<PAGE>   1
                                                                      EXHIBIT 13

                         FINANCIAL STATEMENT INFORMATION

FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA, NUMBER OF STORES AND ANNUAL SALES
PER AVERAGE SQUARE FOOT)

<TABLE>
<CAPTION>
                                                                              FISCAL YEARS ENDED
                                            -----------------------------------------------------------------------------------
                                             JANUARY 29,      JANUARY 30,      JANUARY 31,     FEBRUARY 1,       FEBRUARY 3,
                                                2000              1999             1998            1997            1996 (1)
                                            -----------------------------------------------------------------------------------
<S>                                          <C>              <C>              <C>             <C>               <C>
SUMMARY OF OPERATIONS
    Net sales                                   $ 452,355        $ 376,943        $ 322,150       $ 258,818          $ 214,302
    Gross income (2)                              160,333          125,214           95,247          60,844             38,237
    General, administrative and store
         operating expenses                       117,878           97,333           83,381          69,802             57,631
    Operating income (loss)                        42,455           27,881           11,866          (8,958)           (19,394)
    Net income (loss)                              24,576           16,681            7,166          (5,458)           (11,594)
    Earnings (loss) per share - basic           $    0.80        $    0.54        $    0.23       $   (0.18)         $   (0.38)
    Earnings (loss) per share - diluted (3)     $    0.79        $    0.54        $    0.23       $   (0.18)         $   (0.38)

BALANCE SHEET DATA:
    Inventories                                 $  34,656        $  27,565        $  18,661       $  20,437          $  16,046
    Total assets                                  178,593           90,769           73,574          75,193             73,372
    Total debt                                     50,000               --               --              --                 --
    Total shareholders' equity                     45,467           50,017           37,065          53,923             64,594

SELECTED OPERATING DATA:
    Comparable store sales increase
         (decrease) (4)                                 9%              15%              20%              8%                (4)%
    Total net sales growth                           20.0%            17.0%            24.5%           20.8%              23.3%
    Gross income rate (5)                            35.4%            33.2%            29.6%           23.5%              17.8%
    Operating income (loss) rate (5)                  9.4%             7.4%             3.7%           (3.5)%             (9.0)%
    Total number of stores open at
         year end                                     352              319              312             308                288
    Total square feet at year end                   1,441            1,281            1,244           1,224              1,143
    Annual sales per average square
         foot (6)                                $    330         $    300        $     259        $    214           $    207
    Cash flow from operations                    $ 69,547         $ 17,361        $  30,294        $ 13,764           $ (3,114)
    Capital expenditures                         $ 31,424         $ 14,294        $   4,780        $  8,504           $ 25,341
</TABLE>

(1)      Represents the 53-week fiscal year ended February 3, 1996.
(2)      Gross income equals net sales less costs of goods sold, buying and
         occupancy costs.
(3)      If historical diluted earnings per share were adjusted to reflect
         additional interest expense, net of interest income and related income
         taxes, which would have been incurred given retroactive effect to the
         Company's current capital structure, adjusted diluted earnings per
         share would have been $.75, $.47, $.16, $(.24) and $(.44) for each of
         the five years ended January 29, 2000.
(4)      A store is included in our comparable store sales calculation once it
         has completed 52 weeks of operation. Further, stores that are expanded
         more than 20% in square feet are treated as new stores for purposes of
         this calculation.
(5)      Calculated as a percentage of net sales.
(6)      Annual sales per average square foot is the result of dividing net
         sales for the fiscal year by average gross square feet, which reflects
         the impact of opening and closing stores throughout the year.
<PAGE>   2
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our consolidated financial
statements and the related notes to those consolidated financial statements. For
the purposes of the following discussion, unless the context otherwise requires,
"Too, Inc.", "Limited Too", "Too", the "Company," "we", "our" and "us" refer to
Too, Inc. and our subsidiaries.

GENERAL

Too, Inc. is a rapidly growing, specialty retailer that sells apparel,
underwear, sleepwear, swimwear, lifestyle and personal care products for
fashion-aware, trend-setting young girls ages seven to fourteen years.
Established in 1987 by The Limited, Inc., Too grew moderately from inception
through 1995. During this period, the Company suffered from inconsistent
operational and financial performance. Starting in March 1996, several key
management changes were made beginning with the addition of our current
Chairman, President and Chief Executive Officer, Michael W. Rayden. The results
since these changes were made have been dramatic.

Since fiscal 1996, we have:

o        increased net sales approximately 75% to $452 million from $259 million
         through increases in comparable store sales and, more recently, new
         store growth,

o        improved our gross income rate to 35.4% from 23.5% as a result of
         better merchandise assortments, higher merchandise margins and improved
         inventory control,

o        increased our operating income rate to 9.4% from a loss of (3.5%) due
         to improved per store productivity and slowing the growth in certain
         components of selling, general and administrative expense,

o        embarked on several strategic initiatives designed to further enhance
         our financial and operational performance and to build Limited Too into
         a 360-degree brand including greater focus on our target market,
         introducing the "Girl Power" store format, mailing the first "catazine"
         and the introduction of our Web site with e-commerce to follow.

In August 1999, we were completely spun-off from The Limited and we became an
independent, separately traded public company listed on the New York Stock
Exchange.

Effective August 23, 1999, The Limited distributed to its shareholders of record
as of August 11, 1999, all of its ownership interest in Too on the basis of one
share of Too common stock for each seven shares of The Limited common stock (the
"Spin-off"). The Spin-off resulted in 30.7 million shares of Too common stock
outstanding as of August 23, 1999. Additionally, in connection with the
Spin-off, Too and The Limited entered into certain transitional service
agreements, which are described in Note 8 to the Consolidated Financial
Statements.
<PAGE>   3
RESULTS OF OPERATIONS (AS A PERCENT OF SALES)

<TABLE>
<CAPTION>
                                                     FISCAL YEARS ENDED
                                      ---------------------------------------------------
                                        JANUARY 29,        JANUARY 30,       JANUARY 31,
                                           2000              1999              1998
                                      ---------------    --------------    --------------
<S>                                   <C>                <C>               <C>
Net sales                                      100.0%            100.0%            100.0%
Costs of goods sold, buying and
     occupancy costs                            64.6              66.8              70.4
                                      --------------     -------------     -------------
Gross income                                    35.4              33.2              29.6
General, administrative and store
     operating expenses                         26.1              25.8              25.9
                                      --------------     -------------     -------------
Operating income                                 9.4               7.4               3.7
Interest expense, net                            0.3                --                --
                                      --------------     -------------     -------------
Income before income taxes                       9.1               7.4               3.7
Provision for income taxes                       3.6               3.0               1.5
                                      --------------     -------------     -------------
Net income                                       5.4%              4.4%              2.2%
                                      ==============     =============     =============
</TABLE>

On a historical basis, net income increased 47% in fiscal 1999 to $24.6 million
or $.79 per diluted share versus net income of $16.7 million or $.54 per diluted
share in fiscal 1998. Adjusted net income increased 60% to $23.4 million or $.75
per diluted share compared to adjusted net income of $14.6 million, or $.47 per
diluted share for fiscal 1998.

In connection with the Spin-off, the Company entered into a five-year, $100
million credit agreement (the "Credit Facility") with a syndicate of banks. The
Credit Facility is comprised of a $50 million term loan and a $50 million
revolving credit commitment. The Company borrowed funds under the term portion
of the Credit Facility to pay a one-time $50 million dividend to The Limited and
borrowed approximately $14 million from the revolving portion of the Credit
Facility principally to repay a portion of the working capital advances made by
The Limited in 1999 prior to the Spin-off. Adjusted net income and adjusted
earnings per share are presented as if these borrowings were outstanding for all
periods presented.

<TABLE>
<CAPTION>
                                                                  FISCAL YEARS ENDED
                                                     --------------------------------------------
                                                      JANUARY 29,     JANUARY 30,    JANUARY 31,
                                                         2000            1999           1998
                                                     -------------   -------------  -------------
<S>                                                  <C>             <C>            <C>
Earnings per diluted share on a historical basis         $   0.79        $   0.54        $  0.23
                                                     =============   =============  =============

Adjusted earnings per diluted share:

Net income as reported                                   $ 24,576        $ 16,681        $ 7,166

     Adjusted interest expense, net of tax (1)              1,208           2,087          2,087
                                                     -------------   -------------  -------------

Net income as adjusted                                   $ 23,368        $ 14,594        $ 5,079
                                                     =============   =============  =============

Adjusted earnings per diluted share (2)                  $   0.75        $   0.47        $  0.16
                                                     =============   =============  =============
</TABLE>
<PAGE>   4
(1)      Adjusted interest expense includes interest expense and financing fees,
         net of interest income and the related tax benefit, on approximately
         $52 million of average indebtedness.
(2)      Adjusted earnings per diluted share is calculated by dividing adjusted
         net income for each period by fiscal 1999 weighted average diluted
         shares.


FINANCIAL SUMMARY

Summarized annual financial data for the last three fiscal years is presented
below:

<TABLE>
<CAPTION>
                                                               FISCAL YEARS ENDED                             % CHANGE
                                                  ----------------------------------------------    --------------------------------
                                                   JANUARY 29,     JANUARY 30,      JANUARY 31,         1999-           1998-
                                                      2000            1999             1998             1998            1997
                                                  -------------   -------------    -------------    ------------    ------------
<S>                                               <C>             <C>              <C>                <C>             <C>
Net sales (millions)                                   $   452         $   377          $   322              20%             17%
Comparable store sales increase (1)                          9%             15%              20%
Annual sales per average square foot (2)               $   330         $   300          $   259              10%             16%
Sales per average store (thousands)                    $ 1,349         $ 1,204          $ 1,039              12%             16%
Average store size at year end (square feet)             4,094           4,015            3,987               2%              1%
Total square feet at year end (thousands)                1,441           1,281            1,244              12%              3%
Number of stores:
     Beginning of year                                     319             312              308
          Opened                                            42              10                7
          Closed                                            (9)             (3)              (3)
                                                  -------------   -------------    -------------
     End of year                                           352             319              312
                                                  =============   =============    =============

     Stores remodeled                                       18              15               --

     Stores with "Girl Power" format                        89              29                4

     Percentage of stores in "Girl Power" format            25%              9%               1%
</TABLE>

(1)      A store is included in our comparable store sales calculation once it
         has completed 52 weeks of operation. Further, stores that are expanded
         more than 20% in square feet are treated as new stores for the purpose
         of this calculation.
(2)      Annual sales per average square foot is the result of dividing net
         sales for the fiscal year by average gross square feet, which reflects
         the impact of opening and closing stores throughout the year.

FISCAL YEAR ENDED JANUARY 29, 2000 COMPARED TO FISCAL YEAR ENDED JANUARY 30,
1999

NET SALES - Net sales for 1999 increased 20% to $452.4 million from $376.9
million for 1998. The increase was primarily a result of a 9% increase in
comparable store sales, with the balance attributable to the net addition of 33
stores. Net sales productivity increased 10% to $330 per average square foot due
in part to the increase in the number of stores operating under the Girl Power
format. Average sales per store are substantially higher under the Girl Power
format compared to the stores for the balance of the Company. Within merchandise
categories, knit tops showed a significant sales increase, led by cut-and-sewn
tops and graphic and active T-shirts. The add-on category (principally
underwear, sleepwear and swimwear) and accessories also increased significantly.
<PAGE>   5
GROSS INCOME - The gross income rate expressed as a percentage of net sales,
increased to 35.4% from 33.2% for 1998. The increase in rate was primarily
attributable to higher initial markups and lower markdowns. These gains were
partially offset by an increase in buying and occupancy costs, expressed as a
percentage of net sales, due to an increase in buying payroll and incremental
catalog costs which were not incurred in 1998.

GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES - General, administrative
and store operating expenses, expressed as a percentage of net sales, increased
to 26.1% from 25.8% for 1998. This increase was attributable to various expenses
associated with the Spin-off, incremental catalog costs net of shipping and
handling revenue and increased distribution center costs. These increases were
partially offset by a decrease in expense allocations from The Limited.

OPERATING INCOME - Operating income, expressed as a percentage of net sales,
increased to 9.4% for 1999 from 7.4% for 1998. The increase was attributable to
higher merchandise margins partially offset by higher general, administrative
and store operating expenses.

INTEREST EXPENSE - Interest expense, net of interest income, amounted to $1.5
million in fiscal 1999 and related to borrowings under the Company's $100
million Credit Facility entered into in August, 1999. No interest expense was
incurred in fiscal 1998 or 1997. Interest expense also includes the amortization
of financing fees and related costs incurred in connection with the Credit
Facility.

FISCAL YEAR ENDED JANUARY 30, 1999 COMPARED TO FISCAL YEAR ENDED JANUARY 31,
1998

NET SALES - Net sales for 1998 increased 17% to $376.9 million from $322.2
million in 1997. The increase was primarily attributable to a 15% increase in
comparable store sales and the net addition of seven stores. During the third
quarter of fiscal 1997, we exited the infant merchandise category because it was
inconsistent with a store environment that appeals to our target customer.
Therefore, excluding infant sales in 1997, we experienced a 24% increase in
comparable store sales over the prior year. While sales increased across
virtually all merchandise categories, add-on, lifestyles, personal care products
under our "GirlCare" product line and tops experienced significant increases.
Net sales productivity increased 16% to $300 per average square foot.

GROSS INCOME - The gross income rate, expressed as a percentage of net sales,
increased to 33.2% in 1998 from 29.6% in 1997. The increase in rate was
attributable to an increase in initial markup on merchandise and a decrease in
buying and occupancy costs, expressed as a percentage of net sales, due to the
leverage achieved through higher comparable store sales. The improvement in
these margin components was slightly offset by an increase in markdowns
experienced during the fall season as a result of underperformance in the
ready-to-wear category and overassortment in the bottoms categories.

GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES - General, administrative
and store operating expenses, expressed as a percentage of net sales, improved
slightly to 25.8% in 1998 from 25.9% in 1997. The favorable leveraging of these
expenses associated with improved sales productivity was partially offset by an
increase in overhead allocations from The Limited. The increase in the allocated
expenses included information technology costs, including Year 2000 costs, and
central distribution center costs, driven by unit growth.

OPERATING INCOME - Operating income, expressed as a percentage of net sales, was
7.4% and 3.7% in fiscal 1998 and 1997, respectively. The improvement in 1998
over 1997 was due principally to the improvement in
<PAGE>   6
merchandise margins and the positive leveraging of buying and occupancy expenses
arising from increases in comparable store sales.

SEASONALITY AND QUARTERLY FLUCTUATIONS

As illustrated in the table below, our business is highly seasonal, with
significantly higher sales, gross income and net income realized during the
fourth quarter, which includes the holiday selling season.

(IN THOUSANDS EXCEPT PERCENTAGES)

<TABLE>
<CAPTION>
1999 QUARTERS                     FIRST          SECOND           THIRD          FOURTH
-------------                   ---------       ---------       ---------       ---------
<S>                             <C>             <C>             <C>             <C>
Net sales                       $ 95,048        $ 86,864        $114,802        $155,641
     % of full year                 21.0%           19.2%           25.4%           34.4%
Gross income                    $ 31,724        $ 28,606        $ 38,346        $ 61,657
     % of full year                 19.8%           17.8%           23.9%           38.5%
Net income                      $  1,622        $  1,004        $  4,740        $ 17,210
     % of full year                  6.6%            4.1%           19.3%           70.0%

1998 QUARTERS
-------------

Net sales                       $ 82,257        $ 74,746        $ 96,720        $123,220
     % of full year                 21.8%           19.8%           25.7%           32.7%
Gross income                    $ 24,888        $ 24,016        $ 29,870        $ 46,440
     % of full year                 19.9%           19.2%           23.8%           37.1%
Net income                      $    736        $    240        $  4,248        $ 11,457
     % of full year                  4.4%            1.4%           25.5%           68.7%
</TABLE>

FINANCIAL CONDITION

Our balance sheet reflects not only the effects of the Spin-off but increased
financial strength as a result of a substantial increase in operating income and
cash flow from operations. A more detailed discussion of liquidity, capital
resources and capital requirements follows.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided from operating activities provided the resources to support
operations, including projected growth, seasonal working capital requirements
and capital expenditures. Additionally, the Company entered into a $100 million
Credit Facility used to finance a $50 million dividend to The Limited as well as
the repayment of a portion of working capital advances made by The Limited in
1999 prior to the Spin-off. At January 29, 2000, only the $50 million five-year
term portion of the Credit Facility was outstanding.
<PAGE>   7
A summary of the Company's working capital position and capitalization follows
(thousands):

<TABLE>
<CAPTION>
                                                                       FISCAL YEARS ENDED
                                                         ------------------------------------------------
                                                          JANUARY 29,      JANUARY 30,     JANUARY 31,
                                                             2000             1999             1998
                                                         --------------   --------------  ---------------
<S>                                                      <C>              <C>              <C>
Net cash provided by operating activities                     $ 69,547         $ 17,361         $ 30,294

Working capital (deficit)                                     $ 26,098         $    311         $ (8,945)

Capitalization:
    Long-term debt                                              50,000               --               --
    Shareholders' equity (1)                                    45,467           50,017           37,065
                                                         --------------   --------------  ---------------
Total capitalization                                          $ 95,467         $ 50,017         $ 37,065
                                                         ==============   ==============  ===============

Additional amounts available under the revolving
    portion of the Credit Facility                            $ 50,000               --               --
</TABLE>

(1)      Prior to the Spin-off, shareholders' equity was comprised solely of the
         net investment by The Limited.

OPERATING ACTIVITIES

Net cash provided by operating activities amounted to $69.5 million for fiscal
1999 versus $17.4 million for fiscal 1998. The increase was primarily driven by
an increase in net income, plus depreciation and amortization expense and an
increase in accounts payable and accrued expenses in fiscal 1999 versus 1998.
Cash flow from operations decreased in 1998 versus 1997 as higher net income was
more than offset by an increase in inventories and higher income tax payments.

INVESTING ACTIVITIES

Capital expenditures increased substantially in 1999 to $31.4 million from $14.3
million in 1998 and $4.8 million in 1997. Capital expenditures were used
primarily to construct new stores and remodel existing stores.

FINANCING ACTIVITIES

Financing activities in 1999 included an increase of $20.9 million in the net
investment by The Limited representing $32.9 million of working capital advances
through the date of the Spin-off, of which $12 million was repaid on August 13,
1999 with proceeds from the $100 million Credit Facility. Additionally, the
Company paid a $50 million cash dividend to The Limited with proceeds from the
Credit Facility on August 13, 1999. In connection with the Spin-off, the balance
of the net investment by The Limited was converted to common stock and paid in
capital based on the 30.7 million shares issued with a par value of $.01 per
share. The Company also paid off borrowings under the revolving portion of the
$100 million Credit Facility during the third quarter.
<PAGE>   8
CAPITAL EXPENDITURES

Capital expenditures amounted to $31.4 million, $14.3 million and $4.8 million
for fiscal 1999, 1998 and 1997, respectively. Approximately $28 million of
capital expenditures made in 1999 were for the construction of new stores and
the remodeling of existing stores with a substantial portion of the remaining
expenditures related to information technology initiatives. Substantially all
capital expenditures in 1998 and 1997 were for constructing new and remodeled
stores.

We anticipate spending between $40 and $45 million in 2000 for capital
expenditures, of which $30 to $35 million will be for new stores, remodeling or
expansion of existing stores and related fixtures and equipment. We intend to
add 210,000 to 230,000 square feet in 2000, which will represent a 15% to 16%
increase over year-end 1999. We anticipate that the increase will result from
opening approximately 50 to 55 new stores and expanding a portion of the 10
stores identified for remodeling.

We estimate that the average cost for leasehold improvements, furniture and
fixtures for stores to be opened in 2000 will be approximately $390,000 per
store, after giving effect to landlord allowances. Average pre-opening costs per
store, which will be expensed as incurred, are expected to approximate $10,000
while inventory purchases are expected to average approximately $75,000 per
store. We also anticipate approximately $10 million in capital expenditures in
fiscal 2000 principally related to the construction of a new distribution center
and home office scheduled for completion in the first half of 2002.

We expect that substantially all capital expenditures in 2000 will be funded by
net cash provided by operating activities.

TRANSITIONAL SERVICES AND SEPARATION AGREEMENTS

In connection with the Spin-off, the Company entered into several Transitional
Services and Separation Agreements (the "Transitional Services Agreements") with
The Limited that govern certain aspects of our ongoing relationship. We believe
that the terms of these agreements are similar to terms achievable through arm's
length negotiations with third parties.

A summary of some of the more significant Transitional Services Agreements
follows:

TRADEMARK AND SERVICE MARK LICENSING AGREEMENT

We have entered into an exclusive trademark and service mark licensing agreement
(the "Trademark Agreement") with The Limited that will allow us to operate under
the "Limited Too" brand name. The agreement will have an initial term of five
years after the Spin-off, renewable annually at our option. All licenses granted
under the agreement will be granted free of charge. In return, we will be
required to provide The Limited with the right to inspect our stores and
distribution facilities and an ability to review and approve our advertising.
Under the Trademark Agreement, we will only be able to use the brand name
"Limited Too" in connection with any business in which we sell to our current
target customer group or to infants and toddlers. In addition, we may not use
the Limited Too brand name or its derivative that competes with merchandise
currently offered by The Limited or its subsidiaries, unless it is for our
current target customer group. The Limited has the right to terminate the
Trademark Agreement under certain limited conditions.
<PAGE>   9
SERVICES AGREEMENT

The Services Agreement relates to transitional services that The Limited or its
subsidiaries or affiliates will provide to us subsequent to the Spin-off. Under
this agreement, The Limited will provide services in exchange for fees which we
believe are similar in material respects to what a third-party provider would
charge, and will be based on several billing methodologies. Under one of these
billing methodologies, which is the most prevalent, The Limited will provide us
with services at costs comparable to those charged to other businesses operated
by The Limited from time to time. We will generally be obligated to purchase
those services at fees equal to The Limited's costs of providing the services
plus 5% of these costs. However, third party costs are not subject to the 5%
mark-on. Subsequent to fiscal 1999, the services that The Limited will provide
to us principally relate to management information systems through the first
anniversary of the Spin-off and merchandise distribution covering flow of goods
from factory to store through the third anniversary of the Spin-off.

STORE LEASES AGREEMENT

At January 29, 2000, 126 of our stores were adjacent to The Limited's stores. Of
these, 122 stores are subject to sublease agreements (the "Store Leases
Agreement") with The Limited for stores where we occupy space that The Limited
leases from third party landlords (the "Direct Limited Leases"). Under the terms
of the Store Leases Agreement, we are responsible for our proportionate share,
based on the size of our selling space, of all costs (principally rent, excess
rent, if applicable, maintenance and utilities).

All termination rights and other remedies under the Direct Limited Leases will
remain with The Limited. If The Limited decides to terminate any of the Direct
Limited Leases early, The Limited must first offer to assign such lease to us.
If, as a result of such early termination by The Limited, we are forced to
remodel our store or relocate within the mall, The Limited will compensate us
with a combination of cash payments and loans which will vary depending on the
remaining term of the affected store lease at the time the Limited closes its
adjacent store as follows:

<TABLE>
<CAPTION>
                                    CASH            LOAN
REMAINING LEASE TERM               PAYMENT         AMOUNT
-----------------------------    ------------    ------------
<S>                              <C>             <C>
Less than one year                        --        $100,000
One to two years                    $ 50,000         100,000
Three to four years                  100,000         100,000
Greater than four years              100,000         150,000
</TABLE>

Approximately 100 of the Direct Limited Leases of which we are a part are
scheduled to expire during 2005 or later. We may not assign or sublet our
interest in those premises, except to an affiliate, without The Limited's
consent. If The Limited intends to sublet or assign its portion of the leased
premises under any of the Direct Limited Leases to any non-affiliate, it will be
required to give us 60 days notice, and we will be allowed to terminate our
interest.

Approximately 73 of our direct leases are guaranteed by The Limited. Pursuant to
the Store Leases Agreement, we are required to make additional payments to The
Limited as consideration for the guarantees that The
<PAGE>   10
Limited provides under such leases along with amounts for adjacent stores based
on those locations achieving certain performance targets.

CREDIT FACILITY

In August 1999, we entered into a five-year, $100 million collateralized Credit
Facility. The Credit Facility consists of a $50 million five-year term loan and
a $50 million, five-year revolving credit commitment. The Credit Facility's
interest rates, which reflect matrix pricing, are based on the London Interbank
Offered Rate or Prime plus a spread as defined in the agreement. The term loan
is interest only until the end of the third year at which time the amortization
of the outstanding principle balance will begin. The Credit Facility contains
customary representations and warranties as well as certain affirmative,
negative and financial covenants.

At year-end, the entire amount of the $50 million revolving credit commitment
was available to fund working capital requirements and for general corporate
purposes.

IMPACT OF INFLATION

Our results of operations and financial condition are presented based upon
historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, we believe that
the effects of inflation, if any, on our results of operations and financial
condition have been minor.

YEAR 2000

The Company's information systems are primarily operated by The Limited using
Limited hardware in their facilities pursuant to the Transition Services
Agreement. Additionally, we use a variety of proprietary and third party
computer technologies -- hardware and software -- directly in our business. We
participated in the Year 2000 readiness efforts undertaken by The Limited both
prior to and subsequent to the Spin-off. We are not aware of any Year 2000
related incident or activity that occurred which resulted in any major
disruption to our business. Additionally, we are not aware of any Year 2000
related event or situation either within the Company or at a major vendor which
would materially affect the Company's financial position or results of
operations.

Total expenditures, exclusive of internal payroll costs, incurred from 1997
through January 29, 2000 related to remediation, testing, conversion,
replacement and upgrading system applications were approximately $6.7 million,
of which approximately $2.3 million represent capital assets which are being
amortized principally over a period of three or five years beginning in May
1999.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Any forward-looking statements contained in this Management Discussion and
Analysis or elsewhere involve risks and uncertainties and may change based on
various important factors, many of which may be beyond our control. Thus, our
future performance and financial results may differ materially from those
expressed or implied in any such forward-looking statements. Forward-looking
statements are indicated by words such as "anticipate," "estimate," "expect,"
"intend," "risk," "could," "may," "will," "pro forma," "likely," "possible,"
"potential" and similar words and phrases and the negative forms and variations
of these words and phrases.

Factors such as changes in consumer spending patterns and preferences,
competition, pricing, weather patterns, overall economic conditions, political
stability, currency and exchange risk, duties, tariffs or quotas, availability
<PAGE>   11
of suitable store locations at appropriate terms, ability to develop new
merchandise, and ability to hire and train associates, among others, in some
cases have affected and in the future could affect our financial performance and
actual results and could cause actual results for 2000 and beyond to differ
materially from those expressed or implied in any such forward-looking
statements.
<PAGE>   12
                                    TOO, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                  1999            1998           1997
                                             -------------   -------------  -------------
<S>                                          <C>             <C>            <C>
Net sales                                       $ 452,355       $ 376,943      $ 322,150
     Costs of goods sold, buying and
          occupancy costs                         292,022         251,729        226,903
                                             -------------   -------------  -------------
Gross income                                      160,333         125,214         95,247
     General, administrative and store
          operating expenses                      117,878          97,333         83,381
                                             -------------   -------------  -------------
Operating income                                   42,455          27,881         11,866
Interest expense, net                               1,479              --             --
                                             -------------   -------------  -------------
Income before income taxes                         40,976          27,881         11,866
Provision for income taxes                         16,400          11,200          4,700
                                             -------------   -------------  -------------
Net income                                      $  24,576       $  16,681      $   7,166
                                             =============   =============  =============

NET INCOME PER SHARE:

     Basic                                      $    0.80       $    0.54      $    0.23
                                             =============   =============  =============

     Diluted                                    $    0.79       $    0.54      $    0.23
                                             =============   =============  =============

WEIGHTED AVERAGE COMMON SHARES:

     Basic                                         30,674          30,674         30,674
                                             =============   =============  =============

     Diluted                                       30,974          30,674         30,674
                                             =============   =============  =============
</TABLE>


The accompanying Notes are an integral part of these Consolidated Financial
Statements
<PAGE>   13
                                    TOO, INC.
                           CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                     JANUARY 29,     JANUARY 30,
                                                                        2000            1999
                                                                    -------------  --------------
<S>                                                                 <C>            <C>
                             ASSETS
CURRENT ASSETS:
     Cash and equivalents                                              $  59,984        $    987
     Receivables                                                           2,863           1,440
     Inventories                                                          34,656          27,565
     Store supplies                                                        6,171           5,237
     Deferred income taxes                                                 2,904           3,751
     Other                                                                   504             582
                                                                    -------------  --------------
Total current assets                                                     107,082          39,562

Property and equipment, net                                               61,874          44,894
Deferred income taxes                                                      7,838           6,313
Other assets                                                               1,799              --
                                                                    -------------  --------------

Total assets                                                           $ 178,593        $ 90,769
                                                                    =============  ==============


              LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                                  $  20,754        $  3,108
     Accrued expenses                                                     46,689          24,260
     Income taxes payable                                                 13,541          11,883
                                                                    -------------  --------------
Total current liabilities                                                 80,984          39,251

Long-term debt                                                            50,000              --

Other long-term liabilities                                                2,142           1,501

Commitments and contingencies

                      SHAREHOLDERS' EQUITY
Preferred stock, 50 million shares authorized                                 --              --
Common stock, $.01 par value, 100 million shares authorized,
     30.7 million issued and outstanding at January 29, 2000                 307              --
Paid in capital                                                           24,410              --
Retained earnings since effective date, August 23, 1999                   20,750              --
Net investment by The Limited                                                 --          50,017
                                                                    -------------  --------------

Total shareholders' equity                                                45,467          50,017
                                                                    -------------  --------------

Total liabilities and shareholders' equity                             $ 178,593        $ 90,769
                                                                    =============  ==============
</TABLE>


The accompanying Notes are an integral part of these Consolidated Financial
Statements
<PAGE>   14
                                    TOO, INC.
                      CONSOLIDATED STATEMENTS OF CHANGES IN
                              SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                        NET
                                                                                     INVESTMENT                       TOTAL
                                             COMMON         PAR        PAID IN         BY THE        RETAINED     SHAREHOLDERS'
                                             SHARES        VALUE       CAPITAL        LIMITED        EARNINGS        EQUITY
                                           ------------ ------------ -------------  -------------  ------------- ----------------
<S>                                        <C>          <C>          <C>            <C>            <C>           <C>
BALANCES, FEBRUARY 1, 1997                                                              $ 53,923                        $ 53,923

Net income                                                                                 7,166                           7,166
Transfers to The Limited, net                                                            (24,024)                        (24,024)
                                                                                    -------------                ----------------

BALANCES, JANUARY 31, 1998                                                                37,065                          37,065

Net income                                                                                16,681                          16,681
Transfers to The Limited, net                                                             (3,729)                         (3,729)
                                                                                    -------------                ----------------

BALANCES, JANUARY 30, 1999                                                                50,017                          50,017

Net income prior to Spin-off                                                               3,826                           3,826
Cash dividend to The Limited                                                             (50,000)                        (50,000)
Distribution of Too, Inc. common stock
     by The Limited                             30,674        $ 307      $ 24,410        (24,717)
Transfers from The Limited, net                                                           20,874                          20,874
Net income after Spin-off                                                                              $ 20,750           20,750
                                           ------------ ------------ -------------  -------------  ------------- ----------------

BALANCES, JANUARY 29, 2000                      30,674        $ 307      $ 24,410             --       $ 20,750         $ 45,467
                                           ============ ============ =============  =============  ============= ================
</TABLE>


The accompanying Notes are an integral part of these Consolidated Financial
Statements
<PAGE>   15
                                    TOO, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     1999           1998            1997
                                                                -------------  -------------   -------------
<S>                                                             <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income                                                      $ 24,576       $ 16,681         $ 7,166

IMPACT OF OTHER OPERATING ACTIVITIES ON CASH FLOWS:

    Depreciation and amortization                                     13,804         10,563          10,626

    CHANGES IN ASSETS AND LIABILITIES:

       Inventories                                                    (7,091)        (8,904)          1,776
       Accounts payable and accrued expenses                          40,075          2,215             666
       Income taxes                                                      980         (3,114)          9,248
       Other assets and liabilities                                   (2,797)           (80)            812
                                                                -------------  -------------   -------------

    NET CASH PROVIDED BY OPERATING ACTIVITIES                         69,547         17,361          30,294
                                                                -------------  -------------   -------------

INVESTING ACTIVITIES:

    Capital expenditures                                             (31,424)       (14,294)         (4,780)
                                                                -------------  -------------   -------------

    CASH USED FOR INVESTING ACTIVITIES                               (31,424)       (14,294)         (4,780)
                                                                -------------  -------------   -------------

FINANCING ACTIVITIES:

    Net increase (decrease) in net investment by
          The Limited                                                 20,874         (3,729)        (24,024)
    Proceeds from borrowings under the Credit Facility                64,235             --              --
    Payment of dividend to The Limited                               (50,000)            --              --
    Repayment of borrowings under the Credit Facility                (14,235)            --              --
                                                                -------------  -------------   -------------

    NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES              20,874         (3,729)        (24,024)
                                                                -------------  -------------   -------------

    NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                   58,997           (662)          1,490

    Cash and equivalents, beginning of year                              987          1,649             159
                                                                -------------  -------------   -------------

    Cash and equivalents, end of year                               $ 59,984       $    987         $ 1,649
                                                                =============  =============   =============
</TABLE>


The accompanying Notes are an integral part of these Consolidated Financial
Statements
<PAGE>   16
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

Too, Inc., (referred herein as "Too" or the "Company") is a specialty retailer
that sells apparel, underwear, sleepwear, swimwear, lifestyle and personal care
products for fashion-aware, trend-setting young girls ages seven to fourteen
years. The accompanying consolidated financial statements include the accounts
of Too, Inc. and its subsidiaries and reflect the Company's assets, liabilities,
results of operations and cash flows on a historical cost basis. The Company was
established in 1987 and, prior to the Spin-off, was a wholly-owned subsidiary of
The Limited, Inc. ("The Limited").

Effective August 23, 1999, The Limited distributed to its shareholders of record
as of August 11, 1999, all of its interest in Too on the basis of one share of
Too common stock for each seven shares of The Limited common stock (the
"Spin-off"). The Spin-off resulted in 30.7 million shares of Too common stock
outstanding as of August 23, 1999. As a result of the Spin-off, the Company
became an independent, separately traded, public company. In connection with the
Spin-off, Too and The Limited entered into certain agreements which are more
fully described in Note 8. The Company's largest shareholder is also the largest
shareholder of The Limited, Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Too and all
subsidiaries which are more than 50% owned. All significant intercompany
balances and transactions have been eliminated in consolidation. The Company has
one reportable segment which includes all of its products.

FISCAL YEAR

The Company's fiscal year ends on the Saturday closest to January 31. Fiscal
years are designated in the financial statements and notes by the calendar year
in which the fiscal year commences. The results for fiscal years 1999, 1998 and
1997 represent the 52-week periods ended January 29, 2000, January 30, 1999, and
January 31, 1998.

CASH EQUIVALENTS

The Company considers short-term investments with original maturities of three
months or less to be cash equivalents.

INVENTORIES

Inventories are principally valued at the lower of average cost or market, on a
first-in, first-out basis, utilizing the retail method.
<PAGE>   17
STORE SUPPLIES

The initial inventory of supplies for new stores including, but not limited to,
hangers, signage, security tags, packaging and point-of-sale supplies is
capitalized at the store opening date. In lieu of amortizing the initial
balance, subsequent shipments are expensed, except for new merchandise
presentation programs, which are capitalized. Store supplies are periodically
inventoried and adjusted as appropriate for changes in supply levels or costs.

CATALOG AND ADVERTISING COSTS

Catalog costs, principally catalog production and mailing costs, are amortized
over the expected revenue stream, which is generally three to six months from
the date that the catalogs are mailed. All other advertising costs, including
costs associated with in-store photographs and direct mail campaigns, are
expensed at the time the promotion first appears in media or in the store.
Advertising costs amounted to $1,658,000, $567,000 and $755,000 for fiscal years
1999, 1998 and 1997.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are
computed on a straight-line basis, using service lives ranging principally from
7 to 10 years for building improvements and 3 to 10 years for other property and
equipment. The cost of assets sold or retired and the related accumulated
depreciation or amortization are removed from the accounts, with any resulting
gain or loss included in net income. Maintenance and repairs are charged to
expense as incurred. Major renewals and betterments that extend service lives
are capitalized. Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate that full recoverability is questionable.
The store assets are reviewed by district, in accordance with the method by
which management reviews store performance. Factors used in the valuation
include, but are not limited to, management's plans for future operations,
recent operating results and projected cash flows. No impairment charges have
been taken based on management's review.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires the use of the liability method. Under this method, deferred tax assets
and liabilities are recognized based on the difference between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect in the years in which those temporary differences
are expected to reverse. Under SFAS No. 109, the effect on deferred taxes of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Prior to the Spin-off, the Company was included in The Limited's consolidated
federal and certain state income tax returns for income tax reporting purposes.
However, income taxes in the Company's consolidated financial statements were
calculated as if the Company had filed separate income tax returns for all
periods presented. In connection with the Spin-off, the Company entered into a
tax separation agreement with The Limited. The purpose of this agreement is to
reflect each party's rights and obligations relating to payment and refunds of
taxes attributable to periods up to and including the Spin-off.
<PAGE>   18
REVENUE RECOGNITION

Sales are recorded when the customer takes possession of merchandise -- that is,
the point of sale. Markdowns associated with the Frequent Buyer and "Too Bucks"
Programs are recognized upon redemption in conjunction with a qualifying
purchase. Catalog sales are recorded upon shipment to the customer.

STORE PRE-OPENING EXPENSES

Pre-opening expenses related to new store openings are charged to operations as
incurred.

FINANCIAL INSTRUMENTS

The recorded values of financial instruments, including cash and equivalents,
receivables and accounts payable, approximate fair value due to their short
maturity. The recorded value of long-term debt approximates fair value as the
interest rate on such debt was reset near the end of fiscal 1999.

STOCK-BASED COMPENSATION

The Company accounts for stock options using Accounting Principle Board Opinion
No. 25 (APB 25) and has provided pro forma disclosures in accordance with
Statement of Financial Accounting Standards No. 123 (SFAS 123).

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if options or restricted
stock were converted into common stock using the treasury stock method.

Earnings per share, as presented in the Consolidated Statements of Income, for
periods prior to the Spin-off was calculated by dividing net income by the 30.7
million common shares issued in connection with the Spin-off as if these shares
were outstanding for such periods. The dilutive effect of options and restricted
shares used to determine diluted weighted average shares outstanding was
approximately 300,000 shares for the year ended January 29, 2000.

USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Since actual results may differ from those estimates, the
Company revises its estimates and assumptions as new information becomes
available.
<PAGE>   19
3. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consisted of (in thousands):

<TABLE>
<CAPTION>
                                             JANUARY 29,       JANUARY 30,
                                                2000               1999
                                           ----------------   ---------------
<S>                                        <C>                <C>
Furniture, fixtures and equipment                 $ 84,166          $ 69,523
Leaseholds and improvements                         37,102            28,950
                                           ----------------   ---------------
     Total                                         121,268            98,473
Less: accumulated depreciation and
     amortization                                  (59,394)          (53,579)
                                           ----------------   ---------------
Property and equipment, net                       $ 61,874          $ 44,894
                                           ================   ===============
</TABLE>

4. LEASED FACILITIES AND COMMITMENTS

The Company operated stores under lease agreements expiring on various dates
through 2012. The initial terms of leases are generally between ten and fifteen
years. Annual store rent is generally comprised of a fixed minimum amount, plus
contingent rent based on a percentage of sales exceeding a stipulated amount.
Many of the leases provide for future rent escalations and renewal options. Most
leases require the Company to pay taxes, common area costs and certain other
expenses.

At January 29, 2000, the Company operated 122 stores under sublease agreements
with The Limited. These sublease agreements require the Company to pay a
proportionate share, based on selling space, of all costs, principally rent,
maintenance, taxes and utilities. Pursuant to the sublease agreements, the
Company is required to pay contingent rent to The Limited if stores sales exceed
a stipulated amount. The Limited also provides guarantees on 73 store leases and
assesses a fee based on stores sales exceeding defined levels. Total contingent
fees were approximately $284,000 in 1999.

A summary of rent expense for the years 1999, 1998, and 1997 follows (in
thousands):

<TABLE>
<CAPTION>
                                        1999            1998            1997
                                    -------------   -------------   -------------
<S>                                 <C>             <C>             <C>
Fixed minimum                           $ 32,515        $ 28,916        $ 28,198
Contingent                                 1,037             375             296
                                    -------------   -------------   -------------
     Total store rent                     33,552          29,291          28,494
Equipment and other                        1,077             880             879
                                    -------------   -------------   -------------
     Total rent expense                 $ 34,629        $ 30,171        $ 29,373
                                    =============   =============   =============
</TABLE>
<PAGE>   20
A summary of minimum rent commitments under noncancellable leases as of January
29, 2000 follows (in thousands):

<TABLE>
<S>                                                     <C>
2000                                                    $ 32,674
2001                                                      33,099
2002                                                      31,568
2003                                                      30,722
2004                                                      28,919
Thereafter                                                63,928
</TABLE>

5. ACCRUED EXPENSES

Accrued expenses consisted of (in thousands):

<TABLE>
<CAPTION>
                                                   JANUARY 29,     JANUARY 30,
                                                      2000            1999
                                                  -------------   -------------
<S>                                               <C>             <C>
Compensation, payroll taxes and benefits              $ 13,186         $ 5,907
Rent                                                    12,482           7,187
Taxes, other than income                                 3,092           2,252
Other                                                   17,929           8,914
                                                  -------------   -------------
     Total                                            $ 46,689        $ 24,260
                                                  =============   =============
</TABLE>

6. CREDIT FACILITY

During August 1999, the Company entered into a five-year $100 million credit
agreement (the "Credit Facility") with a syndicate of banks. The Credit Facility
is collateralized by virtually all assets of the Company and is comprised of a
$50 million five-year term loan and a $50 million revolving loan commitment. The
entire amount of the term portion was drawn in order to fund a $50 million
dividend to The Limited and $14 million was drawn million under the revolving
loan commitment principally to repay a portion of working capital advances made
by the Limited prior to the Spin-off.

The $50 million revolving loan commitment is available to fund working capital
requirements and for general corporate purposes. Interest on borrowings under
the Credit Facility is based on matrix pricing applied to either the London
Interbank Offered Rate or Prime, as defined in the agreement. Payments of
principal under the term loan are due at various dates from July 2002 to August
2004. A commitment fee based on matrix pricing is charged on the unused portion
of the revolving loan commitment. The commitment fee is up to 1/2 of 1% of the
unused revolving credit commitment per annum. Under the terms of the Credit
Facility, the Company is required to comply with certain financial ratios. The
Credit Facility limits the Company from incurring certain additional
indebtedness and restricts substantial asset sales, capital expenditures above
approved limits and cash dividends. The Company is in compliance with all
applicable terms of the Credit Facility. Interest paid in fiscal 1999 amounted
to $2.1 million. As of January 29, 2000, there were no amounts outstanding under
the revolving portion of the Credit Facility.
<PAGE>   21
The aggregate amount of future maturities for long-term debt are as follows (in
thousands):

<TABLE>
<S>                                             <C>
2002                                            $17,500
2003                                             20,000
2004                                             12,500
                                           -------------
                                                $50,000
                                           =============
</TABLE>

7. INCOME TAXES

The provision (benefit) for income taxes consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                1999              1998             1997
                                           --------------   ---------------   --------------
<S>                                        <C>               <C>               <C>
CURRENT:
     Federal                                    $ 13,631          $ 12,326          $ 7,804
     State                                         3,447             2,832            1,790
                                           --------------   ---------------   --------------
                                                  17,078            15,158            9,594
DEFERRED:
     Federal                                        (621)           (3,068)          (3,975)
     State                                           (57)             (890)            (919)
                                           --------------   ---------------   --------------
                                                    (678)           (3,958)          (4,894)
                                           --------------   ---------------   --------------
        Total income tax provision              $ 16,400          $ 11,200          $ 4,700
                                           ==============   ===============   ==============
</TABLE>

A reconciliation between the statutory federal income tax rate and the effective
income tax rate follows:

<TABLE>
<CAPTION>
                                                   1999            1998           1997
                                               -------------   -------------  --------------
<S>                                            <C>             <C>             <C>
Federal income tax rate                                35.0 %          35.0 %          35.0 %
State income taxes, net of federal benefit              4.5             4.5             4.5
Other items, net                                        0.5             0.7             0.1
                                               -------------   -------------  --------------
                    Total                              40.0 %          40.2 %          39.6 %
                                               =============   =============  ==============
</TABLE>

The effect of temporary differences which give rise to net deferred tax asset
balances was as follows (in thousands):

<TABLE>
<CAPTION>
                                            JANUARY 29,      JANUARY 30,
                                               2000              1999
                                           --------------   ---------------
<S>                                        <C>               <C>
Book depreciation in excess of tax               $ 3,306           $ 3,204
Rent                                               2,526             2,476
Inventory                                            785               881
Accrued expenses                                   2,284             1,508
Other, net                                         1,841             1,995
                                           --------------   ---------------
          Total deferred income taxes           $ 10,742          $ 10,064
                                           ==============   ===============
</TABLE>
<PAGE>   22
No valuation allowance has been provided for deferred tax assets because
management believes that it is more likely than not that the full amount of the
net deferred tax assets will be realized in the future.

Subsequent to the Spin-off, the Company began filing its tax returns on a
separate basis. Prior to the Spin-off, income tax obligations were treated as
being settled through the intercompany accounts as if the Company was filing its
income tax returns on a separate company basis. Amounts paid to (received from)
The Limited totaled $12 million, $14.3 million and $(4.5) million for the years
1999, 1998 and 1997, respectively. Subsequent to the Spin-off, the Company made
income tax payments directly to taxing authorities amounting to $2.7 million in
fiscal 1999.

8. RELATED PARTY TRANSACTIONS

Prior to the Spin-off, transactions between the Company and The Limited and its
subsidiaries and affiliates primarily consisted of the following:

     Merchandise purchases
     Capital expenditures
     Inbound and outbound shipping
     Store leasing, construction and management
     Distribution center, information systems and home office expenses
     Corporate services and centrally managed benefits

Information with regard to these transactions is as follows:

Significant purchases were made from Mast, a wholly-owned subsidiary of The
Limited. Purchases were also made from Gryphon, an indirect subsidiary of The
Limited. Mast is a contract manufacturer and apparel importer while Gryphon is a
developer of fragrance and personal care products and also a contract
manufacturer. Prices were negotiated on a competitive basis by merchants of Too
with Mast, Gryphon and manufacturers.

The Company's inbound and outbound transportation expenses were managed
centrally by Limited Distribution Services, a wholly owned subsidiary of The
Limited. Inbound freight was charged to Too based on actual receipts and related
charges, while outbound freight was charged based on a percentage of cartons
shipped.

The Company's real estate operations, including all aspects of lease
negotiations and ongoing dealings with landlords and developers, were handled
centrally by the real estate division of The Limited ("Real Estate Division").
Real Estate Division expenses were allocated to Too based on a combination of
the Company's pro rata share of new and remodeled store construction projects
and open selling square feet. Additionally, Too was charged rent expense, common
area maintenance charges and utilities for stores shared with other consolidated
subsidiaries of The Limited. The charges were based on square footage and
represent the proportionate share of the underlying leases with third parties.

The Company was charged for usage of certain of The Limited's management
information systems (MIS) facilities. The Company was also charged rent expense
and utilities for certain distribution and home office space occupied.
<PAGE>   23
The Company's store design and construction operations were coordinated
centrally by the store planning division of The Limited ("Store Planning
Division"). The Store Planning Division facilitated the design and construction
of the stores and upon completion transferred the stores to Too at actual cost
net of construction allowances, if any. Store Planning Division expenses were
charged to Too based on a combination of Too's pro rata share of new and
remodeled store construction projects and open selling square feet.

The Limited provided certain services to the Company including, among other
things, certain tax, treasury, legal, corporate secretary, accounting, auditing,
corporate development, risk management, associate benefit plan administration,
human resource and compensation, government affairs and public relations
services. Identifiable costs were charged directly to the Company. All other
services-related costs not specifically attributable to an operating business
were allocated to Too based upon a percentage of sales.

The Company participated in The Limited's centralized cash management system.
Under this system, cash received from the Company's operations was transferred
to The Limited's centralized cash accounts and cash disbursements were funded
from the centralized cash accounts on a daily basis. Prior to the Spin-off, no
interest was charged or earned on the cash management account. Subsequent to the
Spin-off, Too earned interest on excess funds generated by the Company and
invested through The Limited's cash management system.

Management believes the charges and allocations described above were reasonable.
However, these charges and allocations were not necessarily indicative of the
amounts that would have been recorded by Too on a stand-alone basis.

The following table summarizes the related party transactions between Too and
The Limited (in thousands):

<TABLE>
<CAPTION>
                                                                1999            1998             1997
                                                            -------------   --------------   -------------
<S>                                                         <C>             <C>              <C>
Merchandise purchases                                          $  71,235        $  58,456        $ 42,255
Capital expenditures                                              29,867           11,818           2,359
Inbound and outbound shipping                                      6,790            6,023           5,702
Store leasing, construction and management                        58,471           50,044          23,044
Distribution center, MIS and home office expenses                 12,508            9,140           6,675
Corporate services and centrally managed functions                 8,723           13,920           9,153
                                                            -------------   --------------   -------------
                           Total                               $ 187,594        $ 149,401        $ 89,188
                                                            =============   ==============   =============
</TABLE>

The following table summarizes activity in the net investment by The Limited
account (in thousands):

<TABLE>
<CAPTION>
                                                                          1999                1998                1997
                                                                     ----------------   -----------------   -----------------
<S>                                                                  <C>                <C>                 <C>
Beginning balance                                                          $  50,017           $  37,065           $  53,923
Transactions with related parties                                            107,197             149,401              89,188
Centralized cash management, dividends and transfers                        (173,040)           (167,444)           (108,664)
Settlement of income taxes                                                    12,000              14,314              (4,548)
Net income                                                                     3,826              16,681               7,166
                                                                     ----------------   -----------------   -----------------
Ending balance                                                             $      --           $  50,017           $  37,065
                                                                     ================   =================   =================
</TABLE>
<PAGE>   24
In conjunction with the Spin-off, the Company and The Limited entered into
service agreements which include among other things tax, information technology
and store design and construction. These agreements are for a term of up to one
year. Service agreements were also entered into for the continued use by the
Company of its home office space and distribution services covering flow of
goods from factory to store. These agreements are for a term of up to three
years. Costs for these services are generally the costs and expenses incurred by
The Limited plus five percent of such amounts, excluding any markup on third
party costs. Amounts payable to the Limited were $2.8 million at January 29,
2000.

The Company does not anticipate that costs associated with the remaining service
agreements provided by The Limited which expire in May 2002 or costs incurred to
replace the services currently provided by The Limited will have a material
adverse impact on its financial condition.

9. RETIREMENT BENEFITS

The Company sponsors a qualified defined contribution retirement plan and a
nonqualified supplemental retirement plan. Participation in the qualified plan
is available to all associates who have completed 1,000 or more hours of service
with the Company during certain 12-month periods and attained the age of 21.
Participation in the nonqualified plan is subject to service and compensation
requirements. The Company's contributions to these plans are based on a
percentage of the associates' eligible annual compensation. The cost of these
plans was $2.9 million, $1.2 million and $1.9 million in years 1999, 1998 and
1997, respectively.

10. STOCK-BASED COMPENSATION

The Company has various stock option and restricted stock plans which provide
incentive stock options, non-qualified stock options and restricted stock to
officers and key associates. Stock options are granted at the fair market value
of the Company's common shares on the date of grant, and generally have ten-year
terms. The stock options and restricted stock grants generally vest over periods
from four to six years after grant date.

Prior to the Spin-off, certain associates of the Company participated in The
Limited's stock option and restricted stock plans. In connection with the
Spin-off, Too associates were allowed to exercise vested Limited options within
90 days of the Spin-off date. All unvested Limited stock options and restricted
shares held, including the intrinsic "in the money" value, by Too associates
were replaced with Too stock options and restricted shares (collectively, the
"awards"). The awards have the same ratio of the exercise price per option to
the market value per share and the same vesting provisions, option periods and
other terms as The Limited's awards that they replaced. The Company granted
additional awards on the date of Spin-off to certain associates and independent
directors with exercise prices equal to the market value of Too's common stock
at the date of Spin-off. Certain restricted stock awards contained performance
requirements which were attained in 1999.
<PAGE>   25
A summary of changes in the Company's stock option plans for 1999 is presented
below:

<TABLE>
<CAPTION>
                                                                               WEIGHTED
                                                          NUMBER OF         AVERAGE OPTION
                                                           SHARES          PRICE PER SHARE
                                                      ------------------  -------------------
<S>                                                   <C>                 <C>
Outstanding at beginning of year
     Granted and converted                                    1,913,600          $11
     Exercised                                                       --           --
     Canceled                                                   (16,200)         $ 9
                                                      ------------------  -------------------
Outstanding at end of year                                    1,897,400          $11
                                                      ==================  ===================

Options exercisable at end  of year                              25,300          $10
                                                      ==================  ===================
</TABLE>

The following table summarizes information about stock options outstanding at
January, 29, 2000:

<TABLE>
<CAPTION>
                                 OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                   ---------------------------------------------------    ---------------------------------
                                       WEIGHTED
                                        AVERAGE           WEIGHTED                            WEIGHTED
   RANGE OF           NUMBER           REMAINING          AVERAGE             NUMBER           AVERAGE
EXERCISE PRICE      OUTSTANDING    CONTRACTUAL LIFE    EXERCISE PRICE       EXERCISABLE    EXERCISE PRICE
--------------     --------------  ------------------  ---------------    ---------------- ----------------
<S>                <C>             <C>                 <C>                <C>              <C>
$ 5 - $10                817,000          7.2               $ 7               10,900            $ 9
$10 - $15                694,000          8.4                11               14,400             11
$15 - $20                386,400          9.4                16                   --             --
                   --------------  ------------------  ---------------    ---------------- ----------------
                       1,897,400          8.1               $11               25,300            $10
                   ==============  ==================  ===============    ================ ================
</TABLE>

The weighted average per share fair value of options granted is estimated using
the Black-Scholes option-pricing model and the following weighted average
assumptions for 1999: no expected dividends, price volatility of 35%, risk-free
interest rate of 7%, assumed forfeiture rate of 20% and expected life of 5.2
years.

Shares reserved under the various plans amounted to 3.8 million as of January
29, 2000. The weighted average per share fair value of options granted during
1999 was $4.82.

Under APB 25, no compensation expense is recognized in the financial statements
for stock options. Had compensation expense been recognized for stock-based
compensation plans in accordance with the Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", the Company would
have recorded net income and diluted earnings per share of $24,027 and $.78,
respectively.

A total of 524,000 restricted shares were granted in 1999 (inclusive of The
Limited's restricted shares converted to Too restricted shares in connection
with the Spin-off) with total market value of $8.9 million. Of this amount,
399,000 were subject to performance criteria which was met during 1999.
Restricted shares generally vest over periods from four to six years. The market
value of restricted shares, as adjusted at the measurement date for shares with
performance requirements, is being amortized over the vesting period.
Compensation expense related to restricted shares amounted to $1.7 million for
1999.

<PAGE>   26
11. LEGAL MATTERS

There are various claims, lawsuits and pending actions against Too incident to
the operations of its business. It is the opinion of management that the
ultimate resolution of these matters will not have a material effect on Too's
results of operations, cash flows or financial position.

12. QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE
    AMOUNTS)

<TABLE>
<CAPTION>
1999 - AS RESTATED (1)                     FIRST          SECOND         THIRD         FOURTH
------------------------------------   -------------  ------------- -------------- -------------
<S>                                    <C>            <C>           <C>            <C>
Net sales                                  $ 95,048       $ 86,864      $ 114,802     $ 155,641
Gross income                                 31,724         28,606         38,346        61,657
Net income                                    1,622          1,004          4,740        17,210
Earnings per share - basic                 $   0.05       $   0.03         $ 0.15     $    0.56
Earnings per share - diluted               $   0.05       $   0.03         $ 0.15     $    0.55

Market price per share:
     - High                                      --             --      $   19.19     $   19.00
     - Low                                       --             --      $   14.38     $   15.81
     - Close                                     --             --      $   16.00     $   17.13

1999 - AS PREVIOUSLY REPORTED
------------------------------------

Net income                                 $    812       $  1,004      $   4,740     $  17,210
Earnings per share - basic                 $   0.03       $   0.03      $    0.15     $    0.56
Earnings per share - diluted               $   0.03       $   0.03      $    0.15     $    0.55

1998 - AS RESTATED (1)
------------------------------------

Net sales                                  $ 82,257       $ 74,746      $  96,720     $ 123,220
Gross income                                 24,888         24,016         29,870        46,440
Net income                                      736            240          4,248        11,457
Earnings per share - basic                 $   0.02       $   0.01      $    0.14     $    0.37
Earnings per share - diluted               $   0.02       $   0.01      $    0.14     $    0.37

1998 - AS PREVIOUSLY REPORTED
------------------------------------

Net income                                 $    189       $    240      $   4,248     $  12,379
Earnings per share - basic                 $   0.01       $   0.01      $    0.14     $    0.40
Earnings per share - diluted               $   0.01       $   0.01      $    0.14     $    0.40
</TABLE>

(1)      During the fourth quarter of 1999, the Company changed its accounting
         for gift certificates. The Company has given retroactive effect to this
         change by restating its previously issued financial statements for the
         years ended January 30, 1999 and January 31, 1998 and the quarterly
         financial statements for fiscal 1999 and 1998.

         Historically, the Company recognized net receipts (redemptions) from
         gift certificates as a reduction (increase) to general, administrative
         and store operating expenses. The Company now defers the recognition of
         income on these transactions until the customer takes possession of the
         merchandise.
<PAGE>   27
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Too, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Too, Inc. and its
subsidiaries at January 29, 2000 and January 30, 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
January 29, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


PricewaterhouseCoopers LLP
Columbus, Ohio
February 17, 2000