Abercrombie & Fitch 2012 Annual Report Download - page 8

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Table of Contents
Plan for purposes of preserving the tax deductibility of annual cash incentive payments as "performance-based compensation." If such re-
approval is not obtained, the Company would still expect to have an annual cash incentive component to its compensation program for senior
management; however, any such annual cash incentive payments would no longer be deductible for federal income tax purposes. The Board
recommends a "FOR" vote.
Executive Compensation Highlights
We believe that our executive compensation policies and practices are effective in achieving the Company's goals of aligning executive pay with the
achievement of financial and operational objectives, creating and sustaining long-term stockholder value and reflecting the strong team-based culture of the
Company. In evaluating this year's "say on pay" proposal, we recommend that you review our "COMPENSATION DISCUSSION AND ANALYSIS"
section that begins on page 41 of this Proxy Statement, which explains how and why the Compensation Committee arrived at its executive compensation
actions and decisions for Fiscal 2011 and the changes made for Fiscal 2012 and beyond.
The CEO Compensation Reflected in the Fiscal 2011 Summary Compensation Table is Based on an Employment Agreement Entered into with the
CEO in December 2008
• The CEO's employment agreement was entered into at a critical juncture in December 2008 as the Company was embarking on a major
international expansion. The Board considered retention of the CEO to be critical.
• The Company's international expansion has been extremely successful with the number of international stores growing from 15 in two countries
at the end of Fiscal 2008 to 99 in 15 countries at the end of Fiscal 2011, and international store sales growing to $876.6 million in Fiscal 2011.
This growth has been highly profitable, creating significant stockholder value.
• The CEO has played a central and vital role in both the design and execution of this international expansion strategy. The Board believes it is
very unlikely that the success the Company has achieved would have occurred without the CEO's retention and ongoing involvement.
The CEO's Employment Agreement includes a Strong Pay for Performance Alignment
• Approximately 94% of the CEO's 2011 total direct compensation is in the form of equity compensation, derived from semi-annual awards made
in March 2011 and September 2011, as further described in the section captioned "Compensation for Fiscal 2011 related to Mr. Jeffries"
beginning on page 47 of this Proxy Statement.
• The value of each semi-annual equity award to the CEO is based on 2.5% of the total stockholder return over the applicable semi-annual
measurement period (as defined in the CEO's employment agreement) as long as such total stockholder return exceeds all previous high-water
marks since the December 2008 beginning of the CEO's employment agreement, and then only to the extent that the value created exceeds any
cash compensation paid to or earned by the CEO and any increase in the CEO's pension benefits accrued with respect to the semi-annual period
to which the grant relates.
• All of the equity compensation awarded to the CEO in Fiscal 2011 was in the form of stock appreciation rights ("SARs"), which only have value
to the CEO if the market price of the Company's Common Stock increases above the market price on the grant date.
• The 1,590,908 SARs awarded on March 22, 2011 represent the performance-based grant earned for the measurement period with respect to
the second half of Fiscal 2010, which was based on an overall increase in total stockholder return of approximately $1.7 billion. These SARs
have an exercise price of $54.87 per share but are currently underwater and have no instrinsic value.
• The 288,287 SARs awarded on September 20, 2011 represent the performance-based grant earned for the measurement period with respect to
the first half of Fiscal 2011, which was based on an
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