SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-K
                                    ---------

(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 .


               For the fiscal year ended January 29, 2000
               ------------------------------------------

                                       OR
                                       --

|_| TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
    EXCHANGE ACT OF 1934.
                           Commission File No. 1-11980
                           ---------------------------


                                 ANNTAYLOR, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)


        DELAWARE                                       51-0297083
-------------------------------          --------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)


     142 West 57th Street, New York, NY                        10019
   ---------------------------------------                  ---------
  (Address of principal executive offices)                  (Zip Code)


                                       (212) 541-3300
                    ---------------------------------------------------
                    (Registrant's telephone number, including area code)



          Securities registered pursuant to Section 12(b) of the Act:
          -----------------------------------------------------------
                                      None.
                                      -----


           Securities registered pursuant to Section 12(g) of the Act:
           -----------------------------------------------------------
                                      None.
                                      -----


      Indicate  by check  mark  whether  registrant  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No__.

      As of February 25, 2000, 1 share of Common Stock was outstanding.


                      Documents Incorporated by Reference:
                      ------------------------------------
                                      None


      The  registrant  meets the  conditions  set forth in  General  Instruction
I(1)(a) and (b) of Form 10-K and is therefore  filing this form with the reduced
disclosure format.

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                                     PART I
                                     ------

ITEM 1.  BUSINESS

GENERAL

      AnnTaylor,  Inc.  (the  "Company" or  "AnnTaylor")  is a leading  national
specialty retailer of better quality women's apparel, shoes and accessories sold
primarily  under the Ann Taylor  brand  name.  The  Company  believes  that "Ann
Taylor" is a highly  recognized  national brand that defines a distinct  fashion
point of view. Ann Taylor  merchandise  represents  classic  styles,  updated to
reflect  current  fashion  trends.  The  Company's  stores offer a full range of
career and casual separates, dresses, tops, weekend wear, shoes and accessories,
coordinated  as part of a  total  wardrobing  strategy.  This  total  wardrobing
strategy is  reinforced  by an emphasis on customer  service.  Ann Taylor  sales
associates are trained to assist customers in merchandise selection and wardrobe
coordination,  helping them achieve the "Ann Taylor look" while  reflecting  the
customers' personal styles.

      As of January 29,  2000,  the  Company  operated  405 retail  stores in 42
states, the District of Columbia and Puerto Rico under the names Ann Taylor, Ann
Taylor Loft and Ann Taylor  Factory  Store.  The Company's 319 Ann Taylor stores
compete in the "better"-priced market. These stores represent the Company's core
merchandise  line.  Approximately  three-quarters of these stores are located in
regional malls and upscale specialty retail centers, with the balance located in
downtown and village locations.  The Company believes that the customer base for
its   Ann   Taylor   stores   consists   primarily   of   relatively   affluent,
fashion-conscious  women from the ages of 25 to 55, and that the majority of its
customers are working women with limited time to shop,  who are attracted to Ann
Taylor  by  its  focused   merchandising   and  total   wardrobing   strategies,
personalized customer service, efficient store layouts and continual flow of new
merchandise.

      As of January 29,  2000,  the Company  operated 75 Ann Taylor Loft stores.
Ann Taylor Loft stores compete in the "upper-moderate"-priced market. Ann Taylor
Loft is designed for women with a more relaxed lifestyle, who appreciate the Ann
Taylor style but are more price  sensitive.  Merchandise is created uniquely for
these  stores and is sold under the Ann Taylor Loft label.  The first Ann Taylor
Loft  stores  opened by the  Company  were  located in factory  outlet  centers,
including some Ann Taylor  Factory Stores that, in 1996,  were converted to Loft
stores after the  introduction  of the Loft concept.  In 1998, the Company began
opening Ann Taylor  Loft stores  outside  the  factory  outlet  environment,  in
regional  malls and strip  shopping  centers.  At January 29, 2000,  over 40 Ann
Taylor Loft stores were located in these  venues.  Management  believes that Ann
Taylor Loft  represents a significant  opportunity for the Company to compete in
the  upper-moderate-priced  women's apparel market. See "Management's Discussion
and  Analysis  of  Financial  Condition  and Results of  Operations  - Statement
Regarding Forward Looking Disclosures" below.

      At January 29,  2000,  the  Company  also  operated 11 Ann Taylor  Factory
stores in factory outlet  centers.  These stores serve  primarily as a clearance
vehicle for merchandise from Ann Taylor stores.  Many of these stores also offer
a limited selection of original priced Ann Taylor Loft merchandise.

      From time to time, the Company  introduces  new product  categories to its
merchandise assortment. The Company believes that product extensions support the
Company's total wardrobing  strategy and provide existing and new customers with
additional  reasons  to  shop  at  the  Company's  stores.   Product  extensions
introduced  over the last several  years  include  petite sizes in the Company's
apparel  offerings,  and fragrance and personal care products in both Ann Taylor
and Ann Taylor Loft stores.  In Fall of 2000, the Company intends to test market
its own line of color cosmetics in a select group of Ann Taylor stores.

      The  Company was  incorporated  under the laws of the state of Delaware in
1986.  All of the  outstanding  capital stock of the Company,  consisting of one
share of common stock, is owned by AnnTaylor Stores  Corporation  ("ATSC").  Ann
Taylor was acquired by ATSC in a leveraged buyout transaction in 1989.

                                          -1-
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<PAGE>



STATEMENT REGARDING FORWARD LOOKING DISCLOSURES

    Sections of this Annual Report on Form 10-K contain  various forward looking
statements,  within the meaning of the Private Securities  Litigation Reform Act
of 1995,  with respect to the financial  condition,  results of  operations  and
business of the Company. These forward-looking  statements involve certain risks
and  uncertainties,  and no assurance can be given that any of such matters will
be realized.  Actual results may differ  materially  from those  contemplated by
such forward looking  statements.  See "Management's  Discussion and Analysis of
Financial  Condition  and Results of  Operations - Statement  Regarding  Forward
Looking Disclosures".


ITEM 2.  PROPERTIES

      As of January 29, 2000, the Company operated 405 stores, all of which were
leased.  The store  leases  typically  provide for  initial  terms of ten years,
although  some  leases have  shorter or longer  initial  periods,  and grant the
Company  the  right  to  extend  the term  for one or two  additional  five-year
periods.  Most of the store leases require Ann Taylor to pay a specified minimum
rent,  plus a contingent  rent based on a percentage of the store's net sales in
excess of a specified  threshold.  Most of the leases also require Ann Taylor to
pay real estate taxes, insurance and certain common area and maintenance costs.

      Ann Taylor  leases  corporate  offices at 142 West 57th Street in New York
City and office space at 1372 Broadway in New York City. The Company also leases
office space in New Haven, Connecticut.

      Ann Taylor's wholly owned  subsidiary,  AnnTaylor  Distribution  Services,
Inc.,  owns its 256,000 square foot  distribution  center located in Louisville,
Kentucky.  Nearly all Ann Taylor  merchandise  is  distributed  to the Company's
stores  through this facility.  The parcel on which the Louisville  distribution
center  is  located  comprises  approximately  20 acres  and  could  accommodate
possible future expansion of the facility.


ITEM 3.  LEGAL PROCEEDINGS

      On April 26, 1996, certain alleged  stockholders of ATSC filed a purported
class action lawsuit in the United States  District  Court Southern  District of
New York, against ATSC, the Company,  certain officers and directors of ATSC and
the Company,  Merrill Lynch & Co.  ("ML&Co.")  and certain  affiliates of ML&Co.
(Novak v.  Kasaks,  et. al., No. 96 CIV 3073  (S.D.N.Y.  1996)).  The  complaint
alleged causes of action under Section 10(b) and Section 20(a) of the Securities
Exchange Act of 1934, as amended, by alleging that ATSC and the other defendants
engaged in a fraudulent  scheme and course of business  that operated a fraud or
deceit on  purchasers  of ATSC's  common  stock  during  the  period  commencing
February  3, 1994  through  May 4,  1995,  due to alleged  false and  misleading
statements about the Company and ATSC. The complaint sought, among other things,
certification  as a class  action on behalf of all  purchasers  of common  stock
during the period commencing  February 3, 1994 through May 4, 1995, the awarding
of  compensatory  damages to the plaintiffs and purported  members of the class,
the  awarding  of costs,  including  pre-judgment  and  post-judgment  interest,
reasonable  attorneys'  fees  and  expert  witness  fees to the  plaintiffs  and
purported  members  of the class and  equitable  and/or  injunctive  relief.  On
November 9, 1998, the District  Court issued an order  granting the  defendants'
motion to dismiss the amended complaint with prejudice, for its failure to plead
fraud with particularity.  On or about December 15, 1998, the plaintiffs filed a
notice of appeal to the United  States Court of Appeals for the Second  Circuit,
seeking review of the District  court's order.  The Court heard oral argument on
this appeal on September 15, 1999.  ML&Co., its affiliates and the two directors
who previously served on the Company's Board of Directors as  representatives of
certain affiliates of ML&Co. (the "settling  defendants"),  reached a settlement
with the plaintiffs,  which provides,  among other things, for the establishment
of a settlement fund in the amount of $3,000,000 plus interest. On or about

                                      -2-

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<PAGE>





December  14,  1999,  the  District  Court  entered an Order and Final  Judgment
approving  this  partial  settlement,  dismissing  the  amended  complaint  with
prejudice as to the settling  defendants,  and barring and  enjoining any future
claims  by,  among  others,  the  remaining   defendants  against  the  settling
defendants  for  contribution.  The appeal as against the remaining  defendants,
including the Company, is pending before the Second Circuit Court of Appeals. As
a result,  any liability  that may arise from this action cannot be predicted at
this time. The Company believes that the amended  complaint is without merit and
intends to continue to defend the action vigorously.

      The  Company  is  also a  party  to  routine  litigation  incident  to its
business.  Although the amount of any liability that could arise with respect to
these actions cannot be accurately predicted, in the opinion of the Company, any
such  liability  will  not  have a  material  adverse  effect  on the  financial
position, results of operations or liquidity of the Company.

                                      -3-
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<PAGE>

                                     PART II
                                     -------





ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      There is no public market for the common stock of the Company.  All of the
outstanding  stock of the  Company,  consisting  of one share of common stock is
owned by ATSC.

      The  payment  of  dividends  by Ann  Taylor to ATSC is  subject to certain
restrictions   under  the  Company's  Credit  Facility   described  below  under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Liquidity  and Capital  Resources".  From time to time,  the Company
pays dividends to ATSC in amounts sufficient to fund ATSC's operating expenses.



ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

SALES

      The  following  table  sets  forth  certain  sales and store  data for the
periods indicated:

                                                       Fiscal Year
                                          -----------------------------------
                                             1999          1998          1997
                                             ----          ----          ----
      Net sales ($000)...................$1,084,519     $911,939    $ 781,028
      Total net sales increase
        (decrease) percentage............      18.9%        16.8%        (2.1)%
      Comparable store sales increase
        (decrease) percentage............       8.4%         7.9%        (5.5)%
      Net sales per average square foot..$      502     $    474    $     445
      Total store square footage
        at end of period................. 2,280,000    2,038,000    1,808,000
      Number of
        New stores.......................        47           45           27
        Expanded stores..................         8            8            9
        Closed stores....................         7            4           12
      Total stores open at end of period.       405          365          324


      The  Company's  net  sales do not  show  significant  seasonal  variation,
although  net sales in the fourth  quarter  have  historically  been  moderately
higher  than  in the  other  quarters.  As a  result,  the  Company  has not had
significant  overhead and other costs  generally  associated with large seasonal
variations.


                                      -4-
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<PAGE>


RESULTS OF OPERATIONS

      The  following  table sets forth  income  statement  data  expressed  as a
percentage of net sales for the periods indicated:

                                                         Fiscal Year
                                             ---------------------------------
                                              1999          1998         1997
                                              ----          ----         ----
    Net sales............................    100.0%        100.0%       100.0%
    Cost of sales........................     49.4          50.0         52.7
                                              ----          ----         ----
        Gross profit.....................     50.6          50.0         47.3
    Selling, general and administrative
      expenses...........................     38.1          38.4         39.5
    Retirement of assets.................      ---           0.4          ---
    Amortization of goodwill.............      1.0           1.2          1.4
                                              ----           ---         ----
        Operating income.................     11.5          10.0          6.4
    Interest income......................      0.4           0.2          0.1
    Interest expense.....................      1.1           2.2          2.7
    Other expense, net...................      0.1           ---          ---
                                              ----           ---         ----
    Income before income taxes and
      extraordinary loss.................     10.7           8.0          3.8
    Income tax provision.................      4.6           3.7          2.3
                                              ----           ---         ----
    Income before extraordinary loss.....      6.1           4.3          1.5
    Extraordinary loss...................      0.1           ---          ---
                                              ----           ---         ----
    Net income...........................      6.0%          4.3%         1.5%
                                              ====          ====         ====



FISCAL 1999 COMPARED TO FISCAL 1998

      The Company's net sales increased to  $1,084,519,000  over $911,939,000 in
Fiscal 1998, an increase of $172,580,000,  or 18.9%.  Comparable store sales for
Fiscal 1999 increased 8.4%,  compared to an increase of 7.9% in Fiscal 1998. The
sales  increase was  primarily  attributable  to the opening of new stores,  the
expansion of existing  stores and the net increase in comparable  store sales in
1999.  Management  believes that the increase in comparable  store sales was the
result of improved  customer  acceptance of the Company's  product offerings and
merchandise assortment.

      Gross profit as a percentage of net sales  increased to 50.6% in 1999 from
50.0% in 1998.  This increase in gross margin  reflects a higher  initial markup
rate,  reflecting  on-going  improvements  achieved  by the  Company's  sourcing
division, offset in part by a higher markdown rate on goods that were sold below
full price.

      Selling,  general and administrative expenses were $413,058,000,  or 38.1%
of net sales, in 1999, compared to $349,955,000, or 38.4% of net sales, in 1998.
The decrease in selling,  general and administrative expenses as a percentage of
net sales was primarily  attributable  to increased  leverage on fixed  expenses
resulting  from  increased   comparable  store  sales  and  improved   operating
efficiencies. The benefits of this leverage were partially offset by an increase
in marketing  expenditures in support of the Company's strategic  initiatives to
enhance  the Ann  Taylor  brand  and  increased  investment  in  infrastructure,
including in the Company's stores organization, to support the planned expansion
of the Company's Ann Taylor Loft business.

      Operating income increased to $124,407,000, or 11.5% of net sales, in 1999
from $91,587,000,  or 10.0% of net sales, in 1998.  Amortization of goodwill was
$11,040,000,  or 1.0% of net sales, in 1999 compared to $11,040,000,  or 1.2% of
net sales, in 1998.  Operating income without giving effect to such amortization
was $135,447,000,  or 12.5 % of net sales, in 1999 and $102,627,000, or 11.2% of
net sales, in 1998.

      Interest income was $4,378,000 in 1999 compared to $2,241,000 in 1998. The
increase was primarily  attributable to interest income earned on increased cash
on hand for the  portion of the fiscal  year prior to  execution,  in the second
half of 1999, of ATSC's  securities  repurchase  program  described  below under
"Liquidity and Capital Resources".

                                      -5-
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<PAGE>

      Interest  expense was $11,814,000 in 1999 compared to $20,358,000 in 1998.
The decrease in interest  expense is attributable to the forgiveness  during the
second  quarter  of 1999 of a note  (the  "intercompany  note")  payable  by the
Company to ATSC in August 1998 referred to below and the  redemption  during the
second quarter of 1999 of the Company's 8 3/4% Subordinated  Notes due 2000 (the
"8 3/4%  Notes")  referred  to below,  offset in part by  interest  expense on a
promissory  note to ATSC (the  "Note  Payable  to ATSC")  that was issued in the
second  quarter of 1999.  The weighted  average  interest  rate on the Company's
outstanding  indebtedness  at January  29,  2000 was 3.88%  compared to 8.60% at
January 30, 1999.

      The income tax provision was $50,221,000, or 43.4% of income before income
taxes and extraordinary  loss, in the 1999 period,  compared to $33,579,000,  or
46.1% of income  before  income taxes in 1998.  The effective tax rates for both
periods  were  higher  than  the  statutory  rates,  primarily  as a  result  of
non-deductible goodwill expense.

      On July 22, 1999, the Company redeemed its outstanding 8 3/4% Notes.  This
resulted in an extraordinary charge to earnings in Fiscal 1999 of $962,000,  net
of income tax benefit.

      As a result  of the  foregoing  factors,  the  Company  had net  income of
$64,531,000,  or  6.0%  of net  sales,  for  1999,  compared  to net  income  of
$39,324,000, or 4.3% of net sales, for 1998.


FISCAL 1998 COMPARED TO FISCAL 1997

      The  Company's  net sales  increased to  $911,939,000  in Fiscal 1998 over
$781,028,000 in Fiscal 1997, an increase of $130,911,000,  or 16.8%.  Comparable
store sales for Fiscal 1998  increased  7.9%,  compared to a decrease of 5.5% in
Fiscal 1997. The sales increase was primarily attributable to the opening of new
stores,  the  expansion of existing  stores and the net  increase in  comparable
store sales in 1998.  Management  believes  that the net increase in  comparable
store  sales was the result of improved  customer  acceptance  of the  Company's
product offerings and merchandise assortment.

      Gross profit as a percentage of net sales  increased to 50.0% in 1998 from
47.3% in 1997. As discussed in Note 1 to the Consolidated  Financial Statements,
the  Company  elected in Fiscal  1998 to change the method by which the  Company
accounts for inventory,  from the retail method to the average cost method.  The
effect of this  accounting  change on Fiscal  1998 net income was an increase of
$1,272,000.  Under the retail method,  gross margin as a percentage of net sales
would have been  approximately  49.8%.  The  increase in gross  margin  reflects
continued  merchandise margin improvements  resulting from the maturation of the
Company's sourcing organization, since the acquisition of the Company's sourcing
joint  venture in  September  1996,  as well as a reduction  in  markdowns  as a
percentage of sales.

      Selling,  general and administrative expenses were $349,955,000,  or 38.4%
of net sales, in 1998, compared to $308,232,000, or 39.5% of net sales, in 1997.
The decrease in selling,  general and administrative expenses as a percentage of
net sales was primarily  attributable  to increased  leverage on fixed  expenses
resulting from increased  comparable  store sales. The benefits of this leverage
were partially offset by an increase in the provision for management performance
bonus  expense,  and an increase  in  marketing  expenditures  in support of the
Company's strategic initiatives to enhance the Ann Taylor brand.

      Operating income increased to $91,587,000,  or 10.0% of net sales, in 1998
from  $50,000,000,  or 6.4% of net sales, in 1997.  Operating income in 1998 was
reduced by  $3,633,000,  or 0.4% of net  sales,  for the  retirement  of certain
assets in connection  with the  renovation of the Company's  corporate  offices.
Amortization of goodwill was $11,040,000, or 1.2% of net sales, in 1998 compared
to $11,040,000,  or 1.4% of net sales, in 1997.  Operating income without giving
effect to such amortization was $102,627,000, or 11.2% of net sales, in 1998 and
$61,040,000, or 7.8% of net sales, in 1997.

      Interest income was $2,241,000 in 1998 compared to $1,157,000 in 1997. The
increase was primarily  attributable to interest income earned on increased cash
on hand.
                                      -6-
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      Interest  expense was $20,358,000 in 1998 compared to $21,146,000 in 1997.
The decrease in interest expense was primarily attributable to a decrease in the
Company's  outstanding  long-term debt, resulting in part from the prepayment in
July 1997 of a $24,500,000  term loan. The weighted average interest rate on the
Company's  outstanding  indebtedness  at January 30, 1999 was 8.60%  compared to
8.59% at January 31, 1998.

      The income tax provision was $33,579,000, or 46.1% of income before income
taxes, in the 1998 period,  compared to  $17,466,000,  or 59.3% of income before
income taxes and  extraordinary  loss, in 1997. The effective tax rates for both
periods  were  higher  than  the  statutory  rates,  primarily  as a  result  of
non-deductible  goodwill expense.  Without giving effect to such  non-deductible
goodwill amortization, the Company's effective income tax rate was 40% of income
before income taxes in the 1998 period,  compared to 43% before income taxes and
extraordinary  loss in the 1997 period. The decrease in the effective income tax
rate resulted primarily from the implementation of additional state tax planning
and from an increase in the amount of income earned outside the United States by
the Company's non-U.S. sourcing subsidiaries.

      As a result  of the  foregoing  factors,  the  Company  had net  income of
$39,324,000,  or  4.3%  of net  sales,  for  1998,  compared  to net  income  of
$11,824,000, or 1.5% of net sales, for 1997.


CHANGES IN FINANCIAL POSITION

      Accounts  receivable  decreased  to  $67,092,000  at the end of 1999  from
$71,049,000 at the end of 1998, a decrease of $3,957,000, or 5.6%. This decrease
was  primarily  attributable  to  construction   allowance  receivables,   which
decreased $4,079,000 to $8,406,000 in 1999.

      Merchandise inventories increased to $140,026,000 at January 29, 2000 from
$136,748,000  at January  30,  1999,  an increase of  $3,278,000,  or 2.4%.  The
increase in merchandise  inventories is primarily due to inventory purchased for
new store  square  footage.  Merchandise  inventories  at January  29,  2000 and
January  30,  1999   included   approximately   $22,959,000   and   $32,329,000,
respectively,  of inventory  associated  with the Company's  sourcing  division,
which is  principally  finished  goods in transit from  factories.  Total square
footage  increased to  approximately  2,280,000  square feet at January 29, 2000
from  approximately  2,038,000  square  feet at January  30,  1999.  Merchandise
inventory on a per square foot basis,  excluding  inventory  associated with the
Company's sourcing division, was approximately $51 at the end of 1999 as well as
1998.  Inventory  turned  4.8  times  in 1999  compared  to 5.0  times  in 1998,
excluding inventory  associated with the Company's sourcing division.  Inventory
turnover is  determined  by dividing cost of sales by the average of the cost of
inventory at the beginning and end of the period (excluding inventory associated
with the sourcing division).


LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  primary  sources  of  working  capital  are cash flow from
operations.  The following  table sets forth material  measures of the Company's
liquidity:

                                                          Fiscal Year
                                                 ----------------------------
                                                    1999     1998      1997
                                                    ----     ----      ----
                                                    (dollars in thousands)

    Cash provided by operating activities....... $ 98,299  $ 75,535  $ 71,589
    Working capital............................. $151,368  $168,708  $122,181
    Current ratio...............................   2.26:1    2.30:1    2.39:1
    Debt to equity ratio........................    .22:1     .48:1     .28:1

      Cash provided by operating  activities,  as presented on the  consolidated
statements of cash flows, increased in 1999 principally as a result of earnings,
noncash charges and decreases in net long term assets and receivables  partially
offset by decreases in accounts payable and accrued liabilities and increases in
deferred income taxes, prepaid expenses and other current assets and merchandise
inventories.

                                      -7-
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<PAGE>


      The Company's  principal credit facility is a bank credit facility that it
entered into in June 1998 with a syndicate  of lenders (the "Credit  Facility").
The Company uses the Credit  Facility for the issuance of commercial and standby
letters of credit and to provide funds for other general corporate purposes. The
lenders' commitment under the Credit Facility was originally  $150,000,000.  The
Credit  Facility  had an original  maturity  date of June 30,  2000,  subject to
extension upon the satisfaction of certain  conditions.  Effective  September 3,
1999,  the Company  elected to reduce the  commitment  of the lenders  under the
Credit  Facility by  $25,000,000  to  $125,000,000  and extended the term of the
Credit Facility to June 30, 2001.

      Loans  outstanding  under the Credit  Facility  at any time may not exceed
$50,000,000.  The Company did not make any borrowings  under the loan provisions
of the Credit Facility  during Fiscal 1999, and there were no loans  outstanding
at fiscal year end.  The  outstanding  loan balance is required to be reduced to
zero for the thirty-day  period  commencing  January 1 each year. This cleandown
period was achieved for January 2000. Maximum availability for loans and letters
of credit  under the Credit  Facility is governed by a monthly  borrowing  base,
determined  by the  application  of  specified  advance  rates  against  certain
eligible  assets.  Based on this  calculation,  the maximum amount available for
loans and  letters of credit  under the Credit  Facility at January 29, 2000 was
$125,000,000.  Commercial and standby  letters of credit  outstanding  under the
Credit Facility at January 29, 2000 were approximately $69,649,000.

      Amounts  outstanding  under the Credit  Facility  bear  interest at a rate
equal to, at the  Company's  option,  the lead  lender's Base Rate or Eurodollar
Rate,  plus a  margin  ranging  from  0.25% to 1.00%  and from  1.25% to  2.00%,
respectively.  In  addition,  the  Company  is  required  to pay the  lenders  a
quarterly  commitment fee on the unused  revolving loan  commitment  amount at a
rate ranging from 0.375% to 0.5% per annum. Fees for outstanding  commercial and
standby  letters  of credit  range  from  0.625% to 1.0% and from 1.25% to 2.0%,
respectively.

      The Credit  Facility  contains  financial and other  covenants,  including
limitations on indebtedness, liens and investments, restrictions on dividends or
other  distributions to stockholders and maintenance of certain financial ratios
including a specified fixed charge ratio and specified levels of net worth.

      The  lenders  have been  granted a pledge of the common  stock of ATSC and
certain of its subsidiaries,  and a security interest in substantially all other
tangible and  intangible  assets,  including  accounts  receivable,  trademarks,
inventory, store furniture and fixtures, of the Company and its subsidiaries, as
collateral for the Company's obligations under the Credit Facility.

      The Company had outstanding an intercompany  note payable of $100,625,000
to ATSC. During the second quarter of Fiscal 1999, the Company made a prepayment
on the intercompany note in the amount of $100,000, and the balance was forgiven
by ATSC. This  forgiveness of debt constitutes a contribution of capital by ATSC
to the Company.

      In the second  quarter of Fiscal  1999,  the Company  issued a  promissory
note, as amended,  to ATSC of an aggregate of $199,072,000  principal  amount at
maturity. The Note Payable to ATSC was issued, as amended, by the Company during
the second quarter of 1999 for value received and has interest and payment terms
substantially  similar  to the  terms  of the  Convertible  Debentures  Due 2019
("Convertible  Debentures")  that were issued in 1999 by ATSC.  ATSC has pledged
the Note Payable to ATSC to the lenders under the Company's bank Credit Facility
as  collateral  for  ATSC's  guarantee  of  the  Company's  performance  of  its
obligations under the Credit Facility.

      On July 22,  1999,  the Company  redeemed  all of the  outstanding  8 3/4%
Notes,  at a  redemption  price of 101.375% of  principal  amount,  plus accrued
unpaid  interest to the  redemption  date.  The  redemption  of the 8 3/4% Notes
resulted in an  extraordinary  charge to earnings in the second quarter and year
to date period of $962,000, net of income tax benefit.

                                      -8-
--------------------------------------------------------------------------------
<PAGE>




      The  Company  and its  wholly  owned  subsidiary,  AnnTaylor  Distribution
Services, Inc., are parties to a $7,000,000 seven-year mortgage loan maturing in
Fiscal 2002. The loan is secured by the Company's  distribution  center land and
building in Louisville,  Kentucky.  The mortgage loan bears interest at 7.5% and
is payable in monthly installments of approximately  $130,000. The mortgage loan
balance at January 29, 2000 was $3,950,000.

      The Company's capital expenditures totaled $53,409,000,  $45,131,000,  and
$22,945,000,  in Fiscal 1999, 1998 and 1997, respectively.  Capital expenditures
were primarily  attributable  to the Company's store  expansion,  renovation and
refurbishment  programs,  as well as the  investment the Company made in certain
information  systems  and,  in Fiscal  1999 and 1998,  the  Company's  corporate
offices.  The Company  expects its total  capital  expenditure  requirements  in
Fiscal 2000 will be approximately  $78,000,000,  including capital for new store
construction  for a planned square  footage  increase of  approximately  460,000
square  feet,  or 20%, as well as capital to support  continued  investments  in
information  systems.  The actual amount of the Company's  capital  expenditures
will depend in part on the number of stores opened, expanded and refurbished and
on the amount of construction allowances the Company receives from the landlords
of its new or expanded stores.

      On  September  9, 1999,  the  Company  announced  its  participation  in a
securities  repurchase  program of ATSC,  authorized  by its Board of Directors,
pursuant  to which  ATSC and the  Company  were  authorized  to  purchase  up to
$40,000,000 of ATSC's common stock and/or Convertible  Debentures,  through open
market  purchases and privately  negotiated  transactions.  In January 2000, the
Board  of  Directors   authorized  a  $50,000,000  increase  in  the  securities
repurchase  program,  bringing  the  total  amount  of  securities  that  may be
repurchased  under the program to $90,000,000.  In the third and fourth quarters
of 1999, ATSC  repurchased an aggregate of 3,012,500 shares of its Common Stock,
for an  aggregate  repurchase  price  of  $89,900,000  (exclusive  of  brokerage
commissions),  pursuant to this program.  All of the  repurchased  shares became
treasury  shares  of ATSC  and may be  used  for  general  corporate  and  other
purposes. No Convertible Debentures were repurchased.

      In order to finance its operations and capital  requirements,  the Company
expects to use internally  generated funds,  trade credit and funds available to
it under  the  Credit  Facility.  The  Company  believes  that  cash  flow  from
operations  and funds  available  under the Credit  Facility are  sufficient  to
enable  it to meet its  on-going  cash  needs  for its  business,  as  presently
conducted, for the foreseeable future.

      Effective  February 1, 1998,  the Company  elected to change its method of
inventory  valuation  from the retail  method to the average  cost  method.  The
Company  believes the average cost method,  which traces each inventory unit and
its cost, is a preferable  method for matching the cost of merchandise  with the
revenues generated.  The retail method does not provide for individual unit cost
information. The cumulative effect of this accounting change on February 1, 1998
was not material. The effect of this accounting change on Fiscal 1998 net income
was an increase of $1,272,000. It is not possible to determine the effect of the
change on income in fiscal  periods  ending prior to February 1, 1998 as no cost
information was available.

      In June 1998, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities"  as amended by SFAS No.  137,
"Accounting  for  Derivative  Instruments  and Hedging  Activities - Deferral of
Effective Date of FASB Statement No. 133". This statement establishes accounting
and reporting standards for derivative  instruments embedded in other contracts,
and for hedging activities.  This statement is effective for all fiscal quarters
of  fiscal  years  beginning  after  June  15,  1999.  Management  is  currently
evaluating  the impact of this  statement  and believes  its  adoption  will not
affect the Company's consolidated  financial position,  results of operations or
cash flows.

                                      -9-

--------------------------------------------------------------------------------
<PAGE>


STATEMENT REGARDING FORWARD-LOOKING DISCLOSURES

      Sections  of this  Annual  Report on Form 10-K,  including  the  preceding
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  contain various forward looking  statements,  within the meaning of
the  Private  Securities  Litigation  Reform  Act of 1995,  with  respect to the
financial condition, results of operations and business of the Company. Examples
of  forward-looking  statements  are  statements  that use the  words  "expect",
"anticipate",  "plan", "intend",  "project",  "believe" and similar expressions.
These forward looking statements involve certain risks and uncertainties, and no
assurance can be given that any of such matters will be realized. Actual results
may differ materially from those contemplated by such forward-looking statements
as a result of, among other things, failure by the Company to predict accurately
customer fashion preferences; a decline in the demand for merchandise offered by
the  Company;  competitive  influences;  changes  in levels of store  traffic or
consumer  spending  habits;  effectiveness  of the Company's brand awareness and
marketing  programs;  lack of sufficient  customer  acceptance of the Ann Taylor
Loft  concept  in the  upper-moderate-priced  women's  apparel  market;  general
economic  conditions  that are less favorable than expected or a downturn in the
retail  industry;  the  inability  of the  Company to locate new store  sites or
negotiate  favorable  lease terms for additional  stores or for the expansion of
existing stores;  lack of sufficient consumer interest in an Ann Taylor Internet
Website; a significant change in the regulatory  environment  applicable to the
Company's  business;  an increase in the rate of import  duties or export quotas
with respect to the Company's merchandise; financial or political instability in
any of the  countries  in which  the  Company's  goods are  manufactured;  or an
adverse  outcome  of the  litigation  referred  to in "Legal  Proceedings"  that
materially and adversely affects the Company's financial condition.  The Company
assumes no obligation to update or revise any such forward  looking  statements,
which  speak  only as of their  date,  even if  experience  or future  events or
changes make it clear that any projected  financial or operating results implied
by such forward-looking statements will not be realized.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      The Company  maintains  the majority of its cash and cash  equivalents  in
financial  instruments  with original  maturities of three months or less. These
financial  instruments  are  subject to interest  rate risk and will  decline in
value if interest rates  increase.  Due to the short duration of these financial
instruments,  a change of 100 basis  points in  interest  rates would not have a
material effect on the Company's financial condition.

      The  Company's  outstanding  long-term  debt as of January  29, 2000 bears
interest at fixed rates;  therefore,  the Company's  results of operations would
only be affected by interest  rate changes to the extent that  fluctuating  rate
loans are  outstanding  under the Credit  Facility.  As of January 29, 2000, the
Company has no such amounts outstanding.  Future borrowings would be affected by
interest  rate changes;  however,  the Company does not believe that a change of
100 basis points in interest rates would have a material effect on the Company's
financial condition.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The  following  consolidated  financial  statements of the Company for the
 years  ended  January  29,  2000,  January  30,  1999 and  January 31, 1998 are
 included as a part of this Report (See Item 14):

      Consolidated  Statements  of Income for the fiscal years ended January 29,
          2000, January 30, 1999 and January 31, 1998.

      Consolidated Balance Sheets as of January 29, 2000 and January 30, 1999.

      Consolidated  Statements  of Cash Flows for the fiscal years ended January
          29, 2000, January 30, 1999 and January 31, 1998.

      Notes to Consolidated Financial Statements.


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURES

        None.

                                      -10-
--------------------------------------------------------------------------------
<PAGE>


                                     PART IV
                                     -------


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

   (a) List of documents filed as part of this Annual Report:

          The  following  consolidated  financial  statements of the Company are
          included  on pages 17 through 34 and are filed as part of this  Annual
          Report:  Independent  Auditors'  Report;  Consolidated  Statements  of
          Income for the fiscal years ended  January 29, 2000,  January 30, 1999
          and January 31, 1998;  Consolidated  Balance  Sheets as of January 29,
          2000 and January 30, 1999;  Consolidated  Statements of Cash Flows for
          the fiscal years ended January 29, 2000, January 30, 1999, and January
          31, 1998; Notes to Consolidated Financial Statements.

   (b)    Reports on Form 8-K
          None

   (c)    Exhibits
          The exhibits listed below are filed as a part of this Annual Report.


   Exhibit Number
   --------------


   3.1     Certificate   of   Incorporation   of  the  Company,   as  amended.
             Incorporated  by  reference  to  Exhibit  3.3 to  the  Registration
             Statement of ATSC and Ann Taylor filed on May 3, 1989 (Registration
             No. 33-28522).

   3.2     By-Laws of the Company. Incorporated by reference to Exhibit 3.4 to
             the  Registration  Statement of ATSC and Ann Taylor filed on May 3,
             1989 (Registration No.
             33-28522).

   4.1     Indenture, dated as of June 18, 1999, between the Company, ATSC and
             the Bank of New York, as Trustee.  Incorporated  by reference to
             Exhibit 4.01 to the Registration  Statement  of ATSC filed on
             September  13,  1999.

   10.1    1989 Stock Option Plan.  Incorporated by reference to Exhibit 10.18
             to the Registration Statement of ATSC and Ann Taylor filed on May
             3, 1989 (Registration No. 33-28522).

   10.1.1  Amendment to 1989 Stock Option Plan.  Incorporated  by reference to
             Exhibit  10.15.1 to the Annual  Report on Form 10-K of the  Company
             filed on April 30, 1993.

   10.2    Lease,  dated as of March 17, 1989,  between Carven  Associates and
             Ann  Taylor   concerning   the  West  57th   Street   headquarters.
             Incorporated  by  reference  to Exhibit  10.21 to the  Registration
             Statement of ATSC and Ann Taylor filed on May 3, 1989 (Registration
             No. 33-28522).

   10.2.1  First  Amendment to Lease,  dated as of November 14, 1990,  between
             Carven  Associates  and Ann Taylor.  Incorporated  by  reference to
             Exhibit  10.17.1  to the  Registration  Statement  of ATSC filed on
             April 11, 1991 (Registration No.
             33-39905).

   10.2.2  Second Amendment to Lease,  dated as of February 28, 1993,  between
             Carven  Associates  and Ann Taylor.  Incorporated  by  reference to
             Exhibit  10.17.2 to the Annual Report on Form 10-K of ATSC filed on
             April 29, 1993.

   10.2.3  Extension  and  Amendment  to Lease  dated as of  October  1, 1993,
             between Carven Associates and Ann Taylor. Incorporated by reference
             to Exhibit  10.11 to the Form 10-Q of the  Company  for the Quarter
             ended October 30, 1993 filed on November 26, 1993.

   10.2.4  Modification of Amendment and Extension to Lease, dated as of April
             14, 1994 between Carven Associates and Ann Taylor.  Incorporated by
             reference to Exhibit  10.15.4 to the Annual  Report on Form 10-K of
             ATSC filed on April 28, 1995.


                                      -11-
--------------------------------------------------------------------------------
<PAGE>




Exhibit Number
--------------

   10.2.5  Fifth  Amendment  to  Lease,  dated as of March 14,  1995,  between
             Carven  Associates  and Ann Taylor.  Incorporated  by  reference to
             Exhibit  10.15.5 to the Annual Report on Form 10-K of ATSC filed on
             April 28, 1995.

   10.2.6  Sixth  Amendment  to Lease,  dated as of January  5, 1996,  between
             Pacific  Metropolitan  Corporation and Ann Taylor.  Incorporated by
             reference  to Exhibit  10.8.6 to the Annual  Report on Form 10-K of
             ATSC filed on April 30, 1998.

   10.2.7  Seventh  Amendment  to  Lease,  dated as of June 5,  1996,  between
             Pacific  Metropolitan  Corporation and Ann Taylor.  Incorporated by
             reference  to Exhibit  10.8.7 to the Annual  Report on Form 10-K of
             ATSC filed on April 30, 1998.

   10.2.8  Eighth Amendment to Lease,  undated,  between Pacific  Metropolitan
             Corporation  and Ann Taylor.  Incorporated  by reference to Exhibit
             10.8.8 to the Annual Report on Form 10-K of ATSC filed on April 30,
             1998.

   10.2.9  Ninth Amendment to Lease, dated as of May 13, 1997, between Pacific
             Metropolitan Corporation and Ann Taylor.  Incorporated by reference
             to Exhibit  10.8.9 to the Annual  Report on Form 10-K of ATSC filed
             on April 30, 1998.

   10.2.10 Tenth Amendment to Lease, dated as of May 21, 1997, between Pacific
             Metropolitan Corporation and Ann Taylor.  Incorporated by reference
             to Exhibit  10.8.10 to the Annual Report on Form 10-K of ATSC filed
             on April 30, 1998.

   10.2.11 Eleventh  Amendment  to Lease,  dated as of May 15,  1998,  between
             Pacific  Metropolitan  Corporation and Ann Taylor.  Incorporated by
             reference to Exhibit  10.3.11 to the Annual  Report on Form 10-K of
             ATSC filed on March 29, 1999.

   10.2.12 Sublease Agreement,  dated as of February 23, 1999, between Societe
             Air France  (formerly known as Compagnie  Nationale Air France) and
             the Company.  Incorporated  by reference to Exhibit  10.2.12 to the
             Annual Report on Form 10-K of ATSC filed on April 18, 2000.

   10.3    Tax Sharing Agreement,  dated as of July 13, 1989, between ATSC and
             Ann Taylor. Incorporated by reference to Exhibit 10.24 to Amendment
             No. 2 to the Registration Statement of ATSC and Ann Taylor filed on
             July 13, 1989 (Registration No. 33-28522).


   10.4    Employment  Agreement  dated as of  February  1, 1994  between
             ATSC and Sally  Frame  Kasaks.  Incorporated  by  reference  to
             Exhibit 10.8 to the Form 10-Q of ATSC for the Quarter ended October
             29, 1994 filed on December 9, 1994.

   10.5    Employment  Agreement  dated  February 16, 1996 between ATSC and J.
             Patrick Spainhour. Incorporated by reference to Exhibit 10.4 to the
             Annual Report on Form 10-K of ATSC filed on April 8, 1996.

   10.5.1  Amendment  to the  Employment  Agreement,  dated  August 23,  1996,
             between ATSC and J. Patrick Spainhour. Incorporated by reference to
             Exhibit  10.11.1 to the Annual Report on Form 10-K of ATSC filed on
             May 1, 1997.

   10.5.2  Amendment #2 to the  Employment  Agreement,  dated August 12, 1999,
             between ATSC and J. Patrick Spainhour. Incorporated by reference to
             Exhibit  10.6.2 to the Form  10-Q of ATSC  for the Quarter ended
             July 31, 1999 filed on  September  14, 1999.  Confidential
             treatment  has been  granted  with  respect to certain  portions
             of this exhibit.

   10.5.3  Amendment  #3 to the  Employment  Agreement,  dated March 10, 2000,
             between ATSC and J. Patrick Spainhour. Incorporated by reference to
             Exhibit  10.5.3 to the Annual  Report on Form 10-K of ATSC filed on
             April 18, 2000.

                                      -12-

--------------------------------------------------------------------------------
<PAGE>


Exhibit Number
--------------

   10.6    Employment  Agreement  dated  November  25, 1996  between  ATSC and
             Patricia DeRosa.  Incorporated by reference to Exhibit 10.3 to Form
             10-Q of ATSC  for the  Quarter  ended  November  2,  1996  filed on
             December 17, 1996.

   10.6.1  Amendment #1 to the Employment Agreement,  dated February 16, 2000,
             between ATSC and Patricia DeRosa.  Confidential  treatment has been
             requested  with  respect  to  certain  portions  of  this  exhibit.
             Incorporated by reference to Exhibit 10.6.1 to the Annual Report on
             Form 10-K of ATSC filed on April 18, 2000.

   10.7    Employment  Agreement  dated  September 20, 1996 between Ann Taylor
             and Dwight F. Meyer.  Incorporated  by reference to Exhibit 10.4 to
             the Form 10-Q of Ann Taylor for the Quarter ended  November 2, 1996
             filed on December 17, 1996.

   10.8    The AnnTaylor  Stores  Corporation 1992 Stock Option and Restricted
             Stock and Unit Award Plan,  Amended and Restated as of February 23,
             1994.  Incorporated  by  reference  to Exhibit  10.15 to the Annual
             Report on Form 10-K of ATSC filed on May 1, 1997.

   10.8.1  Amendment to the AnnTaylor Stores Corporation  Amended and Restated
             1992 Stock  Option and  Restricted  Stock and Unit Award  Plan,  as
             approved  by  stockholders  on  June  18,  1997.   Incorporated  by
             reference  to Exhibit  10.15.1 to the Form 10-Q of ATSC for the
             Quarter Ended August 2, 1997 filed on September 12, 1997.

   10.8.2  Amendment  to  the  AnnTaylor   Stores   Corporation   Amended  and
             Restated  1992 Stock Option and  Restricted  Stock and Unit Award
             Plan dated as of January 16,  1998.  Incorporated  by  reference to
             Exhibit 10 of Form 8-K of ATSC filed on March 12, 1998.

   10.8.3  Amendment to the AnnTaylor Stores Corporation  Amended and Restated
             1992 Stock Option and Restricted Stock and Unit Award Plan dated as
             of May 2, 1998. Incorporated by reference to Exhibit 10.16.3 to the
             Form 10-Q of ATSC for the Quarter ended April 2, 1998 filed on June
             16, 1998.

   10.8.4  Amendment to the AnnTaylor Stores Corporation  Amended and Restated
             1992 Stock Option and Restricted Stock and Unit Award Plan dated as
             of March 10, 2000.  Incorporated  by reference to Exhibit 10.8.4 to
             the Annual Report on Form 10-K of ATSC filed on April 18, 2000.

   10.9    AnnTaylor  Stores  Corporation   Amended  and  Restated  Management
             Performance  Compensation Plan, as approved by stockholders on June
             18, 1997.  Incorporated  by reference to Exhibit  10.16 to the Form
             10-Q  of ATSC  for the  Quarter  Ended  August  2,  1997  filed  on
             September 12, 1997.

   10.9.1  Amendment to the AnnTaylor Stores Corporation  Amended and Restated
             Management  Performance  Compensation  Plan  dated as of March  12,
             1998.  Incorporated  by reference to Exhibit  10.17.1 to the Annual
             Report on Form 10-K of ATSC filed on April 30, 1998.

   10.9.2  Amendment to the AnnTaylor Stores Corporation  Amended and Restated
             Management  Performance  Compensation  Plan  dated as of March  10,
             2000.  Incorporated  by reference  to Exhibit  10.9.2 to the Annual
             Report on Form 10-K of ATSC filed on April 18, 2000.

   10.10   Associate Stock Purchase Plan. Incorporated by reference to Exhibit
             10.31 to the Form 10-Q of ATSC for the  Quarter  Ended  October 31,
             1992 filed on December 15, 1992.

   10.11   AnnTaylor   Stores   Corporation   Deferred    Compensation   Plan.
             Incorporated  by reference to Exhibit 10.33 to the Annual Report on
             Form 10-K of ATSC filed on April 28, 1995.

                                      -13-
--------------------------------------------------------------------------------
<PAGE>




Exhibit Number
--------------

   10.11.1 Amendment to the AnnTaylor Stores Corporation Deferred Compensation
             Plan as  approved  by the Board of  Directors  on August 11,  1995.
             Incorporated  by reference  to Exhibit  10.33.1 to the Form 10-Q of
             ATSC for the  Quarter  Ended July 29, 1995 filed on  September  11,
             1995.

   10.12   Mortgage,  Assignment of Rents and Leases,  Security  Agreement and
             Fixture  Financing  Statement  dated  November  20,  1995,  between
             AnnTaylor  Distribution Services,  Inc., as Mortgagor,  and General
             Electric Capital Assurance Company,  as Mortgagee.  Incorporated by
             reference  to Exhibit  10.34 to the Form 10-Q of Ann Taylor for the
             Quarter ended October 28, 1995 filed on December 8, 1995.

   10.13   Promissory  Note  dated  November  20,  1995  from Ann  Taylor  and
             AnnTaylor Distribution Services, Inc., collectively as Borrower, to
             General Electric Capital Assurance Company, as Lender. Incorporated
             by  reference  to Exhibit  10.35 to the Form 10-Q of Ann Taylor for
             the Quarter ended October 28, 1995 filed on December 8, 1995.

   10.14   Commitment  Letter dated as of May 7, 1998 among the Company,  Bank
             of America  National  Trust and  Savings  Association,  BancAmerica
             Robertson   Stephens,   Citicorp  USA  and  CoreStates  Bank,  N.A.
             Incorporated by reference to Exhibit 10.27 to the Form 10-Q of ATSC
             for the Quarter Ended May 2, 1998 filed on June 16, 1998.

   10.15   Credit Agreement,  dated as of June 30, 1998 among the Company,
             Bank of  America,  Citicorp  USA  and  First  Union  National Bank,
             as Co-Agents,  the  financial  institutions from time to time party
             thereto,  BancAmerica Robertson Stephens, as Arranger,  and Bank of
             America,  as  Administrative  Agent.  Incorporated  by reference to
             Exhibit 10.28 to the Form 10-Q of ATSC for the Quarter Ended August
             1, 1998 filed on September 14, 1998.

   10.15.1 Trademark  Security  Agreement,  dated as of June 30, 1998, made by
             Ann Taylor in favor of Bank of America,  as  Administrative  Agent.
             Incorporated  by reference  to Exhibit  10.28.1 to the Form 10-Q of
             ATSC for the Quarter  Ended August 1, 1998 filed on  September  14,
             1998.

   10.15.2 Guaranty,  dated as of June 30, 1998,  made by the Company in favor
             of  Bank of  America,  as  Administrative  Agent.  Incorporated  by
             reference  to  Exhibit  10.28.2  to the  Form  10-Q of ATSC for the
             Quarter Ended August 1, 1998 filed on September 14, 1998.

   10.15.3 Security and Pledge  Agreement,  dated as of June 30, 1998, made by
             ATSC in favor of Bank of America,  as Administrative  Agent.
             Incorporated  by reference  to Exhibit  10.28.3 to the Form 10-Q of
             ATSC for the Quarter  Ended August 1, 1998 filed on  September  14,
             1998.

   10.15.4 Security  and Pledge  Agreement,  dated as of June 30, 1998 made by
             Ann Taylor in favor of Bank of America,  as  Administrative  Agent.
             Incorporated  by reference  to Exhibit  10.28.4 to the Form 10-Q of
             ATSC for the Quarter  Ended August 1, 1998 filed on  September  14,
             1998.

   10.15.5 Subsidiary  Guaranty,  dated as of June 30, 1998 made by  AnnTaylor
             Distribution   Services   in   favor   of  Bank  of   America,   as
             Administrative Agent.  Incorporated by reference to Exhibit 10.28.5
             to the Form 10-Q of ATSC for the Quarter Ended August 1, 1998 filed
             on September 14, 1998.

   10.15.6 First Amendment to the Credit  Agreement,  dated as of September 7,
             1999, among the Company,  Bank of America,  N.A.,  Citibank,  N.A.,
             First Union  National  Bank and each of the other  lenders party to
             the Credit  Agreement,  NationsBanc  Montgomery  Securities LLC, as
             Arranger and Bank of America, as Administrative Agent. Incorporated
             by  reference  to Exhibit  10.17.6 to the Form 10-Q of ATSC for the
             Quarter Ended July 31, 1999 filed on September 14, 1999.

                                      -14-

--------------------------------------------------------------------------------
<PAGE>



Exhibit Number
--------------

   10.15.7 Second  Amendment to the Credit  Agreement,  dated  December  1999,
             among the Company,  Bank of America,  N.A.,  Citibank,  N.A., First
             Union  National  Bank,  and each of the other  lenders party to the
             Credit  Agreement,   NationsBanc   Montgomery  Securities  LLC,  as
             Arranger and Bank of America, as Administrative Agent. Incorporated
             by reference to Exhibit 10.15.7 to the Annual Report on Form 10-K
             of ATSC filed on April 18, 2000.

   10.16   AnnTaylor Stores Corporation Long-Term Cash Incentive  Compensation
             Plan, as approved by stockholders on June 17, 1998. Incorporated by
             reference  to  Exhibit A to the Proxy  Statement  dated May 1, 1998
             filed on May 6, 1998.

   10.16.1 Amendment  to  the  AnnTaylor  Stores  Corporation  Long-Term  Cash
             Inventive   Compensation   Plan,   dated  as  of  March  10,  2000.
             Incorporated  by reference to Exhibit  10.16.1 to the Annual Report
             on Form 10-K of ATSC filed on April 18, 2000.

   10.17   Separation  Agreement  dated March 25, 1999 between the Company and
             Walter  Parks.  Incorporated  by reference to Exhibit  10.21 to the
             Form 10-Q of ATSC for the  Quarter  Ended May 1, 1999 filed on June
             1, 1999.

   10.18   AnnTaylor Stores  Corporation  Special  Severance Plan, dated as of
             March 10, 2000.  Incorporated  by reference to Exhibit 10.18 to the
             Annual Report on Form 10-K of ATSC filed on April 18, 2000.

   18      Preferability  letter  relating  to the  change  in  accounting
             principle.  Incorporated  by  reference  to Exhibit 18 to the Form
             10-Q of ATSC for the Quarter Ended May 2, 1998 filed on June
             16, 1998.

   23      Consent of Deloitte & Touche LLP



   27      Financial Data Schedule.

                                      -15-
--------------------------------------------------------------------------------
<PAGE>



                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                      ANNTAYLOR, INC.

                                      By:    /s/ J. Patrick Spainhour
                                             ---------------------------
                                                 J. Patrick Spainhour
                                            Chairman and Chief Executive Officer

Date:  April 18, 2000

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


   /s/ J. Patrick Spainhour      Chairman and Chief Executive     April 18, 2000
   ---------------------------      Officer and Director
       J. Patrick Spainhour



   /s/ Patricia DeRosa           President and Chief Operating    April 18, 2000
   ---------------------------      Officer and Director
       Patricia DeRosa



   /s/ Barry Erdos               Executive Vice President -       April 18, 2000
   --------------------------       Chief Financial Officer
       Barry Erdos                    and Treasurer



   /s/ James M. Smith            Vice President and Controller    April 18, 2000
   --------------------------       Principal Accounting Officer
       James M. Smith



   /s/ Gerald S. Armstrong       Director                         April 18, 2000
   --------------------------
       Gerald S. Armstrong



   /s/ James J. Burke, Jr.       Director                         April 18, 2000
   --------------------------
       James J. Burke, Jr.



   /s/ Wesley E. Cantrell        Director                         April 18, 2000
   --------------------------
       Wesley E. Cantrell



   /s/ Robert C. Grayson         Director                         April 18, 2000
   --------------------------
       Robert C. Grayson



   /s/ Ronald W. Hovsepian       Director                         April 18, 2000
   --------------------------
       Ronald W. Hovsepian



   /s/ Rochelle B. Lazarus       Director                         April 18, 2000
   --------------------------
       Rochelle B. Lazarus



   /s/ Hanne M. Merriman         Director                         April 18, 2000
   --------------------------
       Hanne M. Merriman



                                      -16-
--------------------------------------------------------------------------------

                                 ANNTAYLOR, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




                                                                    Page No.
                                                                    --------

Independent Auditors' Report......................................     18

Consolidated Financial Statements:

     Consolidated Statements of Income for the fiscal years ended
        January 29, 2000, January 30, 1999 and January 31, 1998...     19

     Consolidated Balance Sheets as of January 29, 2000 and
        January 30, 1999..........................................     20

     Consolidated Statements of Cash Flows for the fiscal years
        ended January 29, 2000, January 30, 1999 and
        January 31, 1998..........................................     21

     Notes to Consolidated Financial Statements...................     22

                                      -17-

--------------------------------------------------------------------------------
                          INDEPENDENT AUDITORS' REPORT




To the Stockholder of
   ANNTAYLOR, INC.:


      We have audited the  accompanying  consolidated  financial  statements  of
AnnTaylor,  Inc. and its subsidiaries,  listed in the accompanying  index. 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 of America.  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, such consolidated  financial statements present fairly, in
all  material   respects,   the  financial  position  of  the  Company  and  its
subsidiaries  at January  29, 2000 and January 30, 1999 and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended  January 29,  2000 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

      As discussed in Note 1 to the consolidated  financial  statements,  during
the fiscal  year ended  January  30,  1999,  the  Company  changed its method of
inventory valuation to the average cost method from the retail method.


DELOITTE & TOUCHE LLP



New York, New York
March 6, 2000
                                      -18-
--------------------------------------------------------------------------------

                                 ANNTAYLOR, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
       For the Fiscal Years Ended January 29, 2000, January 30, 1999 and
                                January 31, 1998




                                                Fiscal Years Ended
                                         -----------------------------------
                                         January 29, January 30, January 31,
                                             2000        1999       1998
                                         ----------- ----------- -----------

                                                  (in thousands)

Net sales..............................  $1,084,519  $ 911,939   $ 781,028
Cost of sales..........................    536,014     455,724     411,756
                                          --------    --------    --------
Gross profit...........................    548,505     456,215     369,272
Selling, general and administrative
  expenses.............................    413,058     349,955     308,232
Retirement of assets...................        ---       3,633         ---
Amortization of goodwill...............     11,040      11,040      11,040
                                          --------    --------    --------

Operating income.......................    124,407      91,587      50,000
Interest income........................      4,378       2,241       1,157
Interest expense.......................     11,814      20,358      21,146
Other expense, net.....................      1,257         567         548
                                          --------    --------    --------

Income before income taxes and
   extraordinary loss..................    115,714      72,903      29,463
Income tax provision...................     50,221      33,579      17,466
                                          --------    --------    --------

Income before extraordinary loss.......     65,493      39,324      11,997
Extraordinary loss (net of income tax
  benefit of $641,000, $0 and
  $130,000, respectively)..............        962         ---         173
                                          --------    --------     -------

    Net income.........................  $  64,531   $  39,324   $  11,824
                                          ========    ========    ========


            See accompanying notes to consolidated financial statements.

                                      -19-
--------------------------------------------------------------------------------
<PAGE>
                                 ANNTAYLOR, INC.
                           CONSOLIDATED BALANCE SHEETS
                      January 29, 2000 and January 30, 1999







                                                         January 29, January 30,
                                                              2000        1999
                                                             --------   --------
                           ASSETS                       (in thousands)
Current assets
  Cash and cash equivalents............................... $ 35,081   $ 67,031
  Accounts receivable, net ...............................   67,092     71,049
  Merchandise inventories ................................  140,026    136,748
  Prepaid expenses and other current assets ..............   29,390     23,637
                                                           --------   --------
      Total current assets ...............................  271,589    298,465
Property and equipment, net ..............................  173,639    151,785
Goodwill, net ............................................  308,659    319,699
Deferred financing costs, net ............................    5,358      2,627
Other assets .............................................    5,872      2,841
                                                           --------   --------
      Total assets........................................ $765,117   $775,417
                                                           ========   ========

            LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
  Accounts payable........................................ $ 56,175   $ 65,419
  Accrued salaries and bonus .............................   23,297     17,132
  Accrued tenancy ........................................    7,800      8,465
  Gift certificates and merchandise credits redeemable ...   15,618     12,102
  Accrued expenses .......................................   16,031     25,433
  Current portion of long-term debt ......................    1,300      1,206
                                                           --------   --------
      Total current liabilities ..........................  120,221    129,757
Long-term debt, net ......................................  114,485    204,576
Deferred lease costs and other liabilities ...............   14,789     12,386

Commitments and contingencies

Stockholder's equity
  Common stock, $1.00 par value; 1,000 shares authorized;
   1 share issued and outstanding ........................        1          1
  Additional paid-in capital .............................  377,155    354,762
  Retained earnings ......................................  138,466     73,935
                                                           --------   --------
      Total stockholder's equity .........................  515,622    428,698
                                                           --------   --------
      Total liabilities and stockholder's equity.......... $765,117   $775,417
                                                           ========   ========



           See accompanying notes to consolidated financial statements.

                                      -20-
--------------------------------------------------------------------------------
<PAGE>

                                 ANNTAYLOR, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          For the Fiscal Years Ended January 29, 2000, January 30, 1999
                              and January 31, 1998



<TABLE>
<CAPTION>
                                                                                  Fiscal Years Ended
                                                                     -------------------------------------------
                                                                     January 29,        January 30,  January 31,
                                                                         2000              1999          1998
                                                                      ---------         ---------    ---------
                                                                                     (in thousands)
<S>                                                                   <C>               <C>          <C>
Operating activities:
   Net income .....................................................   $  64,531         $  39,324    $  11,824
   Adjustments to reconcile net income to net cash
     provided by operating activities:
        Extraordinary loss ........................................       1,603              --            303
        Provision for loss on accounts receivable .................       1,032             1,476        1,795
        Depreciation and amortization .............................      30,347            28,783       27,803
        Amortization of goodwill ..................................      11,040            11,040       11,040
        Amortization of deferred compensation .....................       1,877               465        1,065
        Non-cash interest .........................................       3,026             1,290        1,419
        Deferred income taxes .....................................      (3,843)            3,966       (2,687)
        Loss on disposal of property and equipment ................       1,219             4,175          248
        Changes in assets and liabilities:
              Decrease (increase) in receivables ..................       2,925           (12,314)       1,599
              Decrease (increase) in merchandise inventories ......      (3,278)          (39,514)       3,003
              Decrease (increase) in prepaid expenses and
                  other current assets ............................      (5,680)           (5,581)       1,894
              Decrease in other non-current assets and liabilities,
                  net .............................................       3,131               679        2,861
           Increase (decrease) in accounts payable and
             and accrued liabilities ..............................      (9,631)           41,746        9,422
                                                                      ---------         ---------    ---------
   Net cash provided by operating activities ......................      98,299            75,535       71,589
                                                                      ---------         ---------    ---------
Investing activities:
   Purchases of property and equipment ............................     (53,409)          (45,131)     (22,945)
                                                                      ---------         ---------    ---------
   Net cash used by investing activities ..........................     (53,409)          (45,131)     (22,945)
                                                                      ---------         ---------    ---------
Financing activities:
   Parent company activity ........................................      29,891             9,036          869
   Repayment of term loan .........................................          --                --      (24,500)
   Term loan prepayment penalty ...................................          --                --         (184)
   Payments of mortgage ...........................................      (1,206)           (1,119)        (416)
   Redemption of 8 3/4% Notes .....................................    (101,375)               --           --
   Payment of deferred financing costs ............................      (4,150)           (2,659)         (69)
                                                                      ---------         ---------    ---------
   Net cash provided (used by) financing activities ...............     (76,840)            5,258      (24,300)
                                                                      ---------         ---------    ---------
Net increase (decrease) in cash ...................................     (31,950)           35,662       24,344
Cash, beginning of year ...........................................      67,031            31,369        7,025
                                                                      ---------         ---------    ---------
Cash, end of year .................................................   $  35,081         $  67,031    $  31,369
                                                                      =========         =========    =========
Supplemental disclosures of cash flow information:
   Cash paid during the year for interest .........................   $   9,405         $  18,582    $  19,251
                                                                      =========         =========    =========

   Cash paid during the year for income taxes .....................   $  51,222         $  33,934    $  17,220
                                                                      =========         =========    =========
</TABLE>

                 See accompanying notes to consolidated financial statements.

                                      -21-
--------------------------------------------------------------------------------
<PAGE>



                                 ANNTAYLOR, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      AnnTaylor,  Inc.  (the  "Company" or "Ann  Taylor") is a leading  national
specialty retailer of better quality women's apparel, shoes and accessories sold
principally under the Ann Taylor brand name.

      All of the  outstanding  capital  stock of the Company,  consisting of one
share of common stock, is owned by AnnTaylor Stores Corporation ("ATSC").


BASIS OF PRESENTATION

      The consolidated  financial statements include the accounts of the Company
and  its  subsidiaries.  All  intercompany  accounts  have  been  eliminated  in
consolidation.

     Certain Fiscal 1998 and 1997 amounts have been  reclassified  to conform to
the Fiscal 1999 presentation.


FISCAL YEAR

      The Company follows the standard fiscal year of the retail industry, which
is a 52 or 53 week period  ending on the  Saturday  closest to January 31 of the
following calendar year. All fiscal years presented include 52 weeks.


REVENUE RECOGNITION

      The Company records  revenue as merchandise is sold. The Company's  policy
with respect to gift  certificates is to record revenue as the  certificates are
redeemed  for  merchandise.  Prior to their  redemption,  the  certificates  are
recorded as a liability.


CASH EQUIVALENTS

      Cash and short-term highly liquid investments with original  maturities of
three months or less are considered cash or cash equivalents.


MERCHANDISE INVENTORIES

      Merchandise inventories are stated at the lower of average cost or market.
Effective  February  1,  1998,  the  Company  elected  to change  its  method of
inventory  valuation  from the retail  method to the average  cost  method.  The
Company believes the average cost method is a preferable method for matching the
cost of merchandise with the revenues generated. This is principally because the
average  cost method  traces each  individual  unit sold during a period and its
individual  cost,  while  the  retail  method  estimates  the cost  value of the
inventory sold,  instead of using the actual cost of each  individual  unit. The
cumulative  effect  of this  accounting  change  on  February  1,  1998  was not
material.  The effect of this accounting change on Fiscal 1998 net income was an
increase of $1,272,000. It is not possible to determine the effect of the change
on income in any previously  reported  fiscal years as no cost  information  was
available.

      The  majority  of  the  Company's  inventory   represents  finished  goods
available for sale.

                                      -22-
--------------------------------------------------------------------------------
<PAGE>
                                 ANNTAYLOR, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT

      Property and equipment are recorded at cost. Depreciation and amortization
are computed on a  straight-line  basis over the  estimated  useful lives of the
assets (3 to 40 years) or, in the case of leasehold improvements, over the lives
of the respective leases, if shorter.


DEFERRED FINANCING COSTS

      Deferred  financing  costs are being  amortized  using the interest method
over the term of the related debt. Accumulated  amortization at January 29, 2000
and January 30, 1999 was $1,628,000 and $3,119,000, respectively.


FINANCE SERVICE CHARGE INCOME

      Income from  finance  service  charges  relating to customer  receivables,
which is deducted from selling, general and administrative expenses, amounted to
$8,650,000 for Fiscal 1999, $8,422,000 for Fiscal 1998 and $8,568,000 for Fiscal
1997.


GOODWILL AND OTHER LONG-LIVED ASSETS

      Goodwill  relating to the 1989  acquisition of Ann Taylor by ATSC is being
amortized  on a  straight-line  basis over 40 years.  Goodwill  relating  to the
acquisition,  in 1996,  of the  operations  comprising  the  Company's  sourcing
division, is being amortized on a straight-line basis over 25 years. Accumulated
amortization  at January 29, 2000 and  January  30,  1999 was  $109,931,000  and
$98,891,000, respectively.

      The Company  evaluates its long-lived  assets for  impairment  annually or
whenever events or changes in circumstances indicate that the carrying value may
not be  recoverable.  The Company  compares the carrying value of its long-lived
assets to an estimate of their  expected  future  cash flows  (undiscounted  and
without interest  charges) to evaluate the  reasonableness of the carrying value
and remaining  depreciation or amortization  period.  If the sum of the expected
future cash flows is less than the carrying  amount of the asset,  an impairment
loss is recognized.


ADVERTISING

      Costs associated with the production of advertising,  such as printing and
other costs,  are  expensed as incurred.  Costs  associated  with  communicating
advertising that has been produced,  such as magazine ads, are expensed when the
advertising  first takes place.  Costs of direct mail catalogs and postcards are
expensed when the advertising  arrives in customers'  homes.  Advertising  costs
were  $25,700,000,  $17,800,000  and  $10,500,000 in Fiscal 1999, 1998 and 1997,
respectively.


INCOME TAXES

      The Company  accounts for income  taxes in  accordance  with  Statement of
Financial  Accounting  Standards No. 109,  "Accounting for Income Taxes",  which
requires an asset and liability  method of accounting for deferred income taxes.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized,  and income or expense is  recorded,  for the  estimated  future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.

                                      -23-
--------------------------------------------------------------------------------
<PAGE>

                                 ANNTAYLOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES (CONTINUED)

      Pursuant to a Tax Sharing  Agreement,  ATSC and the Company have agreed to
elect to file  consolidated  income tax returns for federal  income tax purposes
and may elect to file such  returns in states and other  relevant  jurisdictions
that permit such an  election,  for income tax  purposes.  With  respect to such
consolidated  income tax returns,  the Tax Sharing Agreement  generally requires
the  Company to pay to ATSC the entire tax shown to be due on such  consolidated
returns,  provided  that the  amount  paid by the  Company  shall not exceed the
amount of taxes that would have been owed by the Company on a stand-alone basis.

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  reported  amount of assets and  liabilities  and
disclosures  of contingent  assets and  liabilities at the date of the financial
statements and the reported  amounts of revenue and expenses during the reported
period. Actual results could differ from these estimates.


RECENT ACCOUNTING PRONOUNCEMENTS

      In June 1998, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities"  as amended by SFAS No.  137,
"Accounting  for  Derivative  Instruments  and Hedging  Activities - Deferral of
Effective Date of FASB Statement No. 133". This statement establishes accounting
and reporting standards for derivative  instruments embedded in other contracts,
and for hedging activities.  This statement is effective for all fiscal quarters
of  fiscal  years  beginning  after  June  15,  1999.  Management  is  currently
evaluating  the impact of this  statement  and believes  its  adoption  will not
affect the Company's consolidated  financial position,  results of operations or
cash flows.


2.  LONG-TERM DEBT

      The following table  summarizes  long-term debt outstanding at January 29,
2000 and January 30, 1999:

<TABLE>
<CAPTION>
                                                        January 29, 2000     January 30, 1999
                                                      --------------------  -------------------
                                                      Carrying   Estimated  Carrying  Estimated
                                                        Amount  Fair Value    Amount Fair Value
                                                      --------   --------   --------   --------
                                                                     (in thousands)
<S>                                                   <C>        <C>        <C>        <C>
Mortgage...........................................   $  3,950   $  3,950   $  5,157   $  5,157
8 3/4% Notes ......................................       --         --      100,000    101,875
Intercompany note .................................       --         --      100,625    100,625
Note payable to ATSC, net .........................    111,835    111,835       --         --
                                                      --------   --------   --------   --------
       Total debt .................................    115,785    115,785    205,782    207,657
Less current portion ..............................      1,300      1,300      1,206      1,206
                                                      --------   --------   --------   --------
       Total long-term debt........................   $114,485   $114,485   $204,576   $206,451
                                                      ========   ========   ========   ========
</TABLE>


                                      -24-
--------------------------------------------------------------------------------
<PAGE>

                                 ANNTAYLOR, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



2.  LONG-TERM DEBT (CONTINUED)

      In accordance with the  requirements of Statement of Financial  Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments",  the
Company  determined the estimated fair value of its financial  instruments using
quoted market information, as available. As judgement is involved, the estimates
are not  necessarily  indicative  of the amounts the Company  could realize in a
current market exchange.

      The Company's  principal credit facility is a bank credit facility that it
entered into in June 1998 with a syndicate  of lenders (the "Credit  Facility").
The Company uses the Credit  Facility for the issuance of commercial and standby
letters of credit and to provide funds for other general corporate purposes. The
lenders' commitment under the Credit Facility was originally  $150,000,000.  The
Credit  Facility  had an original  maturity  date of June 30,  2000,  subject to
extension upon the satisfaction of certain  conditions.  Effective  September 3,
1999,  the Company  elected to reduce the  commitment  of the lenders  under the
Credit  Facility by  $25,000,000  to  $125,000,000  and extended the term of the
Credit Facility to June 30, 2001.

      Loans  outstanding  under the Credit  Facility  at any time may not exceed
$50,000,000.  The Company did not make any borrowings  under the loan provisions
of the Credit Facility  during Fiscal 1999, and there were no loans  outstanding
at fiscal year end.  The  outstanding  loan balance is required to be reduced to
zero for the thirty-day  period  commencing  January 1 each year. This cleandown
period was achieved for January 2000. Maximum availability for loans and letters
of credit  under the Credit  Facility is governed by a monthly  borrowing  base,
determined  by the  application  of  specified  advance  rates  against  certain
eligible  assets.  Based on this  calculation,  the maximum amount available for
loans and  letters of credit  under the Credit  Facility at January 29, 2000 was
$125,000,000.  Commercial and standby  letters of credit  outstanding  under the
Credit Facility at January 29, 2000 were approximately $69,649,000.

      Amounts  outstanding  under the Credit  Facility  bear  interest at a rate
equal to, at the  Company's  option,  the lead  lender's Base Rate or Eurodollar
Rate,  plus a  margin  ranging  from  0.25% to 1.00%  and from  1.25% to  2.00%,
respectively.  In  addition,  the  Company  is  required  to pay the  lenders  a
quarterly  commitment fee on the unused  revolving loan  commitment  amount at a
rate ranging from 0.375% to 0.5% per annum. Fees for outstanding  commercial and
standby  letters  of credit  range  from  0.625% to 1.0% and from 1.25% to 2.0%,
respectively.

      The Credit  Facility  contains  financial and other  covenants,  including
limitations on indebtedness, liens and investments, restrictions on dividends or
other  distributions to stockholders and maintenance of certain financial ratios
including a specified  fixed charge  coverage ratio and specified  levels of net
worth.

      The  lenders  have been  granted a pledge of the common  stock of ATSC and
certain of its subsidiaries,  and a security interest in substantially all other
tangible and  intangible  assets,  including  accounts  receivable,  trademarks,
inventory, store furniture and fixtures, of the Company and its subsidiaries, as
collateral for the Company's obligations under the Credit Facility.


                                      -25-
--------------------------------------------------------------------------------
<PAGE>
                                 ANNTAYLOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



2.  LONG-TERM DEBT (CONTINUED)

      In the second  quarter of Fiscal  1999,  the Company  issued a  promissory
note, as amended,  to ATSC of an aggregate of $199,072,000  principal  amount at
maturity (the "Note Payable to ATSC").  The Note Payable to ATSC was issued,  as
amended, by the Company during the second quarter of 1999 for value received and
has  interest  and  payment  terms  substantially  similar  to the  terms of the
Convertible  Debentures Due 2019 ("Convertible  Debentures") that were issued in
1999 by ATSC. ATSC has pledged the Note Payable to ATSC to the lenders under the
Company's  bank  Credit  Facility  as  collateral  for ATSC's  guarantee  of the
Company's performance of its obligations under the Credit Facility.

      On July 22,  1999,  the Company  redeemed  all of its  outstanding  8 3/4%
Subordinated  Notes  due 2000 (the "8 3/4%  Notes"),  at a  redemption  price of
101.375% of principal  amount,  plus accrued  unpaid  interest to the redemption
date. The redemption of the 8 3/4% Notes resulted in an extraordinary  charge to
earnings  in the second  quarter  and year to date  period of  $962,000,  net of
income tax benefit.

      The Company had  outstanding a note (the  "intercompany  note") payable of
$100,625,000 to ATSC. The intercompany  note was issued by the Company on August
28, 1998 and had interest and payment terms  substantially  similar to the terms
of the 8 1/2% Convertible  Subordinated  Debentures Due 2016 that were issued in
1996 by ATSC to AnnTaylor  Finance Trust. ATSC had pledged the intercompany note
to the lenders as collateral for ATSC's  guarantee of the Company's  performance
of its  obligations  under the Credit  Facility.  During  the second  quarter of
Fiscal  1999,  the Company  made a prepayment  on the  intercompany  note in the
amount of $100,000 and the balance was forgiven by ATSC. The forgiveness of debt
constituted a contribution of capital by ATSC to the Company.

      The  Company  and  its  wholly  owned  subsidiary  AnnTaylor  Distribution
Services,  Inc. are parties to a $7,000,000 seven-year mortgage loan maturing in
Fiscal 2002. The loan is secured by the Company's  distribution  center land and
building in Louisville,  Kentucky.  The mortgage loan bears interest at 7.5% and
is payable in monthly installments of approximately  $130,000. The mortgage loan
balance at January 29, 2000 was $3,950,000.

      The aggregate  principal payments for the next five years of all long-term
obligations at January 29, 2000 are as follows :

         Fiscal Year                                    (in thousands)
         -----------
           2000............................................$ 1,300
           2001............................................  1,400
           2002............................................  1,250
           2003............................................    ---
           2004............................................    ---
                                                            ------
           Total...........................................$ 3,950
                                                            ======


3.  PREFERRED SECURITIES

      In April and May of Fiscal 1996,  ATSC  completed the sale of an aggregate
of $100,625,000 of 8 1/2%  Company-Obligated  Mandatorily Redeemable Convertible
Preferred  Securities  (the  "preferred  securities")  issued  by its  financing
vehicle,  AnnTaylor Finance Trust, a Delaware  business trust (the "Trust").  On
June 29, 1999, AnnTaylor Finance Trust redeemed all of the outstanding preferred

                                      -26-
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<PAGE>

                                 ANNTAYLOR, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


3.  PREFERRED SECURITIES (CONTINUED)

securities.  All  but  $100,000  of the  liquidation  amount  of  the  preferred
securities were tendered for conversion into an aggregate of 5,116,717 shares of
ATSC common stock prior to the redemption  date, at a conversion price of $19.65
per share of ATSC common  stock,  or 2.545  shares of ATSC common  stock per $50
liquidation  amount of the security.  Holders of preferred  securities that were
not tendered for conversion  received  105.95% of the liquidation  amount of the
preferred securities redeemed, plus accrued distributions.


4.  ALLOWANCE FOR DOUBTFUL ACCOUNTS

      A summary of activity  in the  allowance  for  doubtful  accounts  for the
fiscal years ended January 29, 2000, January 30, 1999 and January 31, 1998 is as
follows:

                                                    Fiscal Years Ended
                                              ---------------------------------
                                             January 29, January 30, January 31,
                                                 2000       1999        1998
                                               -------    -------      -------
                                                         (in thousands)

   Balance at beginning of year ............   $   820    $   812    $   811
   Provision for loss on accounts receivable     1,032      1,476      1,795
   Accounts written off ....................    (1,186)    (1,468)    (1,794)
                                               -------    -------    -------
   Balance at end of year ..................   $   666    $   820    $   812
                                               =======    =======    =======



5.  COMMITMENTS AND CONTINGENCIES

RENTAL COMMITMENTS

      The Company occupies its retail stores and administrative facilities under
operating leases, most of which are non-cancelable.  Some leases contain renewal
options for periods ranging from one to ten years under  substantially  the same
terms and  conditions as the original  leases.  Most of the store leases require
payment  of a  specified  minimum  rent,  plus  a  contingent  rent  based  on a
percentage  of the  store's  net sales in excess of a  specified  threshold.  In
addition, most of the leases require payment of real estate taxes, insurance and
certain  common area and  maintenance  costs in  addition to the future  minimum
lease payments shown below.

      Future  minimum lease payments under  non-cancelable  operating  leases at
January 29, 2000 are as follows:

      Fiscal Year                                   (in thousands)
      -----------
        2000.........................................$  95,655
        2001.........................................   94,422
        2002.........................................   91,391
        2003.........................................   85,413
        2004.........................................   81,065
        2005 and thereafter..........................  288,433
                                                       -------
        Total........................................$ 736,379
                                                       =======
                                      -27-
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<PAGE>

                                 ANNTAYLOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



5.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

      Rent expense for the fiscal years ended January 29, 2000, January 30, 1999
and January 31, 1998 was as follows:

                                                 Fiscal Years Ended
                                       ----------------------------------------
                                       January 29,   January 30,    January 31,
                                           2000          1999          1998
                                           ----          ----          ----
                                                   (in thousands)

      Minimum rent.....................   $72,763      $66,358      $59,495
      Percentage rent..................     3,131        2,414        1,671
                                            -----        -----        -----
           Total.......................   $75,894      $68,772      $61,166
                                           ======       ======       ======

LITIGATION

      The Company has been named as a defendant in several legal actions arising
from its normal business  activities.  Although the amount of any liability that
could arise with respect to these actions cannot be accurately predicted, in the
opinion of the  Company,  any such  liability  will not have a material  adverse
effect on the  financial  position,  results of  operations  or liquidity of the
Company.

      In addition,  ATSC, Ann Taylor,  certain directors and former officers and
directors of ATSC and Ann Taylor,  Merrill  Lynch & Co.  ("ML&Co.")  and certain
affiliates of ML&Co.  have been named as defendants in a purported  class action
lawsuit filed in April 1996 by certain alleged stockholders,  alleging that ATSC
and the other defendants  engaged in a fraudulent  scheme and course of business
that  operated a fraud or deceit on purchasers of ATSC's common stock during the
period from  February  3, 1994  through  May 4, 1995.  On November 9, 1998,  the
District  Court issued an order granting the  defendants'  motion to dismiss the
amended   complaint   with  prejudice  for  its  failure  to  plead  fraud  with
particularity.  On or about December 15, 1998, the plaintiffs  filed a notice of
appeal to the United  States  Court of Appeals for the Second  Circuit,  seeking
review of the  District  court's  order.  The Court heard oral  argument on this
appeal on September 15, 1999.  ML&Co.,  its affiliates and the two directors who
previously  served on the  Company's  Board of Directors as  representatives  of
certain  affiliates of ML&Co. (the "settling  defendants")  reached a settlement
with the plaintiffs,  which provides,  among other things, for the establishment
of a settlement  fund in the amount of  $3,000,000  plus  interest.  On or about
December  14,  1999,  the  District  Court  entered an Order and Final  Judgment
approving  this  partial  settlement,  dismissing  the  amended  complaint  with
prejudice as to the settling  defendants,  and barring and  enjoining any future
claims  by,  among  others,  the  remaining   defendants  against  the  settling
defendants  for  contribution.  The appeal as against the remaining  defendants,
including the Company, is pending before the Second Circuit Court of Appeals. As
a result,  any liability  that may arise from this action cannot be predicted at
this time. The Company believes that the amended  complaint is without merit and
intends to continue to defend the action vigorously.


6.  ENTERPRISE-WIDE OPERATING INFORMATION

      In Fiscal 1998,  the Company  adopted  Statement  of Financial  Accounting
Standards  No. 131,  "Disclosure  About  Segments of an  Enterprise  and Related
Information",  which establishes  annual and interim reporting  standards for an
enterprise's  operating  segments and related  disclosures  about its  products,
services,  major customers and the material  countries in which the entity holds
assets and reports revenues.

                                      -28-
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<PAGE>
                                 ANNTAYLOR, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



6.  ENTERPRISE-WIDE OPERATING INFORMATION (CONTINUED)

     The  Company  is  a  specialty  retailer  of  women's  apparel,  shoes  and
accessories.  Given  the  economic  characteristics  of the store  formats,  the
similar  nature  of the  products  sold,  the type of  customer  and  method  of
distribution,  the operations of the Company are aggregated  into one reportable
segment.  The Company  believes that the customer  base for its stores  consists
primarily of relatively affluent, fashion-conscious women from the ages of 25 to
55, and that the majority of its  customers  are working women with limited time
to shop.


7.  PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:
                                                        Fiscal Years Ended
                                                    -------------------------
                                                    January 29,   January 30,
                                                        2000           1999
                                                        ----           ----
                                                         (in thousands)

          Land and building..........................$  8,774      $  8,683
          Leasehold improvements..................... 110,573        93,168
          Furniture and fixtures..................... 169,521       153,395
          Construction in progress...................  23,518        11,059
                                                      -------       -------
                                                      312,386       266,305
          Less accumulated depreciation
            and amortization......................... 138,747       114,520
                                                      -------       -------
               Net property and equipment............$173,639      $151,785
                                                      =======       =======


8.  OTHER EQUITY AND STOCK OPTION PLANS

REPURCHASE PROGRAM

     During the third quarter of Fiscal 1999,  the Company's  Board of Directors
authorized  the  Company's  participation  in a program under which ATSC and the
Company were  authorized  to purchase up to  $40,000,000  of ATSC's common stock
and/or Convertible  Debentures through open market purchases and/or in privately
negotiated  transactions.  On January 10, 2000, the Board of Directors increased
the  amount  of  securities  that  could  be  purchased  under  the  program  to
$90,000,000.  As of January 29, 2000, ATSC had repurchased  3,012,500  shares of
its common stock for an aggregate  purchase price of  $89,900,000  (exclusive of
brokerage commissions), completing the securities repurchase program. All of the
repurchased  shares of ATSC became  treasury  shares and may be used for general
corporate or other purposes. No Convertible Debentures were purchased.


ASSOCIATE DISCOUNT STOCK PURCHASE PLAN

     In Fiscal 1999, ATSC established an Associate  Discount Stock Purchase Plan
(the "Plan") through which participating  eligible employees may purchase shares
of ATSC's common stock semiannually, at a price equal to the lower of 85% of the
closing  price of ATSC's  common stock on the grant date or the purchase date of
each semiannual  stock purchase  period.  Participating  employees pay for their
stock purchases under the Plan by authorizing  limited payroll  deductions of up
to a maximum of 15% of their compensation. No shares of ATSC's common stock will
be issued  pursuant to the Plan until  Fiscal 2000.  At January 29, 2000,  there
were 250,000  shares of ATSC common stock  available for future  issuance  under
this Plan.
                                      -29-
--------------------------------------------------------------------------------
<PAGE>

                                 ANNTAYLOR, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



8.  OTHER EQUITY AND STOCK OPTION PLANS (CONTINUED)

STOCK OPTION PLANS

      ATSC accounts for stock options in accordance with  Accounting  Principles
Board Opinion No. 25, under which no compensation costs have been recognized for
stock option awards.  Had  compensation  costs of option awards been  determined
under a fair  value  alternative  method  as stated in  Statement  of  Financial
Accounting  Standards No. 123, "Accounting for Stock-Based  Compensation",  ATSC
would have been  required  to prepare a fair value  model for such  options  and
record such amount in the financial  statements  as  compensation  expense.  Pro
forma net income  before  extraordinary  loss,  after  taking into  account such
expense  would have been $63.9  million,  $38.4  million  and $11.0  million for
Fiscal 1999, 1998 and 1997, respectively. For purposes of this calculation, ATSC
arrived at the fair value of each stock  grant at the date of grant by using the
Black  Scholes  option  pricing  model  with  the  following   weighted  average
assumptions used for grants for the fiscal years ended January 29, 2000, January
30, 1999 and January 31, 1998:  risk-free  interest rate of 4.9%, 5.4% and 6.2%,
respectively; expected life of 4.0 years, 4.0 years and 5.0 years, respectively;
and expected volatility of 49.1%, 59.4% and 67.9%, respectively.


9.   EXTRAORDINARY ITEMS

      On July 22,  1999,  the Company  applied the  proceeds  received  from the
issuance of its Notes Payable to ATSC to redeem the outstanding 8 3/4% Notes.
This resulted in an extraordinary charge to earnings in Fiscal 1999 of $962,000,
net of income tax benefit of $641,000.

      On July 2, 1997, the Company used  available  cash to prepay  $24,500,000,
the outstanding  balance of its term loan due September 1998,  which resulted in
an  extraordinary  charge to earnings in Fiscal 1997 of $173,000,  net of income
tax benefit of $130,000.


10.  NONRECURRING CHARGES

RETIREMENT OF ASSETS

      In the fourth  quarter of Fiscal 1998,  the Company  recorded a $3,633,000
non-cash  pre-tax  charge for the  retirement  of certain  assets.  This  charge
related to the write-off of the net book value of assets relinquished during the
renovation of the Company's corporate offices.

                                      -30-
--------------------------------------------------------------------------------
<PAGE>
                                 ANNTAYLOR, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



11.   INCOME TAXES

      The  provision  for income  taxes for the fiscal  years ended  January 29,
2000, January 30, 1999 and January 31, 1998 consists of the following:

                                                Fiscal Years Ended
                                        ----------------------------------
                                        January 29,January 30,  January 31,
                                           2000       1999         1998
                                           ----       ----         ----
                                                 (in thousands)
    Federal:
      Current...........................$ 41,682    $21,589     $14,427
      Deferred..........................  (3,033)     2,748      (1,917)
                                          -------    ------      -------
        Total federal...................  38,649     24,337      12,510
                                          ------     ------      ------
    State and local:
      Current...........................  11,856      7,869       5,538
      Deferred..........................    (809)     1,217        (769)
                                          -------    ------      -------
        Total state and local...........  11,047      9,086       4,769
                                          ------     ------      ------
    Foreign:
      Current...........................     525        156         187
      Deferred..........................     ---        ---         ---
                                          ------     ------      ------
        Total foreign...................     525        156         187
                                          ------     ------      ------
      Total.............................$ 50,221    $33,579     $17,466
                                          ======     ======      ======


      The  reconciliation  between  the  provision  for  income  taxes  and  the
provision  for income taxes at the federal  statutory  rate for the fiscal years
ended January 29, 2000, January 30, 1999 and January 31, 1998 is as follows:

                                               Fiscal Years Ended
                                        ----------------------------------
                                        January 29,January 30, January 31,
                                           2000       1999        1998
                                           ----       ----        ----

                                                 (in thousands)

Income before income taxes and
   exraordinary loss....................$ 115,714  $ 72,903    $ 29,463
                                          =======   =======     =======
Federal statutory rate..................      35%        35%         35%
                                          ======    =======     =======
Provision for income taxes at
   federal statutory rate...............$ 40,500   $ 25,516    $ 10,312
State and local income taxes,
   net of federal income
   tax benefit..........................   6,278      4,660       3,800
Non-deductible amortization of goodwill.   3,500      3,500       3,500
Earnings of foreign subsidiaries........      79       (188)       (314)
Other...................................    (136)        91         168
                                          -------   -------     -------
Provision for income taxes..............$ 50,221   $ 33,579    $ 17,466
                                          ======    =======     =======

                                      -31-
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<PAGE>
                                 ANNTAYLOR, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



11.   INCOME TAXES (CONTINUED)

      The tax effects of significant items comprising the Company's deferred tax
assets (liabilities) as of January 29, 2000 and January 30, 1999 are as follows:

                                                  January 29,   January 30,
                                                      2000          1999
                                                      ----          ----

                                                      (in thousands)
    Current:
     Inventory..................................   $  2,071    $    128
     Accrued expenses...........................      2,306       3,812
     Real estate................................     (2,050)     (1,686)
     Other......................................        ---         ---
                                                    -------     -------
    Total current...............................   $  2,327    $  2,254
                                                    =======     =======
    Noncurrent:
     Accrued expenses...........................   $    763    $    ---
     Depreciation and amortization..............     (2,936)     (5,510)
     Rent expense...............................      5,168       4,786
     Other......................................        327         276
                                                    -------     -------
    Total noncurrent............................   $  3,322    $   (448)
                                                    =======     ========

      Income taxes provided reflect the current and deferred tax consequences of
events that have been  recognized in the Company's  financial  statements or tax
returns.  U.S. federal income taxes are provided on unremitted  foreign earnings
except those that are considered  permanently  reinvested,  which at January 29,
2000 amounted to approximately  $6,852,000.  However, if these earnings were not
considered  permanently  reinvested,  under current law, the  incremental tax on
such undistributed earnings would be approximately $2,137,000.


 12. RETIREMENT PLANS

      SAVINGS PLAN. The Company maintains a defined  contribution 401(k) savings
plan  for  substantially  all  full-time   employees  of  the  Company  and  its
subsidiaries.  Participants may contribute to the plan an aggregate of up to 10%
of their annual earnings.  The Company makes a matching contribution of 50% with
respect to the first 3% of each participant's annual earnings contributed to the
plan. The Company's  contributions to the plan for Fiscal 1999,  Fiscal 1998 and
Fiscal 1997 were $697,000, $592,000 and $519,000, respectively.

      PENSION PLAN. Substantially all full-time employees of the Company and its
subsidiaries are covered under a  noncontributory  defined benefit pension plan.
Through  December 31, 1997, the pension plan was a "cash balance  pension plan",
under which each  participant  accrued a benefit based on compensation and years
of service with the Company. As of January 1, 1998, the plan was amended and the
formula to calculate  benefits was changed to a career average formula.  The new
career  average  formula was used to  determine  the funding  status of the plan
beginning  in Fiscal  1997.  The  Company's  funding  policy  for the plan is to
contribute  annually  the amount  necessary  to provide  for  benefits  based on
accrued  service and projected pay increases.  Plan assets consist  primarily of
cash, equity and fixed income securities.

      In Fiscal 1998,  the Company  adopted  Statement  of Financial  Accounting
Standards   No.  132,   "Employers'   Disclosures   about   Pensions  and  Other
Postretirement  Benefits",  which  standardizes the disclosure  requirements for
pension and other postretirement benefits,  eliminates certain disclosures,  and
requires  additional  information on the changes in the benefit  obligations and
fair value of plan assets.

                                      -32-
--------------------------------------------------------------------------------
<PAGE>

                                 ANNTAYLOR, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



 12. RETIREMENT PLANS (CONTINUED)

      The following  table provides  information for the Pension Plan at January
29, 2000, January 30, 1999 and January 31, 1998:

                                                    Fiscal Years Ended
                                            ------------------------------------
                                            January 29,  January 30, January 31,
                                                2000        1999         1998
                                                ----        ----         ----

                                                       (in thousands)
Change in benefit obligation:
Benefit obligation, beginning of year ......  $ 4,642      $ 3,820      $ 3,413
Service cost ...............................    1,129          669          571
Interest ...................................      340          292          250
Plan amendments ............................     --           --             81
Actuarial loss (gain) ......................       19          348         (103)
Benefits paid ..............................   (1,176)        (487)        (392)
                                              -------      -------      -------
Benefit obligation, end of year ............    4,954        4,642        3,820
                                              -------      -------      -------
Change in plan assets:
Fair value of plan assets,
  beginning of year ........................    7,486        5,128        4,745
Actual return on plan assets ...............      763        1,205          907
Employer contribution (refund) .............    2,416        1,640         (132)
Benefits paid ..............................   (1,176)        (487)        (392)
                                              -------      -------      -------
Fair value of plan assets, end of year .....    9,489        7,486        5,128
                                              -------      -------      -------
Funded status (fair value of plan
   assets less benefit obligation) .........    4,535        2,844        1,308
Unrecognized net actuarial gain ............   (1,621)      (1,675)      (1,361)
Unrecognized prior service cost ............       63           69           75
                                              -------      -------      -------
Prepaid benefit cost........................  $ 2,977      $ 1,238      $    22
                                              =======      =======      =======

Net pension cost includes the following components:

                                                      Fiscal Years Ended
                                           -------------------------------------
                                           January 29,   January 30, January 31,
                                              2000          1999         1998
                                              ----          ----         ----
                                                        (in thousands)

Service cost..............................$   1,129     $    669    $     571
Interest cost.............................      340          292          250
Expected return on assets.................     (776)        (481)        (409)
Amortization of prior gains...............      (22)         (61)         (42)
Amortization of prior service cost........        6            6            6
                                            -------      -------     --------
Net periodic pension cost.................$     677     $    425    $     376
                                            =======      =======     ========

      For the fiscal years ended January 29, 2000,  January 30, 1999 and January
31, 1998, the following actuarial assumptions were used:

                                                      Fiscal Years Ended
                                           -------------------------------------
                                           January 29,   January 30, January 31,
                                              2000           1999        1998
                                              ----           ----        ----

Discount rate.............................    8.25%         6.75%        7.50%
Long-term rate of return on assets........    9.00%         9.00%        9.00%
Rate of increase in future compensation...    4.00%         4.00%        4.00%

                                      -33-
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<PAGE>
                                 ANNTAYLOR, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



13. STOCKHOLDER'S EQUITY

      The following summarizes the changes in stockholder's equity during Fiscal
1999, Fiscal 1998 and Fiscal 1997:
                                                                         Total
                                               Additional                Stock-
                                       Common    Paid-in    Retained    holder's
                                        Stock    Capital    Earnings     Equity
                                       ------  ----------   --------    --------
                                                         (in thousands)

Balance at February 1, 1997............$   1    $443,952    $ 22,787   $466,740
   Net income..........................  ---         ---      11,824     11,824
   Parent company contributions........  ---       1,934         ---      1,934
                                         ---      ------       -----    -------
Balance at January 31, 1998............    1     445,886      34,611    480,498
   Net income..........................  ---         ---      39,324     39,324
   Parent company contributions........  ---       9,501         ---      9,501
   Intercompany note...................  ---    (100,625)      ---     (100,625)
                                         ---    --------       -----    -------
Balance at January 30, 1999............    1     354,762      73,935    428,698
   Net income..........................  ---        ---       64,531     64,531
   Parent company contributions........  ---      31,768         ---     31,768
   Forgiveness of intercompany note....  ---     100,625         ---    100,625
   Note payable to ATSC................  ---    (110,000)        ---   (110,000)
                                         ---    --------     -------    -------
Balance at January 29, 2000............$   1    $377,155    $138,466   $515,622
                                         ===     =======      =======    =======

                                      -34-