Dollar
Tree Stores, Inc.
May
29,
2007
Dear
Dollar Tree Shareholder:
You
recently received a proxy statement concerning the upcoming Annual Meeting
of
the Dollar Tree shareholders. The proxy statement includes a proposal
submitted to us by the California Public Employees’ Retirement System (CalPERS),
a public pension system that owns about 0.05% of our shares. The
proposal urges us to repeal supermajority voting requirements in our charter
and
by-laws, including those relating to our classified board of directors and
procedures for removing directors and calling of special meetings.
With
the
June 21, 2007 Annual Meeting approaching, we write to reiterate our Board
of
Director’s opposition to this proposal and urge all shareholders to vote
AGAINST it on their proxy cards. For the reasons
outlined in the proxy statement and further explained below, our Board believes
that this proposal is not in the best interest of our
shareholders.
REASONABLE
PROTECTIONS
Most
proposals submitted to our shareholders require approval from only a majority
of
the shares present and voting. However, we believe that certain
fundamental changes involving the corporation should only be made through
a
broad consensus among our shareholders. Our supermajority voting
requirements are tailored to protect shareholders by enabling the Board of
Directors to chart the best strategic course for company growth and insure
that
the long term interests of those shareholders are protected.
Public
company ownership has seen a marked increase in shareholder turnover in recent
years. Questions have also been raised about the validity of certain
manipulative techniques, such as overvoting and groups voting with borrowed
shares. Given this volatile environment, radical changes in our form
of corporate governance should not occur without approval from a large
cross-section of our corporate ownership.
Our
limited supermajority voting requirements afford protection to the
majority-independent Board of Directors so that they may carry out their
fiduciary duties to all shareholders. In contrast, shareholders
generally have no fiduciary duty to each other. By design then, the
supermajority provisions guard against self-interested actions by one or
a few
large shareholders and allow the Board to maximize long-term value for
all shareholders.
GOOD
CORPORATE GOVERNANCE
The
Board
believes that improving corporate governance serves shareholder interests
better
than weakening key charter or by-law protections. In addition to
nominating independent director candidates with strong credentials, the Board
of
Directors is committed to high standards of corporate governance. We
recently:
·
|
reconstituted
our independent Nominating and Corporate Governance Committee under
a
newly revised, comprehensive
charter;
|
·
|
adopted
Corporate Governance Guidelines, available on our website, that
outline
the responsibilities of our Board, as well as director stock ownership
requirements;
|
·
|
appointed
a lead independent director; and
|
·
|
adopted
a policy requiring a director who does not receive a majority of
votes
cast in an uncontested director election to submit his or her
resignation.
|
Prior
to
these improvements, and before CalPERS submitted its proposal, Dollar Tree
had a
strong corporate governance rating from The Corporate Library (“TCL”), an
independent rating firm. While 75-80% of the companies analyzed by
TCL have a rating of C or D, in July 2006 Dollar Tree received a B, making
us
one of only 10 companies in the retail sector with a governance rating
higher than C. According to Institutional Shareholder Services
(“ISS”), our corporate governance outperformed 65.3% of companies in the
retailing group. Additionally, Dollar Tree has never had a “poison
pill” plan, and we long ago opted out of Virginia’s anti-takeover
statutes. Even with our strong ratings, the Board will continue to
evaluate additional measures that may be taken to ensure that we are governed
in
a manner that will best optimize our growth and serve to increase shareholder
value.
LONG-TERM
VALUE
CalPERS
frequently cites poor stock market performance to support its proposals for
company governance reform, claiming the changes will improve shareholder
returns. However, unlike many companies that CalPERS targets, Dollar
Tree has not lost value for long-term shareowners, has performed very well
relative to typical benchmarks and has strongly outperformed those benchmarks
in
the past three years.
|
Share
Price Increase
(as
of May 17, 2007)
|
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
|
|
|
|
Dollar
Tree Stores
|
56.2%
|
65.2%
|
4.7%
|
253.9%
|
|
|
|
|
|
Dow
Jones Industrials
|
20.3%
|
36.0%
|
30.2%
|
82.5%
|
S&P
500
|
19.1%
|
39.5%
|
36.7%
|
78.0%
|
S&P
400 Midcap Index
|
16.2%
|
59.1%
|
63.8%
|
229.1%
|
S&P
Retail Index
|
12.8%
|
37.2%
|
N/A
|
N/A
|
Our
earnings per share have increased every year since Dollar Tree became a public
company in 1995. Moreover, sales for the last fiscal year ending
February 3, 2007 were nearly four billion dollars. For the preceding
ten years (1997-2006), net sales increased at a compound annual growth rate
of
18.7%. Considering the positive historical performance of Dollar Tree
stock, our Board does not believe that eliminating the supermajority provisions
would have any significant beneficial effect on shareholder value.
PLEASE
VOTE “AGAINST” THE CALPERS PROPOSAL
Our
Board
has carefully analyzed the issues and strongly believes that the CalPERS
proposal is not in our shareholders’ best interests. Even
though the proposal is non-binding, voting for it sends the wrong message
because it elevates a technical, legal matter above more important issues
of
governance, independence and shareholder value. These latter three
are and will remain the focus of the company’s Board and
management.
We
ask
all of our shareholders to consider the merits of both arguments and then
vote
their shares “AGAINST” the CalPERS proposal. Please refer to our
proxy statement for more information. If you have any questions or
need assistance in voting your shares, call Georgeson Inc., who is assisting
us
with this effort, at 1-888-605-7513.
Sincerely,
/s/Bob
Sasser
Bob
Sasser
Chief
Executive Officer