Corporate governance is a joint responsibility requiring the involvement of and interaction between the Board of Directors and the senior management of the company.

Toys"R"Us, Inc. is fortunate to have a talented Board of Directors committed to the success of the company. For example, during fiscal year 2002, 11 Board meetings and 34 additional Board committee meetings were held. At several of the Board meetings, the Board met in executive session, outside the presence of senior management, to further discuss and examine issues of importance to the company.

After many months of careful research, investigation and thought, the Board adopted Corporate Governance Guidelines of the company in March 2002 to reflect the Board's commitment to monitor the effectiveness of policy and decision-making, both at the Board and management level, and to enhance stockholder value over the long term. Those Guidelines covered such issues as conflicts of interest, the compensation of the company's Chief Executive Officer and other Board members, the process and criteria for selecting Board members and the requirements that the Audit, Compensation and former Corporate Governance Committees be comprised solely of independent Board members and that independent Board members constitute a substantial majority of the Board.

In the past year, the Board has adopted Amended and Restated Corporate Governance Guidelines of the company that further address those issues and cover such issues as director orientation and continuing education and the Board's retention of independent advisors, as well as the requirement that the new Corporate Governance and Nominating Committee be comprised solely of independent Board members. The current Guidelines and committee charters are published in the company's proxy materials filed with the SEC in 2003.

The Toys"R"Us Board of Directors is fully engaged in and focused on the strategic issues facing our business. Each year, the Board devotes one meeting to develop, discuss and refine the company's long-range operating plan and overall corporate strategy. Following the Board's annual strategic meeting, the Board reviews the progress of one or more strategic initiatives at each scheduled meeting. Through the established procedures, the Board, consistent with good corporate governance, encourages the long-term success of the company by exercising sound and independent business judgment on the strategic issues that are important to the company's business.

There is growing concern in the global community about working conditions in many nations, including the United States, which may fall below the basic standards of fair and humane treatment. In an effort to source products in a manner that is both socially responsible and profitable, Toys"R"Us, Inc. developed its Code of Conduct for Suppliers program in 1997.

Implementation of the Code and the use of SA8000®, an independent monitoring and factory certification program, enable the company and its business partners to continually improve their performance in relation to workers' rights, labor standards and other human rights issues integral to the manufacturing process.

Developed by Social Accountability International (SAI) in 1998 and currently in use by businesses and governments around the world, SA8000® assessments are widely recognized by trade unions and non-governmental organizations as a powerful tool for creating environments where both workers and management benefit. Facilities in more than 20 nations and 15 industries have been SA8000® certified.

Participation in the Toys"R"Us Code of Conduct program and compliance with all of its provisions is mandatory for all suppliers who sell products, for the purpose of resale, to any Toys"R"Us, Inc. division. The company will terminate its business relationship with any supplier that elects not to participate in the Code of Conduct program or fails to abide by any of its stated provisions.

The Toys"R"Us Code of Conduct includes provisions covering the following issues: Child Labor, Forced Labor, Worker Environment, Working Conditions, Discrimination, Wages & Hours, and Freedom of Association.

Suppliers must post copies of the Toys"R"Us Code of Conduct for all workers to view. The company also encourages suppliers to implement their own Code of Conduct that meets or exceeds the provisions of the Toys"R"Us, Inc. program.

Inquiries about the Toys"R"Us Code of Conduct can be directed to: Vice President of Product Development, Safety Assurance & Imports, Toys"R"Us, Inc., 461 From Road, Paramus, NJ 07652.