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VICTORIA’S

S E C R E T
Annual Report 2007
VICTORIA’S
S E C R E T

Table Of Contents
Introduction........................................................................1
Financial Highlights...........................................................2
Letter to Our Shareholders.................................................7
Board of Directors and Executive Officers........................13
Form 10-K...................................................................Insert Introduction
Description of Business and Business Segments............. 14 Welcome to the Victoria’s Secret 2007 Annual Report.
Management’s Discussion and Analysis.......................... 15
We are a leading lingerie, clothing, and swimwear retailor whose mission
Financial Statements and Supplimentary Data................. 15 is to deliver the best quality clothing to our customers across the world.
Consolidated Balance Sheets........................................... 16
Consolidated Statements of Operations........................... 17 Our majority shareholder, Limited Brands, has lauched the Victoria’s Secret
brand in Europe. Together we have created Victoria’s Secret as a global
Consolidated Statements of Cash Flows.......................... 18 lingerie brand, bringing our unique combination of beautiful, sexy, and
Consolidated Statements of Shareholders’ Equity............. 19 wearable items across the globe. Collectively the Victoria’s Secret brand
Notes to Consolidated Financial Statements.................... 20 reaches millions of customers worldwide.

1
our
highlights Continued
growth
VICTORIA’S
S E C R E T

187.8 97.4
155.5 165.3 85.9
129.3 146.8 75.2 74.8
129.3
120.1
58.0
45.1
40.3

Revenues Catalog Revenues


[$ million] [$ million]

47.1 41.8
41.4 38.3
34.8
32.3
29.4 31.4
26.3
24.9
13.5 21.9 24.7
12.3

Advertising Revenues Customers Reached


[$ million] [million]

2 3
our
VICTORIA’S
highlights Continued
growth
S E C R E T

19.8
30.9 30.9 17.1
20.2 16.2 13.6
5.8
10.4 3.8
8.9
(4.4)
(9.9) (28.9)
(29.8)
Operating Cash Flow
[$ million] Net Income
[$ million]

The Victoria’s Secret segment sells women’s intimate and other apparel, personal
care and beauty products and accessories marketed under the Victoria’s Secret and La
Senza brand names. Victoria’s Secret merchandise is sold through retail stores and direct
response channels (e-commerce and catalogue). Through its e-commerce site, www.
VictoriasSecret.com, and catalogue, certain of Victoria’s Secret’s merchandise may be
purchased
worldwide.
In January 2007, the Company completed its acquisition of La Senza Corporation (“La
Senza”) for $600 million. La Senza is a Canadian specialty retailer offering lingerie and
sleepwear as well as apparel for girls in the 7-14 year age group. In addition, indepen-
dently owned La Senza stores operate in 34 other countries. The acquisition of La Senza
supports our objective of enhancing our capabilities to pursue our strategic growth goals
internationally. The results of La Senza are included in the Victoria’s Secret segment.

4 5
Chief Executive
Officer’s Review

2006 was a good year for Limited Brands. A very good year. Our financial
results indicate real progress — sales increased by 10% and operating income
increased by 19%. Clearly, this past year’s performance reflects a combination
of skills, including brand builders’ and shopkeepers’ skills, real tactical ability,
and execution. We kept our eye on the near-term and the long-term, achieving
day-to-day results while building a foundation for sustained growth.

In our business, everything begins and ends with the customer. We have
to keep giving them what they want. To do that, we must be exceptional
shopkeepers and really know our customers.

For 44 years we have grown and evolved. Yet, we remain shopkeepers.


Regardless of scale, we run our brands with the insights of a single shopkeeper
in a single store. Single-minded focus. Up close and personal. No substitute for it.

I began as a shopkeeper. I am still a shopkeeper. I see the world that way. In one
store. In four thousand. Doesn’t matter. It’s all about knowing the customer, not
from data or research alone, but knowing her like a friend. Intimately.

Traditional market information is important, but it only confirms what has


already occurred. Significant, but not an insight to the future...not a substitute
for knowing in real time.

If specialty retail was about technology and systems, it would be easy.


Whoever had the biggest, fastest computer would win. But it’s not.
Mediocre ideas, executed efficiently and quickly, are still mediocre ideas.

7
No, the race will never be won by the technocrats. It will be won by great shopkeep-
ers. As, indeed, it always has been. Walt Disney constantly walked his theme parks and
would stop to talk to any child about their experience.

Charles Revson would interrupt a board meeting to talk to a woman calling about her
nail polish. Ray Kroc ate in McDonald’s every chance he got. Great shopkeepers, keep-
ing their priorities straight.

Does anyone doubt Steve Jobs knows his customer? And what of Starbucks’ How-
ard Schultz? He recently sent an open letter to top management saying they had to
reestablish the small, intimate, critical details that make up the Starbucks’ experience.
He worried they were getting lost as the business continued to grow. He wanted them
back. Howard didn’t learn that in the office. He learned it in the shop.

I said earlier that our business has evolved for over 40 years. We started with a single
brand and an assortment “limited” to sportswear. Today, we are focused primarily on
lingerie and beauty, and have distorted our time and resources to categories which are
demonstrating significant market opportunity.

Victoria’s Secret is our largest brand. I’m pleased to report that the Victoria’s Secret
megabrand surpassed $5 billion in sales in 2006, with nearly $1 billion in operating
income. We intend to grow this remarkably powerful brand to $10 billion in sales in
five years.

8
As sales have grown, it has become obvious that Victoria’s Secret needs larger-
stores. We have tested larger store formats for several years and the format
is achieving very attractive returns. We are, therefore, resizing the average
Victoria’s Secret store by about 50%. In 2007, we will increase square footage by
8–10% through 125 to 140 store projects.

The groundwork for this real estate initiative is laid on a foundation of proven
sales growth, category expansion, new segments, the amazing success of
PINK, Beauty growth, and growth in Intimissimi.

The Victoria’s Secret Direct channel (internet and catalogue) had a phenomenal
year in 2006, with sales growth of 16%, and a significant increase in operat-
ing income. We are supporting the continued growth of the Direct business by
investing in expanded distribution center capabilities and upgraded internet
and catalogue support technology. The Direct channel is a great medium for the
brand and an important part of the 360° access we provide to our customers.

Our acquisition of La Senza adds Canada’s number one lingerie brand to


our intimate apparel group and gives us a greater international presence.
La Senza has achieved very impressive growth in Canada and 34 other
countries through its franchise operated stores. We have great confidence
in La Senza’s management team and look forward to working with them.

11
This is a great time to be a member of the Limited Brands family:
· We are an enterprise of shopkeepers
· We are building our brands, and incubating new ones
· We have focused on attracting and retaining best-in-class talent
· And we have invested in the infrastructure and technology necessary
to support our growth

The fact that we are growing is the most positive indicator that we are
focusing on the right things. The customer, in the end, is the judge of our
talent, our brand strategies and our infrastructure investments. They vote
with their dollars, and they vote every hour.
Much has changed.

We will continue to change, adapt and grow. What will remain constant is
who we are; our values, culture and thinking — an enterprise of shopkeepers,
doing our best to know our customers, and always giving them what they want.
Best regards,

Leslie H. Wexner
Chairman and Chief Executive Officer

12
Management Accounts
Board ACCOUNTS CONTENTS
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Operations
Leslie H. Wexner Consolidated Statements of Cash Flows
Chief Executive Officer Consolidated Statements of Shareholders’ Equity
Leslie Wexner was formally appointed Chief Executive Officer in November of 2004 having served as Interim CEO since
July 2004. In this role, she is responsible for leading the continued growth of all Victoria’s Secret businesses. Ms. Wexner
spent 5 years at BSkyB and was General Manager of Movies & Pay-Per-View when he left to join Victoria’s Secret. Prior to
that she served as Director of Advertising Sales at US Gold and US Living. Ms. Wexner also worked at Channel Four from
1992 to 1996, and heldposts at various advertising agencies including JWT, McCanns, Lowe Howard-Spink and Geers
Gross.

Dene Stratton
Chief Financial Officer
Dene Stratton was appointed Chief Financial Officer and a member of the Management Board in January 2005. He is
responsible for all aspects of finance, administration, business development and investor relations. Prior to joining Victoria’s
Secret he worked at The Limited, as Senior Vice President, Planning & Control at Limited Inc., having held a number of
roles within Limited since 1990. He began his career in public accounting with Ernst & Young in Los Angeles.

Olivier Spiner
Executive Vice President of International Affairs
Olivier Spiner was appointed as a member of the Management Board and Executive Vice President of International Affairs
in November 1999, and is responsible for the Victoria’s Secret corporate activities. Prior to joining Victoria’s Secret he
served as Deputy General Manager of The Limited from 1996 and before this, from 1982, he held the positions of Deputy
General Manager and Chief Financial Officer at Créativité and Développement.

Oliver Fryer
General Counsel
Oliver Fryer was appointed as a member of the Management Board in September 2003. In his role, he is responsible for all
of the Victoria’s Secret contractual, legal and business affairs issues. He previously served as Director of Legal and Business
Affairs for Victoria’s Secret. Before joining the company in June 2001, Mr. Fryer worked for The Simkins Partnership and for
Zenith Entertainment plc, where for several years he was Director of Legal and Business Affairs.

13 14
REPORT OF INDEPENDENT AUDITORS CONSOLIDATED BALANCE SHEETS
December 31, 2006 and December 26, 2005 (Thousands of Dollars Except Share Data) 2006 2005

Assets
To the Shareholders of Victorias Secret:
We have audited the accompanying consolidated balance sheets of Hasbro and subsidiaries (“the
Current assets
Company”), as of September 30, 2006 and as of September 30, 2005 and the related consolidated statements of Cash and cash equivalents $127,115 280,159
Accounts receivable, less allowance for doubtful accounts
operations, cash flows and shareholders’ equity for the years then ended which have been prepared on the basis
of $55,000 in 2000 and $65,000 in 1999 685,975 1,084,118
of accounting principles generally accepted in the United States of America. These financial statements are the Inventories 335,493 408,571
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial Prepaid expenses and other current assets 431,630 358,804
statements based on our audit. Total current assets 1,580,213 2,131,652

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. These Property, plant and equipment, net 296,729 318,825
standards require that we plan and perform the audit to obtain reasonable assurance about whether the Other assets
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence Cost in excess of acquired net assets, less accumulated
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting prin- amortization of $225,770 in 2000 and $193,947 in 1999 803,189 806,092
ciples used and significant estimates made by management, as well as evaluating the overall financial statement presen- Other intangibles, less accumulated amortization
tation. We believe that our audit provides a reasonable basis for our opinion. of $347,149 in 2000 and $300,632 in 1999 902,893 949,789
Other 245,435 256,990
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the Total other assets 1,951,517 2,012,871
financial position of Hasbro and its subsidiaries at September 30, 2006 and September 30, 2004 and the results of their
operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Total assets $3,828,459 4,463,348
the United States of America.
Liabilities and Shareholders’ Equity
This report, including the opinion, has been prepared for and only for the Company’s members as a body in order to Current liabilities
meet the provisions of the listing agreement with the Stock Exchange and for no other purpose. We do not, in giving this Short-term borrowings $228,085 714,669
opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or Trade payables 191,749 284,772
into whose hands it may come save where expressly agreed by our prior consent in writing. Accrued liabilities 789,128 983,280
Income taxes 30,850 88,606
Total current liabilities 1,239,812 2,071,327

Long-term debt 1,167,838 420,654


Deferred liabilities 93,403 92,392

Big Company Auditors Incorporated Total liabilities 2,501,053 2,584,373
Chartered Accountants and Registered Auditors
London, United Kingdom Shareholders’ equity
January 18, 2005 Preference stock of $2.50 par value.
Authorized 5,000,000 shares; none issued — —
Common stock of $.50 par value. Authorized 600,000,000 shares;
issued 209,694,630 shares in 2000 and 1999 104,847 104,847
Additional paid-in capital 464,084 468,329
Deferred compensation (6,889) —
Retained earnings 1,583,394 1,764,110
Accumulated other comprehensive earnings (44,718) (32,982)
Treasury stock, at cost, 37,253,164 shares in 2000
and 16,710,620 shares in 1999 (773,312) (425,329)

Total shareholders’ equity 1,327,406 1,878,975

Total liabilities and shareholders’ equity $3,828,459 4,463,348

See accompanying notes to consolidated financial statements.


15 16
CONSOLIDATED STATEMENTS OF OPERATIONS CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended in December (Thousands of Dollars Except Share Data) 2006 2005 2004
Fiscal Years Ended in December (Thousands of Dollars Except Share Data) 2006 2005 2004

Net revenues $3,787,21 4,232,263 3,304,454 Cash flows from operating activities
Cost of sales 1,673,973 1,698,242 1,366,061 Net earnings (loss) $(144,631) 188,953 206,365
Gross profit 2,113,242 2,534,021 1,938,393 Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Expenses Depreciation and amortization of plant and equipment 106,458 103,791 96,991
Amortization 157,763 173,533 72,208 Other amortization 157,763 173,533 72,208
Royalties, research and development 635,366 711,790 424,673 Deferred income taxes (67,690) (38,675) 1,679
Advertising 452,978 456,978 440,692 Compensation earned under restricted stock programs 2,754 — —
Selling, distribution and administration 863,496 799,919 655,938 Loss on sale of business units 43,965 — —
Restructuring charge 63,951 64,232 — Acquired in-process research and development — — 20,000
Loss on sale of business units 43,965 — — Change in operating assets and liabilities
Acquired in-process research and development — — 20,000 (other than cash and cash equivalents):
Decrease (increase) in accounts receivable 395,682 (11,248) (126,842)
Total expenses 2,217,519 2,206,452 1,613,511 Decrease (increase) in inventories 69,657 (44,212) (44,606)
Increase in prepaid expenses and other current assets (84,006) (26,527) (113,451)
Operating profit (loss) (104,277) 327,569 324,882 (Decrease) increase in trade payables and other current liabilities (292,313) 193,626 17,668
Long-term advances and other (25,083) (147,729) (3,425)
Nonoperating (income) expense
Interest expense 114,421 69,340 36,111 Net cash provided by operating activities 162,556 391,512 126,587
Other (income) expense, net 7,288 (15,616) (14,707)
Total nonoperating expense 121,709 53,724 21,404 Cash flows from investing activities
Earnings (loss) before income taxes (225,986) 273,845 303,478 Additions to property, plant and equipment (125,055) (107,468) (141,950)
Investments and acquisitions, net of cash acquired (138,518) (352,417) (667,736)
Income taxes (81,355) 84,892 97,113 Other 82,863 30,793 16,986
Net earnings (loss) $(144,631) 188,953 206,365
Net cash utilized by investing activities (180,710) (429,092) (792,700)
Per common share
Net earnings (loss Cash flows from financing activities
Basic $ (.82) .97 1.04 Proceeds from borrowings with original maturities of more than three months 912,979 460,333 407,377
Diluted $ (.82) .93 1.00 Repayments of borrowings with original maturities of more than three months(291,779) (308,128) (24,925)
Net (repayments) proceeds of other short-term borrowings (341,522) 226,103 271,895
Cash dividends declared $.21 .24 .21 Purchase of common stock (367,548) (237,532) (178,917)
Stock option and warrant transactions 2,523 50,358 58,493
Dividends paid (42,494) (45,526) (42,277)

Net cash (utilized) provided by financing activities (127,841) 145,608 491,646


Effect of exchange rate changes on cash (7,049) (5,617) (9,570)
(Decrease) increase in cash and cash equivalents (153,044) 102,411 (184,037)
Cash and cash equivalents at beginning of year 280,159 177,748 361,785
Cash and cash equivalents at end of year $127,115 280,159 177,748

Supplemental information
Cash paid during the year for
Interest $91,180 64,861 25,135
Income taxes $95,975 108,342 128,436

See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements.
17 18
CONSOLIDATED STATEMENTS OF ANTICIPATED MONTHLY SALES AND
SHAREHOLDERS’ EQUITY QUARTERLY EARNINGS DATES FOR 2007
Accumulated
Additional Other Total
Common Paid-in Deferred Retained Comprehensive Shareholders’
(Thousands of Dollars)
Stock Capital Compensation
Earnings
Earnings Treasury Stock Equity Monthly Sales Reporting Dates Quarterly Earnings Report Dates
February 03/08/07 1st Quarter Earnings 5/24/07
Balance, December 28, 1997 $104,849 454,498 — 1,457,495 (3,903) (174,822) 1,838,117
Net earnings — — — 206,365 — — 206,365 March 04/12/07 2nd Quarter Earnings 8/23/07
Other comprehensive earnings — — — — (5,722) — (5,722) April 05/10/07 3rd Quarter Earnings 11/21/07
Comprehensive earnings 200,643
Purchase of treasury stock — — — — — (178,917) (178,917) May 06/07/07 4th Quarter Earnings 2/28/08
Stock option and warrant June 07/12/07
transactions — 66,818 — — — 60,195 127,013
Dividends declared — — — (42,061) — — (42,061) July 08/09/07
Balance, December 27, 1998 104,849 521,316 — 1,621,799 (9,625) (293,544) 1,944,795 August 09/06/07 Live webcasts of the quarterly earnings conference
Net earnings — — — 188,953 — — 188,953 calls can be accessed through our Web site
Other comprehensive earnings — — — — (23,357) — (23,357) September 10/11/07 www.LimitedBrands.com. Audio replays of both month-
Comprehensive earnings 165,596 October 11/08/07 ly sales and quarterly earnings conference calls can be
Purchase of treasury stock — — — — — (237,532) (237,532) accessed through our Web site, www.LimitedBrands.
Stock option and warrant November 12/06/07
com, or by dialing 1-800-337-6551 followed by the
transactions — (52,892) — — — 105,747 52,855 December 01/10/08 conference call passcode, LTD (or 583).
Dividends declared — — — (46,642) — — (46,642)
Other (2) (95) — — — — (97) January 02/07/08
Balance, December 26, 1999 104,847 468,329 — 1,764,110 (32,982) (425,329) 1,878,975
Net loss — — — (144,631) — — (144,631)
Other comprehensive earnings — — — — (11,736) — (11,736)
Comprehensive earnings (156,367)
Purchase of treasury stock — — — — — (367,548) (367,548)
Stock option and warrant
transactions — (1,708) — — — 7,406 5,698
Restricted stock activity — (2,537) (6,889) — — 12,159 2,733
Dividends declared — — — (36,085) — — (36,085)
Balance, December 31, 2000 $104,847 464,084 (6,889) 1,583,394 (44,718) (773,312) 1,327,406

About This Report


This annual report is produced with environmentally friendly
processes and products. The paper for the cover and Chair-
man’s Letter contains 20% post-consumer waste
and the paper for the 10-K is 100% post-consumer waste.
The environmental savings from using recycled content
paper is:
· 1,259 fewer trees used
· 508,942 fewer gallons of water consumed
· 551 million BTUs of energy saved
· 59,703 fewer pounds of solid waste generated
· 111,701 fewer pounds of atmospheric emissions

See accompanying notes to consolidated financial statements.


19 20
Victoria’s Secret
For more information write to:
Investor Relations
Limited Brands
56 Kingsland Street
Columbus, Ohio 41212

Tel: +44 58 7333 5821


Fax: +44 58 7333 4812

www.victoriassecret.com

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