---

---

# UNITED STATESSECURITIES 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 31, 2004OR

# |  |   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT          OF 1934.

Commission file number 1-10738

# ANNTAYLOR STORES CORPORATION
(Exact name of registrant as specified in its charter)

|                                                              |  |                                        
|------------------------------------------------------------- |  | ---------------------------------------
|DELAWARE                                                      |  | 13-3499319                             
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. Employer Identification Number)

|                                         |  |           
|---------------------------------------- |  | ----------
|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:

|                              |  |                                          
|----------------------------- |  | -----------------------------------------
|Title of Each Class           |  | Name of each exchange on which registered
|Common Stock,$.0068 Par Value |  | The New York Stock Exchange              



# 

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 .

Indicate
 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
 herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
 statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X|.

Indicate
 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
 Act).Yes |X|  No .

The
 aggregate market value of the registrant's voting stock held by non-affiliates of the registrant as
 of August 2, 2003 was $1,345,276,718.



The number
 of shares of the registrant's common stock outstanding as of February 27, 2004 was 45,495,072.

Documents Incorporated By Reference:

Portions
 of the Registrant's Proxy Statement for the Registrant's 2004 Annual Meeting of Stockholders to be held
 on April 29, 2004 are incorporated by reference into Part III.

---

---

---

# PART I

# ITEM 1. Business

# General

AnnTaylor
 Stores Corporation (the Company), through its wholly owned subsidiaries, is a leading national specialty
 retailer of better quality womens apparel, shoes and accessories sold primarily under the Ann Taylor
 and Ann Taylor Loft brands. 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 client service. Ann Taylor sales associates
 are trained to assist clients in merchandise selection and wardrobe coordination, helping them achieve
 the Ann Taylor look while reflecting the clients personal styles. Unless the context indicates otherwise,
 all references herein to the Company include the Company and its wholly owned subsidiaries.

The
 Company believes that Ann Taylor is a highly recognized national brand that defines a distinct fashion
 point of view. The Ann Taylor brand appeals to a broad range of clients through the Companys Ann Taylor
 and Ann Taylor Loft concepts. Ann Taylor merchandise represents classic styles, updated to reflect current
 fashion trends.

The
 Company is dedicated to maintaining the right merchandise mix in its stores among suits and separates,
 tops, footwear and accessories. The Company concentrates on calibrating the timing of its product offerings
 to address clients wardrobing needs, anticipating fabric and yarn preferences on a regional and seasonal
 basis, and timing direct marketing efforts accordingly.

The
 Ann Taylor client base consists primarily of fashion conscious women from the ages of 25 to 55. The
 Ann Taylor concept appeals to professional women with limited time to shop, who are attracted to Ann
 Taylor by its focused merchandising and total wardrobing strategy, personalized client service, efficient
 store layouts and continual flow of new merchandise. The Ann Taylor Loft concept appeals to women with
 a more relaxed lifestyle and work environment, who appreciate the Ann Taylor style and compelling value.
 Certain clients of Ann Taylor and Ann Taylor Loft cross-shop both brands.

As of
 January 31, 2004, the Company operated 648 retail stores in 43 states, the District of Columbia and
 Puerto Rico, of which 354 were Ann Taylor stores, 268 were Ann Taylor Loft stores and 26 were Ann Taylor
 Factory stores. The Companys operations are conducted within one segment for financial reporting purposes.
 See Stores and Expansion for further discussion.

In Fiscal
 2000, the Company launched anntaylor.com (the Online Store), making Ann Taylor merchandise available
 for direct retail sale to clients over the Internet. The Online Store was designed as an extension of
 the in-store experience and offers a wide selection of each seasons Ann Taylor collection. The Company
 believes that the Online Store further builds the Ann Taylor brand and enhances the Companys relationships
 with clients, as well as creates the opportunity for sales to new and existing clients.

In January
 2003, the Company launched anntaylorloft.com (collectively with anntaylor.com, the Online Stores).
 The site currently offers clients a search vehicle for locating stores, as well as the opportunity to
 sign up to receive catalogs and other promotional materials via regular mail or email. The site is scheduled
 to allow internet sales in Spring 2004.

# Merchandise Design and Production

Substantially
 all merchandise offered by the Companys stores is developed by the Companys in-house product design
 and development teams, which design merchandise exclusively for the Company. The Companys merchandising
 groups determine inventory needs for the upcoming season, edit the assortments developed by the design
 teams, plan monthly merchandise flows, and arrange for the production of merchandise by independent
 manufacturers, primarily through the Companys sourcing division or through private label specialists.

2

---

The
 Companys production management and quality assurance departments establish the technical specifications
 for all Company merchandise and inspect merchandise on a test basis for uniformity of size and color,
 as well as for conformity with specifications and overall quality of manufacturing in order to identify
 potential problems prior to shipment. In addition, spot inspections are performed in factories which
 produce the Companys merchandise, including periodic in-line inspections while goods are in production.

The
 Company sources merchandise from approximately 260 manufacturers and vendors, none of which accounted
 for more than 4% of the Companys merchandise purchases in Fiscal 2003. The Companys merchandise is
 manufactured in over 24 countries, with approximately 27%of the Companys merchandise manufactured
 in China, 13% in Hong Kong, 13% in the Philippines, and 8% in Korea. Substantially all of the Companys
 foreign purchases are negotiated and paid in U.S. dollars.

The
 Company cannot predict with certainty whether any of the foreign countries in which its products are
 currently manufactured or any of the countries in which the Company may manufacture its products in
 the future will be subject to future import restrictions by the U.S. government, including the likelihood,
 type or degree of effect of any such new trade restriction.  Trade restrictions, including increased
 tariffs or quotas, against apparel, footwear or other items sold by the Company could affect the importation
 of such merchandise and could increase the cost or reduce the supply of merchandise available to the
 Company and adversely affect the Companys business, financial condition, results of operations and
 liquidity.

On January
 1, 2005, in accordance with its commitments under the World Trade Organization (WTO) the United States
 will no longer apply quantitative limits (quotas) on the import of apparel from other WTO Members.
 This action may create short-term cost pressures and reduce availability in certain key product categories
 from certain countries, specifically China and the Philippines among others, in the fourth quarter of
 2004. In 2005, this event should initially improve flexibility obtaining imported merchandise manufactured
 in countries currently subject to quotas, however this flexibility may be reduced or eliminated if new
 restrictions are imposed on the import of apparel from other countries. Although the Company cannot
 predict with certainty the effect the elimination of quotas will have on its business, management believes
 that any impact on operations arising from changes to quotas or other trade restrictions will not be
 material.

The
 Companys merchandise flow may also be adversely affected by financial or political instability in any
 of the countries in which its goods are manufactured, the potential impact of health concerns relating
 to severe infectious diseases, particularly on manufacturing operations of the Companys vendors in
 Asia and elsewhere, or acts of war or terrorism in the United States or worldwide, if it affects the
 production, shipment or receipt of merchandise from such countries.  Merchandise flow may also
 be adversely affected by significant fluctuation in the value of the U.S. dollar against foreign currencies
 or restrictions on the transfer of funds. See Statement Regarding Forward Looking Disclosures.

The
 Company does not maintain any long-term or exclusive commitments or arrangements to purchase merchandise
 from any single supplier. The Company believes it has good relationships with its suppliers and that,
 subject to the discussion above, there will continue to be adequate sources to produce a sufficient
 supply of quality goods in a timely manner and on satisfactory economic terms.

# Inventory Control and Merchandise Allocation

The
 Companys planning departments analyze each stores size, location, demographics, sales and inventory
 history to determine the quantity of merchandise to be purchased for, and the allocation of merchandise
 to, the Companys stores. Upon receipt, merchandise is allocated to achieve an emphasis that is suited
 to each stores client base. Merchandise typically is sold at its original marked price for several
 weeks, with the length of time varying by item. The Company reviews its inventory levels on an on-going
 basis in order to identify slow-moving merchandise styles and broken assortments (items no longer in
 stock in a sufficient range of sizes) and uses markdowns to clear this merchandise. Markdowns may be
 used if inventory exceeds client demand for reasons of design, seasonal adaptation or changes in client
 preference, or if it is determined that the inventory will not sell at its currently marked price. Some
 marked-down items remaining unsold are moved periodically to the Companys Ann Taylor Factory stores,
 where additional markdowns may be taken.

3

---

In Fiscal
 2003, inventory turned 4.1 times compared to 3.5 times in Fiscal 2002 and 3.7 times in Fiscal 2001.
 Inventory turnover is determined by dividing cost of sales by the average of the cost of inventory at
 the beginning and the end of the period.

The
 Companys comprehensive merchandising information system provides systems support for the Companys
 merchandising functions. This system serves as the Companys central source of information regarding
 merchandise items, inventory management, purchasing, replenishment, receiving and distribution. During
 2003 the Company introduced a new store planning system to improve the management of store inventory
 levels.

The
 Company uses a centralized distribution system, under which nearly all merchandise is distributed to
 the Companys stores through its distribution center, located in Louisville, Kentucky. See Properties.
 Merchandise is shipped by the distribution center to the Companys stores several times each week.

# Stores and Expansion

An important
 aspect of the Companys business strategy is a real estate expansion program designed to reach new clients
 through the opening of new stores. The Company opens new stores in markets that it believes have a sufficient
 concentration of its target clients. The Company also adds stores, or expands the size of existing stores,
 in markets where the Company already has a presence, as market conditions warrant and sites become available.
 Store locations are determined on the basis of various factors, including geographic location, demographic
 studies, anchor tenants in a mall location, other specialty stores in a mall or specialty center location
 or in the vicinity of a village location, and the proximity to professional offices in a downtown or
 village location. Stores opened in factory outlet centers are located in factory outlet malls in which
 co-tenants generally include a significant number of outlet or discount stores operated under nationally
 recognized upscale brand names. Store size also is determined on the basis of various factors, including
 geographic location, demographic studies, and space availability.

As of
 January 31, 2004, the Company operated 648 stores throughout the United States, the District of Columbia
 and Puerto Rico, of which 354 were Ann Taylor stores, 268 were Ann Taylor Loft stores, and 26 were Ann
 Taylor Factory Stores.

The
 average Ann Taylor store is approximately 5,000 square feet in size. The Company also has three flagship
 Ann Taylor stores in New York City, San Francisco and Chicago, which represent the fullest assortment
 of Ann Taylor merchandise. In Fiscal 2003, the Company opened 8 Ann Taylor stores that averaged approximately
 4,600 square feet. In Fiscal 2004, the Company plans to open approximately 10  15 Ann Taylor stores,
 which are expected to average approximately 5,000 square feet.

Ann
 Taylor Loft stores average approximately 6,000 square feet. In Fiscal 2003, the Company opened 61 Ann
 Taylor Loft stores that averaged approximately 5,400square feet. In Fiscal 2004, the Company
 expects to open approximately 65  70 Ann Taylor Loft stores, which are expected to average approximately
 5,500square feet.

The
 Companys 26 Ann Taylor Factory stores average approximately 9,200 square feet. In Fiscal 2003 the Company
 opened 1 Ann Taylor Factory store that was approximately 7,400 square feet. In Fiscal 2004, the Company
 expects to open approximately seven Ann Taylor Factory stores, which are expected to average about 7,200
 square feet.

The
 Companys stores typically have approximately 20% of their total square footage allocated to stockroom
 and other non-selling space.

The
 following table sets forth certain information regarding store openings, expansions and closings for
 Ann Taylor stores (ATS), Ann Taylor Loft stores (ATL), and Ann Taylor Factory stores (ATFS) over
 the past five years:

4

---

|Fiscal Year |  | Total StoresOpen atBeginningof FiscalYear | No. StoresOpened DuringFiscal Year | No.Stores ExpandedDuringFiscalYear(a) | No.StoresClosedDuringFiscalYear (a) | No. Stores Openat End ofFiscal Year |    |  |  |    | 
|----------- |  | ----------------------------------------- | ---------------------------------- | ------------------------------------- | ----------------------------------- | ----------------------------------- | -- |  |  | -- | 
|
|
|
|
|
|
|
|1999        |  |                                           |                                    | 365                                   |                                     |                                     | 18 |  |  | 29 | 
|2000        |  |                                           |                                    | 405                                   |                                     |                                     | 18 |  |  | 63 | 
|2001        |  |                                           |                                    | 478                                   |                                     |                                     | 10 |  |  | 57 | 
|2002        |  |                                           |                                    | 538                                   |                                     |                                     | 10 |  |  | 39 | 
|2003        |  |                                           |                                    | 584                                   |                                     |                                     | 8  |  |  | 61 | 



|(a) | All stores expanded and all stores closed were ATS stores,
 except that in 2003, two stores closed were ATFS stores; in 2002, one store closed was an ATFS store;
 in 2001, five stores closed were ATFS stores, and two stores closed were ATL stores; and in 2000, two
 stores closed were ATL stores and one store closed was an ATFS store. In addition, two stores closed
 in 2000 and four stores closed in 1999 were ATS stores that were replaced in the same locations with
 new ATL stores.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(b) | In 2002, 2001 and 2000, 18, two and three ATL stores located
 in factory outlet malls were converted to ATFSstores, respectively.                                                                                                                                                                                                                                                                                                                                                                    

The
 Company believes that its existing store base is a significant strategic asset of its business, and
 its stores are located in some of the most productive retail centers in the United States. The Company
 has invested approximately $219,000,000 in its store base since the beginning of Fiscal 1999; approximately
 53% of its stores are either new or have been remodeled, as a result of an expansion or relocation,
 in the last five years.

The
 Companys Fiscal 2003 real estate expansion plan resulted in an increase in the Companys total store
 square footage of approximately 357,000 square feet (net of store closings), or 10.8%, from approximately
 3,305,000 square feet at the end of Fiscal 2002 to approximately 3,662,000 square feet at the end of
 Fiscal 2003. In Fiscal 2004, the Company intends to increase store square footage by approximately 470,000
 square feet, or 12.8%.

The
 Companys expansion in Fiscal 2004 may include increased implementation of new ideas in design and product
 mix similar to those tested in the Companys store in the Short Hills Mall in New Jersey. This 11,000
 square foot store features a more striking and sophisticated look, consistent with this upscale mall,
 and includes a separate entrance for Ann Taylor Petite clients.

Capital
 expenditures for the Companys Fiscal 2003 store expansion program, net of landlord construction allowances,
 totaled approximately $33,000,000 and expenditures for store refurbishing and refixturing totaled approximately
 $15,000,000. The Company expects that capital expenditures for its Fiscal 2004 store expansion program,
 net of landlord construction allowances, will be approximately $50,000,000and expenditures for
 store refurbishing and refixturing will be approximately $22,000,000.

The
 Companys ability to continue to increase store square footage will be dependent upon, among other things,
 general economic and business conditions affecting consumer confidence and spending, the availability
 of desirable locations and the negotiation of acceptable lease terms. See Statement Regarding Forward
 Looking Disclosures and Managements Discussion and Analysis of Financial Condition and Results of
 Operations  Liquidity and Capital Resources.

# Customer Credit

On February
 4, 2002, the Company sold its proprietary credit card portfolio to World Financial Network National
 Bank and contracted with Alliance Data Systems Corporation, to provide private label credit card services
 to proprietary Ann Taylor credit card customers. See Managements Discussion and Analysis of Financial
 Condition and Results of Operations  Liquidity and Capital Resources.

5

---

# Information Systems

During
 Fiscal 2003 the Company continued its ongoing commitment to make investments and enhancements to information
 services and technology. The Company continued to rollout enhancements to its performance measurement
 software which enables the measurement of store associate job performance against learning and productivity
 goals. The Company completed the rollout of a store based Wide Area Network that has resulted in improved
 communication between corporate offices and stores, and will provide a platform for future operational
 improvements. In addition, the Company completed several new initiatives in fiscal 2003. These include
 the deployment of an application that serves to locate product across the chain for clients; and the
 implementation of a price optimization system which will help improve the profitability of merchandising
 decisions and improve gross margin by optimally pricing product relative to client demand.

# Brand Building and Marketing

The
 Company believes that its Ann Taylor and Ann Taylor Loft brands are among its most important assets.
 The ability of the Company to continuously evolve these brands to appeal to the changing needs and priorities
 of their target client bases is a key source of its competitive advantage. All aspects of brand development
 for both retail concepts, including product design, store merchandising and shopping environments, channels
 of distribution, and marketing and advertising, are controlled by the Company. The Company continues
 to invest in the development of these brands through, among other things, client research, advertising,
 in-store marketing, direct mail marketing, and its internet presence. The Company also makes investments
 to enhance the overall client experience through the opening of new stores, the expansion and remodeling
 of existing stores, and a focus on client service.

The
 Company believes it is strategically important to communicate on a regular basis directly with its current
 client base and with potential clients, through national and regional advertising, as well as through
 direct mail marketing and in-store presentation. Marketing expenditures as a percentage of sales were
 2.5% in Fiscal 2003, 2.2% in Fiscal 2002 and 2.6% in Fiscal 2001.

# Trademarks and Service Marks

The
 AnnTaylor and AnnTaylor Loft trademarks are registered with the United States Patent and Trademark
 Office and with the trademark registries of many foreign countries. The Companys rights in the AnnTaylor
 and AnnTaylor Loft marks are a significant part of the Companys business, as the Company believes
 those trademarks are well known in the womens retail apparel industry. Accordingly, the Company intends
 to maintain its AnnTaylor and AnnTaylor Loft marks and related registrations and vigorously protect
 its trademarks against infringement.

# Competition

The
 womens retail apparel industry is highly competitive. The Companys stores compete with certain departments
 in national or local department stores, and with other specialty store chains, independent retail stores,
 catalog and internet businesses that offer similar categories of merchandise. The Company believes that
 its focused merchandise selection, exclusive fashions, personalized service, wardrobing advice and convenience
 distinguish it from other apparel retailers. Many of the Companys competitors are considerably larger
 and have substantially greater financial, marketing and other resources than the Company and there is
 no assurance that the Company will be able to compete successfully with them in the future.

6

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# Employees

As of
 January 31, 2004, the Company had approximately 13,000 employees, of which 3,100 were full-time salaried
 employees, 1,700 were full-time hourly employees and 8,200 were part-time hourly employees working less
 than 30 hours per week. None of the Companys employees are represented by a labor union. The Company
 believes that its relationship with its employees is good.

# Available Information

The
 Company makes available free of charge on its website, http://investor.anntaylor.com, copies of its
 annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
 to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
 of 1934 as soon as reasonably practicable after filing such material electronically with, or otherwise
 furnishing it to, the United States Securities and Exchange Commission (the SEC). Copies of the charters
 of each of the Companys Audit Committee, Compensation Committee and Nominating and Corporate Governance
 Committee, as well as the Companys Corporate Governance Guidelines and Business Conduct Guidelines,
 are also available on the website or in print upon written request by any shareholder.

# Statement Regarding Forward-Looking Disclosures

Sections
 of this annual report on Form 10-K, including the following Managements Discussion and Analysis of
 Financial Condition and Results of Operations, contain various forward-looking statements, made pursuant
 to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking
 statements may use the words expect, anticipate, plan, intend, project, may, believe and
 similar expressions. These forward-looking statements reflect the Companys current expectations concerning
 future events, and actual results may differ materially from current expectations or historical results.
 Any such forward-looking statements are subject to various risks and uncertainties, including failure
 by the Company to predict accurately client fashion preferences; 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; general economic conditions
 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 the Companys Online Store(s); a significant change in the regulatory environment
 applicable to the Companys business; risks associated with the possible inability of the Company, particularly
 through its sourcing and logistics functions, to operate within production and delivery constraints;
 the impact of quotas, and the elimination thereof; 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; the potential impact of health concerns relating to severe
 infectious diseases, particularly on manufacturing operations of the Companys vendors in Asia and elsewhere;
 acts of war or terrorism in the United States or worldwide; work stoppages, slowdowns or strikes; the
 inability of the Company to hire, retain and train key personnel, and other factors set forth in the
 Companys filings with the SEC. The Company does not assume any obligation to update or revise any forward-looking
 statements at any time for any reason.

7

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# ITEM 2.    Properties

As of
 January 31, 2004, the Company operated 648 stores in 43 states, the District of Columbia and Puerto
 Rico, all of which were leased. Store leases typically provide for initial terms of ten years, although
 some leases have shorter or longer initial periods. Some of the leases grant the Company the right to
 extend the term for one or two additional five-year periods. Some leases also contain early termination
 options, which can be exercised by the Company under specific conditions. Most of the store leases require
 the Company 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 the Company to pay real
 estate taxes, insurance and certain common area and maintenance costs. The current terms of the Companys
 leases, including renewal options, expire as follows:

|Fiscal Years Lease                            Terms Expire | Number ofStores
|---------------------------------------------------------- | ---------------
|
|2004 - 2006                                                |                
|2007 - 2009                                                |                
|2010 - 2012                                                |                
|2013 and later                                             |                
|                                                           |                

Ann
 Taylor leases corporate offices at 142 West 57th Street in New York City, containing approximately 140,000
 square feet and approximately 93,000 square feet of office space at 1372 Broadway in New York City.
 The leases for these premises expire in 2006 and 2010, respectively. The Company also leases office
 space in New Haven, Connecticut, containing approximately 39,000 square feet. This lease expires in
 October 2004.The Company is currently evaluating alternative office locations in the New Haven
 area.

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

The
 Company is a party to routine litigation incidental 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 consolidated financial position,
 consolidated results of operations, or liquidity of the Company.

# ITEM 4.    Submission of Matters to a Vote of Security Holders



8

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# PART II

# ITEM 5.    Market for Registrants Common Equity and Related Stockholder Matters

The
 Companys common stock is listed and traded on the New York Stock Exchange under the symbol ANN. The
 number of holders of record of common stock at February 27, 2004 was 579. The following table sets forth
 the high and low sale prices for the common stock on the New York Stock Exchange for the periods indicated.

In April
 2002, the Companys Board of Directors approved a 3-for-2 split of the Companys common stock, in the
 form of a stock dividend. One additional share of Common stock for every two shares owned was distributed
 on May 20, 2002 to stockholders of record at the close of business on May 2, 2002. All share and per
 share amounts for all periods presented in this report have been restated to reflect the stock split.

|                 |  | Market Price
|---------------- |  | ------------
|
|
|Fiscal Year 2003 |  |             
|Fourth quarter   |  |             
|Third quarter    |  |             
|Second quarter   |  |             
|First quarter    |  |             
|Fiscal Year 2002 |  |             
|Fourth quarter   |  |             
|Third quarter    |  |             
|Second quarter   |  |             
|First quarter    |  |             

The
 Company has never paid cash dividends on its common stock. As a holding company, the Companys ability
 to pay dividends is dependent upon the receipt of dividends or other payments from its subsidiaries,
 including the Companys direct wholly owned subsidiary AnnTaylor, Inc. (Ann Taylor). In addition,
 any determination to pay cash dividends is at the discretion of the Companys Board of Directors. The
 payment of dividends by Ann Taylor to the Company is subject to certain restrictions under Ann Taylors
 Credit Facility. The Company is also subject to certain restrictions contained in the Credit Facility
 on the payment of cash dividends on its common stock. See Managements Discussion and Analysis of Financial
 Condition and Results of Operations  Liquidity and Capital Resources.

# ITEM 6.    Selected Financial Data

The
 following historical consolidated income statement and consolidated balance sheet information has been
 derived from the audited consolidated financial statements of the Company. The Companys consolidated
 statements of income, stockholders equity and cash flows for each of the three fiscal years ended January
 31, 2004, February 1, 2003 and February 2, 2002 and consolidated balance sheets as of January 31, 2004
 and February 1, 2003, as audited by Deloitte & Touche LLP, independent auditors, appear elsewhere
 in this document. The information set forth below should be read in conjunction with Managements Discussion
 and Analysis of Financial Condition and Results of Operations and the consolidated financial statements
 and notes thereto of the Company included elsewhere in this document. All references to years are to
 the fiscal year of the Company, which ends on the Saturday nearest January 31 in the following calendar
 year. All fiscal years for which financial information is set forth below had 52 weeks, except the fiscal
 year ended February 3, 2001 which had 53 weeks.

9

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|                                                    | Fiscal Years Ended
|--------------------------------------------------- | ------------------
|
|
|
|Net sales                                           |                   
|Cost of sales                                       |                   
|                                                    |                   
|Gross margin                                        |                   
|Selling, general and administrative expenses        |                   
|Loss on debt extinguishment (a)                     |                   
|Amortization of goodwill (b)                        |                   
|                                                    |                   
|Operating income                                    |                   
|Interest income                                     |                   
|Interest expense (c)                                |                   
|                                                    |                   
|Income before income taxes                          |                   
|Income tax provision                                |                   
|                                                    |                   
|Net income                                          |                   
|                                                    |                   
|Basic earnings per share (d)                        |                   
|                                                    |                   
|Diluted earnings per share (d)                      |                   
|                                                    |                   
|
|Weighted average shares outstanding (in 000s)(d)    |                   
|                                                    |                   
|Weighted average shares outstanding,                |                   
|assuming dilution (in 000s) (d)                     |                   
|                                                    |                   
|Consolidated Operating Information:                 |                   
|Percentage increase (decrease) in comparable        |                   
|store sales (e)                                     |                   
|Net sales per gross square foot (f)                 |                   
|Number of stores:                                   |                   
|Open at beginning of period                         |                   
|Opened during the period                            |                   
|Expanded during the period                          |                   
|Closed during the period                            |                   
|Open at the end of the period                       |                   
|Total store square footage at end of period (000s) |                   
|Capital expenditures                                |                   
|Depreciation and amortization including             |                   
|goodwill (b)                                        |                   
|Working capital turnover (g)                        |                   
|Inventory turnover (h)                              |                   
|                                                    |                   
|Consolidated Balance Sheet Information:             |                   
|Working capital (i)                                 |                   
|Goodwill, net (b)                                   |                   
|Total assets                                        |                   
|Total debt                                          |                   
|Stockholders equity                                |                   

(Footnotes on following page)

10

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(Footnotes for preceding page)

| | (a) | In Fiscal 1999, Ann Taylor incurred a loss of $1,603,000 ($962,000, or $0.02 per share, net of income tax benefit) in connection with the redemption of its outstanding 83⁄4% Subordinated Notes due 2000.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The Company acquired Ann Taylor in a leveraged buyout in 1989. As a result of that transaction, $380,250,000, representing the excess of the allocated purchase price over the fair value of the Companys net assets, was recorded as goodwill and has been amortized on a straight-line basis through the end of Fiscal 2001 using an assumed 40 year life. In addition, as a result of the September 1996 acquisition of the operations that became the Companys sourcing division, the Company recorded goodwill of $38,430,000 that has been amortized on a straight-line basis through the end of Fiscal 2001 using an assumed 25 year life. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets on February 3, 2002. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwills impairment. The Company tests
goodwill for impairment annually, during February, and determined that the carrying value of its goodwill at January 31, 2004 and February 1, 2003 was not impaired.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Includes non-cash interest expense of $4,320,000, $4,261,000, $4,140,000, $4,247,000, and $3,026,000, in Fiscal 2003, 2002, 2001, 2000, and 1999, respectively, from amortization of deferred financing costs and accretion of original issue discount.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | In May 2002, the Company effected a 3-for-2 stock split of its common stock. All share and per share amounts in the financial information have been restated to reflect the split.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | Comparable store sales are calculated by excluding the net sales of a store for any month of one period if the store was not also open during the same month of the prior period. A store that is expanded by more than 15% is treated as a new store for the first year following the opening of the expanded store. In addition, in a year with 53 weeks, sales in the last week of that year are not included in determining comparable store sales; therefore, comparable store sales for Fiscal 2000 reflect a 52-week period.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) | Net sales per gross square foot is determined by dividing net sales for the period by the average of the gross square feet at the beginning and end of each period. Unless otherwise indicated, references herein to square feet are to gross square feet, rather than net selling space.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g) | Working capital turnover is determined by dividing net sales by the average of the amount of working capital at the beginning and end of the period.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | (h) | 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.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------

| | (i) | Includes current portion of long-term debt of $1,250,000, $1,400,000, and $1,300,000, at the end of Fiscal 2001, 2000, and 1999, respectively. There was no current portion at the end of Fiscal 2003 or Fiscal 2002.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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# ITEM 7.    Management's Discussion and Analysis of Financial Condition and Results of OperationsManagement Overview

The
 Company experienced record sales and earnings in Fiscal 2003, due in large part to client acceptance
 of the Companys product offerings, managed store growth, focused inventory management and control over
 expenses. These factors contributed to a 27.1% increase in operating income and a $0.41 increase in
 diluted earnings per share over Fiscal 2002, and are each key to the Companys continued growth.

Positive
 client acceptance of the Companys product offerings was a primary factor in the strong earnings performance
 experienced in Fiscal 2003. This is evidenced by a 5.3% increase in comparable store sales over last
 year, with both Ann Taylor and Ann Taylor Loft achieving double-digit comparable store sales growth
 in the fourth quarter of Fiscal 2003. The Company plans to continue its focus on strengthening the Ann
 Taylor brand through the further development of its collections and successful product extensions.

In Fiscal
 2003, the Company opened 70 new stores funded by operating cash flow, and is planning to open 80 to
 90 stores next year, also expected to be funded by operating cash flow. The Company believes controlled
 store growth is one factor critical to its success in achieving continued economic growth, and is committed
 to continuing to identify the best properties and negotiating the most favorable lease terms in order
 to achieve this objective.

Disciplined
 inventory and expense management each contributed to the Companys earnings growth in Fiscal 2003, and
 will continue to be a focus in the future. Improved inventory management, which centered on offering
 the right product to clients at the right locations, resulted in an increase in inventory turns from
 3.5 times in Fiscal 2002 to 4.1 times in Fiscal 2003. In addition, while total net sales increased 15.0%
 in Fiscal 2003 over Fiscal 2002, selling, general and administrative expenses as a percentage of net
 sales decreased 0.6% due in part to managements efforts to control costs and monitor spending.

While
 the Companys financial results have grown steadily and record sales performance was achieved during
 the 2003 holiday season, the retail environment remains very competitive. Managements plan for future
 growth builds on the strengths discussed above, and is based on offering clients brand-appropriate merchandise
 at convenient, accessible locations. The Companys ability to achieve this objective will be dependent
 on factors such as those outlined in the Statement Regarding Forward-Looking Disclosures.

The
 Companys reported operating results and financial position include the application of critical accounting
 policies. Management has determined that the Companys most critical accounting policies are those related
 to merchandise inventory valuation, intangible asset impairment and income taxes. These critical policies
 are discussed further below and in the Notes to the Companys Consolidated Financial Statements.

# Results of Operations

The
 following table sets forth consolidated income statement data expressed as a percentage of net sales:

12

---

|                                             | Fiscal Years Ended
|-------------------------------------------- | ------------------
|
|
|Net sales                                    |                   
|Cost of sales                                |                   
|                                             |                   
|Gross margin                                 |                   
|Selling, general and administrative expenses |                   
|Amortization of goodwill                     |                   
|                                             |                   
|Operating income                             |                   
|Interest income                              |                   
|Interest expense                             |                   
|                                             |                   
|Income before income taxes                   |                   
|Income tax provision                         |                   
|                                             |                   
|Net income                                   |                   
|                                             |                   
|                                             |                   

The
 following table sets forth selected consolidated income statement data expressed as a percentage change
 from the prior period:

|                 | Fiscal Years Ended
|---------------- | ------------------
|
|
|
|Net sales        |                   
|Operating income |                   
|Net income       |                   

# Sales

The
 following table sets forth certain sales and store data:

|                                           | Fiscal Years Ended
|------------------------------------------ | ------------------
|
|
|Net sales (in thousands)                   |                   
|Comparable store sales percentage          |                   
|increase(decrease)(a)                      |                   
|Total Company                              |                   
|Ann Taylor                                 |                   
|Ann Taylor Loft                            |                   
|Net sales per average gross square foot(b) |                   
|Total store square footage at              |                   
|end of period (000's) (b)                  |                   
|Number of:                                 |                   
|New stores                                 |                   
|Expanded stores                            |                   
|Closed stores                              |                   
|Total stores open at end of period         |                   

---

|(a) | Comparable store sales are calculated by excluding the net sales of a store for any month of one period if the store was not also open during the same month of the prior period. A store that is expanded by more than 15% is treated as a new store for the first year following the opening of the expanded store.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Net sales per gross square foot is determined by dividing net sales for the period by the average of the gross square feet at the beginning and end of each period. Unless otherwise indicated, references herein to square feet are to gross square feet, rather than net selling space.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---

``

The
 Companys net sales increased $206,742,000, or 15.0% in Fiscal 2003 from Fiscal 2002. The increase in
 net sales is due to the combined effect of an increase in comparable store sales and the opening of
 new stores. Management believes that the increase in comparable store sales was due to client acceptance
 of the merchandise assortment available at both Ann Taylor and Ann Taylor Loft, particularly in the
 fourth quarter.

The
 Companys net sales increased $81,393,000, or 6.3% in Fiscal 2002 from Fiscal 2001. The increase in
 net sales was primarily attributable to the opening of new stores, partially offset by a decrease in
 comparable store sales. Management believes that the decrease in comparable store sales was, in part,
 the result of client dissatisfaction with certain of the Companys product offerings and merchandise
 assortment available in Ann Taylor stores in the fall 2002 season. Fiscal 2002 sales were also impacted
 by an overall reduction in client spending caused by the economic environment.

The
 Companys net sales do not show significant seasonal variation, although net sales in the fourth quarter
 have historically been 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.

# Gross Margin

Gross
 margin as a percentage of sales increased to 54.5% in Fiscal 2003 from 54.1% in Fiscal 2002.

Gross
 margin as a percentage of net sales increased to 54.1% in Fiscal 2002 from 49.8% in Fiscal 2001. The
 increase in gross margin is the combined result of higher full price sales and higher margin rates achieved
 on full price and non-full price sales at both divisions. Fiscal 2001 gross margin was impacted by approximately
 $4,100,000 in pre-tax nonrecurring charges, which related to the inventory write-off associated with
 the discontinuation of the Ann Taylor cosmetics line, and inventory costs associated with canceling
 certain Fall 2001 and Spring 2002 merchandise orders.

# Selling, General and Administrative Expenses

Selling,
 general and administrative expenses as a percentage of net sales decreased 0.6% in Fiscal 2003 from
 Fiscal 2002. The decrease was primarily due to increased leverage on fixed expenses resulting from the
 increase in comparable store sales.

Selling,
 general and administrative expenses as a percentage of net sales decreased 0.1% in Fiscal 2002 from
 Fiscal 2001. Lower internet operating costs and reduced marketing spending were offset by an increase
 in the provision for management performance bonus and higher tenancy expenses. Fiscal 2001 selling,
 general and administrative expenses included approximately $12,900,000 in pre-tax nonrecurring charges.
 Approximately $7,200,000 of this amount related to the write-down of certain anntaylor.com assets, based
 upon projected cash flows, which were not deemed adequate to support the carrying value of the assets
 associated with this ongoing business. An additional $3,300,000 related to the cost, net of insurance
 proceeds, of settling a class action lawsuit. The remaining $2,400,000 represented the write-off of
 certain fixed assets related to the discontinuation of the Ann Taylor cosmetics line, and severance
 costs associated with reductions made in the Companys store and home office workforce.

# Interest Income

Interest
 income was substantially unchanged in Fiscal 2003.

Interest
 income increased $1,889,000 in Fiscal 2002 from Fiscal 2001. The increase was primarily attributable
 to higher cash on hand during Fiscal 2002 compared to Fiscal 2001, partially offset by lower interest
 rates.

14

---

# Interest Expense

There
 has been no significant change in interest expense during the years presented.

The
 weighted average interest rate on the Companys outstanding indebtedness at January 31, 2004, February
 1, 2003 and February 2, 2002 was 3.75%. Interest expense also includes various other charges, the largest
 of which are fees related to the Companys revolving credit facility. See Note 3 to the Consolidated
 Financial Statements for further discussion of the Companys revolving credit facility.

# Income Taxes

The
 effective income tax rate was 40.0%, 39.0% and 46.8% of net income in Fiscal 2003, Fiscal 2002 and Fiscal
 2001, respectively.

The
 increase in the effective income tax rate in Fiscal 2003 from Fiscal 2002 is due to higher state income
 taxes.

The
 decrease in the effective income tax rate in Fiscal 2002 from Fiscal 2001 was the result of non-deductible
 goodwill amortization expense which, as discussed in the Notes to the Companys Consolidated Financial
 Statements, has not been recorded since Fiscal 2001.

# Liquidity and Capital Resources

The
 Companys primary source of working capital is cash flow from operations. The following table sets forth
 material measures of the Companys liquidity:

|                                      | Fiscal Years Ended
|------------------------------------- | ------------------
|
|
|Cash provided by operating activities |                   
|Working capital                       |                   
|Current ratio                         |                   
|Debt to equity ratio                  |                   

As presented
 in the Companys Consolidated Statements of Cash Flows, cash provided by operating activities in each
 of the fiscal years presented primarily resulted from net earnings before non-cash expenses such as
 depreciation and amortization. Cash used for investing activities in each of the fiscal years presented
 includes capital expenditures, offset in Fiscal 2002 by proceeds from the sale of the Companys proprietary
 credit card portfolio. Cash provided by financing activities in each of the fiscal years presented includes
 proceeds from the exercise of stock options and other employee stock based compensation programs.

15

---

On November
 14, 2003, Ann Taylor and certain of its subsidiaries entered into a Second Amended and Restated $175,000,000
 senior secured revolving credit facility (the Credit Facility) with Bank of America N.A. and a syndicate
 of lenders. The Credit Facility which, at the Companys option, provides for an increase in the total
 facility and the aggregate commitments thereunder up to $250,000,000, amended Ann Taylors then existing
 $175,000,000 bank credit agreement scheduled to expire in April 2004. The Credit Facility matures on
 November 13, 2008 and will be used by Ann Taylor and certain of its subsidiaries for letters of credit
 and other general corporate purposes. The Credit Facility contains financial and other covenants regarding
 indebtedness, liens and dividends. There were no borrowings outstanding under the Credit Facility at
 any point during Fiscal 2003 or as of the date of this filing. Commercial and standby letters of credit
 outstanding under the Credit Facility totaled $96,814,000 and $97,114,000 as of January 31, 2004 and
 February 1, 2003, respectively. See Note 3 to the Consolidated Financial Statements for further discussion
 of the Credit Facility.

Merchandise
 inventories decreased $10,926,000, or 6.0% in Fiscal 2003 from Fiscal 2002. The decrease in merchandise
 inventories is primarily due to strong holiday and post-holiday sales, particularly at Ann Taylor Loft,
 offset in part by inventory purchased to support new stores opened since the beginning of Fiscal 2003.
 Merchandise inventory on a per-square-foot basis was approximately $47 at the end of Fiscal 2003 compared
 to $55 at the end of Fiscal 2002. Inventory turned 4.1 times in Fiscal 2003 compared to 3.5 times in
 Fiscal 2002. 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.

The
 following table sets forth the Companys capital expenditures (in thousands):

|                               | Fiscal Years Ended
|------------------------------ | ------------------
|
|New store construction         |                   
|Store renovation/refurbishment |                   
|Information systems            |                   
|Other                          |                   
|                               |                   
|Total                          |                   
|                               |                   

The
 Company expects its total capital expenditure requirements in Fiscal 2004 will be approximately $116,000,000.
 Approximately $50,000,000 will be spent on new store construction, store expansion and relocation, for
 a planned square footage increase of approximately 470,000 square feet, or 12.8%. Another $22,000,000
 is planned for store renovation and refurbishment programs. Approximately $28,000,000 will be spent
 to support continued investments in information systems, and $16,000,000 is planned for corporate office
 and distribution center initiatives and other general corporate purposes. 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. See Business  Stores and Expansion.

In order
 to finance its operations and capital requirements, the Company expects to use internally generated
 funds. The Company believes that cash flow from operations will be sufficient to enable it to meet its
 ongoing cash needs for its business, as presently conducted, for the foreseeable future.

On February
 4, 2002, the Company sold its proprietary credit card portfolio to World Financial Network National
 Bank. The associated gain of $2,095,000 is reported in selling, general and administrative expenses
 in the Consolidated Statement of Income for Fiscal 2002. In connection with the sale, the Company contracted
 with Alliance Data Systems Corporation (ADS) to provide private label credit card services to proprietary
 Ann Taylor credit card clients. ADS pays the Company a percentage of all collected finance charges.

16

---

During
 Fiscal 1999, the Company completed the issuance of an aggregate of $199,072,000 principal amount at
 maturity of its Convertible Subordinated Debentures due 2019 (Convertible Debentures). The Convertible
 Debentures were sold at an original issue price of $552.56 per $1,000 principal amount at maturity of
 Debenture. Cash interest is payable on the principal amount at maturity of the Convertible Debentures
 at the rate of 0.55% per annum. This interest rate and the accrual of original issue discount represent
 a yield to maturity on the Convertible Debentures of 3.75%. The Convertible Debentures are convertible
 at the option of the holders thereof into 18.117 shares of the Companys common stock per $1,000 principal
 amount at maturity of Debenture. The Convertible Debentures may be redeemed at the Companys option
 on or after June 18, 2004. In addition, the Company is obligated to purchase on specified purchase dates,
 beginning June 18, 2004 and each five years thereafter, at specified Put Prices plus accrued cash interest
 to the purchase date, any outstanding Convertible Debentures for which a written notice has been received
 from the holder. The Company is evaluating possible options related to the Convertible Debentures however,
 as of the date of this filing, the Company has no intention to redeem any of the Convertible Debentures.
 The Companys obligations with respect to the Convertible Debentures are guaranteed on a subordinated
 basis by Ann Taylor.

In August
 2002, the Companys Board of Directors authorized a $50,000,000 securities repurchase program, which
 was increased to $75,000,000 (not including the value of shares already repurchased under the original
 program) by the Companys Board of Directors on March 9, 2004. The repurchase program is subject to
 compliance with the Companys Credit Facility. Pursuant to this program, purchases of shares of the
 Companys common stock and/or its Convertible Debentures due 2019 may be made from time to time, subject
 to market conditions and at prevailing market prices, through open market purchases or in privately
 negotiated transactions. Repurchased shares of common stock will become treasury shares available for
 general corporate and other purposes. Repurchased Convertible Debentures will be cancelled. The Company
 repurchased 680,000 shares of its common stock during the first quarter of Fiscal 2003 in connection
 with this securities repurchase program, at a total cost of approximately $12,800,000. No Convertible
 Debentures have been repurchased.

During
 Fiscal 2002 the seven-year mortgage loan related to the Companys distribution center land and building
 in Louisville, Kentucky was paid in full. Ann Taylor and its wholly owned subsidiary, AnnTaylor Distribution
 Services, Inc., were parties to the $7,000,000 seven-year mortgage loan.

Substantially
 all full-time employees of the Company are covered under a noncontributory defined benefit pension plan.
 The Companys funding obligations and liability under the terms of the plan are determined using certain
 actuarial assumptions, including a discount rate and an expected long-term rate of return on plan assets.
 The discount rate selected was determined based on the change in the Moodys Aa corporate bond yields,
 and was adjusted from 6.75% at February 1, 2003 to 6.0% at January 31, 2004. The market-related value
 of plan assets for determining pension expense is equal to the fair value of plan assets. Plan assets
 as of January 31, 2004 are allocated 58% in equities, 23% in bond related funds and 19% in short-term
 investments. To develop the expected long-term rate of return on plan assets, the Company considered
 the historical returns and the future expectations for returns for each asset class, as well as the
 target asset allocation of the pension portfolio. In light of this, and in view of current market conditions,
 the expected long-term rate of return on plan assets was reduced from 8.5% for the fiscal year ended
 January 31, 2004 to 7.25% for the fiscal year ending January 29, 2005. While no contributions to the
 plan have been required, as the fair value of plan assets has been greater than the benefit obligation
 for all periods presented, the Company contributed $4,000,000 and $9,522,000 to the pension plan in
 Fiscal 2003 and Fiscal 2002, respectively. Although not required to make a contribution to the pension
 plan next year, the Company may likewise make a contribution in Fiscal 2004.

In April
 2002, the Companys Board of Directors approved a 3-for-2 stock split of the Companys common stock
 in the form of a stock dividend. One additional share of common stock for every two shares owned was
 distributed on May 20, 2002 to stockholders of record at the close of business on May 2, 2002. See the
 Consolidated Statements of Stockholders Equity for adjusted shares and per share data reflecting the
 issuance of additional shares in connection with the stock split.

17

---

On May
 18, 2000, the Board of Directors of the Company adopted a Stockholder Rights Plan (Rights Plan). Rights
 under the Rights Plan (Rights) were distributed as a dividend at the rate of one Right for each share
 of common stock of the Company held by stockholders of record as of the close of business on May 30,
 2000. As a result of the 3-for-2 split of the Companys common stock on May 20, 2002, each share of
 common stock now represents two-thirds of a Right. Each Right entitles stockholders to buy one unit
 of a share of a new series of preferred stock for $125. Under certain circumstances, if a person or
 group acquires beneficial ownership of 15% or more of the voting power of the Company as represented
 by the Companys common stock, or commences a tender or exchange offer upon consummation of which such
 person or group would beneficially own 15% or more of the voting power of the Company as represented
 by the Companys common stock, holders of the Rights, other than the person or group triggering their
 exercise, will be able to purchase, in exchange for the $125 exercise price, shares of the Companys
 common stock or of any company into which the Company is merged having a value of $250. The Rights will
 expire on May 18, 2010. No Rights were exercised under the Rights Plan in Fiscal 2003.

The
 Company is self-insured for expenses related to its employee point of service medical and dental plans,
 and its workers compensation plan, up to certain thresholds. Claims filed, as well as claims incurred
 but not reported, are accrued based on managements estimates, using information received from plan
 administrators, historical analysis, and other relevant data. Management believes that it has taken
 reasonable steps to ensure that the Company is adequately accrued for costs incurred related to these
 programs at January 31, 2004.

# Off Balance Sheet Arrangements

The
 Company has no off balance sheet arrangements as defined by Regulation 229.303 Item 303 (a) (4).

# Contractual Obligations

The
 following table sets forth the Companys contractual obligations as of January 31, 2004:



|                           | Total | Less Than1 Year | 1-3Years | 4-5Years  | More than5 Years
|-------------------------- | ----- | --------------- | -------- | --------- | ----------------
|Long-term debt (a)         |       |                 | $        | 199,072   |                 
|Operating leases (b)       |       |                 |          | 1,132,629 |                 
|Purchase obligations:      |       |                
|Merchandise (c)            |       |                 |          | 219,776   |                 
|New store construction (d) |       |                 |          | 12,527    |                 
|Information systems (e)    |       |                 |          | 17,143    |                 
|Employment agreements      |       |                 |          | 6,445     |                 
|Other (f)                  |       |                 |          | 20,673    |                 
|                           |       |                 |          |           |                 
|Total                      |       |                 | $        | 1,608,265 |                 
|                           |       |                 |          |           |                 



---

|(a) | Represents the face value of the Companys Convertible Debentures, which includes $73,920,000 of unamortized original issue discount at January 31, 2004.            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Represents future minimum lease payments under non-cancelable operating leases as of January 31, 2004.                                                               
|(c) | Represents open purchase orders with vendors for merchandise not yet received or recorded on the Companys Consolidated Balance Sheet.                               
|(d) | Represents commitments for Fiscal 2004 store construction not recorded on the Companys Consolidated Balance Sheet.                                                  
|(e) | Represents maintenance and license agreements for services to be provided and / or software not yet received or recorded on the Companys Consolidated Balance Sheet.
|(f) | Represents contractual commitments or open purchase orders for goods or services not received or recorded on the Companys Consolidated Balance Sheet.               

18

---

# Recent Accounting Pronouncements

In December
 2003, Financial Accounting Standards Board (the FASB) revised and reissued FASB Interpretation (FIN)
 No. 46, Consolidation of Variable Interest Entities  an Interpretation of Accounting Research Bulletin
 No. 51". FIN No. 46 requires unconsolidated variable interest entities to be consolidated by their primary
 beneficiaries if the entities do not effectively disperse the risks and rewards of ownership among their
 owners and other parties involved. The provisions of FIN No. 46 must be applied no later than as of
 the end of the first reporting period ending after March 15, 2004. Management has determined FIN No.
 46 will have no impact on the Companys consolidated financial statements.

In April
 2003 the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
 Activities. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain
 derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS
 No. 149 is effective for contracts entered into or modified after June 30, 2003. Management has evaluated
 the provisions of SFAS No. 149, and determined that it has had no impact on the Companys consolidated
 financial statements for the periods presented. The Company will evaluate contracts entered into in
 future periods and record them in accordance with the provisions of SFAS No. 149.

In May
 2003 the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
 of both Liabilities and Equity. SFAS No. 150 requires that an issuer classify financial instruments
 that are within its scope as a liability. Many of those instruments were classified as equity under
 previous guidance. Most of the guidance in SFAS No. 150 is effective for certain financial instruments
 entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim
 period beginning after June 15, 2003 for financial instruments included in its scope. The adoption of
 SFAS No. 150 has had no impact on the Companys consolidated financial statements for the periods presented.
 The Company will record financial instruments entered into or modified in future periods in accordance
 with the provisions of SFAS No. 150.

In December
 2003 the FASB revised and reissued SFAS No. 132. This Statement revises disclosures about pension plans
 and other postretirement benefit plans, and is effective for fiscal years ending after December 15,
 2003. The Company has adopted the additional disclosure requirements of this Statement, which are presented
 in the Notes to the Companys Consolidated Financial Statements.

# Critical Accounting Policies

Management
 has determined that the Companys most critical accounting policies are those related to merchandise
 inventory valuation, intangible asset impairment and income taxes. These policies are also discussed
 in the Notes to the Consolidated Financial Statements, and in relevant sections of this discussion and
 analysis.

Merchandise
 inventories are valued at the lower of average cost or market, at the individual item level. Market
 is determined based on the estimated net realizable value, which is generally the merchandise selling
 price. Merchandise inventory levels are monitored to identify slow-moving items and broken assortments
 (items no longer in stock in a sufficient range of sizes) and markdowns are used to clear such merchandise.
 Merchandise inventory value is reduced if the selling price is marked below cost. Physical inventory
 counts are performed annually in January, and estimates are made for any shortages between the previous
 physical inventory count and the balance sheet date.

19

---

The
 Company follows SFAS No. 142, Goodwill and Other Intangible Assets, which requires that amortization
 of goodwill and indefinite life intangible assets be replaced with annual impairment tests. Intangible
 assets with finite lives will continue to be amortized over their useful lives. The Company performs
 impairment testing annually to determine whether an impairment charge related to the carrying value
 of the Companys recorded goodwill is necessary. The most recent impairment tests did not result in
 an impairment charge. In the case of long-lived tangible assets, if the undiscounted future cash flows
 related to the long-lived assets are less than the assets carrying value, a similar impairment charge
 would be considered. Managements estimate of future cash flows is based on historical experience, knowledge,
 and market data. These estimates can be affected by factors such as those outlined in the Statement
 Regarding Forward-Looking Disclosures.

The
 Company follows SFAS No. 109 Accounting for Income Taxes, which requires the use of the liability
 method. Deferred tax assets and liabilities are recognized based on the differences between the financial
 statement carrying value of existing assets and liabilities and their respective tax bases. Inherent
 in the measurement of these deferred balances are certain judgments and interpretations of existing
 tax law and other published guidance as applied to the Companys operations. No valuation allowance
 has been provided for deferred tax assets, since management anticipates that the full amount of these
 assets should be realized in the future. The Companys effective tax rate considers managements judgment
 of expected tax liabilities in the various taxing jurisdictions within which it is subject to tax. The
 Company is involved in both state and local tax audits. At any given time, many tax years are subject
 to audit by various taxing authorities. The recorded amounts of income tax are subject to adjustment
 upon audit, changes in interpretation and changes in judgment utilized in determining estimates. While
 no adjustments to recorded amounts are anticipated, a 1% variance in the Companys effective tax rate
 would affect pre-tax income by approximately $1,700,000 in Fiscal 2003.

# 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, made pursuant
 to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking
 statements may use the words expect, anticipate, plan, intend, project, may, believe and
 similar expressions. These forward-looking statements reflect the Companys current expectations concerning
 future events, and actual results may differ materially from current expectations or historical results.
 Any such forward-looking statements are subject to various risks and uncertainties, including failure
 by the Company to predict accurately client fashion preferences; 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; general economic conditions
 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 the Companys Online Store(s); a significant change in the regulatory environment
 applicable to the Companys business; risks associated with the possible inability of the Company, particularly
 through its sourcing and logistics functions, to operate within production and delivery constraints;
 the impact of quotas, and the elimination thereof; 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; the potential impact of health concerns relating to severe
 infectious diseases, particularly on manufacturing operations of the Companys vendors in Asia and elsewhere;
 acts of war or terrorism in the United States or worldwide; work stoppages, slowdowns or strikes; the
 inability of the Company to hire, retain and train key personnel, and other factors set forth in the
 Companys filings with the SEC. The Company does not assume any obligation to update or revise any forward-looking
 statements at any time for any reason.

20

---

# ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk

The
 Company currently maintains all of its cash and cash equivalents in financial instruments with original
 maturity dates of three months or less. The Companys Credit Facility allows for investments in financial
 instruments with original maturity dates of up to 12 months. Generally, over approximately 60% of these
 financial instruments have a fixed rate of return and are therefore subject to interest rate risk. These
 fixed rate investments 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 31, 2004 bears interest at fixed rates; therefore,
 the Companys consolidated 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 31,
 2004, the Company has no such amounts outstanding. The effect of interest rate changes on the Company
 would depend on the amount of indebtedness outstanding at the time and the amount of such change.

# ITEM 8.    Financial Statements and Supplementary Data

The
 following consolidated financial statements of the Company for the years ended January 31, 2004, February
 1, 2003 and February 2, 2002 are included as a part of this Report (See Item 15):

| | Consolidated Statements of Income for the fiscal years ended January 31, 2004, February 1, 2003   
and February 2, 2002.              
| | --------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Balance Sheets as of January 31, 2004 and February 1, 2003.                                                              
| | Consolidated Statements of Stockholders' Equity for the fiscal years ended January 31, 2004, February
   1, 2003 and February 2, 2002.
| | Consolidated Statements of Cash Flows for the fiscal years ended January 31, 2004, February 1, 2003
   and February 2, 2002.          
| | Notes to Consolidated Financial Statements.                                                                                           

# ITEM 9.    Changes in and Disagreement with Accountants on Accounting and Financial Disclosures

| | None.
| | -----

# ITEM 9A.    Controls and Procedures

Under
 the supervision and with the participation of the Companys management, including the Chief Executive
 Officer and Chief Financial Officer, the Company has conducted an evaluation of the effectiveness of
 the design and operation of its disclosure controls and procedures (as such term is defined in Rules
 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act))
 as of the end of the period covered by this report (the Evaluation Date). There are inherent limitations
 to the effectiveness of any system of disclosure controls and procedures, including the possibility
 of human error and the circumvention or overriding of the controls and procedures. Accordingly, even
 effective disclosure controls and procedures can only provide reasonable assurance of achieving their
 control objectives. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer
 have concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures are
 effective in alerting them on a timely basis to material information relating to the Company (including
 its consolidated subsidiaries) required to be included in the Companys reports filed or submitted under
 the Exchange Act.

There
 was no change in the Companys internal control over financial reporting during the Companys fourth
 fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys
 internal control over financial reporting.

21

---

# PART III

# ITEM 10.    Directors and Executive Officers of the Registrant.

The
 information required by this item is incorporated herein by reference to the Sections entitled Election
 of Class I Directors, Executive Officers, Audit Committee Report and Section 16(a) Beneficial
 Ownership Reporting Compliance in the Companys Proxy Statement for its 2004 Annual Meeting of Stockholders.

The
 Company has Business Conduct Guidelines that apply to all Ann Taylor associates, including its chief
 executive officer, chief financial officer, and principal accounting officer/controller, as well as
 members of the Companys Board of Directors. A copy of the Business Conduct Guidelines is available
 on the Companys Investor Relations website at http://investor.anntaylor.com. Any future changes or
 amendments to the Business Conduct Guidelines, and any waiver that applies to the Companys chief executive
 officer, chief financial officer, or principal accounting officer/controller, will also be posted on
 http://investor.anntaylor.com.

# ITEM 11.     Executive Compensation.

The
 information required by this Item is incorporated herein by reference to the Sections entitled Compensation
 of Directors and Related Matters, Compensation Committee Interlocks and Insider Participation in Compensation
 Decisions and Executive Compensation in the Companys Proxy Statement for its 2004 Annual Meeting
 of Stockholders.

# ITEM 12.     Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder           
        Matters.

The
 information required by this Item is incorporated herein by reference to the Sections entitled Beneficial
 Ownership of Common Stock and Equity Compensation Plan Information in the Companys Proxy Statement
 for its 2004 Annual Meeting of Stockholders.

# ITEM 13.    Certain Relationships and Related Transactions.

The
 information required by this item is incorporated herein by reference to the Section entitled Compensation
 Committee Interlocks and Insider Participation in Compensation Decisions in the Companys Proxy Statement
 for its 2004 Annual Meeting of Stockholders.

# ITEM 14.    Principal Accountant Fees and Services.

The
 information required by this item is incorporated herein by reference to the Section entitled Ratification
 of Engagement of Independent Auditors in the Companys Proxy Statement for its 2004 Annual Meeting
 of Stockholders.

22

---

# PART IV

# ITEM 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

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

|1. |  | The following consolidated financial statements of the Company are filed as part of this Annual Report:
|-- |  | -------------------------------------------------------------------------------------------------------

| | Independent Auditors Report; Consolidated Statements of Income for the fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002; Consolidated Balance Sheets as of January 31, 2004 and February 1, 2003; Consolidated Statements of Stockholders Equity for the fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002; Consolidated Statements of Cash Flows for the fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002; Notes to Consolidated Financial Statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Schedules other than the above have been omitted
because they are either not applicable or the required information has been disclosed in the consolidated financial statements or notes thereto.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | The exhibits filed as a part of this Annual Report are listed in the exhibit index below:
|-- |  | -----------------------------------------------------------------------------------------

(b)       
 Reports on Form 8-K:

The
 Company filed the following reports on Form 8-K during the quarter ended January 31, 2004:

| | Date of Reports   | Item(s) Reported  
| | ----------------- | ------------------
| | November 6, 2003  | Item 7 and Item 9 
| | November 12, 2003 | Item 7 and Item 12
| | November 14, 2003 | Item 5 and Item 7 
| | December 4, 2003  | Item 7 and Item 9 
| | January 8, 2004   | Item 7 and Item 9 



The
 report on Form 8-K dated November 12, 2003 included the Companys Condensed Consolidated Statements
 of Operations for the quarters and 9 months ended November 1, 2003 and November 2, 2002 and Condensed
 Consolidated Balance Sheets at November 1, 2003 and February 1, 2003.

(c)   Exhibit Index.

|Exhibit Number
|--------------
|3.1           
|              
|3.1.1         
|              
|3.2           

23

---

|Exhibit Number
|--------------

| | 4.1     | Indenture, dated as of June 18, 1999,
 between the Company, Ann Taylor, and the Bank of    New York, as Trustee relating
to the Company's Convertible Subordinated Debentures    due 2019. Incorporated
by reference to Exhibit 4.01 to the Registration Statement of the    Company filed
on September 13, 1999 (Registration No. 333-86955).
| | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.2     | Amended and Restated Rights Agreement, dated as
of May 1, 2001, between the   Company and Mellon Investor Services LLC. Incorporated by
reference to Exhibit 1 of   Form 8-A/A No. 1 of the Company filed on May 24, 2001.                                                                                                                    
| | 10.1    | 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 the
Company and Ann Taylor filed on     May 3, 1989 (Registration No. 33-28522).                                                  
| | 10.1.1  | 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 the Company filed on April
11, 1991 (Registration No. 33-39905).                                                                                       
| | 10.1.2  | 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 the Company filed on April 29, 1993.                                                                                                              
| | 10.1.3  | 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 Ann Taylor for the Quarter
ended October 30, 1993 filed on November 26,     1993.                                                                               
| | 10.1.4  | 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 the Company filed on April 28, 1995.                                                                                           
| | 10.1.5  | 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 the Company filed on April 28, 1995.                                                                                                               
| | 10.1.6  | 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 the Company filed on April 30, 1998.                                                                                                   
| | 10.1.7  | 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 the Company
filed on April 30, 1998.                                                                                                    
| | 10.1.8  | 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   the Company filed on April 30, 1998.                                                                                                                       
| | 10.1.9  | 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 the Company filed
on April 30, 1998.                                                                                                    
| | 10.1.10 | 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 the Company filed
on April 30, 1998.                                                                                                     

24

---

|Exhibit Number
|--------------
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              

25

---

|Exhibit Number
|--------------
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              
|              

26

---

|Exhibit Number
|--------------

| | 10.16   | Employment Agreement, dated as of March 7, 2001, between the Company and Barry
     Erdos ("Erdos Agreement"). Incorporated by reference to Exhibit 10.17
      to the Annual Report on Form 10-K of the Company filed on April 5, 2001.          
| | -------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.16.1 | Amendment, dated as of June 1, 2001, to the Erdos Agreement. Incorporated by
     reference to Exhibit 10.17.1 to the Form 10-Q of the Company for the
     Quarter ended May 5, 2001 filed on June 18, 2001.                                     
| | 10.16.2 | Amendment No. 2, dated as of November 25, 2001, to the Erdos Agreement.
   Incorporated by reference to Exhibit 10.19.2 to the Annual Report on Form 10-K of the
    Company filed on April 4, 2002.                                              
| | *10.17  | Separation agreement, dated as of March 9, 2004, between the
Company    and Barry Erdos.                                                                                                                                                          
| | 10.18   | Employment Agreement, dated as of April 24, 2001,
between the Company and Kim Roy      ("Roy Agreement").
Incorporated by reference to Exhibit 10.19 to the Form 10-Q     of the
Company for the Quarter ended May 5, 2001 filed on June 18, 2001.
| | 10.18.1 | Amendment No. 1, dated as of November 25, 2001, to the Roy Agreement.
Incorporated      by reference to Exhibit 10.20.1 to the Annual Report on Form 10-K
of the Company     filed on April 4, 2002.                                              
| | *10.19   | Employment Agreement, dated as of January 29, 2004,
between the Company and    Katherine Lawther Krill.                                                                                                                                           
| | 10.20   | Employment Agreement, dated as of March 28, 2003,
between the Company and      
Jerome Jessup.  Incorporated by reference to Exhibit 10.2 to the Form 10-Q of the
      Company for the Quarter ended May 3, 2003 filed on June 13, 2003.         
| | 21       | Subsidiaries of the Company, incorporated by reference to
Exhibit 21 to the Annual       Report on
Form 10-K of the Company filed on April 1, 2003.                                                                                               
| | *23      | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                 
| | *31.1    | Certification of chief executive officer
pursuant to Section 302 of the Sarbanes-Oxley     Act of 2002.                                                                                                                                           
| | *31.2    | Certification of chief financial officer pursuant to
Section 302 of the Sarbanes-Oxley     Act of 2002.                                                                                                                                           
| | *32.1    | Certification of chief executive officer and chief
financial officer pursuant to Section 906      of the Sarbanes-Oxley Act of 2002.                                                                                                              

*Filed electronically herewith.Management contract or compensatory plan
 or arrangement.

27

---

# 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 STORES CORPORATION        
|-------------------- | ------------------------------------
|                     |                                     
|Date: March 16, 2004 | By:  /s/ J. Patrick Spainhour       
|                     | J. Patrick Spainhour                
|                     | Chairman and Chief Executive Officer



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, Chief Executive      | March 16, 2004
|------------------------ | ------------------------------ | --------------
|J. Patrick Spaihour      | Officer and Director           | Date          
|                         | (Principal Executive Officer)  |               
|                         |                                |               
|                         |                                |               
|                         |                                |               
|/s/ James M. Smith       | Executive Vice President,      | March 16, 2004
|James M. Smith           | Chief Financial Officer        | Date          
|                         | and Treasurer                  |               
|                         | (Principal Financial Officer)  |               
|                         |                                |               
|                         |                                |               
|/s/ Sallie A. DeMarsilis | Senior Vice President, Finance | March 16, 2004
|Sallie A. DeMarsilis     | (Principal Accounting Officer) | Date          
|                         |                                |               
|                         |                                |               
|/s/ James J. Burke, Jr.  | Director                       | March 16, 2004
|James J. Burke, Jr.      |                                | Date          
|                         |                                |               
|                         |                                |               
|/s/ Wesley E. Cantrell   | Director                       | March 16, 2004
|Wesley E. Cantrell       |                                | Date          
|                         |                                |               
|                         |                                |               
|/s/ Robert C. Grayson    | Director                       | March 16, 2004
|Robert C. Grayson        |                                | Date          
|                         |                                |               
|                         |                                |               
|/s/ Ronald W. Hovsepian  | Director                       | March 16, 2004
|Ronald W. Hovsepian      |                                | Date          
|                         |                                |               
|                         |                                |               
|/s/ Rochelle B. Lazarus  | Director                       | March 16, 2004
|Rochelle B. Lazarus      |                                | Date          
|                         |                                |               
|                         |                                |               
|/s/ Michael W. Trapp     | Director                       | March 16, 2004
|Michael W. Trapp         |                                | Date          
|                         |                                |               
|                         |                                |               

28

---

ANNTAYLOR STORES CORPORATIONINDEX TO CONSOLIDATED
 FINANCIAL STATEMENTS



|                                                                                                                                         | Page No.
|---------------------------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                                                         |         
|Independent Auditors' Report                                                                                                             | 30      
|                                                                                                                                         |         
|Consolidated Financial Statements:                                                                                                      
|                                                                                                                                         |         
|Consolidated Statement of Income for the fiscal years ended
      January 31, 2004, February 1, 1003 and February 2, 2002                | 31      
|                                                                                                                                         |         
|Consolidated Balance Sheets as of January 31, 2004 and February 1, 2003                                                                  | 32      
|                                                                                                                                         |         
|Consolidated Statements of Stockholders' Equity for the fiscal years ended
      January 31, 2004, February 1, 2003 and February 2, 2002 | 33      
|                                                                                                                                         |         
|Consolidated Statements of Cash Flows for the fiscal years ended
      January 31, 2004, February 1, 2003 and February 2, 2002           | 34      
|                                                                                                                                         |         
|Notes to Consolidated Financial Statements                                                                                               | 35      

29

---

# INDEPENDENT AUDITORS REPORT

To the Stockholders of       ANNTAYLOR
 STORES CORPORATION:

We have
 audited the accompanying consolidated financial statements of AnnTaylor Stores Corporation 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 31, 2004 and February 1, 2003 and the results
 of their operations and their cash flows for each of the three fiscal years in the period ended January
 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

As discussed
 in Note 1 to the consolidated financial statements, the Company changed its method of accounting for
 goodwill on February 3, 2002 to conform to Statement of Financial Accounting Standards No. 142.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLPNew York, New
 YorkMarch 9, 2004

30

---

ANNTAYLOR STORES CORPORATIONCONSOLIDATED STATEMENTS
 OF INCOME For the Fiscal Years Ended January 31, 2004, February 1, 2003 and February 2, 2002



|                                             | Fiscal Years Ended
|-------------------------------------------- | ------------------
|
|
|
|Net sales                                    |                   
|Cost of sales                                |                   
|                                             |                   
|Gross margin                                 |                   
|Selling, general and administrative expenses |                   
|Amortization of goodwill                     |                   
|                                             |                   
|Operating income                             |                   
|Interest income                              |                   
|Interest expense                             |                   
|                                             |                   
|Income before income taxes                   |                   
|Income tax provision                         |                   
|                                             |                   
|Net income                                   |                   
|                                             |                   
|Basic earnings per share                     |                   
|                                             |                   
|Diluted earnings per share                   |                   
|                                             |                   

See accompanying notes to consolidated financial
 statements.

31

---

# ANNTAYLOR STORES CORPORATIONCONSOLIDATED BALANCE SHEETSJanuary 31, 2004 and February 1, 2003

|                                                     | January 31,2004 | February 1,2003
|---------------------------------------------------- | --------------- | ---------------
|
|ASSETS                                               |                
|
|Current assets                                       |                 |                
|Cash and cash equivalents                            |                 |                
|Accounts receivable                                  |                 |                
|Merchandise inventories                              |                 |                
|Prepaid expenses and other current assets            |                 |                
|                                                     |                 |                
|Total current assets                                 |                 |                
|Property and equipment, net                          |                 |                
|Goodwill, net                                        |                 |                
|Deferred financing costs, net                        |                 |                
|Other assets                                         |                 |                
|                                                     |                 |                
|Total assets                                         |                 |                
|                                                     |                 |                
|LIABILITIES AND STOCKHOLDERS' EQUITY                 |                 |                
|Current liabilities                                  |                 |                
|Accounts payable                                     |                 |                
|Accrued salaries and bonus                           |                 |                
|Accrued tenancy                                      |                 |                
|Gift certificates and merchandise credits redeemable |                 |                
|Accrued expenses                                     |                 |                
|                                                     |                 |                
|Total current liabilities                            |                 |                
|Long-term debt, net                                  |                 |                
|Deferred lease costs and other liabilities           |                 |                
|                                                     |                
|Stockholders' equity                                 |                 |                
|Common stock, $.0068 par value; 120,000,000          |                 |                
|shares authorized; 49,465,620 and 48,932,860         |                 |                
|shares issued, respectively                          |                 |                
|Additional paid-in capital                           |                 |                
|Retained earnings                                    |                 |                
|Deferred compensation on restricted stock            |                 |                
|                                                     |                 |                
|                                                     |                 |                
|Treasury stock, 4,087,620 and 4,050,972 shares       |                 |                
|respectively, at cost                                |                 |                
|                                                     |                 |                
|Total stockholders' equity                           |                 |                
|                                                     |                 |                
|Total liabilities and stockholders' equity           |                 |                
|                                                     |                 |                

See accompanying notes to consolidated financial
 statements.

32

---

# ANNTAYLOR STORES CORPORATIONCONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITYFor the Fiscal Years Ended January 31, 2004, February 1, 2003 and February 2, 2002(in thousands)



|                                  | Common Stock |  |  |        | Treasury
|--------------------------------- | ------------ |  |  | ------ | --------
|
|Balance at February 3, 2001       |              |  |  | 47,751 |         
|Net income                        |              |  |  | --     |         
|Exercise of stock options and     |              | 
|related tax benefit               |              |  |  | 264    |         
|Activity related to common        |              | 
|stock issued as employee          |              | 
|incentives                        |              |  |  | 156    |         
|Issuance of common stock pursuant |              | 
|to Associate Discount Stock       |              | 
|Purchase Plan                     |              |  |  | 105    |         
|                                  |              |  |  |        |         
|Balance at February 2, 2002       |              |  |  | 48,276 |         
|Net income                        |              |  |  | --     |         
|Exercise of stock options and     |              | 
|related tax benefit               |              |  |  | 387    |         
|Activity related to common        |              | 
|stock issued as employee          |              | 
|incentives                        |              |  |  | 142    |         
|Issuance of common stock pursuant |              | 
|to Associate Discount Stock       |              | 
|Purchase Plan                     |              |  |  | 128    |         
|                                  |              |  |  |        |         
|Balance at February 1, 2003       |              |  |  | 48,933 |         
|Net income                        |              |  |  | --     |         
|Exercise of stock options and     |              | 
|related tax benefit               |              |  |  | 434    |         
|Activity related to common        |              | 
|stock issued as employee          |              | 
|incentives                        |              |  |  | (3     | )       
|Repurchase of common stock        |              |  |  | --     |         
|Issuance of common stock pursuant |              | 
|to Associate Discount Stock       |              | 
|Purchase Plan                     |              |  |  | 102    |         
|                                  |              |  |  |        |         
|Balance at January 31, 2004       |              |  |  | 49,466 |         
|                                  |              |  |  |        |         

See accompanying notes to consolidated financial
 statements.33

---

# ANNTAYLOR STORES CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWSFor the Fiscal Years Ended January 31, 2004, February 1, 2003 and February 2, 2002



|                                                   | Fiscal Years Ended
|-------------------------------------------------- | ------------------
|
|
|Operating activities:                              |                   
|Net income                                         |                   
|Adjustments to reconcile net income to net cash    |                   
|provided by operating activities                   |                   
|Amortization of deferred compensation              |                   
|Amortization of goodwill                           |                   
|Deferred income taxes                              |                   
|Depreciation and amortization                      |                   
|Gain on sale of proprietary credit card            |                   
|Loss on disposal and write-down of property        |                   
|and equipment                                      |                   
|Non-cash interest                                  |                   
|Provision for loss on accounts receivable          |                   
|Tax benefit from exercise of stock options         |                   
|Changes in assets and liabilities:                 |                   
|Accounts receivable                                |                   
|Merchandise inventories                            |                   
|Prepaid expenses and other current assets          |                   
|Other non-current assets and liabilities, net      |                   
|Accounts payable and accrued expenses              |                   
|                                                   |                   
|Net cash provided by operating activities          |                   
|                                                   |                   
|Investing activities:                              |                   
|Proceeds from sale of proprietary credit card      |                   
|Purchases of property and equipment                |                   
|                                                   |                   
|Net cash provided (used) by investing activities   |                   
|                                                   |                   
|Financing activities:                              |                   
|Common stock activity related to stock based       |                   
|compensation programs, net                         |                   
|Payment of financing costs                         |                   
|Repurchases of common stock                        |                   
|Payments on mortgage                               |                   
|                                                   |                   
|Net cash provided by financing activities          |                   
|                                                   |                   
|Net increase (decrease) in cash                    |                   
|Cash, beginning of year                            |                   
|                                                   |                   
|Cash, end of year                                  |                   
|                                                   |                   
|Supplemental disclosures of cash flow information: |                   
|Cash paid during the year for interest             |                   
|                                                   |                   
|Cash paid during the year for income taxes         |                   
|                                                   |                   

See accompanying notes to consolidated financial
 statements. 34

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

# 1.    Summary of Significant Accounting Policies

The
 Company is a leading national specialty retailer of better quality womens apparel, shoes and accessories
 sold principally under the Ann Taylor and Ann Taylor Loft brands. Its principal market consists of the
 United States. The Company sells its products through traditional retail stores and over the Internet
 through its Online Store.

Basis of Presentation

The
 consolidated financial statements include the accounts of AnnTaylor Stores Corporation (the Company)
 and its subsidiaries, including AnnTaylor, Inc. (Ann Taylor). The Company has no material assets other
 than the common stock of Ann Taylor and conducts no business other than the management of Ann Taylor.
 All intercompany accounts have been eliminated in consolidation.

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.

Use of Estimates

The
 preparation of financial statements in conformity with accounting principles generally accepted in the
 United States of America 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 reporting period.
 Actual results could differ from these estimates.

Revenue Recognition

The
 Company records revenue as merchandise is sold to clients. 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. Amounts related to shipping and handling billed to clients
 in a sales transaction are classified as revenue and the costs related to shipping product to clients
 (billed and unbilled) are classified as cost of goods sold. Reserves for estimated discounts, returns
 and allowances are provided when sales are recorded.

Cash and Cash Equivalents

Cash
 and short-term highly liquid investments with original maturity dates of 3 months or less are considered
 cash or cash equivalents.

35

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



# 1.    Summary of Significant Accounting Policies (Continued)

Merchandise Inventories

Merchandise
 inventories are valued at the lower of average cost or market, at the individual item level. Merchandise
 inventory value is reduced if the selling price is marked below cost. Physical inventory counts are
 performed annually in January, and estimates are made for any shortages between the previous physical
 inventory count and the balance sheet date.

Cost of Sales

Cost
 of sales is comprised of direct inventory costs for merchandise sold, including all costs to transport
 merchandise from third party suppliers to the Companys distribution center.

Store Pre-Opening Costs

Non-capital
 expenditures, such as advertising and payroll costs incurred prior to the opening of a new store are
 charged to expense in the period they are incurred.

Property and Equipment

Property
 and equipment are recorded at cost. Depreciation and amortization are computed on a straight-line basis
 over the following estimated useful lives:

| | Building                          | 40 years                               
| | --------------------------------- | ---------------------------------------
| | Leasehold improvements            | 3-10 years or term of lease, if shorter
| | Furniture, fixtures and equipment | 2-10 years                             
| | Software                          | 5 years                                

Deferred Rent Obligations

Rent
 expense under non-cancelable operating leases with scheduled rent increases and landlord incentives
 is accounted for on a straight-line basis over the lease term. The amount of the excess of straight-line
 rent expense over scheduled payments is recorded as a deferred liability.

Deferred Financing Costs

Deferred
 financing costs are being amortized using the interest method over the term of the related debt. Accumulated
 amortization at January 31, 2004 and February 1, 2003 was $5,101,000 and $4,458,000 respectively. Amortization
 expense recognized was $820,000, $889,000, and $820,000 in Fiscal 2003, Fiscal 2002, and Fiscal 2001,
 respectively.

36

---

# ANNTAYLOR STORES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 1. Summary of Significant Accounting Policies (Continued)

Finance Service Charge Income

On February
 4, 2002, the Company sold its proprietary credit card portfolio to World Financial Network National
 Bank. The associated gain of $2,095,000 is reported in selling, general and administrative expenses
 in the Consolidated Statements of Income. In connection with the sale, the Company contracted with Alliance
 Data Systems (ADS) to provide private label credit card services to proprietary Ann Taylor credit
 card clients. ADS pays the Company a percentage of all collected finance charges which is recorded as
 a reduction of selling, general and administrative expenses in the Consolidated Statements of Income.

During
 Fiscal 2001 income from finance charges relating to owned customer receivables was $9,354,000 and was
 deducted from selling, general and administrative expenses in the Consolidated Statements of Income.

Goodwill and Other Long-Lived Assets

The
 Company acquired Ann Taylor in a leveraged buyout in 1989. As a result of that transaction, $380,250,000,
 representing the excess of the allocated purchase price over the fair value of the Companys net assets,
 was recorded as goodwill and was amortized on a straight-line basis through the end of Fiscal 2001 using
 an assumed 40 year life. In addition, as a result of the September 1996 acquisition of the operations
 that became the Companys sourcing division, the Company recorded goodwill of $38,430,000 that was amortized
 on a straight-line basis through the end of Fiscal 2001 using an assumed 25 year life. The Company adopted
 Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets
 on February 3, 2002. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic
 tests of the goodwills impairment. The Company performs annual impairment testing which considers the
 Companys fair value to determine whether an impairment charge related to the carrying value of the
 Companys recorded goodwill is necessary. As a result of this testing, the Company concluded that there
 was no such impairment loss at January 31, 2004 or February 1, 2003. This will be reevaluated annually,
 or more frequently if necessary, using similar testing. In the case of long-lived tangible assets, if
 the undiscounted future cash flows related to the long-lived assets are less than the assets carrying
 value, a similar impairment charge would be considered. Managements estimate of future cash flows is
 based on historical experience, knowledge, and market data.

Net
 income and earnings per share for Fiscal 2001, adjusted to exclude the after-tax effect of goodwill
 amortization, are as follows:

|                                    |  |  | (in thousands,except per share amounts)
|----------------------------------- |  |  | ---------------------------------------
|
|Reported net income                 |  |  | $                                      
|Goodwill amortization (net of tax)  |  |  |                                        
|                                    |  | 
|Adjusted net income                 |  |  | $                                      
|                                    |  | 
|Basic earnings per share:           |  | 
|As reported                         |  |  | $                                      
|Goodwill amortization (net of tax)  |  |  |                                        
|                                    |  | 
|Adjusted basic earnings per share   |  |  | $                                      
|                                    |  | 
|Diluted earnings per share:         |  | 
|As reported                         |  |  | $                                      
|Goodwill amortization (net of tax)  |  |  |                                        
|                                    |  | 
|Adjusted diluted earnings per share |  |  | $                                      
|                                    |  | 

37

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 1.    Summary of Significant Accounting Policies (Continued)

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 appears in print. Costs of direct mail catalogs and postcards are expensed when
 the advertising is scheduled to arrive in clients homes. Advertising costs were approximately $39,000,000,
 $30,600,000 and $34,000,000 in Fiscal 2003, 2002 and 2001, respectively.

Stock-based Awards

The
 Company accounts for stock-based awards and employees purchase rights under the Stock Purchase Plan
 using the intrinsic value-based method of accounting in accordance with Accounting Principles Board
 Opinion No. 25, under which no compensation cost is recognized for stock option awards granted at fair
 market value and employees purchase rights under the Associate Discount Stock Purchase Plan (see Note
 6). Had compensation costs of option awards and employees purchase rights been determined under a fair
 value alternative method as stated in SFAS No. 148 Accounting for Stock-Based Compensation  Transition
 and Disclosure, an amendment of FASB Statement No. 123", the Company would have been required to prepare
 a fair value model for such options and employees purchase rights, and record such amount in the consolidated
 financial statements as compensation expense. Pro forma stock based employee compensation costs, net
 income and earnings per share, as they would have been recognized if the fair value method had been
 applied to all awards, are presented in the table below. See Note 6 for the weighted average assumptions
 used in determining the fair value of option grants.

|                                                  | Fiscal Years Ended
|------------------------------------------------- | ------------------
|
|
|Net income:                                       |                   
|As reported                                       |                   
|Deduct: Total stock-based employee compensation   |                   
|expense determined under fair value based         |                   
|method for all awards, net of related tax effects |                   
|                                                  |                   
|Pro forma                                         |                   
|                                                  |                   
|Basic earnings per share:                         |                   
|As reported                                       |                   
|                                                  |                   
|Pro forma                                         |                   
|                                                  |                   
|Diluted earnings per share:                       |                   
|As reported                                       |                   
|                                                  |                   
|Pro forma                                         |                   
|                                                  |                   

Deferred
 Compensation        Restricted stock awards
 result in the recognition of deferred compensation. Deferred compensation is shown as a reduction of
 stockholders equity and is amortized to operating expenses over the vesting period of the stock award.

38

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



# 1.    Summary of Significant Accounting Policies (Continued)

Income Taxes

The
 Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which
 requires the use of the liability method. Deferred tax assets and liabilities are recognized based on
 the differences between the financial statement carrying value of existing assets and liabilities and
 their respective tax bases. No valuation allowance has been provided for deferred tax assets, since
 management anticipates that the full amount of these assets will be realized in the future.

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. The Company
 and its domestic subsidiaries file a consolidated Federal income tax return, while the Companys foreign
 subsidiaries file in their respective local jurisdictions.

Segments

The
 Company has aggregated its Ann Taylor and Ann Taylor Loft brands based on the aggregation criteria outlined
 in SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information, which states
 that two or more operating segments may be aggregated into a single operating segment if aggregation
 is consistent with the objective and basic principles of the Statement, if the segments have similar
 economic characteristics, similar product, similar production process, similar clients, and similar
 methods of distribution.

Ann
 Taylor and Ann Taylor Loft have similar economic characteristics and similar operating, financial and
 competitive risks. Ann Taylor and Ann Taylor Loft are similar in nature of product, as they both offer
 womens apparel, shoes and accessories. The merchandise inventory for both Ann Taylor and Ann Taylor
 Loft is sourced from the same countries and some of the same vendors, using similar production processes.
 Ann Taylor and Ann Taylor Loft clients have similar characteristics, based on independent market research.
 Ann Taylor and Ann Taylor Loft merchandise is distributed to retail stores in a similar manner, through
 the Companys Louisville Distribution Center. In addition, both Ann Taylor and Ann Taylor Loft are distributed
 to stores in a similar manner, through the Companys retail stores located primarily in malls and downtown
 areas.

Comprehensive Income

SFAS
 No. 130, Comprehensive Income, requires the presentation of comprehensive income, in addition to the
 existing income statement. Comprehensive income is defined as the change in equity during a period from
 transactions and other events, excluding changes resulting from investments by owners and distributions
 to owners. For all years presented, there are no material items requiring separate disclosure in accordance
 with this statement.

Reclassification

Certain
 Fiscal 2002 and Fiscal 2001 amounts have been reclassified to conform to the Fiscal 2003 presentation.

39

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 1.   Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

In December
 2003, Financial Accounting Standards Board (the FASB) revised and reissued FASB Interpretation (FIN)
 No. 46, Consolidation of Variable Interest Entities  an Interpretation of Accounting Research Bulletin
 No. 51". FIN No. 46 requires unconsolidated variable interest entities to be consolidated by their primary
 beneficiaries if the entities do not effectively disperse the risks and rewards of ownership among their
 owners and other parties involved. The provisions of FIN No. 46 must be applied no later than as of
 the end of the first reporting period ending after March 15, 2004. Management has determined FIN No.
 46 will have no impact on the Companys consolidated financial statements.

In April
 2003 the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
 Activities. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain
 derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS
 No. 149 is effective for contracts entered into or modified after June 30, 2003. Management has evaluated
 the provisions of SFAS No. 149, and determined that it has had no impact on the Companys consolidated
 financial statements for the periods presented. The Company will evaluate contracts entered into in
 future periods and record them in accordance with the provisions of SFAS No. 149.

In May
 2003 the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
 of both Liabilities and Equity. SFAS No. 150 requires that an issuer classify financial instruments
 that are within its scope as a liability. Many of those instruments were classified as equity under
 previous guidance. Most of the guidance in SFAS No. 150 is effective for certain financial instruments
 entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim
 period beginning after June 15, 2003 for financial instruments included in its scope. The adoption of
 SFAS No. 150 has had no impact on the Companys consolidated financial statements for the periods presented.
 The Company will record financial instruments entered into or modified in future periods in accordance
 with the provisions of SFAS No. 150.

In December
 2003, the FASB revised and reissued SFAS No. 132. This statement revises disclosures about pension plans
 and other postretirement benefit plans and is effective for financial statements for fiscal years ending
 after December 15, 2003. The Company has adopted the additional disclosure requirements of this statement,
 which are presented in Note 8 of the Consolidated Financial Statements.

# 2.    Property and Equipment

Property
 and equipment consists of the following:

|                                               | Fiscal Years Ended
|---------------------------------------------- | ------------------
|
|
|Land and building                              |                   
|Leasehold improvements                         |                   
|Furniture and fixtures                         |                   
|Construction in progress                       |                   
|                                               |                   
|                                               |                   
|Less accumulated depreciation and amortization |                   
|                                               |                   
|Net property and equipment                     |                   
|                                               |                   

40

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 3.   Long-Term Debt

During
 Fiscal 1999, the Company completed the issuance of an aggregate of $199,072,000 principal amount at
 maturity of its Convertible Subordinated Debentures due 2019 (Convertible Debentures). The Convertible
 Debentures were sold at an original issue price of $552.56 per $1,000 principal amount at maturity of
 Debenture. Cash interest is payable on the principal amount at maturity of the Convertible Debentures
 at the rate of 0.55% per annum. This interest rate and the accrual of original issue discount represent
 a yield to maturity on the Convertible Debentures of 3.75%. The Convertible Debentures are convertible
 at the option of the holders thereof into 18.117 shares of the Companys common stock per $1,000 principal
 amount at maturity of Debenture. The Convertible Debentures may be redeemed at the Companys option
 on or after June 18, 2004. In addition, the Company is obligated to purchase on specified purchase dates,
 beginning June 18, 2004 and each five years thereafter, at specified Put Prices plus accrued cash interest
 to the purchase date, any outstanding Convertible Debentures for which a written notice has been received
 from the holder. The Company is evaluating possible options related to the Convertible Debentures however,
 as of the date of this filing, the Company has no intention to redeem any of the Convertible Debentures.

The
 net carrying amount of the Companys Convertible Debentures at January 31, 2004 and February 1, 2003
 was $125,152,000 and $121,652,000, respectively. The estimated fair value of these Convertible Debentures
 at January 31, 2004 and February 1, 2003 was $149,579,000 and $122,810,000, respectively. In accordance
 with the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments, the
 Company determined the estimated fair value of its Convertible Debentures using quoted market information,
 as available. As judgment is involved, the estimates are not necessarily indicative of the amounts the
 Company could realize in a current market exchange. The Companys obligations with respect to the Convertible
 Debentures are unconditionally guaranteed on a subordinated basis by the Companys wholly owned operating
 subsidiary, Ann Taylor.

On November 14, 2003, Ann Taylor and certain of its
 subsidiaries entered into a Second Amended and Restated $175,000,000 senior secured revolving credit
 facility (the Credit Facility) with Bank of America N.A. and a syndicate of lenders. The Credit Facility,
 which, at the Companys option, provides for an increase in the total facility and the aggregate commitments
 thereunder up to $250,000,000, amended Ann Taylors then existing $175,000,000 bank credit agreement
 scheduled to expire in April 2004. The Credit Facility matures on November 13, 2008 and will be used
 by Ann Taylor and certain of its subsidiaries for letters of credit and other general corporate purposes.

Loans
 outstanding under the Credit Facility at any time may not exceed $75,000,000. 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. There were no borrowings
 outstanding under the Credit Facility at any point during Fiscal 2003 or as of the date of this filing.
 Commercial and standby letters of credit outstanding under the Credit Facility totaled $96,814,000 and
 $97,114,000 as of January 31, 2004 and February 1, 2003, respectively.

Amounts
 outstanding under the Credit Facility bear interest at a rate equal to, at Ann Taylors option, the
 Bank of America Base Rate, or Eurodollar Rate, plus a margin of up to 0.25%, and 1.25% to 2.00%, respectively.
 In addition, Ann Taylor is required to pay the lenders a quarterly commitment fee on the unused revolving
 loan commitment amount at a rate ranging from 0.325% to 0.40% per annum. Fees for outstanding commercial
 and standby letters of credit range from 0.50% to 0.75% and from 1.25% to 2.00%, respectively. The Credit
 Facility contains financial and other covenants, including limitations on indebtedness and liens.

The
 Credit Facility permits the payment of cash dividends by the Company (and dividends by certain of its
 subsidiaries to fund such cash dividends) if liquidity (as defined in the Credit Facility) is at least
 $35,000,000. Certain subsidiaries of the Company are also permitted to pay dividends to the Company
 to fund certain taxes owed by the Company; fund ordinary operating expenses of the Company not in excess
 of $500,000 per annum; for repurchases of common stock held by employees not in excess of $100,000 per
 annum; and for certain other stated purposes.

41

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 3.   Long-Term Debt (Continued)

The
 lenders have been granted a pledge of the common stock of Ann Taylor and certain of its subsidiaries,
 and a security interest in substantially all real and personal property (other than leasehold interests)
 and all other assets of Ann Taylor and certain of its subsidiaries, as collateral for Ann Taylors obligations
 under the Credit Facility.

During
 Fiscal 2002, the seven year mortgage loan related to the Companys distribution center land and building
 in Louisville, Kentucky was paid in full. Ann Taylor and its wholly owned subsidiary, AnnTaylor Distribution
 Services, Inc., were parties to the $7,000,000 seven-year mortgage loan.

# 4.   Commitments and Contingencies

Leases

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. Some leases also contain early termination
 options, which can be exercised by the Company under specific conditions. 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.

The
 Company also leases certain office equipment for its corporate offices and store locations under non-cancelable
 operating leases, all of which have 3-year terms.

Future
 minimum lease payments under non-cancelable operating leases as of January 31, 2004 are as follows:

| | Fiscal Year |  | (in thousands)     
| | ----------- |  | -------------------
| |             |  |                    
| |             |  | 2004               
| |             |  | 2005               
| |             |  | 2006               
| |             |  | 2007               
| |             |  | 2008               
| |             |  | 2009 and thereafter
| |             |  |                    
| |             |  | Total              
| |             |  |                    

Rent
 expense for the fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002 was as follows:

| |  | Fiscal Years Ended
| |  | ------------------
|
|
|
| |  |                   
| |  |                   
| |  |                   
| |  |                   
| |  |                   

Other

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 consolidated financial position, consolidated results of operations, or liquidity of the Company.

42

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 5.    Net Income per Share

Basic
 earnings per share is calculated by dividing net income by the weighted average number of common shares
 outstanding during the period. Diluted earnings per share assumes the issuance of additional shares
 of common stock by the Company upon exercise of all outstanding stock options, conversion of all outstanding
 convertible securities and vesting of unvested restricted stock, if the effect is dilutive.

In April
 2002, the Companys Board of Directors approved a 3-for-2 split of the Companys common stock, in the
 form of a stock dividend. One additional share of common stock for every two shares owned was distributed
 on May 20, 2002 to stockholders of record at the close of business on May 2, 2002. Shares outstanding,
 as well as basic and diluted earnings per share (restated for the effect of the stock split) follow:

|                             | Fiscal Years Ended
|---------------------------- | ------------------
|
|
|
|
|Basic Earnings per Share     |                   
|Income available             |                   
|to common stockholders       |                   
|                             |                   
|Effect of DilutiveSecurities |                   
|Stock options and            |                   
|restricted stock             |                   
|Convertible Debentures       |                   
|Diluted Earnings per Share   |                   
|Income available             |                   
|to common stockholders       |                   

Options
 to purchase 266,250, 1,088,874 and 3,113,160 shares of common stock were excluded from the above computations
 of weighted average shares for diluted earnings per share for Fiscal 2003, 2002 and 2001, respectively.
 This was due to the antidilutive effect of the options exercise prices as compared to the average market
 price of the common shares during those periods. Additionally, conversion of the Convertible Debentures
 into common stock is excluded from the computation of diluted earnings per share for Fiscal 2001, due
 to the antidilutive effect of the conversion for that period.

# 6.   Other Equity and Stock Incentive Plans

Preferred Stock

At January
 31, 2004, February 1, 2003 and February 2, 2002, there were 2,000,000 shares of preferred stock, par
 value $0.01, authorized and unissued.

43

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 6.   Other Equity and Stock Incentive Plans (Continued)

Repurchase Program

In August
 2002, the Companys Board of Directors authorized a $50,000,000 securities repurchase program, which
 was increased to $75,000,000 (not including the value of shares already repurchased under the original
 program) by the Companys Board of Directors on March 9, 2004. The repurchase program is subject to
 compliance with the Companys Credit Facility. Pursuant to this program, purchases of shares of the
 Companys common stock and/or its Convertible Debentures due 2019 may be made from time to time, subject
 to market conditions and at prevailing market prices, through open market purchases or in privately
 negotiated transactions. Repurchased shares of common stock will become treasury shares and available
 for general corporate and other purposes. Repurchased Convertible Debentures will be cancelled. The
 Company repurchased 680,000 shares of its common stock during the first quarter of Fiscal 2003 in connection
 with this securities repurchase program, at a total cost of approximately $12,800,000. No Convertible
 Debentures have been repurchased.

Associate Discount Stock Purchase Plan

In Fiscal
 1999, the Company established an Associate Discount Stock Purchase Plan (the Stock Purchase Plan).
 In Fiscal 2002, an additional 600,000 shares of the Companys common stock were reserved for issuance
 under the Stock Purchase Plan. Under the terms of the Stock Purchase Plan, which was revised during
 Fiscal 2003, eligible employees may purchase shares of the Companys common stock quarterly, at a price
 equal to the lower of 85% of the closing price of the Companys common stock on the grant date or the
 purchase date of each quarterly stock purchase period. Participating employees pay for their stock purchases
 under the Stock Purchase Plan by authorizing limited payroll deductions of up to a maximum of 15% of
 their compensation. During Fiscal 2003, Fiscal 2002 and Fiscal 2001, 102,131, 128,248, and 105,032 shares
 respectively were issued pursuant to the Stock Purchase Plan, at an average price per share of $18.20,
 $18.40 and $16.33, respectively. At January 31, 2004, there were 477,683 shares available for future
 issuance under the Stock Purchase Plan.

Stock Incentive Plans

The
 Company has established four stock incentive plans, which are summarized below:



|        |  |           | Shares Reserved |                                                         | 
|------- |  | --------- | --------------- | ------------------------------------------------------- | 
|
|1992(b) |  | 1992 Plan |                 | Stock option and restricted   stock and unit award plan | 
|       
|2000    |  | 2000 Plan |                 | Stock option and restricted   stock and unit award plan | 
|       
|2001    |  | 2002 Plan |                 | Stock option and restricted   stock and unit award plan | 
|       
|2003    |  | 2003 Plan |                 | Stock option and restricted   stock and unit award plan | 

---

|(a) | The Company may issue restricted stock grants up to the levels presented under each plan, however sharesnot used for this purpose are available for issuance as stock option grants, except for 100,000 sharesunder the 1992 Plan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Amended in 1994 to include restricted stock and unit awards.                                                                                                                                                                      

44

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 6.   Other Equity and Stock Incentive Plans (Continued)

Stock Incentive Plans (Continued)

Each
 of the Plans described above also includes an acceleration clause by which all options not exercisable
 by their terms will, upon the occurrence of certain events, become exercisable. Under the terms of all
 Plans, the exercise price of any option may not be less than 100% of the fair market value of the common
 stock on the date of grant.

Stock
 options granted prior to 1994 generally vest over a five year period, with 20% becoming exercisable
 immediately upon grant of the option and 20% per year for the next four years. Stock options granted
 since 1994 generally vest either (i) over a four year period, with 25% becoming exercisable on each
 of the first four anniversaries of the grant, or (ii) in seven or nine years with accelerated vesting
 upon the achievement of specified earnings or stock price targets within a five-year period. In general,
 stock options granted under all of the plans expire ten years from the date of grant.

The
 following table summarizes stock option transactions for the fiscal years ended January 31, 2004, February
 1, 2003 and February 2, 2002:

|                                        | Option Prices | Weighted Average Price | Number of Shares
|--------------------------------------- | ------------- | ---------------------- | ----------------
|Options outstanding at February 3, 2001 |               |                        | $  7.67 - $31.79
|Granted                                 |               |                        | $16.69 - $25.30 
|Exercised                               |               |                        | $  9.46 - $23.59
|Canceled                                |               |                        | $10.33 - $30.00 
|                                       
|                                        |               |                        |                 
|Options outstanding at February 2, 2002 |               |                        | $  7.67 - $31.79
|Granted                                 |               |                        | $22.85 - $30.59 
|Exercised                               |               |                        | $  7.67 - $29.50
|Canceled                                |               |                        | $14.00 - $29.50 
|                                        |               |                        |                 
|                                       
|Options outstanding at February 1, 2003 |               |                        | $  7.67 - $31.79
|Granted                                 |               |                        | $19.06 - $39.74 
|Exercised                               |               |                        | $10.33 - $31.79 
|Canceled                                |               |                        | $15.54 - $29.50 
|                                        |               |                        |                 
|                                       
|Options outstanding at January 31, 2004 |               |                        | $  9.67 - $39.74
|                                        |               |                        |                 

Options
 for 1,900,269, 1,792,177 and 1,094,978 shares were exercisable as of January 31, 2004, February 1, 2003
 and February 2, 2002, respectively, and had a weighted average exercise price of $23.40, $23.03 and
 $17.97 per share, respectively.

The
 following table summarizes information concerning options outstanding and exercisable at January 31,
 2004:

|                 | Options Outstanding | Options Exercisable
|---------------- | ------------------- | -------------------
|
|$  8.54 - $12.80 |                     |                    
|$12.80 - $17.07  |                     |                    
|$17.07 - $21.34  |                     |                    
|$21.34 - $25.61  |                     |                    
|$25.61 - $29.88  |                     |                    
|$29.88 - $34.14  |                     |                    
|$34.14 - $38.41  |                     |                    
|$38.41 - $42.68  |                     |                    
|                 |                     |                    
|$ 8.54 - $42.68  |                     |                    
|                 |                     |                    

45

---

# ANNTAYLOR STORES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 6.    Other Equity and Stock Incentive Plans (Continued)

Stock Incentive Plans (Continued)

The
 weighted average fair values of options at their grant date during Fiscal 2003, 2002 and 2001, where
 the exercise price equaled the market price on the date of grant, were $9.07, $15.95 and $12.92, respectively.
 The estimated fair value of each option grant is calculated using the Black-Scholes option-pricing model,
 with the following weighted average assumptions:

|                        | Fiscal Years Ended
|----------------------- | ------------------
|
|Expected volatility     |                   
|Risk-free interest rate |                   
|Expected life (years)   |                   
|Dividend yield          |                   

All
 the plans allow for restricted stock awards, and the 1992 Plan, 2002 Plan, and 2003 Plan also include
 restricted unit awards. A unit represents the right to receive the cash value of a share of common stock
 on the date the restrictions on the unit lapse. The restrictions on restricted stock or restricted unit
 grants generally lapse over a four-year period from the date of the grant. In the event a grantee terminates
 employment with the Company, any restricted stock or restricted units remaining subject to restrictions
 are forfeited. During Fiscal 2003, 2002 and 2001 certain executives were awarded restricted common stock.
 The resulting unearned compensation expense, based upon the market value on the date of grants, was
 charged to stockholders equity and is being amortized over the restricted period.

The
 following table summarizes restricted stock activity and its impact on net income for the years ended
 January 31, 2004, February 1, 2003 and February 2, 2002.

|                                         | Fiscal Years Ended
|---------------------------------------- | ------------------
|
|
|Shares outstanding - beginning of period |                   
|Shares granted                           |                   
|Shares vested                            |                   
|Shares forfeited                         |                   
|                                         |                   
|Shares outstanding - end of period       |                   
|                                         |                   
|Compensation expense                     |                   
|                                         |                   

Stockholder Rights Plan

On May
 18, 2000, the Board of Directors of the Company adopted a Stockholder Rights Plan (Rights Plan). Rights
 under the Rights Plan (Rights) were distributed as a dividend at the rate of one Right for each share
 of common stock of the Company held by stockholders of record as of the close of business on May 30,
 2000. As a result of the 3-for-2 split of the Companys common stock on May 20, 2002, each share of
 common stock now represents two-thirds of a Right. Each Right entitles stockholders to buy one unit
 of a share of a new series of preferred stock for $125. Under certain circumstances, if a person or
 group acquires beneficial ownership of 15% or more of the voting power of the Company as represented
 by the Companys common stock, or commences a tender or exchange offer upon consummation of which such
 person or group would beneficially own 15% or more of the voting power of the Company as represented
 by the Companys common stock, holders of the Rights, other than the person or group triggering their
 exercise, will be able to purchase, in exchange for the $125 exercise price, shares of the Companys
 common stock or of any company into which the Company is merged having a value of $250. The Rights will
 expire on May 18, 2010. No Rights were exercised under the Rights Plan in Fiscal 2003.

46

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# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 7.   Income Taxes

The
 provision for income taxes for the fiscal years ended January 31, 2004, February 1, 2003 and February
 2, 2002 consists of the following:

|                      | Fiscal Years Ended
|--------------------- | ------------------
|
|
|Federal:              |                   
|Current               |                   
|Deferred              |                   
|                      |                   
|Total federal         |                   
|                      |                   
|State and local:      |                   
|Current               |                   
|Deferred              |                   
|                      |                   
|Total state and local |                   
|                      |                   
|Foreign:              |                   
|Current               |                   
|Deferred              |                   
|                      |                   
|Total foreign         |                   
|                      |                   
|Total                 |                   
|                      |                   

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 31, 2004, February 1, 2003 and February 2, 2002
 is as follows:

|                                                     | Fiscal Years Ended
|---------------------------------------------------- | ------------------
|
|
|
|Income before income taxes                           |                   
|Federal statutory rate                               |                   
|                                                     |                   
|Provision for income taxes at federal statutory rate |                   
|State and local income taxes, net of federal         |                   
|income tax benefit                                   |                   
|Non-deductible amortization of goodwill              |                   
|Earnings of foreign subsidiaries                     |                   
|Other                                                |                   
|                                                     |                   
|Provision for income taxes                           |                   
|                                                     |                   

The
 tax effects of significant items comprising the Companys deferred tax assets as of January 31, 2004
 and February 1, 2003 are as follows:

|                              | January 31, 2004 | February 1, 2003
|----------------------------- | ---------------- | ----------------
|
|Current:                      |                  |                 
|Inventory                     |                  |                 
|Accrued expenses              |                  |                 
|Real estate                   |                  |                 
|                              |                  |                 
|Total current                 |                  |                 
|                              |                  |                 
|Non-current:                  |                  |                 
|Accrued expenses              |                  |                 
|Depreciation and amortization |                  |                 
|Rent expense                  |                  |                 
|Other                         |                  |                 
|                              |                  |                 
|Total non-current             |                  |                 
|                              |                  |                 

47

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# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 7.   Income Taxes (Continued)

Income
 taxes provided reflect the current and deferred tax consequences of events that have been recognized
 in the Companys consolidated 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
 31, 2004 amounted to approximately $6,804,000. However, if these earnings were not considered permanently
 reinvested, under current law, the incremental tax on such undistributed earnings would be approximately
 $2,162,000.

# 8.   Retirement Plans

Savings Plan

The
 Company maintains a defined contribution 401(k) savings plan for substantially all full-time employees
 of Ann Taylor 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 2003, Fiscal 2002 and Fiscal 2001 were $1,387,000, $972,000 and $950,000, respectively.

Pension Plan

Substantially
 all full-time associates of the Company who complete 1,000 hours of service are covered under a noncontributory
 defined benefit pension plan. The plan calculates benefits based on a career average formula.

The
 following table provides information for the pension plan at January 31, 2004, and February 1, 2003:

|                                               | Fiscal Years Ended
|---------------------------------------------- | ------------------
|
|
|Change in benefit obligation:                  |                   
|Benefit obligation at beginning of year        |                   
|Service cost                                   |                   
|Interest cost                                  |                   
|Actuarial loss                                 |                   
|Benefits paid                                  |                   
|                                               |                   
|Benefit obligation at end of year              |                   
|                                               |                   
|Change in plan assets:                         |                   
|Fair value of plan assets at beginning of year |                   
|Actual return on plan assets                   |                   
|Employer contribution                          |                   
|Benefits paid                                  |                   
|                                               |                   
|Fair value of plan assets at end of year       |                   
|                                               |                   
|Funded status (fair value of plan assets less  |                   
|benefit obligation)                            |                   
|Unrecognized net actuarial loss                |                   
|Unrecognized prior service cost                |                   
|                                               |                   
|Net amount recognized                          |                   
|                                               |                   

48

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# ANNTAYLOR STORES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 8.   Retirement Plans (Continued)

Pension Plan (Continued)

Pension benefits recognized in the statement of financial
 position consist of:

|                                       | Fiscal Years Ended
|-------------------------------------- | ------------------
|
|
|Prepaid benefit cost                   |                   
|Accrued benefit cost                   |                   
|Intangible assets                      |                   
|Accumulated other comprehensive income |                   
|                                       |                   
|Net amount included in total assets    |                   
|                                       |                   

The
 accumulated benefit obligation for all defined benefit pension plans was $21,037,000, $12,910,000 and
 $9,023,000 at January 31, 2004 and February 1, 2003 and February 2, 2002 respectively.

The
 following table summarizes the components of Net Periodic Pension Cost:

|                                   | Fiscal Years Ended
|---------------------------------- | ------------------
|
|
|Service cost                       |                   
|Interest cost                      |                   
|Expected return on plan assets     |                   
|Amortization of prior service cost |                   
|Amortization of net loss           |                   
|                                   |                   
|Net periodic pension cost          |                   
|                                   |                   

For the fiscal years ended January 31, 2004, and February
 1, 2003 the following weighted-average assumptions were used to determine benefit obligations at the
 end of the fiscal years:

|                                        | Fiscal Years Ended
|--------------------------------------- | ------------------
|
|Discount rate                           |                   
|Rate of increase in future compensation |                   

For
 the fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002 the following weighted-average
 assumptions were used to determine net periodic benefit cost for the fiscal years shown:

|                                        | Fiscal Years Ended
|--------------------------------------- | ------------------
|
|Discount rate                           |                   
|Long-term rate of return on assets      |                   
|Rate of increase in future compensation |                   

49

---

# ANNTAYLOR STORES CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 8.   Retirement Plans (Continued)

Pension Plan (Continued)

To develop the expected long-term rate of return on
 plan assets, the Company considered the historical returns and the future expectations for returns for
 each asset class, as well as the target asset allocation of the pension portfolio. In light of this,
 and in view of current market conditions, the expected long-term rate of return on plan assets was reduced
 from 8.5% for the fiscal year ended January 31, 2004 to 7.25% for the fiscal year ending January 29,
 2005.

The Companys pension plan weighted-average asset allocation
 at the end of the fiscal year, by asset category, are as follows:

|                  | Fiscal Years Ended
|----------------- | ------------------
|
|Asset Category    |                   
|Equity securities |                   
|Debt securities   |                   
|Other             |                   
|                  |                   
|Total             |                   
|                  |                   

The Companys investment policy specifies a minimum
 investment of 50% but not more than 70% in equity securities, up to 30% but not more than 50% in debt
 securities, and up to 20% in other short-term investments. The Company reviews the returns on pension
 plan investments on a periodic basis in order to consider appropriate changes in the mix of assets in
 light of current market conditions. Equity securities do not include any of the Companys common stock.

While no contributions to the plan have been required,
 as the fair value of plan assets has been greater than the benefit obligation for all periods presented,
 the Company contributed $4,000,000 and $9,522,000 to the pension plan in Fiscal 2003 and Fiscal 2002,
 respectively. Although not required to make a contribution to the pension plan next year, the Company
 may likewise make a contribution in Fiscal 2004.

# 9.   Quarterly Financial Data  Unaudited

|                           | Quarter
|-------------------------- | -------
|
|
|Fiscal 2003                |        
|Net sales                  |        
|Gross margin               |        
|Net income                 |        
|                           |        
|Basic earnings per share   |        
|Diluted earnings per share |        

50

---

# ANNTAYLOR STORES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

# 9. Quarterly Financial Data  Unaudited (Continued)

|                           | Quarter
|-------------------------- | -------
|
|
|Fiscal 2002                |        
|Net sales                  |        
|Gross margin               |        
|Net income                 |        
|                           |        
|Basic earnings per share   |        
|Diluted earnings per share |        

In the
 fourth quarter of Fiscal 2002, the Company incurred a pre-tax nonrecurring charge related to the severance
 costs associated with a former executives employment agreement with the Company. In addition, the Company
 changed its vacation vesting policy for corporate associates in January 2003, which resulted in pre-tax
 savings. The combined effect of these items on fourth quarter pre-tax income resulted in a savings of
 $1,700,000.

The
 sum of the quarterly per share data may not equal the annual amounts due to changes in the weighted
 average shares and share equivalents outstanding.

51