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THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES

THAT HAVE BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933, AS AMENDED.









Cliff Restricted Performance Share Unit Award

Overview —  United States




Fiscal 2007




 









 






HIGHLIGHTS OF THE AWARD



This Overview is qualified in its entirety by reference to the Memorandum to Participants in
the Polo Ralph Lauren 1997 Long-Term Stock Incentive Plan and to the Plan itself. Copies of the
Memorandum and the Plan are available from your Human Resources Department or by logging on to Polo
Express at http://poloexpress.polo.com. Once on the Polo Express home page, on the left
hand side choose:



Tools & Resources ® Human Resources ® Benefits ® Stock Plan Summaries ® Long-Term Stock Incentive
Plan Summary or ® Long-Term Stock Incentive Plan Memorandum




OVERVIEW



The Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan (as amended and restated as
of August 12, 2004, “the Plan”), authorizes the Compensation Committee of the Board of Directors to
grant equity awards to officers and other employees of the Company and its subsidiaries.



As determined by the Compensation Committee, the Corporation may grant one or more types of
Restricted Performance Share Units (“RPSUs”). This Overview describes one type of RPSU with
three-year cliff vesting (“Cliff RPSU”) and the potential benefits of this award to you.



A Cliff RPSU award granted under the Plan provides a participant the opportunity to receive shares
of Polo Ralph Lauren Class A Common Stock (traded on the New York Stock Exchange under the symbol
RL) based on the achievement of cumulative performance goals over a specified period, generally
three fiscal years. The performance measure(s) are set by the Compensation Committee of the Board
of Directors at the time of grant, and may include (among others) one or more of the following:




     Net Earnings or Net Income (before or after taxes)



     Basic or Diluted Earnings Per Share



     Net Operating Profit



     Net Revenue or Net Revenue Growth



     Gross Profit or Gross Profit Growth



     Return on Assets



AWARD OBJECTIVES



The objectives of the award are:





	1.	 	For selected executives, to link a portion of their long-term incentive to the
achievement of specific corporate performance objectives.
	 
	2.	 	To attract and retain individuals of superior talent.










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PLAN ADMINISTRATION



Polo Ralph Lauren’s Human Resources Department administers the Restricted Performance Share Unit
Award program. Record keeping for Cliff RPSU awards is performed by Merrill Lynch. You must have
an open brokerage account at Merrill Lynch in order to facilitate distribution of your vested Cliff
RPSUs. You can contact a Merrill Lynch representative at 1-877-765-POLO to open an account or
login at www.benefits.ml.com.



The Company’s Board of Directors reserves the right to amend, modify or terminate the Plan at any
time. No such amendment to the Plan would adversely affect any Cliff RPSU awards then
outstanding.



If you have any questions after reading this Overview, please consult the Memorandum to
Participants (available on the Intranet as noted above) or the Corporate Compensation
Department.



ELIGIBILITY FOR GRANT



Equity awards, including Cliff RPSU awards, are granted to individuals in key executive positions
that have a significant impact on the strategic direction and business results of the Company.
Individuals in designated positions may receive an equity award each year.



Guidelines have been established for equity awards that eligible participants may receive. The
guidelines reflect a position’s scope, accountability and impact on the organization, and may also
reflect changes in the value of Polo Ralph Lauren stock.



Please note that the guidelines do not constitute a guarantee that any specific individual will
receive an equity award in any given year or guarantee the type or size of any grant, if a grant is
made.



A Polo Ralph Lauren employee who receives an Improvement Needed (I) or Unsatisfactory (U) rating on
his/her annual performance appraisal is not eligible for an equity award in the fiscal year
following that appraisal performance period.



STRUCTURE OF GRANTS AND PAYOUT SCHEDULE



At the time of grant, the award has a target number of Cliff RPSUs. Threshold, Target, and Maximum
levels of performance have been established for the measure(s) applicable to the award.




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The payout schedule will normally be as follows:




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	% of Target
	Performance	 	% of Goal	 	Cliff RPSUs
	Level	 	Achieved	 	Vested
	Threshold

	 	 	70	%	 	 	75	%
	Target

	 	 	100	%	 	 	100	%
	Maximum

	 	 	110	%	 	 	150	%







Note: Cliff RPSU vesting is interpolated for performance between
70%-110% of target. No payout will be earned for performance below
Threshold.


Once an award is granted in any fiscal year, the performance measure(s), performance goals, vesting
or payout schedule will not be modified for that grant during the award term. However, for any
future awards, the Compensation Committee may change the performance measure(s), goals, vesting and
payout schedule(s). In calculating performance against the goal for any fiscal year, the Corporate
results may be adjusted to exclude the effects of certain events and transactions as specified by
the Committee at the time of grant.



AWARD VESTING



As shown below, all Cliff RPSUs granted for a particular award will vest at the end of the
three-year performance period, if at least Threshold performance for the applicable goal has been
achieved. This is referred to as “cliff” vesting since all Cliff RPSUs vest at the same time.



If Threshold or better performance is achieved, participants will receive shares of stock. You
will own the shares and as a shareholder of Polo Ralph Lauren, you will have voting rights, and you
will receive dividends. Dividends are not earned on Cliff RPSUs. Dividends will accrue and be
paid only after vesting occurs and actual shares are distributed to the participant.



If performance is below Threshold at the end of the three-year period, all Cliff RPSUs for that
award will be forfeited. As noted above, as participants receive awards over a period of years,
they will have potential vesting on their other awards even if the award maturing in that fiscal
year does not vest.




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VESTING*/EXPIRATION SCHEDULE








If a participant leaves Polo Ralph Lauren (except as a result of retirement, disability, or death)
before the three-year period is over, all unvested Cliff RPSUs units are forfeited. (For details,
please see the chart on Page 6.)




EXAMPLE



An award granted in fiscal 2007 will mature at the end of fiscal 2009 and will be vested in fiscal
2010, subject to achievement of the cumulative performance goals specified for FY 2007-FY 2009.
Vesting of Cliff RPSUs will typically occur in June but may occur earlier or later.



Beginning with fiscal 2008, participants who receive Cliff RPSUs annually would have the
opportunity for an RPSU award to vest each year, as shown below:




	 	 	 	 	 
	Year Granted	 	Performance Period	 	Year Paid 1
	FY05

	 	FY05 — FY07
	 	FY08
	FY06

	 	FY06 — FY08
	 	FY09
	FY07

	 	FY07 — FY09
	 	FY10








 




			
	 	 	1  If at least a Threshold level of performance is achieved.








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Example of awards and payouts to a Division SVP:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  Year	 	 	 	 	 	Performance	 	Performance	 	Vested	 	Year	 	 
	Granted	 	# Cliff RPSUs	 	Period	 	Level	 	Percentage	 	Vested	 	# Shares
	FY05

	 	 	1,000	 	 	FY05 — FY07
	 	Target
	 	 	100	%	 	FY08
	 	 	1,000	 
	FY06

	 	 	1,000	 	 	FY06 — FY08
	 	 	70	%	 	 	75	%	 	FY09
	 	 	750	 
	FY07

	 	 	1,000	 	 	FY07 — FY09
	 	 	110	%	 	 	150	%	 	FY10
	 	 	1,500	 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total Cliff RPSUs	 	 	 	 	 	 	 	 	 	Total Shares
	 	 	Granted	 	 	 	 	 	 	 	 	 	Vested
	 

	 	 	3,000	 	 	 
	 	 
	 	 
	 	 
	 	 	3,250	 






VALUE OF RESTRICTED PERFORMANCE SHARE UNITS



Unlike stock options, Cliff RPSUs are not dependent on an increase in the price of Polo Ralph
Lauren stock. If Threshold or better performance against the three-year cumulative goal is
achieved, Cliff RPSUs offer the opportunity for you to recognize value in several ways:





	•	 	Receiving shares of RL stock without paying any exercise price.






	•	 	The number of Cliff RPSUs vesting can range from 75% (Threshold) to 150% (Maximum) of the target shares granted.






	•	 	Any increase in Polo’s stock price above the grant price increases the value of the award.




The potential gain from Cliff RPSUs can be significant, as shown in the following example. As
depicted, we are not forecasting actual growth in the company’s stock price, but merely
illustrating both the original award value and the opportunity for gains based on potential rates
of appreciation in the price of the stock.




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In the example, the participant received a grant for 1,000 Cliff RPSUs. At a stock price of $55
when the grant was made, the value of the underlying shares of Polo Ralph Lauren stock was $55,000.
Any increase in the stock price above the market price of the stock on the grant date increases the
value of the award as shown below.



POTENTIAL VALUE INCREASE




AWARD OF 1,000 RPSUs with $55 Price at Grant Date




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	If Stock Price at Payout Reaches:	 
	 	 	Number of Shares	 	 	$55	 	 	$58	 	 	$60	 	 	$62	 
	Value at Threshold Performance
	 	 	750	 	 	$	41,250	 	 	$	43,500	 	 	$	45,000	 	 	$	46,500	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Value at Target Performance
	 	 	1,000	 	 	$	55,000	 	 	$	58,000	 	 	$	60,000	 	 	$	62,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Value at Maximum Performance
	 	 	1,500	 	 	$	82,500	 	 	$	87,000	 	 	$	90,000	 	 	$	93,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 





Note: Value is before tax and shares will be withheld in satisfaction of withholding taxes.




SELLING YOUR SHARES



When shares acquired through vesting of a Cliff RPSU award are sold at a later date, participants
can benefit from any additional price appreciation that occurred after the date the shares were
vested and distributed. Shares received from a Cliff RPSU award may be sold at any time except
when such sale would be considered insider trading or during those “Blackout” periods specified by
the Company’s Securities Trading Policy (see Page 8). Executive Officers, however, may sell shares
only pursuant to SEC Rule 144 or another applicable exception under the Securities Act of 1933, as
amended.




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IF YOU LEAVE THE COMPANY



The following chart explains what happens if you leave Polo Ralph Lauren.



IMPACT ON CLIFF RESTRICTED PERFORMANCE SHARE UNIT AWARDS




	 	 	 	 
	Event	 	Status of Awards
	Retirement Beginning at age 55

Disability

Death

	 	•
	In the case of retirement, disability or death, a
pro-rated1 Target number of Cliff RPSUs will be
determined.
	 

	 	•
	These pro-rated Cliff RPSUs will vest at the end of
the three-year period and vesting will be based on the
actual degree of achievement. If performance against the
cumulative three-year goal does not reach the Threshold
level, then the pro-rated Cliff RPSUs will be forfeited.
	 
	 	 	 
	 

	 	•
	All remaining Cliff RPSUs are forfeited.
	 
	 	 	 
	Involuntary Termination

	 	•
	All unvested Cliff RPSUs are forfeited.
	 
	 	 	 
	Dismissal for Cause

	 	•
	All vested Cliff RPSUs not yet distributed are
forfeited.
	 
	 

	 	•
	All unvested Cliff RPSUs are forfeited.
	 
	 	 	 
	Voluntary Resignation

	 	•
	All unvested Cliff RPSUs are forfeited.








 




			
	1	 	For purposes of the Cliff RPSU program, the pro-rated portion will be determined
by taking the number of months worked during the corresponding three fiscal years, dividing it
by 36, and then multiplying the resulting decimal by the number of Cliff RPSUs scheduled to
vest for that grant.




Once Cliff RPSUs have vested and a participant receives shares of Polo Ralph Lauren stock from
any Cliff RPSU award, the participant retains all rights to those shares.




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TAX LIABILITY



The following statements regarding United States federal income tax consequences of the grant
and vesting of Cliff Vesting Restricted Performance Share Unit awards under the Plan should be read
in conjunction with the “Federal Income Tax Consequences” section of the Memorandum to Participants
in the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan and are not intended to be
a complete summary of applicable law, nor do they address state, local or non-U.S. tax
considerations. Moreover, the federal income tax consequences to any particular participant may
differ from those described herein by reason of, among other things, the specific circumstances of
such participant. For these reasons, participants are urged to consult their tax advisors with
respect to the consequences of their participation in the Plan.



AT GRANT



No United States federal income tax is owed at grant.



AT VESTING



United States federal income tax is owed on the value of the shares of Polo Ralph Lauren stock, if
any, to be distributed upon vesting of any Cliff RPSUs.



For example, if 1,000 shares are distributed upon vesting of Cliff RPSUs, the shares have a value
of $55 per share for a total value of $55,000 so that amount would be subject to federal income
taxes. In addition, the value will be subject to state and local taxes, as well as Federal
Insurance Contributions Act (FICA) to the extent applicable. A participant will automatically have
a portion of their shares sold (a whole number of shares only) and the proceeds used to satisfy
applicable federal, state, and local payroll and income tax withholding requirements. However, the
amount withheld by Polo may be less than a participant’s actual federal, state or local income tax
liabilities because a participant’s individual tax rate may exceed required withholding rates. As a
result, participants may wish to consult with their tax advisors regarding their individual tax
liability.



Any income generated from the vesting and distribution of a Cliff RPSU award must be reported as
income to the Internal Revenue Service (IRS) and will therefore be included on the W-2 form
received in the following January.



SALE OF SHARES SUBSEQUENT TO DISTRIBUTION



Please consult the Memorandum to Participants and your own tax advisor.




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OTHER IMPORTANT PLAN INFORMATION



INSIDER TRADING



As provided in the Polo Ralph Lauren Employee Handbook, employees are prohibited by law from buying
or selling stock if an employee has or is aware of any material, non-public information about Polo
Ralph Lauren. This is commonly referred to as “insider information.” Material, non-public
information is any information that has not been disclosed to the public that could affect the
price of RL stock — either positively or negatively — or affect a person’s decision to buy, hold
or sell stock.



Examples of what might be considered “insider information” include but are not limited to the
following:





	•	 	Earnings or other financial information;
	 
	•	 	Changes in dividend policy;
	 
	•	 	Stock splits;
	 
	•	 	Mergers and acquisitions;
	 
	•	 	Major new contracts or product-line introductions;
	 
	•	 	Litigation involving substantial amounts of money; or
	 
	•	 	Changes in management




These insider-trading rules are applicable to employees of Polo Ralph Lauren and its related
companies worldwide.



COMPANY BLACKOUT PERIODS



To avoid even the appearance of “insider trading,” our Company’s policy prohibits members of the
Board of Directors and all employees from making trades involving stock of the Company during
certain “blackout periods.” This prohibition covers buying or selling shares, including shares
received upon vesting of Cliff RPSUs. These blackout periods generally begin two weeks before the
end of each of our fiscal quarters and continue through one trading day after the Company issues
its earnings release for the fiscal quarter or year just ended. If the earnings release is issued
before the opening of the market on a trading day, trading may begin the next day. The “blackout
periods” are announced at the start of each year. In addition, the Board of Directors, officers
(any employee who is a Vice President or above), and employees in the Finance and Legal departments
must clear all trades with the Corporate Counsel, whether they occur within a blackout period or
not.




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ADDITIONAL PROHIBITED TRANSACTIONS



Because we believe it is inappropriate for any Company personnel to engage in short-term or
speculative transactions involving the Company’s common stock, it is Company policy that employees
do not engage in any of the following activities with respect to the securities of the Company:





	•	 	“In and out” trading in securities of the Company. Any Company
stock purchased in the market must be held for a minimum of six
months, and ideally longer. (Note that the Securities and Exchange
Commission (SEC) has a “short-swing profit recapture” rule that
effectively prohibits Executive Officers and members of the Board
of Directors from selling any Company stock within six months of a
purchase. The Company has extended this prohibition to all
employees. The receipt of shares pursuant to the vesting of Cliff
RPSU awards is not considered a purchase under the SEC’s rule.
	 
	•	 	Short sales (i.e., selling stock one does not own and then
borrowing the shares to make delivery.)
	 
	•	 	Buying or selling “puts” or “calls” (i.e., making commitments to
buy or sell securities at a specified price for a fixed period of
time.)




CLEARANCE OF ALL TRADES BY DIRECTORS, OFFICERS AND OTHER KEY PERSONNEL



All transactions in Company stock (purchases, sales, transfers, etc.) by members of the Board of
Directors, officers (any employee who is a Vice President or above), and personnel in the Finance
and Legal departments must be cleared by the Corporate Counsel. If you contemplate a transaction,
you must contact the Corporate Counsel at (212) 705-8280 before contacting Merrill Lynch or
taking any other step to initiate a transaction.








In the event of any discrepancy between the terms of the Plan and the Cliff RPSU Overview, the
terms of the Plan will govern. A copy of the official Polo Ralph Lauren Corporation 1997 Long-Term
Stock Incentive Plan is available from your Human Resources department or you may log on to the
Intranet at http:/poloexpress.polo.com.









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