Limited Brands (LTD)

Equity-Based Incentive Programs.

The Compensation Committee believes that long-term equity-based compensation encourages performance that enhances stockholder value, thereby further linking leadership and stockholder objectives. Our equity-based incentive program includes stock options, performance-based restricted stock and time vested restricted stock.

Equity awards are dated effective the later of the date of approval or the effective date for grants in connection with hirings, promotions, etc.

Stock Options.

Stock options comprise 25% of the annual value of the Company’s long-term incentive program. Stock options are awarded to align executive interests with stockholder interests by creating a direct link between compensation and stockholder return and to help retain executives. In 2008, stock options were awarded to our named executive officers in the amounts set forth below in the Grants of Plan-Based Awards table on page 33. The options granted to each executive officer vest, subject to continued employment, in four equal installments beginning on the first anniversary of the grant date. The exercise price for these options is equal to the closing price of the underlying Common Stock on the date of the grant.

Restricted Stock.

Performance-based restricted stock comprises 75% of the value of executives’ annual equity-based incentive opportunity. Performance-based restricted stock is awarded to link compensation to business performance, encourage ownership of Company stock, retain superior executive talent, and reward exceptional executive performance. Executives are awarded an annual target number of shares based on guidelines which include the individual’s performance and responsibility level, competitive practice and the market price of Common Stock.

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The performance-based restricted stock target is broken down into seasonal targets for Spring and Fall and is adjusted up or down based upon the extent to which the pre-established objective financial goals for each season are achieved or exceeded. The number of shares earned can range from zero to double the target. The performance-based restricted stock metrics are the same metrics used to determine payments under the short-term performance-based incentive compensation program outlined above. Once earned, the Spring portion of the award vests on the second anniversary of the grant date and the Fall portion of the award vests on the third anniversary of the grant date, in each case subject to continued employment.

In addition to the annual performance-based restricted stock award, the Compensation Committee approved special performance-based restricted stock awards for the named executive officers, excluding Mr. Wexner. The awards were granted to address retention of key talent. For the named executive officers with the exception of Ms. Turney, the awards were based on a targeted multiple of base salary and vest 100% three years from the date of grant. Ms. Turney’s award was set at one million shares, was designed to provide significant retentive value and vests over seven years, 40% after four years and 20% after each of five, six and seven years. These awards will be earned only if the Company achieves operating income as a percentage of sales above the median of this performance measure for the companies listed in the S&P 500 Retailing Index in 2008, 2009 or 2010. In connection with these awards, each executive officer has agreed to provide at least three months’ notice before resigning their employment with the Company.

The performance-based restricted stock awarded to the named executive officers in 2008 is detailed in the Grants of Plan-Based Awards table on page 33.

Time vested restricted stock is awarded to executives to encourage ownership of Company stock, as a hiring and retention incentive, to recognize significant promotions, as a match on an executive’s election to receive his or her cash performance-based incentive compensation in stock and as deemed appropriate by the Compensation Committee. The Compensation Committee awarded our named executive officers restricted stock in 2008 in the amounts set forth below in the Grants of Plan-Based Awards table on page 33, which vest 100% three years from the grant date, subject to continued employment.

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 stockholder objectives. Beginning in 2006, our equity-based incentive programs have been re-designed to include both performance-based restricted stock and stock options to better align with our business objectives.

The 2006 program includes a performance-based restricted stock target for each eligible associate. The number of performance-based restricted shares earned by participating executives can range from zero to double their grant target, based upon the extent to which the pre-established objective financial goals are achieved or exceeded. This is consistent with our pay-for-performance philosophy and alignment of executive rewards with stockholder interests. The performance-based restricted stock goals are the same goals used to determine payments under the short-term performance-based incentive compensation program. The Committee believes that restricted stock awards, the vesting of which is subject to continued employment, also helps us to retain key high-performing executives.

Award opportunities for each eligible participant are based on guidelines, which include individual performance, the individual’s responsibility level, competitive practice and the market price of 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.

Grants of stock options greater than 25,000 options (or an equivalent value of full value awards) and grants to Executive Leadership Team members are approved by the Compensation Committee. Grants below this threshold, up to an aggregate of 250,000 options per quarter, are approved by the Executive Vice President of Human Resources in accordance with the Committee’s authorized delegation of authority. Equity awards are approved by the Executive Vice President of Human Resources monthly and grants are dated effective the date of approval. Equity awards approved by the Committee are dated effective the later of the date of approval or the effective date for grants in connection with hire, promotion, etc.

The Committee authorized a review by the Company’s Internal Audit staff of the Company’s historical stock award grant practices. The testing performed included a review of the grant approval process and the rationale for grant date determination from 1996 through 2006. Data analysis tools were used to identify any anomalies in the data and individual grants (including those to the named executive officers) were tested for evidence that would indicate backdating or “spring-loading”. Based on this review, Internal Audit found no evidence of either backdating or “spring-loading” of option grants.

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 stockholder objectives. In 2005, the Committee awarded equity-based incentives, granting stock options and also, to a limited extent, restricted stock awards. The Committee believes that restricted 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 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.

Beginning in 2006, our equity-based incentive programs have been re-designed to better align with our business objectives. The 2006 program includes performance-based restricted stock, with Limited Brands establishing a target performance-based restricted stock amount for each eligible associate. The number of performance-based restricted shares earned by participating executives can range from zero to double their grant target, based upon the extent to which the pre-established objective financial goals are achieved. This is consistent with our pay for performance philosophy and aligning executive rewards with shareholder interests.

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 stockholder objectives. In 2004, the Committee awarded equity-based incentives, granting stock options and also, to a limited extent, restricted stock awards. The Committee believes that restricted 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 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.