stuff.com since
July 1999. Mr. Zimmerman is a director of Service Merchandise Company, Inc.
("Service Merchandise") and was Non-Executive Chairman of the Board of Service
Merchandise from 1999 to 2000. He was Chairman of the Board of Service
Merchandise from 1997 to 1999 and was Chairman of the Board and Chief Executive
Officer of Service Merchandise from 1981 to 1997. In March 1999, Service
Merchandise filed a reorganization petition under Chapter 11 of the United
States Bankruptcy Code.
Directors whose terms continue until the 2003 annual meeting.
E. Gordon Gee Director since 1991 Age 57
Dr. Gee has been Chancellor of Vanderbilt University since August 1, 2000.
Dr. Gee was the President of Brown University from 1998 to 2000. Dr. Gee was
also President of The Ohio State University from 1990 to 1997. Dr. Gee is a
director of Allmerica Financial, Dollar General Corporation, Glimcher Realty
Trust, Hasbro, Inc., Intimate Brands and Massey Energy Company.
Alex Shumate Director since 2000 Age 50
Mr. Shumate has been the Managing Partner of the Columbus, Ohio office of
the law firm of Squire, Sanders & Dempsey L.L.P. ("Squire, Sanders") since
1991. Squire, Sanders provided legal services to The Limited during fiscal year
2000, and The Limited anticipates that Squire, Sanders will continue to provide
legal services to The
5
Limited from time to time in the future. Mr. Shumate was a director of Intimate
Brands from 1996 to 2000. Mr. Shumate is also a director of Bank One
Corporation and Wm. Wrigley, Jr. Company.
Allan R. Tessler Director since 1987 Age 64
Mr. Tessler has been Chairman of the Board and Chief Executive Officer of
International Financial Group, Inc., an international merchant banking firm,
since 1987. He is also Chief Executive Officer and Chairman of the Board of J
Net Enterprises, a technology holding company. Since March 2001, Mr. Tessler
has also been Acting Chief Executive Officer of Jasmine Networks. He was
Co-Chairman of the Board of Data Broadcasting Corporation, a provider of
financial and business information to institutional and individual investors,
from June 1992 until May 2000 and Co-Chief Executive Officer from June 1992
until November 29, 1999. He is also Chairman of the Board of InterWorld
Corporation. Since January 1997, Mr. Tessler has also served as Chairman of
Checking Holdings Corp. IV. From 1989 to 1996 he was Chairman of the Board of
Great Dane Holdings, Inc. He is also a director of Allis- Chalmers Corporation.
Abigail S. Wexner Director since 1997 Age 39
Mrs. Wexner was an attorney with the New York and London offices of Davis
Polk & Wardwell from 1987 until 1992, where she specialized in mergers and
acquisitions. By appointment of the President of the United States, Mrs. Wexner
served as a member of the United States Holocaust Memorial Council from 1994 to
1999. She is a director of the Children's Defense Fund and is Chairman of the
Governing Committee of The Columbus Foundation and a member of the Boards of
Trustees of Children's Hospital, Inc., The Columbus Academy and The Wexner
Center Foundation in Columbus, Ohio. Mrs. Wexner is also the founder and
President of The Columbus Coalition Against Family Violence. Mrs. Wexner is the
wife of Leslie H. Wexner.
Information concerning the Board of Directors
Our Board of Directors held five meetings in fiscal year 2000. During
fiscal year 2000, all of the directors attended 75% or more of the total number
of meetings of the Board and of committees of the Board on which they served.
Committees of the Board of Directors
Audit Committee.
The Audit Committee of the Board assists the Board in fulfilling its
oversight responsibilities with respect to various audit, financial reporting
and other matters. The members of the Audit Committee are Mr. Shackelford
(Chair) and Messrs. Shumate, Tessler and Zimmerman. The members of the Audit
Committee are all "independent" for purposes of the New York Stock Exchange's
listing standards. That is, the Board has determined that none of the Audit
Committee members has a relationship to the Company that may interfere with the
exercise of his independence from the Company and its management. The Board has
adopted a written charter for the Audit Committee setting out the functions the
Committee is to perform. A copy of that charter is attached to this proxy
statement as Appendix A, and the Audit Committee's Report can be found on page
23 of this proxy statement. The Audit Committee held seven meetings in fiscal
year 2000.
Compensation Committee.
The Compensation Committee of the Board reviews executive compensation and
administers our stock option and performance incentive plans. Its members are
Dr. Gee (Chair) and Mr. Shackelford. A copy of the Compensation Committee's
Report can be found on page 18 of this Proxy Statement. Members of the
Compensation Committee held four meetings in fiscal year 2000 and took action
in writing without a meeting on twelve occasions.
6
Executive Committee.
The Executive Committee of the Board may exercise, to the fullest extent
permitted by law, all of the powers and authority granted to the Board. Among
other things, the Executive Committee may declare dividends, authorize the
issuance of stock and authorize the seal of The Limited to be affixed to papers
that require it. Its members are Messrs. Wexner (Chair) and Shackelford. The
Executive Committee took action in writing without a meeting on ten occasions
in fiscal year 2000.
Finance Committee.
The Finance Committee of the Board periodically reviews our financial
position and financial arrangements with banks and other financial
institutions. The Finance Committee also makes recommendations on financial
matters that it believes are necessary, advisable or appropriate. Its members
during fiscal year 2000 were Mrs. Wexner and Messrs. Tessler (Chair), Freedman,
Shackelford and Zimmerman. The Finance Committee held two meetings in fiscal
year 2000.
Nominating Committee.
The Nominating Committee of the Board nominates, on behalf of the Board,
suitable persons for election as directors of The Limited. Its members are
Messrs. Tessler (Chair) and Wexner. Stockholders are permitted to nominate
directly directors for election (see "ELECTION OF DIRECTORS" above); therefore,
no formal procedures exist for stockholders to make nominee recommendations to
the Nominating Committee. The Nominating Committee took action in writing
without a meeting on one occasion in fiscal year 2000.
7
Security ownership of directors and management
The following table shows certain information about the securities
ownership of all directors of The Limited, the executive officers of The
Limited named in the Summary Compensation Table below and all directors and
executive officers of The Limited as a group.
Number of
Shares of
Intimate
Number of Brands, Inc. Percent of
Shares of Class A Intimate
Common Stock Common Stock Brands Inc.
Beneficially Percent Beneficially Class A
Name Owned(a)(b) of Class Owned(a)(b) Common Stock
- ---- ------------ -------- ------------ ------------
Eugene M. Freedman................................ (c) * **
E. Gordon Gee..................................... (c) * (d) *
Kenneth B. Gilman................................. (c)(e)(f) * (d)(g) *
V. Ann Hailey..................................... (c) * *
David T. Kollat................................... (c) * **
Leonard A. Schlesinger............................ (c) * *
Donald B. Shackelford............................. (c)(f) * (d) *
Alex Shumate...................................... * (d) *
Allan R. Tessler.................................. (c)(f) * **
Martin Trust...................................... (c)(e)(f) [ %] (h) *
Abigail S. Wexner................................. (c)(i) [ %] **
Leslie H. Wexner.................................. (c)(e)(j) [ %] (d) *
Raymond Zimmerman................................. (c)(k) * *
All directors and executive officers as a group... (c)(e)(l) [ %] (d)(m) *
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* Less than 1%.
** Not applicable.
(a) Unless otherwise indicated, each named person has voting and investment
power over the listed shares and such voting and investment power is
exercised solely by the named person or shared with a spouse.
(b) Reflects ownership as of March 2, 2001.
(c) Includes the following number of shares issuable within 60 days upon the
exercise of outstanding stock options: Mr. Freedman, _______; Dr. Gee,
_______; Mr. Gilman,_______; Ms. Hailey, _______; Dr. Kollat, _______; Mr.
Schlesinger, _______; Mr. Shackelford _______; Mr. Tessler, _______; Mr.
Trust, _______; Mrs. Wexner, _______; Mr. Wexner,_______; Mr. Zimmerman,
_______; and all directors and executive officers as a group, _______ .
(d) Includes the following number of shares issuable within 60 days upon the
exercise of outstanding stock options: Dr. Gee, _______; Mr. Gilman,
_______; Mr. Shackelford, _______; Mr. Shumate, _______; Mr. Wexner,
_______; and all directors and executive officers as a group, _______.
(e) Includes the following number of shares held in an employee benefit plan,
over which the participant has the power to dispose or withdraw shares:
Mr. Gilman, _______; Mr. Trust, _______; Mr. Wexner, _______; (reflects
ownership as of February 28, 2001); and all directors and executive
officers as a group, _______.
(f) Includes the following number of shares owned by family members, as to
which beneficial ownership is disclaimed: Mr. Gilman, _______; Mr.
Shackelford, _______; and Mr. Trust, _______.
(g) Includes _______ shares owned by family members, as to which Mr. Gilman
disclaims beneficial ownership.
(h) Includes _______ shares, as to which Mr. Trust disclaims beneficial
ownership.
8
(i) Includes _______ shares held by a trust of which Mrs. Wexner is the
beneficiary. Mrs. Wexner disclaims beneficial ownership of these shares.
Excludes _______ shares beneficially owned by Mr. Wexner as to which Mrs.
Wexner disclaims beneficial ownership.
(j) Includes _______ shares held by Health and Science Interests II, _______
shares held by The Wexner Foundation and _______ shares held by The Wexner
Children's Trust. Mr. Wexner disclaims beneficial ownership of the shares
held by Health and Science Interests II and The Wexner Foundation. Mr.
Wexner shares investment and voting power with others with respect to
shares held by The Wexner Foundation. Excludes _______ shares held in a
trust of which Mrs. Wexner is a beneficiary and as to which Mr. Wexner
disclaims beneficial ownership. Includes _______ shares beneficially owned
by Mrs. Wexner as to which Mr. Wexner may be deemed to share the power to
vote or direct the disposition.
(k) Includes _______ shares which are Mr. Zimmerman's pro rata share of
_______ shares owned by a corporation of which Mr. Zimmerman is president
and a 33% shareholder plus _______ shares held by a partnership which is
45% owned by Mr. Zimmerman and 45% owned by his wife.
(l) Includes _______ shares as to which beneficial ownership is disclaimed.
(m) Includes _______ shares as to which beneficial ownership is disclaimed.
9
AMENDMENT TO INCREASE AUTHORIZED NUMBER OF SHARES
The Company's Certificate of Incorporation currently authorizes the
issuance of 510,000,000 shares of Capital Stock, of which 500,000,000 shares
are Common Stock and 10,000,000 shares are Preferred Stock. In January 2001,
the Board of Directors adopted a resolution proposing that our Certificate of
Incorporation be amended to increase the authorized number of shares of Common
Stock to 1,000,000,000, subject to stockholder approval of the amendment.
Our Board of Directors recommends a vote FOR the approval of the amendment
of our Certificate of Incorporation to increase the number of authorized
shares.
Vote required
The affirmative vote of holders representing a majority of the outstanding
shares of Common Stock is necessary for the adoption of this proposal.
Proposed amendment
As of March 30, 2001, The Limited had approximately [_________] shares of
Common Stock outstanding. In addition, ____________ shares of Common Stock were
reserved for issuance under the Company's benefit plans. Of the 10,000,000
shares of Preferred Stock authorized, no shares were outstanding as of March
30, 2001.
The following is the text of Section 1 of Article IV of the Certificate of
Incorporation of the Company, including the proposed amendment (highlighted in
bold):
The Corporation shall be authorized to issue two classes of stock to be
designated, respectively, "Preferred Stock" and "Common Stock"; the total
number of shares which the Corporation shall have authority to issue is One
Billion Ten Million (1,010,000,000); the total number of shares of Preferred
Stock shall be Ten Million (10,000,000) and each such share shall have a par
value of One Dollar ($1.00); and the total number of shares of Common Stock
shall be One Billion (1,000,000,000) and each such share shall have a par value
of Fifty Cents ($.50).
Purpose and effect of the proposed amendment
In May 2000, we completed a two-for-one stock split which required the
issuance of substantially all of the authorized shares of Common Stock not
otherwise reserved for issuance under our benefit plans. The Board believes
that the proposed increase in the number of authorized shares of Common Stock
will benefit The Limited by improving our flexibility to issue Common Stock for
a variety of corporate purposes, such as to effect future stock dividends, make
acquisitions through the use of stock, raise equity capital and adopt
additional employee benefit plans or reserve additional shares for issuance
under such plans and under plans of acquired companies. The Board also believes
that the amendment should facilitate our ability to accomplish various business
and financial objectives in the future without the necessity of delaying such
activities for further shareholder approval, except as may be required in
particular cases by the our charter documents, the rules of the New York Stock
Exchange, the terms of any series of Preferred Stock or the terms of any
agreements or securities we may enter into or issue or applicable law. Other
than as permitted or required under our employee benefit plans and under
outstanding options, the Board has no immediate plans, understandings,
agreements or commitments to issue additional Common Stock for any purposes.
Whether or not the our shareholders approve this proposal will not impact our
existing agreements to issue stock. We reserve the right to seek a further
increase in authorized shares from time to time in the future as considered
appropriate by the Board.
Under our Certificate of Incorporation, shareholders do not have
preemptive rights with respect to Common Stock. Thus, should the Board elect to
issue additional shares of Common Stock, existing shareholders would not have
any preferential rights to purchase such shares. If the Board elects to issue
additional shares of Common Stock, the issuance could have a dilutive effect on
the earnings per share, book value per share, voting power and
10
shareholdings of current shareholders. In addition to our Common Stock, our
Certificate of Incorporation currently empowers the Board to authorize the
issuance of one or more series of Preferred Stock without shareholder approval.
Currently, no shares of Preferred Stock are issued or outstanding.
Except for the increase of the number of authorized shares, the proposed
amendment would not change any of the provisions of our Certificate of
Incorporation. All shares of Common Stock or Preferred Stock, including the
additional shares of Common Stock that would be authorized if the proposed
amendment is adopted, which are not issued and outstanding would be issuable at
any time or from time to time by action of the Board without further
authorization from stockholders, except to the extent that such further
authorization is required by the rules of the New York Stock Exchange, the
terms of any series of Preferred Stock or the terms of any agreements or
securities we may hereafter enter into or issue or applicable law.
The proposal could have an anti-takeover effect, although that is not its
intention. For example, if The Limited were the subject of a hostile takeover
attempt, we could issue additional shares of Common Stock and thereby dilute
the voting power of the other outstanding shares and increase the potential
cost of the takeover. The availability of this defensive strategy to us could
discourage unsolicited takeover attempts, thereby limiting the opportunity for
our shareholders to realize a higher price for their shares than is generally
available in the public markets. The Board is not aware of any attempt, or
contemplated attempt, to acquire control of The Limited, and this proposal is
not being presented with the intent that it be utilized as a type of
anti-takeover device. In addition to our Common Stock, our Certificate of
Incorporation currently empowers the Board to authorize the issuance of one or
more series of Preferred Stock without shareowner approval. No change to our
Preferred Stock authorization is requested by the amendment.
If the proposed amendment is adopted, it will become effective upon filing
of a Certificate of Amendment to our Certificate of Incorporation with the
Delaware Secretary of State. However, if The Limited's shareholders approve the
proposed amendment to our Certificate of Incorporation, the Board retains
discretion under Delaware law not to implement the proposed amendment. If the
Board exercised such discretion, the number of authorized shares would remain
at current levels.
11
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table (the "Summary Compensation Table") shows the
compensation paid by The Limited to each of the named executive officers of The
Limited for each of our last three fiscal years.
Annual Compensation Long-Term Compensation
--------------------------------------------------- --------------------------
Securities
Restricted Underlying All Other
Fiscal Other Annual Stock Options Compensation
Name and Principal Position(1) Year Salary($)(2) Bonus($)(3) Compensation($) Awards($)(5) Awarded(#)(6) ($)(7)
- ---------------------------------- ------ ----------- ---------- -------------- ----------- ------------ ------------
Leslie H. Wexner............... 2000 $ $ $ (4) - - $
Chairman of the Board, Chief 1999 1,185,577 3,331,968 - $ 2,353,431 - 262,914
Executive Officer and President 1998 1,046,154 1,519,392 - 29,316 429,564 154,706
Kenneth B. Gilman.............. 2000 (4) - -
Vice Chairman and Chief 1999 958,077 1,999,181 14,762 2,353,431 - 337,363
Administrative Officer 1998 936,923 935,150 14,955 158,304 - 277,290
Martin Trust................... 2000 (4) - -
President and Chief Executive 1999 757,115 892,696 81,412 - - 357,197
Officer of Mast Industries, Inc. 1998 727,692 1,460,000 85,966 137,899 - 336,771
V. Ann Hailey.................. 2000 (4) - --
Executive Vice President, 1999 592,788 937,116 - - 100,000 79,969
Chief Financial Officer 1998 517,307 332,367 - 2,791,669 429,564 14,215
Leonard A. Schlesinger......... 2000 (4) -- --
Executive Vice President and 1999 187,981 376,499 - 1,915,625 502,110 -
Chief Operating Officer of The
Limited
- ---------
(1) Mr. Schlesinger joined The Limited on October 1, 1999 as Executive Vice
President, Organization, Leadership and Human Resources; therefore,
amounts disclosed for 1999 are for partial year. Effective March 1, 2001,
Mr. Gilman became Chief Executive Officer of Lane Bryant, Inc. and
resigned as a director and executive officer of The Limited.
(2) Amounts reported for 2000 reflect a 53 week fiscal year.
(3) Represents for each fiscal year, the aggregate of the performance-based
incentive compensation for the Spring and Fall selling seasons. Mr.
Schlesinger's bonus amount for 2000 was determined based on his
pre-existing agreement with The Limited.
(4) Represents for the 2000 fiscal year, reimbursement of taxes on life
insurance premiums paid on behalf of executive officers Gilman, Trust,
Hailey and Schlesinger, reimbursement of certain taxes on non-qualified
retirement plan imputed income paid on behalf of executive officers
Wexner, Gilman, Trust and Hailey and reimbursement for tax on relocation
expenses for Mr. Schlesinger.
(5) Represents for each executive officer, the restricted stock awards for the
specified fiscal year under The Limited's 1993 Stock Option and
Performance Incentive Plan. Information set forth above is based on the
closing price of The Limited's Common Stock on the date on which the
awards were made.
Restricted shares have been adjusted to reflect The Limited's two-for-one
stock split in May 2000.
On January 31, 2000, 5,524 restricted shares of The Limited's Common Stock
were granted to Mr. Schlesinger. The per share value of The Limited's
Common Stock on such date was $15.3438. This award vests 10%, 10%,
12
10%, 15%, 20% and 35% on the first through sixth anniversaries of the
grant date, respectively, subject to continued employment with The
Limited.
On October 1, 1999, 100,000 restricted shares of The Limited's Common
Stock were granted to Mr. Schlesinger. The per share value of The
Limited's Common Stock on such date was $19.1563. This award has been
earned in accordance with pre-established financial performance measures
and vests 10%, 10%, 10%, 15%, 20% and 35% on the first through sixth
anniversaries of the grant date, respectively, subject to continued
employment with The Limited.
On May 18, 1999, 101,770 restricted shares of The Limited's Common Stock
were granted to each of executive officers Wexner and Gilman. The per
share value of the Common Stock on such date was $23.125. This award was
earned in accordance with pre-established financial performance measures
and vested 100% at the end of the 1999 fiscal year.
On June 1, 1998, 1,770, 9,558, 8,326 and 4,780 restricted shares of The
Limited's Common Stock were granted to executive officers Wexner, Gilman,
Trust and Hailey, respectively. The per share value of the Common Stock on
such date was $16.5625. These awards were made in connection with the
distribution in 1998 of the Abercrombie & Fitch shares to The Limited's
stockholders. The vesting of these awards is the same as the vesting of
the previously granted restricted stock awards to which these adjustment
grants relate.
On February 2, 1998, 200,000 restricted shares of The Limited's Common
Stock were granted to Ms. Hailey. The per share value of The Limited's
Common Stock on such date was $13.5625. This award has been earned in
accordance with pre-established financial performance measures and vests
10%, 10%, 10%, 15%, 20% and 35% on the first through sixth anniversaries
of the grant date, respectively, subject to continued employment with The
Limited.
Restricted shares of The Limited's Common Stock granted prior to August
23, 1999 were subsequently adjusted to reflect the spin-off of Limited
Too.
Dividends will not be paid or accrue with respect to shares of restricted
stock until such shares vest.
(6) These options have been adjusted to reflect The Limited's two-for-one
stock split in May 2000.
(7) Includes employer matching and supplemental contributions allocated to
each executive officer's account under certain of The Limited's qualified
and non-qualified defined contribution plans during the year in the amount
of $_____________________________________ and $____________ for executive
officers Wexner, Gilman, Trust, Hailey and Schlesinger, respectively.
Includes term life insurance premiums in the amount of $ ,
$ , $ and $ paid on behalf of executive
officers Gilman, Trust, Hailey and Schlesinger, respectively.
Includes reimbursement of relocation expenses in the amount of $126,763
for Mr. Schlesinger.
13
Long-Term Incentive Plan Awards
The Limited did not grant any awards for the 2000 fiscal year to the
executive officers named in the Summary Compensation Table.
Stock Options
The following table shows certain information regarding stock options
granted to the executive officers named in the Summary Compensation Table
during our 2000 fiscal year.
Option Grants in Fiscal Year 2000
Individual Grants
-----------------------------------------------------------
Approximate Potential Realizable
% of Value at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation for
Underlying Granted to Exercise Option Term(2)
Options Associates in Price -------------------------------
Name Granted(#)(1) Fiscal Year Per Share($) Expiration Date 5%($) 10%($)
- ------------------------------- ------------ ------------- ----------- --------------- ------------ ------------
Leslie H. Wexner...............
Kenneth B. Gilman..............
Martin Trust...................
V. Ann Hailey..................
Leonard A. Schlesinger.........
- ---------
(1) On January 31, 2000, options were granted to Ms. Hailey and Mr.
Schlesinger pursuant to The Limited's 1993 Stock Option and Performance
Incentive Plan (1998 Restatement). Such options vest 10%, 10%, 10%, 15%,
20% and 35% on the first through sixth anniversaries of the grant date,
respectively, in each case subject to the holder's continued employment
with the Company. The exercise price per share of Mr. Schlesinger's
options is set at a premium over the fair market value of The Limited's
Common Stock on the grant date.
These options have been adjusted to reflect The Limited's two-for-one
stock split in May 2000.
(2) The assumed rates of growth were selected by the Securities and Exchange
Commission ("Commission") for illustrative purposes only and are not
intended to predict or forecast future stock prices.
14
The following table sets forth certain information regarding stock options
exercised by the executive officers named in the Summary Compensation Table
during The Limited's 2000 fiscal year and the year-end values of unexercised
options held by those executive officers.
Aggregated Option Exercises in 2000 Fiscal Year
and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at Fiscal Money Options at Fiscal
Year-End(#) Year-End($)
Acquired on Value --------------------------- ----------------------------
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ----------- -------------- ----------- ------------- ----------- -------------
Leslie H. Wexner............... (2) (2) $ (2) $ (2)
(3) (3) (3) (3)
Kenneth B. Gilman.............. (2) (2) (2) (2)
(3) (3) (3) (3)
Martin Trust................... (2) (2) (2) (2)
V. Ann Hailey.................. (2) (2) (2) (2)
Leonard A. Schlesinger......... (2) (2) (2) (2)
- ---------
(1) Calculated on the basis of the number of shares exercised, multiplied by
the excess of the fair market value of a share of Common Stock on the date
of exercise over the exercise price of such option.
(2) Denominated in shares of The Limited's Common Stock. Value is calculated
on the basis of the number of shares subject to each such option,
multiplied by the excess of the fair market value of a share of Common
Stock at fiscal year-end ($19.81) over the exercise price of such option.
Options have been adjusted to reflect The Limited's two-for-one stock
split in May 2000.
(3) Denominated in shares of Intimate Brands' Class A Common Stock. Value is
calculated on the basis of the number of shares subject to each such
option, multiplied by the excess of the fair market value of a share of
Common Stock at fiscal year-end ($18.21) over the exercise price of such
option.
Options have been adjusted to reflect Intimate Brands' two-for-one stock
split in May 2000.
Compensation of directors
Associates and officers who are directors receive no additional
compensation for their service as directors. We provide the following
compensation to our directors who are not associates of The Limited for their
services as directors:
o an annual retainer of $20,000 per year (increased by $4,000 for each
committee chair held), plus
o a fee of $3,500 for each Board meeting attended ($1,000 for a
telephonic meeting) and, as committee members, a fee of $1,500 per
committee meeting attended ($500 for a telephonic meeting), and
o a fee of $500 for each action in writing taken by the Board or any
committee.
Under The Limited's 1996 Stock Plan for Non-Associate Directors, each
director who is not an associate of The Limited receives (i) annual grants of
options to purchase 1,000 shares of The Limited's Common Stock at a price equal
to the fair market value of such shares at the date of grant and (ii) 50% of
the annual retainer in shares of The Limited's Common Stock.
15
Employment agreements with certain executive officers
In 1999 the Company entered into an employment agreement with Mr.
Schlesinger, at which time he was to serve as the Company's Executive Vice
President for Organization, Leadership and Human Resources. On March 1, 2001,
Mr. Schlesinger was appointed Executive Vice President and Chief Operating
Officer of The Limited. The initial term of Mr. Schlesinger's agreement is six
years, with automatic one-year extensions thereafter unless either party gives
written notice to the contrary. Mr. Schlesinger's agreement provides for an
initial base salary of $575,000, the grant of options to purchase 250,000
shares of The Limited's Common Stock, rights to receive, based on Company
performance and continued employment, 50,000 shares of The Limited's Common
Stock, incentive plan participation as determined by the Board, life insurance
coverage of $5 million and disability benefits in addition to the benefits
available under the Company's disability plans. Mr. Schlesinger's agreement
also provides that, if the Company fails to extend the agreement or terminates
Mr. Schlesinger's employment without cause, or if he terminates his employment
for good reason, he will continue to receive his base salary for one year after
the termination date. In the event any "parachute" excise tax is imposed on Mr.
Schlesinger, he will be entitled to tax reimbursement payments.
In 1998 the Company entered into an employment agreement with Ms. Hailey
under which she will continue to serve as the Company's Executive Vice
President and Chief Financial Officer. The initial term of Ms. Hailey's
agreement is six years, with automatic one-year extensions thereafter unless
either party gives written notice to the contrary. Ms. Hailey's agreement
provides for an initial base salary of $525,000, an initial grant of options to
purchase 200,000 shares of The Limited's Common Stock, an initial grant of
rights to receive, based on Company performance and continued employment,
100,000 shares of The Limited's Common Stock, incentive plan participation as
determined by the Board, life insurance coverage of $5 million and disability
benefits in addition to the benefits available under the Company's disability
plans. Ms. Hailey's agreement also provides that, if the Company fails to
extend the agreement or terminates Ms. Hailey's employment without cause, or if
she terminates her employment for good reason, she will continue to receive her
base salary for one year after the termination date. In the event any
"parachute" excise tax is imposed on Ms. Hailey, she will be entitled to tax
reimbursement payments.
In 1997 the Company entered into individual employment agreements with
Messrs. Gilman and Trust. Under these agreements, Mr. Gilman served as the
Company's Vice Chairman and Chief Administrative Officer and Mr. Trust will
continue to serve as President and Chief Executive Officer of Mast Industries,
Inc. The initial term of each agreement is six years, with automatic one-year
extensions thereafter unless either party gives written notice to the contrary.
Mr. Gilman's agreement provided for an initial base salary of $900,000. Mr.
Trust's agreement provides for an initial base salary of $700,000. Each
agreement also provides for incentive plan participation as determined by the
Board and life insurance coverage of $5 million. Each agreement provides that,
if the Company fails to extend the agreement or terminates the executive's
employment without cause, or if the executive terminates his employment for
good reason, the executive will continue to receive his base salary for one
year after the termination date. Each executive's agreement provides for
disability benefits in addition to the benefits available under the Company's
disability plans. In the event any "parachute" excise tax is imposed on an
executive, he will be entitled to tax reimbursement payments. Effective March
1, 2001, Mr. Gilman's agreement with the Company was amended to provide that he
would become chief executive officer of Lane Bryant, Inc. and that he would
resign as an executive officer and director of The Limited and Intimate Brands
and the agreement, as amended, was assumed by Lane Bryant, Inc.
Section 16(a) beneficial ownership reporting compliance
The Limited's officers and directors, and persons who own more than ten
percent of a registered class of The Limited's equity securities, must file
reports of ownership and changes in ownership of The Limited's equity
securities with the Commission and the New York Stock Exchange. Copies of those
reports must also be furnished to The Limited.
Based solely on a review of the copies of reports furnished to The Limited
and written representations that no other reports were required, we believe
that during fiscal 2000 our officers, directors and greater than ten-percent
16
beneficial owners complied with these filing requirements, except for Mr. Trust
who inadvertently failed to make a timely filing of one report for one
transaction.
17
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") reviews and approves The
Limited's compensation philosophy and policies and the application of such
policies to the compensation of Mr. Wexner and other executive officers. The
Limited has retained independent compensation consultants to assist in
developing, and periodically assessing the effectiveness and reasonableness of,
The Limited's executive officer compensation program. The Committee meets
independently on a periodic basis with these consultants to review the
Company's programs.
Compensation philosophy
The Limited attempts to apply a consistent philosophy to compensation for
all leadership associates, including senior executives. The primary goal of the
compensation program is to link total executive compensation to performance
that enhances stockholder value. Accordingly, The Limited has structured total
compensation for leadership individuals so that a lower proportion is fixed
compensation and a much higher proportion is variable, keyed to business and
stock performance.
The Limited's philosophy is based on the following basic principles:
To Pay for Outstanding Performance.
The Limited believes in paying for results. Individuals in leadership
roles are compensated based on a combination of total company, business unit
and individual performance factors. Total company and business unit performance
are evaluated primarily on the degree by which financial targets are met.
Individual performance is evaluated based upon several leadership factors,
including building brand identity, attainment of specific merchandise and
financial objectives, building and developing a strong leadership team,
developing an infrastructure to support future business growth and managing
expenses. In addition, a significant portion of total compensation is in the
form of equity-based award opportunities to directly tie any increased
compensation to increased stockholder value.
To Pay Competitively.
The Limited is committed to providing a total compensation program
designed to attract the best senior leaders to the business and to retain the
best, consistently highest performers. To achieve this goal, The Limited
annually compares its pay practices and overall pay levels with other leading
retail, and where appropriate, non-retail companies and sets pay guidelines
based on this review.
To Pay Equitably.
The Limited believes that it is important to apply generally consistent
guidelines for all leadership compensation programs across business units,
considering the size, complexity, stage of development and performance of the
business, and the performance of each individual executive.
Principal compensation elements
The principal elements of executive compensation at The Limited are base
salary, short-term performance-based cash incentive compensation and long-term
equity-based incentive programs. In determining guidelines for each
compensation element, The Limited participates in compensation surveys which
include approximately 75 national and regional specialty and department store
retail businesses, chosen because of their general similarity to The Limited in
business and merchandise focus. In addition, The Limited participates in
special surveys focusing on specific segments of the business, such as
merchandise design and production sourcing. With the help of The Limited's
compensation consultants, The Limited analyzes executive compensation levels
and practices relative to the performance of these competitor companies and,
from this information, develops pay guidelines that generally reward
exceptional executive performance with pay well above the industry survey
median. The competitor group that is surveyed is subject to periodic review and
is modified from time to time to reflect new
18
businesses, mergers, acquisitions and changes in business focus. The competitor
group that The Limited uses for this purpose contains approximately 40% of the
companies in the S&P Retail Stores Composite Index represented in the
Stockholder Return Graph below. Subject to The Limited's needs, The Limited
generally attempts to design all incentive and equity-based compensation
programs to be deductible under the Internal Revenue Code of 1986, as amended.
Base salary.
The Committee annually reviews and approves the base salary of each
executive officer and business president. In determining salary adjustments,
the Committee considers the size and responsibility of the individual's
position, the business unit's overall performance, the individual's overall
performance and future potential and the base salaries paid by competitors to
employees in comparable positions. Individual performance is measured against
the following factors: seasonal and annual business goals, brand strategy
execution and business growth goals, and the recruitment and development of
leadership talent. These factors are considered subjectively in the aggregate,
and none of these factors is accorded a formula weight.
In 2000, the base salaries of Ms. Hailey and Messrs. Schlesinger, Trust
and Wexner were adjusted based on both performance and market comparisons, with
continued emphasis placed on performance-based cash and equity incentive
compensation.
Performance-based cash incentive compensation.
The Limited has implemented a short-term performance-based cash incentive
compensation program for specified key leadership positions that provides for
incentive payments for each six-month operating season. These incentive
payments are based on the attainment of pre-established objective financial
goals.
For most businesses, the goals under this plan are based on operating
income. However, goals also may be based on other objectives or criteria,
depending on the business unit and its strategy. The Limited sets these goals
at the beginning of each six-month season, and bases them on an analysis of
historical performance, growth and income improvement expectations for that
business, financial results of other comparable businesses both inside and
outside The Limited, and progress toward achieving the strategic plan for that
business. Annually, The Limited establishes target cash incentive compensation
opportunities for eligible executives stated as a specific percent of base
salary. The amount of performance-based incentive compensation earned by
participating executives can range from zero to double their incentive target,
based upon the extent to which the pre-established financial goals are
achieved.
Equity-based incentive programs.
The Committee believes that continued emphasis on equity-based
compensation opportunities encourages performance that enhances stockholder
value, thereby further linking leadership and shareholder objectives. In 2000,
the Committee awarded equity-based incentives, granting stock options and also,
to a limited extent, restricted stock. The Committee believes that stock
awards, the vesting of which is subject to continued employment, help us to
retain key high performing executives.
Award opportunities for each eligible participant are based on guidelines,
which include size of the executive's business unit, the individual's
responsibility level within that business, competitive practice and the market
price of The Limited's Common Stock. In determining the awards for an executive
officer, the Committee evaluated competitive practice and the executive
officer's performance and importance to the business.
Stock options.
In 2000, stock options were awarded to Ms. Hailey and Mr. Schlesinger, in
the amounts set forth in the Option Grants in Fiscal Year 2000 table above. The
options granted to both Ms. Hailey and Mr. Schlesinger vest, subject to
continued employment, on a graduated basis over a period of six years. The
exercise price for Ms. Hailey's options
19
is equal to the fair market value of the underlying common stock on the date of
grant. The exercise price for Mr. Schlesinger's options is based on a premium
over the fair market value on the date of grant.
Performance-based restricted stock.
The Committee awarded Mr. Schlesinger restricted shares in 2000, which
vest on a graduated basis over a six-year period.
CEO compensation
Mr. Wexner has been Chief Executive Officer and President since founding
The Limited in 1963. The Limited conducts the same type of competitive review
and analysis to determine base salary and incentive guidelines for Mr. Wexner's
position as it does for the other executive positions.
In 2000, as in prior years, in establishing Mr. Wexner's compensation
package the Committee considered competitive practices, the extent to which The
Limited achieved operating income and sales objectives, progress regarding
brand strategy, and the continued recruitment and development of leadership
talent for the business. These factors are considered subjectively in the
aggregate and none of these factors is accorded specific weight.
In fiscal 2000, The Limited posted actual net sales of $10.105 billion, an
increase of 5.9% compared to fiscal 1999 net sales, excluding Limited Too sales
in 1999. Additionally, 2000 adjusted net income was $ 432.9 million, which was
3% below comparable adjusted net income for fiscal 1999, and adjusted earnings
per share were $0.97 per share, which was flat compared to 1999 adjusted
earnings per share. These 2000 fiscal results were below targeted performance
objectives established by the Committee for the year, and as a result, the
annual cash incentive payment earned by Mr. Wexner was significantly below
target level, according to the Plan.
Compensation Committee
E. Gordon Gee, Chair
Donald B. Shackelford
20
STOCKHOLDER RETURN GRAPH
The following graph shows the changes, over the past five-year period, in
the value of $100 invested in Common Stock of The Limited, the Standard &
Poor's 500 Composite Stock Price Index and the Standard & Poor's Retail Stores
Composite Index. The plotted points represent the closing price on the last day
of the fiscal year indicated.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG THE LIMITED, INC., THE S&P 500 INDEX
AND THE S&P RETAIL COMPOSITE INDEX
LOGO
* $100 INVESTED IN STOCK OR IN INDEX AT THE CLOSING PRICE ON
1/31/95--INCLUDING REINVESTMENT OF DIVIDENDS.
21
SHARE OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth the names of all persons who, on March 2,
2001, were known by The Limited to be the beneficial owners (as defined in the
rules of the Commission) of more than 5% of the shares of Common Stock of The
Limited. The information was obtained from information supplied by shareholders
on Schedules 13D and 13G:
Amount
Beneficially Percent
Name and Address of Beneficial Owner Owned of Class
- ------------------------------------------------- ------------ --------
Leslie H. Wexner (1)............................. 77,264,562 18.1%
Three Limited Parkway
P.O. Box 16000
Columbus, OH 43216
Capital Research and Management Company (2)...... 55,003,000 12.9%
333 South Hope Street
Los Angeles, CA 90071
FMR Corp. (3).................................... 41,649,406 9.8%
82 Devonshire Street
Boston, MA 02109-3614
- ---------
(1) Information obtained from Amendment No. 25 to Mr. Wexner's Schedule 13D
filing for The Limited, dated January 9, 2001. Includes 1,107,524 shares
held in The Limited, Inc. Savings and Retirement Plan for Mr. Wexner's
account (as of December 31, 2000) over which he exercises dispositive but
not voting control; and 1,911,558 shares issuable within 60 days of
January 5, 2001 upon exercise of outstanding options held by Mr. Wexner.
Also includes 10,005,510 shares beneficially owned by Abigail S. Wexner,
Mr. Wexner's wife, as to which Mr. Wexner may be deemed to share the power
to vote and direct the disposition. Excludes 400,000 shares held in a
trust of which Mrs. Wexner is a beneficiary and as to which Mr. Wexner
disclaims beneficial ownership. Power to vote or direct the disposition of
736,634 shares held by the Wexner Foundation may be deemed to be shared by
Mr. Wexner and the other trustee thereof. Power to vote or direct the
disposition of 700,000 shares held by Health and Science Interests II may
be deemed to be shared by Mr. Wexner and the trustee thereof. Mr. Wexner
disclaims beneficial ownership of the shares held by The Wexner Foundation
and Health and Science Interests II. Mr. Wexner, as the sole trustee of
The Wexner Children's Trust, holds the power to vote or direct the
disposition of 21,499,700 shares.
(2) Capital Research and Management Company, an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, is deemed to be
the beneficial owner of 55,003,000 shares of The Limited's Common Stock as
a result of acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of 1940.
(3) FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson and certain
subsidiaries of FMR Corp. may be deemed to be members of a "group" as such
term is defined in the rules promulgated by the Commission. FMR Corp. is
the beneficial holder of The Limited's Common Stock as a result of the
investment-related activities of certain subsidiaries of FMR Corp.,
members of the Edward C. Johnson 3d family and trusts for their benefit
are the predominant owners of Class B shares of common stock of FMR Corp.,
representing approximately 49% of its voting power. Mr. Johnson 3d, the
chairman of FMR Corp., owns 12.0% of the aggregate outstanding voting
stock of FMR Corp. and Ms. Johnson 3d, a director of FMR Corp., owns 24.5%
of the aggregate outstanding voting stock of FMR Corp.
22
REPORT OF THE AUDIT COMMITTEE
In accordance with our written charter adopted by the Board in 2000 (a
copy of which is filed as Appendix A to this proxy statement), the Audit
Committee assists the Board in fulfilling its oversight responsibilities with
respect to the following matters: the system of internal control, the audit
process, the financial reporting process and the process for monitoring
compliance with applicable laws and regulations and our code of business
conduct. We and the Board have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace our independent public
accountants. We also annually review our auditors' qualifications and fees. In
addition, we (i) ensure that the Company's independent public accountants
submit, on a periodic basis, a formal written statement delineating
relationships between the accountants and The Limited, (ii) actively engage in
dialogue with the accountants with respect to any disclosed relationships or
services that may impact their objectivity and independence and (iii) recommend
that the Board take appropriate action in response to the foregoing to satisfy
itself of the accountants' independence.
Management is responsible for the financial reporting process, including
the system of internal control, and for the preparation of consolidated
financial statements in accordance with generally accepted accounting
principles. The Company's independent accountants are responsible for auditing
those financial statements. Our responsibility is to monitor and review the
output of these processes. However, we are not professionally engaged in the
practice of accounting and auditing and are not experts in the fields of
accounting and auditing. We rely on the information provided to us and on the
representations made by management and the independent accountants.
We have reviewed and discussed The Limited's audited financial statements
as of and for the year ended February 3, 2001 and met with both management and
our independent accountants to discuss the financial statements. Management has
represented to us that the financial statements were prepared in accordance
with generally accepted accounting principles. We have reviewed with the
internal and independent accountants the overall scope and plans for their
respective audits. We also met with the internal and independent accountants,
with and without management present, to discuss the results of their
examinations and their evaluations of the Company's internal controls.
We have also discussed with the independent accountants all matters
required to be discussed with audit committees by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The Company's
independent accountants also provided to us the written disclosures and the
letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and we discussed with the independent
accountants their independence from the Company. When considering the
accountants' independence, we considered whether the provision of information
technology consulting services relating to financial information systems design
and implementation and other non-audit services by the independent accountants
to the Company is compatible with maintaining their independence.
Based on the reviews and discussions summarized in this Report, and
subject to the limitations on our role and responsibilities, certain of which
are referred to above and in the Audit Committee charter, we recommended to the
Board that The Limited's audited financial statements be included in our Annual
Report on Form 10-K for the fiscal year 2000 for filing with the Securities and
Exchange Commission.
Audit Committee
Donald B. Shackelford, Chair
Alex Shumate
Allan R. Tessler
Raymond Zimmerman
23
INDEPENDENT PUBLIC ACCOUNTANTS
During our 2000 fiscal year, PricewaterhouseCoopers LLP served as our
independent public accountants and in that capacity rendered an opinion on our
consolidated financial statements as of and for the fiscal year ended February
3, 2001. We annually review the selection of our independent public
accountants, but we have not yet selected independent public accountants for
the current fiscal year.
Representatives of PricewaterhouseCoopers LLP are expected to be present
at the annual meeting. They will be available to respond to appropriate
questions and may make a statement if they so desire.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of The Limited's annual financial statements and financial statements contained
in the Company's Form 10-Q for the 2000 fiscal year were
[_________].
Financial Information Systems Design and Implementation Fees
The aggregate fees billed for our 2000 fiscal year by our principal
accountants, PricewaterhouseCoopers LLP, for (1) directly or indirectly
operating, or supervising the operation of, The Limited's information system or
managing The Limited's local area network and (2) designing or implementing a
hardware or software system that aggregates source data underlying the
financial statements or generates information that is significant to The
Limited's financial statements taken as a whole was [__________].
All Other Fees
The aggregate fees billed for our 2000 fiscal year for services rendered
by PricewaterhouseCoopers LLP, other than those disclosed above was [_____].
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
annual meeting. However, if other matters should come before the meeting, each
of the persons named in the proxy intends to vote in accordance with his
judgment on such matters.
STOCKHOLDER PROPOSALS
We may omit from the Proxy Statement and form of proxy relating to the
next annual meeting of stockholders any proposals of stockholders which are
intended to be presented at that meeting which are not received by the
Secretary of The Limited at our principal executive offices on or before
December 21, 2001.
24
SOLICITATION EXPENSES
We will pay the expense of preparing, assembling, printing and mailing the
proxy form and the form of material used in solicitation of proxies. Our
employees may solicit proxies by telephone, mailgram, facsimile, telegraph,
cable and personal interview, in addition to the use of the mails. We have
retained Georgeson Shareholder Communications Inc., New York, New York, to help
us solicit proxies relating to shares held by brokerage houses, custodians,
fiduciaries and other nominees for a fee of approximately $10,000, plus
expenses. We do not expect to pay any other compensation for the solicitation
of proxies.
By Order of the Board of Directors
LOGO
Leslie H. Wexner
Chairman of the Board
25
APPENDIX A
THE LIMITED, INC.
Audit Committee Charter
The Audit Committee assists the Board of Directors in fulfilling its
oversight responsibilities with respect to the following matters: the system of
internal control; the audit process; the financial reporting process; and the
process for monitoring compliance with applicable laws and regulations and the
Corporation's code of business conduct.
The Audit Committee shall consist of not less than three nor more than
five members, who shall be elected by the Board of Directors from the directors
who are not employees of the Corporation and who have no other relationship to
the Corporation that may interfere with the exercise of their independence from
management and the Corporation. The Board shall designate one member of the
Committee to serve as its Chair. Each member of the Committee shall be
financially literate, and at least one member shall have accounting or related
financial management expertise. All determinations relating to the eligibility
of directors to serve on the Committee shall be made by the Board in the
exercise of its business judgment and in a manner consistent with the
requirements of the New York Stock Exchange.
The Audit Committee shall meet as often as it deems necessary, but in no
event less than four times per year. The Committee shall have the power to
adopt its own operating rules and procedures and to request that members of
management, representatives of the Corporation's independent public
accountants, and others attend meetings and provide pertinent information. The
Committee may also meet in executive session with any of such persons.
The Corporation's independent public accountants are ultimately
accountable to the Audit Committee and the Board of Directors. The Committee
and the Board have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the Corporation's independent public
accountants. The Committee will also annually review their qualification and
fees. In addition, the Committee shall (i) ensure that the independent public
accountants submit, on a periodic basis, a formal written statement delineating
all relationships between such accountants and the Corporation, (ii) actively
engage in dialogue with such accountants with respect to any disclosed
relationships or services that may impact their objectivity and independence,
and (iii) recommend that the Board take appropriate action in response to the
foregoing to satisfy itself of such accountants' independence.
On an annual basis, the Audit Committee will review and reassess the
adequacy of this charter.
A-1
APPENDIX B
PROXY
THE LIMITED, INC.
This Proxy is Solicited by the Board of Directors
Annual Meeting of Stockholders
May 21, 2001
The undersigned hereby appoints Leslie H. Wexner and V. Ann Hailey, and each of
them, proxies, with full power of substitution, to vote for the undersigned all
shares of Common Stock of The Limited, Inc. which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders to
be held on May 21, 2001 at 9:00 am, Eastern Daylight Time, and at any
adjournments thereof, upon the matters described in the accompanying Proxy
Statement and upon any other business that may properly come before the meeting
or any adjournments thereof.
Election of Directors, Nominees:
01. Eugene M. Freedman, 02. V. Ann Hailey, 03. David T. Kollat, 04. Leslie H.
Wexner
SAID PROXIES ARE DIRECTED TO VOTE AS MARKED ON THE REVERSE SIDE AND IN THEIR
DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENTS THEREOF.
(Continued and to be signed on the reverse side)
^ FOLD AND DETACH HERE ^
[X] Please mark your 9 7 8 8
votes as in this
example.
The Board of Directors recommends a vote "FOR" the following proposals. If
no specification is indicated, the shares represented by this proxy will be
voted as recommended by the Board.
1. To amend and restate the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock that the Company
is authorized to issue from 500,000,000 to 1,000,000,000.
FOR AGAINST WITHHELD
[ ] [ ] [ ]
2. Election of FOR WITHHELD
Directors [ ] [ ]
(see reverse)
For, except vote withheld from following nominee(s):
______________________________________________________
The undersigned acknowledges
receipt with this Proxy of a
copy of the Notice of Annual
Meeting of Stockholders and
Proxy Statement dated April
20, 2001.
IMPORTANT: Please date this
Proxy and sign exactly as
your name or names appear
hereon. If stock is held
jointly, signature should
include both names.
Executors, Administrators,
Trustees, Guardians and
others signing in a
representative capacity
should indicate full titles.
SIGNATURE(S) DATE
----------------------------------- --------------------------
The Limited, Inc.
Dear Stockholder:
The Limited, Inc. encourages you to take advantage of new and convenient ways
by which you can vote your shares. You can vote your shares electronically
through the Internet or by telephone. This eliminates the need to return your
proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the Internet:
o Log on to the Internet and go to the web site
http://www.eproxyvote.com/ltd
2. To vote by telephone:
o On a touch-tone telephone, call 1-877-779-8683
24 hours a day, 7 days a week.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need to mail back
your proxy card.
Your vote is important. Thank you for voting.