Exhibit 99
----------
Ary, Earman and Roepcke
Certified Public Accountants
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Plan Administrator of The Limited,
Inc. Savings and Retirement Plan:
We have audited the accompanying statements of net assets available for
benefits of The Limited, Inc. Savings and Retirement Plan (the "Plan") as of
December 31, 1997 and 1996, and the related statements of changes in net assets
available for benefits for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan as
of December 31, 1997 and 1996, and the changes in net assets available for
benefits for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Ary, Earman and Roepcke
Columbus, Ohio,
March 24, 1998.
2929 Kenny Road, Suite 280, Columbus, Ohio 43221
(614) 459-3868 FAX (614) 459-0219
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
----------------------------------------------
DECEMBER 31, 1997
-----------------
Limited Fixed Index-500 U.S. Growth Wellington
ASSETS TOTAL Stock Fund Income Fund Fund Fund Fund
- - ------ ------- ----------- ----------- ----------- ----------- -----------
Investments, at Fair Value:
Determined by Quoted Market Price:
Common Stock:
The Limited, Inc.
(Cost $30,208,630) $ 68,513,782 $68,513,782 $ - $ - $ - $ -
Intimate Brands, Inc.
(Cost $2,541,834) 3,027,342 - - - - -
Shares of Registered Investment
Company:
Vanguard Investment Contract
Trust (Cost $88,164,291) 88,164,291 - 88,164,291 - - -
Vanguard Index Trust - 500
Portfolio (Cost $49,301,042) 75,764,074 - - 75,764,074 - -
Vanguard U.S. Growth Portfolio
(Cost $46,374,763) 62,996,962 - - - 62,996,962 -
Vanguard Wellington Fund
(Cost $17,415,133) 19,115,007 - - - - 19,115,007
Temporary Investments (Cost
Approximates Fair Value) 308 241 - - - -
------------ ----------- ----------- ----------- ----------- -----------
Total Investments 317,581,766 68,514,023 88,164,291 75,764,074 62,996,962 19,115,007
Contribution Receivable from Employers 22,644,974 1,372,671 10,275,136 4,632,422 3,993,277 1,928,218
Receivable from Employers for Withheld
Participants' Contributions 1,395,711 91,947 391,319 391,168 333,773 156,157
Due from Brokers 1,655,464 1,543,543 - - - -
Interfund Transfers - 858,585 (35,679) 3,698 (2,722) (828,447)
Cash 417,865 - 368,110 49,755 - -
Accrued Interest and Dividends 4,297 693 1,410 1,086 769 166
Other 2,470 - 2,470 - - -
------------ ----------- ----------- ----------- ----------- -----------
Total Assets 343,702,547 72,381,462 99,167,057 80,842,203 67,322,059 20,371,101
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES
- - -----------
Cash Overdraft 418,897 - - - 36,843 382,054
Administrative Fees Payable 218,952 85,121 - - 127,701 5,551
------------ ----------- ----------- ----------- ----------- -----------
Total Liabilities 637,849 85,121 - - 164,544 387,605
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $343,064,698 $72,296,341 $99,167,057 $80,842,203 $67,157,515 $19,983,496
============ =========== =========== =========== =========== ===========
Intimate
Brands
ASSETS Stock Fund
- - ------ -----------
Investments, at Fair Value:
Determined by Quoted Market Price:
Common Stock:
The Limited, Inc.
(Cost $30,208,630) $ -
Intimate Brands, Inc.
(Cost $2,541,834) 3,027,342
Shares of Registered Investment
Company:
Vanguard Investment Contract
Trust (Cost $88,164,291) -
Vanguard Index Trust - 500
Portfolio (Cost $49,301,042) -
Vanguard U.S. Growth Portfolio
(Cost $46,374,763) -
Vanguard Wellington Fund
(Cost $17,415,133) -
Temporary Investments (Cost
Approximates Fair Value) 67
-----------
Total Investments 3,027,409
Contribution Receivable from Employers 443,250
Receivable from Employers for Withheld
Participants' Contributions 31,347
Due from Brokers 111,921
Interfund Transfers 4,565
Cash -
Accrued Interest and Dividends 173
Other -
-----------
Total Assets 3,618,665
-----------
LIABILITIES
- - -----------
Cash Overdraft -
Administrative Fees Payable 579
-----------
Total Liabilities 579
-----------
NET ASSETS AVAILABLE FOR BENEFITS $ 3,618,086
===========
The accompanying notes are an integral part of this financial statement.
F-1
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
----------------------------------------------
DECEMBER 31, 1996
-----------------
Limited Fixed Index-500 U.S. Growth Wellington
ASSETS TOTAL Stock Fund Income Fund Fund Fund Fund
- - ------ ------------ ------------ ----------- ----------- ----------- -----------
Investments, at Fair Value:
Determined by Quoted Market Price:
Common Stock:
The Limited, Inc.
(Cost $34,108,707) $ 60,824,705 $60,824,705 $ - $ - $ - $ -
Intimate Brands, Inc.
(Cost $1,037,101) 976,468 - - - - -
Shares of Registered Investment
Company:
Vanguard Investment Contract
Trust (Cost $82,389,513) 82,389,513 - 82,389,513 - - -
Vanguard Index Trust - 500
Portfolio (Cost $38,949,927) 53,136,984 - - 53,136,984 - -
Vanguard U.S. Growth Portfolio
(Cost $36,722,202) 46,268,660 - - - 46,268,660 -
Vanguard Wellington Fund
(Cost $9,986,245) 10,453,023 - - - - 10,453,023
Temporary Investments (Cost
Approximates Fair Value) 30,946 873 18,039 5,684 3,824 329
------------ ----------- ----------- ----------- ----------- -----------
Total Investments 254,080,299 60,825,578 82,407,552 53,142,668 46,272,484 10,453,352
Contribution Receivable from Employers 20,704,066 2,147,770 7,190,373 5,136,265 4,396,598 1,667,242
Receivable from Employers for Withheld
Participants' Contributions 1,183,352 118,433 391,432 298,971 255,519 108,647
Due from Brokers 311,530 311,530 - - - -
Interfund Transfers - 4,686 (12,473) 12,645 (4,213) (2,507)
Accrued Interest and Dividends 4,553 1,089 1,772 847 682 131
------------ ----------- ----------- ----------- ----------- -----------
Total Assets 276,283,800 63,409,086 89,978,656 58,591,396 50,921,070 12,226,865
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES
- - -----------
Due to Brokers 122,686 - - - - -
Administrative Fees Payable 278,885 114,176 29,286 15,828 109,033 10,562
------------ ----------- ----------- ----------- ----------- -----------
Total Liabilities 401,571 114,176 29,286 15,828 109,033 10,562
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $275,882,229 $63,294,910 $89,949,370 $58,575,568 $50,812,037 $12,216,303
============ =========== =========== =========== =========== ===========
Intimate
Brands
ASSETS Stock Fund
- - ------ -----------
Investments, at Fair Value:
Determined by Quoted Market Price:
Common Stock:
The Limited, Inc.
(Cost $34,108,707) $ -
Intimate Brands, Inc.
(Cost $1,037,101) 976,468
Shares of Registered Investment
Company:
Vanguard Investment Contract
Trust (Cost $82,389,513) -
Vanguard Index Trust - 500
Portfolio (Cost $38,949,927) -
Vanguard U.S. Growth Portfolio
(Cost $36,722,202) -
Vanguard Wellington Fund
(Cost $9,986,245) -
Temporary Investments (Cost
Approximates Fair Value) 2,197
-----------
Total Investments 978,665
Contribution Receivable from Employers 165,818
Receivable from Employers for Withheld
Participants' Contributions 10,350
Due from Brokers -
Interfund Transfers 1,862
Accrued Interest and Dividends 32
-----------
Total Assets 1,156,727
-----------
LIABILITIES
- - -----------
Due to Brokers 122,686
Administrative Fees Payable -
-----------
Total Liabilities 122,686
-----------
NET ASSETS AVAILABLE FOR BENEFITS $ 1,034,041
===========
The accompanying notes are an integral part of this financial statement.
F-2
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------
Limited Fixed Index-500 U.S. Growth Wellington
Total Stock Fund Income Fund Fund Fund Fund
------------ ----------- ----------- ----------- ----------- ------------
Investment Income:
Increase in Net Unrealized
Appreciation $ 32,720,107 $11,589,154 $ - $12,275,975 $ 7,075,741 $ 1,233,096
Realized Gain on Sale of Securities 17,867,974 8,862,376 - 5,135,799 3,381,580 398,590
Interest 5,334,197 10,449 5,286,565 18,262 14,531 2,544
Dividends 1,474,398 1,422,393 - - - -
Mutual Funds' Earnings 5,548,382 - - 1,569,334 2,443,033 1,536,015
------------ ----------- ----------- ----------- ----------- -----------
Total Investment Income 62,945,058 21,884,372 5,286,565 18,999,370 12,914,885 3,170,245
------------ ----------- ----------- ----------- ----------- -----------
Contributions:
Employers 32,697,039 1,963,696 15,507,190 6,371,651 5,370,568 2,879,631
Participants 18,024,880 1,322,245 5,226,156 4,897,686 4,290,800 1,963,375
------------ ----------- ----------- ----------- ----------- -----------
Total Contributions 50,721,919 3,285,941 20,733,346 11,269,337 9,661,368 4,843,006
------------ ----------- ----------- ----------- ----------- -----------
Interfund Transfers - (6,914,328) (1,840,989) 3,344,531 2,288,479 1,827,162
------------ ----------- ----------- ----------- ----------- -----------
Administrative Expense (892,874) (204,971) (261,763) (203,185) (174,289) (42,505)
------------ ----------- ----------- ----------- ----------- -----------
Benefits to Participants (45,591,634) (9,049,583) (14,699,472) (11,143,418) (8,344,965) (2,030,715)
------------ ----------- ----------- ----------- ----------- -----------
Increase in Net Assets Available
for Benefits 67,182,469 9,001,431 9,217,687 22,266,635 16,345,478 7,767,193
Beginning Net Assets Available
for Benefits 275,882,229 63,294,910 89,949,370 58,575,568 50,812,037 12,216,303
------------ ----------- ----------- ----------- ----------- -----------
Ending Net Assets Available
for Benefits $343,064,698 $72,296,341 $99,167,057 $80,842,203 $67,157,515 $19,983,496
============ =========== =========== =========== =========== ===========
Intimate
Brands
Stock Fund
------------
Investment Income:
Increase in Net Unrealized
Appreciation $ 546,141
Realized Gain on Sale of Securities 89,629
Interest 1,846
Dividends 52,005
Mutual Funds' Earnings -
-----------
Total Investment Income 689,621
-----------
Contributions:
Employers 604,303
Participants 324,618
-----------
Total Contributions 928,921
-----------
Interfund Transfers 1,295,145
-----------
Administrative Expense (6,161)
-----------
Benefits to Participants (323,481)
-----------
Increase in Net Assets Available
for Benefits 2,584,045
Beginning Net Assets Available
for Benefits 1,034,041
-----------
Ending Net Assets Available
for Benefits $ 3,618,086
===========
The accompanying notes are an integral part of this financial statement.
F-3
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
Limited Fixed Index-500 U.S. Growth Wellington
Total Stock Fund Income Fund Fund Fund Fund
------------ ---------- ----------- ----------- ----------- -----------
Investment Income:
Increase (Decrease) in Net
Unrealized Appreciation $ 2,868,839 $(6,465,140) $ - $ 5,621,065 $ 3,428,551 $ 344,996
Realized Gain (Loss) on Sale
of Securities 17,166,139 12,343,083 - 2,732,990 2,001,323 90,165
Interest 4,977,925 17,980 4,888,501 6,109 4,933 60,295
Dividends 1,400,891 1,395,032 - - - -
Mutual Funds' Earnings 5,229,593 - - 1,139,142 3,420,290 670,161
------------ ----------- ----------- --------- --------- -----------
Total Investment Income (Loss) 31,643,387 7,290,955 4,888,501 9,499,306 8,855,097 1,165,617
------------ ----------- ----------- ----------- ----------- -----------
Contributions:
Employers 30,145,525 3,087,453 10,664,673 7,443,415 6,287,166 2,489,055
Participants 16,172,183 1,802,993 5,382,468 4,063,595 3,449,162 1,412,169
------------ ----------- ----------- ----------- ----------- -----------
Total Contributions 46,317,708 4,890,446 16,047,141 11,507,010 9,736,328 3,901,224
------------ ----------- ----------- ----------- ----------- -----------
Interfund Transfers - (13,040,074) (3,485,681) 5,016,481 6,476,961 4,164,295
------------ ----------- ----------- ----------- ----------- -----------
Transfer of Participants' Account
Balances to Former Affiliate's Plan (10,235,572) (2,073,801) (2,722,848) (3,193,351) (2,040,825) (204,747)
------------ ----------- ----------- ----------- ----------- -----------
Administrative Expense (935,202) (258,452) (320,918) (125,949) (207,292) (22,591)
------------ ----------- ----------- ----------- ----------- -----------
Benefits to Participants (29,417,363) (6,076,610) (12,983,786) (5,442,433) (4,315,844) (585,243)
------------ ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
Available for Benefits 37,372,958 (9,267,536) 1,422,409 17,261,064 18,504,425 8,418,555
Beginning Net Assets Available for
Benefits 238,509,271 72,562,446 88,526,961 41,314,504 32,307,612 3,797,748
------------ ----------- ----------- ----------- ----------- -----------
Ending Net Assets Available for Benefits $275,882,229 $63,294,910 $89,949,370 $58,575,568 $50,812,037 $12,216,303
============ =========== =========== =========== =========== ===========
Intimate
Brands
Stock Fund
------------
Investment Income:
Increase (Decrease) in Net
Unrealized Appreciation $ (60,633)
Realized Gain (Loss) on Sale
of Securities (1,422)
Interest 107
Dividends 5,859
Mutual Funds' Earnings -
-----------
Total Investment Income (Loss) (56,089)
-----------
Contributions:
Employers 173,763
Participants 61,796
-----------
Total Contributions 235,559
-----------
Interfund Transfers 868,018
-----------
Transfer of Participants' Account
Balances to Former Affiliate's Plan -
-----------
Administrative Expense -
-----------
Benefits to Participants (13,447)
-----------
Increase (Decrease) in Net Assets
Available for Benefits 1,034,041
Beginning Net Assets Available for
Benefits -
-----------
Ending Net Assets Available for Benefits $ 1,034,041
===========
The accompanying notes are an integral part of this financial statement.
F-4
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
----------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
Limited Fixed Index-500 U.S. Growth Wellington
Total Stock Fund Income Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------ ------------
Investment Income:
Increase (Decrease) in Net
Unrealized Appreciation $ 3,582,066 $ (9,559,767) $ - $ 7,535,683 $ 5,484,368 $ 121,782
Realized Gain on Sale of Securities 7,412,552 5,426,833 - 1,096,390 877,023 12,306
Interest 4,771,693 10,190 4,752,866 4,761 3,726 150
Dividends 1,632,728 1,632,728 - - - -
Mutual Funds' Earnings 2,054,249 - - 832,487 1,151,646 70,116
------------ ------------ ------------ ------------ ------------ ------------
Total Investment Income (Loss) 19,453,288 (2,490,016) 4,752,866 9,469,321 7,516,763 204,354
------------ ------------ ------------ ------------ ------------ ------------
Contributions:
Employers 29,943,002 4,142,615 13,472,869 6,246,002 4,928,087 1,153,429
Participants 13,909,162 2,380,938 4,899,509 3,466,763 2,694,626 467,326
------------ ------------ ------------ ------------ ------------ ------------
Total Contributions 43,852,164 6,523,553 18,372,378 9,712,765 7,622,713 1,620,755
------------ ------------ ------------ ------------ ------------ ------------
Interfund Transfers - (775,658) (1,604,380) (28,051) 378,900 2,029,189
------------ ------------ ------------ ------------ ------------ ------------
Administrative Expense (1,017,651) (384,338) (357,753) (153,254) (117,880) (4,426)
------------ ------------ ------------ ------------ ------------ ------------
Benefits to Participants (24,679,806) (7,721,019) (9,758,147) (3,959,696) (3,188,820) (52,124)
------------ ------------ ------------ ------------ ------------ ------------
Increase (Decrease) in Net Assets
Available for Benefits 37,607,995 (4,847,478) 11,404,964 15,041,085 12,211,676 3,797,748
Beginning Net Assets Available for
Benefits 200,901,276 77,409,924 77,121,997 26,273,419 20,095,936 -
------------ ------------ ------------ ------------ ------------ ------------
Ending Net Assets Available for Benefits $238,509,271 $ 72,562,446 $ 88,526,961 $ 41,314,504 $ 32,307,612 $ 3,797,748
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of this financial statement.
F-5
THE LIMITED, INC. SAVINGS AND RETIREMENT PLAN
---------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) DESCRIPTION OF THE PLAN
-----------------------
General
-------
The Limited, Inc. Savings and Retirement Plan (the "Plan") is a defined
contribution plan covering certain employees of The Limited, Inc. and
its affiliates (the "Employers") who are at least 21 years of age and
have completed 1,000 or more hours of service during their first
consecutive twelve months of employment or any calendar year
beginning in or after their first consecutive twelve months of
employment. Certain employees of the Employers, who are covered by a
collective bargaining agreement, are not eligible to participate in
the Plan. At December 31, 1997, there were 31,412 participants in the
Plan.
Effective January 1, 1997, the Plan allows for the associates of Galyans
Trading Company, Inc. who have met the eligibility requirements of the
Plan to participate in the Plan for purposes of electing voluntary
tax-deferred contributions only and will not be eligible to receive
allocations of Employers' contributions as noted below.
Effective October 1, 1997, the Plan's enrollment dates were changed from
quarterly to monthly.
On January 31, 1996, The Limited, Inc. sold 60% of its interest in World
Financial Network National Bank and transferred the assets and
liabilities allocated to the employees of World Financial Network
National Bank and its affiliates to the World Financial Network
National Bank Savings and Retirement Plan.
The following description of the Plan provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA) as amended.
Contributions
-------------
Employer Contributions:
The Employers may provide a non-service related retirement contribution of
4% of annual compensation up to the Social Security wage base and 7%
of annual compensation after that and a service related retirement
contribution of 1% of annual compensation for participants who have
completed five or more years of vesting service as of the last day of
the Plan year. Participants who complete 500 hours of service during
the Plan year and are participants on the last day of the Plan year
are eligible. The annual compensation of each participant taken into
account under the Plan is limited to the maximum amount permitted
under Section 401(a)(17) of the Internal Revenue Code. The annual
compensation limit for the Plan year ended December 31, 1997, was
$160,000.
The Employers may provide a matching contribution of 100% of the
participant's voluntary contributions up to 3% of the participant's
total annual compensation.
Participant Voluntary Contributions:
A participant may elect to make a voluntary tax-deferred contribution of
1% to 6% of his or her annual compensation up to the maximum permitted
under Section 402(g) of the Internal Revenue Code adjusted annually
($9,500 at December 31, 1997). This voluntary tax-deferred
contribution may be limited by Section 401(k) of the Internal Revenue
Code.
F-6
Vesting
-------
A participant is fully and immediately vested for voluntary and rollover
contributions and is credited with a year of vesting service in the
Employers' contributions for each Plan year that they are credited
with at least 500 hours of service. A summary of vesting percentages
in the Employers' contributions follows:
Years of Vested Service Percentage
-------------------------- -----------
Less than 3 years 0%
3 years 20
4 years 40
5 years 60
6 years 80
7 years 100
Payment Of Benefits
-------------------
The full value of participants' accounts becomes payable upon retirement,
disability, or death. Upon termination of employment for any other
reason participants' accounts, to the extent vested, become payable.
Those participants with vested account balances greater than $5,000
($3,500 prior to January 1, 1997) have the option of leaving their
accounts invested in the Plan until age 65. All benefits will be paid
as a lump-sum distribution. Those participants holding shares of
Employer Securities will have the option of receiving such amounts in
whole shares of Employer Securities and cash for any fractional
shares. Participants have the option of having their benefit paid
directly to an eligible retirement plan specified by the participant.
A participant who is fully vested in his or her account and who has
participated in the Plan for at least seven years may obtain an in-
service withdrawal from their account based on the percentage amounts
designated by the Plan. A participant may also request a hardship
distribution due to an immediate and heavy financial need based on the
terms of the Plan.
Amounts Allocated to Participants Withdrawn from the Plan
---------------------------------------------------------
The vested portion of net assets available for benefits allocated to
participants withdrawn from the plan as of December 31, 1997 and 1996,
is set forth below:
1997 1996
---------- ----------
Limited Stock Fund $ 377,704 $ 914,636
Fixed Income Fund 645,142 1,171,143
Index-500 Fund 489,489 371,539
U.S. Growth Fund 409,316 338,708
Wellington Fund 128,102 77,814
Intimate Brands Stock Fund 12,002 165
---------- ----------
$2,061,755 $2,874,005
========== ==========
Forfeitures
-----------
Forfeitures are used to reduce the Employers' required contributions.
Utilized forfeitures for 1997, 1996 and 1995, are set forth below:
1997 1996 1995
---------- ---------- ----------
Limited Stock Fund $ 345,937 $ 309,429 $ 268,411
Fixed Income Fund 2,715,821 3,178,025 1,691,327
Index-500 Fund 1,240,275 743,916 352,056
U.S. Growth Fund 1,028,955 692,299 295,948
Wellington Fund 269,006 36,468 -
Intimate Brands Stock Fund 9,983 - -
---------- ---------- ----------
$5,609,977 $4,960,137 $2,607,742
========== ========== ==========
F-7
Expenses
--------
Brokerage fees, transfer taxes, and other expenses incurred in connection
with the investment of the Plan's assets will be added to the cost of
such investments or deducted from the proceeds thereof, as the case
may be. Administrative expenses of the Plan will be paid from the Plan
from earnings not allocated to participants' accounts. The remainder
will be paid by the Employers, unless the Employers elect to pay more
or all of such costs.
Tax Determination
-----------------
The Plan obtained its latest determination letter on January 30, 1995, in
which the Internal Revenue Service stated that the Plan, as amended and
restated January 1, 1992 was in compliance with the applicable
requirements of the Internal Revenue Code. The Plan has been amended
since receiving the determination letter. However, the Plan
administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with the
applicable requirements of the Internal Revenue Code. Accordingly, the
following Federal income tax rules will apply to the Plan:
Voluntary tax-deferred contributions made under the Plan by a
participant and contributions made by the Employers to
participant accounts are generally not taxable until such amounts
are distributed.
The participants are not subject to Federal income tax on
interest, dividends, or gains in their particular accounts
until distributed.
The foregoing is only a brief summary of certain tax implications and
applies only to Federal tax regulations currently in effect.
(2) SUMMARY OF ACCOUNTING POLICIES
------------------------------
The Plan's financial statements are prepared on the accrual basis of
accounting. Assets of the Plan are valued at fair value. If available,
quoted market prices are used to value investments. The amounts for
investments that have no quoted market price are shown at their
estimated fair value, which is determined based on yields equivalent for
such securities or for securities of comparable maturity, quality, and
type as obtained from market makers.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
Realized gains or losses on the distribution or sale of securities
represent the difference between the average cost of such securities
held and the fair value on the date of distribution or sale.
Reclassification of Prior Year Information
------------------------------------------
Certain prior year information has been reclassified to conform with current
year presentation.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Plan administrator to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results may differ from those
estimates.
F-8
(3) INVESTMENTS
-----------
Net unrealized appreciation, equal to the difference between cost and fair
value of all investments held at the applicable valuation dates, is
recognized in determining the value of each fund. The unrealized
appreciation (depreciation) as of December 31, 1997, 1996 and 1995 is
set forth below:
1997 1996 1995
----------- ------------ -----------
Limited Stock Fund $38,305,152 $26,715,998 $33,181,138
Fixed Income Fund - - -
Index-500 Fund 26,463,032 14,187,057 8,565,992
U.S. Growth Fund 16,622,199 9,546,458 6,117,907
Wellington Fund 1,699,874 466,778 121,782
Intimate Brands Stock Fund 485,508 (60,633) -
----------- ----------- -----------
$83,575,765 $50,855,658 $47,986,819
=========== =========== ===========
The following is a summary of the net gain (loss) on securities sold or
distributed during the periods ended December 31, 1997, 1996 and 1995:
Realized
Proceeds Cost Gain (Loss)
----------- ----------- ------------
Period Ended December 31, 1997
Limited Stock Fund $18,999,960 $10,137,584 $ 8,862,376
Fixed Income Fund 26,199,812 26,199,812 -
Index-500 Fund 15,205,435 10,069,636 5,135,799
U.S. Growth Fund 12,450,768 9,069,188 3,381,580
Wellington Fund 3,458,363 3,059,773 398,590
Intimate Brands Stock Fund 792,401 702,772 89,629
----------- ----------- -----------
$77,106,739 $59,238,765 $17,867,974
=========== =========== ===========
Period Ended December 31, 1996
Limited Stock Fund $24,864,301 $12,521,218 $12,343,083
Fixed Income Fund 31,802,226 31,802,226 -
Index-500 Fund 11,800,336 9,067,346 2,732,990
U.S. Growth Fund 8,582,452 6,581,129 2,001,323
Wellington Fund 1,842,744 1,752,579 90,165
Intimate Brands Stock Fund 11,229 12,651 (1,422)
----------- ----------- -----------
$78,903,288 $61,737,149 $17,166,139
=========== =========== ===========
Period Ended December 31, 1995
Limited Stock Fund $ 9,577,761 $ 4,150,928 $ 5,426,833
Fixed Income Fund 21,155,451 21,155,451 -
Index-500 Fund 6,616,037 5,519,647 1,096,390
U.S. Growth Fund 4,986,144 4,109,121 877,023
Wellington Fund 266,558 254,252 12,306
----------- ----------- -----------
$42,601,951 $35,189,399 $ 7,412,552
=========== =========== ===========
Contributions under the Plan are invested in one of six investment funds:
(1) The Limited Stock Fund, consisting of common stock of The Limited,
Inc., a Delaware corporation (the "Issuer") and parent company of the
Employers, (2) the Fixed Income Fund, which is invested in the Vanguard
Investment Contract Trust, and prior to January 1996, was also invested
in other guaranteed investment contracts issued by insurance companies,
(3) the Index-500 Fund, which is invested in the Vanguard Index - 500
Portfolio, (4) the U.S. Growth Fund, which is invested in the Vanguard
U.S. Growth Portfolio, (5) the Wellington Fund, which is invested in the
Vanguard Wellington Fund, and (6) the Intimate Brands Stock Fund,
consisting of common stock of Intimate Brands, Inc., a Delaware corpora-
tion and an eighty-three percent owned subsidiary of The Limited, Inc.
Prior to July 1, 1995 the Wellington Fund was not an investment option
and prior to October 1, 1996 the Intimate Brands Stock Fund was not an
investment option.
F-9
Participants' voluntary and Employers' contributions may be invested in any
one or more of the funds, at the election of the participant. There
are 5,216 participants in the Limited Stock Fund, 19,220 in the
Fixed Income Fund, 10,330 in the Index-500 Fund, 8,625 in the U.S.
Growth Fund, 5,854 in the Wellington Fund, and 1,602 in the Intimate
Brands Stock Fund at December 31, 1997.
Participants may make or change an investment direction as of the first
day of any month of the Plan year.
(4) PLAN ADMINISTRATION
-------------------
The Plan is administered by a Committee, the members of which are appointed
by the Board of Directors of the Employers.
(5) PLAN TERMINATION
----------------
Although the Employers have not expressed any intent to do so, the Employers
have the right under the Plan to discontinue their contributions at any
time. The Limited, Inc. has the right at any time, by action of its
Board of Directors, to terminate the Plan subject to provisions of
ERISA. Upon Plan termination or partial termination, participants will
become fully vested in their accounts.
F-10