<PAGE>

                                                                      EXHIBIT 13
                        FINANCIAL STATEMENT INFORMATION

Selected Financial Data
(in thousands, except per share data, number of stores and annual sales per
average square foot)

<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended
                                                      -------------------------------------------------------------------
                                                      February 3,   January 29,   January 30,   January 31,   February 1,
                                                       2001 (1)        2000          1999          1998          1997
                                                      -------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>           <C>           <C>
Statement of Income Data:
  Net Sales                                           $ 545,040     $ 450,426     $ 374,637     $ 320,228     $ 256,699
  Gross income (2)                                      192,581       158,189       122,908        93,325        58,725
  General, administrative and store
     operating expenses                                 137,285       115,734        95,027        81,459        67,683
  Operating income (loss)                                55,296        42,455        27,881        11,866        (8,958)
  Net income (loss)                                      32,245        24,576        16,681         7,166        (5,458)
  Earnings (loss) per share - basic                   $    1.05     $    0.80     $    0.54     $    0.23     $   (0.18)
  Earnings (loss) per share - diluted                 $    1.02     $    0.79     $    0.54     $    0.23     $   (0.18)

Balance Sheet Data:
  Inventories                                         $  45,715     $  34,656     $  27,565     $  18,661     $  20,437
  Total assets                                          209,111       178,593        90,769        73,574        75,193
  Total debt                                             50,000        50,000        -             -             -
  Total shareholders' equity                             79,711        45,467        50,017        37,065        53,923

Selected Operating Data:
  Comparable store sales increase (3)(6)                      4 %           9 %          15 %          20 %           8 %
  Total net sales growth                                   21.0 %        20.2 %        17.0 %        24.7 %        20.8 %
  Gross income rate (4)                                    35.3 %        35.1 %        32.8 %        29.1 %        22.9 %
  Operating income (loss) rate (4)                         10.1 %         9.4 %         7.4 %         3.7 %        (3.5)%
  Total number of stores open at
     year end                                               406           352           319           312           308
  Total square feet at year end
     (thousands)                                          1,669         1,441         1,281         1,244         1,224
  Annual sales per average square
     foot (5)                                         $     341     $     329     $     299     $     258     $     212
  Cash flow from operations                           $  29,209     $  69,547     $  17,361     $  30,294     $  13,764
  Capital expenditures                                $  36,308     $  31,424     $  14,294     $   4,780     $   8,504
</TABLE>

(1)  Represents the 53-week fiscal year ended February 3, 2001.
(2)  Gross income equals net sales less costs of goods sold, buying and
     occupancy costs.
(3)  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.
(4)  Calculated as a percentage of net sales.
(5)  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.
(6)  Comparable store sales for fiscal 2000 are for the 52-weeks ended January
     27, 2001.

                                      39
<PAGE>

               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," "we," "our," "the Company" and "us" refer to
Too, Inc. and our subsidiaries.

GENERAL

Fiscal 2000 was a year of change and transition for us as we completed our first
full year as an independent, separately traded, public company. Since our Spin-
off from The Limited in August 1999, we have made solid progress on several of
our financial and strategic initiatives designed to improve our financial
performance and to build and strengthen our 360-degree brand. During fiscal
2000, we have:

 . increased sales 21% to $545 million

 . increased comparable store sales by 4% despite a difficult retail environment
  in the latter half of 2000

 . increased net income 31% to $32.2 million or $1.02 per diluted share versus
  net income of $24.6 million or $.79 per diluted share in fiscal 1999

 . mailed 12.5 million "catazines" which not only generated sales into its own
  channel, but served to drive sales to the stores

 . launched our interactive e-commerce platform on our Web site at
  limitedtoo.com, which is currently generating in excess of one-half million
  sessions per month

 . rolled out our proprietary credit card in September 2000 with over 100,000
  cards issued by fiscal year-end.

Additionally, we have nearly eliminated administrative and support functions
provided by The Limited after the Spin-off that were covered by the Transitional
Services and Separation Agreements. This means that we are self sufficient
except for the rent we pay The Limited for our home office and distribution
services provided by one of their subsidiaries. We have commenced construction
on our new distribution center and home office which we expect to move into
during the first quarter 2002.

                                      40
<PAGE>

RESULTS OF OPERATIONS

Our results of operations, expressed as a percentage of sales, follow:

<TABLE>
<CAPTION>
                                                           Fiscal Year Ended
                                                 ---------------------------------------
                                                 February 3,   January 29,   January 30,
                                                  2001 (1)        2000          1999
                                                 -----------   -----------   -----------
<S>                                              <C>           <C>           <C>
Net Sales                                             100.0 %      100.0 %        100.0 %
  Costs of goods sold, buying and
  occupancy costs                                      64.7         64.9           67.2
                                                 -----------   -----------   -----------
Gross income                                           35.3         35.1           32.8
  General, administrative and store
  operating expenses                                   25.2         25.7           25.4
                                                 -----------   -----------   -----------
Operating income                                       10.1          9.4            7.4
Interest expense, net                                   0.3          0.3            0.0
                                                 -----------   -----------   -----------
Income before income taxes                              9.9          9.1            7.4
Provision for income taxes                              3.9          3.6            3.0
                                                 -----------   -----------   -----------
Net income                                              5.9 %        5.5 %          4.4 %
                                                 ===========   ===========   ===========
</TABLE>

(1)  Represents the 53-week fiscal year ended February 3, 2001.

Net income increased 31% in fiscal 2000 to $32.2 million or $1.02 per diluted
share versus net income of $24.6 million or $.79 per diluted share in fiscal
1999. An increase in gross income and a reduction, as a percent of sales, in
general, administrative and store operating expenses resulted in a 70 basis
point improvement in operating income for fiscal 2000.

                                      41
<PAGE>

Financial Summary

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

<TABLE>
<CAPTION>
                                                                    Fiscal Year Ended                   % Change
                                                         ---------------------------------------      -------------
                                                         February 3,   January 29,   January 30,      1999-   1998-
                                                          2001 (1)        2000          1999          2000    1999
                                                         -----------   ----------    -----------      -----   -----
<S>                                                      <C>           <C>           <C>              <C>     <C>

Net sales (millions)                                     $     545.0   $    450.4    $     374.6        21 %    20 %
Comparable store sales increase (2)(3)                             4 %          9 %           15 %
Annual sales per average square foot (4)                 $       341   $      329    $       299         4 %    10 %
Sales per average store (thousands)                      $     1,418   $    1,347    $     1,197         5 %    13 %
Average store size at year end (square feet)                   4,111        4,094          4,015        -  %     2 %
Total square feet at year end (thousands)                      1,669        1,441          1,281        16 %    12 %
Number of stores:
  Beginning of year                                              352          319            312
     Opened                                                       58           42             10
     Closed                                                       (4)          (9)            (3)
                                                         -----------   ----------    -----------
  End of Period                                                  406          352            319
                                                         ===========   ==========    ===========

  Stores remodeled                                                10           18             15

  Stores with "Girl Power" format                                156           89             29

  Percentage of stores in "Girl Power" format                     38 %         25 %            9 %
</TABLE>

(1)  Represents the 53-week fiscal year ended February 3, 2001.
(2)  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.
(3)  Comparable store sales for fiscal 2000 are for the 52-weeks ended January
     27, 2001.
(4)  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 FEBRUARY 3, 2001 COMPARED TO FISCAL YEAR ENDED JANUARY 29,
2000

Net Sales - Net sales for 2000 increased 21% to $545.0 million from $450.4
million for 1999. The increase was primarily a result of a 4% increase in
comparable store sales and the net addition of 54 stores. Additionally, over 1%
of the increase was due to an increase in catazine and e-commerce sales. Net
sales productivity increased 4% to $341 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 higher under the Girl Power format compared to the
stores for the balance of the Company.

Within merchandise categories, sales of Active apparel increased significantly
led by Active bottoms and tees. Also, the entire Add-on category (principally
underwear, bras, sleepwear and swimwear) posted solid sales increases as did cut
and sewn knit tops.

                                      42
<PAGE>

Gross Income - The gross income rate expressed as a percentage of net sales,
increased to 35.3% in fiscal 2000 from 35.1% for 1999. The increase in rate was
primarily attributable to a higher merchandise margin arising from improved
initial markups which were partially offset by an increase in markdowns. This
increase in merchandise margin was partially offset by an increase, expressed as
a percentage of net sales, in buying and occupancy costs due to incremental
catazine costs. The Company mailed approximately 12.5 million catazines in
fiscal 2000 compared to 1.5 million in 1999.

General, Administrative and Store Operating Expenses - General, administrative
and store operating expenses, expressed as a percentage of net sales, decreased
to 25.2% from 25.7% for 1999. The leveraging of store expenses associated with a
4% increase in comparable store sales and lower home office expenses, expressed
as a percentage of sales, were partially offset by higher catazine and e-
commerce related costs.

Operating Income - Operating income, expressed as a percentage of net sales,
increased to 10.1% for 2000 from 9.4% for 1999. The increase was attributable to
higher gross income and lower general, administrative and store operating
expenses, expressed as a percentage of sales.

Interest Expense, Net - Interest expense, net of interest income, amounted to
$1.55 million in fiscal 2000 compared to $1.48 million in 1999. Interest expense
was for the term portion of borrowings under the Company's Credit Facility,
while interest income was earned on the short-term investment of cash balances.
Interest expense and interest income amounted to $5.04 million and $3.49
million, respectively for the year ended February 3, 2001 and $2.62 and $1.14
million, respectively, for the year ended January 29, 2000. Interest expense
also includes the amortization of financing fees and related costs incurred in
connection with the Credit Facility.

Income Taxes - Income tax expense amounted to $21.5 million for 2000 compared to
$16.4 million for 1999. The annual effective tax rate remained unchanged at 40%
for fiscal 2000.


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

Net Sales - Net sales for 1999 increased 20% to $450.4 million from $374.6
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 $329 per average square foot due
in part to the increase in the number of stores operating under the Girl Power
format. Within merchandise categories, knit tops showed a significant sales
increase, led by cut and sewn tops and Active T-shirts. The Add-on category
(principally underwear, sleepwear and swimwear) and accessories also increased
significantly.

Gross Income - The gross income rate expressed as a percentage of net sales,
increased to 35.1% from 32.8% 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
catazine 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 25.7% from 25.4% for 1998. This increase was attributable to various expenses
associated with the Spin-off, incremental catazine costs and increased

                                      43
<PAGE>

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, Net - Interest expense, net of interest income, amounted to
$1.48 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. Interest expense also includes the amortization of
financing fees and related costs incurred in connection with the Credit
Facility.

Income Taxes - Income tax expense amounted to $16.4 million for 1999 compared to
$11.2 million for 1998.  The annual effective tax rate decreased slightly in
1999 to 40.0% from 40.2% for 1998.

                                      44
<PAGE>

FINANCIAL CONDITION

Our balance sheet remains strong due to a substantial increase in operating
income and positive cash flow from operations. We were able to finance all
capital expenditures with working capital generated from operations and ended
the year with approximately $55 million in cash and equivalents. Our debt-to-
equity ratio decreased substantially to 63% at February 3, 2001, from 110% at
January 29, 2000, as long-term debt (incurred in connection with the Spin-off)
remained unchanged while equity increased principally due to a 31% increase in
net income. 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. A summary of the Company's working capital position
and capitalization follows (thousands):

<TABLE>
<CAPTION>
                                                                             Fiscal Year Ended
                                                                  ---------------------------------------
                                                                  February 3,   January 29,   January 30,
                                                                     2001          2000          1999
                                                                  -----------   -----------   -----------
<S>                                                               <C>           <C>           <C>
Net cash provided by operating activities                         $    29,209   $    69,547   $    17,361

Working capital                                                        40,762        26,098           311

Capitalization:
  Long-term debt                                                       50,000        50,000        -
  Shareholders' equity (1)                                             79,711        45,467        50,017
                                                                  -----------   -----------   -----------
Total capitalization                                              $   129,711   $    95,467   $    50,017
                                                                  ===========   ===========   ===========

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

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

In connection with the Spin-off, 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 prior to
the Spin-off. At February 3, 2001, and January 29, 2000, only the $50-million
five-year term portion of the Credit Facility was outstanding.

Operating Activities

Net cash provided by operating activities amounted to $29.2 million for fiscal
2000 versus $69.5 million for fiscal 1999. An increase in net income plus
depreciation and amortization was more than offset by the timing of cash
payments related to accounts payable and accrued expenses in fiscal 2000 and
1999. Net cash provided by operating activities increased to $69.5 million for
fiscal 1999 compared to $17.4 million for fiscal 1998. This 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.

                                      45
<PAGE>

Investing Activities

Capital expenditures amounted to $36.3 million, $31.4 million and $14.3 million
for fiscal years 2000, 1999 and 1998, respectively. In fiscal 2000, we expended
$10 million in connection with the construction of our new home office and
distribution center. The balance of capital expenditures in fiscal 2000 was
incurred primarily to construct new stores and remodel existing stores as was
the case for 1999 and 1998. Approximately $21 million and $28 million of capital
expenditures made in fiscal 2000 and 1999 were for the construction of new
stores and the remodeling of existing stores.

We anticipate spending between $70 million and $75 million in fiscal 2001 for
capital expenditures, of which $20 million to $25 million will be for new
stores, remodeling or expansion of existing stores and related fixtures and
equipment. We intend to add 220,000 to 230,000 square feet in 2001, which will
represent a 13% to 14% increase over year-end 2000. We anticipate that the
increase will result from opening approximately 50 to 55 new stores and
expanding a portion of seven to ten stores identified for remodeling.
Additionally, we plan to open between five and seven new stores by the 2001
Holiday season related to our new growth concept, "mishmash."

We estimate that the average cost for leasehold improvements, furniture and
fixtures for stores to be opened in 2001 will be between $260,000 and $270,000
per store, after giving effect to landlord allowances. Average pre-opening costs
per store, which will be expensed as incurred, are expected to approximate
$11,000 while inventory purchases are expected to average approximately $75,000
per store. We also anticipate capital expenditures between $45 million and $50
million in fiscal 2001 principally related to the construction of a new
distribution center and home office scheduled for completion in the first
quarter of 2002.

We expect that substantially all capital expenditures in 2001 will be funded by
cash on hand and net cash provided by operating activities.

Financing Activities

Financing activities in 2000 principally comprised the issuance of common shares
related to restricted stock and stock options plans. 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 of 1999.

                                      46
<PAGE>

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 had 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.

Services Agreement

The Services Agreement relates to transitional services that The Limited or its
subsidiaries or affiliates provides or provided to us subsequent to the Spin-
off. Under this agreement, The Limited provides services in exchange for fees
which we believe are similar in material respects to what a third-party provider
would charge, and are based on several billing methodologies. Under one of these
billing methodologies, which is the most prevalent, The Limited provides us with
services at costs comparable to those charged to other businesses operated by
The Limited from time to time. We are generally 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 cost components are not subject to the 5%
mark-on. Subsequent to fiscal 2000, the services that The Limited will provide
to us principally relate to merchandise distribution covering flow of goods from
factory to store through the third anniversary of the Spin-off.

Store Leases Agreement

At February 3, 2001 and January 29, 2000, 89 and 126 of our stores were adjacent
to The Limited's stores, respectively. In addition, at February 3, 2001 and
January 29, 2000, 108 and 122 stores, respectively, 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

                                      47
<PAGE>

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 87 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 on that basis.

Approximately 53 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 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 principal 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.


Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 is

                                      48
<PAGE>

effective for all fiscal quarters of all fiscal years beginning after June 15,
2000 (February 4, 2001 for the Company). SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. Management of the Company
anticipates that the adoption of SFAS 133 will not have a material effect on the
Company's results of operations or its financial position.

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.

<TABLE>
<CAPTION>
(in thousands except percentages)
2000 Quarters                            First            Second            Third           Fourth (1)
=============                          ----------       ----------        ----------        ----------
<S>                                    <C>              <C>               <C>               <C>
Net Sales                              $  118,753       $  108,315        $  133,829        $  184,143
  % of full year                             21.8 %           19.9 %            24.5 %            33.8 %
Gross income                           $   39,472       $   34,731        $   45,257        $   73,121
  % of full year                             20.5 %           18.0 %            23.5 %            38.0 %
Net income                             $    3,142       $    1,921        $    6,378        $   20,804
  % of full year                              9.7 %            6.0 %            19.8 %            64.5 %

1999 Quarters
=============

Net sales                              $   94,598       $   86,365        $  114,236        $  155,227
  % of full year                             21.0 %           19.2 %            25.4 %            34.4 %
Gross income                           $   31,274       $   28,107        $   37,756        $   61,052
  % 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 %
</TABLE>

(1)  Represents the 14-week period ended February 3, 2001.


Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) contained in
Management's Discussion and Analysis or made by management of the Company
involve risks and uncertainties and are subject to change based on various
important factors, many of which may be beyond the Company's control. 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, and include statements in this
Management's Discussion and Analysis relating to anticipated capital
expenditures in 2001 for new stores and the remodeling or expansion of existing
stores, and the related funding. The following factors, among others, in some
cases have affected, and in the future could affect, the Company's financial
performance and actual results and could cause future performance and financial
results to differ materially from those expressed or implied in any forward-
looking statements included in this Management's Discussion and Analysis or
otherwise made by management: changes in consumer spending patterns, consumer
preferences and overall economic conditions; the impact of competition and
pricing; changes in weather

                                      49
<PAGE>

patterns; currency and exchange risks; changes in existing or potential trade
restrictions, duties, tariffs or quotas; changes in political or financial
stability; changes in postal rates and charges and paper and printing costs;
availability of suitable store locations at appropriate terms; ability to
develop new merchandise; ability to hire and train associates; and/or other risk
factors that may be described in the Risk Factors section of the Company's Form
10, filed August 18, 1999, as well as other filings with the Securities and
Exchange Commission. Future economic and industry trends that could potentially
impact revenue and profitability are difficult to predict. The Company assumes
no obligation to publicly update or revise its forward-looking statements even
if experience or future changes make it clear that any projected results
expressed or implied therein will not be realized.

                                      50
<PAGE>

                                   TOO, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                            2000            1999            1998
                                                                         ----------      ----------      ----------
<S>                                                                      <C>             <C>             <C>

Net sales                                                                $  545,040      $  450,426      $  374,637

  Costs of goods sold, buying and
     occupancy costs                                                        352,459         292,237         251,729
                                                                         ----------      ----------      ----------
Gross income                                                                192,581         158,189         122,908
  General, administrative and store
     operating expenses                                                     137,285         115,734          95,027
                                                                         ----------      ----------      ----------
Operating income                                                             55,296          42,455          27,881
Interest expense, net                                                         1,551           1,479               -
                                                                         ----------      ----------      ----------
Income before income taxes                                                   53,745          40,976          27,881
Provision for income taxes                                                   21,500          16,400          11,200
                                                                         ----------      ----------      ----------
Net income                                                               $   32,245      $   24,576      $   16,681
                                                                         ==========      ==========      ==========

Net income per share:

  Basic                                                                  $     1.05      $     0.80      $     0.54
                                                                         ==========      ==========      ==========

  Diluted                                                                $     1.02      $     0.79      $     0.54
                                                                         ==========      ==========      ==========

Weighted average common shares:

  Basic                                                                      30,740          30,674          30,674
                                                                         ==========      ==========      ==========

  Diluted                                                                    31,737          30,974          30,674
                                                                         ==========      ==========      ==========
</TABLE>

             The accompanying notes are an integral part of these
                       Consolidated Financial Statements

                                      51
<PAGE>

                                   TOO, INC.
                          CONSOLIDATED BALANCE SHEETS
                      (in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                       February 3,      January 29,
                                                                          2001             2000
                                                                       -----------      -----------
<S>                                                                    <C>              <C>

                           ASSETS

Current assets:
  Cash and equivalents                                                 $    54,788      $    59,984
  Receivables                                                                2,422            2,863
  Inventories                                                               45,715           34,656
  Store supplies                                                             9,050            6,171
  Deferred income taxes                                                      2,898            2,904
  Other                                                                      1,408              504
Total current assets                                                       116,281          107,082

Property and equipment, net                                                 81,184           61,874
Deferred income taxes                                                       10,321            7,838
Other assets                                                                 1,325            1,799
                                                                       -----------      -----------

Total assets                                                           $   209,111      $   178,593
                                                                       ===========      ===========
          LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                     $    24,213      $    20,754
  Accrued expenses                                                          37,703           46,689
  Income taxes payable                                                      13,603           13,541
                                                                       -----------      -----------
Total current liabilities                                                   75,519           80,984

Long-term debt                                                              50,000           50,000

Other long-term liabilities                                                  3,881            2,142

Commitments and contingencies

                   SHAREHOLDERS' EQUITY
Preferred stock, 50 million shares authorized                                    -                -
Common Stock, $.01 par value, 100 million shares authorized,
  30.8 million and 30.7 million shares issued and outstanding
  at February 3, 2001 and January 29, 2000, respectively                       308              307
Paid in capital                                                             26,408           24,410
Retained earnings                                                           52,995           20,750
                                                                       -----------      -----------

Total shareholders' equity                                                  79,711           45,467
                                                                       -----------      -----------

Total liabilities and shareholders' equity                              $   209,111     $   178,593
                                                                       ===========      ===========
</TABLE>

             The accompanying notes are an integral part of these
                       Consolidated Financial Statements

                                      52
<PAGE>

                                   TOO, INC.
                     CONSOLIDATED STATEMENTS OF CHANGES IN
                             SHAREHOLDERS' EQUITY
                                (in thousands)

<TABLE>
<CAPTION>

                                                                                      Net
                                                  Common Shares                    Investment                        Total
                                                 ---------------      Paid In        by The        Retained      Shareholders'
                                                 Shares   Amount      Capital       Limited        Earnings         Equity
                                                 ------   ------      -------      ----------      --------      -------------
<S>                                              <C>      <C>         <C>          <C>             <C>           <C>

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

Net income                                                                                           32,245             32,245
Issuance of common stock under stock
  option and restricted stock plans                  85        1        1,100                                            1,101
Other equity changes                                                      898                                              898
                                                 ------   ------      -------      ----------      --------      -------------

Balances, February 3, 2001                       30,759   $  308      $26,408      $        -      $ 52,995      $      79,711
                                                 ======   ======      =======      ==========      ========      =============
</TABLE>

             The accompanying notes are an integral part of these
                       Consolidated Financial Statements


                                      53
<PAGE>

                                   TOO, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)

<TABLE>
<CAPTION>
                                                                            2000            1999            1998
                                                                         ----------      ----------      ----------
<S>                                                                      <C>             <C>             <C>

Cash flows from operating activities:

  Net income                                                             $   32,245      $   24,576      $   16,681

Impact of other operating activities on cash flows:

  Depreciation and amortization                                              16,536          13,804          10,563

  Changes in assets and liabilities:
     Inventories                                                            (11,059)         (7,091)         (8,904)
     Accounts payable and accrued expenses                                   (6,646)         40,075           2,215
     Income taxes                                                            (2,319)            980          (3,114)
     Other assets                                                            (1,386)         (2,999)           (577)
     Other liabilities                                                        1,838             202             497
                                                                         ----------      ----------      ----------

  Net cash provided by operating activities:                                 29,209          69,547          17,361
                                                                         ----------      ----------      ----------

Investing activities:

  Capital expenditures                                                      (36,308)        (31,424)        (14,294)
                                                                         ----------      ----------      ----------

  Net cash used for investing activities:                                   (36,308)        (31,424)        (14,294)
                                                                         ----------      ----------      ----------

Financing activities:

  Stock options, restricted stock and other equity changes                    1,903               -               -
  Net increase (decrease) in net investment by
     The Limited                                                                  -          20,874          (3,729)
  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:                       1,903          20,874          (3,729)
                                                                         ----------      ----------      ----------

  Net increase (decrease) in cash and equivalents:                           (5,196)         58,997            (662)

  Cash and equivalents, beginning of year                                    59,984             987           1,649
                                                                         ----------      ----------      ----------

  Cash and equivalents, end of year                                      $   54,788      $   59,984      $      987
                                                                         ==========      ==========      ==========
</TABLE>

             The accompanying notes are an integral part of these
                       Consolidated Financial Statements

                                      54
<PAGE>

                  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.


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 year 2000 represent
the 53-week period ended February 3, 2001 while the 1999 and 1998 fiscal years
represent the 52-week periods ended January 29, 2000, and January 30, 1999.

Cash Equivalents

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

                                      55
<PAGE>

Inventories

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

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 supply balances are
periodically reviewed and adjusted as appropriate for changes in supply levels
and costs.

Catalog and Advertising Costs

Catalog costs, principally catalog production and mailing costs, are amortized
over the expected revenue stream, which is generally three months from the date
that the catalogs are first 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 $8.4 million, $1.7 million and $567,000 for fiscal years 2000, 1999
and 1998, respectively.

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. Interest costs associated with the
construction of certain long-term projects are capitalized. 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. Impaired assets are written down to estimated
fair value with fair value generally being determined based on discounted
expected future cash flows. No impairment charges have been recorded based on
management's review.

Income Taxes

The Company accounts for income taxes using 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 when
those temporary differences are expected to reverse. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.

                                      56
<PAGE>

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 year of the Spin-off.

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. A reserve is
provided for projected merchandise returns based on prior experience.

In the fourth quarter 2000, the Company adopted Emerging Issues Task Force
(EITF) No. 00-10 "Accounting for Shipping and Handling Fees and Costs" which
changed its classification of shipping revenue. Amounts relating to shipping and
handling billed to customers in a sale transaction are now classified as
revenue. The Company considers related shipping and handling costs to be the
direct shipping charges associated with catalog and e-commerce sales. Such costs
are reflected in cost of goods sold, buying and occupancy costs. The Company
also changed the classification of employee discounts as a reduction of revenue.
Previously, shipping revenues and the related expenses and employee discounts
were included in SG&A. Prior periods' financial statements presented for
comparative purposes have been reclassified to comply with these new reporting
guidelines. These reclassifications had no impact on the results of operations,
cash flows or the financial position of the Company.

The Company adopted Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements" during the fourth quarter of 2000. SAB No.
101 provides the Securities and Exchange Commission's views in applying
generally accepted accounting principles to selected revenue recognition issues.
The adoption of SAB No. 101 did not have a material effect on the Company's
results of operations, cash flows or financial position.

Store Pre-opening Expenses

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

                                      57
<PAGE>

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 2000.

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. A reconciliation of basic and diluted common
shares used in the determination of earnings per share follows (in thousands):

<TABLE>
<CAPTION>
                                                   2000            1999            1998
                                                ----------      ----------      ----------
<S>                                             <C>             <C>             <C>

Net Income                                      $   32,245      $   24,576      $   16,681
                                                ==========      ==========      ==========

Weighted average common shares - basic              30,740          30,674          30,674
Dilutive effect of stock options
  and restricted stock                                 997             300               -
                                                ----------      ----------      ----------
Weighted average common shares - diluted            31,737          30,974          30,674
                                                ==========      ==========      ==========
</TABLE>

Options to purchase 174,200 and 9,000 common shares were not included in the
computation of net income per diluted share for the fiscal years ended February
3, 2001 and January 29, 2000, respectively, as the options' exercise prices were
greater than the average market price of the common shares for the reported
periods. No options to purchase common shares were excluded from the computation
of net income per share for the fiscal year ended January 30, 1999.

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. Because actual results may differ from those estimates,
the Company revises its estimates and assumptions as new information becomes
available.

                                      58
<PAGE>

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (February 4, 2001 for
the Company). SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and the type of hedge transaction. Management of the Company anticipates that
the adoption of SFAS 133 will not have a material effect on the Company's
results of operations or its financial position.


3.   PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                              February 3,      January 29,
                                                 2001             2000
                                              -----------      -----------
<S>                                           <C>              <C>

Land                                          $     7,691      $         -
Furniture, fixtures and equipment                  93,880           84,166
Leasehold improvements                             42,528           37,102
Construction-in-progress                            3,643                -
                                              -----------      -----------
  Total                                           147,742          121,268
Less: accumulated depreciation and
  amortization                                    (66,558)         (59,394)
                                              -----------      -----------
Property and equipment, net                   $    81,184      $    61,874
                                              ===========      ===========
</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 10 and 15 years.
Annual store rent is generally composed 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 February 3, 2001, the Company operated 108 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 53 store
leases and assesses a fee based on stores' sales exceeding defined levels.

                                      59
<PAGE>

A summary of rent expense for the fiscal years 2000, 1999, and 1998 follows (in
thousands):

<TABLE>
<CAPTION>
                                     2000            1999            1998
                                  ----------      ----------      ----------
<S>                               <C>             <C>             <C>

Fixed minimum                     $   36,881      $   32,515      $   28,916
Contingent                             1,649           1,037             375
                                  ----------      ----------      ----------
  Total store rent                    38,530          33,552          29,291
Equipment and other                    1,074           1,077             880
                                  ----------      ----------      ----------
  Total rent expense              $   39,604      $   34,629      $   30,171
                                  ==========      ==========      ==========
</TABLE>

A summary of minimum rent commitments under noncancellable leases as of February
3, 2001 follows (in thousands):

<TABLE>
<S>                                               <C>
2001                                              $   40,561
2002                                                  40,008
2003                                                  39,053
2004                                                  37,430
2005                                                  33,490
Thereafter                                            80,083
</TABLE>

5.   ACCRUED EXPENSES

Accrued expenses consisted of (in thousands):

<TABLE>
<CAPTION>
                                                  February 3,      January 29,
                                                     2001             2000
                                                  -----------      -----------
<S>                                               <C>              <C>

Compensation, payroll taxes and benefits          $    16,057      $    13,186
Rent                                                    8,276           12,482
Taxes, other than income                                3,864            3,092
Other                                                   9,506           17,929
                                                  -----------      -----------
  Total                                           $    37,703      $    46,689
                                                  ===========      ===========
</TABLE>

                                      60
<PAGE>

6.   CREDIT FACILITY

During August 1999, the Company entered into a $100-million, five-year credit
agreement (the "Credit Facility") with a syndicate of banks. The Credit Facility
is collateralized by virtually all assets of the Company and comprises 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.

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. As of February 3, 2001, there were no
amounts outstanding under the revolving portion of the Credit Facility.

The aggregate amount of future maturities for long-term debt are as follows:
$17.5 million in 2002; $20.0 million in 2003; and $12.5 million in 2004.

Net interest expense comprises the following (in thousands):

<TABLE>
<CAPTION>
                                 2000            1999            1998
                              ----------      ----------      ----------
<S>                           <C>             <C>             <C>

Interest expense              $    5,044      $    2,622      $        -
Interest income                   (3,493)         (1,143)              -
                              ----------      ----------      ----------
  Net interest expense        $    1,551      $    1,479      $        -
                              ==========      ==========      ==========
</TABLE>

Interest paid in fiscal 2000 and fiscal 1999 amounted to $4.7 million and $2.1
million, respectively.

                                      61
<PAGE>

7.   INCOME TAXES

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


                                      2000           1999           1998
                                   ---------      ---------      ---------
Current:
  Federal                          $  19,534      $  13,631      $  12,326
  State                                4,443          3,447          2,832
                                   ---------      ---------      ---------
Total Current                         23,977         17,078         15,158

Deferred:
  Federal                             (2,347)          (621)        (3,068)
  State                                 (130)           (57)          (890)
                                   ---------      ---------      ---------
Total Deferred                        (2,477)          (678)        (3,958)
Total income tax provision         $  21,500      $  16,400      $  11,200
                                   ---------      ---------      ---------

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

                                      2000           1999           1998
                                   ---------      ---------      ---------
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            0.5            0.7
                                   ---------      ---------      ---------
Total effective income tax rate         40.0 %         40.0 %         40.2 %
                                   =========      =========      =========


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

                                                 February 3,    January 29,
                                                     2001           2000
                                                  ---------      ---------
Book depreciation in excess of tax                $   2,787      $   3,306
Rent                                                  1,679          2,526
Inventory                                             1,149            785
Accrued expenses                                      4,558          2,284
Other, net                                            3,046          1,841
                                                  ---------      ---------
   Total deferred income taxes                    $  13,219      $  10,742
                                                  ---------      ---------

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 The Limited
related to income tax liabilities incurred prior to the Spin-off totaled $8.5
million, $12.0 million and $14.3 million in fiscal years 2000, 1999 and 1998,
respectively.  Subsequent to the Spin-off, the Company made income tax payments



                                      62
<PAGE>

directly to taxing authorities amounting to $16.1 million and $2.7 million in
fiscal years 2000 and 1999, respectively.


8.   RELATED PARTY TRANSACTIONS

Prior to the Spin-off, the Company and The Limited entered into service
agreements which include among other things tax sharing and compliance,
information technology support and store design and construction. These
agreements were generally for a term of up to one year with most of the
agreements having expired during fiscal 2000. 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 The
Limited's costs of providing the services plus 5% of these costs, excluding any
markup on third-party costs.

Significant merchandise purchases were made from Mast, a wholly-owned subsidiary
of The Limited. Merchandise 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 are negotiated on a competitive basis by merchants
of Too with Mast, Gryphon and manufacturers.

The Company does not anticipate that costs to replace the remaining service
agreements with The Limited will have a material adverse impact on its financial
condition.

Prior to the Spin-off, transactions between the Company and The Limited and its
subsidiaries and affiliates primarily consisted of merchandise purchases,
capital expenditures, inbound and outbound shipping, store leasing, construction
and management, distribution center, information systems and certain other home
office and corporate services expenses. Management believes that the charges and
allocations related to the services as 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 amounts incurred related to transactions between
Too and The Limited (in thousands):

<TABLE>
<S>                                                   <C>             <C>            <C>
                                                         2000            1999           1998
                                                      ---------       ---------      ---------
Merchandise purchases                                 $  74,866       $  71,235      $  58,456
Capital expenditures                                      9,038          29,867         11,818
Inbound and outbound shipping                             8,717           6,790          6,023
Store leasing, construction and management               34,799          58,471         50,044
Distribution center, MIS and home office expenses        12,325          12,508          9,140
Corporate services and centrally managed functions            0           8,723         13,920
                                                      ---------       ---------      ---------
                                                      $ 139,745       $ 187,594      $ 149,401
                                                      =========       =========      =========

</TABLE>

Amounts payable to the Limited were $13.2 million at February 3, 2001 and $12.6
million at January 29, 2000.



                                      63
<PAGE>

The following table summarizes activity in the net investment by The Limited
account for fiscal years 1999 and 1998 (in thousands):

<TABLE>
<S>                                                                   <C>            <C>
                                                                         1999           1998
                                                                      ---------      ---------
Beginning balance                                                     $  50,017      $  37,065
Transactions with related parties                                       107,197        149,401
Centralized cash management, dividends and transfers                   (173,040)      (167,444)
Settlement of income taxes                                               12,000         14,314
Net income                                                                3,826         16,681
                                                                      ---------      ---------
Ending balance                                                        $       -      $  50,017
                                                                      =========      =========


</TABLE>


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 $4.2 million, $2.9 million, and $1.2 million in fiscal years 2000,
1999 and 1998, 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 10-year
terms. The options generally become exercisable in installments of 25% on each
of the first four anniversaries of the 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 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.

                                      64
<PAGE>

Approximately 100,000 and 524,000 restricted shares were granted in 2000 and
1999 (inclusive of The Limited's restricted shares converted to Too restricted
shares in connection with the Spin-off) with total market value at the grant
date of $2.7 million and $8.9 million, respectively.  All 100,000 restricted
shares granted in 2000 and 399,000 of the restricted shares granted in 1999 were
subject to performance requirements all of which have been met.  Restricted
shares generally vest on a graduated scale over four 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 $4.3 million and
$1.7 million for 2000 and 1999, respectively.

A summary of changes in the Company's stock option plans for fiscal years 2000
and 1999 is presented below:

<TABLE>
<CAPTION>
                                                    2000                              1999
                                        ---------------------------        ---------------------------
                                                        Weighted                           Weighted
                                         Number of   Average Option         Number of    Average Option
                                           Shares      Price/Share           Shares       Price/Share
                                        -----------    -----------         -----------    -----------
<S>                                     <C>           <C>                  <C>           <C>
Outstanding at beginning of year          1,897,400         $11                 -              $ 0

  Granted and converted                     614,300          26              1,913,600          11
  Exercised                                 (38,400)         10                 -               -
  Canceled                                 (137,100)         16                (16,200)          9
                                        -----------    -----------         -----------    -----------
Outstanding at end of year                2,336,200         $14              1,897,400         $11
                                        ===========    ===========         ===========    ===========
Options exercisable at end of year          514,200         $11                 25,300         $10
                                        ===========    ===========         ===========    ===========

</TABLE>

The following table summarizes information about stock options outstanding at
February 3, 2001:

<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               785,900          6.2               $ 7               173,000          $ 7
$10 - $15               633,900          7.4                11               267,000           11
$15 - $20               378,400          8.4                17                74,200           17
$20 - $25                37,500          9.7                24                   -             -
$25 - $32               500,500          9.3                27                   -             -
                    -----------    ----------------    --------------      -----------    --------------
                      2,336,200          7.6               $14               514,200          $11
                    ===========    ================    ==============      ===========    ==============

</TABLE>

The weighted average fair value per-share of options granted is estimated using
the Black-Scholes option-pricing model and the following weighted average
assumptions for fiscal years 2000 and 1999, respectively: price volatility of
45% and 35%, risk-free interest rate of 5.5% and 7.0%, and expected life of 5.5
and 5.2 years. Additionally, for  fiscal years 2000 and 1999,  no expected
dividends are assumed and the forfeiture rate is 20%.

Shares reserved under the various plans amounted to 3.8 million as of February
3, 2001 and January 29, 2000.  The weighted average fair value of options
granted during fiscal years 2000 and 1999, respectively, was $13.29 and $4.82.



                                      65
<PAGE>

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 of $30.9 million and $24.0 million, and diluted
earnings per share of $.97 and $.78, for fiscal years 2000 and 1999,
respectively.


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.






                                      66
<PAGE>

12.  QUARTERLY FINANCIAL DATA (unaudited)(in thousands except per share amounts)

<TABLE>
<S>                                <C>            <C>            <C>            <C>

2000 - (1)                            First         Second          Third         Fourth
----------                         ----------     ----------     ----------     ----------
Net sales                          $  118,753     $  108,315     $  133,829     $  184,143
Gross income                           39,472         34,731         45,257         73,121
General, administrative and
  store operating expenses             33,858         31,133         34,118         38,176
Net income                              3,142          1,921          6,378         20,804
Earnings per share - basic         $     0.10     $     0.06     $     0.21     $     0.68
Earnings per share - diluted       $     0.10     $     0.06     $     0.20     $     0.66

Market price per share:
  - High                           $    35.38     $    32.38     $    27.06     $    23.44
  - Low                            $    15.50     $    17.75     $    19.50     $    11.31
  - Close                          $    29.94     $    22.00     $    22.13     $    18.60

1999 - (1)
----------                         ----------     ----------     ----------     ----------
Net sales                          $   94,598     $    86,365    $   114,236    $  155,227
Gross income                           31,274          28,107         37,756        61,052
General, administrative and
  store operating expenses             28,652          26,403         28,715        31,964
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


</TABLE>

(1) In the fourth quarter 2000, the Company adopted Emerging Issues Task Force
(EITF) No. 00-10 "Accounting for Shipping and Handling Fees and Costs" which
changed its classification of shipping revenue.  Amounts relating to shipping
and handling billed to customers in a sale transaction are now classified as
revenue. The Company considers related shipping and handling costs to be the
direct shipping charges associated with catalog and e-commerce sales.  Such
costs are reflected in cost of goods sold, buying and occupancy costs.  The
Company also changed the classification of employee discounts as a reduction of
revenue.  Previously, shipping revenues and the related expenses and employee
discounts were included in SG&A. Prior periods' financial statements presented
for comparative purposes have been reclassified to comply with these new
reporting guidelines. These reclassifications had no impact on the results of
operations, cash flows or the financial position of the Company.





                                      67
<PAGE>

Report of Management


We are responsible for the preparation and integrity of Too, Inc.'s financial
statements and other financial information presented in this Annual Report.  The
financial statements were prepared in accordance with generally accepted
accounting principles and include certain amounts based upon our estimates and
assumptions.

We maintain an internal control structure designed to provide reasonable
assurance that Too's assets are safeguarded against loss or unauthorized use and
to produce the records necessary for the preparation of the financial
information.  There are limits inherent in all systems of internal control based
on the recognition that the costs of such systems should be related to the
benefits derived.  We believe our system of controls provides the appropriate
balance.

The financial statements have been audited and reported on by our independent
accountants, PricewaterhouseCoopers LLP who were given free access to all
financial records and related data, including minutes of the meetings of the
Board of Directors and Committees of the Board.

The Audit Committee of the Board of Directors, which is comprised solely of
outside directors, provides oversight to our financial reporting process and our
control environment through periodic meetings with management and our
independent accountants.



Michael W. Rayden                            Kent A. Kleeberger
Chairman of the Board, President and         Executive Vice President - Chief
Chief Executive Officer                      Financial Officer, Logistics and
Too, Inc.                                    Systems, Secretary and Treasurer
                                             Too, Inc.






                                      68
<PAGE>

                       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 February 3, 2001 and January 29, 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
February 3, 2001, in conformity with accounting principles generally accepted in
the United States of America.  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 of America, 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 our opinion.



/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
February 21, 2001






                                      69