EXHIBIT 13
                                 2000 & Beyond:
                             "R" Winning Strategies

                                                                          [Logo]
                                                                  Toys "R" Us(R)
                                                              1999 Annual Report


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                               Table of Contents

Financial Highlights ..................................................  page  3

Letter to Our Shareholders ............................................  page  5

Divisional Highlights .................................................  page  8

Management's Discussion and Analysis
of Results of Operations and Financial Condition ......................  page 21

Financial Statements ..................................................  page 25

Report of Management and
Report of Independent Auditors ........................................  page 35

Directors and Officers ................................................  page 36

Quarterly Financial Data,
Market Information and Store Locations ................................  page 38

Corporate Data and Citizenship ........................................  page 39


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Financial Highlights
TOYS"R"US, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>

(Dollars in millions except per share data)                                                                      Fiscal Year Ended
==================================================================================================================================
                               Jan. 29,    Jan. 30,  Jan. 31,    Feb.1,   Feb. 3, Jan. 28,  Jan. 29,  Jan. 30,   Feb. 1,   Feb. 2,
                                 2000*      1999**     1998      1997**    1996**   1995      1994      1993      1992      1991
----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>        <C>        <C>       <C>       <C>      <C>       <C>       <C>       <C>       <C>
OPERATIONS:

    Net Sales                   $11,862    $11,170    $11,038   $ 9,932   $ 9,427  $ 8,746   $ 7,946   $ 7,169   $ 6,124   $ 5,510
    Net Earnings/(Loss)             279       (132)       490       427       148      532       483       438       340       326
    Basic Earnings/(Loss)
    Per Share                      1.14      (0.50)      1.72      1.56      0.54     1.88      1.66      1.51      1.18      1.12
    Diluted Earnings/(Loss)
    Per Share                      1.14      (0.50)      1.70      1.54      0.53     1.85      1.63      1.47      1.15      1.11

FINANCIAL POSITION AT YEAR END:

    Working Capital             $    35    $   106    $   579   $   619   $   326  $   484   $   633   $   797   $   328   $   177
    Real Estate-Net               2,342      2,354      2,435     2,411     2,336    2,271     2,036     1,877     1,751     1,433
    Total Assets                  8,353      7,899      7,963     8,023     6,738    6,571     6,150     5,323     4,583     3,582
    Long-Term Debt                1,230      1,222        851       909       827      785       724       671       391       195
    Stockholders' Equity          3,680      3,624      4,428     4,191     3,432    3,429     3,148     2,889     2,426     2,046

NUMBER OF STORES AT YEAR END:

    Toys"R"Us - United States       710        704        700       682       653      618       581       540       497       451
    Toys"R"Us - International       462        452        441       396       337      293       234       167       126        97
    Kids"R"Us - United States       205        212        215       212       213      204       217       211       189       164
    Babies"R"Us - United States     131        113         98        82        --       --        --        --        --        --
    Imaginarium                      40         --         --        --        --       --        --        --        --        --

    Total Stores                  1,548      1,481      1,454     1,372     1,203    1,115     1,032       918       812       712
</TABLE>

 *  Includes the company's Internet subsidiary, toysrus.com.

**  After restructuring and other charges.


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To Our
Shareholders

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This is my first formal  opportunity  to  communicate  with many of you, and I'm
pleased to share with you my enthusiasm for the future of Toys"R"Us.

As a relative newcomer,  I have a different  perspective of the company, and I'd
like you to take a moment to see it through my eyes. When I look at Toys"R"Us, I
see a great family of brands and a financially healthy company with a solid cash
flow. I also see lots of opportunity.

It  comes  as no  surprise  to  anyone  that  Toys"R"Us  needs  to  improve  its
performance. No doubt many of you have been frustrated by the performance of the
company  over the last few years,  including  the  holiday  season of 1999 which
yielded disappointing  results. Those financials are thoroughly examined in this
report. While we can't change the past, we can learn from it. I believe we have,
and I want to tell you why I'm  optimistic  about the future of  Toys"R"Us,  and
what our priorities are for the next 24 months.

We've got a strong  organization of talented and dedicated  people, a brand that
is second to none in the toy industry, and a solid financial foundation.  Let me
share with you the strategies that we are focused on executing in 2000 and 2001.

Differentiation.

We're  going to focus on four key  priorities,  beginning  with our  merchandise
offering.  It is essential  that we  differentiate  our content from that of our
competitors.  We will still be the  headquarters  for the toy  brands  known and
loved by our customers,  but we'll be more. We are committed to offering new and
exciting  products  first,  and to that end we will be  focusing  a  significant
amount  of  time  and  attention  on  developing   exclusive  new  concepts  and
technologies to offer more unique, fun and interesting products.

We made important strides in that effort here in the U.S. recently. In February,
we announced a new line of exclusive branded products with Animal Planet. Animal
Planet is the  fastest  growing  cable  station  in the U.S.,  and this  unique,
interactive  product line will be unlike anything else on the market. The Animal
Planet  line will be  introduced  in our stores  this  fall,  and it is only the
beginning of new,  exclusive products to come.

The company has also  entered  into an  exclusive  partnership  with Home Depot.
Together  with Home Depot,  we'll be the store where kids and their  parents can
buy "real" tools for kids -- actual working tools that are scaled  appropriately
to a kid's size and capability.  These will come complete with  accessories like
tool belts,  safety goggles and work aprons.  We'll also offer construction kits
for  kids  that  will  enable  them to build  things  such as a  birdhouse  or a
bookshelf  on their own or under the  guidance  of an adult.  And the Home Depot
line of toys will also include  role-play items like  workbenches or drills that
actually  simulate the motion of a real drill. We will begin  introducing  these
products  in our stores in May with a full  assortment  rolled out by the end of
the summer. We are very excited about this partnership and this line of creative
and interactive toys available only at Toys"R"Us.

We've signed a unique licensing agreement with OshKosh B'Gosh,  Inc., for a line
of baby products under the well-known OshKosh brand. These products,  which will
be available in our stores in August,  bring  additional  equity to our juvenile
line and will include items such as basic juvenile toys, dolls, plush, soft toys
and other items.

Toys"R"Us will also develop exclusive products with our most important resources
that  support  their  principal  brands.   This  will  further   strengthen  our
relationships  with key  manufacturers  while  providing  interesting and unique
products available only at Toys"R"Us.

                                 [Photo Omitted]

The Animal Planet Line is only the beginning of new, exclusive products to come.


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[Photo Omitted]

Our focus is on better category segmentation

Refining our Store Format.

There is no  question  that we have made  significant  financial  investment  in
remodeling  stores over the last few years, both in the C-3 and the Concept 2000
formats.  The good news is that the new store formats are out performing the old
ones -- and the gap continues to widen with this more customer-friendly  format.
The new format is a major step forward, and provides a solid foundation on which
to build.  We also  think it  provides  us with  further  opportunity  to unlock
additional performance gains.

The best news,  though, is that even with the progress we've made, we're not yet
close to maximizing the potential of our new format.  That's why we've developed
16  test  stores  across  the  country  to  provide  us  with  laboratories  for
experimenting with new concepts and refinements.

This test store  effort  focuses on the  reconfiguration  of  fixturing,  better
category  segmentation  and clear  projection of  merchandising  concepts -- all
designed to make the shopping  experience  more pleasant and  productive for our
guests,  the customers  who shop at Toys"R"Us.  It also includes the addition of
many new business categories, the addition of Imaginarium as a child development
center,  demonstration  areas  where we can  delight  our guests with the newest
products,  and a redefinition  of our service  level.  These test stores include
selling  specialists  and a  truly  service-focused  management  commitment.  We
believe the opportunities for sales growth and guest  satisfaction are material.
As these concepts are  validated,  we expect to execute  significant  rollout by
holiday season 2000.

Redeployment of Inventory Investment.

We  are  redeploying   inventory  investment  to  ensure  major  intensification
supporting the most important volume-producing toys in our assortment. We missed
many  selling  opportunities  during  the  holiday  season in 1999 by not having
enough investment behind the top 1,000 items. We will dramatically  improve this
process in 2000, and have already begun  substantial  order placements to ensure
key item  availability.

Our objective this year is to fund a doubling of the investment in our top 1,000
items by reducing our current  levels of non-key  inventory  and by working with
our resources to more tightly focus our  investment  behind their most important
properties.  We will still offer the broadest selection of any bricks and mortar
store in the world,  but this  redeployment  of inventory  depth behind the most
important  items will help to energize our sales this coming  holiday  season by
ensuring that we have the most wanted items.

Redeployment of Expense Dollars.

We have  challenged  each  operating and support  division  worldwide to analyze
every expense dollar and to eliminate  spending that does not productively serve
our guests, generate sales or improve productivity.

Those expense  dollars are being  redeployed to fund guest service,  pricing and
marketing initiatives designed to drive sales growth in our stores.

Unlocking the Value of our Assets.

There are many assets  within this  company that offer  tremendous  value to our
shareholders.  This was evident in our recent announcement  regarding an initial
public offering (IPO) plan for Toys"R"Us - Japan. Under the IPO plan,  Toys"R"Us
- Japan and the company will offer primary and secondary  shares,  respectively,
to the public in Japan. Such shares should begin trading on the

Demonstration areas delight our customers

[Photo Omitted]

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[Photo Omitted]
Babies "R" US ia a clear winner

Japanese OTC market on April 25, 2000. Following that offering, the company will
retain a 48% ownership stake of Toys"R"Us - Japan.

This action is beneficial to our  shareholders in several ways: we will continue
to derive benefits from our 48% share of Toys"R"Us - Japan's future earnings, as
well as through royalty  income.  In addition,  the IPO will enable  Toys"R"Us -
Japan to fund its future  growth  without  support from the  company,  therefore
greatly  enhancing our financial  flexibility.  Furthermore,  we expect that the
sale of shares,  which  reduces our  ownership  position  from 80% to 48%,  will
result in a significant gain for the company.

We will continue to explore other  opportunities and alternatives as appropriate
to further unlock the value of our assets.

Other Aspects of the Business.

We have begun many  initiatives  in our U.S.  toy stores  already,  and more are
planned in the months  ahead.  But we're  making  strides in other  areas of our
business as well.

Babies"R"Us  is a clear winner in the juvenile  products  market.  This division
marked the new millenium by reaching the  billion-dollar  sales mark in January.
Babies"R"Us  has excelled in all areas of the  business,  including  outstanding
guest  service,  terrific  juvenile  assortment  and  strong  merchandising  and
operational  capabilities.  In  addition,  the success we have had with our Baby
Registry is second to none -- Babies"R"Us  registers more expectant parents than
any  other  retailer  in the U.S.  We're  pleased  with  the  strong  growth  of
Babies"R"Us and expect to open 20 new stores this year.

Performance  of Kids"R"Us has reached a plateau,  but we are making  substantial
progress  in  rethinking  how to  rekindle  growth in sales and profits for this
division.  We have seen significant success with leveraging our Kids"R"Us buying
expertise  and  infrastructure  up to our combo  stores --  essentially  placing
Kids"R"Us  stores within Toys"R"Us stores -- and we expect to roll out many more
of these in 2000.

I mentioned the addition of  Imaginarium  child  development  centers within our
Toys"R"Us stores earlier in this letter.  Based on the tremendous success of the
19 initial  tests of this  concept,  we plan to have upwards of 100  Imaginarium
worlds within our Toys"R"Us stores by year-end.  In addition,  we expect to open
five or more free-standing Imaginarium "neighborhood stores" this year as well.

Our International business had a terrific year with a much-improved performance,
as the financials  indicate.  Our International stores have been the vanguard of
the   redeployment   of  expense  and  inventory   dollars  to  maximize   their
opportunities for this past holiday. We think the future has never been brighter
for that  segment  of our  business.  A major  milestone  for the year 2000 will
include  the  opening of our 100th  store in Japan,  our  largest  International
market.

Finally,  our  toysrus.com  business  has  proven  the power of our brand on the
Internet,  and we are confident that our "clicks and mortar"  strategy will be a
long-term winner.

During  the last few  months  of 1999,  toysrus.com  became  one of the  fastest
growing Web sites on the Internet. With its new management,  the advantage of an
unbeatable  brand  name,  and brick and mortar  assets,  we are  confident  that
toysrus.com  will  become the  undisputed  one-stop  shop for kids,  parents and
grandparents anywhere in the world.

We took a giant  step  forward  in  achieving  that  goal  in  February  when we
announced an exciting strategic  partnership between Toys"R"Us,  toysrus.com and
SOFTBANK,  the world's leading  Internet  venture  capital firm.  SOFTBANK's $57
million investment is a strong endorsement of our Internet business.  SOFTBANK's
investment  capital will be used to accelerate the development of  toysrus.com's
infrastructure  to support  further  growth.  Their track record,  international
savvy and unbeatable  industry experience will help us in building a world-class
e-commerce platform.

Conclusion.

As we look at the  months  ahead  and as we  begin  to  write a new  chapter  in
Toys"R"Us  history,  it's  important to remember that we're building on a strong
foundation. Ours is a profitable business that can and will do much better.

We're moving ahead aggressively with our store refinements,  adding new products
and  pockets  of  excitement  as we go.  Our stores are going to be more fun and
interactive,  and more guest-friendly.  Our merchandise assortments will be more
interesting  and  captivating  with greater  guest appeal than  competitors  can
offer.  These are realistic,  achievable goals, and my commitment to you is that
our company will put every resource we have against these goals.  We're going to
get better,  we're  going to perform  better,  and we're going to maintain  that
momentum.

Many  people  have asked me over the past few months  about my  decision to join
Toys"R"Us.  I can say in all honesty that after  working with this  organization
and looking at what needs to be done, I am even more optimistic and enthusiastic
than I was when I first  joined.  We know what we need to do. Some of you may be
skeptical  and say that  you've  heard this  before.  My  request  to you,  as a
shareholder,  is to have the  patience  and the faith in  Toys"R"Us  to let this
strategy  unfold.  We are moving  forward  with the  greatest  possible  energy,
emotion and  commitment.  When I look ahead to the future of Toys"R"Us,  I see a
bright future,  and I know that the best days of this company are still in front
of us.

/s/ John H. Eyler Jr.
---------------------
John H. Eyler Jr.
President and
Chief Executive Officer

March 27, 2000


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                                     vision

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[Photo Omitted]

The power of our brand strengthens our connection with our customer and inspires
us to create a shopping experience that is truly satisfying and memorable.

The Toys"R"Us brand has become  synonymous with family fun and kids' wishes come
true. Such positive associations have made Toys"R"Us among the top-ranked brands
for kids, in the company of giants like Disney and McDonald's.

We recognize  that the quality of the shopping  experience in our stores must be
superior to our  competition to ensure the continuing  strength of our brand. We
are  committed to making our customers - now referred to as our guests - central
to everything we work for in our company.

We have taken  actions to ensure that our guests will find the products they are
shopping for when they visit our stores.  We have improved our  forecasting  and
inventory  replenishment process so that we do a better job of being in-stock on
the products our guests want - including  the most  requested  and unusual items
which are not available in other retail outlets.

[Logo] Toys "R" Us

When kids refer to Toys"R"Us as their  favorite  store,  we are  motivated to be
even better for them. To meet this objective, we are enhancing the layout of our
stores to  create  greater  interactivity  and  provide  more  opportunities  to
demonstrate products.  Our desire to bring products to life in a better shopping
environment is certain to create more fun and excitement for all our guests.

Our guests have told us that friendly and  knowledgeable  sales  associates  are
important   factors  in  bringing  the  shopping   experience  to  a  satisfying
conclusion.  With that in mind, we have undertaken a major initiative to upgrade
the quality of our store  management and associate  teams, as well as to provide
funding for improved levels of customer service.

These significant new dimensions to serve our guests better reinforce the single
premise  that  Toys"R"Us  is the  one  place  that's  all  for  them.  Improving
merchandise  offerings  and  customer  service  are ongoing  priorities  for all
stores;  and we anticipate  completing the remodeling of all our U.S.  stores in
two years. We will work every day to continually give our guests more reasons to
choose Toys"R"Us over other retailers.

Toys"R"Us  will be the brand and the store that captures the most share of heart
and mind, the source of all the best for kids, family and fun.

[Two Photos Omitted]

Our remodeled  stores feature  exciting  "worlds" that make shopping  easier and
more fun for all our guests.


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                                    teamwork

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[Logo] TOYS "R" US INTERNATIONAL

With 462 stores in 26  countries,  Toys"R"Us is a global leader in retailing for
kids and families.  Our powerhouse  brand is recognized by children  everywhere,
and no matter what language is spoken, Toys"R"Us translates universally into the
best store for fun, excitement, and learning for the whole family.

Our  extraordinary  success in Japan is a prime  example of the  strength of our
International  Brand plus our  ability to  leverage  our global  resources.  Our
incredible  growth  since we opened our first  store in  Arakawaoki  in 1991 has
enabled us to become market leaders for toys and juvenile  products in Japan. In
1999,  we surpassed the one billion  dollar sales level in that market.  We have
recently announced an initial public offering of stock in  Toys"R"Us-Japan;  and
we will achieve another  milestone there in the year 2000 when we open our 100th
store.

Our worldwide presence has enabled us to identify trends, and provide our guests
with  unique  products  and  proprietary  brands  that  are  available  only  at
Toys"R"Us. In most of our countries worldwide, we have successfully expanded our
juvenile  merchandise  offerings through the Babies"R"Us  departments in our toy
stores.  These  examples  prove that our global  leverage is one of our greatest
assets.

Excellent  management  and dedicated  associates in each  international  market,
combined with strategic assistance from the corporate support team enables us to
serve a record number of customers in "R"World.

Our international  presence gives us great  opportunities to learn and share the
best  practices  from around the world with the  introduction  of new and unique
product lines,  enhanced  merchandise  presentations  and  innovative  marketing
campaigns.  Our goal is to make the Toys"R"Us  shopping  experience even better,
store by store and country by country.

These success  stories are a tribute to the continuing  excellence  displayed by
our  international  associates and their  partnership with the corporate support
team.

We will  continue  to work  together  to build  the  brand  that  kids and their
families  love  worldwide.   Our  on-going  emphasis  on  maintaining  the  best
merchandise  assortments,  presenting in-store excitement and excellent customer
service will reinforce our global commitment to kids, family and fun.

                                [Photo Omitted]


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                                   opportunity

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[Logo] toysrus.com

Toysrus.com experienced massive growth in the fourth quarter of 1999, during the
key holiday  selling season.  We  accomplished  these successes on a new website
(launched in October),  with a new management  team, and using a fraction of the
marketing  and promotion  investment of our online  competitors - a testament to
the drawing power of the "R"Us brand.

We learned valuable  lessons and made some tough calls,  including the proactive
decision to inform a small  percentage  of our guests that their  orders may not
arrive on time.  (Over 97% of our  shipments  arrived by Dec.  25th.) We can and
will rise to the  challenge of retailing on the Internet,  bringing  customers a
better and more  confident  online  presence and  responding to the needs of the
Internet shopper.

The growth and  acceptance  of shopping for goods and services on the  worldwide
web presents a major sales opportunity.  Over the next five years, the number of
online users around the world is projected to increase  more than  three-fold to
400  million.  Our goal is to  build a  world-class  e-commerce  infrastructure,
taking toysrus.com forward into an exciting future.

In the fourth  quarter of 1999,  with  heightened  website  traffic  and orders,
toysrus.com was the...

Number One*

o     fastest growing e-commerce site on the Internet

o     online toy site, the first traditional retailer to surpass a pure e-tailer

o     e-commerce site for women

o     bricks-and-mortar site

Number Five*

o     e-commerce site overall

* Source:Media Metrix.


                                [Photo Omitted]

As we enter a revolutionary period in retail and consumer marketing, toysrus.com
is uniquely positioned to become a global leader on the Internet.


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[Photo Omitted]

Our guests can look  forward to a more focused  assortment  of key items and the
newest fashion trends.

[Photo Omitted]

Through extensive  consumer  research,  our Kids"R"Us  customers have given us a
clear  picture of the store  that they  would like us to be. Our guests  want an
exciting  store that's  easier to shop,  with a more focused  assortment  of key
items and the newest fashion  trends.  They want us to offer them the best value
propositions.  They  want us to be more  available  to assist  them  with  their
shopping  needs.  Our focus for the year ahead is clear:  make it happen for our
guests.

We will  continue to grow by adding over 70 more  Kids"R"Us  combo stores within
Toys"R"Us stores by the end of the year,  bringing our guests added  convenience
and leveraging our "R"Us family connection.  In addition,  programs are underway
that focus on "guest  delight" and  elevating  service  levels,  with  associate
training and recognition components.

Our customer  communications  will be more targeted as well. A fresh new look in
our advertising and direct mail efforts will enable us to present clear branding
and value messages to our guests throughout the year.

                                [Photo Omitted]

                                     focus
We're  sharpening our  merchandise  mix,  making shopping more rewarding for our
guests, and taking Kids"R"Us forward in the competitive marketplace.


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                             [Logo] BABIES"R"US (R)
                                Baby Superstore (R)

In January 2000, Babies"R"Us reached the billion dollar sales mark. We could not
have asked for a better way to enter the new millennium.  The growth and success
of this  "Billion  Dollar Baby" is testimony to our  commitment to excellence at
all levels of our organization.

Looking ahead, we will continue to establish Babies"R"Us as the premier retailer
of baby products,  and to grow our market share. As we open more new stores, the
guest  focus  that is  pervasive  throughout  the "R"Us  Family  will  drive our
initiatives in marketing, merchandising and human resources.

We will reach our guests  through  strategic  marketing  and  advertising,  with
messages that build the strength of our brand and  communicate  the benefits and
services at our stores.  Local events like our BabyFest Weekends,  combined with
programs  that allow us to  partner  with  childbirth  educators,  OB-GYNs,  and
hospitals will also help us reach potential customers as early as possible.

We will make our in-store experience even more unique,  through merchandise that
is  exclusive  to our  stores.  As we expand  and  develop  our  Koala  Baby and
Especially for Baby brands, our guests can look forward to quality products that
can only be found at Babies"R"Us.

[Photo Omitted]

The success we have had with our Baby  Registry  is second to none.  Babies"R"Us
registers more expectant parents than any other retailer in the U.S.

To make sure that we provide our guests with the best service possible, programs
that focus on product  training and product  knowledge  are in place for all our
associates.

Our guests have paid us the ultimate compliment by returning to our stores again
and again.  They expect and deserve the best  selection and the highest level of
service. Babies"R"Us will deliver - for 2000 and beyond.

                             [Photo Omitted]
                                  growth

1999 was a banner  year for  Babies"R"Us,  with our chain that grew to 131 total
stores across the country.  We directed our resources  towards  establishing our
leadership position in the juvenile retail market.


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[Photo Omitted]

The addition of Imaginarium stores to the "R"Us Family enables us to explore new
ways to delight our customers.

Imaginarium  stores  immerse  children  and  adults  in a fun  environment  that
stimulates  all the senses - where play and  exploration  are  encouraged to the
fullest.  Children and their parents quickly become part of a memorable in-store
experience.  From the children's music that fills the store, to the many product
demonstrations  and in-store craft classes they can participate in,  Imaginarium
offers children and their parents something to enjoy and remember.

Our  neighborhood  stores  are  located  in 40 towns  (and  growing)  across the
country.  Each Imaginarium  store carries the finest  collection of quality toys
from around the world. Every item in our "Galaxy of Toys"(a) is specially chosen
by our "Master  Toyologist"(a),  whose criteria for selection includes high play
and learning values, excellent quality and, most of all, fun!

[Logo] Imaginarium(R)
A Galaxy of Toys(R)

The attraction and appeal of the Imaginarium  neighborhood  stores and specialty
merchandise  was  recreated  inside 19  Toys"R"Us  stores in October  1999.  New
specialty brands, known for their quality and educational value, were introduced
to Toys"R"Us and  presented  along with  traditional  favorites for a successful
merchandise mix. These test stores generated positive sales results and customer
feedback.

Moving  forward  into the  year  2000,  Imaginarium  will  focus  on  three  key
initiatives.  The first is the expansion of the Imaginarium  "worlds" within the
Toys"R"Us stores. The second is the addition of new neighborhood stores; and the
third  is the  expansion  of our  Imaginarium.com  site  (integrating  with  the
toysrus.com site). Imaginarium is committed to merchandise the finest playthings
to promote learning and fun, while providing  outstanding customer service - all
in an environment of fun and discovery.

                                 [Photo Omitted]
                                    discovery

                                                                              19
<PAGE>

                                [Photo Omitted]

Financial Section

Management's Discussion and Analysis
of Results of Operations and
Financial Condition ............................. page 21

Financial  Statements ........................... page 25

Report of Management and
Report of Independent Auditors .................. page 35

Directors and Officers .......................... page 36

Quarterly Financial Data,
Market Information
and Store Locations ............................. page 38

Corporate Data and
Citizenship ..................................... page 39


20
<PAGE>

Manangement's Discussion and Analysis
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS*
Comparison of Fiscal Year 1999 to 1998

The company's total sales increased 6% to $11.9 billion from $11.2 billion.  The
total sales growth was  primarily  driven by a 3% increase in  comparable  store
sales, as well as continued new store expansion, partially offset by the closing
of 46  under-performing  stores in 1999 and 1998 (see  "Restructuring  and Other
Charges" below). Comparable store sales for the USA toy store division increased
3% . The USA  comparable  toy store sales  increases  were driven  primarily  by
improved  merchandising  trends and strong sales of Pokemon and  electronic  and
video products.  These gains were partially offset by the deflationary impact of
video hardware sales, and were limited by industry-wide  shortages of electronic
and other  products  during the  holiday  season.  The  International  toy store
division results of operations  discussed below include the results of Toys"R"Us
- Japan.  Total sales for the International toy store division  increased 7% and
comparable  international toy store sales, on a local currency basis,  increased
2%. The comparable  international  toy store sales  increases  reflect  improved
performances in several merchandise categories, in particular, the juvenile, toy
and electronics  categories.  Total sales for the Babies"R"Us  division exceeded
the $1 billion  milestone in 1999 and increased 28%.  Comparable store sales for
Babies"R"Us  increased 9%. The Kids"R"Us division reported a 3% comparable store
sales decrease.  The company's  toysrus.com  Internet  subsidiary reported total
sales of $49 million from its inception in May 1999.

International sales were favorably impacted by the translation of local currency
into U.S. dollars by approximately $59 million in 1999 and unfavorably  impacted
by approximately  $30 million in 1998.  Neither the translation of currency into
U.S.  dollars nor  inflation had a material  effect on the  company's  operating
results for 1999.

In 1998, the company recorded  restructuring and other non-recurring  charges of
$698 million to reposition  its  world-wide  business,  as set forth below.  For
comparability purposes, the following discussion regarding results of operations
excludes the impact of these charges.

On a consolidated basis, 1999's cost of sales as a percentage of sales was 70.1%
versus 70.2%. The USA toy store division  reported cost of sales as a percentage
of sales of 71.6% as compared to 71.0%.  This increase was a result of increased
markdowns to keep inventory fresh. The International toy store division reported
cost of sales as a percentage  of sales of 69.2% versus 69.1%.  The  Babies"R"Us
division  reported cost of sales as a percentage of sales of 67.2% versus 69.0%,
reflecting a favorable change in the sales mix.

On a consolidated basis, selling,  general and administrative expenses (SG&A) as
a percentage  of sales  increased to 23.1% from 21.3%.  This increase was due in
part  to  establishing  and  operating   toysrus.com,   the  company's  Internet
subsidiary,  the implementation of strategic initiatives targeted to improve the
company's  long-term  performance,  and costs related to the reformatting of the
company's toy stores to the C-3 format. The USA toy store division reported SG&A
as a percentage  of sales of 19.8% versus  18.6%,  while the  International  toy
store division reported SG&A as a percentage of sales of 23.4% versus 23.6%. The
Babies"R"Us  division  reported  SG&A as a  percentage  of sales of 24.0% versus
25.0%.

Depreciation and amortization  increased to $278 million from $255 million. This
increase was due in part to  additional  new stores and  renovations  to the C-3
format,  as well as  strategic  investments  to improve  management  information
systems.

Interest  expense  decreased by $11 million.  This decrease was due primarily to
lower average  interest rates in 1999. Also included in 1998 interest expense is
$6 million relating to the early extinguishment of long-term debt.

Included in the  company's  1999 results are net costs to establish  and operate
the company's Internet  subsidiary,  toysrus.com.  Excluding the impact of these
net costs,  1999 earnings before income taxes, net earnings and diluted earnings
per share would have been $526 million, $334 million and $1.36, respectively.

The  company's  effective  tax  rate  was  unchanged  at  36.5%,  excluding  the
restructuring and other charges.

Comparison of Fiscal Year 1998 to 1997

The  company's  total sales  increased to $11.2 billion from $11.0  billion.  In
1998,  sales were negatively  impacted by the overall  weakness in the worldwide
toy industry  which was cycling  against  strong sales of virtual  pets,  action
figures  and plush from the prior  year.  In  addition,  sales  were  negatively
impacted by sales of video  hardware  and software at lower price points as well
as the deflationary  effect from sales of clearance  merchandise  related to the
company's  inventory  reduction program.  Comparable store sales for the USA toy
store division  declined 4%, while the International toy store division had a 2%
comparable  store sales decline,  in local currency.  The  Babies"R"Us  division
reported a 19%  comparable  store  sales  increase  and the  Kids"R"Us  division
reported a 2% comparable store sales decrease.

International  sales  were  unfavorably  impacted  by the  translation  of local
currency into U.S. dollars by approximately $30 million in 1998 and $250 million
in 1997. Neither the translation of currency into U.S. dollars nor inflation had
a material effect on the company's operating results for 1998 and 1997.

* References  to 1999,  1998,  and 1997,  are for the 52 weeks ended January 29,
2000, January 30, 1999 and January 31, 1998, respectively.


                                                                              21
<PAGE>

Manangement's Discussion and Analysis
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On a consolidated basis, cost of sales as a percentage of sales was 70.2% versus
69.8%.  The USA toy store  division  reported  cost of sales as a percentage  of
sales of 71.0% versus 70.5%. The  International toy store division reported cost
of sales as a percentage of sales of 69.1% versus 68.8%.  These  increases  were
due to a shift in the sales mix to lower margin video software  merchandise from
higher margin action figures and virtual pet products.  The Babies"R"Us division
reported cost of sales as a percentage of sales of 69.0% versus 70.7%.

On a consolidated  basis,  SG&A as a percentage of sales was 21.3% versus 20.2%.
The USA toy  store  division  reported  SG&A as a  percentage  of sales of 18.6%
versus 17.5%, the International toy store division reported SG&A as a percentage
of sales of 23.6% versus 23.1%.  These  increases were primarily a result of the
implementation  of  strategic  initiatives,  as well  as  store  expansion.  The
Babies"R"Us  division  reported  SG&A as a  percentage  of sales of 25.0% versus
27.1%.

Depreciation,  amortization and write-offs were $255 million as compared to $253
million.

Interest  expense  increased  by $17  million  primarily  due to higher  average
borrowings  outstanding  throughout the year as a result of the company's  share
repurchase  programs.  Also  included  in 1998  interest  expense  is $6 million
relating to the early extinguishment of long-term debt.

The  company's  effective  tax rate for 1998  was  unfavorably  affected  by the
restructuring and other charges recorded in 1998.  Excluding the impact of these
charges, the company's effective tax rate was unchanged at 36.5%.

Restructuring and Other Charges

During 1998,  the company  announced  strategic  initiatives  to reposition  its
worldwide business and other charges including the customer-focused reformatting
of its toy stores into the new C-3 format,  as well as the  restructuring of its
international  operations,  all of which  resulted  in a charge of $353  million
($279  million  net  of  tax  benefits,  or  $1.05  per  share).  The  strategic
initiatives  resulted  in a  restructuring  charge  of $294  million.  The other
charges of $59 million  primarily  consisted of changes in accounting  estimates
and provisions for legal settlements.  The company has closed 46 underperforming
stores and 7  administrative  offices,  as well as 4 distribution  centers.  The
company is continuing to aggressively  negotiate the  closing/downsizing  of the
remaining stores and distribution centers included in its repositioning  program
and intends to execute the remainder of the initiatives included in the program.
Details on the  components  of the  charges  are  described  in the notes to the
consolidated financial statements and are as follows:

                                                     Reserve             Reserve
                                           Utilized  Balance  Utilized   Balance
Description                       Charge   in 1998   1/30/99  in 1999    1/29/00
--------------------------------------------------------------------------------
Closings/downsizings:
  Lease commitments               $ 81      $ --      $ 81      $19         $62
  Severance and
  other closing costs               29         4        25        11         14
  Write-down of property,
  plant and equipment              155       155        --        --         --
  Other                             29         5        24        13         11
--------------------------------------------------------------------------------
Total restructuring               $294      $164      $130       $43        $87
================================================================================
Changes in accounting
estimates and provisions
for legal settlements             $ 59      $ 20      $ 39       $ 9        $30
================================================================================

In 1998, the company also announced  markdowns and other charges of $345 million
($229 million net of tax  benefits,  or $0.86 per share).  Of this charge,  $253
million  related to markdowns  required to clear excess  inventory  from stores,
primarily  to enable  the  company  to proceed  with the C-3  conversions  on an
accelerated  basis.  The  company's  objective  with its new C-3  concept  is to
provide customers with a better shopping  experience  leading to increased sales
and higher  inventory  turns. In addition,  the company  recorded $29 million in
markdowns related to the store closings discussed  previously.  The company also
recorded  charges to cost of sales of $63 million  related to  inventory  system
refinements and changes in accounting estimates.  Unused reserves at January 29,
2000 are  expected to be  utilized in the  company's  upcoming  business  cycle.
Details of the markdowns and other charges are as follows:

                                                     Reserve             Reserve
                                           Utilized  Balance  Utilized   Balance
Description                       Charge   in 1998   1/30/99  in 1999    1/29/00
--------------------------------------------------------------------------------
Markdowns
  Clear excess
  inventory                       $253      $179      $ 74         $72      $ 2
  Store closings                    29         2        27          15       12
  Change in accounting
  estimates and other               63        57         6           6       --
--------------------------------------------------------------------------------
Total cost of sales               $345      $238      $107         $93      $14
================================================================================

The company has  substantially  completed  its  restructuring  program  that was
announced in 1995,  with the exception of long-term  lease  commitment  reserves
that will be utilized throughout 2000 and thereafter.

The company  believes all  reserves  are adequate to complete its  restructuring
programs.

Liquidity and Capital Resources

The  company's  cash flow from  operations  were $865  million  in 1999 and $964
million in 1998. The difference relates primarily to the non-cash portion of the
1998  restructuring  charge as well as a significant  decrease in inventories in
1998,  partially  offset  by  higher  net  earnings  in 1999.  Cash  flows  from
operations increased to $964 million in 1998 from $509 million in 1997 primarily
due to a  significant  reduction  in  inventories  during 1998 as well as higher
accounts payable, accrued expenses and other liabilities.


22
<PAGE>

Manangement's Discussion and Analysis
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Cash flows used for investing  activities increased by $182 million in 1999, due
to new store expansion in the Babies"R"Us  division and  International toy store
division,  USA toy  store  conversions  to the C-3  format,  as well as  capital
requirements  to  establish  and  operate  the  company's  toysrus.com  Internet
subsidiary.  The  company  now  operates  170 toy stores in the U.S.  in the C-3
format and 163 additional toy stores in the U.S. with retrofitted  "front-ends".
In addition,  the company  invested $43 million for the purchase of  Imaginarium
(see "Other Matters" below). Cash flows used for investing  activities decreased
by $94 million in 1998 from 1997,  primarily due to fewer new store  openings in
1998, as well as fewer store conversions in 1998.

Cash flows used for financing  activities decreased to $102 million in 1999 from
$344 million in 1998. As discussed  above,  the company  increased the number of
toy stores  converted to its C-3 format in 1999 and thus decreased the amount of
cash used for its share  repurchase  program to $200 million in 1999,  from $723
million in 1998. In addition,  net borrowings decreased by $279 million for 1999
verses 1998. Cash flows used for financing  activities decreased to $344 million
in 1998 from $498 million in 1997  primarily  due to repayment of a $115 million
Baby Superstore obligation in 1997.

For 2000,  capital  requirements for new stores,  conversions of existing stores
and other capital investments are estimated at approximately $550 million. These
plans include the addition of  approximately  20 new  Babies"R"Us  stores in the
United States,  approximately 30 new International toy stores,  including 17 new
stores in Japan and 10  franchise  stores.  The  company  is also  planning  the
conversion of approximately 70 toy stores in the U.S. into C-3 combo stores.  In
addition, the company's capital investment plans also include major revisions to
its distribution center structure and enhancements to its management information
systems.

In 1999,  the company  repurchased 12 million shares of its common stock through
its share repurchase  programs for a total of $200 million. At January 29, 2000,
the  company  has $130  million  remaining  in its $1 billion  share  repurchase
program announced in January 1998. On March 20,2000,  the company announced that
its Board of Directors approved a new $1 billion share repurchase  program.  The
company will continue to repurchase additional shares when appropriate.

The company  announced  several major  strategic  initiatives  regarding  online
retailing,  as part of the  company's  strategy to become a global leader in the
online retail market for toys and  children's  products.  Although  online sales
currently represent only a very small percentage of the overall toy business, it
is a rapidly  growing retail  segment.  Over the next five years,  the number of
online users around the world is  forecasted to increase more than three fold to
over 400 million.  The key initiatives  include the establishment of toysrus.com
as a separate  subsidiary of the company and the acquisition of a 500,000 square
foot  distribution  center  dedicated solely to the fulfillment of orders placed
with toysrus.com.  In addition, on February 24, 2000, the company entered into a
partnership  with  SOFTBANK  Venture  Capital and  affiliates  that  included an
investment  of $57 million in  toysrus.com.  During the last few months of 1999,
toysrus.com  became one of the fastest  growing web sites on the  Internet.  The
company  plans to  continue  making  strategic  investments  in  toysrus.com  to
capitalize on the company's brand names, brick and mortar assets, and SOFTBANK's
Internet  expertise to reach the goal of making  toysrus.com  a global leader in
the online retail market for toys and children's products.

The seasonal  nature of the business  (approximately  42% of sales take place in
the fourth quarter)  typically  causes cash to decline from the beginning of the
year through  October as inventory  increases for the holiday selling season and
funds are used for land purchases and construction of new stores,  which usually
open  in the  first  ten  months  of the  year.  The  company  has a $1  billion
multi-currency   unsecured  committed  revolving  credit  facility  expiring  in
December  2002,  from a  syndicate  of  financial  institutions.  There  were no
outstanding  balances under this revolver at January 2000,  1999 and 1998.  Cash
requirements for operations,  capital  expenditures,  lease  commitments and the
share repurchase  program will be met primarily  through  operating  activities,
borrowings  under  the  $1  billion  revolving  credit  facility,   issuance  of
commercial paper and/or other bank borrowings of foreign subsidiaries.

Other Matters

On August 20, 1999, the company acquired all of the capital stock of Imaginarium
Toy Centers,  Inc. for  approximately  $43 million in cash and the assumption of
certain  liabilities.  The company believes this acquisition will accelerate its
strategy to  establish a leadership  position in the  learning  and  educational
category and will provide further  opportunities for new growth.  The company is
currently operating existing  Imaginarium stores under the Imaginarium name. The
operating  results of Imaginarium from the date of acquisition were not material
to the overall results or financial condition of the company.

On August 26, 1999, Robert C. Nakasone resigned as the company's Chief Executive
Officer and as a director. Also on that date Michael Goldstein,  Chairman of the
Board of Directors,  was named Chief Executive  Officer on an interim basis. Mr.
Goldstein  was Chief  Executive  Officer of the  company  from 1994 to 1998.  On
January 17, 2000,  John H. Eyler,  Jr. was named  President and Chief  Executive
Officer and a director of the company.  Mr.  Goldstein  remains  Chairman of the
Board of Directors.  In connection with the resignation of Mr. Nakasone as Chief
Executive  Officer and a director,  the company  entered into a  Separation  and
Release Agreement with Mr. Nakasone  providing for cash payments,  the immediate
vesting of all unvested options and unvested profit shares held by Mr. Nakasone,
as well as the  prorated  vesting of other  unvested  equity based awards on the
second  anniversary  of the  termination  date.  The  company  accrued all costs
related to this matter as of January 29, 2000.  These  amounts were not material
to the overall results or financial condition of the company.

                                                                              23
<PAGE>

Manangement's Discussion and Analysis
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On March 20, 2000, the company  announced the planned  initial  public  offering
("IPO")  in Japan of shares of  Toys"R"Us  - Japan.  Under  the  initial  public
offering  plan,  Toys"R"Us  - Japan  and the  company  will  offer  primary  and
secondary shares  respectively,  to the public in Japan during the first half of
fiscal 2000. This offering is subject to Japanese  government approval and risks
associated with market conditions. After the offering, the company will retain a
significant  ownership stake of Toys"R"Us - Japan, although less than 50% of the
then  outstanding  shares.  Accordingly,  subsequent  to the  completion  of the
planned IPO, the company will no longer consolidate the financial  statements of
Toys"R"Us - Japan.  Toys"R"Us - Japan will  operate as a licensee of  Toys"R"Us,
Inc.

Quantitative and Qualitative
Disclosures About Market Risks

The company is exposed to market risk from  potential  changes in interest rates
and foreign exchange rates. The company regularly  evaluates these risks and has
taken the following measures to mitigate these risks: the countries in which the
company owns assets and operates  stores are politically  stable;  the company's
foreign exchange risk management  objectives are to stabilize cash flow from the
effects of foreign currency fluctuations;  the company will, whenever practical,
offset local  investments in foreign  currencies with borrowings  denominated in
the same currencies;  the company also enters into foreign exchange contracts or
purchases  options to  eliminate  specific  transaction  risk.  The market  risk
related to these  derivative  contracts is offset by the changes in value of the
underlying  items being hedged.  Approximately  half of the company's  long-term
debt is at fixed  interest  rates and  therefore,  the fair value is affected by
changes in market  interest rates.  The company  believes the amount of risk and
the use of derivative financial  instruments described above are not material to
the company's financial condition or results of operations.

Impact of Year 2000

In prior years,  the company  discussed  the nature and progress of its plans to
become Year 2000 ready. In late 1999, the company  completed its remediation and
testing of systems.  As a result of those planning and  implementation  efforts,
the  company   experienced  no  significant   disruptions  in  mission  critical
information technology and non-information technology systems and believes those
systems successfully  responded to the Year 2000 date change. The company is not
aware of any material problems resulting from Year 2000 issues,  either with its
products,  its internal systems,  or the products and services of third parties.
The company will continue to monitor its mission-critical  computer applications
and those of its suppliers and vendors  throughout  the Year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.

Recent Accounting Pronouncements

In June 1999,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  (SFAS)  No.  137,  Accounting  for  Derivative
Instruments  and Hedging  Activities  - Deferral of the  Effective  Date of FASB
Statement No. 133. This pronouncement requires the company to adopt SFAS No 133,
Accounting for Derivative  Instruments  and Hedging  Activities,  on February 4,
2001. SFAS No. 133 requires the company to recognize all derivative  instruments
as assets or  liabilities  in its balance  sheet and measure them at fair value.
The  company  does not  expect the  adoption  of SFAS No. 133 to have a material
impact on its financial position, results of operations or cash flows.

Euro Conversion

The  company  has  developed a plan to ensure  business  and systems  continuity
during  the  introduction  of the Euro  currency  in  certain  of the  company's
European operations. The initial phase of this plan was implemented prior to the
January 1, 1999 (Phase 1) introduction of the Euro.  Further  implementation  of
this plan is scheduled to coincide with the  transition  phases (Phases 2 and 3)
of  completely  converting  from local  denominated  currencies to the Euro (the
"Euro  conversion").  Total costs for the entire Euro conversion program are not
expected to be material.  Based on the actions  taken to date,  the company does
not expect the Euro  conversion  to have a material  effect on the  consolidated
financial position, results of operations or cash flows of the company.

Forward Looking Statements

This annual report contains "forward  looking"  statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange  Act of 1934,  which are intended to be covered by the safe
harbors created thereby. All statements that are not historical facts, including
statements  about the company's  beliefs or  expectations,  are  forward-looking
statements.  Such statements  involve risks and uncertainties  that exist in the
company's  operations and business environment that could render actual outcomes
and results materially different than predicted.  The company's  forward-looking
statements  are based on  assumptions  about many  factors,  including,  but not
limited to, ongoing  competitive  pressures in the retail  industry,  changes in
consumer  spending,  general economic  conditions in the United States and other
jurisdictions in which the company conducts business (such as interest rates and
consumer confidence) and normal business uncertainty. While the company believes
that its assumptions are reasonable at the time forward-looking  statements were
made,  it  cautions  that it is  impossible  to predict  the  actual  outcome of
numerous factors and, therefore, readers should not place undue reliance on such
statements.  Forward-looking statements speak only as of the date they are made,
and the company  undertakes no obligation to update such  statements in light of
new information or future events that involve inherent risks and  uncertainties.
Actual results may differ materially from those contained in any forward looking
statement.


24
<PAGE>

Consolidated Statements of Earnings
TOYS"R"US, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                                  Year Ended
                                                            ------------------------------------------------
                                                            January 29,         January 30,      January 31,
(In millions except per share data)                                2000                1999             1998
------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                 <C>             <C>
Net sales                                                       $11,862             $11,170         $ 11,038
Cost of sales                                                     8,321               8,191            7,710
------------------------------------------------------------------------------------------------------------
      Gross Profit                                                3,541               2,979            3,328
------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses                      2,743               2,443            2,231
Depreciation, amortization and asset write-offs                     278                 255              253
Restructuring charge                                                 --                 294               --
------------------------------------------------------------------------------------------------------------
      Total Operating Expenses                                    3,021               2,992            2,484
------------------------------------------------------------------------------------------------------------
      Operating Income/(Loss)                                       520                 (13)             844

Interest expense                                                     91                 102               85
Interest and other income                                           (11)                 (9)             (13)
------------------------------------------------------------------------------------------------------------
      Interest Expense, Net                                          80                  93               72
------------------------------------------------------------------------------------------------------------

Earnings/(loss) before income taxes                                 440                (106)             772
Income taxes                                                        161                  26              282
------------------------------------------------------------------------------------------------------------
Net earnings/(loss)                                             $   279             $  (132)        $    490
============================================================================================================

Basic earnings/(loss) per share                                 $  1.14             $ (0.50)        $   1.72
============================================================================================================
Diluted earnings/(loss) per share                               $  1.14             $ (0.50)        $   1.70
============================================================================================================
</TABLE>

See notes to consolidated financial statements.

                                [Photo Omitted]


                                                                              25
<PAGE>

                                [Photo Omitted]

Consolidated Balance Sheets
TOYS"R"US, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                            January 29,      January 30,
(In millions)                                                      2000             1999
----------------------------------------------------------------------------------------
<S>                                                            <C>               <C>
ASSETS

Current Assets:

Cash and cash equivalents                                      $    584          $   410
Accounts and other receivables                                      182              204
Merchandise inventories                                           2,027            1,902
Prepaid expenses and other current assets                            80               81
----------------------------------------------------------------------------------------
      Total current assets                                        2,873            2,597

Property and Equipment:

Real estate, net                                                  2,342            2,354
Other, net                                                        2,113            1,872
----------------------------------------------------------------------------------------
      Total property and equipment                                4,455            4,226

Goodwill, net                                                       374              347
Other assets                                                        651              729
----------------------------------------------------------------------------------------
                                                               $  8,353          $ 7,899
========================================================================================

<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                            <C>               <C>
Current Liabilities:

Short-term borrowings                                          $    278          $   156
Accounts payable                                                  1,617            1,415
Accrued expenses and other current liabilities                      836              696
Income taxes payable                                                107              224
----------------------------------------------------------------------------------------
      Total current liabilities                                   2,838            2,491

Long-Term Debt                                                    1,230            1,222
Deferred Income Taxes                                               362              333
Other Liabilities                                                   243              229

Stockholders' Equity:

Common stock                                                         30               30
Additional paid-in capital                                          453              459
Retained earnings                                                 4,757            4,478
Foreign currency translation adjustments                          (137)             (100)
Treasury shares, at cost                                        (1,423)           (1,243)
----------------------------------------------------------------------------------------
      Total stockholders' equity                                  3,680            3,624
----------------------------------------------------------------------------------------
                                                               $  8,353          $ 7,899
========================================================================================
</TABLE>

See notes to consolidated financial statements.


26
<PAGE>

Consolidated Statements of Cash Flows
TOYS"R"US, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                                            Year Ended
                                                                     --------------------------------------------------
                                                                     January 29,        January 30,        January 31,
(In millions)                                                               2000               1999               1998
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings/(Loss)                                                        $ 279             $ (132)              $ 490
Adjustments to reconcile net earnings/(loss) to net cash
provided by operating activities:
      Depreciation, amortization and asset write-offs                        278                255                 253
      Deferred income taxes                                                  156                (90)                 18
      Restructuring and other charges                                         --                546                  --
      Changes in operating assets and liabilities:
           Accounts and other receivables                                     35                (43)                (40)
           Merchandise inventories                                          (192)               233                (265)
           Prepaid expenses and other operating assets                       (69)               (27)                 (9)
           Accounts payable, accrued expenses and other liabilities          497                229                  22
           Income taxes payable                                             (119)                (7)                 40
-----------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                    865                964                 509
-----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net                                                   (533)              (373)               (494)
Other assets                                                                 (28)               (49)                (22)
Purchase of Imaginarium, net of cash acquired                                (43)                --                  --
-----------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                                       (604)              (422)               (516)
=======================================================================================================================

CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net                                                    95                  4                (142)
Long-term borrowings                                                         593                771                  11
Long-term debt repayments                                                   (604)              (412)               (176)
Exercise of stock options                                                     14                 16                  62
Share repurchase program                                                    (200)              (723)               (253)
-----------------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities                                       (102)              (344)               (498)
=======================================================================================================================

Effect of exchange rate changes on cash and cash equivalents                  15                 (2)                (42)

CASH AND CASH EQUIVALENTS
Increase/(decrease) during year                                              174                196                (547)
Beginning of year                                                            410                214                 761
-----------------------------------------------------------------------------------------------------------------------
End of Year                                                                $ 584             $  410               $ 214
=======================================================================================================================

SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
Income tax payments                                                        $ 126             $  122               $ 192
Interest payments                                                          $  92             $  109               $  83
=======================================================================================================================
</TABLE>

See notes to consolidated financial statements.


                                                                              27
<PAGE>

Consolidated Statements of Stockholders' Equity
TOYS"R"US, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                   Common Stock
                                      ----------------------------------                    Foreign
                                           Issued          In Treasury     Additional      currency                        Total
                                      ----------------   ---------------      paid-in   translation     Retained   stockholders'
(In millions)                         Shares    Amount   Shares   Amount      capital   adjustments     earnings          equity
----------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>     <C>     <C>          <C>         <C>           <C>             <C>
Balance, February 1, 1997            300.4       $ 30    (12.6)  $  (388)     $ 489       $  (60)       $ 4,120         $ 4,191
Net earnings for the year             --           --     --          --         --           --            490             490
Foreign currency translation
   adjustments                        --           --     --          --         --          (62)            --             (62)
                                                                                                                        --------
   Comprehensive income                                                                                                     428
Share repurchase program              --           --     (8.2)     (253)        --           --             --            (253)
Exercise of stock options, net        --           --      2.8        84        (22)          --             --              62
--------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1998            300.4         30    (18.0)     (557)       467         (122)         4,610           4,428
--------------------------------------------------------------------------------------------------------------------------------
Net loss for the year                 --           --     --          --         --           --           (132)           (132)
Foreign currency translation
   adjustments                        --           --     --          --         --           22             --              22
                                                                                                                        --------
   Comprehensive loss                                                                                                      (110)
Share repurchase program              --           --    (32.2)     (723)        --           --             --            (723)
Issuance of restricted stock          --           --     --          15         (2)          --             --              13
Exercise of stock options, net        --           --       .4        22         (6)          --             --              16
--------------------------------------------------------------------------------------------------------------------------------
Balance, January 30, 1999            300.4         30    (49.8)   (1,243)       459         (100)         4,478           3,624
--------------------------------------------------------------------------------------------------------------------------------
Net earnings for the year             --           --     --          --         --           --            279             279
Foreign currency translation
   adjustments                        --           --     --          --         --          (37)            --             (37)
                                                                                                                        --------
   Comprehensive income                                                                                                     242
Share repurchase program              --           --    (12.0)     (200)        --           --             --            (200)
Issuance of restricted stock, net     --           --     --           3         (4)          --             --              (1)
Exercise of stock options, net        --           --       .7        17         (2)          --             --              15
================================================================================================================================
Balance, January 29, 2000            300.4       $ 30    (61.1)  $(1,423)     $ 453       $ (137)       $ 4,757         $ 3,680
================================================================================================================================
</TABLE>

See notes to consolidated financial statements.

                                [Photo Omitted]


28
<PAGE>

Notes to Consolidated Financial Statements
TOYS"R"US, INC. AND SUBSIDIARIES

(Amounts in millions except per share data)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The company's fiscal year ends on the Saturday nearest to January 31. References
to 1999, 1998 and 1997 are for the 52 weeks ended January 29, 2000,  January 30,
1999 and January 31, 1998, respectively.

Reclassification

Certain amounts in the 1998 Consolidated Balance Sheet have been reclassified to
conform with the 1999 presentation.

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the company and
its subsidiaries.  All material intercompany balances and transactions have been
eliminated.  Assets and  liabilities  of foreign  operations  are  translated at
current  rates of exchange at the balance sheet date while results of operations
are translated at average rates in effect for the period.  Translation  gains or
losses are shown as a separate component of stockholders' equity.

Cash and Cash Equivalents

The company considers its highly liquid investments with original  maturities of
less than three months to be cash equivalents.

Merchandise Inventories

Merchandise  inventories for the U.S.A.  toy store  operations,  which represent
approximately  60% of  total  inventories,  are  stated  at the  lower  of  LIFO
(last-in,  first-out)  cost or market,  as  determined  by the retail  inventory
method.  If  inventories  had  been  valued  at the  lower  of  FIFO  (first-in,
first-out) cost or market,  inventories would show no change at January 29, 2000
or January 30, 1999. All other  merchandise  inventories are stated at the lower
of FIFO cost or market as determined by the retail inventory method.

Property and Equipment

Property and equipment are recorded at cost.  Depreciation  and amortization are
provided using the  straight-line  method over the estimated useful lives of the
assets or, where applicable,  the terms of the respective  leases,  whichever is
shorter.  The company evaluates the need to recognize impairment losses relating
to long-lived  assets based on several  factors  including,  but not limited to,
management's plans for future operations, recent operating results and projected
cash flows.

Financial Instruments

The  carrying  amounts  reported  in  the  balance  sheets  for  cash  and  cash
equivalents  and short and long-term  borrowings  approximate  their fair market
values.

Forward Foreign Exchange Contracts

The company enters into forward foreign exchange contracts to eliminate the risk
associated with currency movement  relating to its short-term  intercompany loan
program with foreign subsidiaries and inventory purchases denominated in foreign
currency.  Gains  and  losses,  which  offset  the  movement  in the  underlying
transactions,  are  recognized  as  part of such  transactions.  Gross  deferred
unrealized gains and losses on the forward contracts were not material at either
January 29,  2000 or January  30,  1999.  The  related  receivable,  payable and
deferred  gain or loss are  included  on a net basis in the balance  sheet.  The
company had $59 and $209 of short term outstanding  forward contracts at January
29, 2000 and January 30, 1999,  maturing in 2000 and 1999,  respectively.  These
contracts are entered into with counterparties that have high credit ratings and
with  which  the  company  has the  contractual  right to net  forward  currency
settlements.  In  addition,  the company  had a $342  currency  swap  obligation
outstanding at January 29, 2000 and January 30, 1999,  respectively,  related to
its 475 Swiss franc note payable due 2004.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  amounts  reported  in the  consolidated  financial  statements  and
accompanying notes. Actual results could differ from those estimates.


                                                                              29
<PAGE>

PROPERTY AND EQUIPMENT

                           Useful Life    January 29,     January 30,
                            (in years)           2000            1999
---------------------------------------------------------------------
Land                                         $    827        $    829

Buildings                        45-50          1,859           1,842

Furniture and equipment           5-20          2,046           1,861

Leaseholds and
  leasehold improvements     12 1/2-35          1,432           1,213

Construction in progress                           42              42

Leased property
  under capital leases                             26              27
---------------------------------------------------------------------
                                                6,232           5,814

Less accumulated depreciation
  and amortization                              1,777           1,588
=====================================================================
                                              $ 4,455         $ 4,226
=====================================================================

SEASONAL FINANCING
AND LONG-TERM DEBT

                                              January 29,  January 30,
                                                     2000         1999
----------------------------------------------------------------------
Commercial Paper
  interest rates from 5.64% to 5.98%              $   368      $   368

475 Swiss franc note payable, due 2004(a)             342          342

8 3/4% debentures, due 2021,
  net of expenses                                     198          198

Japanese yen loans with interest payable
  at annual rates from 1.49% to 6.47%,
  due in varying amounts through 2012                 242          198

Industrial revenue bonds,
  net of expenses(b)                                   52           60

7% British pound sterling loan payable,
  due quarterly through 2001(c)                        19           33

8 1/4% sinking fund debentures,
  due 2017, net of discounts                           12           24

Mortgage notes payable at annual
  interest rates from 10.16% to 11.00%(d)              10           11

Obligations under capital leases                        8           11
----------------------------------------------------------------------
                                                    1,251        1,245
Less current portion (e)                               21           23
======================================================================
                                                  $ 1,230      $ 1,222
======================================================================

(a)  Supported  by a 406 Swiss franc bank  letter of credit.  This note has been
converted by an interest  rate and currency  swap to a floating  rate, US dollar
obligation at 3 month LIBOR less approximately 95 basis points.

(b) Bank letters of credit of $35,  expiring in 2001,  support  certain of these
industrial  revenue bonds.  The company  expects that the bank letters of credit
will be renewed. The bonds have fixed or variable interest rates with an average
rate of 4.1% and 3.6% at January 29, 2000 and January 30, 1999, respectively.

(c) Collateralized by property with a carrying value of $156 and $160 at January
29, 2000 and January 30, 1999, respectively.

(d) Collateralized by property and equipment with an aggregate carrying value of
$12 and $15 at January 29, 2000 and January 30, 1999, respectively.

(e)  Included  in  accrued  expenses  and  other  current   liabilities  on  the
consolidated  balance sheets.

The fair market value of the  company's  long-term  debt at January 29, 2000 and
January 30, 1999,  exclusive of commercial  paper,  was  approximately  $932 and
$980,  respectively.  The fair market value was  estimated  using quoted  market
rates for publicly traded debt and estimated interest rates for non-public debt.

The company  has a $1 billion  unsecured  committed  revolving  credit  facility
expiring in December 2002. This  multi-currency  facility permits the company to
borrow at the lower of LIBOR  plus a fixed  spread or a rate set by  competitive
auction.  The  facility  is  available  to  support  domestic  commercial  paper
borrowings and to meet worldwide cash requirements.

Commercial paper of $368 is classified as long-term debt at January 29, 2000 and
January  30,  1999,  as  the  company  maintains   long-term   committed  credit
agreements,  as described  above,  to support  these  borrowings  and intends to
refinance  them  on  a  long-term  basis  through  continued   commercial  paper
borrowings.  Commercial  paper  of $152 at  January  29,  2000 was  included  in
short-term debt.

Additionally,  the company has lines of credit  with  various  banks to meet the
short-term financing needs of its foreign subsidiaries.

The  weighted-average  interest  rates on short-term  borrowings  outstanding at
January 29, 2000 and January 30, 1999 were 4.8% and 3.8%, respectively.

The  annual  maturities  of  long-term  debt  at  January  29,  2000,  excluding
commercial paper of $368, are as follows:

---------------------------------------------------------------
2000                                                     $   21
2001                                                         55
2002                                                         10
2003                                                        352
2004                                                         10
2005 and subsequent                                         435
===============================================================
                                                         $  883
===============================================================

LEASES

The company  leases a portion of the real estate  used in its  operations.  Most
leases  require the company to pay real estate  taxes and other  expenses;  some
require additional amounts based on percentages of sales.

Minimum rental commitments under noncancelable operating leases having a term of
more than one year as of January 29, 2000 are as follows:

                                 Gross                      Net
                               minimum    Sublease      minimum
                               rentals      income      rentals
---------------------------------------------------------------
2000                           $   353       $  23      $   330
2001                               349          20          329
2002                               344          18          326
2003                               341          15          326
2004                               333          12          321
2005 and subsequent              2,968          59        2,909
===============================================================
                               $ 4,688       $ 147      $ 4,541
===============================================================

Total rent expense, net of sublease income was $350, $334 and $309 in 1999, 1998
and 1997, respectively.


30
<PAGE>

STOCKHOLDERS' EQUITY

The common shares of the company, par value $0.10 per share, were as follows:

                                       January 29,  January 30,
                                              2000         1999
---------------------------------------------------------------
Authorized shares                            650.0        650.0
---------------------------------------------------------------
Issued shares                                300.4        300.4
---------------------------------------------------------------
Treasury shares                               61.1         49.8
===============================================================
Issued and outstanding shares                239.3        250.6
===============================================================

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

                                    1999        1998       1997
---------------------------------------------------------------

Numerator:

Net income/(loss) available to
  common stockholders             $  279     $  (132)    $  490

Denominator for basic earnings
  per share - weighted average
  shares                           244.8       265.4      285.3

Effect of diluted securities:
  Stock options, etc.                 .6        --          3.1

Denominator for diluted
  earnings per share - adjusted
  weighted average shares          245.4       265.4      288.4
===============================================================
Basic earnings/(loss) per share   $ 1.14     $ (0.50)    $ 1.72
===============================================================
Diluted earnings/(loss) per share $ 1.14     $ (0.50)    $ 1.70
===============================================================

Options to purchase approximately 38.7, 25.0 and 6.0 shares of common stock were
outstanding during 1999, 1998 and 1997,  respectively,  but were not included in
the computation of diluted  earnings/(loss)  per share because either the option
exercise prices were greater than the average market price of the common shares,
or the effect would be antidilutive.

TAXES ON INCOME

The provisions for income taxes consist of the following:

                                  1999         1998         1997
----------------------------------------------------------------
Current:
  Federal                        $ (12)        $ 78        $ 199
  Foreign                           17           18           35
  State                             --           20           30
----------------------------------------------------------------
                                     5          116          264
----------------------------------------------------------------
Deferred:
  Federal                           31          (64)          32
  Foreign                          124           (9)         (17)
  State                              1          (17)           3
----------------------------------------------------------------
                                   156          (90)          18
================================================================
Total tax provision              $ 161         $ 26        $ 282
================================================================

The tax effects of temporary  differences  and carry  forwards that give rise to
significant  portions  of  deferred  tax assets and  liabilities  consist of the
following:

                                       January 29,   January 30,
                                              2000         1999
----------------------------------------------------------------
Deferred tax assets:
  Foreign loss carryforwards                 $ 330         $ 311
  Restructuring                                 67            92
  Other                                         48            51
----------------------------------------------------------------
  Gross deferred tax assets                    445           454
  Valuation allowances related to
   foreign loss carryforwards                 (273)         (141)
----------------------------------------------------------------
                                             $ 172         $ 313
----------------------------------------------------------------
Deferred tax liabilities:
  Property, plant and equipment                316           281
  LIFO inventory                                30            50
----------------------------------------------------------------
Gross deferred tax liabilities               $ 346         $ 331
================================================================
Net deferred tax liability                   $ 174         $  18
================================================================

On January 29, 2000, the company had $845 of foreign loss carryforwards of which
$340 must be  utilized  within the next five  years and $505 over an  indefinite
period.

The valuation allowances related to foreign loss carryforwards increased to $273
from $141 in  recognition  of the  uncertainty  of  obtaining  tax benefit  from
foreign loss carryforwards.

A reconciliation  of the federal  statutory tax rate with the effective tax rate
follows:

                                     1999        1998        1997
-----------------------------------------------------------------
Statutory tax rate                   35.0%      (35.0)%      35.0%
State income taxes, net of
  federal income tax benefit          0.6         4.2         3.2
Foreign taxes                        (2.6)      (22.4)       (2.3)
Valuation allowances for foreign
  loss carryforwards                 30.0        74.7        --
Tax benefit of
  branch election                   (22.5)       --          --
Subpart F income                      1.0         8.5        --
Foreign tax credits                  (1.6)       (6.8)       --
Amortization of goodwill              0.7         3.0         0.4
Other, net                           (4.1)       (1.7)        0.2
=================================================================
Effective tax rate                   36.5%       24.5%       36.5%
=================================================================

In 1999, the company  elected to treat two of its foreign  subsidiaries  as U.S.
branches,  claimed  deductions for its  investments in these  subsidiaries,  and
reduced its current tax expense. In future years, income earned by these foreign
subsidiaries can be offset by foreign loss  carryforwards but will be subject to
current U.S. income tax.

In 1998,  certain foreign tax benefits have been offset by valuation  allowances
related to foreign loss carryforwards due in part to the restructuring and other
charges recorded in 1998.


                                                                              31
<PAGE>

Deferred  income  taxes are not  provided  on  unremitted  earnings  of  foreign
subsidiaries that are intended to be indefinitely invested. Exclusive of
amounts,  that if remitted  would result in little or no tax under  current U.S.
tax laws,  unremitted  earnings were approximately $568 at January 29, 2000. Net
income taxes of  approximately  $167 would be due if these  earnings  were to be
remitted.

STOCK OPTIONS

The company has Stock Option Plans (the "Plans")  which provide for the granting
of options to purchase the company's common stock. The plans cover substantially
all  employees  and  directors  of the company  and provide for the  issuance of
non-qualified  options,  incentive  stock  options,  performance  share options,
performance  units,  stock appreciation  rights,  restricted shares,  restricted
units and  unrestricted  shares.  Of the total number of shares reserved for the
Plans,  3.0  shares of company  stock have been  reserved  for the  issuance  of
restricted shares, restricted units, performance units, and unrestricted shares.
The Plans  provide  for a variety of  vesting  dates  with the  majority  of the
options vesting  approximately  five years from the date of grant. Prior to June
10,  1999,  options  granted to  directors  are  exercisable  20% each year on a
cumulative basis commencing one year from the date of grant.  Effective June 10,
1999, the options granted to directors are exercisable one-third on a cumulative
basis commencing on the third,  fourth and fifth  anniversaries from the date of
grant.

In addition to the  aforementioned  plans,  1.0 stock  options  were  granted to
certain  senior  executives  during the  period  from 1993 to 1996  pursuant  to
stockholder approved individual plans. Of this total, 0.25 options vest 20% each
on a  cumulative  basis  commencing  one year  from  the date of grant  with the
balance of the options vesting five years from the date of grant. Of this total,
0.25 options became vested on September 5, 1999, 1998 and 1997.

The exercise price per share of all options  granted has been the average of the
high and low market  price of the  company's  common stock on the date of grant.
All options must be exercised within ten years from the date of grant.

At January 29, 2000, an aggregate of 45.3 shares of authorized common stock were
reserved  for all of the Plans  noted  above,  of which 5.5 were  available  for
future grants. All outstanding  options expire at dates ranging from January 31,
2000 to January 17, 2010.

Stock option transactions are summarized as follows:

                                               Exercise Price   Weighted-Average
                                    Shares        Per Share      Exercise Price
--------------------------------------------------------------------------------
Outstanding at February 1, 1997      23.2     $12.33 - $40.94      $ 25.82
Granted                               6.8      25.38 - 36.47         34.74
Exercised                            (3.3)     12.33 - 33.13         22.11
Canceled                             (2.6)     13.00 - 40.94         28.82
--------------------------------------------------------------------------------
Outstanding at January 31, 1998      24.1      14.78 - 40.94         29.12
--------------------------------------------------------------------------------
Granted                              17.7      16.94 - 28.38         22.18
Exercised                            (0.7)     14.78 - 27.81         17.99
Canceled                             (4.3)     14.99 - 39.88         28.89
--------------------------------------------------------------------------------
Outstanding at January 30, 1999      36.8     14.78 -  40.94         26.02
--------------------------------------------------------------------------------
Granted                               9.7      11.69 - 24.22         18.63
Exercised                            (1.3)     18.16 - 25.44         17.71
Canceled                             (5.4)     18.16 - 39.88         25.34
--------------------------------------------------------------------------------
Outstanding at January 29, 2000      39.8    $11.69 - $40.94       $ 24.59
================================================================================

Options exercisable and the weighted-average exercise prices were 8.4 and $26.38
at January 31, 1998, 10.8 and $28.25 at January 30, 1999, and 20.7 and $23.94 at
January 29, 2000, respectively.

The company  utilizes a restoration  feature to encourage the early  exercise of
certain options and retention of shares,  thereby promoting  increased  employee
ownership.  This feature  provides for the grant of new options when  previously
owned shares of company stock are used to exercise existing options. Restoration
option grants are  non-dilutive  as they do not increase the combined  number of
shares of company stock and options held by an employee  prior to exercise.  The
new options are granted at a price equal to the fair market value on the date of
the new grant,  and  generally  expire on the same date as the original  options
that were exercised.

The  company  has  adopted  the  disclosure  only  provisions  of SFAS No.  123,
Accounting for Stock-Based  Compensation,  issued in October 1995. In accordance
with the  provisions  of SFAS No. 123,  the  company  applies APB Opinion 25 and
related   interpretations   in  accounting  for  its  stock  option  plans  and,
accordingly, does not recognize compensation cost. If the company had elected to
recognize  compensation  cost based on the fair value of the options  granted at
grant date as  prescribed  by SFAS No. 123,  net income and  earnings  per share
would have been reduced to the pro forma amounts indicated in the table below:

                                          1999    1998      1997
----------------------------------------------------------------
Net income/(loss) - as reported         $  279  $ (132)    $ 490

Net income/(loss) - pro forma              232    (162)      470

Basic earnings/(loss) per share -
   as reported                            1.14   (0.50)     1.72

Basic earnings/(loss) per share -
   pro forma                              0.95   (0.61)     1.65

Diluted earnings/(loss) per share -
   as reported                            1.14   (0.50)     1.70

Diluted earnings/(loss) per share -
   pro forma                              0.95   (0.61)     1.63
================================================================


32
<PAGE>

The  weighted-average  fair value at date of grant for options  granted in 1999,
1998 and 1997 was $6.26, $5.31 and $7.66,  respectively.  The fair value of each
option grant is estimated  on the date of grant using the  Black-Scholes  option
pricing  model.  As there were a number of options  granted  during the years of
1997 through 1999, a range of assumptions are provided below:

                                            1999         1998           1997
--------------------------------------------------------------------------------

Expected  stock  price  volatility      .351 - .568   .283 - .347    .294 - .334
Risk-free interest rate                 4.7% - 6.7%   4.7% - 5.8%    5.0% - 6.9%
Weighted average
    expected life of options              6 years       6 years        6 years
================================================================================

The effects of applying SFAS No. 123 and the results obtained through the use of
the Black-Scholes option pricing model are not necessarily  indicative of future
values.

PROFIT SHARING PLAN

The company has a profit sharing plan with a 401(k) salary deferral  feature for
eligible domestic employees. The terms of the plan call for annual contributions
by the  company  as  determined  by the Board of  Directors,  subject to certain
limitations.  The  profit  sharing  plan  may be  terminated  at  the  company's
discretion.  Provisions  of $48,  $41 and $39 have been  charged to  earnings in
1999, 1998 and 1997, respectively.

ACQUISITION

On August 20, 1999, the company acquired all of the capital stock of Imaginarium
Toy Centers, Inc. ("Imaginarium"), a leading educational specialty retailer with
41 stores in 13 states,  for  approximately  $43 in cash and the  assumption  of
certain liabilities.  The acquisition is accounted for using the purchase method
of accounting and the results of Imaginarium  operations have been combined with
those of the company from the date of acquisition.  The excess of purchase price
over net assets acquired of approximately  $38 has been recorded as goodwill and
is being amortized on a straight-line basis over the estimated useful life of 10
years.  The operating  results of Imaginarium  from the date of acquisition were
not material to the overall  results or financial  condition of the company,  as
such, proforma information has not been provided.

SEGMENTS

The company's reportable segments are Toys"R"Us-USA,  Toys"R"Us - International,
Toys"R"Us-Japan,  Babies"R"Us and  toysrus.com.  The division that does not meet
quantitative  reportable  thresholds is Kids"R"Us.  Toys"R"Us - USA operates toy
stores in 49 states and Puerto Rico and  Toys"R"Us -  International  operates or
franchises toy stores in 26 countries outside the United States.  Information on
segments and a  reconciliation  to  income/(loss)  before income  taxes,  are as
follows:

                                                                 Year ended
---------------------------------------------------------------------------
                                January 29,      January 30,    January 31,
                                       2000             1999           1998
---------------------------------------------------------------------------

Sales
  Toys"R"Us - USA                  $ 6,819          $ 6,581         $ 6,814
  Toys"R"Us - International(b)       1,990            2,090           2,072
  Toys"R"Us - Japan(c)               1,208              906             795
  Babies"R"Us                        1,036              810             563
  toysrus.com                           49               --              --
  Kids"R"Us                            760              783             794
---------------------------------------------------------------------------
 Total                             $11,862          $11,170         $11,038
---------------------------------------------------------------------------
Operating earnings/(loss)
  Toys"R"Us - USA                  $   386          $   501         $   654
  Toys"R"Us - International(b)          73               85             106
  Toys"R"Us - Japan,
    net of minority interest(c)         88               61              59
  Babies"R"Us                           69               30              (6)
  toysrus.com                          (86)              --              --
  Kids"R"Us                             18               29              47
  General corporate expenses           (28)             (21)            (16)
  Interest expense, net                (80)             (93)            (72)
  Restructuring and other charges       --             (698)             --
---------------------------------------------------------------------------
Earnings/(loss) before taxes
  on income                        $   440          $  (106)        $   772
===========================================================================
Identifiable assets
  Toys"R"Us - USA                  $ 4,801          $ 4,300         $ 4,732
  Toys"R"Us - International(b)       1,274            1,742           1,734
  Toys"R"Us - Japan(c)                 813              680             548
  Babies"R"Us                          389              295             232
  toysrus.com                           65               --              --
  Kids"R"Us                            427              472             504
  Corporate(a)                         584              410             213
===========================================================================
Total                              $ 8,353          $ 7,899         $ 7,963
===========================================================================
Depreciation, amortization
and asset write-offs
  Toys"R"Us - USA                  $    172         $   154         $   158
  Toys"R"Us - International(b)           47              52              52
  Toys"R"Us - Japan(c)                   16              11               9
  Babies"R"Us                            22              19              15
  toysrus.com                             2              --              --
  Kids"R"Us                              19              19              19
===========================================================================
Total                              $    278         $   255         $   253
===========================================================================


(a) Consists primarily of cash and cash equivalents.

(b) Excludes Toys"R"Us - Japan.

(c) 80% owned.

RESTRUCTURING AND OTHER CHARGES

On September 16, 1998, the company announced strategic initiatives to reposition
its worldwide  business.  The cost to implement  these  initiatives,  as well as
other charges  resulted in a total charge of $333 ($266 net of tax benefits,  or
$1.00 per share). The company determined that the strategic initiatives required
a  restructuring  charge of $294 to close and/or downsize  stores,  distribution
centers and administrative  functions.  This worldwide plan included the closing
of 50 toy stores in the  International  division,  predominately  in continental
Europe,  and 9 in the United  States that did not meet the  company's  return on
investment objectives. The plan also included the closing of


                                                                              33
<PAGE>

31 Kids"R"Us  stores and conversion of 28 nearby USA toy stores into combination
stores in the  company's  C-3 format.  Combination  stores  include  toys and an
apparel  selling  space  of  approximately  5,000  square  feet.  Other  charges
consisted primarily of changes in accounting  estimates and provisions for legal
settlements of $39 recorded in selling,  general and administrative expenses. Of
the total  restructuring and other charges,  $149 related to domestic operations
and $184 related to international operations.

Also on September 16, 1998, the company  announced  mark-downs and other charges
to cost of sales of $345 ($229 net of tax benefits, or $0.86 per share). Of this
charge,  $253 related to markdowns  required to clear excess  inventory from its
stores  so the  company  could  proceed  with  its new C-3  store  format  on an
accelerated  basis.  Another component of the charge was inventory  markdowns of
$29 related to the closing  and/or  downsizing of stores  discussed  above.  The
company  also  recorded  charges to cost of sales of $63  related  to  inventory
system refinements and changes in accounting  estimates.  Of these charges, $288
related to  domestic  operations  and $57 related to  International  operations.
Remaining  reserves  of $14 are  expected to be used in the  company's  upcoming
business cycle.

Additionally, in the fourth quarter of 1998 the company recorded a charge of $20
($13 net of tax  benefits,  or $0.05 per share),  related to the  resolution  of
third  party  claims  asserted  from  allegations  made  by  the  Federal  Trade
Commission.  This charge was in  addition  to a $15 charge  relating to the same
matter, included in the charges mentioned above. (See Other Matters).

The company intends to execute the remainder of the initiatives  included in its
repositioning  program and will utilize the remaining  reserves of $117 as these
initiatives are completed.

The company has  substantially  completed  its  restructuring  program  that was
announced in 1995,  with the exception of long-term  lease  commitment  reserves
that will be utilized throughout 2000 and thereafter.

The company  believes all  reserves  are adequate to complete its  restructuring
programs.

Other Matters

On May 22, 1996, the Staff of the Federal Trade  Commission (the "FTC") filed an
administrative  complaint  against the company  alleging  that the company is in
violation of Section 5 of the Federal  Trade  Commission  Act for its  practices
relating to warehouse  clubs.  The  complaint  alleges that the company  reached
understandings  with various suppliers that such suppliers not sell to the clubs
the same items that they sell to the company.  The  complaint  also alleges that
the  company  "facilitated  understandings"  among the  manufacturers  that such
manufacturers  not sell to clubs.  The complaint seeks an order that the company
cease  and  desist  from  this   practice.   The  matter  was  tried  before  an
administrative  law judge in the  period  from  March  through  May of 1997.  On
September  30,  1997,  the  administrative  law judge filed an Initial  Decision
upholding the FTC's complaint against the company.  On October 13, 1998, the FTC
issued a final  order and  opinion  upholding  the FTC's  complaint  against the
company.

The company  has  appealed  the FTC's  decision  to the United  States  Court of
Appeals  for the Seventh  Circuit.  The appeal was argued on May 18, 1999 and is
awaiting decision from the Court.

After the filing of the FTC  complaint,  several  class  action suits were filed
against the company in State courts in Alabama and California, alleging that the
company had violated  certain state  competition  laws as a  consequence  of the
behavior  alleged in the FTC  complaint.  After the Initial  Decision was handed
down,  more than thirty  purported class actions were filed in federal and state
courts in various  jurisdictions  alleging  that the  company had  violated  the
federal  antitrust  laws as a  consequence  of the  behavior  alleged in the FTC
complaint. In addition, the attorneys general of forty-four states, the District
of Columbia and Puerto Rico filed a suit  against the company in their  capacity
as representatives  of the consumers of their states,  alleging that the company
had violated  federal and state  antitrust laws as a consequence of the behavior
alleged in the FTC complaint.  These suits sought damages in unspecified amounts
and other  relief under state and/or  federal law and were  consolidated  in the
United States District Court for the Eastern District of New York.

The company  believes that it has always acted fairly and in the best  interests
of its customers and that both its policy and its conduct in connection with the
foregoing  have  been and are  within  the law.  However,  to avoid the cost and
uncertainty  of  protracted  litigation  the company has reached an agreement to
settle all of the class action and attorney  general  lawsuits in a manner which
will not have a material adverse effect on its financial  condition,  results of
operations or cash flow.  The Court  granted final  approval of the agreement on
February 17, 2000.  The company had accrued all  anticipated  costs  relating to
this matter as of January 30, 1999.

The  company  is  party to  certain  other  litigation  which,  in  management's
judgement,  based  in part on the  opinion  of  legal  counsel,  will not have a
material adverse effect on the company's financial position.

                                [Photo Omitted]

34
<PAGE>

REPORT OF MANAGEMENT

Responsibility  for the integrity and  objectivity of the financial  information
presented in this Annual  Report rests with the  management  of  Toys"R"Us.  The
accompanying  financial  statements have been prepared from  accounting  records
which  management  believes  fairly and  accurately  reflect the  operations and
financial  position  of the  company.  Management  has  established  a system of
internal controls to provide reasonable assurance that assets are maintained and
accounted for in accordance with its policies and that transactions are recorded
accurately on the company's books and records.

The  company's  comprehensive  internal  audit  program  provides  for  constant
evaluation of the adequacy of the adherence to management's established policies
and  procedures.  The company has  distributed to key employees its policies for
conducting business affairs in a lawful and ethical manner.

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

The financial  statements of the company have been audited by Ernst & Young LLP,
independent  auditors,  in accordance with auditing standards generally accepted
in the United  States,  including a review of  financial  reporting  matters and
internal  controls  to  the  extent  necessary  to  express  an  opinion  on the
consolidated financial statements.

/s/ Louis Lipschitz
-------------------
Louis Lipschitz
Executive Vice President
and Chief Financial Officer

Report of Independent Auditors
The Board of Directors and Stockholders
Toys"R"US", Inc.

We have audited the accompanying  consolidated balance sheets of Toys"R"Us, Inc.
and  subsidiaries  as of January 29, 2000 and January 30, 1999,  and the related
consolidated  statements  of earnings,  stockholders'  equity and cash flows for
each of the three years in the period ended  January 29, 2000.  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 in accordance with auditing standards generally accepted
in the United States. Those standards 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.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of Toys"R"Us,  Inc.
and  subsidiaries at January 29, 2000 and January 30, 1999, and the consolidated
results of their  operations and their cash flows for each of the three years in
the period ended  January 29, 2000,  in conformity  with  accounting  principles
generally accepted in the United States.


/s/ Ernst & Young LLP
---------------------
New York, New York
March 8, 2000


                                                                              35


<PAGE>

Directors and Officers

Note of Thanks

On behalf of the "R"Us family, we would like to express our deep appreciation to
Robert A.  Bernhard  and  Howard W.  Moore  who are  retiring  from our Board of
Directors  this year.  Bob became a member of the Board of Directors in 1980 and
Howard in 1984. They both served our Board and our company with distinction, and
their  insight  and  counsel  will  be  greatly  missed.  Their  commitment  and
dedication to our company was exemplary,  and we sincerely  thank them for their
tireless efforts on behalf of us all. Bob and Howard may be leaving our Board of
Directors,  but we know that in their hearts they will always be true  Toys"R"Us
kids.

      With deepest appreciation,
      The"R"Us Family

Directors

CHARLES LAZARUS
Chairman Emeritus of the company

MICHAEL GOLDSTEIN
Chairman of the Board of the company

ROBERT A. BERNHARD
Real Estate Developer

ROANN COSTIN
President,
Reservoir Capital Management, Inc.

JOHN H. EYLER, JR.
President and Chief Executive Officer
of the company

CALVIN HILL
Consultant

SHIRLEY STRUM KENNY
President, State University of
New York at Stony Brook

NORMAN S. MATTHEWS
Consultant and former Vice Chairman
of the Board and President of
Federated Department Stores

HOWARD W. MOORE
Consultant

ARTHUR B. NEWMAN
Senior Managing Director,
Blackstone Group

Corporate and Administrative

JOHN H.EYLER, JR.
President and Chief Executive Officer

MICHAEL G. SHANNON
President - Administration and Logistics

WARREN F. KORNBLUM
Executive Vice President - Worldwide
Marketing and Brand Management

LOUIS LIPSCHITZ
Executive Vice President -
Chief Financial Officer

FRANCESCA L. BROCKETT
Senior Vice President -
Strategic Planning/Business Development

ROGER C. GASTON
Senior Vice President -
Human Resources

JOHN HOLOHAN
Senior Vice President -
Chief Information Officer

REBECCA A. CARUSO
Vice President -
Corporate Communications

MICHAEL J. CORRIGAN
Vice President -
Compensation and Benefits

RICHARD N. CUDRIN
Vice President -
Associate Relations

MARIANITA HOWARD
Vice President -
Creative Services

JON W. KIMMINS
Vice President - Treasurer

DAVID P. PICOT
Vice President - Real Estate,
Design and Construction

DION C. ROONEY
Vice President - Systems Development

MICHAEL L. TUMOLO
Vice President - Counsel

PETER W. WEISS
Vice President - Taxes

DENNIS J. BLOCK
Secretary
Partner - Cadwalader, Wickersham & Taft


36
<PAGE>

Toys"R"Us United States

GREGORY R. STALEY
President

JAMES E. FELDT
Executive Vice President
President - Merchandising and Marketing

DENNIS J. WILLIAMS
Senior Vice President - Operations

KRISTOPHER M. BROWN
Vice President - Logistics

STEVEN M. COOK
Vice President - Distribution Operations

THOMAS F. DELUCA
Vice President - Imports, Product
Development and Safety Assurance

ANDREW R. GATTO
Vice President -
Product Development

ALBERT FORTIER
Vice President - World Leader

EMANUEL J. FRANCIONE
Vice President - World Leader

JONATHAN M. FRIEDMAN
Vice President - Chief Financial Officer

DANIEL D. HLAVATY
Vice President - Loss Prevention

JEREL G. HOLLENS
Vice President -
Merchandise Planning

FREDERICK L. HURLEY
Vice President - World Leader

ELIZABETH S. JORDAN
Vice President - Human Resources

MITCHELL B. LOUKOTA
Vice President - World Leader

JULIE E. LYNN
Vice  President - World Leader

THOMAS J. LYNN
Vice President and President of
Imaginarium Stores

CHARLENE MADY
Vice President -
Area Merchandise Planning

GERALD S. PARKER
Vice President -
Sales and Service

TIMOTHY J. SLADE
Vice President - Store Planning

WILLIAM A. STEPHENSON
Vice President -
Merchandise Planning and Allocation

DAVID S. WALKER
Vice President - Advertising

THOMAS A. DRUGAN
Regional Vice President - Midwest

HARVEY J. FINKEL
Regional Vice President - Northeast

MICHAEL K. HEFFNER
Regional Vice President - West

SAMUEL M. MARTIN
Regional Vice President - Pacific

JOHN J. PRAWLOCKI
Regional Vice President - Southeast

EDWARD F. SIEGLER
Regional Vice President - Mid-Atlantic

KEVIN VANDERGRIEND
Regional Vice President - Great Lakes

Toys"R"Us International

ERNEST V. SPERANZA
Senior Vice President - Marketing

ROBERT J. BAKER
Vice President - Finance

JOAN W. DONOVAN
Vice President -
General Merchandise Manager

LARRY D. GARDNER
Vice President - Operations

MICHAEL C. TAYLOR
Vice President - Franchising/Logistics

DAVID RURKA
Managing Director -
Toys"R"Us United Kingdom and Chairman
of the European Management Board

JOHANNES DERCKS
President -
Toys"R"Us Central Europe

JACQUES LEFOLL
President -
Toys"R"Us France

MONIKA MERZ
President - Toys"R"Us Canada

JOHN SCHRYVER
Managing Director -
Toys"R"Us Australia

MANABU TAZAKI
President -
Toys"R"Us Japan

ANTONIO URCELAY
Managing Director -
Toys"R"Us Iberia

Babies"R"Us and Kids"R"Us

RICHARD L. MARKEE
President - Babies"R"Us and
Chairman - Kids"R"Us

JAMES G. PARROS
Senior Vice President -
Stores and Distribution Center Operations

THERESE R. DENA
Vice President -
Planning and Allocation

JAMES L. EASTON
Vice President -
General Merchandise Manager

MARTIN E. FOGELMAN
Vice President -
General Merchandise Manager Babies"R"Us and Toys"R"Us

VINCENT A. SCARFONE
Vice President - Human Resources

CHRISTOPHER M. SCHERM
Vice President - Advertising

DAVID E. SCHOENBECK
Vice President -
Operations - Babies"R"Us

SANDEE A. SPRINGER
Vice President -
Divisional Merchandise Manager

PAMELA B. WALLACK
Vice President -
Divisional Merchandise Manager

ROBERT S. ZARRA
Vice President - Chief Financial Officer
Kids"R"Us and Babies"R"Us

* Kids"R"Us Officer, unless otherwise indicated.

toysrus.com

JOHN BARBOUR
Chief Executive Officer

JONATHAN F. FOSTER
Executive Vice President -
Chief Operating Officer and
Chief Financial Officer

JOEL D. ANDERSON
Vice President - General Manager

RAYMOND L. ARTHUR
Vice President - Finance and Controller

LAWRENCE MC GUIRE
Vice President - Human Resources

JOHN P. SULLIVAN
Vice President - General Manager

GREGG TREADWAY
Vice President - Logistics


                                                                              37
<PAGE>

Quarterly Financial Data and Market Information
TOYS"R"US, INC. AND SUBSIDIARIES

Quarterly Financial Data
(In millions except per share data)

The following table sets forth certain unaudited quarterly financial
information.

                         First    Second     Third   Fourth
                       Quarter    Quarter   Quarter  Quarter
------------------------------------------------------------
1999
------------------------------------------------------------
Net Sales              $2,166    $2,204     $2,465    $5,027
Cost of Sales           1,505     1,522      1,704     3,590
Net Earnings               17        12(a)      15(a)    235(a)
Basic Earnings
  per Share            $  .07    $  .05     $  .06    $  .98
Diluted Earning s
  per Share            $  .07    $  .05     $  .06    $  .98

1998
------------------------------------------------------------
Net Sales               $2,043   $2,020   $2,171      $4,936
Cost of Sales            1,417    1,390    1,831       3,553
Net Earnings/(Loss)         19       14     (475)(b)     310(c)
Basic Earnings/(Loss)
  per Share             $  .07   $  .05   $(1.85)     $ 1.23
Diluted Earnings/(Loss)
  per Share             $  .07   $  .05   $(1.85)     $ 1.23

(a)   Includes  costs  to  establish  and  operate  toysrus.com,  the  company's
      Internet subsidiary as follows:

            Second  quarter - $5 million  ($3  million  net of tax, or $0.01 per
            share).

            Third  quarter - $17 million  ($11  million net of tax, or $0.04 per
            share).

            Fourth  quarter - $64 million  ($41million  net of tax, or $0.17 per
            share).

(b)   Includes  restructuring  and  other  charges  of  $678  ($495  net  of tax
      benefits, or $1.93 per share)

(c)   Includes provisions for legal settlements of $20 ($13 net of tax benefits,
      or $.05 per share).

Market Information

The  company's  common  stock is  listed  on the New York  Stock  Exchange.  The
following  table  reflects  the  high and low  prices  (rounded  to the  nearest
one-sixteenth) based on New York Stock Exchange trading since January 31, 1998.

The company has not paid any cash dividends,  however, the Board of Directors of
the company reviews this policy annually.

The company had approximately 31,100 Stockholders of Record on March 7, 2000.

                                    High                 Low
---------------------------------------------------------------
 1998 1st Quarter                  30 7/8              25 7/8
      2nd Quarter                  29 1/2              22 5/16
      3rd Quarter                  23 13/16            15 5/8
      4th Quarter                  21 1/2              14 7/16
---------------------------------------------------------------
 1999 1st Quarter                  23 1/4              13 5/8
      2nd Quarter                  24 3/4              15 15/16
      3rd Quarter                  17 3/16             13 1/8
      4th Quarter                  19                   9 3/4

Store Locations

Stores Across the United States

                                        Toys      Kids      Babies   Imaginarium
--------------------------------------------------------------------------------
Alabama                                  8          1          2         --
Alaska                                   1         --         --         --
Arizona                                 12         --          3          1
Arkansas                                 4         --         --         --
California                              88         22         13          7
Colorado                                11         --          2         --
Connecticut                             11          5         --          2
Delaware                                 2          1          1         --
Florida                                 47         10         10         --
Georgia                                 20          4          6         --
Hawaii                                   1         --         --         --
Idaho                                    2         --         --         --
Illinois                                35         19          6          2
Indiana                                 13          7          2         --
Iowa                                     8          1         --         --
Kansas                                   5          1          1         --
Kentucky                                 8         --          2          1
Louisiana                               11         --          1         --
Maine                                    2          1         --         --
Maryland                                19          8          3          4
Massachusetts                           19          6          4         --
Michigan                                25         13          6         --
Minnesota                               11          2          1          2
Mississippi                              5         --         --         --
Missouri                                13          4          3         --
Montana                                  1         --         --         --
Nebraska                                 3         --         --         --
Nevada                                   4         --          2         --
New Hampshire                            5          2         --         --
New Jersey                              26         18          8          7
New Mexico                               4         --         --         --
New York                                47         24          6          3
North Carolina                          16          1          5         --
North Dakota                             1         --         --         --
Ohio                                    33         18          8          5
Oklahoma                                 5         --          1         --
Oregon                                   8         --          2          1
Pennsylvania                            33         15          3         --
Rhode Island                             1          1          1         --
South Carolina                           9         --          3         --
South Dakota                             2         --         --         --
Tennessee                               15          2          4         --
Texas                                   54          8         13         --
Utah                                     6          3          1         --
Vermont                                  1         --         --         --
Virginia                                22          5          6          2
Washington                              15         --          2          3
West Virginia                            4         --         --         --
Wisconsin                               10          3         --         --

Puerto Rico                              4         --         --         --
================================================================================
                                       710        205        131         40
================================================================================
 Toys"R"Us International - 462
--------------------------------------------------------------------------------
Australia - 23
Austria - 7
Bahrain - 1(a)
Canada - 63
Denmark - 10(a)
France - 31
Germany - 53
Hong Kong - 5(a)
Indonesia  - 3(a)
Israel - 19(a)
Japan - 91(b)
Malaysia - 5(a)
Netherlands - 10(a)
Norway - 1(a)
Portugal - 6
Qatar - 1(a)
Saudi  Arabia - 3(a)
Singapore  - 4(a)
South  Africa - 7(a)
Spain - 30
Sweden - 7(a)
Switzerland - 4
Taiwan - 6(a)
Turkey - 7(a)
United Arab Emirates - 2(a)
United Kingdom - 63

(a) Franchise or joint venture.

(b) 80 % owned.


38
<PAGE>


Corporate Data and Citizenship
TOYS"R"US, INC. AND SUBSIDIARIES

Annual Meeting

The Annual  Meeting of the  Stockholders  of  Toys"R"Us  will be held at The 200
Fifth Club, 200 Fifth Avenue, New York, New York, on June 7, 2000 at 10:00 A.M.

The Offices of The
Company are Located at
461 From Road
Paramus, New Jersey 07652
Telephone: 201-262-7800

225 Summit Avenue
Montvale, New Jersey 07645
Telephone: 201-802-5000

General Counsel
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10036

Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019

Registrar and Transfer Agent
American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005
Telephone: 718-921-8200

Common Stock Listed
New York Stock Exchange, Symbol: TOY

Stockholder  Information

The company will supply to any owner of its common stock,  upon written  request
to Mr. Louis Lipschitz of the company at the above address and without charge, a
copy of the annual  report on Form 10-K for the year  ended  January  29,  2000,
which has been filed with the Securities and Exchange Commission.

Stockholder  information,  including quarterly earnings and other corporate news
releases,  can be  obtained by calling  800-785-TOYS,  or at our web site on the
Internet at www.toysrus.com

Significant    news    releases     are
anticipated to be available as follows:

Call after...     For the following...

May  15, 2000     1st Quarter Results
Aug. 14, 2000     2nd Quarter Results
Nov. 13, 2000     3rd Quarter Results
Jan. 4, 2001      Holiday Sales Results
Mar. 14, 2001     2000 Results

Corporate Citizenship

Toys"R"Us  maintains a  company-wide  giving  program  focused on improving  the
health  care  needs  of  children  by  supporting  many  national  and  regional
children's health care  organizations.  The Counsel on Economic Priority awarded
Toys"R"Us the Pioneer Award in Global  Ethics.  This award was the direct result
of the  implementation  of our Code of Conduct for suppliers  which outlines the
company's position against child labor and unsafe working  conditions.  In order
for a vendor's  product to be sold in any of our  stores,  they must comply with
our Code of Conduct. If you would like to receive more information on Toys"R"Us'
corporate  citizenship  please  write to Mr.  Roger Gaston of the company at the
above address.

Visit us on the Internet at www.toysrus.com and www.imaginarium.com.

                                 [Photo Omitted]

                                                                              39
<PAGE>

                               [Logo] Toys "R" Us

                             [Logo] Kids "R" Us(R)

                            [Logo] Babies "R" Us(R)

                             [Logo] toysrus.com(R)

                                 Imaginarium(R)