TOYS R US INC, DEF 14A, 1998-04-24

TOYS R US INC
DEF 14A, 1998-04-24
HOBBY, TOY & GAME SHOPS

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )

Check the appropriate box:

( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

TOYS "R" US
(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

(X) No fee required

( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

( ) Fee paid previously with preliminary materials.

( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule, or Registration Statement No.:

3) Filing Party:

4) Date Filed:

<PAGE>

[TOYS "R" US LOGO APPEARS HERE]
461 FROM ROAD
PARAMUS, NJ 07652

[GEOFFREY LOGO APPEARS HERE]

ROBERT C. NAKASONE
CHIEF EXECUTIVE OFFICER
April 24, 1998

Dear Stockholder:

I am pleased to invite you to our Company's 1998 Annual Meeting of
Stockholders on Wednesday, June 3, 1998, beginning at 10:00 a.m. The meeting
will be held at our Toys "R" Us Distribution Center, 703 Bartley-Chester Road,
Flanders, NJ 07836.

Immediately following the Annual Meeting, you are invited to tour our
state-of-the-art distribution center. This center, which services 81 stores,
covers 773,000 square feet, is 53 feet high at its peak, and has 80,000 pallet
locations. In addition, it is equipped with 5 miles of fully automated material
handling equipment. During our busy season, this center can process 8,500
cartons per hour (or 170,000 cartons per day). For those of you intending to
take the distribution center tour, please wear comfortable shoes, and women
should wear slacks.

Directions to the Annual Meeting are included on the reverse side of this
letter and can be easily detached from the proxy along the perforated line.
Please bring this letter with you to the meeting as it will serve as your
admittance pass to the meeting. Additionally, in order to better accommodate
you, we ask that you contact us at 1-800-236-0397 to advise us that you plan on
attending the 1998 meeting.

Sincerely,

/s/ Robert C. Nakasone

<PAGE>

Directions to Toys "R" Us Distribution Center in Flanders, New Jersey
(approximately fifty miles from the George Washington Bridge)

From Newark Airport and Route 78 Westbound:

Route 78 West to Exit 29 (Route 287 North). Route 287 North to Exit 22B
(Routes 202/
206 North). Stay on Route 202/206 North and bear left (to Route 206
North) when road splits. Continue on Route 206 North for approximately
14 miles to the intersection of Route 206 North and Bartley-Chester
Road (traffic light at intersection). Make a left at the light on to
Bartley-Chester Road. Take first left to the Toys "R" Us driveway.
Proceed to gate.

From Points South and Route 287 Northbound:

Take Route 95 (NJ Turnpike) to Exit 10. Follow signs to Route 287 North
to Exit 22B (Routes 202/206 North). Follow directions "From Newark
Airport and Route 78 Westbound" once on Route 202/206 North.

From New York City, Long Island, Connecticut, New England (via George
Washington Bridge) and Route 80 Westbound:

Take Route 95 South as you enter New Jersey. Follow signs to Route 80
West (use the Express Lanes) and once on Route 80 West, take Exit 27A
(Route 206 South). Stay on Route 206 South for approximately 5 miles to
intersection of 206 South and Bartley-Chester Road (traffic light at
intersection). Make a right at the light on to Bartley-Chester Road.
Take first left to the Toys "R" Us driveway. Proceed to the gate.

From Points North (including NY State) and Route 287 Southbound:

Take Route 87 to Route 287 South. Follow signs to Route 80 West. Follow
directions "From New York City, Long Island, Connecticut, New England
(via George Washington Bridge)" once on Route 80 West.

From Northern Pennsylvania and Route 80 Eastbound:

Take Route 80 East to Exit 27 (Route 206 South). Follow directions
"From New York City, Long Island, Connecticut, New England (via George
Washington Bridge)" once on Route 206 South.

Toys "R" Us Distribution Center
703 Bartley-Chester Road
Flanders, New Jersey 07836
Phone: 973-252-1488, Ext. 4890

PLEASE PRESENT FOR ADMITTANCE INTO THE MEETING
<PAGE>

[TOYS "R" US LOGO APPEARS HERE]

461 FROM ROAD
PARAMUS, NEW JERSEY 07652

--------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
June 3, 1998
--------------------------------------------------------
TO THE STOCKHOLDERS OF
TOYS "R" US, INC.

The Annual Meeting of Stockholders of Toys "R" Us, Inc. will be held at
the Toys "R" Us Distribution Center, 703 Bartley-Chester Road, Flanders, N.J.
07836, on Wednesday, June 3, 1998 at 10:00 A.M., for the following purposes:

1. to elect directors; and

2. to consider and transact such other business as may properly be brought
before the meeting or any adjournment or adjournments thereof.

Only stockholders of record at the close of business on April 13, 1998
will be entitled to vote at the meeting.

ANDRE WEISS
Secretary

April 24, 1998

PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

<PAGE>

-----------------
PROXY STATEMENT
-----------------
TOYS "R" US, INC.
461 From Road
Paramus, New Jersey 07652

Annual Meeting of Stockholders
June 3, 1998

SOLICITATION OF PROXIES

The accompanying proxy is solicited by the Board of Directors of Toys "R"
Us, Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting
of Stockholders to be held at the Company's Distribution Center, 703
Bartley-Chester Road, Flanders, N.J. 07836, on Wednesday, June 3, 1998 at 10:00
A.M., or at any adjournment or adjournments thereof.

A stockholder who executes a proxy may revoke it at any time before it is
voted. Attendance at the meeting shall not have the effect of revoking a proxy
unless the stockholder so attending shall, in writing, so notify the secretary
of the meeting at any time prior to the voting of the proxy. A proxy that is
properly signed and not revoked will be voted for the nominees for election as
directors listed herein unless contrary instructions are given or the persons
named in the proxy elect to exercise their discretionary authority to
accumulate votes in favor of less than all nominees. The Board of Directors
knows of no other business to come before the meeting, but if other matters
properly come before the meeting, the persons named in the proxy intend to vote
thereon in accordance with their best judgment.

The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by mail, directors, officers and employees of the Company may
solicit proxies by telephone or otherwise. The Company will reimburse brokers
or other persons holding stock in their names or in the names of their nominees
for their charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock. It is anticipated that the mailing of this
Proxy Statement will commence on or about April 24, 1998.

VOTING SECURITIES

The Company had outstanding 279,041,094 shares of common stock ("Common
Stock") at the close of business on April 13, 1998, which are the only
securities of the Company entitled to be voted at the meeting. Each share of
Common Stock is entitled to one vote (except as stated below under "Election of
Directors") on each matter as may properly be brought before the meeting. Only
stockholders of record at the close of business on April 13, 1998 will be
entitled to vote.

With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee. Directors are elected by a plurality of the votes
cast in the election. Votes that are withheld will be excluded entirely from
the vote and will have no effect.

Under the rules of the New York Stock Exchange, brokers who hold shares in
street name have the authority to vote on certain "routine" matters when they
have not received instructions from beneficial owners. Brokers that do not
receive instructions are entitled to vote on the election of directors. Under
applicable law, a broker non-vote will have no effect on the outcome of the
election of directors.

Proxies identifying individual stockholders are confidential except: (i)
as necessary to determine compliance with law or assert or defend legal claims;
(ii) as necessary to allow the inspector of elections to certify the results of
a vote; (iii) in the event that a stockholder expressly authorizes disclosure
with respect to his or her vote; (iv) in certain circumstances in a contested
proxy solicitation; or (v) in the event that a stockholder makes a written
comment on a proxy card or an attachment to it. The Company retains an
independent organization to tabulate stockholder votes and to certify voting
results.

1
<PAGE>

PRINCIPAL STOCKHOLDERS

As of April 13, 1998, the following are the only entities known to the
Company to be the beneficial owners of more than five percent of the Common
Stock:

<TABLE>
<CAPTION>
Total Number
of Shares
Name and Address of Beneficially Percent
Beneficial Owner Owned of Class
- -------------------------------------------------- -------------- ---------
<S> <C> <C>
Putnam Investments, Inc.(1) .............. 20,330,316 7.3%
One Post Office Square
Boston, MA 02109
FMR Corp.(2) ............................. 17,402,390 6.2%
82 Devonshire Street
Boston, Massachusetts 02109
J.P. Morgan & Co., Inc.(3) ............... 15,321,259 5.5%
60 Wall Street
New York, N.Y. 10260
Trimark Financial Corporation(4) ......... 14,861,900 5.3%
One First Canadian Place
Suite 5600, POB 487
Toronto, Ontario M5X 1ES

</TABLE>

- ----------
(1) According to the Schedule 13G, dated January 16, 1998, filed with the
Securities and Exchange Commission (the "Commission") jointly by Putnam
Investments, Inc. ("PII"), Marsh & McLennan Companies, Inc. ("MMC"),
Putnam Investment Management, Inc. ("PIM") (the investment adviser to
PII's mutual funds), and The Putnam Advisory Company, Inc. ("TPAC") (the
investment adviser to PII's institutional clients), at December 31, 1997,
PII, a wholly-owned subsidiary of MMC, was the beneficial owner of
20,330,316 shares of Common Stock in its capacity as the sole parent of
PIM and TPAC, owners of 20,100,936 and 229,380 shares of Common Stock,
respectively. The Schedule 13G indicates that both subsidiaries have
dispository power over the shares as investment managers, but each of the
mutual funds' trustees have voting power over the shares held by each
fund, and TPAC has shared voting power over the shares held by the
institutional clients. Each of PII and MMC disclaims the power to vote or
dispose of, or to direct the vote or disposition of, such shares.

(2) According to the Schedule 13G, dated February 14, 1998, filed with the
Commission jointly by FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson
and Fidelity Management & Research Company ("Fidelity"), Mr. Johnson is
chairman and Ms. Johnson is a director of FMR Corp. and may be deemed to
be members of a controlling group with respect to FMR Corp. The Schedule
13G indicates that at December 31, 1997: (i) Fidelity, a wholly-owned
subsidiary of FMR Corp., was the beneficial owner of 16,030,900 shares of
Common Stock in its capacity as investment adviser to various registered
investment companies (the "Fidelity Funds") (the power to vote such shares
resides solely with the boards of trustees of the Fidelity Funds, while
the power to dispose of such shares resides with Mr. Johnson, FMR Corp.,
Fidelity and the Fidelity Funds); and (ii) Fidelity Management Trust
Company ("FMTC"), a bank that is wholly-owned by FMR Corp., was the
beneficial owner of 1,371,490 shares of Common Stock (the power to vote
747,790 of such shares resides with Mr. Johnson and FMR Corp., the power
to vote the remaining 623,700 of such shares resides with the boards of
trustees of the Fidelity Funds). Mr. Johnson and FMR Corp., through its
control of FMTC, each has sole dispositive power over the 1,371,490 shares
owned by FMTC.

(3) According to the Schedule 13G, dated December 31, 1997, filed with the
Commission by J.P. Morgan & Co. Incorporated ("JPMI"), JPMI is the
beneficial owner of 15,321,259 shares of Common Stock. The Schedule 13G
indicates that at December 31, 1997 JPMI had sole dispository power over
15,023,324 shares and shared dispository power over 295,335 shares, and
sole power to vote 10,052,488 shares and shared power to vote 157,696
shares.

(4) According to the Schedule 13G, dated February 13, 1998, filed with the
Commission by Trimark Financial Corporation, a corporation incorporated
under the laws of Ontario, Canada ("Trimark"), certain Trimark

2
<PAGE>

mutual funds (the "Trimark Funds"), which are trusts organized under the
laws of Ontario, Canada, are owners of record of 14,861,900 shares of Common
Stock. Trimark Investment Management Inc. ("TIMI"), a corporation
incorporated under the laws of Canada, is a manager and trustee of the
Trimark Funds. TIMI is qualified to act as an investment adviser and manager
of the Trimark Funds in the province of Ontario pursuant to a registration
under the Securities Act (Ontario). Trimark owns 100% of the voting equity
securities of TIMI.

The determination that there were no other persons, entities or groups
known to the Company to beneficially hold more than 5% of the Common Stock was
based on a review of all statements filed with respect to the Company since the
beginning of the past fiscal year with the Commission pursuant to Section 13(d)
or 13(g) of the Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act").

ELECTION OF DIRECTORS

In accordance with the recommendation of its Nominating Committee, the
Board of Directors has proposed for election at the Annual Meeting of
Stockholders the 11 individuals listed below to serve (subject to the Company's
By-Laws) as directors of the Company until the next annual meeting and until
the election and qualification of their successors. All such nominees are
current directors of the Company and, with the exception of Calvin Hill and
Bruce W. Krysiak, were elected by the stockholders at the annual meeting held
in 1997. If any such person should be unwilling or unable to serve as a
director of the Company (which is not anticipated) the persons named in the
proxy will vote the proxy for substitute nominees selected by them unless the
number of directors has been reduced to the number of nominees willing and able
to serve.

In electing directors, holders of Common Stock have cumulative voting
rights; that is, each holder of record of Common Stock shall be entitled to as
many votes as shall equal the number of shares owned of record multiplied by
the number of directors to be elected, and may cast all of such votes for a
single director or may distribute them among all or some of the directors to be
voted for, as such holder sees fit. Unless contrary instructions are given, the
persons named in the proxy will have discretionary authority to accumulate
votes in the same manner.

Certain information for each nominee for director is set forth below:

3
<PAGE>

<TABLE>
<CAPTION>
Common Stock
Beneficially
Owned as of Percent
Principal Occupation, Employment, etc. March 10, 1998 of Class
- ------------------------------------------------------------------------------ --------------------- ---------
<S> <C> <C>
Shirley Strum Kenny .......................................................... 11,402(b)(c) *
President of The State University of New York at Stony Brook since
September 1994; President of Queens College of The City University of New
York since prior to 1993 to August 1994; director of the Company since 1990;
director of Computer Associates International, Inc.; age 63 years.
Bruce W. Krysiak ............................................................. -0- *
President and Chief Operating Officer of the Company and President of U.S.
Toy Store Division since April 15, 1998; President and Chief Operating
Officer of Dollar General Corporation from January 1997 to April 1998; Chief
Operating Officer of Circle K Corporation from April 1995 to June 1996; and
Chairman of Giant Joint Venture since prior to 1993 to December 1994;
director of the Company since February 1998; age 47 years.
Charles Lazarus .............................................................. 790,759(e) *
Chairman Emeritus of the Board since February 1998; Chairman of the Board
since prior to 1993 to February 1998; Chief Executive Officer of the Company
since prior to 1993 to February 1994; director of the Company since 1969;
director of Loral Space and Communications Ltd.; age 74 years.
Norman S. Matthews ........................................................... 10,093(b)(c) *
Independent retail consultant since prior to 1993; director of the Company
since 1995; director of Lechters Inc., Loehmann's Holdings Inc., Finlay
Enterprises Inc., Progressive Corp.; age 65 years.
Howard W. Moore .............................................................. 53,550(c)(f) *
President of Howard Moore Associates, business consultants, since prior to
1993, director of the Company since 1984; age 67 years.
Robert C. Nakasone ........................................................... 1,092,138(g) *
Chief Executive Officer of the Company since February 1998; President and
Chief Operating Officer from February 1994 to February 1998; Vice Chairman
of the Board and President of Worldwide Toy Stores of the Company since
prior to 1993 to February 1994; director of the Company since 1989; director
of Staples, Inc.; age 50 years.
Arthur B. Newman ............................................................. 6,617(c) *
Senior Managing Director of Blackstone Group Holdings, a private investment
banking firm, since prior to 1993; director of the Company since 1997;
director of Lone Star Industries, Inc. and Premium Standard Farms, Inc.; age
54 years.

</TABLE>

- ----------
* Less than 1% of the outstanding Common Stock.

(a) Includes 5,422 shares owned by a profit sharing plan of which Mr. Bernhard
is the sole beneficiary. Also includes 27,419 shares beneficially owned by
his wife, as to which shares Mr. Bernhard disclaims beneficial ownership.

(b) Includes 9,500 shares for each of Mr. Bernhard and Ms. Kenny, 4,500 shares
for Mr. Matthews and 2,500 shares for Ms. Costin which such persons have
the right to acquire upon exercise of currently exercisable options, and
the percentage is calculated on the basis that such shares are deemed
outstanding.

(c) Includes 1,382, 1,344, 1,217, 115, 1,593, 1,250, and 1,617 Stock Units
(rounded down to the nearest whole share) for Mr. Bernhard, Ms. Costin,
Mr. Hill, Ms. Kenny and Messrs. Matthews, Moore and Newman (collectively
the "Non-Employee Directors"), respectively. Each Stock Unit represents
the right to receive a share of Company Common Stock and was received in
lieu of cash for all or a portion of their director's fees. The stock
underlying the Stock Units was purchased by the Company in its name for
the benefit of each Non-Employee Director and will be delivered to each
Non-Employee Director in exchange for Stock Units upon the Non-Employee
Director's death, retirement, or resignation.

4
<PAGE>

(d) Includes 630,642 shares which Mr. Goldstein has the right to acquire upon
exercise of currently exercisable options, of which options to purchase
380,642 shares, although exercisable, provide that the shares acquired
upon the exercise of such options having a value equal to the aggregate
fair market value over the exercise price of such options are generally
subject to forfeiture under certain conditions. Also includes 344,208
shares required to be held for a minimum of two years from the date on
which such shares were deposited in a trust established by the Company
(the "Grantor Trust"); Mr. Goldstein does not have voting power with
respect to the shares held in the Grantor Trust and will forfeit 29,358 of
the shares under certain conditions. The percentage of Mr. Goldstein's
aggregate ownership is calculated on the basis that all such shares are
deemed outstanding.

(e) Includes 725,000 shares which Mr. Lazarus has the right to acquire upon
exercise of currently exercisable options, and the percentage is
calculated on the basis that such shares are deemed outstanding.

(f) Includes 24,300 shares which Mr. Moore has the right to acquire upon
exercise of currently exercisable options, and the percentage is
calculated on the basis that such shares are deemed outstanding.

(g) Includes 686,789 shares which Mr. Nakasone has the right to acquire upon
exercise of currently exercisable options, of which options to purchase
436,789 shares, although exercisable, provide that the shares acquired
upon the exercise of such options having a value equal to the aggregate
fair market value over the exercise price of such options are generally
subject to forfeiture under certain conditions. Also includes 380,066
shares required to be held for a minimum of two years from the date on
which such shares were deposited in a trust established by the Company
(the "Grantor Trust"); Mr. Nakasone does not have the voting power with
respect to the shares held in the Grantor Trust and will forfeit 33,211 of
the shares under certain conditions. Additionally, includes 2,925 shares
beneficially owned by his minor children as to which shares Mr. Nakasone
disclaims beneficial ownership. The percentage of Mr. Nakasone's aggregate
ownership is calculated on the basis that all such shares are deemed
outstanding.
- ----------
The address of each person named in the table above is c/o Toys "R" Us,
Inc., 461 From Road, Paramus, New Jersey 07652.

As of March 10, 1998, all executive officers and directors of the Company
as a group (18 persons) owned beneficially 4,146,569 shares of Common Stock
(including 3,287,139 shares with respect to which such persons had the right to
acquire as of such date or within sixty days thereof, shares deposited in the
Grantor Trust which are subject to forfeiture under certain circumstances and
shares beneficially owned by the family members of certain executive officers
and directors as to which family-owned shares such executive officers and
directors disclaim beneficial ownership), which constituted approximately 1.5%
of the shares of Common Stock deemed outstanding on that date. Except for those
shares of which such persons have the right to acquire beneficial ownership,
shares beneficially owned by such family members and shares deposited in the
Grantor Trust, such executive officers and directors have sole voting power and
sole investment power with respect to such shares.

As of March 10, 1998, the Named Officers (as defined below) not identified
in the table above owned beneficially the following shares of Common Stock (in
each case, less than 1% of the shares deemed outstanding on such date): Gregory
R. Staley, President of Toys "R" Us International Division, owned beneficially
224,942 shares of Common Stock (including 224,800 shares which Mr. Staley had
the right to acquire upon exercise of currently exercisable options); Richard
L. Markee, President of Kids "R" Us and Babies "R" Us Divisions, owned
beneficially 272,858 shares of Common Stock (including 272,800 shares which Mr.
Markee had the right to acquire upon exercise of currently exercisable
options); and Michael J. Madden, President of Operations, U.S. Toy Store
Division, owned beneficially 201,587 shares of Common Stock (including 198,546
shares which Mr. Madden had the right to acquire beneficial ownership upon
exercise of currently exercisable options, and 1,354 shares required to be held
in the Grantor Trust and subject to forfeiture under certain conditions).

The Board of Directors held eight meetings during the Company's last
fiscal year. The Board of Directors has an Executive Committee, a Nominating
Committee, an Audit Committee, a Management Compensation and Stock Option
Committee (the "Compensation Committee"), and an Operating Committee.

The Executive Committee currently has as its members Michael Goldstein,
Charles Lazarus (Chairperson), Norman S. Matthews, Robert C. Nakasone and
Arthur B. Newman. The Executive Committee of the Board of Directors has and may
exercise all the powers and authority of the full Board of Directors, subject
to certain

5
<PAGE>

exceptions. The Executive Committee held two meetings and took action twice by
unanimous written consent during the Company's last fiscal year.

The Nominating Committee currently has as its members three directors who
are not officers or employees of the Company: Robert A. Bernhard, RoAnn Costin
and Shirley Strum Kenny (Chairperson). The Nominating Committee recommends to
the Board of Directors the individuals to be nominated for election as
directors at the annual meeting of stockholders and has the authority to
recommend the individuals to be elected as directors to fill any vacancies or
additional directorships which may arise from time to time on the Board of
Directors. The Nominating Committee considers nominations made in accordance
with the procedure in the following paragraph. The Nominating Committee held
one meeting and took action once by unanimous written consent during the
Company's last fiscal year.

The Company's By-Laws provide that nominations for the election of
directors may be made by any stockholder of at least $1,000 in current value of
shares of the Company entitled to vote for the election of directors in
writing, delivered or mailed to the executive offices of the Company, Toys "R"
Us, Inc., 461 From Road, Paramus, New Jersey 07652, not less than 90 days nor
more than 120 days prior to the meeting, except that if less than 100 days
notice of the meeting is given, such written notice shall be delivered or
mailed not later than the close of the tenth day following the day on which
notice of the meeting was mailed. Each notice shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director: (i) the name, age, business address and residence address of such
person; (ii) the principal occupation or employment of such person; (iii) the
class and number of shares of the Company that are beneficially owned by such
person; and (iv) any other information that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act
(including without limitation such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); and
(b) as to the Company's stockholder giving the notice: (i) the name and
address, as they appear on the Company's books, of such stockholder; (ii) the
class and number of shares of the Company that are beneficially owned by such
stockholder as of the record date; (iii) a representation that the stockholder
intends to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice; and (iv) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder. If the Chairman of the meeting
determines that a nomination was not made in accordance with the foregoing
procedure, such nomination will be disregarded.

In accordance with the Company's retirement policy for Non-Employee
Directors (as defined below), Non-Employee Directors, other than those who were
members of the Board prior to 1997, may not serve on the Board of Directors
after reaching the age of seventy-two, except that any such Non-Employee
Director who reaches age seventy-two may continue to serve until the next
succeeding annual meeting of stockholders and the election and qualification of
such Director's successor.

The Audit Committee currently has as its members three directors who are
not current or former officers or employees of the Company: RoAnn Costin,
Shirley Strum Kenny and Arthur B. Newman (Chairperson). The Audit Committee
held three meetings during the Company's last fiscal year. The Audit Committee:
(i) reviews the procedures employed in connection with the internal auditing
program and accounting procedures; (ii) consults with the independent auditors;
(iii) reviews the reports submitted by such independent auditors; and (iv)
makes such reports and recommendations to the Board of Directors as it may deem
appropriate.

The Compensation Committee currently has as its members three directors
who are not current or former officers or employees of the Company: Robert A.
Bernhard, Norman S. Matthews (Chairperson) and Arthur B. Newman. The
Compensation Committee held seven meetings and took action five times by
unanimous written consent during the Company's last fiscal year. The
Compensation Committee reviews management compensation standards and practices
and functions as the independent committee under certain of the Company's
compensation plans. (See "Report of the Management Compensation and Stock
Option Committee on Executive Compensation.")

The Operating Committee consists of two directors and has as its members
Michael Goldstein and Robert C. Nakasone. The Operating Committee is authorized
to incur indebtedness on behalf of the Company within limits established by the
full Board of Directors. The Operating Committee did not meet or take action by
consent during the Company's last fiscal year.

6
<PAGE>

Compensation of Directors

Directors who are not officers or employees of the Company or any of its
subsidiaries ("Non-Employee Directors") each receive $30,000 per annum for
service on the Board and an additional $1,500 for attending any meetings of the
Board and any committee meetings, subject to a maximum $1,500 meeting fee per
day. Each Non-Employee Director who serves as a Chairperson of a Committee
receives an additional annual fee of $2,500; and each Non-Employee Director who
serves on the Executive Committee receives an additional annual fee of $2,500.
Such fees may be taken in the form of Stock Units (see discussion below).
Directors who are also officers or employees of the Company receive no
additional compensation for services as a director, committee participation or
special assignments.

Non-Employee Directors may elect to receive all or a portion of their cash
fees in the form of units representing shares of Common Stock to be purchased
in the name of the Company for the benefit of eligible Directors ("Stock
Units"). The Stock Units will generally be settled by delivery of Common Stock
upon a Non-Employee Director's death, retirement or resignation.

Under the Company's Amended and Restated Non-Employee Directors' Stock
Option Plan (the "Amended DSO Plan"), each year: (i) each Non-Employee Director
is granted options to purchase 5,000 shares of Common Stock; (ii) each
Non-Employee Director who serves on the Executive Committee is granted
additional options to purchase 5,000 shares of Common Stock; and (iii) each
Chairperson of a Committee of the Board of Directors (consisting of Shirley
Strum Kenny, as Chairperson of the Nominating Committee; Arthur B. Newman, as
Chairperson of the Audit Committee; and Norman S. Matthews, as Chairperson of
the Compensation Committee) is granted additional options to purchase 1,000
shares of Common Stock. In addition, any new Non-Employee Director will be
granted options to purchase 10,000 shares of Common Stock upon his or her
election or appointment to the Board of Directors. Subject to certain
conditions, one-fifth of such options become exercisable on a cumulative basis
on each anniversary of the date of grant. Options expire ten years after the
date of grant. Such option grants for the Company's last fiscal year were made
effective November, 1997 at an exercise price of $34.72 per share, the market
value of Common Stock on the date of grant.

Effective January 31, 1994, Charles Lazarus terminated his employment as
Chief Executive Officer of the Company and, pursuant to his employment
agreement, exercised his right to become a consultant to the Company for a
five-year period. Under the terms of his agreement, Mr. Lazarus is required to
refrain from competing either directly or indirectly with any business carried
on by the Company during the term of his consulting period and for three years
thereafter. As a consultant, Mr. Lazarus is obligated to render such consulting
services as may be requested by the Board of Directors at such times as may be
mutually convenient for the Company and Mr. Lazarus. Mr. Lazarus is entitled to
receive as compensation during the five-year consulting period the following
amounts: for the first year an amount equal to his total compensation (base
salary and incentive compensation) received for the full fiscal year prior to
his becoming a consultant (for the fiscal year ended January 29, 1994) and for
the second through fifth years, 90%, 80%, 70% and 60% of such amount,
respectively. For the fiscal year ended January 31, 1998, Mr. Lazarus received
$5,503,771 in consulting fees. The employment agreement also provides that Mr.
Lazarus is entitled to receive a payment of $200,000 a year for five years
commencing at the termination of his consulting period.

Effective February 25, 1998, Michael Goldstein resigned as Chief Executive
Officer and Vice Chairman of the Board and was elected Chairman of the Board.
Mr. Goldstein receives compensation for his service as Chairman in accordance
with his retention agreement with the Company dated February 25, 1998. See
"Employment Agreements" for a description of the terms of Mr. Goldstein's
retention agreement.

7
<PAGE>

Executive Compensation

The following table sets forth, for the Company's last three fiscal years,
the annual and long-term compensation of those persons who were, at January 31,
1998, (i) the Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company (collectively, the "Named
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
------------------------------------ ---------------------------------------------
Restricted
Stock Stock LTIP
Name and Principal Position(1) Year Salary ($) Bonus ($) Options (#) Units ($)(2) Payouts ($)(3)
- -------------------------------- ----------- ------------ ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael Goldstein .............. 01/31/98 884,615 96,328 524,886 250,040
Vice Chairman of the Board 02/01/97 800,000 344,942 264,144
and Chief Executive Officer 02/03/96 800,000 135,375 303,430
Robert C. Nakasone ............. 01/31/98 884,615 96,328 398,649 250,040
President and Chief Operating 02/01/97 800,000 344,942 416,339
Officer 02/03/96 800,000 135,375 332,901
Gregory R. Staley .............. 01/31/98 416,923 196,277 40,000 957,000 92,340
President of Toys "R" Us 02/01/97 395,385 143,074 40,000
International Division 02/03/96 306,539 49,875 99,800
Richard L. Markee .............. 01/31/98 432,692 8,148 40,000 986,000 92,340
President of Kids "R" Us and 02/01/97 412,308 464,094 40,000
Babies "R" Us Divisions 02/03/96 366,154 49,875 147,800
Michael J. Madden(5) ........... 01/31/98 390,000 29,969 42,250 812,000 92,340
President of Operations, 02/01/97 325,769 123,166 41,602
U.S. Toy Store Division

<CAPTION>
All Other
Name and Principal Position(1) Compensation ($)(4)
- -------------------------------- --------------------
<S> <C>
Michael Goldstein .............. 133,982
Vice Chairman of the Board 102,891
and Chief Executive Officer 299,711
Robert C. Nakasone ............. 133,982
President and Chief Operating 102,891
Officer 303,932
Gregory R. Staley .............. 61,346
President of Toys "R" Us 48,598
International Division 64,355
Richard L. Markee .............. 98,456
President of Kids "R" Us and 50,206
Babies "R" Us Divisions 103,036
Michael J. Madden(5) ........... 55,623
President of Operations, 40,051
U.S. Toy Store Division
</TABLE>

- ----------
(1) Titles are those held during the last fiscal year.

(2) Restricted Stock Units, issued pursuant to the Toys "R" Us, Inc. Amended
and Restated 1994 Stock Option and Performance Incentive Plan (the "1994
Plan"), represent the right to receive a like number of shares of Company
Common Stock upon satisfactorily meeting the vesting, employment, and
non-compete requirements of the executive's Retention Employment
Agreement. Failure to meet such requirements will subject the Restricted
Stock Units to forfeiture. Value of Restricted Stock Units is based on the
closing price on the date of issuance of $29.00. See "Report of the
Management Compensation and Stock Option Committee on Executive
Compensation."

(3) Long Term Incentive Payouts related to long-term Performance Unit Awards.
Prior years' payouts under the Performance Unit Award program were
included in the "Annual Compensation -- Bonus" amounts as awards were
measured on one-year results. See "Report of the Management Compensation
and Stock Option Committee on Executive Compensation."

(4) "All Other Compensation" represents the Company's contributions to the
"TRU" Partnership Employee's Savings and Profit Sharing Plan (the "Profit
Sharing Plan") and to its Supplemental Executive Retirement Plan for the
accounts of the Named Officers.

(5) Mr. Madden became an executive officer of the Company on February 5, 1996.

8
<PAGE>

The following table sets forth certain information concerning stock
options granted during the fiscal year ended January 31, 1998 to the Named
Officers. The hypothetical present value on date of grant shown below is
presented pursuant to the rules of the Commission and is calculated under the
Modified Black-Scholes Model for pricing options. The actual before-tax amount,
if any, realized upon the exercise of a stock option will depend upon the
excess, if any, of the market price of the Common Stock over the exercise price
per share of the stock option at the time the stock option is exercised. There
is no assurance that the hypothetical present value or any value of the stock
options reflected in this table will be realized.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------
% of Total Grant Date
Options Exercise Expiration Present
Options (#) Granted(3) Price/Share ($) Date Value ($)(4)
---------------- ------------ ----------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Michael Goldstein .......... 125,102 (1) 1.9% 25.38 02/02/1998 272,722
47,491(1) 0.7% 30.50 02/02/1998 107,805
93,333 (1) 1.4% 34.19 02/02/1998 196,933
73,397(1) 1.1% 36.47 02/02/1998 147,528
25,563(1) 0.4% 34.19 05/17/2005 177,811
60,000(1) 0.9% 34.16 05/17/2005 372,960
100,000(2) 1.5% 34.72 11/03/2007 837,000
Robert C. Nakasone ......... 74,356(1) 1.1% 30.50 02/02/1998 168,788
128,393(1) 1.9% 36.47 02/02/1998 258,070
95,900(1) 1.4% 34.25 05/17/2005 674,369
100,000(2) 1.5% 34.72 11/03/2007 837,000
Gregory R. Staley .......... 40,000(2) 0.6% 34.72 11/03/2007 334,800
Richard L. Markee .......... 40,000(2) 0.6% 34.72 11/03/2007 334,800
Michael J. Madden .......... 2,250(1) 0.1% 34.38 02/17/2004 15,624
40,000(2) 0.6% 34.72 11/03/2007 334,800
</TABLE>

- ----------
(1) Such options were granted under the Restoration Option feature of the 1994
Plan, which encourages continuing ownership of Common Stock.

(2) Non-qualified stock options granted November 1997 under the 1994 Plan. Such
options become exercisable six months after the date of grant. Upon
exercise of the options, the number of shares having a value equal to the
aggregate fair market value over the exercise price of the options is
generally subject to forfeiture if the grantee does not remain with the
Company until the fifth anniversary from the date the options are granted.
See "Report of the Management Compensation and Stock Option Committee on
Executive Compensation."

(3) Based on a total of 6,759,426 options granted to 36,294 employees of the
Company.

(4) The hypothetical present values on grant date are calculated under the
Modified Black-Scholes Model, which is a mathematical formula used to
value options traded on stock exchanges. This formula considers a number
of factors in hypothesizing an option's present value. Factors used to
value original November 1997 options at date of grant include the Common
Stock's expected volatility rate (29.7%), risk free rate of return (5.9%),
current dividend yield (0%), projected time to exercise (6 years) and
projected risk of forfeiture rate for vesting period (approximately 8% per
annum). Restoration Option values are calculated using the same model and
factors as original options, except that the projected date of exercise is
generally the remaining term of the prior option and the stock's expected
volatility rate (ranging from 29.4% to 33.4%) and risk-free rate of return
(ranging from 5.0% to 6.4%) are calculated at date of grant of the
Restoration Option.

9
<PAGE>

The following table sets forth information concerning the exercise of
options by the Named Officers during the last fiscal year and the value of
unexercised options held by the Named Officers as of the fiscal year ended
January 31, 1998:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
Shares of
Common Value of
Stock Unexercised
Shares of Value Underlying In-the-Money
Common Realized ($) Options at Options at
Stock (Market Price FY-End (#) FY-End ($)
Acquired on at Exercise Less Exercisable/ Exercisable/
Name Exercise (#) Exercise Price)(1) Unexercisable(2) Unexercisable(3)
- ---------------------------- -------------- -------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Michael Goldstein .......... 621,512 5,979,324 758,822 212,846
354,471 0
Robert C. Nakasone ......... 404,427 3,662,724 870,036 193,370
275,000 0
Gregory R. Staley .......... 0 0 184,800 387,319
40,000 0
Richard L. Markee .......... 0 0 232,800 306,037
135,000 0
Michael J. Madden .......... 3,041 27,187 158,546 186,543
40,000 0
</TABLE>

- ----------
(1) The amounts set forth under "Value Realized" were not realized in the form
of cash but were in the form of 199,088, 106,846, and 791 shares of Common
Stock ("Profit Shares") for Messrs. Goldstein, Nakasone, and Madden,
respectively and are held in a Grantor Trust. Of the total Profit Shares
realized, 169,730 and 73,635 for Messrs. Goldstein and Nakasone,
respectively, are deferred for three years from the date of exercise and
29,358, 33,211, and 791 shares for Messrs. Goldstein, Nakasone, and Madden
will not vest until May 17, 2000. Such shares were acquired under the
provisions of the Restoration Option feature of the 1994 Plan, which
encourages continuing ownership of Common Stock.

(2) Included in the totals for "Shares of Common Stock Underlying Options --
Exercisable" are options to purchase 261,171, 336,789, 139,800, 187,800,
and 132,246 shares held by Messrs. Goldstein, Nakasone, Staley, Markee,
and Madden, respectively, which, although exercisable, provide that the
shares acquired upon the exercise of such options having a value equal to
the aggregate fair value over the exercise price of such options are
generally subject to forfeiture if the grantee does not remain with the
Company until the fifth anniversary from the date such options are
granted.

(3) The actual amount, if any, realized upon exercise of the above stock
options will depend on the market price of the stock options at the time
the stock options are exercised. There is no assurance that the values of
unexercised in-the-money stock options reflected in this table will be
realized in the amounts set forth above, or at all.

10
<PAGE>

The following table sets forth information concerning long-term
compensation awards granted under the Toys "R" Us, Inc. Amended and Restated
Management Incentive Plan (the "Incentive Plan") to the Named Officers for the
Company's fiscal year ended January 31, 1998:

LONG-TERM INCENTIVE PLANS -- AWARDS
IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Estimated Future Payouts
Number of Performance Under Non-Stock
Shares, or Other Price-Based Plans(1)
Units or Period Until -------------------------
Other Maturation Target(2)
Name Rights (#) or Payout ($)
- ---------------------------- ------------ ------------- -------------------------
<S> <C> <C> <C>
Michael Goldstein .......... 931,000 3 years 409,640
Robert C. Nakasone ......... 931,000 3 years 409,640
Gregory R. Staley .......... 344,000 3 years 151,360
Richard L. Markee .......... 344,000 3 years 151,360
Michael J. Madden .......... 344,000 3 years 151,360
</TABLE>

- ----------
(1) Each unit awarded annually represents the right to receive a payment in
cash and/or stock (at the discretion of the Compensation Committee) based
upon the attainment of earnings per share levels exceeding an earnings per
share hurdle pre-determined by the Compensation Committee for the
designated performance period. All the payments shown are potential
assumed amounts. There is no assurance that the Company will achieve
results that would lead to payments under the Incentive Plan. If payouts
are made, the Named Officers will be entitled to elect to receive shares
of Common Stock in lieu of cash.

(2) If threshold earnings per share are not exceeded, no awards will be paid.
Subject to certain limitations contained in the Incentive Plan, the unit
awards do not provide for maximum payouts.

Employment Agreements

On February 25, 1998, Michael Goldstein resigned as Chief Executive and
Vice Chairman of the Board of Directors and was elected Chairman of the Board,
and Robert C. Nakasone, then President and Chief Operating Officer of the
Company, was elected Chief Executive Officer. Effective as of that date, the
Company entered into retention agreements with Messrs. Goldstein and Nakasone.
The current term of employment of each such agreement expires on the last day
of the Company's fiscal year 2001. Each such agreement provides for automatic
one-year renewals, unless terminated by either party in accordance with the
terms thereof. Mr. Goldstein's agreement provides for a base salary of $900,000
per year until June 30, 1998, and $300,000 per year thereafter, and Mr.
Nakasone's agreement provides for a base salary of $900,000 per year. The
agreements also provide for participation in any and all insurance and other
plans for the benefit of the Company's officers which are in effect during the
employment period. Messrs. Goldstein and Nakasone are also entitled to
participate in the Company's various incentive bonus plans on a basis
commensurate with their prior participation.

If employment is terminated under the agreements due to the death,
disability or retirement of Mr. Goldstein or Mr. Nakasone, the Company would be
obligated to provide for the continuation of his benefits under the Company's
benefit plans and immediate vesting of all awarded options. If Mr. Goldstein or
Mr. Nakasone resigns without "Good Reason" (as defined in the agreements), he
will be entitled to the foregoing benefits, except that he will also be
entitled to two-years continued vesting of his options in accordance with their
terms following termination. Mr. Goldstein will also be entitled, for a
two-year period following such termination, to be nominated to serve as a
director of the Company and, if elected, to receive the same compensation as
non-employee directors of the Company. Upon termination of his employment by
the Company without "Cause" (as defined in the agreements) or by Mr. Goldstein
or Mr. Nakasone for "Good Reason," he would be entitled to receive: (i) his
pro-rated targeted annual and long-term incentive awards through the date of
termination; and (ii) over a twenty-four month period, in equal installments to
be paid at least monthly, an amount equal to 200% of his annual base salary on
the date of termination, plus 200% of the targeted annual and long-term
incentive awards that would have been paid to him during the fiscal period in
which he was terminated. In exchange for such payments and the continuation of
benefits under the Company's benefit plans and immediate vesting of all

11
<PAGE>

awarded options, Messrs. Goldstein and Nakasone would be subject to a two-year
non-competition covenant and a two or three-year (depending upon the
circumstances of termination) non-solicitation/non-hiring of employees
restrictive covenant. If Mr. Goldstein's or Mr. Nakasone's employment is
terminated within two years after a Change In Control (as defined in the
agreements), other than for "Cause," the amounts described in the next
preceding sentence are payable to each of Messrs. Goldstein and Nakasone in a
lump sum at a rate of 300%, and they will not be subject to the restrictive
covenants. Following termination of employment, Messrs. Goldstein and Nakasone
would also be entitled to exercise any stock options granted under any stock
option plan of the Company for their full term. If termination of their
employment were to occur in connection with a Change in Control, Messrs.
Goldstein and Nakasone would each also be paid an amount pursuant to his
agreement intended to reimburse them for any excise tax imposed under Section
4999 of the Internal Revenue Code, including any tax payable by reason of such
reimbursement.

The Company is also party to retention agreements (each a "Retention
Agreement") with each of Messrs. Staley, Markee and Madden (collectively, the
"Named Executives") and certain other officers and key employees. The Retention
Agreements with the Named Executives will expire on May 1, 1999, but will be
automatically extended for a one-year period each year unless the Company
provides the Named Executive with notice of non-renewal at least six months
prior to the next renewal date. Each Retention Agreement provides for a base
salary per year commensurate with the Named Executive's current base salary
plus participation in any and all insurance and other plans for the benefit of
the Company's officers which are in effect during the employment period. The
Named Executives are also entitled to participate in the Company's incentive
bonus plans. Each Retention Agreement provides that, if, prior to the
expiration or termination thereof, a Change In Control (as defined in the
Retention Agreement) occurs and thereafter the Company terminates his
employment without "Cause" (as defined in the Retention Agreement), or, if the
Named Executive terminates his employment for "Good Reason" (as defined in each
Retention Agreement) or is terminated by the Company without "Cause" prior to a
Change In Control, the Named Executive would be entitled to receive a lump sum
payment equal to: (i) his pro-rated targeted annual and long-term incentive
awards through the date of termination; and (ii) an amount equal to 200% of his
annual base salary on the date of termination, plus 200% of the targeted annual
and long-term incentive awards that would have been paid to him during the
fiscal period in which he was terminated. Under these circumstances the Named
Executive would also be entitled to an additional two-years vesting of his
stock options, and full vesting in any account balance or other benefits
provided under any of the Company's benefit plans. Each Named Executive would
also be paid an amount pursuant to his Retention Agreement intended to
reimburse the Named Executive for any excise tax imposed under Section 4999 of
the Internal Revenue Code, including any tax payable by reason of such
reimbursement. In exchange for these benefits, the Named Executives are subject
to a two-year non-competition covenant and a two-year non-solicitation/
non-hiring covenant (other than in the event of termination following a Change
In Control).

12
<PAGE>

Report of the Management Compensation and Stock Option Committee on
Executive Compensation

Overview and Philosophy

The Compensation Committee is composed entirely of independent outside
directors, none of whom is or has been an officer or employee of the Company.
The Board of Directors has delegated to the Committee the authority to review
and consider the Company's management compensation standards and practices on
an annual basis, particularly with regard to the compensation to be paid to the
Chief Executive Officer and the other executive officers of the Company. The
Committee's responsibilities include administering the Company's stock option
plans and agreements and approving all grants to be made in connection
therewith, and administering, setting performance goals and approving awards
under the Toys "R" Us, Inc. Management Incentive Compensation Plan (the
"Incentive Plan").

The Company's executive compensation program is based on its pay for
performance policy and has been designed to:

o attract and retain high-caliber talent to meet the organization's
executive resource needs;

o attract and retain top-performing executives at the corporate level and
in each of the divisions;

o provide compensation opportunities that are fair and competitive with
those offered by comparable organizations;

o motivate and reward executives based on corporate and division annual and
long-term business performance, strategic progress and the creation of
stockholder value; and

o reinforce the mutuality of interest with the Company's stockholders by
linking a major portion of total compensation to the financial results of
the Company and/or relevant division and the market value of the Common
Stock.

In accordance with the responsibilities delegated by and subject to the
oversight of the Board of Directors, at the beginning of each year the
Compensation Committee reviews the Company's near and long-term strategies and
objectives with the Chief Executive Officer. These form the basis for adopting
or modifying division and corporate annual operating income, net income, and/or
earnings per share plan goals recommended by the Chief Executive Officer. Based
on this review, the Compensation Committee establishes the Company's total
compensation structure for the year, including the elements and level of
compensation opportunities and the variable portion of "at risk" pay for
performance and equity participation. The Compensation Committee considers,
among other matters, marketplace pay levels and practices, as well as the
Company's need to attract, retain and motivate its key employees. Such
compensation structure and base salary amounts for officer level employees,
including the Company's executive officers, are reported to the Board of
Directors.

At year end, the Compensation Committee, in consultation with the Chief
Executive Officer, assesses results achieved and strategic progress relative to
previously approved goals, taking into consideration prevailing economic and
business conditions and opportunities, performance by comparable organizations
and stockholder value. No particular weightings are assigned by the
Compensation Committee to any such factors. Based on this assessment, the
Compensation Committee reviews and considers the Chief Executive Officer's
year-end compensation proposals.

In 1997 (as in 1995 and 1996), the Compensation Committee was assisted in
its review and evaluation by Pearl Meyer & Partners, Inc. ("Pearl Meyer"),
national executive compensation consultants retained by the Compensation
Committee to serve as outside experts in the discharge of its responsibilities.
Pearl Meyer provided advice to the Compensation Committee as to the
reasonableness, fairness and competitiveness of compensation awarded to
officers of the Company, including the Chief Executive Officer. In so doing,
Pearl Meyer collected and reviewed with the Compensation Committee survey data
regarding compensation levels and practices by a peer group of comparable
companies.

13
<PAGE>

Compensation of Executive Officers

Total compensation for target performance under the Company's compensation
program for executive officers for 1997 was generally positioned at the 50th to
the 75th percentile of the peer group, depending upon the individual's level,
position, responsibilities and degree of difficulty and challenge associated
with 1997's performance objectives. The Compensation Committee has balanced the
program with a high proportion of compensation based on variable performance
incentives so that actual annual and long-term compensation levels will vary
from year to year both below and above those of the peer group directly with
results achieved by the Company and the individual.

The Company's 1997 compensation program for executive officers, including
the Chief Executive Officer, was comprised of base salary, annual cash
incentive and long-term incentive compensation in the form of stock options and
performance unit awards. Over two-thirds of the targeted regular total
compensation of the Chief Executive Officer and all other executive officers of
the Company for 1997 was based upon achieving performance targets relating to
annual and long-term business goals or the market price of the Common Stock.

Base Salaries. Base salaries are established within the context of the
total compensation opportunity offered to executive officers. Base salary
levels are set so that the principal compensation opportunities are derived
from annual and long-term incentives. Salaries are reviewed annually in
consideration of the Company's overall financial performance as well as the
competitive marketplace (as discussed above) at the appropriate level relative
to the position, responsibilities and performance of each executive officer.
For 1997, the base salaries of the Chief Executive and Chief Operating Officers
were increased for the first time since 1994.

Annual Cash and Stock Incentives. Executive officers, including the Chief
Executive Officer, participate in the Incentive Plan under which annual cash
incentives are awarded based on achievement relative to targeted performance
goals for the year. Participants may designate a percentage of their awards to
be received in Common Stock of the Company. For 1997, the performance goal for
most executive officers was based upon consolidated pre-tax earnings, and
combined consolidated and division pre-tax earnings for the remaining executive
officers who also have divisional responsibilities. Because the threshold
earnings goals set by the Compensation Committee were achieved for 1997,
bonuses were awarded under the foregoing program for 1997 to executive officers
of the Company, including the Chief Executive Officer. However, actual
consolidated and division pre-tax earnings fell short of targeted goals and,
accordingly, awarded annual bonuses for the executive officers were
significantly below targeted bonuses.

Stock Options. Stock options have historically been a cornerstone of the
Company's program for executive officer and employee compensation. By
correlating this compensation incentive with stockholder value, the
Compensation Committee seeks to create and strengthen the long-term mutuality
of interest between all of the Company's employees and its stockholders in the
Company's growth in real value over the long term.

The Compensation Committee authorized grants of non-qualified stock
options in 1997 to executive officers, including the Chief Executive Officer,
and other key employees which the Compensation Committee believed would serve
to reinforce the Company's ability to retain and motivate its highly qualified
management team. Such stock options have an exercise price of $34.72 per share,
the market price of Common Stock on the date of grant, and become exercisable
six months after the date of grant. The shares received upon exercise of such
options having an aggregate market value in excess of the aggregate exercise
price of the options so exercised are generally subject to forfeiture if the
optionee does not remain with the Company until the fifth anniversary of the
date of option grant.

Performance Unit Awards. To enable the Company to offer its executive
officers and other key employees long-term incentive opportunities on a
performance basis that are competitive with those provided by its peer
companies, the Compensation Committee established a long-term performance
program by granting units under the Incentive Plan to those whose decisions and
performance are critical to the future success of the Company. Each unit
awarded annually represents the right to receive a payment in cash and/or stock
(at the discretion of the Compensation Committee) based upon the attainment of
earnings per share levels exceeding an earnings per share hurdle pre-determined
by the Compensation Committee for the designated performance period. During
1997, the awards were measured on two-year results (1996 through 1997).
Payments made in connection with

14
<PAGE>

such awards are set forth under the column "Long Term Compensation Awards --
LTIP Payouts" in the Summary Compensation Table and reflect achieving average
earnings per share in excess of the applicable threshold but below targeted
performance. Long-term targets have been set for the three fiscal year periods
1996 through 1998 and 1997 through 1999. Awards are reflected under the
"Long-Term Incentive Plans -- Awards in Last Fiscal Year" table. For all
periods, the Compensation Committee has determined that the results achieved
would be computed before giving effect to the costs of the July 1996
arbitration award rendered against the Company.

Performance Unit Awards are made within a guideline that takes into
account competitive practices and position, responsibilities, current
performance and future potential of each individual executive officer,
including the Chief Executive Officer.

Restricted Stock Units. Over the past few years, senior management of the
Company and the Compensation Committee became increasingly concerned regarding
the Company's ability to retain qualified officers and other key employees in a
period of increasing competition, depressed stock market prices for the Common
Stock and difficult business conditions. Accordingly, in 1997, the Compensation
Committee, in consultation with the Chief Executive Officer and Pearl Meyer,
authorized the Company to enter into Employment/Retention Agreements
("Retention Agreements"). See "Employment Agreements" for a description of the
Retention Agreements. As an inducement to enter into the Retention Agreements,
to comply with the restrictive covenants contained therein and to remain in the
employ of the Company, the Compensation Committee awarded each such officer a
grant of Restricted Stock Units. Each Restricted Stock Unit generally
represents the right to receive one share of Common Stock upon the completion
of the vesting period required by the Retention Agreement. The Restricted Stock
Units awarded in 1997 to Named Officers are listed in the table under "Long
Term Compensation Awards -- Restricted Stock Units".

Compensation of the Chief Executive Officer

The Chief Executive Officer participates in the Company's executive
compensation plans on the same basis as all other executive officers and key
employees. In determining the Chief Executive Officer's compensation
opportunities and performance goals, the Compensation Committee conducts the
same type of competitive review and analysis as it does for other executive
officers. For 1997, the Compensation Committee established the Chief Executive
Officer's total compensation (base salary, annual incentive performance units
plus regular stock options) for target performance between the 50th and the
75th percentiles for chief executive officers of the peer group companies
resulting in an increase in Mr. Goldstein's salary to $900,000 from $800,000.
Because corporate pre-tax earnings exceeded the threshold level, an annual
incentive was awarded to Mr. Goldstein. In addition, due to earnings per share
above the threshold level, a performance unit award was earned. However, both
consolidated pre-tax earnings and earnings per share fell short of targeted
goals; accordingly, the annual incentive and performance unit payouts were
significantly below targeted award levels.

Norman S. Matthews, Chair
Robert A. Bernhard
Arthur B. Newman

Members of the Management
Compensation and Stock
Option Committee

15
<PAGE>

Five-Year Stockholder Return Comparison

Set forth below is a line-graph presentation comparing the cumulative
stockholder return on Common Stock, on an indexed basis, against the cumulative
total returns of the S&P Composite-500 Stock Index and the S&P Retail Composite
Index for the period of the Company's last five fiscal years (January 29, 1993
= 100):

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN ON
TOYS "R" US, INC. COMMON STOCK, S&P 500 AND
S&P RETAIL COMPOSITE INDICES

[LINE CHART APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:]

1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
(Dollars)
TOYS "R" US 100.00 94.80 76.00 57.10 64.90 69.60
S&P 500 INDEX 100.00 112.80 113.40 157.30 198.70 252.20
S&P RETAIL COMPOSITE 100.00 96.80 89.50 96.40 115.10 170.60

Compliance with Section 16(a)

During March 1997 the estate of Shirley Strum Kenny's mother was
liquidated. Among the assets liquidated were the estate's holdings of 1,000
shares of the Company's Common Stock. This sale should have been reported on a
Form 4 during April 1997 but was not. The sale was reported on the Form 5 filed
for Ms. Kenny in March 1998. The Company believes that all other persons who
were subject to Section 16(a) of the Securities Exchange Act for the past
fiscal year complied with the filing requirements thereof. In making this
disclosure, the Company has relied on written representations of its directors
and executive officers and its ten percent holders (if any) and copies of the
reports that they have filed with the Commission.

APPOINTMENT OF AUDITORS

The Board of Directors of the Company has appointed and designated Ernst &
Young LLP, independent auditors, New York, New York, to audit the consolidated
financial statements of the Company for the fiscal year ending January 30,
1999.

Representatives of Ernst & Young LLP are expected to be present at the
meeting and will be afforded the opportunity to make a statement if they desire
to do so, and such representatives are expected to be available to respond to
appropriate questions.

16
<PAGE>

SUBMISSION OF STOCKHOLDER PROPOSALS

Proposals of stockholders to be presented at the annual meeting to be held
in 1999 must be received for inclusion in the Company's proxy statement and
form of proxy by December 28, 1998.

By order of the Board of Directors

ANDRE WEISS
Secretary

April 24, 1998

17
<PAGE>

[TOYS "R" US LOGO APPEARS HERE]

461 From Road
Paramus, New Jersey 07652

[RECYCLED PAPER PRINTED ON
LOGO APPEARS RECYCLED PAPER
HERE]

<PAGE>

TOYS "R" US, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 1998

The undersigned hereby appoints MICHAEL GOLDSTEIN and ROBERT C. NAKASONE,
jointly and severally, proxies with power of substitution, to vote at the Annual
Meeting of Stockholders of TOYS "R" US, INC. to be held June 3, 1998 (including
adjournments), with all the powers the undersigned would possess if personally
present, as specified on the reverse side with respect to the election of
directors (including discretionary authority to accumulate votes) and in
accordance with their discretion on any other business that may come before the
meeting, and revokes all proxies previously given by the undersigned with
respect to the shares covered hereby.

You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. In either event, please sign and
return this card.

(Continued and to be signed on reverse side)

<PAGE>

Please Detach and Mail in the Envelope Provided

[X] Please mark your votes as in this example.

The Board of Directors Recommends a Vote "FOR" Proposal 1.

FOR WITHHELD
1. ELECTION
OF [ ] [ ]
DIRECTORS

For, except vote withheld from the following nominee(s):

- ------------------------------------------------------------------

Election of Directors, Nominees:

Robert A. Bernhard
RoAnn Costin
Michael Goldstein
Calvin Hill
Shirley Strum Kenny
Bruce W. Krysiak
Charles Lazarus
Norman S. Matthews
Howard W. Moore
Robert C. Nakasone
Arthur B. Newman

2. In their discretion upon such other business as may properly be brought
before the meeting.

If this proxy is properly executed and returned, the shares represented hereby
will be voted, if not otherwise specified (or unless discretionary authority to
accumulate votes is exercised), for the named persons nominated as directors.

SIGNATURE DATE
----------------------- ---------------------------

Note: Please date and sign above exactly as name appears on this proxy.
Executors, administrators, trustees, etc. should give full title. If
shares are held jointly, each holder should sign.