UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

~~FORM 10-K~~ ______________________________________

~~ANNUAL~~FORM ~~REPORT PURSUANT TO SECTION 13 OR 15(d)~~ 10-K

~~OF THE SECURITIES EXCHANGE ACT OF 1934~~ ______________________________________

~~For~~ANNUAL ~~the~~REPORT ~~fiscal~~PURSUANT ~~year~~TO ~~ended January 29,~~SECTION ~~2011~~13 OR 15(d)

~~Commission~~OF ~~file~~THE ~~number~~SECURITIES ~~333-164018~~EXCHANGE ACT OF 1934

~~Toys~~For ~~“R”~~the Usfiscal ~~Property~~year ~~Company~~ended IJanuary 28, ~~LLC~~2012

~~(Exact~~Commission ~~name~~file ofnumber ~~registrant as specified in its charter)~~ 333-164018

Delaware		04-3829291
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

______________________________________

One Geoffrey Way Wayne, New Jersey		07470
(Address of principal executive offices)		(Zip code)

Toys “R” Us Property Company I, LLC

(~~973) 617-3500~~Exact name of registrant as specified in its charter)

~~(Registrant’s telephone number, including area code)~~ ______________________________________

Securities registered pursuant to Section 12(b) or 12(g) of the Act:



Delaware		04-3829291
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

None



One Geoffrey Way Wayne, New Jersey		07470
(Address of principal executive offices)		(Zip code)

~~Indicate~~(973) ~~by check mark if the registrant is a well~~617-~~known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x~~ 3500

~~Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15~~(d)Registrant’s oftelephone ~~the~~number, ~~Exchange~~including ~~Act. Yes ¨ No x~~area code)

~~Indicate by check mark whether the 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~~Securities byregistered ~~check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted~~ pursuant to ~~Rule~~ ~~405 of Regulation S-T~~ Section 12(~~§232.405 of this chapter~~b) ~~during~~or ~~the preceding~~ 12 ~~months~~ (org) ~~for~~of ~~such shorter period that~~ the ~~registrants were required to submit and post such files). Yes ¨ No ¨~~ Act:

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 None

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): ______________________________________

~~Large~~Indicate ~~accelerated~~by ~~filer~~check ¨mark ~~Accelerated~~if ~~filer~~the ¨registrant ~~Non-accelerated~~is ~~filer~~a xwell-known ~~(Do~~seasoned ~~not~~issuer, ~~check~~as ifdefined ain ~~smaller~~Rule ~~reporting~~405 ~~company)~~of ~~Smaller~~the ~~reporting~~Securities ~~company~~ Act. Yes ¨ No x

Indicate by check mark whether the registrant is anot ~~shell~~required ~~company~~to ~~(as~~file ~~defined~~reports inpursuant ~~Rule~~to ~~12b-2~~Section 13 or Section 15(d) of the Exchange Act). Yes ¨x No x ¨

AsIndicate ofby ~~April~~check mark whether the registrant (1) ~~28,~~has ~~2011,~~filed all reports required to be filed by Section 13 or 15(d) of ~~our~~the ~~outstanding~~Securities ~~membership~~Exchange ~~interests~~Act ~~were~~of ~~privately~~1934 ~~held~~during bythe ~~our~~preceding ~~sole~~12 ~~member,~~months ~~Wayne~~(or ~~Real~~for ~~Estate~~such ~~Holding~~shorter ~~Company~~period that the registrant was required to file such reports), ~~LLC.~~and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

~~Toys~~Indicate ~~“R”~~by Uscheck ~~Property~~mark ~~Company~~whether Ithe registrants have submitted electronically and posted on their corporate Web site, ~~LLC~~if ~~meets~~any, ~~the~~every ~~conditions~~Interactive ~~set~~Data ~~forth~~File inrequired ~~General~~to ~~Instructions~~be ~~(I)(1)(a)~~submitted and ~~(b)~~ posted pursuant to Rule 405 of ~~Form~~Regulation 10S-KT ~~and~~(§232.405 ~~is therefore~~of ~~filing~~ this ~~form~~chapter) ~~with~~during the ~~reduced~~preceding ~~disclosure~~12 ~~format~~months (or for such shorter period that the registrants were required to submit and post such files). Yes x No ¨

~~DOCUMENTS~~Indicate ~~INCORPORATED~~by BYcheck ~~REFERENCE~~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

~~None~~Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

~~Table~~Large ofaccelerated ~~Contents~~filer ¨ Accelerated filer ¨ Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨

~~Forward~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-~~Looking~~2 ~~Statements~~of the Act). Yes ¨ No x

~~This~~As ~~Annual Report on Form 10-K contains “forward looking” statements within the meaning~~ of ~~Section~~April ~~27A of the Securities Act of 1933~~27, ~~as amended~~2012, ~~and~~all ~~Section 21E~~ of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. All statements herein or therein that are not historical facts, including statements about our ~~beliefs~~outstanding ormembership ~~expectations,~~interests ~~are~~were ~~forward-looking statements.~~privately Weheld ~~generally identify these statements~~ by words or phrases, such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,” “foresee,” “will,” “may,” and similar words or phrases. These statements discuss, among other things, our ~~strategy,~~sole ~~future financial or operational performance~~member, ~~anticipated~~Wayne ~~cost~~Real ~~savings,~~Estate ~~results~~Holding ~~of restructurings~~Company, ~~cash flows generated from operating activities, anticipated developments, future financings, targets and future occurrences and trends~~LLC.

~~These statements are subject to risks, uncertainties, and other factors, including, among others, competition in the retail industry, seasonality of~~ Toys “R” Us –Property ~~Delaware,~~Company ~~Inc.’s (“Toys-Delaware”) business~~I, ~~changes~~LLC inmeets ~~consumer~~the ~~preferences and consumer spending patterns, general economic~~ conditions inset ~~the~~forth ~~United States and other countries~~ in ~~which~~General ~~Toys-Delaware~~Instructions ~~conducts its business, Toys-Delaware’s ability to implement its strategy, our, Toys-Delaware’s and Toys “R” Us, Inc.’s~~ (~~“TRU”~~I)(1)(a) ~~respective substantial level of indebtedness~~ and related debt-service obligations and the covenants in their and our respective debt agreements, availability of adequate financing to us, Toys-Delaware and TRU, Toys-Delaware’s dependence on key vendors of merchandise, international events affecting the delivery of toys and other products to Toys-Delaware’s stores, and such risks, uncertainties and factors set forth under Item(b) ~~1A entitled “RISK FACTORS”~~ of ~~this Annual Report on~~ Form 10-K and inis ~~our~~therefore ~~reports~~filing ~~and~~this ~~documents~~form ~~filed~~ with the ~~Securities~~reduced ~~and~~disclosure ~~Exchange Commission~~format. We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

~~Table~~DOCUMENTS ofINCORPORATED ~~Contents~~BY REFERENCE

~~INDEX~~ None

		PAGE
PART I.
Item 1.	Business		1
Item 1A.	Risk Factors		5
Item 1B.	Unresolved Staff Comments		17
Item 2.	Properties		17
Item 3.	Legal Proceedings		17
Item 4.	(Removed and Reserved)		17
PART II.
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		18
Item 6.	Selected Financial Data		18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		24
Item 8.	Financial Statements and Supplementary Data		25
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		47
Item 9A.	Controls and Procedures		47
Item 9B.	Other Information		47
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance		48
Item 11.	Executive Compensation		48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		48
Item 13.	Certain Relationships and Related Transactions and Director Independence		48
Item 14.	Principal Accounting Fees and Services		52
PART IV.
Item 15.	Exhibits and Financial Statement Schedules		52
SIGNATURES			53
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT			54
INDEX TO EXHIBITS			55

Table of Contents

~~Table~~Forward-Looking ~~of Contents~~Statements

~~PART~~This IAnnual Report on Form 10-K contains “forward looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. All statements herein or therein that are not historical facts, including statements about our beliefs or expectations, are forward-looking statements. We generally identify these statements by words or phrases, such as “anticipate,” “estimate,” “plan,” “project,” “expect,” “believe,” “intend,” “foresee,” “forecast,” “will,” “may,” “outlook,” and similar words or phrases. These statements discuss, among other things, our strategy, future financial or operational performance, anticipated cost savings, results of restructurings, cash flows generated from operating activities, anticipated developments, future financings, targets and future occurrences and trends.

~~ITEM~~These 1statements are subject to risks, uncertainties, and other factors, including, among others, competition in the retail industry, seasonality of Toys “R” Us — Delaware, Inc.'s ~~BUSINESS~~(“Toys-Delaware”) business, changes in consumer preferences and consumer spending patterns, general economic conditions in the United States and other countries in which Toys-Delaware conducts its business, Toys-Delaware’s ability to implement its strategy, our, Toys-Delaware’s and Toys “R” Us, Inc.'s (“TRU”) respective substantial levels of indebtedness and related debt-service obligations and the covenants in their and our respective debt agreements, availability of adequate financing to us, Toys-Delaware and TRU, Toys-Delaware’s dependence on key vendors of merchandise, international events affecting the delivery of toys and other products to Toys-Delaware’s stores, and such risks, uncertainties and factors set forth under Item 1A entitled “RISK FACTORS” of this Annual Report on Form 10-K and in our reports and documents filed with the Securities and Exchange Commission. We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update these statements in light of subsequent events or developments unless required by the Securities and Exchange Commission's rules and regulations. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

AsTable used herein, the “Company,” “we,” “us,” or “our” means Toys “R” Us Property Company I, LLC and its subsidiaries (“TRU Propco I”), except as expressly indicated or unless the context otherwise requires. Our fiscal year ends on the Saturday nearest to January 31 of each calendar year. This Annual Report on Form 10-K focuses on our last three fiscal years ended as follows: fiscal 2010 ended January 29, 2011; fiscal 2009 ended January 30, 2010; and fiscal 2008 ended January 31, 2009. References to fiscals 2010, 2009 and 2008 are to our fiscal years unless otherwise specified. Contents

~~Our Business~~ INDEX

We are a special purpose entity, owned indirectly by TRU and formed in September 2005. Our four wholly-owned subsidiaries own fee and leasehold interests in 357 properties in the United States (collectively, the “Properties” and each, a “Property”). Wayne Real Estate Company, LLC was formed on May 27, 2005 to hold the property of our headquarters located in Wayne, New Jersey. MAP Real Estate, LLC was formed on July 7, 2005 for the purposes of owning our properties located in Massachusetts, Ohio and Pennsylvania. TRU 2005 RE II Trust was formed on November 28, 2005 to hold our property located in Maryland. TRU 2005 RE I, LLC was formed on September 15, 2005 to own the remaining properties that did not fall within the categories of the other three subsidiaries.



		PAGE

PART I.

Item 1.	Business	1
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
Item 4.	Mine Safety Disclosure	17

PART II.

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	54
Item 9A.	Controls and Procedures	54
Item 9B.	Other Information	54

PART III.

Item 10.	Directors, Executive Officers and Corporate Governance	55
Item 11.	Executive Compensation	55
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	55
Item 13.	Certain Relationships and Related Transactions and Director Independence	55
Item 14.	Principal Accounting Fees and Services	59

PART IV.

Item 15.	Exhibits and Financial Statement Schedules	61

SIGNATURES		62

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT		63

INDEX TO EXHIBITS		64

WeTable ~~lease the Properties on a triple-net basis under a master lease to Toys-Delaware, the operating entity for all~~ of TRU’s North American businesses, which operates the majority of the Properties as Toys “R” Us stores, Babies “R” Us stores or side-by-side stores, or subleases them to alternative retailers. Substantially all of our revenues and cash flows are derived from payments from Toys-Delaware under the Amended and Restated Master Lease Agreement (the “TRU Propco I Master Lease”). For the financial statements for fiscal year ended January 29, 2011 and other information about our master tenant, Toys-Delaware (“Master Tenant”), see Exhibit 99.1 to this report. Contents

~~TRU,~~PART through its subsidiary Toys-Delaware, also operates other properties in which the fee and leasehold interests in such properties are owned by the following affiliated entities: MAP 2005 Real Estate, LLC, Toys “R” Us Property Company II, LLC (“Propco II”) and Toys-Delaware. TRU used various criteria to allocate its retail stores to us and our counterparts. Historically, TRU acquired and built stores at various subsidiaries of TRU based primarily on local tax considerations. In 2005, TRU allocated certain properties to various subsidiaries, including the entities that would eventually become Propco II and the Company, for the business purpose of facilitating certain financing arrangements obtained at that time. I

AsITEM ~~of January 29, 2011, we owned fee and leasehold interests in 357 properties domestically, which include the following:~~ 1. BUSINESS

•As ~~235~~used ~~traditional~~herein, ~~toy~~the ~~stores~~“Company,” ~~which~~“we,” ~~typically~~“us,” ~~range~~or in“our” ~~size~~means ~~from~~Toys ~~30,000~~“R” toUs ~~50,000~~Property ~~square~~Company ~~feet~~I, LLC and ~~devote~~its ~~approximately~~subsidiaries 7(“TRU Propco I”),~~000~~ ~~square~~except ~~feet~~as expressly indicated or unless the context otherwise requires. Our fiscal year ends on the Saturday nearest to ~~boutique~~January 31 ~~areas~~of ~~for~~each ~~juvenile~~calendar ~~(including~~year. ~~baby)~~This ~~products~~Annual ~~(Babies~~Report ~~“R”~~on UsForm ~~Express~~10-K ~~and~~focuses ~~Juvenile~~on ~~Expansion~~our ~~formats~~last ~~devote~~three ~~approximately~~fiscal anyears ~~additional~~ended 4as follows: fiscal 2011 ended January 28,~~000~~ ~~square~~2012; ~~feet~~fiscal ~~and~~2010 1ended January 29,~~000~~ ~~square~~2011; ~~feet~~and fiscal 2009 ended January 30, ~~respectively~~2010. References to fiscals 2011, ~~for~~2010 ~~juvenile~~and -2009 ~~including~~are ~~baby~~to -our ~~products);~~fiscal years unless otherwise specified.

•Our ~~66 juvenile stores, which typically range in size from 30,000 to 45,000 square feet and devote approximately 4,000 to 5,000 square feet to traditional toy products;~~Business

•We 52are ~~side-~~a special purpose entity, owned indirectly by TRU and formed in September 2005. Our four wholly-~~side~~owned ~~stores,~~subsidiaries ~~which~~own ~~typically~~fee ~~range~~and leasehold interests in ~~size~~351 ~~from~~properties ~~30,000~~in tothe 50United States (collectively,~~000~~ ~~square~~the ~~feet~~“Properties” and ~~devote~~each, ~~approximately~~a 20“Property”). Wayne Real Estate Company,~~000~~ LLC was formed on May 27, 2005 to 30hold the property of our headquarters located in Wayne,~~000~~ ~~square~~New ~~feet~~Jersey. toMAP ~~traditional~~Real ~~toy~~Estate, ~~products~~LLC was formed on July 7, 2005 for the purposes of owning our properties located in Massachusetts, Ohio and ~~approximately~~Pennsylvania. 10TRU 2005 RE II Trust was formed on November 28,~~000~~ 2005 to 20hold our property located in Maryland. TRU 2005 RE I,~~000~~ ~~square~~LLC ~~feet~~was formed on September 15, 2005 to ~~juvenile~~own ~~(including~~the ~~baby)~~remaining ~~products;~~properties that did not fall within the categories of the other three subsidiaries.

•We 3lease ~~distribution~~the ~~centers~~Properties on a triple-net basis under a master lease to Toys-Delaware, the operating entity for all of TRU’s North American businesses, which ~~range~~operates inthe ~~size~~majority ~~from~~of ~~approximately~~the ~~600~~Properties as Toys “R” Us stores,~~000~~ Babies “R” Us stores or side-by-side stores, or subleases them to 1alternative retailers. Substantially all of our revenues and cash flows are derived from payments from Toys-Delaware under the Amended and Restated Master Lease Agreement (the “TRU Propco I Master Lease”). For the financial statements for fiscal year ended January 28,~~000~~ 2012 and other information about our master tenant,~~000~~ ~~square~~Toys-Delaware ~~feet;~~(“Master Tenant”), see Exhibit 99.1 to this report.

• TRU’s, ~~headquarters~~through its subsidiary Toys-Delaware, also operates other properties in ~~Wayne~~which the fee and leasehold interests in such properties are owned by the following affiliated entities: MAP 2005 Real Estate, NJLLC, ~~which~~Toys is“R” ~~approximately~~Us ~~585~~Property Company II,~~000~~ ~~square~~LLC ~~feet~~(“Propco II”) and Toys-Delaware. TRU used various criteria to allocate its retail stores to us and our counterparts. Historically, TRU acquired and built stores at various subsidiaries of TRU based primarily on local tax considerations. In 2005, TRU allocated certain properties to various subsidiaries, including the entities that would eventually become Propco II and the Company, for the business purpose of facilitating certain financing arrangements obtained at that time.

WeAs ~~believe~~of ~~that the Properties are desirable assets in key locations comprising many characteristics which are difficult to replicate~~January 28, ~~as they are generally located in proven retail corridors along major thoroughfares with good access~~2012, ~~ample~~we ~~parking,~~owned ~~frontage~~fee and ~~visibility.~~leasehold ~~The~~interests ~~Properties~~in ~~are~~351 ~~essential~~properties ~~to the operations of Toys-Delaware~~domestically, ~~generating $2.9 billion of U.S. store revenues,~~ which ~~represented~~ ~~36%~~include ~~of Toys-Delaware’s total U.S. store revenues for fiscal 2010. In~~ the ~~opinion of our management, the Properties are adequately covered by insurance.~~ following:

~~The~~• ~~TRU~~217 ~~Propco~~traditional Itoy ~~Master~~stores, ~~Lease~~which ~~covers~~typically ~~all~~range ofin ~~the~~size ~~Properties~~from ~~and~~20,000 ~~is a triple-net lease requiring Toys-Delaware~~ to ~~pay~~50,000 ~~all~~square ~~costs~~feet and ~~expenses~~devote ~~arising~~approximately ~~in connection with the ownership~~7,000 ~~operating,~~square ~~leasing, use,~~feet ~~maintenance~~to ~~and~~boutique ~~repair~~areas offor ~~the~~juvenile ~~Properties,~~ (including ~~real~~baby) ~~estate~~products ~~taxes~~(Babies ~~and~~“R” ~~assessments,~~Us ~~utility~~Express ~~charges, license~~ and ~~permit~~Juvenile ~~fees~~Expansion ~~and~~formats ~~insurance~~devote ~~premiums,~~approximately ~~among~~an ~~other~~additional ~~things.~~3,000 ~~Each~~square offeet ~~the~~and ~~Properties~~1,000 ~~covered~~square byfeet, ~~the~~respectively, ~~TRU~~for ~~Propco~~juvenile I- ~~Master~~including ~~Lease~~baby ~~requires the payment of a specific rent which will increase by 10% every five years during its 20~~-~~year~~ ~~term. The TRU Propco I Master Lease provides that it is a single and indivisible lease of all the Properties.~~ products);

1• 65 juvenile stores, which typically range in size from 30,000 to 45,000 square feet and devote approximately 4,000 to 5,000 square feet to traditional toy products;

~~Table~~• of65 ~~Contents~~side-by-side stores, which typically range in size from 30,000 to 70,000 square feet and devote approximately 20,000 to 40,000 square feet to traditional toy products and approximately 10,000 to 30,000 square feet to juvenile (including baby) products;

~~Geographic~~• ~~Distribution~~3 ofdistribution ~~Properties~~centers, which range in size from approximately 600,000 to 1,000,000 square feet;

~~The~~• ~~following~~TRU’s ~~table~~headquarters ~~sets~~in ~~forth~~Wayne, ~~the~~NJ, ~~locations~~which ofis ~~the~~approximately ~~Properties as of January 29~~585,000 ~~2011:~~square feet.

Location	Number of Properties
Alabama		2
Alaska		1
Arizona		3
Arkansas		3
California		41
Colorado		4
Connecticut		4
Delaware		1
Florida		30
Georgia		17
Idaho		3
Illinois		15
Indiana		8
Iowa		3
Kansas		5
Kentucky		6
Louisiana		2
Maine		3
Maryland		8
Massachusetts		4
Michigan		20
Minnesota		8
Mississippi		3
Missouri		7
Montana		1
Nebraska		2
Nevada		3
New Hampshire		4
New Jersey		16
New Mexico		1
New York		20
North Carolina		4
North Dakota		1
Ohio		6
Oklahoma		1
Oregon		5
Pennsylvania		12
South Carolina		6
Tennessee		6
Texas		29
Utah		5
Vermont		1
Virginia		15
Washington		11
West Virginia		3
Wisconsin		4
Total(1)		357

We believe that the Properties are desirable assets in key locations comprising many characteristics which are difficult to replicate, as they are generally located in proven retail corridors along major thoroughfares with good access, ample parking, frontage and visibility. The Properties are essential to the operations of Toys-Delaware, generating $2.7 billion of U.S. store revenues, which represented approximately 36% of Toys-Delaware’s total U.S. store revenues for fiscal 2011. In the opinion of our management, the Properties are adequately covered by insurance.

~~(1)~~The ~~Total~~TRU ~~includes~~Propco ~~three~~I ~~distribution~~Master ~~centers~~Lease ~~located~~covers all of the Properties and is a triple-net lease requiring Toys-Delaware to pay all costs and expenses arising in ~~California~~connection with the ownership, ~~Georgia~~operating, leasing, use, maintenance and ~~Maryland~~repair asof ~~well~~the asProperties, ~~TRU’s~~including ~~corporate~~real ~~headquarters~~estate ~~located~~taxes inand ~~Wayne~~assessments, NJutility charges, license and permit fees and insurance premiums, among other things. Each of the Properties covered by the TRU Propco I Master Lease requires the payment of a specific rent which will increase by 10% every five years during its 20-year term. The TRU Propco I Master Lease provides that it is a single and indivisible lease of all the Properties.

2 1

Table of Contents

~~The~~Geographic ~~TRU~~Distribution ~~Propco~~of ~~I Master Lease~~ Properties

The ~~base~~following ~~rent~~table tosets beforth ~~paid by Toys-Delaware to~~ the ~~Company~~locations ~~under the TRU Propco I Master Lease, effective July 9, 2009, increased to approximately $173 million per annum, net~~ of ~~rents due to third parties, subject to 10% increases on July 1, 2014, July 1, 2019 and July 1, 2024. The base rent will be reduced by~~ the ~~rent for~~ Properties ~~that~~as ~~are subject to ground or space leases that expire prior to June 30, 2029. The current base rent for these Properties was approximately $10 million per annum, only approximately $2 million~~ of ~~which relates to leases expiring prior to July~~January 128, 2014 and an additional approximately $4 million of which relates to leases expiring between July 1, 2014 and June 30, 2019. For a more detailed description of the TRU Propco I Master Lease, see Note 4 to the Consolidated Financial Statements entitled “LEASES” and Item 13 entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” of this Annual Report on Form 10-K. 2012:

Leases with Third Parties — Company as Lessee



Location		Number of Properties
Alabama		2
Alaska		1
Arizona		3
Arkansas		3
California		40
Colorado		4
Connecticut		4
Delaware		1
Florida		30
Georgia		16
Idaho		3
Illinois		15
Indiana		8
Iowa		3
Kansas		5
Kentucky		6
Louisiana		2
Maine		3
Maryland		8
Massachusetts		4
Michigan		20
Minnesota		8
Mississippi		3
Missouri		7
Montana		1
Nebraska		2
Nevada		3
New Hampshire		4
New Jersey		16
New Mexico		1
New York		20
North Carolina		4
North Dakota		1
Ohio		6
Oklahoma		1
Oregon		5
Pennsylvania		11
South Carolina		6
Tennessee		6
Texas		26
Utah		5
Vermont		1
Virginia		15
Washington		11
West Virginia		3
Wisconsin		4
Total(1)		351

~~Substantially~~(1) ~~all~~Total ofincludes ~~our~~three ~~leases~~distribution ~~with~~centers ~~third~~located ~~parties~~in ~~where we are the lessee include options that allow us to renew or extend the lease term beyond the initial lease period~~California, ~~subject~~Georgia ~~to terms~~ and ~~conditions~~Maryland ~~agreed~~as ~~upon~~well atas ~~the~~TRU’s ~~inception~~corporate ofheadquarters ~~the~~located ~~lease. Such terms and conditions include rental rates agreed upon at the inception of the lease that could represent below or above market rental rates later~~ in ~~the life of the lease~~Wayne, ~~depending upon market conditions at the time of such renewal or extension~~NJ. In addition, many leases include early termination options, which can be exercised by us under specified conditions, including, upon damage, destruction or condemnation of a specified percentage of the value or land area of the property.

~~Formation Documents~~ 2

~~The~~Table ~~Company and each~~ of our wholly-owned subsidiaries (other than TRU 2005 RE II Trust) is a Delaware limited liability company. TRU 2005 RE II Trust is a Delaware statutory trust. The Company and each of our wholly-owned subsidiaries own no material assets other than the Properties and related assets. The sole equity member of the Company is Wayne Real Estate Holding Company, LLC. Contents

The Company and our wholly-owned subsidiaries were organized solely to acquire, own, hold, sell, assign, transfer, operate, lease and otherwise deal with the Properties, and to exercise all powers enumerated in the Delaware Limited Liability Company Act (and in the case of TRU ~~2005~~Propco REI IIMaster Trust, the Delaware Statutory Trust Act) relating thereto. The Company and our wholly-owned subsidiaries are not permitted to own any asset or property other than their interest in the Properties or other properties and incidental personal property. The Company and our wholly-owned subsidiaries are not permitted to engage in any business other than the ownership, leasing, management and operation of the Properties or other properties. Further, subject to certain exceptions, the Company must maintain an arm’s length relationship with any affiliate, and not enter into or be a party to any transaction other than arm’s length transactions. In addition, the Company and our wholly-owned subsidiaries’ respective organizational documents place certain restrictions on the Company and our wholly-owned subsidiaries’ ability to institute bankruptcy proceedings, liquidate, dissolve, consolidate or merge. No assurance can be given that the Company or any wholly-owned subsidiary will not file for bankruptcy protection or that creditors of the Company or any wholly-owned subsidiary will not initiate a bankruptcy or similar proceeding against the Company or any wholly-owned subsidiary. See Item 1A entitled “RISK FACTORS” of this Annual Report on Form 10-K for further details. Lease

~~Employees~~The net base cash rents to be paid by Toys-Delaware to the Company under the TRU Propco I Master Lease, effective July 9, 2009, increased to approximately $173 million per annum, net of rents due to third parties. As of January 28, 2012, the base rents to be paid by Toys-Delaware were approximately $169 million per annum reduced for lease terminations and properties sold. The rental payments are subject to 10% increases on July 1, 2014, July 1, 2019 and July 1, 2024. The base rent will be reduced by the rent for Properties that are subject to ground or space leases that expire prior to June 30, 2029. For a more detailed description of the TRU Propco I Master Lease, see Note 4 to the Consolidated Financial Statements entitled “LEASES” and Item 13 entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” of this Annual Report on Form 10-K.

AsLeases ~~of January 29, 2011, we employed no individuals. Pursuant to the domestic services agreement and the TRU Propco I Master Lease, Toys-Delaware provides us~~ with ~~services~~Third toParties ~~operate~~— ~~our~~Company ~~Properties,~~as ~~including paying all costs and expenses arising in connection with the ownership, operation, lease, use, maintenance and repair of the Properties.~~ Lessee

~~Our~~Substantially ~~executive~~all ~~officers,~~of ~~together~~our leases with ~~Toys-Delaware~~third ~~pursuant~~parties towhere ~~a domestic~~we ~~services~~are ~~agreement,~~the ~~manages~~lessee ~~our~~include ~~day-to-day~~options ~~operations.~~that ~~Our~~allow ~~day-~~us to~~-day~~ ~~operations~~renew ~~consist~~or ~~primarily~~extend ofthe ~~receipt~~lease ofterm ~~rent~~beyond ~~from~~the ~~Toys-Delaware~~initial lease period, ~~pursuant~~subject to terms and conditions agreed upon at the ~~TRU~~inception ~~Propco~~of Ithe ~~Master~~lease. ~~Lease,~~Such terms and ~~payment~~conditions ofinclude ~~interest~~rental torates agreed upon at the ~~note~~inception ~~holders~~of ~~pursuant~~the tolease that could represent below or above market rental rates later in the ~~terms~~ life of the ~~$950~~lease, ~~million~~depending ~~aggregate~~upon ~~principal~~market ~~amount~~conditions at the time of 10such renewal or extension.~~75%~~ ~~senior~~In ~~unsecured~~addition, ~~notes~~many ~~due~~leases ~~fiscal~~include ~~2017~~early (termination options, which can be exercised by us under specified conditions, including, upon damage, destruction or condemnation of a specified percentage of the ~~“Notes”).~~value or land area of the property.

~~Certain members~~Formation of Toys-Delaware’s management were involved in the negotiation of the TRU Propco I Master Lease on our behalf, and management believes these negotiations resulted in a lease that reflects arm’s length terms and conditions. Future amendments to the TRU Propco I Master Lease may be negotiated on our behalf by certain officers of Toys-Delaware who might perform similar functions on behalf of Toys-Delaware. In addition, certain officers of Toys-Delaware, some of whom might perform similar functions on behalf of Toys-Delaware, may have responsibility for determining whether Toys-Delaware is in compliance with the TRU Propco I Master Lease. Although certain conflicts of interest may arise, such as whether to require compliance with certain covenants under the TRU Propco I Master Lease, the Company believes that in light of the importance of the Properties to both Toys-Delaware and the Company and the mutuality of interest in preserving the value of the Properties, conflicts will be resolved in a manner consistent with an arm’s length transaction. In addition, the officers involved are fully aware of, and intend to fully comply with, the Company’s contractual obligations; which require, among other things, that the Company and Master Tenant deal with one another on an arm’s length basis. Documents

3The Company and each of our wholly-owned subsidiaries (other than TRU 2005 RE II Trust) is a Delaware limited liability company. TRU 2005 RE II Trust is a Delaware statutory trust. The Company and each of our wholly-owned subsidiaries own no material assets other than the Properties and related assets. The sole equity member of the Company is Wayne Real Estate Holding Company, LLC.

~~Table~~The Company and our wholly-owned subsidiaries were organized solely to acquire, own, hold, sell, assign, transfer, operate, lease and otherwise deal with the Properties, and to exercise all powers enumerated in the Delaware Limited Liability Company Act (and in the case of ~~Contents~~TRU 2005 RE II Trust, the Delaware Statutory Trust Act) relating thereto. The Company and our wholly-owned subsidiaries are not permitted to own any asset or property other than their interest in the Properties or other properties and incidental personal property. The Company and our wholly-owned subsidiaries are not permitted to engage in any business other than the ownership, leasing, management and operation of the Properties or other properties. Further, subject to certain exceptions, the Company must maintain an arm’s length relationship with any affiliate, and not enter into or be a party to any transaction other than arm’s length transactions. In addition, the Company and our wholly-owned subsidiaries’ respective organizational documents place certain restrictions on the Company and our wholly-owned subsidiaries’ ability to institute bankruptcy proceedings, liquidate, dissolve, consolidate or merge. No assurance can be given that the Company or any wholly-owned subsidiary will not file for bankruptcy protection or that creditors of the Company or any wholly-owned subsidiary will not initiate a bankruptcy or similar proceeding against the Company or any wholly-owned subsidiary. See Item 1A entitled “RISK FACTORS” of this Annual Report on Form 10-K for further details.

There are certain members of Toys-Delaware management that are also involved in our management, and each of the Company, Toys-Delaware and their respective management teams are fully aware of their obligations under the TRU Propco I Master Lease and intend to comply with their contractual obligations. In the event of certain payment defaults by Toys-Delaware under the TRU Propco I Master Lease, the note holders would have the right to accelerate the debt. As a result, in case a conflict of interest were to arise, the Company and Toys-Delaware would have a common interest to resolve the conflict to avoid the acceleration of the debt. Employees

~~Mortgage~~As ~~Limitations~~of January 28, 2012, we employed no individuals. Pursuant to the domestic services agreement and the TRU Propco I Master Lease, Toys-Delaware provides us with services to operate our Properties, including paying all costs and expenses arising in connection with the ownership, operation, lease, use, maintenance and repair of the Properties.

WeOur ~~have~~executive ~~not~~officers, ~~adopted~~together ~~formal policies~~ with ~~respect~~Toys-Delaware pursuant to ~~investing in real estate or interests in real estate. While we have not adopted~~ a ~~formal~~domestic ~~policy~~services ~~in this regard~~agreement, inmanages ~~the event that we elect to lease or purchase additional properties,~~ our ~~current preference would be~~ day-to-day ~~lease such property~~operations. WeOur ~~currently have no intent~~ day-to-day ~~transfer~~operations ~~properties~~consist orprimarily ~~acquire~~of ~~additional~~receipt ~~properties~~of ~~although~~rent wefrom ~~may~~Toys-Delaware, bepursuant ~~required~~ to ~~sell properties in certain circumstances. We have not adopted an internal policy on~~ the ~~number~~TRU orPropco ~~amount~~I ofMaster ~~mortgages~~Lease, ifand ~~any,~~payment ~~which may be placed on any one piece~~ of ~~property;~~interest ~~however, limitations~~to ~~contained~~the innote ~~our~~holders ~~indenture~~pursuant orto the ~~credit~~terms ~~facilities~~of orthe ~~indentures~~$950 tomillion ~~which~~aggregate ~~TRU~~principal isamount aof ~~party may~~10.75% ~~restrict~~senior ~~our~~unsecured ~~ability~~notes todue ~~mortgage~~fiscal ~~our~~2017 ~~property.~~(the “Notes”).

4Certain members of Toys-Delaware’s management were involved in the negotiation of the TRU Propco I Master Lease on our behalf, and management believes these negotiations resulted in a lease that reflects arm’s length terms and conditions. Future amendments to the TRU Propco I Master Lease may be negotiated on our behalf by certain officers of Toys-Delaware who might perform similar functions on behalf of Toys-Delaware. In addition, certain officers of Toys-Delaware, some of whom might perform similar functions on behalf of Toys-Delaware, may have responsibility for determining whether Toys-Delaware is in compliance with the TRU Propco I Master Lease. Although certain conflicts of interest may arise, such as whether to require compliance with certain covenants under the TRU Propco I Master Lease, the Company believes that in light of the importance of the Properties to both Toys-Delaware and the Company and the mutuality of interest in preserving the value of

~~Table of Contents~~3

~~ITEM~~Table ~~1A.~~of ~~RISK FACTORS~~Contents

~~Investors should carefully consider~~ the ~~risks~~Properties, ~~described~~conflicts ~~below~~will ~~and~~be ~~all~~resolved ~~other~~in ~~information~~a inmanner ~~this~~consistent ~~Annual~~with ~~Report~~an onarm’s ~~Form~~length ~~10-K~~transaction. ~~The~~In ~~risks~~addition, ~~and~~the ~~uncertainties~~officers ~~described~~involved ~~below~~ are ~~not~~fully ~~the~~aware ~~only~~of, ~~ones that we face. Additional risks~~ and ~~uncertainties~~intend ~~not presently known~~ to usfully orcomply ~~that~~with, ~~we currently~~the ~~deem~~Company’s ~~immaterial~~contractual ~~may~~obligations; ~~also~~which ~~impact~~require, ~~our~~among ~~business~~other ~~and~~things, ~~operations.~~that ~~If any of~~ the ~~following~~Company ~~risks~~and ~~actually~~Master ~~occur,~~Tenant ~~our~~deal ~~business,~~with ~~financial~~one ~~condition,~~another ~~cash~~on ~~flows~~an orarm’s ~~results~~length ~~of operations could be materially adversely affected~~basis.

~~Risks~~There ~~Relating~~are certain members of Toys-Delaware management that are also involved in our management, and each of the Company, Toys-Delaware and their respective management teams are fully aware of their obligations under the TRU Propco I Master Lease and intend to comply with their contractual obligations. In the event of certain payment defaults by Toys-Delaware under the TRU Propco I Master Lease, the holders of the Notes would have the right to accelerate the debt. As a result, in case a conflict of interest were to arise, the Company and Toys-Delaware would have a common interest to resolve the conflict to avoid the acceleration of the debt.

~~The only~~Mortgage assets, and sole source of revenue, of the Company are the Properties and the TRU Propco I Master Lease. Additionally, the Properties and the TRU Propco I Master Lease provide the sole source of cash to make payments on the Notes. Limitations

~~The~~We ~~only~~have ~~assets~~not ofadopted ~~the~~formal ~~Company~~policies ~~are~~with ~~the~~respect ~~Properties.~~to ~~The~~investing ~~Company~~in ~~has~~real noestate ~~operations~~or ~~and~~interests ~~generates~~in ~~substantially~~real ~~all~~estate. ofWhile ~~its~~we ~~revenues~~have ~~from payments~~not ~~made~~adopted bya ~~Toys-Delaware~~formal ~~pursuant~~policy toin ~~the~~this ~~terms~~regard, ofin the ~~TRU~~event ~~Propco~~that Iwe ~~Master~~elect ~~Lease.~~to Aslease ~~discussed~~or inpurchase ~~more~~additional ~~detail~~properties, ~~below~~our ~~under~~current “—preference ~~Risks~~would ~~Related~~be to ~~the~~lease ~~Master~~such ~~Tenant’s~~property. ~~and~~We ~~TRU’s~~currently ~~Substantial~~have ~~Indebtedness,”~~no ~~Toys-Delaware~~intent ~~is highly~~to ~~leveraged~~transfer ~~and~~properties ~~will~~or acquire additional properties although we may be required to ~~devote~~sell aproperties ~~substantial~~in ~~portion~~certain ofcircumstances. ~~its~~We ~~cash~~have ~~flow~~not toadopted ~~service~~an ~~its~~internal ~~own~~policy ~~debt.~~on ~~Absent~~the ~~continued~~number ~~payments~~or ~~from~~amount ~~Toys-Delaware~~of ~~under~~mortgages, ~~the~~if ~~TRU~~any, ~~Propco~~which Imay ~~Master~~be ~~Lease~~placed on any one piece of property; however, limitations contained in our indenture or the ~~Company~~credit ~~will~~facilities ~~rely~~or ~~solely~~indentures onto ~~cash~~which onTRU ~~hand~~is ~~and additional~~a ~~borrowings~~party tomay ~~make~~restrict ~~payments~~our onability ~~the~~to ~~Notes.~~mortgage our property.

~~Substantially~~ITEM ~~all of our revenues are generated under the TRU Propco I Master Lease~~1A. ~~Unexpected~~ RISK expenses, termination of the TRU Propco I Master Lease, sales of Properties under the TRU Propco I Master Lease or a bankruptcy of the Master Tenant could have a material impact on our financial condition. FACTORS

~~The~~Investors ~~TRU~~should ~~Propco~~carefully Iconsider ~~Master~~the ~~Lease~~risks ~~provides~~described ~~for~~below ~~significantly~~and all ofother ~~the~~information ~~revenue~~in ~~for~~this ~~the~~Annual ~~Company.~~Report ~~While~~on ~~the~~Form ~~TRU~~10-K. ~~Propco~~The Irisks ~~Master~~and ~~Lease~~uncertainties isdescribed abelow ~~triple-net~~are ~~lease whereby~~not ~~Toys-Delaware,~~the asonly ~~tenant,~~ones isthat ~~obligated~~we toface. ~~pay~~Additional ~~most~~risks ~~operating~~and ~~costs~~uncertainties ~~with~~not ~~respect~~presently known to ~~the Properties~~us, ifor ~~the~~that ~~Company~~we ~~has~~currently ~~unexpected~~believe ~~expenses~~to ~~not~~be ~~covered~~less bysignificant than the ~~TRU~~following ~~Propco~~risk ~~I Master Lease~~factors, ~~the~~may ~~net~~also ~~cash~~adversely ~~flow~~affect ofour ~~the~~business ~~Company~~and ~~could be adversely affected~~operations. ~~Toys-Delaware’s~~If ~~failure~~any toof ~~make~~the ~~payments~~following ~~under~~risks ~~the~~actually ~~TRU~~occur, ~~Propco~~our Ibusiness, ~~Master~~financial ~~Lease~~condition, ~~would~~cash ~~have~~flows aor ~~material~~results ~~adverse~~of ~~effect~~operations oncould ~~our~~be ~~financial~~materially ~~condition.~~adversely affected.

InRisks ~~addition~~Relating to the risk that Toys-Delaware might fail to make payments under the TRU Propco I Master Lease, Toys-Delaware may fail to perform other obligations under the TRU Propco I Master Lease, including the obligations to pay real estate taxes on the Properties and the rent owed under any underlying ground leases or space leases, insure the Properties, maintain the Properties in good repair and condition and in compliance with laws, remediate any environmental problems at the Properties and restore any Property following a casualty or condemnation. The failure of Toys-Delaware to perform these obligations may have a material adverse effect on the value of the Properties and our financial condition. Company

~~Pursuant~~The toonly ~~the~~assets, ~~TRU~~and ~~Propco~~sole Isource ~~Master~~of ~~Lease~~revenue, ~~Toys-Delaware~~of ~~has~~ the ~~option~~Company toare ~~declare~~the ~~properties~~Properties ~~“uneconomic”~~ and ~~request~~ the ~~removal of such properties from the~~ TRU Propco I Master Lease. ~~Upon such a request from Toys-Delaware~~Additionally, the ~~Company~~Properties ~~must~~and ~~use reasonable good faith efforts to sell such properties. The sale of a substantial number of properties under~~ the ~~TRU~~ ~~Propco I Master Lease could have a material adverse effect on our cash flows. For a more detailed description of the~~ TRU Propco I Master Lease, ~~see~~provide ~~Note 4 to~~ the ~~Consolidated~~sole ~~Financial~~source ~~Statements entitled, “LEASES” and Item 13 entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE”~~ of ~~this~~cash ~~Annual~~to ~~Report~~make payments on ~~Form~~the ~~10-K~~Notes.

~~Real estate~~The ~~investments~~only assets of the Company are ~~subject~~the toProperties. ~~various~~The ~~risks~~Company ~~and~~has ~~fluctuations~~no operations and ~~cycles~~generates substantially all of its revenues from payments made by Toys-Delaware pursuant to the terms of the TRU Propco I Master Lease. As discussed in ~~value~~more detail below under “— Risks Related to the Master Tenant’s and ~~demand~~TRU’s Substantial Indebtedness,” ~~many~~Toys-Delaware is highly leveraged and will be required to devote a substantial portion of ~~which~~its ~~are~~cash ~~beyond~~flow ~~our~~to ~~control~~service its own debt. Absent continued payments from Toys-Delaware under the TRU Propco I Master Lease, the Company will rely solely on cash on hand and additional borrowings to make payments on the Notes.

~~Certain~~Substantially ~~events~~all ~~may~~of ~~decrease~~our ~~cash~~revenues ~~available~~are ~~for~~generated ~~payments~~under onthe TRU Propco I Master Lease. Unexpected expenses, termination of the ~~Notes~~TRU Propco I Master Lease, assales ~~well~~of asProperties under the ~~value~~TRU Propco I Master Lease or a bankruptcy of the ~~Properties.~~Master ~~These~~Tenant ~~events~~could ~~include,~~have ~~but~~a ~~are~~material ~~not~~impact ~~limited to:~~on our financial condition.

•The ~~adverse~~TRU ~~changes~~Propco inI ~~national~~Master orLease ~~local~~provides ~~economic~~for ~~and~~significantly ~~demographic~~all ~~conditions;~~of the revenue for the Company. While the TRU Propco I Master Lease is a triple-net lease whereby Toys-Delaware, as tenant, is obligated to pay most operating costs with respect to the Properties, if the Company has unexpected expenses not covered by the TRU Propco I Master Lease, the net cash flow of the Company could be adversely affected. Toys-Delaware’s failure to make payments under the TRU Propco I Master Lease would have a material adverse effect on our financial condition.

•In ~~adverse~~addition ~~changes~~to inthe risk that Toys-Delaware might fail to make payments under the ~~financial~~TRU Propco I Master Lease, Toys-Delaware may fail to perform other obligations under the TRU Propco I Master Lease, including the obligations to pay real estate taxes on the Properties and the rent owed under any underlying ground leases or space leases, insure the Properties, maintain the Properties in good repair and condition and in compliance with laws, remediate any environmental problems at the Properties and restore any Property following a casualty or condemnation. The failure of Toys-Delaware to perform these obligations may have a material adverse effect on the ~~Master~~value ~~Tenant;~~of the Properties and our financial condition.

•Pursuant ~~inability~~to the TRU Propco I Master Lease, Toys-Delaware has the option to ~~collect~~declare ~~rent~~properties “uneconomic” and request the removal of such properties from the TRU Propco I Master ~~Tenant;~~Lease. Upon such a request from Toys-Delaware, the Company must

~~• reductions in the level of demand for commercial space, and changes in the relative popularity of properties;~~4

•Table ~~increases in the supply~~ of ~~or demand for commercial space in a particular area;~~Contents

•use ~~fluctuations~~reasonable ingood ~~interest~~faith ~~rates,~~efforts ~~which~~to sell such properties. The sale of a substantial number of properties under the TRU Propco I Master Lease could ~~adversely~~have ~~affect~~a material adverse effect on our ~~ability,~~cash orflows. ~~the~~For ~~ability~~a more detailed description of ~~buyers~~the ~~and~~TRU ~~tenants~~Propco ofI ~~properties~~Master Lease, see Note 4 to ~~obtain~~the ~~financing~~Consolidated onFinancial ~~favorable~~Statements ~~terms~~entitled, or“LEASES” atand ~~all;~~Item 13 entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” of this Annual Report on Form 10-K.

•Real ~~changes~~estate ~~in,~~investments ~~and~~are ~~changes~~subject into ~~enforcement~~various ~~of,~~risks ~~laws,~~and ~~regulations~~fluctuations and ~~governmental~~cycles ~~policies,~~in ~~including,~~value ~~without limitation, health, safety, environmental, zoning~~ and ~~tax laws~~demand, ~~governmental~~many ~~fiscal~~of ~~policies~~which ~~and~~are ~~the~~beyond ~~Americans~~our ~~with Disabilities Act of 1990;~~control.

•Certain ~~property~~events ~~and~~may ~~casualty~~decrease ~~losses~~cash available for payments on the Notes, ~~some~~as well as the value of ~~which~~the ~~may~~Properties. beThese ~~uninsured;~~events include, but are not limited to:

5• adverse changes in national or local economic and demographic conditions;

~~Table~~• adverse changes in the financial condition of ~~Contents~~the Master Tenant;

• ~~liens,~~inability ~~encumbrances, zoning matters or other matters affecting title~~ to orcollect ~~use~~rent offrom ~~real~~the ~~estate~~Master Tenant;

• ~~asbestos/lead~~reductions ~~related~~in ~~liabilities~~the ~~and~~level ~~costs~~ of ~~containment~~demand ~~or removal and other environmental hazards at the Properties~~ for ~~which~~commercial ~~we may be liable~~space, ~~including~~and ~~those~~changes ~~created~~in bythe ~~prior~~relative ~~owners~~popularity orof ~~occupants, existing tenants, adjacent land or other parties~~properties; ~~and~~

• ~~terrorist~~increases ~~attacks~~in ~~which,~~the ~~among~~supply ~~other things, could lead to damage to one or more~~ of ~~the Properties, result in higher costs for insurance premiums~~ or ~~diminished~~demand ~~availability of insurance coverage~~ for ~~losses~~commercial ~~related~~space toin ~~terrorist~~a ~~attacks.~~particular area;

In• ~~addition,~~fluctuations ~~periods~~in ~~of economic slowdown or recession, rising~~ interest rates, orwhich ~~declining~~could ~~demand~~adversely ~~for~~affect ~~real~~our ~~estate~~ability, or the ~~public~~ability ~~perception that any~~ of ~~these~~buyers ~~events~~and ~~may~~tenants ~~occur, could result in a general decline in market rents or property values. If we cannot operate the Properties to meet our financial expectations, our financial condition, results~~ of ~~operations~~properties, ~~cash flow and ability~~ to ~~satisfy~~obtain ~~our~~financing ~~debt~~on ~~service~~favorable ~~obligations~~terms ~~could~~or beat ~~adversely affected.~~ all;

~~The~~• ~~Company~~changes in, and ~~its~~changes ~~subsidiaries~~in ~~lease~~enforcement of, ~~rather~~laws, ~~than~~regulations ~~own~~and governmental policies, aincluding, ~~significant~~without ~~portion~~limitation, ofhealth, ~~the~~safety, ~~Properties~~environmental, zoning and ~~the~~tax ~~leasing~~laws, ofgovernmental ~~Properties~~fiscal ~~exposes~~policies usand tothe ~~possible~~Americans ~~liabilities~~with ~~and~~Disabilities ~~losses.~~Act of 1990;

Of• ~~the~~property ~~357~~and ~~Properties~~casualty ~~we lease to Toys-Delaware~~losses, ~~182~~some ~~are leased from third parties. Substantially all~~ of ~~these~~which leases include options that allow us to renew or extend the lease term beyond the initial lease period at rental rates agreed upon at the inception of the lease that could represent below or above market rental rates later in the life of the lease. As a result, we may be ~~committed to pay rents at above market rental rates for certain of the Properties now and in the future.~~ uninsured;

Of• ~~the 357 Properties we lease to Toys-Delaware~~liens, ~~113 are on land owned by a third party~~encumbrances, ~~where~~zoning wematters have a leasehold interest via a ground lease. This means that while we have the right to use the property, we do not retain fee ownership in the underlying land. Accordingly, with respect to such Properties, we will have no economic interest in the land or ~~building~~other atmatters ~~the~~affecting ~~expiration~~title ~~of the ground lease if not renewed or if it is terminated due~~ to a breach by us. As a result, although we will share in the income stream derived from the lease, we will not share in any increase in value of the land associated with the underlying Property. Further, because we do not completely control the underlying land, the third party owners that lease this land to us could take certain actions to disrupt our rights in the Properties or ~~Toys-Delaware’s~~use ~~operation~~ of ~~the~~real ~~Properties.~~ estate;

~~Six~~• ofasbestos/lead ~~the~~related ~~underlying~~liabilities ~~space~~and ~~leases,~~costs ~~after~~of ~~giving effect~~containment toor ~~our~~removal ~~renewal~~and ~~options,~~other ~~expire~~environmental ~~prior~~hazards toat the ~~maturity~~Properties offor ~~the~~which ~~Notes.~~we ~~Pursuant~~may tobe ~~the~~liable, ~~TRU~~including ~~Propco~~those Icreated ~~Master~~by ~~Lease,~~prior ~~the~~owners ~~total~~or ~~rent~~occupants, ~~will~~existing betenants, ~~reduced~~adjacent ~~upon~~land aor ~~termination~~other ofparties; ~~the underlying lease.~~ and

~~The~~• ~~Properties~~terrorist ~~are~~attacks ~~concentrated~~which, inamong ~~certain~~other ~~states~~things, ~~and~~could alead ~~downturn~~to damage to one or more of the Properties, result in ~~such~~higher ~~states~~costs ~~could~~for ~~have~~insurance anpremiums ~~adverse~~or ~~affect~~diminished onavailability ~~us.~~of insurance coverage for losses related to terrorist attacks.

~~Toys-Delaware’s~~In ~~ability~~addition, toperiods ~~make payments under the TRU Propco I Master Lease and the market value~~ of ~~the Properties could be adversely affected by~~ economic ~~conditions~~slowdown ~~generally~~ or inrecession, ~~states~~rising ~~where~~interest ~~the Properties~~rates ~~are~~or ~~located,~~declining ~~conditions~~demand infor ~~the~~ real estate, ~~markets~~or ~~where~~ the ~~Properties~~public ~~are~~perception ~~located,~~that ~~changes~~any ~~in governmental rules and fiscal policies, acts~~ of ~~nature,~~these ~~including~~events ~~earthquakes, floods and hurricanes (which~~ may ~~result in uninsured losses)~~occur, ~~and~~ ~~other~~could ~~factors~~result ~~which are beyond the control of the Company. The Properties are located~~ in ~~46 states. The economy of any state in which~~ a ~~Property~~general isdecline ~~located may be adversely affected to a greater degree than that of other areas of the country by certain developments affecting industries concentrated~~ in ~~such~~market ~~state~~rents or ~~region.~~property ~~Moreover, in recent periods, several regions have experienced significant downturns in the market value of real estate~~values. AIf ~~significant~~we ~~percentage~~cannot ofoperate the Properties ~~is located~~to inmeet ~~California~~our ~~(41~~financial ~~Properties~~expectations, orour ~~11%~~financial ~~of the Properties); Florida (30 Properties~~condition, orresults 8% of ~~the Properties); Texas (29 Properties~~operations, orcash 8%flow ofand ~~the~~ability ~~Properties)~~to ~~and~~satisfy ~~New~~our ~~York~~debt ~~(20~~service ~~Properties,~~obligations orcould 6%be ofadversely ~~the Properties)~~affected.

~~Insurance~~The ~~for~~Company and its subsidiaries lease, rather than own, a significant portion of the Properties ~~may~~and bethe ~~inadequate~~leasing of Properties exposes us to ~~cover~~possible ~~future~~liabilities and losses.

~~The~~Of ~~Properties~~the ~~are~~351 ~~covered~~Properties bywe ~~insurance~~lease ~~policies~~to ~~that~~Toys-Delaware, ~~also~~180 ~~cover~~are ~~other~~leased ~~TRU~~from ~~real~~third ~~estate,~~parties. ~~subject~~Substantially toall ~~self~~of ~~insurance~~these ~~retentions.~~leases ~~These~~include ~~policies~~options ~~include~~that ~~property~~allow ~~insurance~~us ~~with~~to arenew ~~per~~or ~~occurrence~~extend ~~coverage~~the ~~limit of~~lease ~~$600~~term ~~million~~beyond ~~(which~~the isinitial ~~less~~lease ~~than~~period ~~the~~at ~~aggregate~~rental ~~principal~~rates ~~amount~~agreed ofupon at the ~~outstanding~~inception ~~Notes).~~of In the ~~event~~lease that ~~such~~could ~~policies~~represent ~~are~~below ~~drawn~~or onabove tomarket ~~cover~~rental ~~losses~~rates onlater ~~real~~in ~~estate~~the ~~other~~life ~~than~~of the ~~Properties,~~lease. ~~the~~As ~~amount~~a ofresult, ~~insurance~~we ~~coverage~~may ~~available~~be ~~under such~~committed ~~policies~~to ~~would~~pay ~~thereby~~rents beat ~~reduced~~above ~~and~~market ~~could~~rental berates ~~insufficient~~for tocertain ~~cover~~of the Properties’ ~~insurable~~now ~~risks.~~and in the future.

~~Additionally~~Of the 351 Properties we lease to Toys-Delaware, ~~there~~112 isare on land owned by a ~~possibility~~ ofthird ~~catastrophic~~party, ~~loss~~where ~~with~~we ~~respect~~have toa ~~each~~leasehold ~~Property~~interest ~~for~~via ~~which~~a ~~insurance~~ground ~~proceeds~~lease. ~~may~~This ~~not~~means bethat ~~adequate~~while ~~(such~~we ashave ~~floods)~~the orright ~~which~~to ~~may~~use ~~result~~the ~~from~~property, ~~risks~~we do not ~~covered~~retain byfee ~~insurance~~ownership in the underlying land. ~~Also~~Accordingly, ~~certain~~with ofrespect ~~the~~to such Properties, ~~are~~we ~~located~~will have no economic interest in ~~states~~the ~~that~~land ~~have been~~or ~~historically~~building at ~~greater~~the ~~risk~~expiration toof ~~acts~~the ofground ~~nature~~lease ~~(such~~if asnot ~~earthquakes,~~renewed ~~hurricanes~~or ~~and~~if ~~floods)~~it is terminated due to a breach by us. As ~~with~~a ~~all~~result, ~~real~~although ~~estate,~~we ifwill ~~reconstruction,~~share ~~(for~~in ~~example,~~the ~~following~~income ~~fire~~stream orderived ~~other~~from ~~casualty)~~the orlease, we will not share in any ~~major~~increase ~~repair~~in orvalue ~~improvement~~of isthe ~~required~~land toassociated a with the underlying Property. Further, ~~changes~~because inwe ~~laws~~do ~~and~~not ~~governmental~~completely ~~regulations~~control ~~may~~the beunderlying ~~applicable~~land, ~~and~~the ~~may~~third ~~materially~~party ~~affect~~owners ~~the~~that ~~cost~~lease this land to us orcould ~~our~~take ~~ability~~certain actions to ~~effect~~disrupt ~~such~~our ~~reconstruction,~~rights ~~major~~in ~~repair~~the Properties or ~~improvement.~~Toys-Delaware’s operation of the Properties.

~~There~~Four ~~can~~of bethe nounderlying ~~assurance~~space ~~that~~leases, ~~the~~after ~~amount~~giving ofeffect ~~earthquake~~to orour ~~flood~~renewal oroptions, ~~property~~expire ~~insurance~~prior ~~currently~~to ~~required~~the ormaturity ~~provided~~of ~~would~~the beNotes. ~~sufficient~~Pursuant to ~~cover~~the ~~damages~~TRU ~~caused~~Propco byI anMaster ~~earthquake or flood or other hazard~~Lease, or ~~that~~the ~~such~~total ~~insurance~~rent will be ~~commercially~~reduced ~~available~~upon ina termination of the ~~future.~~underlying lease.

6The Properties are concentrated in certain states and a downturn in such states could have an adverse affect on us.

~~Table~~Toys-Delaware’s ability to make payments under the TRU Propco I Master Lease and the market value of ~~Contents~~the Properties could be adversely affected by economic conditions generally or in states where the Properties are located, conditions in the real estate markets where the Properties are located, changes in governmental rules and fiscal policies, acts of nature, including earthquakes, floods and hurricanes (which may result in uninsured losses), and other factors which are beyond the control of the Company. The Properties are located in 46 states. The economy of any state in which a Property is located may be

Pursuant to the TRU Propco I Master Lease, we are entirely reliant on Toys-Delaware for providing and maintaining insurance. In addition to the risk that Toys-Delaware may fail to perform these obligations, the risks outlined above are also applicable to the insurance provided and maintained by Toys-Delaware. 5

WeTable ~~may~~of ~~be exposed to material environmental liabilities.~~ Contents

~~While~~adversely weaffected to a greater degree than that of other areas of the country by certain developments affecting industries concentrated in such state or region. Moreover, in recent periods, several regions have ~~established~~experienced ~~procedures~~significant todownturns ~~reduce~~in the ~~likelihood~~market value of ~~incurring~~real ~~liabilities~~estate. ~~under~~A ~~applicable~~significant ~~federal~~percentage of the Properties is located in California (40 Properties, ~~state~~or ~~and~~approximately ~~local~~11% ~~environmental~~of ~~laws~~the Properties); Florida (30 Properties, ~~there~~or ~~may~~approximately be9% ~~material~~of ~~environmental~~the ~~liabilities~~Properties); Texas (26 Properties, or approximately 7% of ~~which~~ wethe ~~are~~Properties) ~~unaware.~~and New York (20 Properties, or approximately 6% of the Properties).

InInsurance ~~addition,~~for ~~no assurances can be given that future laws, ordinances or regulations will not impose any material environmental liability on us or that~~ the ~~current environmental condition of our owned or leased~~ Properties ~~will~~may ~~not~~ be ~~adversely~~inadequate ~~affected~~to bycover ~~conditions~~future ~~at locations in the vicinity of the Properties (such as the presence of leaking underground storage tanks) or by third parties unrelated to us~~losses.

WeThe Properties are ~~entirely~~covered ~~reliant~~by oninsurance ~~Toys-Delaware~~policies ~~pursuant~~that toalso ~~the~~cover other TRU ~~Propco~~real Iestate, ~~Master~~subject ~~Lease~~to ~~for our~~self ~~compliance~~insurance retentions. These policies include property insurance with ~~environmental~~a ~~laws.~~per Inoccurrence ~~addition~~coverage tolimit of $600 million (which is less than the ~~risk~~aggregate principal amount of the outstanding Notes). In the event that ~~Toys-Delaware~~such ~~may~~policies ~~fail~~are drawn on to ~~effect~~cover ~~such~~losses ~~compliance~~on real estate other than the Properties, the ~~risks~~amount ~~outlined~~of ~~above~~insurance incoverage ~~this~~available ~~section~~under ~~are~~such ~~also~~policies ~~applicable~~would thereby be reduced and could be insufficient to ~~such~~cover ~~compliance~~the byProperties’ ~~Toys-Delaware.~~insurable risks.

WeAdditionally, ~~Toys-Delaware~~there is a possibility of catastrophic loss with respect to each Property for which insurance proceeds may not be adequate (such as floods) or ~~TRU~~which may ~~become~~result ~~subject~~from torisks ~~bankruptcy~~not ~~proceedings~~covered ~~and~~by insurance. Also, certain of the Properties are located in states that ~~event~~have ~~our~~been ~~respective~~historically ~~rights~~at greater risk to acts of nature (such as earthquakes, hurricanes and ~~obligations~~floods). As with all real estate, if reconstruction, (for example, following fire or other casualty) or any major repair or improvement is required to a Property, changes in laws and governmental regulations may be ~~subject~~applicable and may materially affect the cost to ~~material~~ ~~modification.~~us or our ability to effect such reconstruction, major repair or improvement.

WeThere ~~and~~can ~~our subsidiaries were formed with the intent that we~~ be a bankruptcy remote entity so as to reduce the likelihood of a bankruptcy of us and our subsidiaries. Although such measures reduce the likelihood that we would incur obligations that would result in a bankruptcy, no assurance ~~can be given~~ that ~~we will not file for bankruptcy protection (including in connection with~~ the ~~commencement~~amount of ~~any~~earthquake ~~bankruptcy proceedings of another TRU entity,~~ or ~~otherwise)~~flood or ~~that~~property ~~our~~insurance ~~creditors~~currently ~~will~~required ~~not~~or ~~initiate~~provided awould ~~bankruptcy~~be orsufficient ~~similar~~to ~~proceeding~~cover ~~against~~damages ~~us.~~caused ~~Because~~by wean ~~are~~earthquake ~~the~~or ~~owner~~flood or ~~lessee~~other ~~of the Properties~~hazard, ~~the~~or ~~possibility~~ that ~~we could become~~ such ainsurance ~~debtor~~will isbe ~~likely~~commercially ~~greater,~~available ~~from~~in ~~a theoretical standpoint, than an entity that merely owns financial assets, because, among other reasons, claims may arise against us from our ownership or operation of~~ the ~~Properties~~future.

~~Delay~~Pursuant into ~~Payments.~~the InTRU ~~the~~Propco ~~event~~I ~~that~~Master Lease, we ~~were~~are toentirely ~~become~~reliant aon ~~debtor~~Toys-Delaware infor aproviding ~~case~~and (amaintaining ~~“Bankruptcy~~insurance. ~~Case”) seeking~~In ~~reorganization~~addition orto ~~other~~the ~~relief~~risk ~~under~~that ~~Title~~Toys-Delaware 11may offail ~~the~~to ~~United~~perform ~~States~~these ~~Code~~obligations, (the ~~“Bankruptcy~~risks ~~Code”),~~outlined aabove ~~delay~~are ~~and/or~~also ~~substantial~~applicable ~~reduction~~to inthe ~~payments~~insurance ~~under~~provided ~~the~~and ~~Notes~~maintained ~~may~~by ~~occur~~Toys-Delaware.

~~Rejection~~We ofmay TRU Propco I Master Lease. If Toys-Delaware were to become a debtor in a Bankruptcy Case, a trustee in bankruptcy for Toys-Delaware (or Toys-Delaware as debtor-in-possession) would have the right, under the Bankruptcy Code, to reject or assume the TRU Propco I Master Lease. If the TRU Propco I Master Lease were so rejected, Toys-Delaware would be ~~required~~exposed to ~~surrender~~material ~~the~~environmental Properties to us and we would have a claim against Toys-Delaware limited to the lesser of (a) our actual damages (if any) as determined under applicable state law and (b) the rent required by the TRU Propco I Master Lease, without acceleration, for the greater of one year, or 15%, not to exceed three years, of the remaining term of the TRU Propco I Master Leaseliabilities. ~~It is impossible to predict how such a claim would be treated in any Toys-Delaware Bankruptcy Case or when any distributions would be made thereon.~~

~~Recharacterization of TRU Propco I Master Lease as financing. The foregoing assumes that the TRU Propco I Master Lease would be treated in bankruptcy as a lease, and not as a financing.~~ While ~~the matter is not free from doubt,~~ we believe that if the issue was properly presented to a court and the court interpreted the relevant law on a basis consistent with the existing legal precedents, the court would hold that the TRU Propco I Master Lease constitutes a true lease. If the TRU Propco I Master Lease were treated as a financing by a bankruptcy court, however, we and Toys-Delaware would have ~~the~~established ~~rights~~procedures ~~and obligations of, respectively, a creditor and debtor, rather than a landlord and tenant. It is difficult~~ to ~~predict~~reduce ~~fully~~ the ~~consequences~~likelihood ~~that would result from this recharacterization, but they would include the potential~~ of aincurring ~~non-consensual~~liabilities ~~restructuring~~under ~~of Toys-Delaware’s~~applicable obligations to us (a “cram-down”); the absence of any requirement on the part of Toys-Delaware to accept or reject the TRU Propco I Master Lease and therefore to surrender the Properties in the event of a rejection; the elimination of Toys-Delaware’s obligation to either (i) payfederal, ~~during~~state ~~the bankruptcy proceeding~~ and ~~prior~~local toenvironmental ~~a TRU Propco I Master Lease rejection~~laws, asthere anmay ~~administrative~~be ~~expense,~~material ~~the~~environmental ~~rents~~liabilities ~~payable under the TRU Propco I Master Lease; or (ii) cure any outstanding monetary defaults prior to any assumption~~ of ~~the~~which ~~TRU~~we ~~Propco~~are I Master Lease and the obligation to repay to Toys-Delaware for the benefit of its estate in bankruptcy payments made to us by Toys-Delaware under the TRU Propco I Master Lease during the one-year preference period prior to the commencement of the Bankruptcy Caseunaware.

~~Pari~~In ~~Passu~~addition, ~~treatment~~no ~~of claims.~~assurances ~~Regardless~~can ~~whether~~be ~~the~~given ~~TRU~~that ~~Propco~~future Ilaws, ~~Master~~ordinances ~~Lease were characterized as a true lease~~ or asregulations awill ~~financing~~not byimpose ~~a bankruptcy court,~~ any ~~claim~~material ~~for~~environmental ~~damages~~liability ~~against~~on ~~Toys-Delaware~~us ~~under~~or that the ~~TRU~~current ~~Propco~~environmental Icondition ~~Master~~of ~~Lease~~our byowned usor ~~(to~~leased ~~the~~Properties ~~extent~~will ~~allowed~~not ~~as discussed~~be ~~above)~~adversely ~~would~~affected beby ~~payable~~conditions ~~only~~at ~~out~~locations ofin the ~~assets~~vicinity of ~~Toys-Delaware~~the ~~available~~Properties ~~for~~ (such ~~payment.~~as ~~Any~~the ~~such~~presence ~~claim~~of ~~would~~leaking ~~rank~~underground ~~pari~~storage ~~passu~~tanks) ~~with~~or ~~all~~by ~~unsecured~~third ~~general~~parties ~~obligations~~unrelated ofto ~~Toys-Delaware~~us.

7We are entirely reliant on Toys-Delaware pursuant to the TRU Propco I Master Lease for our compliance with environmental laws. In addition to the risk that Toys-Delaware may fail to effect such compliance, the risks outlined above in this section are also applicable to such compliance by Toys-Delaware.

~~Table~~We, ofToys-Delaware ~~Contents~~or TRU may become subject to bankruptcy proceedings and in that event our respective rights and obligations may be subject to material modification.

~~Severability~~We ofand ~~TRU~~our ~~Propco~~subsidiaries Iwere ~~Master~~formed ~~Lease.~~with ~~Although~~ the ~~TRU~~intent ~~Propco I Master Lease expresses the intention of the parties thereto~~ that ~~the~~we ~~TRU~~are ~~Propco I Master Lease constitutes~~ a ~~single, integrated lease for all of the Properties, there can be no assurance that a~~ bankruptcy ~~court~~remote ~~would~~entity ~~not~~so ~~permit a trustee in bankruptcy for Toys-Delaware (or Toys-Delaware~~ as ~~debtor-in-possession)~~ to ~~assume~~reduce the ~~TRU~~likelihood ~~Propco~~of Ia ~~Master~~bankruptcy ~~Lease~~of ~~only~~us ~~with~~and ~~respect~~our tosubsidiaries. ~~certain~~Although ~~Properties~~such ~~and~~measures ~~reject~~reduce the ~~TRU~~likelihood ~~Propco I Master Lease with respect to other Properties. In~~ that ~~case,~~ we would beincur ~~entitled~~obligations tothat ~~lease~~would ~~rejection damages~~result ~~(limited~~in asa ~~described~~bankruptcy, ~~above)~~no ~~but~~assurance ~~not~~can ~~rent~~be ~~and~~given ~~other~~that ~~rights~~we towill ~~payment~~not ~~under~~file ~~the~~for ~~TRU~~bankruptcy ~~Propco~~protection I(including ~~Master~~in ~~Lease~~connection with ~~respect to those Properties for which~~ the ~~TRU~~commencement ~~Propco I Master Lease was rejected and the surrender~~ of ~~only~~any ~~such~~bankruptcy ~~Properties. Toys-Delaware~~proceedings ~~would be entitled to remain in possession~~ of ~~those~~another ~~Properties for which the~~ TRU ~~Propco I Master Lease was assumed~~entity, or ~~might~~otherwise) beor ~~authorized~~that toour ~~assign~~creditors ~~the~~will ~~TRU~~not ~~Propco~~initiate Ia ~~Master~~bankruptcy ~~Lease~~or ~~with~~similar ~~respect~~proceeding toagainst ~~some~~us. orBecause ~~all~~we ofare ~~those~~the ~~Properties~~owner ~~to one~~ or ~~more~~ ~~other~~lessee ~~parties~~of ~~who will assume~~ the ~~TRU Propco I Master Lease with respect to those~~ Properties, ~~provided that all existing defaults under~~ the ~~TRU~~possibility ~~Propco~~that Iwe ~~Master~~could ~~Lease~~become ~~with respect to~~ such ~~Properties~~a ~~are~~debtor ~~cured~~is ~~and~~likely wegreater, ~~are~~from ~~provided~~a ~~with “adequate~~theoretical ~~assurance”~~standpoint, ~~(as~~than ~~determined by the bankruptcy court) of future performance by the tenant of its obligations under the TRU Propco I Master Lease~~ with respect to ~~such~~an ~~Properties.~~entity ~~In addition, we may determine~~ that ~~agreeing~~merely toowns ~~a modification~~financial ofassets, ~~the~~because, ~~TRU~~among ~~Propco~~other Ireasons, ~~Master~~claims ~~Lease~~may inarise aagainst ~~Toys-Delaware~~us ~~bankruptcy~~from ~~proceeding~~our ~~would~~ownership beor ~~better~~operation ~~for us than a rejection~~ of the ~~TRU Propco I Master Lease in its entirety by Toys-Delaware followed by a liquidation of Toys-Delaware~~Properties.

NoDelay ~~covenant~~in ~~to operate~~Payments. ~~Toys-Delaware~~In ~~is not required under~~ the ~~TRU~~event ~~Propco~~that Iwe ~~Master~~were ~~Lease~~ to ~~operate~~become ~~any of the Properties as Toys “R” Us or Babies “R” Us stores and is permitted to sublease Properties. As~~ a ~~consequence,~~debtor ~~Properties~~ in ~~which Toys-Delaware is not operating may be maintained to~~ a ~~lesser~~case ~~standard than those in which it is operating, and, in the event of~~ (a “Bankruptcy Case”) ~~involving~~seeking ~~Toys-Delaware,~~reorganization ~~Toys-Delaware~~or ~~may~~other berelief ~~more~~under ~~inclined~~Title to11 ~~reject~~of the ~~TRU~~United ~~Propco~~States ICode ~~Master~~(the ~~Lease~~“Bankruptcy ~~with respect to such Properties~~Code”), ~~assuming~~a ~~the~~delay ~~TRU Propco I Master Lease is not held to be indivisible,~~ and/or ~~reject~~substantial ~~the~~reduction ~~TRU Propco I Master Lease~~ in ~~its~~payments ~~entirety~~under ~~assuming~~ the ~~TRU~~Notes ~~Propco~~may ~~I Master Lease is held to be indivisible, if the number of such Properties is substantial~~occur.

~~Ineffectiveness~~Rejection of ~~bankruptcy-remoteness; consolidation with~~ TRU orPropco ~~Toys-Delaware;~~I ~~fraudulent~~Master ~~conveyance~~Lease. ~~The~~If ~~Company has taken steps that are intended to ensure that the voluntary or involuntary application for relief by TRU or~~ Toys-Delaware under the Bankruptcy Code will not result in the consolidation of the assets and liabilities of the Company and its subsidiaries with those of TRU or Toys-Delaware or their subsidiaries (other than the Company and its subsidiaries). These steps include the maintenance of its own books and records and the requirement that all transactions between the Company, on the one hand, and TRU or Toys-Delaware, on the other hand, and their respective affiliates will be on an arm’s-length basis. In the event, however, that we, Toys-Delaware or TRU were to become a debtor in a Bankruptcy Case, a ~~creditor, receiver, conservator or the~~ trustee in a bankruptcy offor ~~the debtor might request a court to order our assets and liabilities be consolidated with our,~~ Toys-Delaware’s (or ~~TRU’s~~Toys-Delaware ~~assets~~as ~~(including its properties~~debtor-in-possession), aswould have the ~~case may be~~right, ~~for~~under the ~~satisfaction~~Bankruptcy ofCode, ~~claims~~to ~~of creditors~~reject ofor ~~the~~assume ~~debtor. If our assets and liabilities were consolidated with Toys-Delaware,~~ the TRU Propco I Master Lease ~~would be eliminated~~. ~~Alternatively,~~If ~~any such party may seek to avoid any part of~~ the ~~2005~~TRU ~~financing~~Propco ~~transactions~~I asMaster ~~a fraudulent~~Lease ~~transfer.~~were Inso ~~addition~~rejected, ~~any claim described herein against the bankruptcy estate of the Company,~~ Toys-Delaware ~~or TRU~~ would be anrequired ~~unsecured~~to ~~claim~~surrender ~~against~~the ~~such~~Properties ~~bankruptcy~~to ~~estate~~us and, aswe ~~such,~~would ~~full~~have ~~recovery~~a ~~may~~claim beagainst ~~unlikely~~Toys-Delaware ~~and~~limited ~~the extent~~ to ~~which~~ ~~such claim would be paid, and~~ the ~~form~~lesser ~~and timing~~ of ~~such payment, is uncertain. As~~ (a) our ~~result, under such circumstances, the amount and timing of distributions on the Notes would be adversely affected.~~

The Company has two independent members whose approval is required as a condition to the Company’s commencement of a Bankruptcy Case with respect to itself. That requirement will not prevent the commencement of such a Bankruptcy Case (including, in connection with the commencement of any Bankruptcy Case of another TRU entity, or otherwise). 6

~~Risks~~Table ~~Relating~~of ~~to the Master Tenant’s Business~~ Contents

~~Toys-Delaware’s~~actual ~~business~~damages is(if ~~highly~~any) ~~seasonal,~~as ~~and~~determined ~~its~~under ~~financial~~applicable ~~performance~~state ~~depends~~law onand (b) the ~~results~~rent ofrequired by the ~~fourth~~TRU ~~quarter~~Propco ofI ~~each~~Master ~~fiscal~~Lease, ~~year~~without ~~and~~acceleration, asfor athe ~~result~~greater of one year, ~~its~~or ~~operating~~15%, ~~results~~not ~~could~~to ~~be materially~~exceed ~~adversely~~three ~~affected~~years, ifof itthe ~~achieves~~remaining ~~less~~term ~~than~~of ~~satisfactory~~the ~~sales~~TRU ~~prior~~Propco I Master Lease. It is impossible to predict how such a claim would be treated in any Toys-Delaware Bankruptcy Case or ~~during~~when ~~the~~any ~~holiday~~distributions ~~season.~~would be made thereon.

~~Toys-Delaware’s business~~Recharacterization isof ~~highly~~TRU ~~seasonal.~~Propco ~~During~~I ~~fiscals~~Master ~~2010,~~Lease ~~2009~~as ~~and~~financing. ~~2008~~The ~~approximately~~foregoing ~~43%,~~assumes ~~43%~~that ~~and~~the ~~40%,~~TRU ~~respectively,~~Propco ofI ~~Toys-Delaware’s~~Master ~~Total~~Lease ~~revenues~~would ~~were~~be ~~generated~~treated in ~~the~~bankruptcy ~~fourth~~as ~~quarter~~a lease, and not as a financing. ItWhile the matter is ~~typically~~not ~~the~~free ~~case~~from doubt, we believe that ~~Toys-Delaware~~if ~~incurs~~the ~~net~~issue ~~losses in~~was ~~each~~properly ofpresented ~~the~~to ~~first~~a ~~three~~court ~~quarters~~and ofthe court interpreted the ~~year,~~relevant ~~with~~law on a ~~substantial~~basis ~~portion~~consistent ofwith ~~its~~the ~~cash~~existing ~~flows~~legal ~~from~~precedents, ~~operations~~the ~~being~~court ~~generated~~would inhold that the ~~fourth~~TRU ~~quarter~~Propco I Master Lease constitutes a true lease. AsIf the TRU Propco I Master Lease were treated as a ~~result~~financing by a bankruptcy court, however, we and Toys-Delaware ~~depends~~would ~~significantly~~have ~~upon~~ the ~~fourth~~rights ~~quarter~~and ~~holiday~~obligations ~~selling~~of, ~~season.~~respectively, ~~If Toys-Delaware~~a ~~achieves~~creditor ~~less~~and debtor, rather than ~~satisfactory~~a ~~sales,~~landlord ~~operating~~and ~~earnings~~tenant. orIt ~~cash~~is ~~flows~~difficult to predict fully the consequences that would result from ~~operating~~this ~~activities~~recharacterization, ~~during~~but they would include the ~~fourth~~potential ~~quarter,~~of ita ~~may~~non-consensual ~~not~~restructuring beof ~~able~~Toys-Delaware’s obligations to ~~compensate~~us ~~sufficiently~~(a ~~for~~“cram-down”); the ~~lower~~absence ~~sales,~~of ~~operating~~any ~~earnings~~requirement on the part of Toys-Delaware to accept or ~~cash~~reject ~~flows~~the ~~from operating~~TRU ~~activities~~Propco ~~during~~I Master Lease and therefore to surrender the ~~first~~Properties ~~three~~in ~~quarters~~the event of a rejection; the ~~fiscal~~elimination ~~year.~~of InToys-Delaware’s ~~addition~~obligation to either (i) pay, ~~its~~during ~~results~~the inbankruptcy ~~any~~proceeding ~~given~~and ~~period~~prior ~~may~~to bea ~~affected~~TRU byPropco ~~the~~I ~~dates~~Master onLease ~~which~~rejection, ~~important~~as ~~holidays~~an ~~fall~~administrative ~~and~~expense, the ~~shopping~~rents ~~patterns~~payable ~~relating~~under the TRU Propco I Master Lease; or (ii) cure any outstanding monetary defaults prior to ~~those~~any ~~holidays.~~assumption ~~Additionally,~~ of the ~~concentrated~~TRU ~~nature~~Propco ofI Master Lease and the obligation to repay to Toys-Delaware’s ~~seasonal~~for ~~sales~~the ~~means~~benefit ~~that~~of its ~~operating~~estate ~~results~~in ~~could~~bankruptcy bepayments ~~materially~~made ~~adversely~~to ~~affected~~us by ~~natural~~Toys-Delaware ~~disasters~~under ~~and~~the ~~labor~~TRU ~~strikes,~~Propco ~~work~~I ~~stoppages,~~Master ~~terrorist~~Lease ~~acts~~during orthe ~~disruptive~~one-year ~~global~~preference ~~political~~period ~~events,~~ prior to ~~or during~~ the ~~holiday~~commencement ~~season,~~of asthe ~~described~~Bankruptcy ~~below~~Case.

8Pari Passu treatment of claims. Regardless whether the TRU Propco I Master Lease was characterized as a true lease or as a financing by a bankruptcy court, any claim for damages against Toys-Delaware under the TRU Propco I Master Lease by us (to the extent allowed as discussed above) would be payable only out of the assets of Toys-Delaware available for such payment. Any such claim would rank pari passu with all unsecured general obligations of Toys-Delaware.

~~Table~~Severability of ~~Contents~~TRU Propco I Master Lease. Although the TRU Propco I Master Lease expresses the intention of the parties thereto that the TRU Propco I Master Lease constitutes a single, integrated lease for all of the Properties, there can be no assurance that a bankruptcy court would not permit a trustee in bankruptcy for Toys-Delaware (or Toys-Delaware as debtor-in-possession) to assume the TRU Propco I Master Lease only with respect to certain Properties and reject the TRU Propco I Master Lease with respect to other Properties. In that case, we would be entitled to lease rejection damages (limited as described above) but not rent and other rights to payment under the TRU Propco I Master Lease with respect to those Properties for which the TRU Propco I Master Lease was rejected and the surrender of only such Properties. Toys-Delaware would be entitled to remain in possession of those Properties for which the TRU Propco I Master Lease was assumed, or might be authorized to assign the TRU Propco I Master Lease with respect to some or all of those Properties to one or more other parties who will assume the TRU Propco I Master Lease with respect to those Properties, provided that all existing defaults under the TRU Propco I Master Lease with respect to such Properties are cured and we are provided with “adequate assurance” (as determined by the bankruptcy court) of future performance by the tenant of its obligations under the TRU Propco I Master Lease with respect to such Properties. In addition, we may determine that agreeing to a modification of the TRU Propco I Master Lease in a Toys-Delaware bankruptcy proceeding would be better for us than a rejection of the TRU Propco I Master Lease in its entirety by Toys-Delaware followed by a liquidation of Toys-Delaware.

No covenant to operate. Toys-Delaware’s ~~industry~~is not required under the TRU Propco I Master Lease to operate any of the Properties as Toys “R” Us or Babies “R” Us stores and is ~~highly~~permitted ~~competitive~~to sublease Properties. As a consequence, Properties in which Toys-Delaware is not operating may be maintained to a lesser standard than those in which it is operating, and, ~~competitive~~in ~~conditions~~the event of a Bankruptcy Case involving Toys-Delaware, Toys-Delaware may ~~adversely~~be ~~affect~~more inclined to reject the TRU Propco I Master Lease with respect to such Properties, assuming the TRU Propco I Master Lease is not held to be indivisible, or reject the TRU Propco I Master Lease in its ~~revenues~~ ~~and~~entirety ~~overall~~assuming ~~profitability.~~the TRU Propco I Master Lease is held to be indivisible, if the number of such Properties is substantial.

~~The~~Ineffectiveness ~~retail~~of ~~industry~~bankruptcy-remoteness; isconsolidation ~~highly~~with ~~and~~TRU ~~increasingly~~or ~~competitive and~~ Toys-Delaware’s; ~~results~~fraudulent ~~of operations~~conveyance. ~~are~~The ~~sensitive~~Company ~~to,~~has ~~and~~taken ~~may~~steps bethat ~~adversely~~are ~~affected~~intended ~~by,~~to ~~competitive~~ensure ~~pricing,~~that ~~promotional~~the ~~pressures,~~voluntary ~~additional~~or ~~competitor~~involuntary ~~store~~application ~~openings~~for ~~and~~relief ~~other~~by ~~factors.~~TRU Asor aToys-Delaware ~~specialty~~under ~~retailer~~the ~~that~~Bankruptcy ~~primarily~~Code ~~focuses~~will onnot ~~toys~~result ~~and~~in ~~juvenile~~the ~~products, Toys-Delaware~~consolidation ~~competes~~of ~~with~~the ~~discount~~assets and ~~mass~~liabilities ~~merchandisers~~of ~~such~~the asCompany ~~Wal-Mart~~ and ~~Target,~~its ~~electronic~~subsidiaries ~~retailers,~~with ~~national~~those ~~and~~of ~~regional~~TRU ~~specialty~~or ~~chains,~~Toys-Delaware asor ~~well~~their assubsidiaries ~~local~~(other ~~retailers~~than in the ~~geographic~~Company ~~areas~~and ~~Toys-Delaware~~its ~~serves~~subsidiaries). ~~Toys-Delaware~~These ~~also competes~~steps ~~with~~include ~~national~~the ~~and~~maintenance ~~local~~of ~~discount~~its ~~stores,~~own ~~department~~books ~~stores,~~and ~~supermarkets~~records and ~~warehouse~~the ~~clubs~~requirement that all transactions between the Company, ason ~~well~~the asone ~~Internet~~hand, and ~~catalog~~TRU ~~businesses.~~or Toys-Delaware, ~~may~~on bethe ~~vulnerable~~other tohand, ~~the~~and ~~special~~their ~~competitive~~respective ~~pressures~~affiliates ~~from~~will ~~the~~be ~~growing~~on ean arm’s-~~commerce activity~~length inbasis. In the ~~market~~event, ~~both~~however, asthat ~~they~~we, ~~may impact its own e~~Toys-~~commerce~~Delaware ~~business,~~or ~~and~~TRU aswere ~~they~~to ~~may~~become ~~impact~~a ~~the~~debtor ~~operating~~in ~~results~~a ~~and~~Bankruptcy ~~investment~~Case, ~~values~~a ofcreditor, ~~its~~receiver, ~~existing~~conservator ~~physical~~or ~~stores.~~the ~~Competition~~trustee isin ~~principally~~a ~~based~~bankruptcy onof ~~product~~the ~~variety,~~debtor ~~quality~~might ~~and availability,~~request ~~price,~~a ~~convenience~~court orto ~~store~~order ~~location,~~our ~~advertising,~~assets ~~promotion,~~and ~~customer~~liabilities ~~support~~be ~~and~~consolidated ~~service.~~with our, Toys- Delaware’s ~~believes~~or ~~that~~TRU’s ~~some~~assets of(including its ~~competitors~~properties), inas the ~~toys~~case ~~market~~may ~~and~~be, ~~juvenile~~for ~~products~~the ~~market,~~satisfaction asof ~~well~~claims asof increditors of the ~~other~~debtor. ~~markets~~If inour ~~which it~~assets ~~competes~~and liabilities were consolidated with Toys-Delaware, ~~have~~the aTRU ~~larger~~Propco ~~market~~I ~~share~~Master ~~than~~Lease ~~its~~would ~~market~~be ~~share~~eliminated. ~~In addition~~Alternatively, ~~some~~any ofsuch ~~its~~party ~~competitors~~may ~~have~~seek ~~greater~~to ~~financial~~avoid ~~resources,~~any ~~lower~~part ~~merchandise~~of ~~acquisition~~the ~~costs~~2005 ~~and~~financing ~~lower~~transactions ~~operating~~as ~~expenses~~a ~~than~~fraudulent ~~Toys-Delaware does~~transfer.

Much of the merchandise Toys-Delaware sells is also available from various retailers at competitive prices. Discount and mass merchandisers use aggressive pricing policies and enlarged toy-selling areas during the holiday season to increase sales and build traffic for other store departments. Toys-Delaware’s business is vulnerable to shifts in demand and pricing, as well as consumer preferences. Competition in the video game market has increased in recent years as mass merchandisers have expanded their offerings in this market, and as alternative sales channels (such as the Internet) have grown in importance. 7

~~The~~Table ~~baby registry market is highly competitive, with competition based on convenience, quality and selection~~ of merchandise offerings and functionality. Toys-Delaware’s baby registry primarily competes with the baby registries of mass merchandisers and other specialty format and regional retailers. Some of Toys-Delaware’s competitors have been aggressively advertising and marketing their baby registries through national television and magazine campaigns. Within the past few years, the number of multiple registries and online registries has steadily increased. These trends present consumers with more choices for their baby registry needs, and as a result, increase competition for Toys-Delaware’s baby registry. Contents

IfIn ~~Toys-Delaware~~addition, ~~fails~~any toclaim ~~compete~~described ~~successfully~~herein against the bankruptcy estate of the Company, Toys-Delaware ~~could~~or ~~face~~TRU ~~lower~~would ~~sales~~be an unsecured claim against such bankruptcy estate and, ~~may~~as ~~decide~~such, orfull recovery may be ~~compelled~~unlikely and the extent to ~~offer~~which ~~greater~~such ~~discounts~~claim towould ~~its~~be ~~customers~~paid, ~~which~~and ~~could~~the ~~result~~form inand ~~decreased~~timing ~~profitability~~of such payment, is uncertain. As a result, under such circumstances, the amount and timing of distributions on the Notes would be adversely affected.

~~Toys-Delaware~~The Company has two independent members whose approval is required as a condition to the Company’s ~~sales~~commencement ~~may~~of bea ~~adversely~~Bankruptcy ~~affected~~Case bywith ~~changes~~respect into ~~economic~~itself. ~~factors~~That ~~and~~requirement ~~changes~~will not prevent the commencement of such a Bankruptcy Case (including, in ~~consumer~~connection ~~spending~~with ~~patterns.~~the commencement of any Bankruptcy Case of another TRU entity, or otherwise).

~~Many~~Risks ~~economic~~Relating ~~and~~to ~~other factors outside Toys-Delaware’s control, including consumer confidence, consumer spending levels, employment levels, consumer debt levels, inflation and deflation, as well as~~ the ~~availability~~Master of consumer credit, affect consumer spending habits. A significant deterioration in the global financial markets and economic environment, recessions or an uncertain economic outlook adversely affects consumer spending habits and results in lower levels of economic activity. The domestic and international political situation, including the economic health of various political jurisdictions, also affects economic conditions and consumer confidence. Any of these events and factors could cause consumers to curtail spending and could have a negative impact on Toys-DelawareTenant’s ~~financial performance and position in future fiscal periods.~~ Business

Toys-Delaware’s ~~operations~~business ~~have~~is ~~significant~~highly ~~liquidity~~seasonal, and ~~capital~~its ~~requirements~~financial ~~and~~performance ~~depend~~depends on the ~~availability~~results of ~~adequate~~the ~~financing~~fourth onquarter ~~reasonable~~of ~~terms.~~each Iffiscal ~~its~~year ~~lenders~~and, ~~are~~as ~~unable~~a toresult, ~~fund borrowings~~its ~~under~~operating ~~their~~results ~~credit~~could ~~commitments~~be ormaterially ~~Toys-Delaware~~adversely isaffected ~~unable~~if toit ~~borrow,~~achieves itless ~~could~~than ~~have~~satisfactory asales ~~significant~~prior ~~negative~~to ~~effect~~or onduring ~~its~~the ~~business.~~holiday season.

Toys-Delaware’s ~~has~~business ~~significant~~is ~~liquidity~~highly ~~and capital requirements~~seasonal. ~~Among~~During ~~other~~fiscals ~~things~~2011, ~~the~~2010 ~~seasonality~~and 2009 approximately 43%, respectively, of Toys-Delaware’s ~~businesses~~total ~~requires~~revenues itwere ~~to purchase~~generated ~~merchandise well~~ in ~~advance of~~ the fourth quarter ~~holiday selling season~~. Toys-Delaware ~~depends~~typically onincurs ~~its~~net ~~ability~~losses toin ~~generate~~each ~~cash~~of ~~flow~~the ~~from~~first ~~operating~~three ~~activities,~~quarters asof ~~well~~the asyear, onwith ~~borrowings~~a ~~under~~substantial ~~its~~portion ~~revolving~~of ~~credit~~its ~~facility,~~earnings togenerated ~~finance~~in the ~~carrying~~ ~~costs~~fourth ofquarter. ~~this~~As ~~inventory~~a ~~and~~result, toToys-Delaware ~~pay~~depends ~~for~~significantly ~~capital~~upon ~~expenditures~~the ~~and~~fourth ~~operating~~quarter ~~expenses~~holiday selling season. ~~For~~If ~~fiscal~~Toys-Delaware ~~2010~~achieves less than satisfactory sales, ~~peak~~operating ~~borrowings~~earnings ~~under~~or ~~our~~cash ~~revolving~~flows ~~credit~~from ~~facility~~operating ~~amounted~~activities toduring ~~$590~~the ~~million.~~fourth Ifquarter, ~~its~~it ~~lenders~~may ~~are~~not ~~unable~~be able to ~~fund~~compensate ~~borrowings~~sufficiently ~~under~~for ~~its~~the ~~credit commitments~~lower orsales, ~~Toys-Delaware~~operating isearnings ~~unable~~or tocash ~~borrow,~~flows itfrom ~~could~~operating ~~have~~activities aduring ~~significant~~the ~~negative~~first ~~effect~~three onquarters ~~its~~of ~~business~~the fiscal year. In addition, ~~any adverse change to~~ its ~~credit~~results ~~ratings~~in ~~could~~any ~~negatively~~given ~~impact~~period ~~its~~may ~~ability~~be toaffected ~~refinance~~by ~~its~~the ~~debt~~dates on ~~satisfactory~~which ~~terms~~important ~~and could~~holidays ~~have~~fall and the ~~effect~~shopping ofpatterns ~~increasing~~relating ~~its~~to ~~financing~~those ~~costs~~holidays. ~~While~~Additionally, wethe ~~believe~~concentrated nature of Toys-Delaware’s ~~currently~~seasonal ~~has~~sales ~~adequate~~means ~~sources~~that ofits ~~funds~~operating toresults ~~provide~~could ~~for~~be ~~its~~materially ~~ongoing~~adversely ~~operations~~affected ~~and~~by ~~capital~~natural ~~requirements~~disasters ~~for~~and ~~the~~labor ~~next~~strikes, 12work ~~months~~stoppages, ~~any~~terrorist ~~inability~~acts toor ~~have~~disruptive ~~future access~~global topolitical ~~financing~~events, ~~when~~prior ~~needed,~~to ~~would~~or ~~have~~during athe ~~negative~~holiday ~~effect~~season, onas ~~its~~described ~~business~~below.

~~A loss of, or reduction in, trade credit from~~ Toys-Delaware’s ~~vendors~~industry ~~could~~is ~~reduce~~highly ~~its~~competitive ~~liquidity,~~and ~~increase~~competitive ~~its~~conditions ~~working~~may ~~capital~~adversely ~~needs~~affect ~~and/or limit~~ its ~~ability~~revenues toand ~~purchase~~overall ~~products~~profitability.

~~Trade~~The ~~credit~~retail ~~from~~industry is highly and increasingly competitive and Toys-Delaware’s ~~vendors~~results isof anoperations ~~important~~are ~~source~~sensitive ofto, ~~financing~~and ~~for~~may ~~the~~be ~~acquisition~~adversely ofaffected ~~the~~by, ~~inventory~~competitive pricing, promotional pressures, competitor credit programs, additional competitor store openings and other factors. As a specialty retailer that primarily focuses on toys and juvenile products, Toys-Delaware ~~sells~~competes inwith ~~its~~discount ~~stores. Accordingly,~~and ~~the~~mass ~~loss~~merchandisers ofsuch as Wal-Mart and Target, ornational ~~reduction~~and inregional chains and department stores, ~~trade~~as ~~credit~~well ~~could~~as ~~have~~local aretailers ~~significant~~in ~~adverse~~the ~~impact~~market onareas Toys-Delaware’s ~~inventory~~serves. ~~levels~~Toys-Delaware also competes with national and ~~operating~~local ~~cash~~discount ~~flow~~stores, consumer electronics retailers, supermarkets and ~~negatively~~warehouse ~~impact~~clubs, ~~its~~as ~~liquidity~~well as Internet and catalog businesses. Toys-Delaware’s ~~vendors~~ may ~~seek~~be ~~credit insurance~~vulnerable to ~~protect~~the ~~against~~special ~~non-payment~~competitive ofpressures ~~amounts~~from ~~due~~the togrowing ~~them.~~e-commerce Ifactivity ~~credit~~in ~~insurance~~the ismarket, ~~not~~both ~~available~~as tothey ~~vendors~~may atimpact ~~reasonable~~its ~~terms~~own ore-commerce ~~at all~~business, ~~vendors~~and as they may ~~demand~~impact ~~accelerated~~the ~~payment~~operating results and investment values of ~~amounts~~its ~~due~~existing tophysical ~~them~~stores. orCompetition ~~require~~is ~~advance~~principally ~~payments~~based on product variety, price, quality, availability, advertising and promotion, convenience or ~~letters~~store ~~of credit~~location, ~~before~~safety ~~goods~~and ~~are~~customer ~~shipped~~support toand service. Toys- Delaware. ~~Any~~believes ~~adverse~~that ~~changes~~some of its competitors in ~~Toys-Delaware’s~~the ~~trade~~toy ~~credit~~market ~~for~~and ~~these~~juvenile orproducts ~~other~~market, ~~reasons~~as ~~could~~well ~~increase~~as in the ~~costs~~other tomarkets ~~Toys-Delaware~~in ofwhich ~~financing~~it ~~its~~competes, ~~inventory~~have ora ~~negatively~~larger ~~impact~~market share than its ~~ability~~market toshare. ~~deliver products~~In toaddition, some of its ~~customers~~competitors have greater financial resources, ~~which~~lower ~~could~~merchandise inacquisition ~~turn~~costs ~~negatively~~and ~~affect~~lower operating expenses than Toys-Delaware’s ~~financial performance~~does.

9Much of the merchandise Toys-Delaware sells is also available from various retailers at competitive prices. Discount and mass merchandisers use aggressive pricing policies and enlarged toy-selling areas during the holiday season to increase sales and build traffic for other store departments. Toys-Delaware’s business is vulnerable to shifts in demand and pricing, as well as consumer preferences. Competition in the video game market has increased in recent years as mass merchandisers have expanded their offerings in this market, and as alternative sales and distribution channels (such as Internet retailers and electronic distribution of software) have grown in importance.

~~Table~~The baby registry market is highly competitive, with competition based on convenience, quality and selection of ~~Contents~~merchandise offerings and functionality. Toys-Delaware’s baby registry primarily competes with the baby registries of mass merchandisers and other specialty format and regional retailers. Some of Toys-Delaware’s competitors have been aggressively advertising and marketing their baby registries through national television and magazine campaigns. Within the past few years, the number of multiple registries and on-line registries has steadily increased. These trends present consumers with more choices for their baby registry needs, and as a result, increase competition for Toys-Delaware’s baby registry.

~~Toys-Delaware~~If ~~may not retain or attract customers if~~ Toys-Delaware fails to ~~successfully~~compete ~~implement its strategic initiatives~~successfully, ~~which~~Toys-Delaware could ~~result~~face in lower sales and amay ~~failure~~decide or be compelled to ~~realize~~offer ~~the~~greater ~~benefit~~discounts ofto ~~the~~its ~~expenditures~~customers, ~~incurred~~which ~~for~~could ~~these~~result ~~initiatives.~~in decreased profitability.

Toys-Delaware’s ~~continues~~sales to implement a series of customer-oriented strategic programs designed to differentiate and strengthen its core merchandise content and service levels and to expand and enhance its merchandise offerings. Toys-Delaware seeks to improve the effectiveness of its marketing and advertising programs for its “R” Us stores and on-line business. The success of these and other initiatives will depend on various factors, including the implementation of its growth strategy, the appeal of its store formats, its ability to offer new products to customers, its financial condition, its ability to respond to changing consumer preferences and competitive and economic conditions. Toys-Delaware continuously endeavors to minimize its operating expenses, without adversely affecting the profitability of the business. If it fails to implement successfully some or all of its strategic initiatives, it may be ~~unable~~adversely ~~to retain~~affected orby ~~attract~~changes ~~customers, which could result~~ in ~~lower~~economic ~~sales~~factors and achanges ~~failure~~in toconsumer ~~realize~~spending ~~the benefit of the expenditures incurred for these initiatives~~patterns.

IfMany ~~Toys-Delaware~~economic ~~cannot~~and ~~implement~~other ~~its~~factors ~~juvenile~~outside ~~integration~~Toys-Delaware’s ~~strategy~~control, orincluding ~~open~~consumer ~~new stores~~confidence, ~~its~~consumer ~~future~~spending ~~growth~~levels, ~~will be adversely affected.~~

Toys-Delaware’s growth is dependent on both increases in sales in existing stores and the ability to successfully implement its juvenile integration strategy and open profitable new stores. Increases in sales in existing stores are dependent on factors such as competition, merchandise selection, store operations and other factors discussed in these Risk Factors. Toys-Delaware’s ability to successfully implement its juvenile integration strategy in a timely and cost effective manner or open new stores and expand into additional market areas depends in part on the following factors, which are in part beyond Toys-Delaware’s control: 8

•Table ~~the availability~~ of ~~attractive store locations and the ability to accurately assess the demographic or retail environment and customer demand at a given location;~~Contents

•employment levels, consumer debt levels, inflation and deflation, as well as the ~~ability~~availability of consumer credit, affect consumer spending habits. A significant deterioration in the global financial markets and economic environment, recessions or an uncertain economic outlook adversely affects consumer spending habits and results in lower levels of economic activity. The domestic and international political situation, including the economic health of various political jurisdictions, also affects economic conditions and consumer confidence. In addition, changing economic and regulatory conditions and increasing consumer credit delinquencies may cause banks to ~~negotiate~~re-evaluate ~~favorable~~their ~~lease~~lending practices and terms which could have an adverse effect on Toys-Delaware's credit card program and ~~obtain~~consequently, ~~the~~an ~~necessary~~adverse ~~permits~~effect on its sales. Any of these events and ~~zoning~~factors ~~approvals;~~could cause consumers to curtail spending and could have a negative impact on Toys-Delaware’s financial performance and position in future fiscal periods.

•Toys-Delaware’s operations have significant liquidity and capital requirements and depend on the ~~absence~~availability of ~~occupancy~~adequate ~~delays;~~financing on reasonable terms. If its lenders are unable to fund borrowings under their credit commitments or Toys-Delaware is unable to borrow, it could have a significant negative effect on its business.

•Toys-Delaware has significant liquidity and capital requirements. Among other things, the seasonality of Toys-Delaware’s businesses requires it to purchase merchandise well in advance of the fourth quarter holiday selling season. Toys-Delaware depends on its ability to ~~construct~~generate cash flow from operating activities, ~~furnish~~as well as on borrowings under its revolving credit facility, to finance the carrying costs of this inventory and ~~supply~~to apay ~~store~~for incapital expenditures and operating expenses. As of January 28, 2012, Toys-Delaware had no outstanding borrowings under its $1.85 billion secured revolving credit facility (“ABL Facility”). For fiscal 2011, peak borrowings under the ABL Facility were $815 million as Toys-Delaware purchased merchandise for the fourth quarter holiday selling season. If its lenders are unable to fund borrowings under its credit commitments or Toys-Delaware is unable to borrow, it could have a ~~timely~~significant negative effect on its business. In addition, any adverse change to its credit ratings or business could negatively impact its ability to refinance its debt on satisfactory terms and ~~cost~~could ~~effective~~have ~~manner;~~the effect of increasing its financing costs. While we believe Toys-Delaware currently has adequate sources of funds to provide for its ongoing operations and capital requirements for the next 12 months, any inability on Toys-Delaware's part to have future access to financing, when needed, would have a negative effect on its business.

•A ~~the~~loss ~~ability~~of, toor ~~hire~~reduction ~~and~~in, ~~train~~trade ~~new~~credit ~~personnel,~~from ~~especially~~Toys-Delaware’s ~~store~~vendors ~~managers~~could reduce its liquidity, inincrease aits ~~cost~~working ~~effective~~capital ~~manner;~~needs and/or limit its ability to purchase products.

•Trade credit from Toys-Delaware’s vendors is an important source of financing for the acquisition of the inventory Toys-Delaware sells in its stores. Accordingly, the loss of, or reduction in, trade credit could have a significant adverse impact on Toys-Delaware’s inventory levels and operating cash flow and negatively impact its liquidity. Toys-Delaware’s vendors may seek credit insurance to protect against non-payment of amounts due to them. If credit insurance is not available to vendors at reasonable terms or at all, vendors may demand accelerated payment of amounts due to them or require advance payments or letters of credit before goods are shipped to Toys-Delaware. Any adverse changes in Toys-Delaware’s trade credit for these or other reasons could increase the costs to Toys-Delaware of ~~integration~~financing its inventory or negatively impact its ability to deliver products to its customers, which ~~may~~could bein ~~higher~~turn ~~than~~negatively ~~anticipated;~~affect Toys-Delaware’s financial performance.

•Toys-Delaware ~~general~~may ~~economic~~not ~~conditions;~~retain or attract customers if Toys-Delaware fails to successfully implement its strategic initiatives, which could result in lower sales and a failure to realize the benefit of the expenditures incurred for these initiatives.

•Toys-Delaware continues to implement a series of customer-oriented strategic programs designed to differentiate and strengthen its core merchandise content and service levels and to expand and enhance its merchandise offerings. Toys-Delaware seeks to improve the ~~availability~~effectiveness of ~~sufficient~~its ~~funds~~marketing and advertising programs for its “R” Us stores and e-commerce business. The success of these and other initiatives will depend on various factors, including the ~~expansion~~implementation of its growth strategy, the appeal of its store formats, its ability to offer new products to customers, its financial condition, its ability to respond to changing consumer preferences and competitive and economic conditions. Toys-Delaware continuously endeavors to minimize its operating expenses, without adversely affecting the profitability of the business. If it fails to implement successfully some or all of its strategic initiatives, it may be unable to retain or attract customers, which could result in lower sales and a failure to realize the benefit of the expenditures incurred for these initiatives.

~~Delays~~If orToys-Delaware ~~failures~~cannot inimplement ~~successfully implementing~~ its juvenile integration strategy ~~and opening new stores,~~ or ~~achieving~~open ~~lower than expected sales in integrated or~~ new stores, orits ~~drawing~~future ~~a greater than expected proportion of sales in integrated or new stores from existing stores, could materially adversely affect Toys-Delaware’s~~ growth ~~and/or~~will ~~profitability. In addition, Toys-Delaware may not~~ be ~~able~~adversely to anticipate all of the challenges imposed by the expansion of its operations and, as a result, may not meet its targets for integrating, opening new stores or relocating stores or expanding profitablyaffected.

~~Some of~~ Toys-Delaware’s ~~new~~growth ~~stores~~is ~~may~~dependent beon ~~located~~both increases in ~~areas~~sales ~~where~~in itexisting ~~has~~stores ~~little~~and orthe noability ~~meaningful~~to ~~experience.~~successfully ~~Those~~implement ~~markets~~its ~~may~~juvenile ~~have~~integration ~~different~~strategy ~~market~~and ~~conditions,~~open ~~consumer~~profitable ~~preferences~~new ~~and~~stores. ~~discretionary spending~~Increases ~~patterns~~in ~~than~~sales ~~Toys-Delaware’s~~in existing ~~markets, which may cause its new~~ stores toare bedependent ~~less~~on ~~successful~~factors ~~than~~such ~~stores~~as incompetition, ~~its~~merchandise ~~existing~~selection, ~~markets.~~store ~~Other~~operations ~~new~~and ~~stores~~other ~~may~~factors bediscussed ~~located~~ in ~~areas~~these ~~where~~Risk Factors. Toys-Delaware’s ~~has~~ability ~~existing~~to ~~stores.~~successfully ~~Although Toys-Delaware~~implement ~~has~~its ~~experience~~juvenile integration strategy in ~~these~~a ~~markets,~~timely ~~increasing~~and ~~the~~cost ~~number~~effective ofmanner ~~locations~~or ~~may~~open ~~result~~new instores ~~unanticipated~~and ~~over-saturation~~expand ofinto ~~markets~~additional ~~and~~market ~~temporarily~~areas ordepends ~~permanently~~in ~~divert~~part ~~customers~~on ~~and~~the ~~sales~~following ~~from~~factors, ~~its~~which ~~existing~~are ~~stores,~~in ~~thereby~~part ~~adversely~~beyond ~~affecting~~ Toys-Delaware’s ~~overall financial performance.~~

~~Toys-Delaware’s sales may be adversely affected if it fails to respond to changes in consumer preferences in a timely manner.~~ 9

~~Toys-Delaware’s~~Table financial performance depends on its ability to identify, originate and define product trends, as well as to anticipate, gauge and react to changing consumer preferences in a timely manner. Its products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. Its business fluctuates according to changes in consumer preferences dictated in part by fashion trends, perceived value and season. These fluctuations affect the merchandise in stock since purchase orders are written well in advance of the holiday season and, at times, before fashion trends and high-demand brands are evidenced by consumer purchases. If it overestimates the market for its products, it may be faced with significant excess inventories, which could result in increased expenses and reduced margins associated with having to liquidate obsolete inventory at lower prices. Conversely, if it underestimates the market for its products, Toys-Delaware will miss opportunities for increased sales and profits, which would place it at a competitive disadvantage. Contents

Sales of video games and video game systems tend to be cyclical, which may result in fluctuations in Toys-Delaware’s results of operations, and may be adversely affected if products are sold through alternative channels. control:

~~Sales~~• ofthe ~~video~~availability ~~games and video game systems, which have accounted for 9%, 10% and 13%~~ of ~~Toys-Delaware’s~~sufficient ~~annual~~funds ~~Total revenues~~ for ~~fiscals 2010, 2009 and 2008, respectively, have been cyclical in nature in response to~~ the introduction and maturation of new technology. Following the introduction of new video game systems, sales of these systems and related software and accessories generally increase due to initial demand, while sales of older systems and related products generally decrease. Moreover, competition within the video game market has increased in recent years and, due to the large size of this product category, fluctuations in this market could have a material adverse impact on Toys-Delaware’s sales and profits trends. Additionally, if video game systems manufacturers fail to develop new hardware systems, or if new video products are sold in channels other than traditional retail stores, including through direct online distribution to customers, Toys-Delaware’s sales of video game products could decline, which would negatively impact its financial performance. expansion;

10• the availability of attractive store locations and the ability to accurately assess the demographic or retail environment and customer demand at a given location;

~~Table~~• ofthe ~~Contents~~ability to negotiate favorable lease terms and obtain the necessary permits and zoning approvals;

~~The~~• ~~success~~the ~~and~~absence ~~expansion~~ of ~~Toys-Delaware’s~~occupancy ~~on-line business depends on its ability to provide quality service to its Internet customers and if it is not able to provide such services, Toys-Delaware’s future growth will be adversely affected.~~ delays;

~~Toys-Delaware’s~~• ~~Internet~~the ~~operations~~ability ~~are subject~~ to aconstruct, ~~number~~furnish ~~of risks~~ and ~~uncertainties~~supply ~~which~~a ~~are~~store ~~beyond~~in ~~its~~a ~~control,~~timely ~~including~~and ~~the~~cost ~~following:~~effective manner;

• ~~changes~~the inability ~~consumer~~to ~~willingness~~hire toand ~~purchase~~train ~~goods~~new ~~via~~personnel, ~~the~~especially ~~Internet~~store managers, in a cost effective manner;

• ~~increases~~costs inof ~~software~~integration, ~~filters~~which ~~that~~ may ~~inhibit~~be ~~Toys-Delaware’s~~higher ~~ability~~than toanticipated; ~~market its products through e-mail messages to Toys-Delaware’s customers~~ and ~~increases in consumer privacy concerns relating to the Internet;~~

• ~~changes~~general ineconomic ~~technology;~~conditions.

•Delays ~~changes~~or failures in ~~applicable~~successfully ~~federal~~implementing its juvenile integration strategy and ~~state~~opening ~~regulation~~new stores, ~~such~~or asachieving ~~the~~lower ~~Federal~~than ~~Trade~~expected ~~Commission~~sales ~~Act~~in integrated or new stores, ~~the~~or ~~Children~~drawing a greater than expected proportion of sales in integrated or new stores from existing stores, could materially adversely affect Toys-Delaware’s ~~Online~~growth ~~Privacy~~and/or ~~Act~~profitability. In addition, ~~the~~Toys-Delaware ~~Fair~~may ~~Credit~~not ~~Reporting~~be ~~Act~~able ~~and~~to anticipate all of the ~~Gramm-Leach-Bliley~~challenges ~~Act~~imposed ~~and~~by ~~similar~~the ~~types~~expansion of ~~international~~its ~~laws;~~operations and, as a result, may not meet its targets for integrating, opening new stores or relocating stores or expanding profitably.

•Some ~~breaches~~of Toys-Delaware’s new stores may be located in areas where it has little or no meaningful experience. Those markets may have different market conditions, consumer preferences and discretionary spending patterns than Toys-Delaware’s existing markets, which may cause its new stores to be less successful than stores in its existing markets. Other new stores may be located in areas where Toys-Delaware has existing stores. Although Toys-Delaware has experience in these markets, increasing the number of ~~Internet~~locations ~~security;~~may result in unanticipated over-saturation of markets and temporarily or permanently divert customers and sales from its existing stores, thereby adversely affecting Toys-Delaware’s overall financial performance.

~~• failure of~~ Toys-Delaware’s ~~Internet~~sales ~~service~~may ~~providers~~be adversely affected if it fails to ~~perform~~respond ~~their~~to ~~services~~changes ~~properly~~in ~~and~~consumer preferences in a timely ~~and efficient~~ manner;.

~~• failures in~~ Toys-Delaware’s ~~Internet~~financial ~~infrastructure~~performance ordepends on its ability to identify, originate and define product trends, as well as to anticipate, gauge and react to changing consumer preferences in a timely manner. Its products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. Its business fluctuates according to changes in consumer preferences dictated in part by fashion trends, perceived value and season. These fluctuations affect the ~~failure~~merchandise in stock since purchase orders are written well in advance of ~~systems~~the orholiday ~~third~~season ~~parties~~and, ~~such~~at astimes, ~~telephone~~before orfashion ~~electric~~trends ~~power~~and ~~service~~high-demand brands are evidenced by consumer purchases. If it overestimates the market for its products, ~~resulting~~it may be faced with significant excess inventories, which could result in ~~website~~increased ~~downtime~~expenses orand ~~other~~reduced ~~problems;~~margins associated with having to liquidate obsolete inventory at lower prices. Conversely, if it underestimates the market for its products, Toys-Delaware will miss opportunities for increased sales and profits, which would place it at a competitive disadvantage.

•Sales ~~failure~~of byvideo ~~Toys-Delaware~~games toand ~~process~~video ~~on-line~~game ~~customer~~systems ~~orders~~tend ~~properly~~to ~~and~~be ~~on time~~cyclical, which may ~~negatively~~result ~~impact~~in ~~future~~fluctuations onin Toys-~~line~~Delaware’s results of operations, and ~~in-store~~may ~~purchases~~be byadversely ~~such~~affected ~~customers;~~if ~~and~~products are sold through alternative channels.

•Sales ~~failure~~of byvideo games and video game systems, which have accounted for 8%, 9% and 10% of Toys-Delaware’s ~~service~~annual ~~provider~~Total revenues for fiscals 2011, 2010 and 2009, respectively, have been cyclical in nature in response to ~~provide~~the ~~warehousing~~introduction and ~~fulfillment~~maturation ~~services~~of new technology. Following the introduction of new video game systems, sales of these systems and related software and accessories generally increase due to initial demand, while sales of older systems and related products generally decrease. There has not been a new video game system introduced in the past several years, which ~~may~~has negatively ~~impact~~affected ~~future~~Toys-Delaware's sales of video games and video game systems in recent periods. Moreover, competition within the video game market has increased in recent years and, due to the large size of this product category, fluctuations in this market could have a material adverse impact on Toys-~~line~~Delaware’s sales and profits trends. Additionally, if video game systems manufacturers fail to develop new hardware systems, or if new video products are sold in channels other than traditional retail stores, including through direct on-~~store~~line ~~purchases~~distribution byto customers, Toys-Delaware’s sales of video game products could continue to decline, which would negatively impact its financial performance.

IfThe ~~Toys-Delaware~~success isand ~~not~~expansion ~~able~~of ~~to provide satisfactory service to its Internet customers, its future growth will be adversely affected. Further,~~ Toys-Delaware’s ~~may be vulnerable to the special competitive pressures from the growing~~ e-commerce ~~activity~~business independs on its ~~market,~~ability ~~both~~to asprovide ~~they~~quality ~~may~~service ~~impact~~to its ~~own~~Internet ~~e-commerce~~customers ~~business,~~ and asif ~~they~~it ~~may impact~~is ~~the~~not ~~operating~~able ~~results~~to ~~and~~provide ~~investment~~such ~~values~~services, ofToys-Delaware’s ~~its~~future ~~existing~~growth ~~physical~~will ~~stores.~~be adversely affected.

Toys-Delaware’s ~~depends~~Internet onoperations ~~key~~are ~~vendors~~subject to ~~supply~~a ~~the merchandise~~number ~~that~~of itrisks ~~sells to its customers~~ and ~~its~~uncertainties ~~vendors’~~which ~~failure~~are tobeyond ~~supply quality merchandise in a timely manner may damage~~ its ~~reputation~~control, ~~and~~including ~~brands~~the ~~and harm its business.~~ following:

~~Toys-Delaware’s~~• ~~performance~~changes ~~depends,~~ in ~~part,~~consumer onwillingness ~~its ability~~ to purchase ~~its~~goods ~~merchandise~~via in sufficient quantities at competitive prices. Toys-Delaware purchases its merchandise from numerous international and domestic manufacturers and importers. Toys-Delaware has no contractual assurances of continued supply, pricing or access to new products, and any vendor could change the terms upon which they sell to it or discontinue selling to it at any time. Toys-Delaware may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to it in the future. Better than expected sales demand may also lead to customer backorders and lower in-stock positions of its merchandise. Internet;

As• ofincreases ~~fiscal~~in ~~2010,~~software ~~Toys-Delaware~~filters ~~had approximately 1,900 active vendor relationships through which it procures the merchandise~~ that itmay ~~offers~~inhibit ~~to its guests. For fiscal 2010,~~ Toys-Delaware’s ~~top~~ability 20to ~~vendors~~market ~~worldwide, based on~~ its ~~purchase~~products ~~volume~~through ine-mail ~~U.S.~~messages ~~dollars,~~to ~~represented approximately 45% of the total products it purchased.~~ Toys-Delaware’s ~~inability~~customers ~~to acquire suitable merchandise on acceptable terms or the loss of one or more key vendors could have a negative effect on its business~~ and ~~operating~~increases ~~results~~in ~~and~~consumer ~~could~~privacy ~~cause~~concerns itrelating to ~~miss~~the products that it felt were important to its assortment. Toys-Delaware may not be able to develop relationships with new vendors, and products from alternative sources, if any, may be of a lesser quality and/or more expensive than those from existing vendors. Internet;

In• ~~addition,~~changes ~~Toys-Delaware’s~~in vendors are subject to certain risks, including raw material costs, inflation, labor disputes, union organizing activities, financial liquidity, product merchantability, inclement weather, natural disasters and general economic and political conditions that could limit its vendors’ ability to provide Toys-Delaware with quality merchandise on a timely basis and at prices and payment terms that are commercially acceptable. technology;

~~For~~• ~~these~~changes or other reasons, one or more of Toys-Delaware’s vendors might not adhere to its quality control standards, and Toys-Delaware might not identify the deficiency before merchandise ships to its stores or customers. In addition, Toys-Delaware’s vendors may have difficulty adjusting to its changing demands and growing business. Toys-Delaware’s vendors’ failure to manufacture or import quality merchandise in aapplicable ~~timely~~federal and ~~effective~~state ~~manner could damage Toys-Delaware’s reputation and brands~~regulation, ~~and~~such ~~could~~as ~~lead~~the toFederal anTrade ~~increase~~Commission ~~in customer litigation against Toys-Delaware and an attendant increase in Toys-Delaware’s routine and non-routine litigation costs. Further~~Act, ~~any~~the ~~merchandise that does not meet Toys-Delaware~~Children’s ~~quality standards could become subject to a recall, which could damage Toys-Delaware’s reputation and brands and harm Toys-Delaware’s business.~~ Online

11 10

Table of Contents

IfPrivacy ~~Toys-Delaware’s~~Act, ~~vendors~~the ~~fail~~Fair toCredit ~~provide~~Reporting ~~promotional~~Act ~~support~~and ~~consistent~~the ~~with past levels, Toys~~Gramm-~~Delaware’s~~Leach-Bliley ~~sales,~~Act ~~earnings~~ and ~~cash~~similar ~~flow~~types ~~could~~of beinternational ~~adversely affected.~~ laws;

~~Toys-Delaware’s~~• ~~vendors~~breaches ~~typically provide it with promotional support for the sale~~ of ~~their~~Internet products in Toys-Delaware’s store and on Toys-Delaware’s website. Toys-Delaware also receives allowances for volume-related purchases. As part of this support, Toys-Delaware receives allowances, payments and credits from the vendors which reduces its cost of goods sold, supports the promotion and merchandising of the products Toys-Delaware sells and drives sales at its stores and on its website. We cannot assure you that vendors will continue to provide Toys-Delaware with this support consistent with past levels. If Toys-Delaware’s vendors fail to do so, its sales, earnings and cash flow could be adversely affected. security;

~~The~~• ~~decrease~~failure of ~~birth~~Toys-Delaware’s ~~rates~~Internet inservice ~~countries~~providers ~~where~~to ~~Toys-Delaware~~perform ~~operates~~their ~~could~~services ~~negatively~~properly ~~affect~~and ~~its~~in ~~business.~~a timely and efficient manner;

~~Most~~• offailures in Toys-Delaware’s ~~end-customers~~Internet ~~are~~infrastructure ~~newborns~~or ~~and children and, as a result, its revenues are dependent on~~ the ~~birth~~failure ~~rates~~of insystems ~~countries~~or ~~where~~third ~~it operates. In recent years~~parties, ~~many~~such ~~countries have experienced a sharp drop in birth rates~~ as ~~their~~telephone ~~population~~or ~~ages~~electric ~~and~~power ~~education~~service, ~~and~~resulting ~~income levels increase. A continued and significant decline~~ in ~~the~~website ~~number~~downtime ofor ~~newborns~~other ~~and children could have a material adverse effect on Toys-Delaware’s operating results.~~ problems;

If• ~~current~~failure ~~store~~by ~~locations~~Toys-Delaware ~~become~~to ~~unattractive,~~process ~~and~~on-line ~~attractive~~customer ~~new~~orders ~~locations~~properly ~~are~~and ~~not~~on ~~available~~time, ~~for~~which amay ~~reasonable~~negatively ~~price, Toys-Delaware’s~~impact ~~ability~~future toon-line ~~implement~~and ~~its~~in ~~growth~~store ~~strategy~~purchases ~~will~~by besuch ~~adversely~~customers; ~~affected.~~ and

~~The~~• ~~success~~failure ofby ~~any~~Toys-Delaware’s ~~store~~service ~~depends~~provider ~~in substantial part on its location. There can be no assurance that current locations will continue~~ to beprovide ~~attractive~~warehousing asand ~~demographic~~fulfillment ~~patterns~~services, ~~change.~~which ~~Neighborhood~~may ornegatively ~~economic~~impact ~~conditions where stores are located could decline in the~~ future, ~~resulting~~on-line inand ~~potentially reduced sales~~ in ~~these~~store ~~locations.~~purchases Ifby ~~Toys-Delaware cannot obtain desirable locations at reasonable prices, its ability to implement its growth strategy will be adversely affected~~customers.

If Toys-Delaware ~~has~~is ~~substantial~~not ~~obligations~~able ~~under~~to ~~long-term~~provide ~~leases~~satisfactory ~~that~~service ~~could~~to its Internet customers, its future growth will be adversely ~~affect~~affected. Further, Toys-Delaware may be vulnerable to the special competitive pressures from the growing e-commerce activity in its ~~financial~~market, ~~condition~~both as they may impact its own e-commerce business, and ~~prevent~~as itthey ~~from~~may ~~fulfilling~~impact the operating results and investment values of its ~~obligations.~~existing physical stores.

~~As of January 29, 2011,~~ Toys-Delaware ~~leased~~depends ~~804~~on ofkey ~~its~~vendors ~~properties pursuant~~ to ~~long-term~~supply ~~space~~the ~~and~~merchandise ~~ground~~that ~~leases,~~it ~~357~~sells ~~(including~~to ~~three distribution centers and~~ its ~~headquarters)~~customers and 40 (including one distribution center) of which are leased from the Company and MAP 2005 Real Estate, LLC, respectively. Total third party rent expense, net of sublease income, was $192 million, $152 million and $135 million in fiscals 2010, 2009 and 2008, respectively. Total related party rent expense under leases with affiliates other than subsidiaries of Toys-Delaware was $264 million, $258 million and $253 million for fiscals 2010, 2009 and 2008, respectively. Many of Toys-Delaware’s leases provide for scheduled increases in rent. The substantial obligations under its ~~leases could further exacerbate the risks described below under “Toys-Delaware~~vendors’s ~~substantial~~failure ~~indebtedness could adversely affect its ability~~ to ~~raise~~supply ~~additional~~quality ~~capital~~merchandise ~~to fund its operations, limit its ability to react to changes~~ in ~~the~~a ~~economy~~timely ormanner ~~its~~may ~~industries,~~damage ~~expose it to interest rate risk to the extent of~~ its ~~variable~~reputation ~~rate~~and ~~debt~~brands and ~~prevent~~harm ~~it from meeting~~ its ~~obligations under its debt instruments, the TRU Propco I Master Lease and/or other obligations~~business.”

If Toys-Delaware’s ~~is unable~~performance depends, in part, on its ability to ~~renew~~purchase orits ~~replace~~merchandise in sufficient quantities at competitive prices. Toys-Delaware purchases its ~~current~~merchandise ~~store~~from ~~leases~~numerous orinternational ifand itdomestic ismanufacturers ~~unable~~and importers. Toys-Delaware has no contractual assurances of continued supply, pricing or access to ~~enter~~new ~~into~~products, ~~leases~~and ~~for~~any ~~additional~~vendor ~~stores~~could onchange ~~favorable~~the terms, orupon ifwhich ~~one~~they sell to it or ~~more~~discontinue ofselling ~~its~~to ~~current~~it ~~leases~~at ~~are~~any ~~terminated~~time. ~~prior~~Toys-Delaware may not be able to ~~expiration~~acquire ofdesired ~~their~~merchandise ~~stated~~in ~~term~~sufficient ~~and~~quantities on terms acceptable to it ~~cannot~~in ~~find suitable~~the ~~alternate~~future. ~~locations,~~Better ~~Toys-Delaware’s~~than ~~growth~~expected sales demand may also lead to customer backorders and ~~profitability~~lower ~~could~~in-stock bepositions ~~negatively~~of ~~impacted.~~its merchandise.

In fiscal 2011, Toys-Delaware ~~currently~~had ~~leases the~~approximately ~~majority~~1,900 ofactive ~~its~~vendor ~~stores,~~relationships ~~including~~through ~~those~~which ~~leased~~it toprocures the merchandise that it byoffers ~~the~~to ~~Company~~its customers. ~~Most~~For offiscal ~~its~~2011, ~~current~~Toys-Delaware’s ~~leases~~top ~~provide~~20 ~~for~~vendors worldwide, based on its ~~unilateral~~purchase ~~option~~volume toin ~~renew~~U.S. ~~for~~dollars, ~~several~~represented ~~additional~~approximately ~~rental~~45% ~~periods~~of atthe ~~specific~~total ~~rental~~products ~~rates~~it purchased. Toys-Delaware’s ~~ability~~inability to ~~re-negotiate~~ ~~favorable~~acquire ~~terms~~suitable merchandise on anacceptable ~~expiring~~terms ~~lease~~ or tothe ~~negotiate~~loss ~~favorable~~of ~~terms~~one ~~for~~or amore ~~suitable~~key ~~alternate~~vendors ~~location,~~could ~~and~~have ~~its~~a ~~ability~~negative toeffect ~~negotiate~~on ~~favorable~~its ~~lease~~business ~~terms~~and ~~for~~operating ~~additional~~results ~~store~~and ~~locations~~ could ~~depend~~cause onit ~~conditions~~to inmiss ~~the~~products ~~real~~that ~~estate market,~~it ~~competition~~felt ~~for~~were ~~desirable~~important ~~properties~~to ~~and~~its assortment. Toys-Delaware’s ~~relationships~~may ~~with~~not ~~current~~be ~~and~~able ~~prospective~~to ~~landlords~~develop orrelationships ~~may~~with ~~depend~~new onvendors, ~~other~~and ~~factors~~products ~~that~~from ~~are~~alternative ~~not~~sources, ~~within~~if ~~Toys-Delaware’s~~any, ~~control.~~may ~~Any~~be ~~or all~~ of ~~these~~a ~~factors~~lesser quality and/or ~~conditions could~~more ~~negatively~~expensive ~~impact~~than ~~Toys-Delaware’s~~those ~~growth~~from ~~and~~existing ~~profitability~~vendors.

In addition, Toys-Delaware’s ~~business~~vendors isare subject to ~~fluctuations~~various inrisks, ~~foreign currency~~including ~~exchange~~raw ~~rates~~material costs, inflation, labor disputes, union organizing activities, financial liquidity, product merchantability, inclement weather, natural disasters and ~~such~~general ~~fluctuations~~economic ~~may~~and ~~have~~political aconditions ~~material~~that ~~adverse~~could ~~effect~~limit its vendors’ ability to provide Toys-Delaware with quality merchandise on a timely basis and at prices and payment terms that are commercially acceptable. For these or other reasons, one or more of Toys-Delaware’s vendors might not adhere to its quality control standards, and Toys-Delaware might not identify the deficiency before merchandise ships to its stores or customers. In addition, Toys-Delaware’s vendors may have difficulty adjusting to Toys-Delaware's changing demands and growing business. Toys-Delaware’s vendors’ failure to manufacture or import quality merchandise in a timely and effective manner could damage Toys-Delaware’s reputation and brands, ~~financial~~and ~~condition~~could lead to an increase in customer litigation against Toys-Delaware and ~~results~~an ofincrease ~~operations~~in Toys-Delaware’s routine and non-routine litigation costs. Further, any merchandise that does not meet Toys-Delaware’s quality standards could become subject to a recall, which could damage Toys-Delaware’s reputation and brands and harm Toys-Delaware’s business.

~~Exchange~~If ~~rate fluctuations may affect the translated value of~~ Toys-Delaware’s ~~earnings~~vendors ~~and~~fail ~~cash~~to ~~flow~~provide ~~associated~~promotional ~~with~~support ~~its~~consistent ~~international~~with ~~operations,~~past ~~as well as the translation of net asset or liability positions that are denominated in foreign currencies. In Canada~~levels, Toys-Delaware generates revenues and incurs operating expenses and selling, general and administrative expenses denominated in the local currency. In countries where Toys-Delaware does not operate stores, Toys-Delaware’s ~~licensees pay royalties in U.S. dollars. However, as the royalties are calculated based on local currency~~ sales, ~~Toys-Delaware’s~~earnings ~~revenues are still impacted by fluctuations in exchange rates. In fiscal years 2010, 2009~~ and ~~2008,~~cash ~~9%,~~flow 8%could ~~and~~be 8%adversely ~~of Toys-Delaware’s Total revenues, respectively, were completed in a currency other than the U~~affected.S. dollar. In fiscal 2010, Toys-Delaware’s reported operating earnings would have decreased or increased approximately $10 million if the related foreign currencies uniformly weakened or strengthened by 10% relative to the U.S. dollar.

Toys-Delaware’s ~~enters~~vendors ~~into~~typically ~~foreign~~provide ~~exchange~~it ~~agreements~~with ~~from~~promotional ~~time~~support tofor ~~time~~the ~~with~~sale ~~financial~~of ~~institutions~~their toproducts ~~reduce~~in ~~its~~Toys-Delaware’s ~~exposure~~stores toand ~~fluctuations~~on inToys-Delaware’s ~~currency~~website. ~~exchange~~Toys-Delaware ~~rates~~also ~~referred~~receives toallowances asfor ~~hedging~~volume-related ~~activities~~purchases. ~~However~~ As part of this support, ~~these~~Toys-Delaware ~~hedging~~receives ~~activities~~allowances, ~~may~~payments ~~not~~and ~~eliminate~~credits ~~foreign~~from ~~currency~~the ~~risk~~vendors ~~entirely~~which ~~and~~reduce ~~involve~~its ~~costs~~cost of goods sold, supports the promotion and ~~risks~~merchandising of ~~their~~the ~~own~~products Toys-Delaware sells and drives sales at its stores and on its website. ~~Although~~We cannot provide assurance that vendors will continue to provide Toys-Delaware ~~hedges~~with ~~some~~this ~~exposures~~support consistent with past levels. If Toys-Delaware’s vendors fail to ~~changes~~do inso, ~~foreign~~its sales, earnings and cash flow could be adversely affected.

12The decrease of birth rates in countries where Toys-Delaware operates could negatively affect its business.

~~Table~~Most of ~~Contents~~Toys-Delaware’s end-customers are newborns and children and, as a result, its revenues are dependent on the birth rates in countries where it operates. In recent years, many countries have experienced a sharp drop in birth rates as their population ages and education and income levels increase. A continued and significant decline in the number of newborns and

currency exchange rates arising in the ordinary course of business, foreign currency fluctuations may have a material adverse effect on Toys-Delaware’s business, financial condition and results of operations. 11

~~Toys-Delaware’s~~Table ~~results~~of ~~may be adversely affected by fluctuations in raw material and energy costs.~~ Contents

~~Toys-Delaware’s~~children ~~results~~could ~~may~~have bea ~~affected~~material byadverse ~~the~~effect ~~prices of the components and raw materials used in the manufacture of its toys and juvenile products. These prices may fluctuate based~~ on ~~a number of factors beyond~~ Toys-Delaware’s ~~control,~~operating ~~including: oil prices, changes in supply and demand, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates and government regulation~~results. In addition, energy costs have fluctuated dramatically in the past. These fluctuations may result in an increase in Toys-Delaware’s transportation costs for distribution, utility costs for its retail stores and overall costs to purchase products from its vendors.

~~Toys-Delaware~~If ~~may~~current ~~not~~store belocations ~~able~~become ~~to adjust the prices of its products~~unattractive, ~~especially~~ ~~in the short-term, to recover these cost increases in raw materials~~ and ~~energy.~~attractive Anew ~~continual~~locations ~~rise~~are innot ~~raw~~available ~~material~~for ~~and~~a ~~energy~~reasonable ~~costs~~price, ~~could adversely affect consumer spending and demand for~~ Toys-Delaware’s ~~products~~ability ~~and~~to ~~increase~~implement its ~~operating~~ ~~costs,~~growth ~~both~~strategy ofwill ~~which~~be ~~could~~adversely ~~have a material adverse effect on its financial condition and results of operations~~affected.

AThe ~~significant disruption~~success of any store depends in substantial part on its location. There can be no assurance that current locations will continue to ~~Toys-Delaware’s~~be ~~distribution~~attractive ~~network~~as demographic patterns change. Neighborhood or toeconomic ~~the~~conditions ~~timely~~where ~~receipt~~stores ofare ~~inventory~~located could ~~adversely~~decline ~~impact~~in the future, resulting in potentially reduced sales orin ~~increase~~these ~~its~~locations. ~~transportation~~If ~~costs~~Toys-Delaware cannot obtain desirable locations at reasonable prices, ~~which~~its ~~would~~ability ~~decrease~~to implement its ~~profits.~~growth strategy will be adversely affected.

Toys-Delaware ~~relies~~has onsubstantial ~~its~~obligations ~~ability~~under tolong-term ~~replenish~~leases ~~depleted~~that ~~inventory~~could inadversely ~~its~~affect ~~stores through deliveries to~~ its ~~distribution~~financial ~~centers~~condition ~~from vendors~~ and ~~then from~~prevent ~~the~~it distribution centers or direct ship vendors to its stores by various means of transportation, including shipments by sea, rail, air and truck. Unexpected delays in those deliveries or increases in transportation costs (including from ~~increased~~ ~~fuel~~fulfilling ~~costs) could significantly decrease~~ its ~~ability to make sales and earn profits~~obligations. In addition, labor shortages or labor disagreements in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries could negatively affect its business.

~~Product~~As ~~safety issues~~of January 28, 2012, Toys-Delaware leased 806 of its properties pursuant to long-term space and ground leases with third parties (other than subsidiaries of Toys-Delaware), 351 (including ~~product~~three ~~recalls~~distribution centers and its headquarters) and 39 (including one distribution center) of which are leased from the Company and MAP 2005 Real Estate, LLC, respectively. Total third party rent expense, net of sublease income, was $185 million, $192 million and $152 million in fiscals 2011, 2010 and 2009, respectively. Total related party rent expense under leases with affiliates other than subsidiaries of Toys-Delaware was $260 million, $264 million and $258 million for fiscals 2011, 2010 and 2009, respectively. In addition, as of January 28, 2012, Toys-Delaware leased 129 properties from its subsidiary Propco II with total rent expense of $106 million, $107 million and $80 million for fiscals 2011, 2010 and 2009, respectively. Many of Toys-Delaware’s leases provide for scheduled increases in rent. The substantial obligations under its leases could ~~harm~~further exacerbate the risks described below under “Toys-Delaware’s ~~reputation~~substantial indebtedness could adversely affect its ability to raise additional capital to fund its operations, ~~divert~~limit ~~resources~~its ability to react to changes in the economy or its industries, ~~reduce~~expose ~~sales~~it to interest rate risk to the extent of its variable rate debt and ~~increase~~prevent ~~costs.~~it from meeting its obligations under its debt instruments, the TRU Propco I Master Lease and/or other obligations.”

~~The products~~If Toys-Delaware ~~sells~~is inunable ~~its~~to ~~stores~~renew ~~are~~or ~~subject~~replace toits ~~regulation~~current bystore ~~the~~leases ~~Consumer~~or ~~Product~~if ~~Safety~~it ~~Commission~~is ~~and~~unable ~~similar~~to ~~U.S.~~enter ~~state,~~into ~~Canadian~~leases ~~and~~for ~~other~~additional ~~international~~stores ~~regulatory~~on ~~authorities.~~favorable ~~As a result~~terms, ~~such~~or ~~products~~if ~~have~~one ~~been~~or ~~and~~more ~~could~~of beits incurrent ~~the future~~leases ~~subject~~are toterminated ~~recalls~~prior ~~and other remedial actions. Product safety concerns may require Toys-Delaware~~ to ~~voluntarily~~expiration ~~remove~~of ~~selected~~their ~~products~~stated ~~from~~term ~~its stores. Such recalls~~ and ~~voluntary~~it ~~removal~~cannot offind ~~products~~suitable ~~can~~alternate ~~result in~~locations, ~~among other things, lost sales, diverted resources, potential harm to~~ Toys-Delaware’s ~~reputation~~growth and ~~increased~~profitability ~~customer service costs, which~~ could ~~have~~be anegatively ~~material adverse effect on Toys-Delaware’s financial condition~~impacted.

Toys-Delaware currently leases the majority of its stores, including those leased to it by the Company. Most of its current leases provide for its unilateral option to renew for several additional rental periods at specific rental rates. Toys-Delaware’s ~~business~~ability ~~exposes~~to itre-negotiate favorable terms on an expiring lease or to ~~personal~~negotiate ~~injury~~favorable terms for a suitable alternate location, and ~~product~~its ~~liability~~ability ~~claims~~to ~~which~~negotiate favorable lease terms for additional store locations could ~~result~~depend on conditions in ~~adverse~~the ~~publicity~~real estate market, competition for desirable properties and ~~harm~~Toys-Delaware’s torelationships ~~its brands~~with current and ~~its~~prospective ~~results~~landlords ofor ~~operations~~may depend on other factors that are not within Toys-Delaware’s control. Any or all of these factors and conditions could negatively impact Toys-Delaware’s growth and profitability.

Toys-Delaware’s business is ~~from time to time~~ subject to ~~claims~~fluctuations ~~due to the injury of an individual~~ in ~~its stores~~foreign orcurrency onexchange ~~its~~rates ~~property.~~and Insuch ~~addition,~~fluctuations ~~Toys-Delaware~~may has in the past been subject to product liability claims for the products that it sells. Subject to certain exceptions, Toys-Delaware’s purchase orders generally require the manufacturer to indemnify it against any product liability claims; however, if the manufacturer does not have ~~insurance or becomes insolvent, there is~~ a ~~risk~~material ~~that~~adverse ~~Toys-Delaware~~effect ~~would~~on ~~not~~its ~~be indemnified. Any personal injury or product claim made against Toys-Delaware~~business, ~~whether~~financial orcondition ~~not it has merit, could be time consuming~~ and ~~costly to defend, result in adverse publicity, or damage to Toys-Delaware’s reputation, and have an adverse effect on Toys-Delaware’s~~ results of operations.

~~Adverse~~Exchange ~~litigation~~rate ~~judgments~~fluctuations may affect the translated value of Toys-Delaware’s earnings and cash flow associated with its international operations, as well as the translation of net asset or ~~settlements~~liability ~~resulting~~positions ~~from~~that ~~legal~~are ~~proceedings~~denominated in ~~which~~foreign currencies. In Canada, Toys-Delaware ~~may~~generates berevenues ~~involved~~and ~~could~~incurs ~~expose~~operating itexpenses ~~to monetary~~and ~~damages~~selling, orgeneral ~~limit~~and ~~its~~administrative ~~ability~~expenses todenominated in the local currency. In countries where Toys-Delaware does not operate ~~its~~stores, ~~business~~Toys-Delaware’s licensees pay royalties in U.S. dollars. However, as the royalties are calculated based on local currency sales, Toys-Delaware’s revenues are still impacted by fluctuations in exchange rates. In fiscal years 2011, 2010 and 2009, 9%, 9% and 8% of Toys-Delaware’s Total revenues, respectively, were completed in a currency other than the U.S. dollar. In fiscal 2011, Toys-Delaware’s reported operating earnings would have decreased or increased $10 million if the related foreign currencies uniformly weakened or strengthened by 10% relative to the U.S. dollar.

Toys-Delaware isenters ~~involved~~into inforeign ~~private~~exchange ~~actions,~~agreements ~~investigations~~from ~~and~~time ~~various other~~to ~~legal~~time ~~proceedings~~with byfinancial ~~employees,~~institutions ~~suppliers,~~to ~~competitors,~~reduce ~~shareholders,~~its ~~government~~exposure ~~agencies~~to orfluctuations ~~others.~~in ~~The~~currency ~~results~~exchange ofrates ~~such~~referred ~~litigation,~~to ~~investigations~~as ~~and~~hedging ~~other~~activities. ~~legal~~However, ~~proceedings~~these ~~are~~hedging ~~inherently~~activities ~~unpredictable.~~may ~~Any~~not ~~claims~~eliminate ~~against~~foreign ~~Toys-Delaware, whether~~currency ~~meritorious~~risk orentirely ~~not,~~and ~~could~~involve becosts ~~time~~and ~~consuming,~~risks ~~result~~of intheir ~~costly~~own. ~~litigation,~~Although ~~require~~Toys-Delaware ~~significant~~hedges ~~amounts~~some ofexposures ~~management~~to ~~time~~changes ~~and~~in ~~divert~~foreign ~~significant~~currency ~~resources.~~exchange Ifrates ~~any~~arising ofin ~~these~~the ~~legal~~ordinary ~~proceedings~~course ~~were~~of tobusiness, beforeign ~~determined~~currency ~~adversely~~fluctuations tomay ~~Toys-Delaware, there~~have ~~could be~~ a material adverse effect on Toys-Delaware’s business, financial condition and results of operations.

13Because of Toys-Delaware's extensive international activities, we could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.

~~Table~~The ofUnited ~~Contents~~States Foreign Corrupt Practices Act, and similar worldwide anti-bribery laws generally prohibit companies and

~~Toys-Delaware is subject to certain regulatory and legal requirements. If it fails to comply with regulatory or legal requirements, its business and financial results may be adversely affected.~~ 12

~~Toys-Delaware~~Table is subject to numerous regulatory and legal requirements. Its policies, procedures and internal controls are designed to comply with all applicable laws and regulations, including those imposed by the Federal Trade Commission, the Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commission (“SEC”). In addition, its business activities require it to comply with complex regulatory and legal issues on a local, national and worldwide basis (including, in some cases, more stringent local labor law or regulations). Failure to comply with such laws and regulations could adversely affect its operations and financial results, involve significant expense and divert management’s attention and resources from other matters, which in turn could harm its business. Contents

their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Toys-Delaware’'s ~~business~~policies ~~operations~~mandate ~~could~~compliance bewith ~~disrupted~~these ifanti-bribery ~~its~~laws. We ~~information~~cannot ~~technology~~provide ~~systems~~assurance ~~fail~~that toToys-Delaware's ~~perform adequately~~internal orcontrol policies and procedures always will protect Toys-Delaware isfrom ~~unable~~reckless toor ~~protect~~criminal acts committed by the ~~integrity~~employees ~~and~~or ~~security~~agents of Toys-Delaware. Violations of these laws, or allegations of such violations, could disrupt Toys-Delaware's business and result in a material adverse effect on its ~~customers’~~financial ~~information.~~condition, results of operations and cash flows.

~~Toys-Delaware~~International ~~depends largely~~events ~~upon~~could ~~its~~delay ~~information~~or ~~technology~~prevent ~~systems in~~ the ~~conduct~~delivery of ~~all~~products ~~aspects~~to ~~of its operations. If~~ Toys-Delaware’s ~~information technology systems fail to perform as anticipated~~stores, ~~Toys-Delaware~~which could ~~experience~~negatively ~~difficulties~~affect ~~in virtually any areas of~~ its operations, including but not limited to replenishing inventories or in delivering its products to store locations in response to consumer demands. Any of these or other systems-related problems could, in turn, adversely affect Toys-Delaware’s sales and profitability.

~~Additionally,~~A asignificant ~~compromise~~portion of products sold by Toys-Delaware’s ~~security~~are ~~systems~~manufactured ~~(or~~outside aof ~~design~~the ~~flaw~~United States, primarily in ~~its system~~Asia. ~~environment)~~As ~~could~~a result, inany ~~unauthorized~~event ~~access~~causing toa ~~certain~~disruption ~~personal~~of ~~information~~imports, ~~about~~including ~~Toys-Delaware’s~~labor ~~customers~~strikes, ~~(including~~work ~~credit~~stoppages, ~~card~~boycotts, ~~information)~~safety ~~which~~issues ~~could~~on ~~adversely~~materials, ~~affect~~the ~~its~~imposition ~~reputation~~of ~~with~~trade ~~its~~restrictions ~~customers~~in ~~and~~the ~~others~~form of tariffs, asembargoes ~~well~~or ~~as its~~export ~~operations~~controls, ~~and~~“anti-dumping” duties, port security or other events that could ~~result~~slow inport ~~litigation~~activities, ~~against~~could itincrease orthe cost and reduce the ~~imposition~~supply of ~~penalties~~products available to Toys-Delaware. In addition, aport-labor ~~security~~issues, ~~breach~~rail ~~could~~congestion ~~require~~and ~~that~~trucking itshortages ~~expend~~can ~~significant~~have ~~additional~~an ~~resources~~impact ~~related~~on all direct importers. Although Toys-Delaware attempts to anticipate and manage such situations, both Toys-Delaware’s ~~information~~sales ~~security~~and ~~systems~~profitability could be adversely impacted by any such developments in the future.

~~Natural disasters, inclement weather, pandemic outbreaks, terrorist acts or disruptive global political events could cause permanent or temporary distribution center or store closures, impair~~ Toys-Delaware’s ~~ability~~results tomay ~~purchase,~~be ~~receive~~adversely oraffected ~~replenish~~by ~~inventory,~~fluctuations ~~or decrease customer traffic, all of which could result~~ in ~~lost~~raw ~~sales~~material and ~~otherwise~~energy ~~adversely affect Toys-Delaware’s financial performance~~costs.

The occurrence of one or more natural disasters, such as hurricanes, fires, floods, earthquakes, tornados and volcano eruptions, or inclement weather such as frequent or unusually heavy snow, ice or rain storms, or extended periods of unseasonable temperatures, or the occurrence of pandemic outbreaks, labor strikes, work stoppages, terrorist acts or disruptive global political events, such as civil unrest in countries in which Toys-Delaware’s ~~suppliers~~results ~~are~~may ~~located,~~be oraffected ~~similar~~by ~~disruptions~~the ~~could~~prices ~~adversely~~of ~~affect~~the ~~Toys-Delaware’s~~components ~~operations~~ and ~~financial~~raw ~~performance.~~materials ~~To the~~used ~~extent~~in ~~these~~the ~~events~~manufacture ~~impact one or more~~ of ~~Toys-Delaware’s~~its ~~key~~toys ~~vendors~~and orjuvenile ~~result~~products. inThese ~~the~~prices ~~closure~~may offluctuate ~~one~~based oron ~~more of its distribution centers or~~ a ~~significant~~ number of ~~stores,~~factors beyond Toys-Delaware’s ~~operations~~control, ~~and~~including: ~~financial~~oil ~~performance~~prices, ~~could~~changes ~~be materially~~in ~~adversely~~supply ~~affected through an inability to make deliveries to its stores~~ and ~~through~~demand, ~~lost~~general ~~sales.~~economic ~~In addition~~conditions, ~~these~~labor ~~events~~costs, ~~could~~competition, ~~result~~import ~~in increases in fuel (or other energy) prices or a fuel shortage~~duties, ~~delays in opening new stores~~tariffs, ~~the temporary~~currency ~~lack~~exchange ofrates anand ~~adequate~~government ~~work~~regulation. ~~force~~In ~~in a market~~addition, ~~the~~energy ~~temporary~~costs orhave ~~long-term~~fluctuated ~~disruption~~dramatically in the ~~supply~~past. ofThese ~~products~~fluctuations ~~from~~may ~~some~~result ~~local and overseas vendor, the temporary disruption~~ in ~~the~~an ~~transport~~increase ~~of goods from overseas, delay~~ in ~~the delivery of goods to~~ Toys-Delaware’s ~~distribution~~transportation ~~centers~~costs orfor ~~stores~~distribution, ~~the~~utility ~~temporary~~costs ~~reduction~~for ~~in the availability of products in~~ its retail stores and ~~disruption~~overall ~~to its information systems. These events also can have indirect consequences such as increases in the~~ costs ofto ~~insurance~~purchase ifproducts ~~they~~from ~~result~~its ~~in significant loss of property or other insurable damage~~vendors.

Toys-Delaware’s ~~results~~may ofnot ~~operations could~~be ~~suffer~~able ifto itadjust ~~loses~~the ~~key~~prices ~~management~~of orits isproducts, ~~unable~~especially in the short-term, to ~~attract~~recover these cost increases in raw materials and ~~retain~~energy. ~~experienced~~A ~~senior~~continual ~~management~~rise in raw material and energy costs could adversely affect consumer spending and demand for Toys-Delaware’s products and increase its ~~business.~~operating costs, both of which could have a material adverse effect on its financial condition and results of operations.

A significant disruption to Toys-Delaware’s ~~future~~distribution ~~success~~network ~~depends~~or to ~~a significant degree on~~ the ~~skills,~~timely ~~experience~~receipt ~~and efforts~~ of ~~its~~inventory ~~senior~~could ~~management~~adversely ~~team.~~impact ~~The~~sales ~~loss of services of any of these individuals,~~ or ~~the~~increase ~~inability~~its bytransportation ~~Toys-Delaware to attract and retain qualified individuals for key management positions~~costs, ~~could~~which ~~harm~~would ~~Toys-Delaware’s~~decrease ~~business~~its ~~and financial performance~~profits.

~~International~~Toys-Delaware ~~events~~relies ~~could~~on ~~delay~~its orability ~~prevent~~to replenish depleted inventory in its stores through deliveries to its distribution centers from vendors and then from the ~~delivery~~distribution ofcenters ~~products~~or direct ship vendors to ~~Toys-Delaware’s~~its stores by various means of transportation, ~~which~~including shipments by sea, rail, air and truck. Unexpected delays in those deliveries or increases in transportation costs (including from increased fuel costs) could ~~negatively~~significantly ~~affect~~decrease its ability to make sales and ~~profitability~~ earn profits. In addition, labor shortages or labor disagreements in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries could negatively affect its business.

AProduct significant portion of products sold by Toys-Delaware are manufactured outside of the United States, primarily in Asia. As a result, any event causing a disruption of imports, including labor strikes, work stoppages, boycotts, safety issues ~~on materials~~, ~~the~~including ~~imposition~~product ~~of trade restrictions in the form of tariffs~~recalls, ~~embargoes or export controls, “antidumping” duties, port security or other events that~~ could ~~slow~~harm ~~port activities, could increase the cost and reduce the supply of products available to~~ Toys-Delaware.’s ~~In addition~~reputation, ~~port-labor~~divert ~~issues~~resources, ~~rail~~reduce ~~congestion and trucking shortages can have an impact on all direct importers. Although Toys-Delaware attempts to anticipate and manage such situations, both Toys-Delaware’s~~ sales and ~~profitability~~increase ~~could be adversely impacted by any such developments in the future~~costs. ~~These and other international events could negatively affect Toys-Delaware’s sales and profitability.~~

14The products Toys-Delaware sells in its stores are subject to regulation by the Consumer Product Safety Commission and similar U.S. state, Canadian and other international regulatory authorities. As a result, such products have been and could be in the future subject to recalls and other remedial actions. Product safety concerns may require Toys-Delaware to voluntarily remove selected products from its stores. Such recalls and voluntary removal of products can result in, among other things, lost sales, diverted resources, potential harm to Toys-Delaware’s reputation and increased customer service costs, which could have a material adverse effect on Toys-Delaware’s business, financial condition and results of operations.

~~Table~~Toys-Delaware’s business exposes it to personal injury and product liability claims which could result in adverse publicity and harm to its brands and its results of ~~Contents~~operations.

Toys-Delaware ~~may~~is ~~experience~~from ~~fluctuations~~time to time subject to claims due to the injury of an individual in its ~~tax~~stores ~~obligations~~or ~~and~~on ~~effective~~its ~~tax~~property. ~~rate~~In addition, ~~which~~Toys-Delaware has in the past been subject to product liability claims for the products that it sells. Subject to certain exceptions, Toys-Delaware’s purchase orders generally require the manufacturer to indemnify it against any product liability claims; however, if the manufacturer does not have insurance or becomes insolvent, there is a risk that Toys-Delaware would not be indemnified. Any personal injury or product claim made against Toys-Delaware, whether or not it has merit, could ~~materially~~ be time consuming and ~~adversely~~costly ~~affect~~to ~~its~~defend, result in adverse publicity, or damage to Toys-Delaware’s reputation, and have an adverse effect on Toys-Delaware’s results of operations.

Toys-Delaware is subject to income taxes in the United States, Puerto Rico and Canada. Toys-Delaware records tax expense based on current tax payments and its estimates of future tax payments, which include reserves for estimates of probable settlements of tax audits. At any one time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. As a result, Toys-Delaware expects that throughout the year there could be ongoing variability in its quarterly tax rates as taxable events occur and exposures are re-evaluated. Further, Toys-Delaware’s effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings by taxing jurisdiction or by changes to existing accounting rules or regulations. Fluctuations in Toys-Delaware’s tax obligations and effective tax rate could materially and adversely affect its results of operations. 13

~~Changes~~Table ~~to accounting rules or regulations may adversely affect Toys-Delaware’s results~~ of ~~operations.~~ Contents

~~Changes~~Adverse tolitigation ~~existing~~judgments ~~accounting rules~~ or ~~regulations~~settlements ~~may~~resulting ~~impact~~from ~~Toys-Delaware’s~~legal ~~future~~proceedings ~~results~~in ofwhich ~~operations or cause the perception that~~ Toys-Delaware ~~is more highly leveraged. Other new accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and~~ may ~~occur in the future. For instance, the SEC is currently considering whether issuers in the United States should~~ be ~~required~~involved tocould ~~prepare~~expose financial statements in accordance with International Financial Reporting Standards (“IFRS”) instead of accounting principles generally accepted in the United States (“GAAP”). IFRS is a comprehensive set of accounting standards promulgated by the International Accounting Standards Board (“IASB”). The SEC has indicated that it ~~will decide in 2011 whether IFRS will be required for issuers in the United States. Additionally, the Financial Accounting Standards Board (“FASB”) is considering various changes~~ to ~~GAAP,~~monetary ~~some~~damages ofor ~~which~~limit ~~may~~its beability ~~significant, as part of a joint effort with the IASB~~ to ~~converge~~operate ~~accounting standards. For instance, the FASB and IASB have issued an exposure draft that would require Toys-Delaware to record lease obligations on~~ its ~~balance sheet and make other changes to its financial statements~~business. ~~These and other future changes to accounting rules or regulations may materially adversely affect Toys-Delaware’s results of operations and financial position.~~

Toys-Delaware’s ~~total assets~~is ~~include~~involved ~~goodwill~~in private actions, investigations and ~~substantial~~various ~~amounts~~other oflegal ~~property~~proceedings ~~and~~by ~~equipment.~~employees, ~~Changes~~suppliers, tocompetitors, ~~estimates~~shareholders, government agencies or ~~projections~~others. ~~related~~The toresults of such ~~assets~~litigation, orinvestigations ~~operating~~and ~~results~~other ~~that~~legal proceedings are ~~lower~~inherently ~~than~~unpredictable. ~~its~~Any ~~current~~claims ~~estimates~~against atToys-Delaware, ~~certain~~whether ~~store~~meritorious ~~locations~~or not, ~~may~~could ~~cause~~be time consuming, result in costly litigation, require significant amounts of management time and divert significant resources. If any of these legal proceedings were to be determined adversely to Toys-Delaware , Toys-Delaware could be exposed to ~~incur~~monetary ~~impairment~~damages ~~charges~~or ~~that~~limits ~~could~~on ~~adversely~~their ~~affect~~ability to operate its business, which could have a material adverse effect on Toys-Delaware’s business, financial condition and results of operations.

Toys-Delaware’s ~~total~~is ~~assets~~subject ~~include~~to ~~goodwill and substantial amounts of property and equipment. Toys-Delaware makes~~ certain ~~estimates~~regulatory and ~~projections~~legal in connection with impairment analyses for these assets, in accordance with FASB Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant and Equipment” (“ASC 360”), and ASC Topic 350, “Intangibles — Goodwill and Other” (“ASC 350”)requirements. ~~Toys-Delaware~~If ~~also~~it ~~reviews~~fails ~~the~~to ~~carrying~~comply ~~value of these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable in accordance~~ with ~~ASC~~regulatory ~~360~~ or ~~ASC~~legal ~~350. Toys-Delaware will record an impairment loss when the carrying value of the underlying asset~~requirements, ~~asset group or reporting unit exceeds~~ its ~~fair~~business ~~value. These calculations require Toys-Delaware to make a number of estimates~~ and ~~projections of future~~ results. ~~If these estimates or projections change, Toys-Delaware may be required to record additional impairment charges on certain~~ of ~~these assets. If these impairment charges are significant, Toys-Delaware’s results of~~ operations ~~would~~may be adversely affected.

Toys-Delaware ~~may~~is ~~from~~subject ~~time~~to numerous regulatory and legal requirements. Its policies and procedures are required to ~~time~~comply ~~pursue~~with ~~acquisitions~~all applicable laws and regulations, ~~which~~including those imposed by the Federal Trade Commission and the Securities and Exchange Commission (“SEC”). In addition, its business activities require it to comply with complex regulatory and legal issues on a local, national and worldwide basis (including, in some cases, more stringent local labor law or regulations). Future legislative and regulatory actions relating to credit cards could also have an adverse impact on Toys-Delaware's credit card program and its ~~business~~sales. Failure to comply with such laws and regulations could adversely affect its operations, asinvolve significant expense and divert management’s attention and resources from other matters, which in turn could ~~the~~harm ~~integration~~its ofbusiness ~~the~~and ~~businesses~~results ~~following~~of ~~acquisition~~operations.

Toys-Delaware may from time to time acquire complementary companies or businesses. Acquisitions may result in unanticipated costs, delays or other operational or financial problems related to integrating the acquired company and business with Toys-Delaware, which may result in the diversion of its capital and its management’s ~~attention from other~~ business ~~issues~~operations ~~and~~could ~~opportunities. Toys-Delaware may not~~ be ~~able~~disrupted toif ~~successfully~~its ~~integrate~~information ~~operations that it acquires, including their personnel,~~ technology, ~~financial~~ systems, ~~distribution~~fail ~~and~~to ~~general~~perform ~~business~~adequately ~~operations~~or ~~and procedures.~~ Toys-Delaware ~~cannot~~is ~~assure~~unable ~~you~~to ~~that~~protect ~~any acquisition~~the itintegrity ~~makes will be successful~~ and ~~its~~security ~~operating results may be adversely impacted by the integration~~ of ~~a new business and~~ its ~~financial~~customers’ ~~results~~information.

AnToys-Delaware ~~investment~~depends ~~group~~largely ~~led~~upon byits ~~Bain~~information ~~Capital~~technology ~~Partners,~~systems ~~LLC,~~in ~~Kohlberg~~the ~~Kravis~~conduct ~~Roberts &~~of ~~Co.~~all Laspects of its operations.~~P.,~~ ~~and~~If ~~Vornado~~Toys-Delaware’s ~~Realty~~information ~~Trust~~technology ~~(collectively,~~systems ~~the~~fail ~~“Sponsors”)~~to ~~control~~perform as anticipated, Toys-Delaware ~~and~~could ~~may~~experience ~~have conflicts~~difficulties in virtually any areas of ~~interest~~its ~~with~~operations, itincluding but not limited to replenishing inventories or in ~~the~~delivering ~~future~~its products to store locations in response to consumer demands. Any of these or other systems-related problems could, in turn, adversely affect Toys-Delaware’s sales and profitability.

~~Investment~~Additionally, ~~funds~~a orcompromise ~~groups~~of ~~advised by or affiliated with the Sponsors currently indirectly control~~ Toys-Delaware’s ~~through~~security ~~their~~systems ~~ownership~~(or ofa ~~approximately~~design ~~98.1%~~flaw ofin ~~TRU’s~~its ~~voting~~system ~~common~~environment) ~~stock.~~could Asresult ain ~~result,~~unauthorized ~~the~~access ~~Sponsors~~to ~~have~~certain ~~control~~personal ~~over~~information about Toys-Delaware’s ~~decisions~~customers to(including ~~enter~~credit ~~into~~card ~~any~~information) ~~corporate~~which ~~transaction~~could ~~and~~adversely ~~have~~affect ~~the~~its ~~ability~~reputation ~~to prevent~~with ~~any~~its ~~transaction~~customers ~~that~~and ~~requires~~others, ~~the~~as ~~approval~~well ofas ~~stockholders.~~its ~~In addition~~operations, ~~the~~and ~~Sponsors~~could ~~may~~result ~~have an interest~~ in ~~pursuing~~litigation ~~dispositions,~~against ~~acquisitions,~~it ~~financings~~ or ~~other~~the ~~transactions~~imposition ~~that,~~of inpenalties. ~~their~~In ~~judgment~~addition, ~~could~~a ~~enhance~~security ~~their~~breach ~~equity investments,~~could ~~even~~require ~~though~~that ~~such~~it ~~transactions~~expend ~~might~~significant ~~involve~~additional ~~risks~~resources related to Toys-Delaware’s asinformation asecurity ~~company~~systems.

~~The~~Natural ~~Sponsors~~disasters, ~~may~~inclement ~~direct~~weather, ~~Toys-Delaware~~pandemic tooutbreaks, ~~make significant~~terrorist ~~changes~~acts toor ~~its~~disruptive ~~business~~global ~~operations~~political ~~and~~events ~~strategy,~~could ~~including~~cause ~~with~~permanent ~~respect~~or ~~to,~~temporary ~~among~~distribution ~~other~~center ~~things,~~or store ~~openings and closings~~closures, ~~new~~impair ~~product~~Toys-Delaware’s ~~and~~ability ~~service~~to ~~offerings~~purchase, ~~sales~~receive ofor ~~real~~replenish ~~estate~~inventory, ~~and~~or ~~other~~decrease ~~assets~~customer traffic, ~~employee~~all ~~headcount~~of ~~levels~~which ~~and initiatives~~could toresult ~~reduce~~in ~~costs~~lost sales and ~~expenses.~~otherwise Weadversely ~~cannot~~affect ~~provide assurance that~~ Toys-Delaware’s ~~future~~financial ~~business operations will remain broadly in line with its existing operations or that significant real estate and other assets will not be sold~~performance.

The ~~Sponsors~~occurrence ~~are~~of ~~also~~one inor ~~the~~more ~~business~~natural disasters, such as hurricanes, fires, floods, earthquakes, tornadoes and volcano eruptions, or inclement weather such as frequent or unusually heavy snow, ice or rain storms, or extended periods of ~~making~~unseasonable ~~investments~~temperatures, ~~for~~or ~~their~~the ~~own~~occurrence ~~accounts~~of inpandemic ~~companies~~outbreaks, ~~and~~labor ~~may~~strikes, ~~from~~work ~~time~~stoppages, toterrorist ~~time~~acts ~~acquire~~or ~~and~~disruptive ~~hold interests~~global political events, such as civil unrest in ~~businesses~~countries ~~that~~in ~~compete~~which ~~directly~~Toys-Delaware’s suppliers are located, or ~~indirectly~~similar ~~with~~disruptions could adversely affect Toys-Delaware’s operations and financial performance. ~~One~~To the extent these events impact one or more of Toys-Delaware’s key vendors or result in the ~~Sponsors~~closure ~~may~~of ~~also~~one ~~pursue~~or ~~acquisition~~more ~~opportunities~~of ~~that~~its ~~may~~distribution becenters ~~complementary~~or toa significant number of stores, Toys-Delaware’s ~~business~~operations and, asfinancial aperformance ~~result,~~could ~~those~~be ~~acquisition opportunities~~materially ~~may~~adversely ~~not~~affected bethrough ~~available~~an inability to ~~Toys-Delaware~~make deliveries to its stores and through lost sales. SoIn ~~long~~addition, asthese ~~investment~~events ~~funds~~could ~~associated~~result ~~with~~in increases in fuel (or ~~designated~~other byenergy) ~~the~~prices ~~Sponsors~~or ~~continue~~a tofuel ~~indirectly~~shortage, ~~own~~delays ain ~~significant~~opening ~~amount~~new ofstores, the ~~outstanding~~temporary ~~shares~~lack of ~~TRU’s~~an ~~common~~adequate ~~stock~~work force in a market, the ~~Sponsors~~temporary ~~will continue~~or tolong-term bedisruption ~~able~~in tothe ~~strongly~~supply ~~influence~~of orproducts ~~effectively~~from ~~control~~some ~~TRU’s~~local and overseas vendor, ~~accordingly~~the temporary disruption in the transport of goods from overseas, delay in the delivery of goods to Toys-Delaware’s ~~decisions~~distribution centers or stores, the temporary reduction in the availability of products in its stores and disruption to its information systems. These events also can have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable damage.

15Toys-Delaware’s results of operations could suffer if it loses key management or is unable to attract and retain experienced senior management for its business.

~~Table~~Toys-Delaware’s future success depends to a significant degree on the skills, experience and efforts of ~~Contents~~its senior management team. The loss of services of any of these individuals, or the inability by Toys-Delaware to attract and retain qualified

~~Risks Related to the Master Tenant’s and TRU’s Substantial Indebtedness~~ 14

~~Toys-Delaware’s~~Table substantial indebtedness could adversely affect its ability to raise additional capital to fund its operations, limit its ability to react to changes in the economy or its industries, expose it to interest rate risk to the extent of ~~its variable rate debt and prevent it from meeting its obligations under its debt instruments, the TRU Propco I Master Lease and/or other obligations.~~ Contents

~~Toys-Delaware~~individuals isfor ~~highly~~key ~~leveraged.~~management ~~As of January 29~~positions, ~~2011,~~could ~~Toys-Delaware’s~~harm ~~total indebtedness was $1.9 billion, substantially all of which was secured indebtedness.~~ Toys-Delaware’s ~~substantial~~business ~~indebtedness~~and ~~could~~financial ~~have significant consequences, including, among others, the following:~~ performance.

•Toys-Delaware ~~increasing~~may experience fluctuations in its ~~vulnerability~~tax toobligations ~~general~~and ~~economic~~effective tax rate, which could materially and ~~industry~~adversely ~~conditions;~~affect its results of operations.

•Toys-Delaware ~~requiring~~is asubject ~~substantial~~to ~~portion~~income oftaxes in the United States, Puerto Rico and Canada. Toys-Delaware records tax expense based on current tax payments and its ~~cash~~estimates ~~flows~~of ~~from~~future ~~operating~~tax ~~activities~~payments, towhich beinclude ~~dedicated~~reserves tofor ~~the~~estimates ~~payment~~of probable settlements of ~~principal~~international and ~~interest~~domestic ontax ~~its~~audits. ~~indebtedness~~At any one time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and asnegotiations with taxing authorities may affect the ultimate settlement of these issues. As a result, ~~reducing~~Toys-Delaware ~~its~~expects ~~ability~~that tothroughout ~~use~~the ~~its~~year ~~cash~~there ~~flows~~could tobe ~~fund~~ongoing variability in its ~~operations~~quarterly tax rates as taxable events occur and ~~capital~~exposures ~~expenditures~~are re-evaluated. Further, ~~capitalize~~Toys-Delaware’s oneffective ~~future~~tax ~~business~~rate ~~opportunities~~in a given financial statement period may be materially impacted by changes in tax laws, ~~expand~~changes in the mix and level of earnings by taxing jurisdiction, changes to existing accounting rules or regulations, or by changes to its ~~business~~ownership or capital structures. Fluctuations in Toys-Delaware’s tax obligations and ~~execute~~effective tax rate could materially and adversely affect its ~~strategy;~~results of operations.

•Changes ~~increasing the difficulty for it~~ to ~~make~~accounting ~~scheduled~~rules ~~payments~~or onregulations ~~its outstanding debt and other obligations, including the TRU Propco I Master Lease, as its business~~ may ~~not~~adversely beaffect ~~able~~Toys-Delaware’s toresults ~~generate~~of ~~sufficient cash flows from operating activities to meet its obligations;~~operations.

•Changes ~~exposing~~to itexisting accounting rules or regulations may impact Toys-Delaware’s future results of operations or cause the perception that Toys-Delaware is more highly leveraged. Other new accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. For instance, the SEC is currently considering whether issuers in the United States should be required to prepare financial statements in accordance with International Financial Reporting Standards (“IFRS”) instead of accounting principles generally accepted in the ~~risk~~United States (“GAAP”). IFRS is a comprehensive set of ~~increased~~accounting ~~interest~~standards ~~expense~~promulgated ~~due~~by the International Accounting Standards Board (“IASB”). The SEC has indicated that it will decide in 2012 whether IFRS will be required for issuers in the United States. Additionally, the Financial Accounting Standards Board (“FASB”) is considering various changes to GAAP, some of which may be significant, as part of a joint effort with the IASB to converge accounting standards. For instance, the FASB and IASB have issued an exposure draft that would require Toys-Delaware to record lease obligations on its balance sheet and make other changes into ~~borrowing~~its ~~spreads~~financial statements. These and ~~short~~other future changes to accounting rules or regulations may materially adversely affect Toys-~~term~~Delaware’s ~~interest~~reported ~~rates;~~results of operations and financial position.

•Toys-Delaware’s ~~causing~~total itassets include goodwill and substantial amounts of property and equipment. Changes to ~~make~~estimates ~~non~~or projections related to such assets, or operating results that are lower than its current estimates at certain store locations, may cause Toys-~~strategic~~Delaware ~~divestitures;~~to incur impairment charges that could adversely affect its results of operations.

•Toys-Delaware’s ~~limiting~~total ~~its~~assets ~~ability~~include togoodwill ~~obtain~~and ~~additional~~substantial ~~financing~~amounts of property and equipment. Toys-Delaware makes certain estimates and projections in connection with impairment analyses for ~~working~~these ~~capital~~assets, ~~capital~~in ~~expenditures~~accordance with FASB Accounting Standards Codification (“ASC”) Topic 360, ~~debt~~“Property, ~~service~~Plant ~~requirements~~and Equipment” (“ASC 360”), and ~~general~~ASC Topic 350, ~~corporate~~“Intangibles — Goodwill and Other” (“ASC 350”). Toys-Delaware also reviews the carrying value of these assets for impairment whenever events or ~~other~~changes ~~purposes;~~in circumstances indicate that the carrying value of the asset may not be recoverable in accordance with ASC 360 or ASC 350. Toys-Delaware will record an impairment loss when the carrying value of the underlying asset, asset group or reporting unit exceeds its fair value. These calculations require Toys-Delaware to make a number of estimates and projections of future results. If these estimates or projections change, Toys-Delaware may be required to record additional impairment charges on certain of these assets. If these impairment charges are significant, Toys-Delaware’s results of operations would be adversely affected.

•Toys-Delaware ~~limiting~~may ~~its~~from ~~ability~~time to ~~adjust~~time topursue ~~changing~~acquisitions, ~~market~~which ~~conditions~~could ~~and~~have ~~reacting~~an toadverse ~~competitive~~impact ~~pressure,~~on ~~placing~~its itbusiness, atas acould ~~competitive~~the ~~disadvantage~~integration ~~compared~~of tothe ~~its~~businesses ~~competitors~~following ~~who are less leveraged~~acquisition.

Toys-Delaware may befrom ~~able~~time to ~~incur~~time ~~additional~~acquire ~~indebtedness~~complementary companies or businesses. Acquisitions may result in ~~the~~unanticipated ~~future~~costs, ~~including under~~delays ~~its~~or ~~current~~other ~~secured~~operational ~~revolving~~or ~~credit~~financial ~~agreement,~~problems ~~subject~~related to integrating the ~~restrictions~~acquired ~~contained~~company and business with Toys-Delaware, which may result in the diversion of its ~~debt~~capital ~~instruments~~and its management’s attention from other business issues and opportunities. IfToys-Delaware ~~new~~may ~~indebtedness~~not isbe ~~added~~able to ~~its~~successfully ~~current~~integrate ~~debt~~operations ~~levels~~that it acquires, ~~the~~including ~~related~~their ~~risks~~personnel, technology, financial systems, distribution and general business operations and procedures. Toys-Delaware cannot provide assurance that any acquisition it ~~now~~makes ~~faces~~will ~~could~~be ~~intensify.~~successful and its operating results may be adversely impacted by the integration of a new business and its financial results.

~~Toys-Delaware~~Risks ~~may~~Related ~~not be able~~ to ~~generate sufficient cash to service all of its indebtedness and/or its obligations under~~ the ~~TRU Propco I~~ Master ~~Lease~~ Tenant’s and may not be able to refinance its indebtedness on favorable terms. If it is unable to do so, it may be forced to take other actions to satisfy its obligations under its indebtedness, its obligations under the TRU’s ~~Propco~~Substantial ~~I Master Lease and/or other obligations, which may not be successful.~~ Indebtedness

Toys-Delaware’s ~~ability~~substantial toindebtedness ~~make~~could ~~scheduled~~adversely ~~payments~~affect onits orability to ~~refinance~~raise ~~its~~additional ~~debt obligations~~capital ~~depends~~to onfund its ~~financial~~operations ~~condition~~or ~~and~~refinance ~~operating performance,~~ its ~~lenders’~~maturing ~~financial stability~~debt, ~~which~~limit ~~are~~its ~~subject~~ability to ~~prevailing~~react ~~global~~to ~~economic~~changes ~~and~~in ~~market~~the ~~conditions~~economy ~~and~~or toits ~~certain financial~~industries, ~~business~~expose ~~and~~it ~~other~~to ~~factors~~interest ~~beyond~~rate ~~its control.~~risk ~~Even~~to ifthe itextent ~~were~~of ~~able~~its tovariable ~~refinance~~rate ordebt ~~obtain~~and ~~additional~~prevent ~~financing,~~it ~~the~~from ~~costs~~meeting ofits ~~new~~obligations ~~indebtedness~~under ~~could~~its bevarious ~~substantially~~debt ~~higher~~instruments ~~than~~and the ~~costs~~TRU ~~of its existing indebtedness.~~

If Toys-Delaware’s cash flows and capital resources are insufficient to fund its debt service obligations or it is unable to refinance its indebtedness, it may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure its indebtedness. These alternative measures may not be successful and may not permit it to meet its scheduled debt service obligations. If Toys-Delaware’s operating results and available cash are insufficient to meet its debt service obligations, it could face substantial liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations. Toys-Delaware may not be able to consummate those dispositions, or the proceeds from the dispositions may not be adequate to meet any debt service obligations then due. Additionally, in the event of such liquidity problems, Toys-Delaware may become unable to meet its obligations under the TRU Propco I Master Lease which may impact the Company’s cash flow and consequently, the Company’s ability to meet its obligations under the Notes. If Toys-Delaware was unable to repay amounts when due, the lenders could proceed against the collateral granted to them to secure that indebtedness. 15

~~Toys-Delaware’s~~Table ~~debt~~of ~~agreements contain covenants that limit its flexibility in operating its business.~~ Contents

~~The~~Propco ~~agreements~~I ~~governing~~Master ~~Toys-Delaware’s indebtedness contain various covenants that limit its ability to engage in specified types of transactions, and may adversely affect its ability to operate its business~~Lease. ~~Among other things, these covenants limit Toys-Delaware’s and its subsidiaries’ ability to:~~

•Toys-Delaware ~~incur~~is ~~certain~~highly ~~additional~~leveraged and expects to continue to be. As of January 28, 2012, Toys-Delaware’s total long-term indebtedness; was $2.4 billion, of which $2.2 billion was secured indebtedness. Toys-Delaware’s substantial indebtedness could have significant consequences, including, among others, the following:

• ~~transfer~~increasing ~~money~~its ~~between~~vulnerability ~~Toys-Delaware~~to ~~and~~general ~~its~~economic ~~various~~and ~~subsidiaries~~industry conditions;

• ~~pay~~requiring ~~dividends~~a substantial portion of its cash flows from operating activities to be dedicated to the payment of principal and interest on its indebtedness, ~~repurchase~~and oras ~~make~~a ~~distributions~~result, ~~with~~reducing ~~respect~~its ability to use its orcash flows to fund its ~~subsidiaries’~~operations and capital ~~stock~~expenditures, orcapitalize ~~make~~on ~~other~~future ~~restricted~~business ~~payments~~opportunities, expand its business and execute its strategy;

• ~~issue~~increasing ~~stock~~the ofdifficulty ~~subsidiaries~~for it to make scheduled payments on its outstanding debt and other obligations, including the TRU Propco I Master Lease, as its business may not be able to generate sufficient cash flows from operating activities to meet its obligations;

• ~~make~~exposing ~~certain~~it ~~investments,~~to ~~loans~~the orrisk ~~advances~~of increased interest expense due to changes in borrowing spreads and short-term interest rates;

16• causing it to make non-strategic divestitures;

~~Table~~• oflimiting ~~Contents~~its ability to obtain additional financing for working capital, capital expenditures, debt service requirements and general, corporate or other purposes; and

• ~~transfer~~limiting its ability to adjust to changing market conditions and ~~sell~~reacting ~~certain~~to ~~assets;~~competitive pressure, placing it at a competitive disadvantage compared to its competitors who are less leveraged.

•Toys-Delaware ~~create~~may orbe ~~permit~~able ~~liens~~to onincur ~~assets;~~additional indebtedness in the future, including under its current secured revolving credit agreement, subject to the restrictions contained in its debt instruments. If new indebtedness is added to its current debt levels, the related risks that it now faces could intensify.

•Toys-Delaware ~~consolidate,~~may ~~merge,~~not ~~sell~~be orable ~~otherwise~~to ~~dispose~~generate ofsufficient ~~all~~cash orto ~~substantially~~service all of its ~~assets;~~indebtedness and/or its obligations under the TRU Propco I Master Lease and may not be able to refinance its indebtedness. If it is unable to do so, it may be forced to take other actions to satisfy its obligations under its indebtedness, its obligations under the TRU Propco I Master Lease and/or other obligations, which may not be successful.

•Toys-Delaware’s ~~enter~~ability ~~into~~to ~~certain~~make ~~transactions~~scheduled ~~with~~payments on or to refinance its ~~affiliates;~~debt obligations depends on its financial condition and operating performance, its lenders’ financial stability, which are subject to prevailing global economic and market conditions and to certain financial, business and other factors beyond its control. Even if it were able to refinance or obtain additional financing, the costs of new indebtedness could be substantially higher than the costs of its existing indebtedness.

•If ~~amend~~Toys-Delaware’s ~~certain~~cash ~~documents~~flows and capital resources are insufficient to fund its debt service obligations or it is unable to refinance its indebtedness, it may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure its indebtedness. These alternative measures may not be successful and may not permit it to meet its scheduled debt service obligations. If Toys-Delaware’s operating results and available cash are insufficient to meet its debt service obligations, it could face substantial liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations. Toys-Delaware may not be able to consummate those dispositions, or the proceeds from the dispositions may not be adequate to meet any debt service obligations then due. Additionally, in the event of such liquidity problems, Toys-Delaware may become unable to meet its obligations under the TRU Propco I Master Lease which may impact the Company’s cash flow and consequently, the Company’s ability to meet its obligations under the Notes. If Toys-Delaware was unable to repay amounts when due, the lenders could proceed against the collateral granted to them to secure that indebtedness.

~~A breach of any of these covenants could result in default under one or more of~~ Toys-Delaware’s debt agreements, ~~which~~contain ~~could~~covenants prompt the lenders to declare all amounts outstanding under one or more of the debt agreements to be immediately due and payable and terminate all commitments to extend further credit. If Toys-Delaware were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that ~~indebtedness.~~limit ~~If the lenders under the debt agreements accelerate the repayment of borrowings, Toys-Delaware may not have sufficient assets and funds to repay the borrowings under~~ its ~~debt~~flexibility ~~agreements~~in ~~or meets~~operating its ~~obligations under the TRU Propco I Master Lease~~business.

~~TRU~~The isagreements ~~highly~~governing ~~leveraged~~Toys-Delaware’s ~~and~~indebtedness ~~needs~~contain tovarious ~~refinance~~covenants ~~portions~~that oflimit its ~~debt~~ability to engage in ~~the~~specified ~~next two~~types ~~years~~of transactions, ~~which~~and ~~refinancing~~ may ~~not~~adversely beaffect ~~available~~its ability to operate its business. Among other things, these covenants limit Toys-Delaware’s and its subsidiaries’ ability to:

As• ofincur ~~January 29,~~certain 2011, total indebtedness of TRU and its subsidiaries (including the Company) was $5.3 billion, of which $2.8 billion was secured indebtedness and $2.0 billion of which matures before the end of fiscal 2013. TRU’s existing cash balances and cash flows from operating activities may not be sufficient to fund its projected cash needs. TRU may not be able to access additional sources of refinancing on similar terms or pricing as those that are currently in place, or at all, or otherwise obtain other sources of funding. An inability to access replacement or additional sources of liquidity to fund TRU’s cash needs or to refinance or otherwise fund the repayment of its maturing debt could adversely affect its financial condition, results of operations and ability to make payments on its debt. While TRU is not obligated to make payments under the TRU Propco I Master Lease or the Notes, in the event that TRU were to become a debtor in a Bankruptcy Case, a creditor, receiver, conservator or the trustee in such bankruptcy might request a court to order TRU’s assets and liabilities be consolidated with ours or Toys-Delaware’s (including its properties) for the satisfaction of claims of creditors of TRU. We, Toys-Delaware or TRU may become subject to bankruptcy proceedings and in that event our respective rights and obligations may be subject to material modification. indebtedness;

~~ITEM~~• ~~1B.~~transfer ~~UNRESOLVED~~money ~~STAFF~~between ~~COMMENTS~~Toys-Delaware, its various subsidiaries and TRU;

~~None.~~ • pay dividends on, repurchase or make distributions with respect to its or its subsidiaries’ capital stock or make other restricted payments;

~~ITEM~~• 2.issue ~~PROPERTIES~~stock of subsidiaries;

~~The~~• ~~following~~make ~~summarizes~~certain ~~our properties as of January 29~~investments, ~~2011:~~loans or advances;


•	transfer and sell certain assets;

~~(1)~~• ~~Owned~~create ~~buildings~~or onpermit ~~leased~~liens ~~land.~~on assets;

~~See~~• ~~also section~~consolidate, ofmerge, ~~Item 1~~sell ~~entitled~~or ~~“Geographic~~otherwise ~~Distribution~~dispose of ~~Properties”~~all ofor ~~this~~substantially ~~Annual~~all ~~Report~~of onits ~~Form 10-K for more information on our Properties.~~ assets;

~~ITEM~~• 3.enter ~~LEGAL~~into ~~PROCEEDINGS~~certain transactions with its affiliates; and

~~Although~~• weamend docertain ~~not currently have material legal proceedings pending against us, in the future, we may be involved in various lawsuits, claims and proceedings incident to the ordinary course of business~~documents. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. The results of these lawsuits, claims and proceedings cannot be predicted with certainty.

~~ITEM 4. (REMOVED AND RESERVED)~~16

17Table of Contents

~~Table~~A breach of ~~Contents~~any of these covenants could result in default under one or more of Toys-Delaware’s debt agreements, which could prompt the lenders to declare all amounts outstanding under one or more of the debt agreements to be immediately due and payable and terminate all commitments to extend further credit. If Toys-Delaware were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. If the lenders under the debt agreements accelerate the repayment of borrowings, Toys-Delaware may not have sufficient assets and funds to repay the borrowings under its debt agreements or meets its obligations under the TRU Propco I Master Lease.

~~PART~~TRU IIis highly leveraged and needs to refinance portions of its debt in the next two years, which refinancing may not be available.

~~ITEM~~As of January 28, 2012, total indebtedness of TRU and its subsidiaries (including the Company) was $5.2 ~~MARKET~~billion, ~~FOR~~of ~~THE~~which ~~REGISTRANT~~$3.1 billion was secured indebtedness and $1.4 billion of which matures before the end of fiscal 2013. TRU’Ss ~~COMMON~~existing ~~EQUITY~~cash balances and cash flows from operating activities may not be sufficient to fund its projected cash needs. TRU may not be able to access additional sources of refinancing on similar terms or pricing as those that are currently in place, ~~RELATED~~or ~~STOCKHOLDER~~at ~~MATTERS~~all, ~~AND~~or ~~ISSUER~~otherwise ~~PURCHASES~~obtain OFother ~~EQUITY~~sources ~~SECURITIES~~of funding. An inability to access replacement or additional sources of liquidity to fund TRU’s cash needs or to refinance or otherwise fund the repayment of its maturing debt could adversely affect its financial condition, results of operations and ability to make payments on its debt. While TRU is not obligated to make payments under the TRU Propco I Master Lease or the Notes, in the event that TRU were to become a debtor in a Bankruptcy Case, a creditor, receiver, conservator or the trustee in such bankruptcy might request a court to order TRU’s assets and liabilities be consolidated with ours or Toys-Delaware’s (including its properties) for the satisfaction of claims of creditors of TRU. We, Toys-Delaware or TRU may become subject to bankruptcy proceedings and in that event our respective rights and obligations may be subject to material modification.

AsITEM of1B. UNRESOLVED ~~April 28,~~STAFF ~~2011, all of our outstanding membership interests were privately held by our sole member, Wayne Real Estate Holding Company, LLC.~~ COMMENTS

~~See Note 6 to the Consolidated Financial Statements entitled “LONG-TERM DEBT” for a description of restrictions on our ability to pay dividends~~None.

WeITEM ~~evaluate our cash balances on an ongoing basis to determine if we can distribute cash to our parent companies~~2. During fiscal 2010, we made cash distributions of $45 million and $13 million in dividends and return of capital, respectively. During fiscal 2009, we made cash distributions of $35 million in dividends. PROPERTIES

OnThe ~~April~~following ~~27,~~summarizes ~~2011,~~our weproperties ~~declared~~as ~~a dividend~~ of ~~approximately~~January 28, ~~$8 million.~~ 2012:

ITEM 6. SELECTED FINANCIAL DATA



Ownership		Total Number of Properties

Owned		171
Ground-leased(1)		112
Space-leased		68
Total		351

~~Item 6 is omitted as the Company meets the conditions set forth in General Instructions~~ (~~I)(~~1)~~(a)~~ ~~and~~Owned ~~(b) of~~buildings ~~Form~~on ~~10-K.~~leased land.

~~ITEM~~See 7.also ~~MANAGEMENT’S~~section ~~DISCUSSION~~of ~~AND~~Item 1 ~~ANALYSIS~~entitled OF“Geographic ~~FINANCIAL~~Distribution ~~CONDITION~~of ~~AND~~Properties” ~~RESULTS~~of OFthis ~~OPERATIONS~~Annual Report on Form 10-K for more information on our Properties.

~~The~~ITEM following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help facilitate an understanding of our historical results of operations during the periods presented and our financial condition3. LEGAL This MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying notes, and contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” and Item 1A entitled “RISK FACTORS” of this Annual Report on Form 10-K. Our MD&A includes the following sections: PROCEEDINGS

~~EXECUTIVE~~Although ~~OVERVIEW~~we ~~provides~~do annot ~~overview~~currently ofhave ~~our~~material legal proceedings pending against us, in the future, we may be involved in various lawsuits, claims and proceedings incident to the ordinary course of business. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. The results of these lawsuits, claims and proceedings cannot be predicted with certainty.

~~RESULTS OF OPERATIONS provides an analysis of our consolidated results of operations for fiscal 2010 compared to fiscal 2009 and fiscal 2009 compared to fiscal 2008.~~ 17

~~LIQUIDITY~~Table ~~AND CAPITAL RESOURCES provides an overview~~ of ~~our cash flows, financing and contractual obligations.~~ Contents

~~CRITICAL~~ITEM ~~ACCOUNTING POLICIES provides a discussion of our accounting policies that require critical judgment, assumptions and estimates~~4. MINE SAFETY DISCLOSURE

~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS provides a brief description of significant accounting standards which were adopted during fiscal 2010~~None.

~~All information in this MD&A is presented on a historical basis and reflects results of continuing operations for all periods presented.~~ 18

~~EXECUTIVE~~Table ~~OVERVIEW~~of Contents

~~Our~~PART ~~Business~~ II

WeITEM ~~are a special purpose entity, owned indirectly by TRU and formed in September 2005~~5. ~~Certain~~MARKET ofFOR ~~our~~THE wholly-owned special purpose subsidiaries own fee and leasehold interests in 357 properties throughout the United States. Under the TRU Propco I Master Lease, we lease the Properties to Toys-Delaware on a triple-net basis, the operating entity for all of TRUREGISTRANT’sS ~~North~~COMMON ~~American businesses~~EQUITY, ~~which~~RELATED ~~operates~~STOCKHOLDER ~~the~~MATTERS ~~Properties~~AND asISSUER ~~Toys~~PURCHASES ~~“R”~~OF UsEQUITY stores, Babies “R” Us stores or side-by-side stores, or subleases them to alternative retailers. Substantially all of our revenues and cash flows are derived from payments from Toys-Delaware under the TRU Propco I Master Lease. For the financial statements for fiscal year ended January 29, 2011 and other information about our master tenant, Toys-Delaware, see Exhibit 99.1 to this report. SECURITIES

~~Our~~As ~~primary business operations consist~~ of ~~leasing~~ ~~properties~~April 27, ~~to our affiliate Toys-Delaware~~2012, ~~servicing~~all ~~our~~of ~~debt via payments on~~ our ~~debt~~outstanding ~~instruments~~membership ~~and,~~interests ~~subject~~were toprivately ~~compliance~~held ~~with~~by our ~~debt~~sole ~~agreements~~member, ~~distributing~~Wayne ~~cash~~Real toEstate ~~our~~Holding ~~ultimate parent, TRU. The~~ Company~~’s management does not currently have plans to purchase additional properties. As a result~~, we do not believe we are subject to risks associated with obtaining financing for individual properties when availability of capital in the marketplace may be limited or may be subject to the overall economic environmentLLC.

~~Substantially~~See ~~all~~Note of6 ~~our cash revenues are subject~~ to ~~fixed increases under~~ the ~~TRU~~Consolidated ~~Propco~~Financial ~~I Master~~Statements ~~Lease~~entitled ~~which~~“LONG-TERM ~~will~~DEBT” ~~expire~~for ina ~~2029.~~description ~~Also,~~of ~~interest~~restrictions ~~payments~~on ~~under~~our ~~the~~ability ~~Notes~~to ~~are~~pay ~~fixed at 10~~dividends.~~75% and mature in fiscal 2017.~~

18We evaluate our cash balances on an ongoing basis and periodically distribute cash to our ultimate parent company, TRU. During fiscal 2011, we made cash distributions of $58 million in dividends. During fiscal 2010, we made cash distributions of $45 million and $13 million in dividends and return of capital, respectively.

~~Table~~ITEM of6. SELECTED ~~Contents~~FINANCIAL DATA

~~Approximately~~Item 6 ~~half~~is ofomitted ~~our Properties are leased from third parties and~~ as ~~these leases expire, we may need to renew these leases on terms that may not be as favorable as under~~ the ~~expiring~~Company ~~lease.~~meets ~~However, only six of such leases expire prior to~~ the ~~maturity~~conditions ofset ~~the~~forth ~~Notes.~~in ~~Also,~~General ~~the~~Instructions ~~TRU Propco~~ (I)(1)(a) ~~Master Lease allows us to charge common area maintenance expenses~~ and ~~certain~~(b) of ~~other~~Form ~~operating costs to Toys~~10-~~Delaware~~K.

~~Material~~ITEM ~~Trends~~7. ~~and~~MANAGEMENT’S ~~Uncertainties~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Our~~The ~~primary~~following ~~source~~Management’s ofDiscussion ~~rental revenue~~ and ~~cash~~Analysis ~~flows~~of isFinancial ~~derived~~Condition ~~from~~and ~~the~~Results ~~leasing~~of ~~arrangements~~Operations we(“MD&A”) ~~have~~is ~~entered~~intended ~~into~~to ~~with~~help ~~Toys-Delaware~~facilitate ~~under~~an ~~the~~understanding ~~TRU~~of ~~Propco I~~our ~~Master~~historical ~~Lease~~results ~~which~~of ~~expires~~operations induring ~~fiscal~~the ~~2029.~~periods Wepresented ~~record~~and ~~rental~~our ~~revenue~~financial ~~using~~condition. ~~the~~This ~~straight-line~~MD&A ~~method,~~should ~~which~~be ~~results~~read in ~~recording~~conjunction awith ~~consistent~~our ~~rate~~Consolidated ofFinancial ~~revenue~~Statements ~~over~~and the ~~terms~~accompanying ofnotes, ~~our~~and ~~lease~~contains ~~agreements~~forward-looking ~~even~~statements ~~when~~that ~~cash~~involve ~~rents~~risks ~~received~~and ~~increase or decrease over the lease term~~uncertainties. ~~Rental~~See ~~payments~~“Forward-Looking ~~under~~Statements” ~~the~~and ~~TRU~~Item 1A ~~Propco~~entitled I“RISK ~~Master~~FACTORS” ~~Lease~~of ~~are~~this ~~scheduled~~Annual toReport ~~increase by 10% for each property~~ on ~~July 1,~~Form ~~2014, July 1, 2019 and July 1, 2024~~10-K. Our ~~largest~~MD&A ~~expense~~includes ~~is interest expense;~~ the ~~payment~~following ~~and recording of which is fixed over the term of the Notes due in fiscal 2017.~~ sections:

~~RESULTS~~EXECUTIVE OFOVERVIEW ~~OPERATIONS~~provides an overview of our business.

~~Fiscal~~RESULTS OF OPERATIONS provides an analysis of our consolidated results of operations for fiscal 2011 compared to fiscal 2010 ~~Compared~~and fiscal 2010 compared to ~~Fiscal~~fiscal 2009 .

~~Earnings~~LIQUIDITY ~~from~~AND ~~Continuing~~CAPITAL ~~Operations~~RESOURCES provides an overview of our cash flows, financing and contractual obligations.

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
Earnings from continuing operations			$ 44,979				$ 52,331				$ (7,352)				(14.0)%

CRITICAL ACCOUNTING POLICIES provides a discussion of our accounting policies that require critical judgment, assumptions and estimates.

~~Earnings~~RECENTLY ~~from~~ADOPTED ~~continued~~ACCOUNTING ~~operations decreased~~PRONOUNCEMENTS byprovides ~~$7.3~~a ~~million,~~brief ordescription ~~14.0%,~~of tosignificant ~~$45.0~~accounting ~~million~~standards inwhich ~~fiscal~~were ~~2010~~adopted ~~compared~~during ~~to $52.3 million in~~ fiscal ~~2009~~2011. ~~The decrease was primarily due to an increase of $18.6 million in Interest expense, net, partially offset by an increase of $10.1 million in Total revenues driven by an increase in Base rents.~~

~~Total~~All ~~Revenues~~information in this MD&A is presented on a historical basis and reflects results of continuing operations for all periods presented.

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
Total revenues			$ 286,718				$ 276,627				$ 10,091				3.6%

EXECUTIVE OVERVIEW

~~Total~~Our revenues increased by $10.1 million, or 3.6%, to $286.7 million in fiscal 2010 compared to $276.6 million in fiscal 2009. The increase was primarily due to the increase in Base rents as a result of the amendments in the TRU Propco I Master Lease on July 9, 2009, partially offset by a reduction in Tenant reimbursements. See Note 4 to our Consolidated Financial Statements entitled “LEASES” and Item 13 entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” of this Annual Report on Form 10-K for a description of the amendment and restatement of the TRU Propco I Master Lease. Business

~~Depreciation~~ We are a special purpose entity, owned indirectly by TRU and formed in September 2005. Certain of our wholly-owned special purpose subsidiaries own fee and leasehold interests in 351 properties in various retail markets throughout the United States. Under the operating company/property company structure, we lease the properties on a triple-net basis, to Toys-Delaware, the operating entity for all of TRU’s North American businesses, which operates the Properties as Toys “R” Us stores, Babies “R” Us stores or side-by-side stores, or subleases them to alternative retailers. Substantially all of our revenues and cash flows are derived from payments from Toys-Delaware under the TRU Propco I Master Lease. For the financial statements for fiscal year ended January 28, 2012 and other information about our master tenant, Toys-Delaware, see Exhibit 99.1 to this report.

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
Depreciation			$ 36,888				$ 36,686				$ 202				0.6%

Our primary business operations consist of leasing properties to our affiliate Toys-Delaware, servicing our debt via payments on our debt instruments and, subject to compliance with our debt agreements, distributing cash to our ultimate parent, TRU. The Company’s management does not currently have plans to purchase additional properties. As a result, we do not believe we are subject to risks associated with obtaining financing for individual properties when availability of capital in the marketplace may be limited or may be subject to the overall economic environment.

~~Depreciation increased by $0.2 million, or 0.6%, to $36.9 million in fiscal 2010 compared to $36.7 million in fiscal 2009.~~ 19

~~Rental~~Table ~~Expense~~of Contents

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
Rental expense			$ 51,070				$ 48,328				$ 2,742				5.7%

Substantially all of our cash revenues are subject to fixed increases under the TRU Propco I Master Lease which will expire in 2029. Also, interest payments under the 10.75% senior unsecured notes due fiscal 2017 (the “Notes”) are fixed at 10.75%. Approximately half of our Properties are leased from third parties and as these leases expire, we may need to renew these leases on terms that may not be as favorable as under the expiring lease. Also, the TRU Propco I Master Lease allows us to charge common area maintenance expenses and certain other operating costs to Toys-Delaware.

~~Rental~~Material ~~expense~~Trends ~~increased~~and by $2.7 million, or 5.7%, to $51.0 in fiscal 2010 compared to $48.3 million in fiscal 2009. The increase was primarily due to a $2.5 million non-cash cumulative correction of prior period straight-line lease accounting. Uncertainties

19Our primary source of rental revenue and cash flows is derived from the leasing arrangements we have entered into with Toys-Delaware under the TRU Propco I Master Lease which expires in fiscal 2029. We record rental revenue using the straight-line method, which results in recording a consistent rate of revenue over the terms of our lease agreements even when cash rents received increase or decrease over the lease term. Rental payments under the TRU Propco I Master Lease are scheduled to increase by 10% for each property on July 1, 2014, July 1, 2019 and July 1, 2024. Future annual related party base rents may be reduced by payments received from Toys-Delaware by the Company as a result of an early termination of a lease, as set forth under the terms of the TRU Propco I Master Lease, or the successful execution of the sale of such properties by the Company to a third party. Our largest expense is interest expense; the payment and recording of which is fixed over the term of the Notes due in fiscal 2017.

~~Table~~RESULTS ofOF ~~Contents~~OPERATIONS

~~Common~~Fiscal ~~Area~~2011 ~~Maintenance~~Compared ~~Expenses~~to Fiscal 2010

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
Common area maintenance expenses			$ 40,495				$ 42,536				$ (2,041)				(4.8)%

Earnings from Continuing Operations

Common area maintenance expenses decreased by $2.0 million, or 4.8%, to $40.5 million in fiscal 2010 compared to $42.5 million in fiscal 2009. These expenses are fully reimbursed by our tenant under the TRU Propco I Master Lease, and are reflected in Tenant reimbursements, which is a component of Total revenues.



($ In thousands)	Fiscal 2011		Fiscal 2010		$ Change		% Change
Earnings from continuing operations	$	50,116	$	43,807	$	6,309	14.4	%

~~Other~~Earnings ~~Operating~~from ~~Expenses~~continuing operations increased by $6.3 million, ~~Net~~or 14.4%, to $50.1 million in fiscal 2011 compared to $43.8 million in fiscal 2010. The increase was primarily due to a decrease in Depreciation expense of $3.0 million primarily due to assets that became fully depreciated in fiscal 2010 and an increase in Total revenues of $2.9 million.

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
Other operating expenses, net			$ 6,396				$ 8,433				$ (2,037)				(24.2)%

Total Revenues

Other operating expenses, net decreased by $2.0 million, or 24.2%, to $6.4 million in fiscal 2010 compared to $8.4 million in fiscal 2009. The decrease is primarily due to indirect costs incurred in the prior year in connection with the issuance of the Notes and repayment of our unsecured credit agreement on July 9, 2009.



($ In thousands)	Fiscal 2011		Fiscal 2010		$ Change		% Change
Total revenues	$	286,999	$	284,052	$	2,947	1.0	%

~~Interest~~Total ~~Expense~~revenues increased by $2.9 million, ~~Net~~or 1.0%, to $287.0 million in fiscal 2011 compared to $284.1 million in fiscal 2010. The increase was primarily due to an increase in Base rents of $1.9 million predominantly due to a non-cash cumulative straight-line lease accounting correction recorded in fiscal 2011, as well as an increase in Tenant reimbursements of $1.1 million.

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
Interest expense, net			$ 106,890				$ 88,313				$ 18,577				21.0%

Depreciation

Interest expense, net increased by $18.6 million, or 21.0%, to $106.9 million in fiscal 2010 compared to $88.3 million in fiscal 2009. The increase was primarily due to higher effective interest rates related to the prior year issuance of the Notes, partially offset by a reduction in average debt balance and the write-off of $7.9 million of deferred financing costs related to the unsecured credit agreement in fiscal 2009.



($ In thousands)	Fiscal 2011		Fiscal 2010		$ Change			% Change
Depreciation	$	33,317	$	36,366	$	(3,049	)	(8.4	)%

~~(Loss)~~Depreciation ~~Earnings~~decreased ~~from~~by ~~Discontinued~~$3.0 ~~Operations~~million, or 8.4%, to $33.3 million in fiscal 2011 compared to $36.3 million in fiscal 2010. The decrease was primarily due to assets that became fully depreciated in fiscal 2010.

($ In thousands)		Fiscal 2010				Fiscal 2009				$ Change				% Change
(Loss) earnings from discontinued operations			$ (211)				$ 4,886				$ (5,097)				(104.3)%

Rental Expense

Earnings from discontinued operations decreased by $5.1 million to a loss of $0.2 million in fiscal 2010 compared to earnings of $4.9 million in fiscal 2009. The decrease is primarily due to the operations of 11 sold properties and 14 transferred properties (collectively, the “Transferred Properties”) being included in our results in fiscal 2009, while the Transferred Properties are no longer included in the current year operating results as they were sold or transferred on July 9, 2009. In addition, during fiscal 2010, we classified three owned properties as assets held for sale and recognized an impairment loss of $0.6 million as well as accelerated depreciation related to locations identified for disposal in fiscal 2010. See Note 3 to the Consolidated Financial Statements entitled “DISCONTINUED OPERATIONS” for further details.



($ In thousands)	Fiscal 2011		Fiscal 2010		$ Change			% Change
Rental expense	$	49,300	$	50,628	$	(1,328	)	(2.6	)%

~~Fiscal~~Rental ~~2009~~expense ~~Compared~~decreased by $1.3 million, or 2.6%, to ~~Fiscal~~$49.3 ~~2008~~ million in fiscal 2011 compared to $50.6 million in fiscal 2010. The decrease was primarily due to a $2.5 million non-cash cumulative straight-line lease accounting correction recorded in fiscal 2010.

~~Earnings from Continuing Operations~~ 20

($ In thousands)		Fiscal 2009				Fiscal 2008				$ Change				% Change
Earnings from continuing operations			$ 52,331				$ 55,645				$ (3,314)				(6.0)%

Table of Contents

~~Earnings~~Common ~~from~~Area ~~continuing~~Maintenance operations decreased by $3.3 million, or 6.0%, to $52.3 million in fiscal 2009 compared to $55.6 million in fiscal 2008. Earnings from continuing operations decreased primarily due to an increase of $16.9 million in Interest expense, net and an increase of $5.5 million in Total operating expenses, partially offset by an increase of $19.0 million in Total revenues due to increases in Base rents. Expenses



($ In thousands)	Fiscal 2011		Fiscal 2010		$ Change		% Change
Common area maintenance expenses	$	41,027	$	39,965	$	1,062	2.7	%

~~Table~~Common area maintenance expenses increased by $1.0 million, or 2.7%, to $41.0 million in fiscal 2011 compared to $40.0 million in fiscal 2010. These expenses are fully reimbursed by our tenant under the TRU Propco I Master Lease, and are reflected in Base rents, which is a component of ~~Contents~~Total revenues.

~~Total~~Other ~~Revenues~~Operating Expenses

($ In thousands)	Fiscal ~~2009~~2011		Fiscal ~~2008~~2010		$ Change			% Change
Total revenues		$ 276,627		$ 257,579		$ 19,048			7.4%
Other operating expenses	$	5,895	$	6,396	$	(501	)	(7.8	)%

~~Total~~Other ~~revenues~~operating ~~increased~~expenses decreased by ~~$19.0 million,~~a ornominal ~~7.4%,~~amount ~~to $276.6 million~~ in fiscal ~~2009~~2011 compared to ~~$257.6 million in~~ fiscal ~~2008~~2010. The increase is primarily due to the increase in Base rents of $16.0 million as a result of the amendments in the TRU Propco I Master Lease and an increase of $3.0 million related to Tenant reimbursements. See Note 4 to our Consolidated Financial Statements entitled “LEASES” and Item 13 entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” of this Annual Report on Form 10-K for a description of the amendment and restatement of the TRU Propco I Master Lease.

~~Depreciation~~ Interest Expense

($ In thousands)	Fiscal ~~2009~~2011		Fiscal ~~2008~~2010		$ Change		% Change
Depreciation		$ 36,686		$ 36,346		$ 340		0.9%
Interest expense	$	107,344	$	106,890	$	454	0.4	%

~~Depreciation~~Interest expense increased by ~~$0.3 million,~~a ornominal ~~0.9%,~~amount ~~to $36.7 million~~ in fiscal ~~2009~~2011 compared to ~~$36.4 million in~~ fiscal ~~2008~~2010.

~~Rental~~Earnings ~~Expense~~from Discontinued Operations

($ In thousands)	Fiscal ~~2009~~2011		Fiscal ~~2008~~2010		$ Change		% Change
Rental expense		$ 48,328		$ 47,266		$ 1,062		2.2%
Earnings from discontinued operations	$	10,884	$	961	$	9,923	1,032.6	%

~~Rental~~Earnings ~~expense~~from discontinued operations increased by $19.1 9 million, ~~or 2.2%,~~ to $4810.39 million in fiscal ~~2009~~2011 compared to $471.20 million in fiscal ~~2008,~~2010. asThe aincrease ~~result~~is primarily due to termination payments of ~~lease~~approximately ~~amendments~~$10.9 million from Toys-Delaware as required under the TRU Propco I Master Lease for four properties sold and ~~renewals~~two early lease terminations during fiscal 2011.

~~Common~~Fiscal ~~Area~~2010 ~~Maintenance~~Compared ~~Expenses~~to Fiscal 2009

($ In thousands)		Fiscal 2009				Fiscal 2008				$ Change				% Change
Common area maintenance expenses			$ 42,536				$ 39,544				$ 2,992				7.6%

Earnings from Continuing Operations

Common area maintenance expenses increased by $3.0 million, or 7.6%, to $42.5 million in fiscal 2009 compared to $39.5 million in fiscal 2008. The increase was primarily due to an increase in real estate taxes of $2.8 million. These expenses are fully reimbursed by our tenant under the TRU Propco I Master Lease, and are reflected in Tenant reimbursements, which is a component of Total revenues.



($ In thousands)	Fiscal 2010		Fiscal 2009		$ Change			% Change
Earnings from continuing operations	$	43,807	$	51,200	$	(7,393	)	(14.4	)%

~~Other~~Earnings ~~Operating Expenses~~from continuing operations decreased by $7.4 million, ~~Net~~or 14.4%, to $43.8 million in fiscal 2010 compared to $51.2 million in fiscal 2009. The decrease was primarily due to an increase of $18.6 million in Interest expense, partially offset by an increase of $9.9 million in Total revenues driven by an increase in Base rents.

($ In thousands)		Fiscal 2009				Fiscal 2008				$ Change				% Change
Other operating expenses, net			$ 8,433				$ 7,333				$ 1,100				15.0%

Total Revenues

Other operating expenses, net increased by $1.1 million, or 15.0%, to $8.4 million in fiscal 2009 compared to $7.3 million in fiscal 2008. The increase was primarily due to indirect costs of approximately $1.1 million incurred in connection with the preparation of offering documents and the Form S-4 registration statement related to the Notes in fiscal 2009.



($ In thousands)	Fiscal 2010		Fiscal 2009		$ Change		% Change
Total revenues	$	284,052	$	274,121	$	9,931	3.6	%

~~Interest~~Total ~~Expense~~revenues increased by $9.9 million, ~~Net~~or 3.6%, to $284.1 million in fiscal 2010 compared to $274.2 million in fiscal 2009. The increase was primarily due to the increase in Base rents as a result of the amendments in the TRU Propco I Master Lease on July 9, 2009, partially offset by a reduction in Tenant reimbursements. See Note 4 to our Consolidated Financial Statements entitled “LEASES” and Item 13 entitled “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” of this Annual Report on Form 10-K for a description of the amendment and restatement of the TRU Propco I Master Lease.

($ In thousands)		Fiscal 2009				Fiscal 2008				$ Change				% Change
Interest expense, net			$ 88,313				$ 71,445				$ 16,868				23.6%

~~Interest~~Table ~~expense, net increased by $16.9 million, or 23.6%, to $88.3 million in fiscal 2009 compared to $71.4 million in fiscal 2008. The increase was primarily due to the write-off~~ of $7.9 million of deferred financing costs associated with the repayment of the loan balance under our senior unsecured credit agreement, as well as higher interest rates related to the issuance of the Notes by us on July 9, 2009. Refer to Note 6 to the Consolidated Financial Statements entitled “LONG-TERM DEBT” for further details. Contents

Depreciation



($ In thousands)	Fiscal 2010		Fiscal 2009		$ Change		% Change
Depreciation	$	36,366	$	36,309	$	57	0.2	%

~~Table~~Depreciation ofincreased ~~Contents~~by a nominal amount in fiscal 2010 compared to fiscal 2009.

~~Earnings~~Rental ~~from Discontinued Operations~~ Expense

($ In thousands)	Fiscal ~~2009~~2010		Fiscal ~~2008~~2009		$ Change		% Change
Earnings from discontinued operations		$ 4,886		$ 5,617		$ (731)		(13.0)%
Rental expense	$	50,628	$	47,876	$	2,752	5.7	%

~~Earnings~~Rental ~~from~~expense ~~discontinued~~increased ~~operations decreased~~ by $02.7 million, or 135.07%, to $450.96 million in fiscal ~~2009~~2010 compared to $547.69 million in fiscal ~~2008~~2009. The ~~decrease~~increase iswas primarily due to ~~the~~a ~~operations~~$2.5 ofmillion ~~the~~non-cash ~~Transferred~~cumulative ~~Properties~~straight-line ~~being~~lease ~~included~~accounting incorrection ~~our~~recorded ~~results for the full fiscal year 2008, while the Transferred Properties were no longer included~~ in ~~the~~ fiscal ~~2009 operating results after July 9, 2009~~2010.

~~Liquidity~~Common ~~and Capital~~Area ~~Resources~~Maintenance Expenses

Overview



($ In thousands)	Fiscal 2010		Fiscal 2009		$ Change			% Change
Common area maintenance expenses	$	39,965	$	41,990	$	(2,025	)	(4.8	)%

AsCommon ofarea ~~January 29~~maintenance expenses decreased by $2.0 million, ~~2011~~or 4.8%, weto ~~were~~$40.0 million in ~~compliance~~fiscal ~~with~~2010 ~~all~~compared ofto ~~our~~$42.0 ~~covenants~~million ~~related~~in tofiscal 2009. These expenses are fully reimbursed by our tenant under the ~~Notes.~~TRU Propco I Master Lease, and are reflected in Base rents, which is a component of Total revenues.

~~Our~~Other ~~largest~~Operating source of operating cash flows is cash collections from our lessees. In general, we utilize our cash to service debt, pay normal operating costs and at the discretion of our sole member, based on the recommendation of our management, and as permitted by the indenture governing the Notes, declare and pay dividends. From time to time a portion of our cash may also be used to tender a portion of the outstanding Notes as permitted by the indenture governing the Notes. Refer to Note 6 to the Consolidated Financial Statements entitled “LONG-TERM DEBT” for further details regarding the tender of the Notes. We have been able to meet our cash needs principally by using cash on hand and cash flows from operations and we believe that cash generated from operations along with existing cash will be sufficient to fund expected cash flow requirements for the next twelve months. Expenses

Cash Flows



($ In thousands)	Fiscal 2010		Fiscal 2009		$ Change			% Change
Other operating expenses	$	6,396	$	8,433	$	(2,037	)	(24.2	)%

		00000		00000		00000
(In thousands)	Fiscal2010		Fiscal2009		Fiscal2008
Net cash provided by operating activities	$	69,038	$	78,438	$	117,118
Net cash provided by (used in) investing activities		4,442		171,629		(14,186)
Net cash used in financing activities		(58,809)		(225,360)		(102,786)
Net increase in cash during period	$	14,671	$	24,707	$	146

Other operating expenses decreased by $2.0 million, or 24.2%, to $6.4 million in fiscal 2010 compared to $8.4 million in fiscal 2009. The decrease is primarily due to indirect costs incurred in fiscal 2009 in connection with the issuance of the Notes and repayment of our unsecured credit agreement on July 9, 2009.

~~Cash~~Interest ~~Flows Provided by Operating Activities~~ Expense

Net cash provided by operating activities for fiscal 2010 was $69.0 million, a decrease of $9.4 million compared to fiscal 2009. The decrease in cash provided by operating activities was primarily due to an increase in interest payments of $25.6 million as compared to the prior year, partially offset by an increase of $14.2 million in collections of base rent due to the timing of rental payments received in the prior year as the amendment and restatement of the TRU Propco I Master Lease on July 9, 2009 changed the payment due date to the first of each month from payments in advance.



($ In thousands)	Fiscal 2010		Fiscal 2009		$ Change		% Change
Interest expense	$	106,890	$	88,313	$	18,577	21.0	%

~~Net~~Interest ~~cash~~expense ~~provided~~increased by ~~operating activities for fiscal 2009 was~~ $7818.46 million, aor ~~decrease~~21.0%, ofto $38106.79 million ~~compared~~in to fiscal ~~2008.~~2010 ~~The~~compared ~~decrease in cash provided by operating activities was primarily due~~ to a $1688.03 million ~~decrease~~ in ~~payments received from an affiliate in~~ fiscal 2009,. aThe ~~decrease~~increase ofwas ~~$14.7~~primarily ~~million~~due into ~~collections~~higher ofeffective ~~base~~interest ~~rent~~rates ~~due~~related to the ~~timing~~issuance of the ~~rental~~Notes ~~payments received~~ in fiscal 2009, aspartially ~~the~~offset ~~amendment~~by ~~and~~a ~~restatement~~reduction ofin ~~the~~average ~~TRU Propco~~debt Ibalance ~~Master~~and ~~Lease on July 9, 2009 changed~~ the ~~payment~~write-off ~~due date to the first~~ of ~~each month from payments in advance~~$7.9 ~~Additionally,~~million ~~the decrease was also a result~~ of ~~higher~~deferred ~~interest~~financing ~~payments~~costs ofrelated ~~$7.1 million due~~ to the ~~higher~~unsecured ~~average~~credit ~~interest rate~~agreement in fiscal 2009 ~~resulting from our issuance of the Notes on July 9, 2009~~.

~~Cash~~Earnings ~~Flows~~from ~~Provided~~Discontinued byOperations ~~(Used in) Investing Activities~~

Net cash provided by investing activities for fiscal 2010 was $4.4 million, a decrease of $167.2 million compared to fiscal 2009. The decrease in net cash provided by investing activities was primarily due to the release of all restricted cash in the prior year as a result of the repayment of the outstanding loan balance under our unsecured credit agreement and a decrease of $58.8 million of proceeds received in the prior year from the Transferred Properties. These decreases were partially offset by $4.4 million of proceeds received from the sale of fixed assets.



($ In thousands)	Fiscal 2010		Fiscal 2009		$ Change			% Change
Earnings from discontinued operations	$	961	$	6,017	$	(5,056	)	(84.0	)%

~~Net~~Earnings ~~cash~~from ~~provided~~discontinued byoperations ~~investing~~decreased ~~activities~~by ~~for fiscal 2009 was~~ $~~171~~5.60 million, anor ~~increase~~84.0%, ofto $~~185~~1.80 million in fiscal 2010 compared to ~~fiscal 2008~~$6.0 ~~The~~million ~~increase~~ in ~~net cash~~fiscal ~~provided~~2009. byThe ~~investing~~decrease ~~activities~~is ~~was~~ primarily due to the ~~release~~operations of ~~all~~11 ~~restricted~~sold ~~cash~~properties asand a14 ~~result~~transferred ofproperties (collectively, the ~~repayment~~“Transferred ofProperties”) being included in our results in fiscal 2009, while the ~~outstanding~~Transferred ~~loan~~Properties ~~balance~~are ~~under~~no ~~our~~longer ~~unsecured~~included ~~credit~~in ~~agreement~~the ~~and~~fiscal ~~$58~~2010 operating results as they were sold or transferred on July 9, 2009.8 ~~million~~In ofaddition, ~~proceeds~~during ~~received~~fiscal ~~from~~2010, ~~the~~we classified three owned properties as assets held for sale ~~of Transferred~~and ~~Properties~~recognized ~~equal~~an toimpairment ~~their~~loss ~~historical~~of ~~cost~~$0.6 ~~Refer~~million toas ~~Note~~well 4as toaccelerated ~~the~~depreciation ~~Consolidated~~related ~~Financial~~to ~~Statements~~locations ~~entitled~~identified ~~“LEASES”~~ for ~~further~~disposal ~~details~~in fiscal 2010.

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~~Cash~~Liquidity ~~Flows~~and ~~Used~~Capital ~~in Financing Activities~~ Resources

Net cash used in financing activities was $58.8 million for fiscal 2010, a decrease of $166.6 million compared to fiscal 2009. The decrease in net cash used in financing activities was primarily due to the prior year repayment of $1.3 billion of our unsecured credit agreement and a decrease of $22.6 million in debt issuance costs. These decreases were partially offset by the proceeds received in the prior year of $925 million from the offering of the Notes (see Note 6 to the Consolidated Financial Statements entitled “LONG-TERM DEBT” for further details), a decrease in Capital contributions of $141.9 million, Amounts received in excess of carrying values of net assets sold of $65.6 million in the prior year and an increase in Distributions of $23.2 million. Overview

~~Net~~As ~~cash used~~of inJanuary 28, ~~financing activities for fiscal 2009 was $225.4 million~~2012, anwe ~~increase~~were ~~of $122.6 million compared to fiscal 2008. The increase~~ in ~~net~~compliance ~~cash~~with ~~used~~all ~~in financing activities was primarily due to the repayment~~ of ~~$1.3 billion under~~ our ~~senior unsecured~~covenants ~~credit~~related ~~agreement.~~to ~~The increase was partially offset by~~ the ~~proceeds of $925 million received from the offering of our~~ Notes~~, Capital contributions of $141~~.~~9 million, Amounts received in excess of carrying values of the net assets sold of $65.6 million and a decrease of $64.2 million in distributions to TRU.~~

~~Debt~~Our largest source of operating cash flows is cash collections from our lessees. In general, we utilize our cash to service debt, pay normal operating costs and at the discretion of our sole member, based on the recommendation of our management, and as permitted by the indenture governing the Notes, declare and pay dividends or make distributions. From time to time a portion of our cash may also be used to tender a portion of the outstanding Notes as permitted by the indenture governing the Notes. Refer to Note 6 to the Consolidated Financial Statements entitled “LONG-TERM DEBT” for further details regarding the tender of the Notes.

~~Refer~~Additionally, the indenture governing the Notes allows the Company to ~~Note~~re-invest 6the net cash proceeds from the sale of properties within 720 days subsequent to the ~~Consolidated~~receipt ~~Financial~~of ~~Statements~~the ~~entitled~~proceeds. If net cash proceeds are not reinvested within 720 days of receipt, the net cash proceeds are deemed to be excess proceeds (“~~LONG-TERM~~Excess ~~DEBT~~Proceeds”). ~~for~~When ~~further~~the ~~details~~aggregate ~~regarding~~amount ~~our~~of Excess Proceeds exceeds $10.0 million, the Company will make an offer to all holders of the Notes within 30 days to purchase Notes with the Excess Proceeds. Although we have recognized sales proceeds in excess of $10.0 million as of January 28, 2012, these are not classified as Excess Proceeds given the time that has elapsed from the sale of the properties.

OnWe ~~July 8,~~have ~~2010,~~been weable ~~completed~~to ameet ~~registered~~our ~~exchange~~cash ~~offer~~needs ~~with~~principally ~~respect~~by tousing ~~the~~cash ~~Notes.~~on ~~Additionally,~~hand inand ~~accordance~~cash ~~with~~flows ~~the~~from ~~indenture~~operations ~~governing~~and ~~the Notes,~~ we ~~commenced~~believe athat ~~tender~~cash ~~offer~~generated onfrom ~~June 25,~~operations ~~2010~~along towith ~~purchase~~existing ~~for~~ cash, upwill tobe ansufficient ~~aggregate~~to ~~amount~~fund ofexpected ~~approximately~~cash ~~$25~~flow ~~million~~requirements offor the ~~Notes~~next attwelve ~~par~~months. ~~The tender offer expired on July 26, 2010 with no holders opting to tender at that time.~~

~~Contractual~~Cash ~~Obligations and Commitments~~ Flows

Our contractual obligations consist mainly of payments related to Long-term debt and related interest, and operating leases related to real estate used in the operation of our business. The following table summarizes our contractual obligations associated with our Long-term debt and other obligations as of January 29, 2011:



(In thousands)	Fiscal 2011			Fiscal 2010			Fiscal 2009
Net cash provided by operating activities	$	78,855		$	69,038		$	78,438
Net cash provided by investing activities	9,680			4,442			171,629
Net cash used in financing activities	(56,132		)	(58,809		)	(225,360		)
Net increase in cash during period	$	32,403		$	14,671		$	24,707

	Payments Due By Period
(In thousands)	Fiscal 2011		Fiscals 2012 & 2013		Fiscals 2014 & 2015		Fiscals 2016 and thereafter		Total
Net operating lease obligations(1)	$	43,445	$	74,507	$	51,730	$	52,065	$	221,747
Long-term debt		-		-		-		950,000		950,000
Interest payments		102,125		204,250		204,250		153,188		663,813
Total contractual obligations	$	145,570	$	278,757	$	255,980	$	1,155,253	$	1,835,560

Cash Flows Provided by Operating Activities

~~(1)~~Net ~~Excluded~~cash ~~from~~provided ~~the~~by ~~Net~~ operating ~~lease~~activities ~~obligations~~for ~~displayed~~fiscal ~~above~~2011 ~~are~~was ~~approximately~~$78.9 million, an increase of $~~964~~9.9 million ~~related~~compared to ~~options~~fiscal to2010. ~~extend~~The ~~ground~~increase ~~lease~~in ~~terms~~cash ~~that~~provided ~~are~~by ~~reasonably~~operating ~~assured~~activities ofwas ~~being~~primarily ~~exercised,~~due ~~the~~to ~~balance~~termination payments received of ~~which~~approximately ~~predominantly~~$10.9 ~~relates~~million tofrom ~~fiscals~~Toys-Delaware ~~2016~~as ~~and~~required ~~thereafter.~~under Asthe ofTRU ~~January~~Propco ~~29,~~I ~~2011,~~Master weLease ~~had~~for ~~113~~four ~~ground~~properties ~~leases~~sold and two early lease terminations during fiscal 2011.

~~Obligations~~Net ~~under~~cash ~~our~~provided by operating ~~leases~~activities for fiscal 2010 was $69.0 million, a decrease of $9.4 million compared to fiscal 2009. The decrease in ~~the~~cash ~~above~~provided ~~table~~by dooperating ~~not~~activities ~~include~~was primarily due to an increase in interest payments ~~for~~of ~~real~~$25.6 ~~estate~~million ~~taxes~~as compared to fiscal 2009, ~~maintenance~~partially ~~and~~offset ~~insurance~~by oran ~~contingent~~increase ~~rent~~of $14.2 ~~The~~million ~~following~~in ~~table~~collections ~~presents~~of ~~these~~base ~~expenses~~rent ~~for fiscals~~due ~~2010,~~to the timing of rental payments received in fiscal 2009 as the amendment and ~~2008:~~restatement of the TRU Propco I Master Lease on July 9, 2009 changed the payment due date to the first of each month from payments in advance.

(In thousands)	Fiscal 2010		Fiscal 2009		Fiscal 2008
Real estate taxes	$	32,530	$	33,970	$	32,313
Maintenance and insurance		7,120		8,441		9,002
Contingent rent		383		636		549
Total	$	40,033	$	43,047	$	41,864

Cash Flows Provided by Investing Activities

~~Off-Balance~~Net ~~Sheet~~cash ~~Arrangements~~provided by investing activities for fiscal 2011 was $9.7 million, an increase of $5.3 million compared to fiscal 2010. The increase in net cash provided by investing activities was primarily due to an increase of $6.9 million of proceeds from the sale of real estate, partially offset by capital expenditures of $1.7 million incurred in fiscal 2011.

~~None~~Net cash provided by investing activities for fiscal 2010 was $4.4 million, a decrease of $167.2 million compared to fiscal 2009. The decrease in net cash provided by investing activities was primarily due to the release of all restricted cash in fiscal 2009 as a result of the repayment of the outstanding loan balance under our unsecured credit agreement and a decrease of $58.8 million of proceeds received in fiscal 2009 from the Transferred Properties. These decreases were partially offset by $4.4 million of proceeds received from the sale of real estate.

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~~CRITICAL~~Cash ~~ACCOUNTING~~Flows ~~POLICIES~~Used in Financing Activities

~~Our~~Net ~~Consolidated~~cash ~~Financial~~used ~~Statements~~in ~~have~~financing ~~been~~activities ~~prepared~~for infiscal ~~accordance~~2011 ~~with~~was ~~GAAP~~$56.1 ~~The~~million, ~~preparation~~a decrease of ~~these~~$2.7 ~~financial~~million ~~statements~~compared ~~requires us~~ to ~~make~~fiscal ~~certain~~2010. ~~estimates~~The ~~and~~decrease ~~assumptions~~in ~~that~~net ~~affect~~cash ~~the reported~~used ~~amounts~~in offinancing ~~assets,~~activities ~~liabilities,~~was ~~revenues~~primarily ~~and~~due ~~expenses,~~to ~~and~~a ~~the~~$1.7 ~~related~~million ~~disclosures~~lease offinancing ~~contingent~~obligation ~~assets~~in ~~and~~fiscal ~~liabilities~~2011, asa ofreduction ~~the~~in ~~date~~Distributions of ~~the Consolidated Financial Statements and during the applicable periods~~$0.6 Wemillion ~~base~~as ~~these~~compared ~~estimates~~to ~~on historical experience and on other factors that we believe are reasonable under~~ the ~~circumstances.~~prior ~~Actual~~year ~~results may differ materially from these estimates under different assumptions or conditions~~ and ~~could~~capitalized ~~have~~debt aissuance ~~material~~costs ~~impact~~incurred onin ~~our Consolidated~~fiscal ~~Financial Statements~~2010.

WeNet ~~believe~~cash ~~the~~used ~~following~~in ~~are~~financing ~~our~~activities ~~most~~for ~~critical~~fiscal ~~accounting~~2010 ~~policies~~was ~~that~~$58.8 ~~include~~million, ~~significant~~a ~~judgments~~decrease ~~and estimates~~of $166.6 million compared to fiscal 2009. The decrease in net cash used in financing activities was primarily due to the ~~preparation~~repayment of $1.3 billion of our ~~Consolidated~~unsecured ~~Financial~~credit ~~Statements~~agreement in fiscal 2009 and a decrease of $22.6 Wemillion ~~consider~~in andebt ~~accounting~~issuance ~~policy~~costs. toThese bedecreases ~~critical~~were ifpartially itoffset ~~requires~~by ~~assumptions~~the toproceeds bereceived ~~made~~in ~~that~~fiscal ~~were~~2009 ~~uncertain~~of at$925 million from the ~~time~~offering ~~they~~of ~~were~~the ~~made~~Notes (see Note 6 to the Consolidated Financial Statements entitled “LONG-TERM DEBT” for further details), ~~and~~Capital ifcontributions ~~changes~~of $141.9 million, which did not recur in ~~these~~fiscal ~~assumptions could~~2010, ~~have~~Amounts areceived ~~material~~in ~~impact~~excess onof ~~our~~carrying ~~consolidated~~values ~~financial~~of ~~condition~~net orassets ~~results~~sold of ~~operations~~$65.6 million in fiscal 2009 and an increase in Distributions of $23.2 million.

~~Long-lived Asset Impairment~~ Debt

WeRefer evaluate the carrying value of all long-lived assets, which include land and buildings, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, in accordance with ASC 360. This evaluation requires management to ~~make~~Note ~~judgments~~6 ~~relating~~ to anthe ~~estimate~~Consolidated ofFinancial ~~undiscounted~~Statements ~~future~~entitled ~~cash flows to determine whether an asset group is recoverable. If a long~~“LONG-~~lived~~TERM ~~asset~~DEBT” ~~group~~for isfurther ~~found~~details toregarding beour ~~non-recoverable, we record an impairment charge equal to the difference between the asset’s carrying value and its fair value~~Notes. ~~We estimate the fair value of an asset group using a valuation method such as discounted cash flows or a relative, market-based approach.~~

~~Revenue~~In ~~Recognition~~accordance with the indenture governing the Notes, we commenced a tender offer on May 13, 2011 to purchase up to an aggregate principal amount of approximately $25 million of the Notes for cash. The tender offer expired on June 13, 2011, with no holders opting to tender at that time. Therefore, as permitted by the indenture, we made cash distributions of approximately $25 million to TRU on June 20, 2011.

~~Base~~Contractual ~~rental~~Obligations revenue is reported on a straight-line basis over the non-cancelable terms of our respective leases. Straight-line rent receivable from affiliates as reported on the Consolidated Balance Sheets represents rental income recognized in excess of rent payments actually received pursuant to the terms of the individual lease agreements. The leases also typically provide for tenant reimbursements of common area maintenance and other operating expenses and real estate taxes. Accordingly, revenues associated with tenant reimbursements are recognized in the period in which the expenses are incurred based upon the tenant lease provision. Management fees are recorded in the period earned. Ancillary and other property-related income, which includes the leasing of vacant space to temporary tenants, is recognized in the period earned. Lease termination fees are included in Base rents and recognized and earned upon termination of a tenant’s lease and relinquishment of space in which the Company has no further obligation to the tenant. Commitments

~~Deferred~~Our ~~Rent~~contractual obligations consist mainly of payments related to Long-term debt and related interest, and operating leases associated with real estate used in the operation of our business. The following table summarizes our contractual obligations associated with our Long-term debt and other obligations as of January 28, 2012:

We recognize fixed minimum rent expense on non-cancelable leases on a straight-line basis over the term of each individual lease starting at the date of possession, including the build-out period, and record the difference between the recognized rental expense and amounts payable under the leases as deferred rent liability.



	Payments Due By Period
(In thousands)	Fiscal 2012		Fiscals 2013 & 2014		Fiscals 2015 & 2016		Fiscals 2017 and thereafter		Total
Net operating lease obligations (1)	$	44,899	$	78,174	$	55,201	$	67,988	$	246,262
Lease financing obligation	339		678		678		4,311		6,006
Long-term debt	—		—		—		950,000		950,000
Interest payments	102,125		204,250		204,250		51,063		561,688
Total contractual obligations	$	147,363	$	283,102	$	260,129	$	1,073,362	$	1,763,956

~~Operating~~(1) ~~leases~~Excluded ~~are~~from ~~recorded~~the onNet aoperating ~~straight-line~~lease ~~basis~~obligations ~~over~~displayed ~~the~~above ~~lease~~are ~~term.~~approximately At$917 ~~the~~million ~~inception~~related ofto aoptions ~~lease,~~to weextend ~~determine~~ground ~~the~~ lease ~~term~~ byterms ~~assuming the exercise of renewal options~~ that are reasonably assured ifof abeing ~~significant~~exercised, ~~economic~~the ~~penalty~~balance ~~exists~~of ~~for~~which ~~not~~predominantly ~~exercising~~relates ~~such options. The expected lease term is used~~ to ~~determine~~fiscals ~~whether~~2017 ~~a lease is capital or operating~~ and ~~is used to calculate straight-line rent expense~~thereafter.

~~RECENTLY~~Obligations ~~ADOPTED~~under ~~ACCOUNTING~~our ~~PRONOUNCEMENTS~~operating leases in the above table do not include payments for real estate taxes, maintenance and insurance or contingent rent. The following table presents these expenses for fiscals 2011, 2010 and 2009:

In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). This ASU provides amendments that will require more robust disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2 and 3. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. Effective for the fiscal 2010 Form 10-K, the Company has adopted ASU 2010-06. The adoption of ASU 2010-06 did not have an impact on our Consolidated Financial Statements.



(In thousands)	Fiscal 2011		Fiscal 2010		Fiscal 2009
Real estate taxes	$	31,328	$	32,530	$	33,970
Maintenance and insurance	8,505		7,120		8,441
Contingent rent	178		383		636
Total	$	40,011	$	40,033	$	43,047

~~ITEM 7A.~~Off-Balance ~~QUANTITATIVE~~Sheet ~~AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~ Arrangements

~~Prior to the issuance of the Notes, we were exposed to market risk from potential changes in interest rates~~None. ~~We entered into derivative financial instruments to economically manage our market risk related to interest rates on our variable rate debt. We do not participate in speculative derivative trading.~~

~~Interest~~CRITICAL ~~Rate~~ACCOUNTING ~~Exposure~~ POLICIES

OnOur ~~July 9,~~Consolidated ~~2009,~~Financial weStatements ~~repaid~~have ~~the~~been ~~outstanding~~prepared ~~loan~~in ~~balance under~~accordance ~~our~~with ~~variable rate debt instrument~~GAAP. ~~Additionally,~~The onpreparation ~~December 9,~~of ~~2009,~~these ~~our~~financial ~~interest rate cap related to our variable debt instrument expired. At January 29, 2011, the Company held only fixed rate debt and has not entered into any derivatives.~~

Table of Contents

~~ITEM 8~~statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities as of the date of the Consolidated Financial Statements and during the applicable periods. ~~FINANCIAL~~We ~~STATEMENTS~~base ~~AND~~these ~~SUPPLEMENTARY~~estimates ~~DATA~~on historical experience and on other factors that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions and could have a material impact on our Consolidated Financial Statements.

	PAGE
Report of Independent Registered Public Accounting Firm		26
Consolidated Statements of Operations		27
Consolidated Balance Sheets		28
Consolidated Statements of Cash Flows		29
Consolidated Statements of Changes in Member’s Capital (Deficit)		30
Notes to Consolidated Financial Statements		31
Schedule III – Real Estate and Accumulated Depreciation		39

We believe the following are our most critical accounting policies that include significant judgments and estimates used in the preparation of our Consolidated Financial Statements. We consider an accounting policy to be critical if it requires assumptions to be made that were uncertain at the time they were made, and if changes in these assumptions could have a material impact on our consolidated financial condition or results of operations.

25Long-lived Asset Impairment

~~Table~~We evaluate the carrying value of ~~Contents~~all long-lived assets, which include land and buildings, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, in accordance with ASC 360. This evaluation requires management to make judgments relating to an estimate of undiscounted future cash flows to determine whether an asset group is recoverable. If a long-lived asset group is found to be non-recoverable, we record an impairment charge equal to the amount the asset group’s carrying value exceeds its fair value. We estimate the fair value of an asset group using a valuation method such as discounted cash flows or a relative, market-based approach.

~~REPORT~~Revenue ~~OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~ Recognition

Base rental revenue is reported on a straight-line basis over the non-cancelable terms of our respective leases. Straight-line rent receivable from affiliate as reported on the Consolidated Balance Sheets represents rental income recognized in excess of rent payments actually received pursuant to the terms of the individual lease agreements. The ~~Board~~leases also typically provide for tenant reimbursements of ~~Directors~~common area maintenance and ~~Member~~other operating expenses and real estate taxes. Accordingly, revenues associated with tenant reimbursements are recognized in the period in which the expenses are incurred based upon the tenant lease provision. Ancillary and other property-related income, which includes the leasing of vacant space to temporary tenants, is recognized in the period earned. Lease termination fees are included in Base rents and recognized and earned upon termination of a tenant’s lease and relinquishment of space in which the Company has no further obligation to the tenant.

~~Toys “R”~~Deferred ~~Us Property Company I, LLC:~~ Rent

We ~~have~~recognize ~~audited~~fixed ~~the~~minimum ~~accompanying~~rent ~~consolidated~~expense ~~balance~~on ~~sheets~~non-cancelable ofleases ~~Toys~~on ~~“R”~~a Usstraight-line ~~Property Company~~basis I,over ~~LLC and subsidiaries (~~the ~~“Company”)~~term as of ~~January 29,~~each ~~2011~~individual ~~and~~lease ~~January 30,~~starting ~~2010,~~at ~~and~~ the ~~related~~date ~~consolidated statements~~ of ~~operations~~possession, ~~changes~~including ~~in member’s capital (deficit) and cash flows for each of~~ the ~~three fiscal~~build-out ~~years in the~~ period ~~ended January 29~~, ~~2011.~~and ~~Our~~record ~~audits also included~~ the ~~financial~~difference ~~statement~~between ~~schedule listed in~~ the ~~Index~~recognized atrental ~~Item 15.~~expense ~~These financial statements~~ and ~~financial~~amounts ~~statement~~payable ~~schedule~~under ~~are~~ the ~~responsibility~~leases ofas ~~the Company’s~~deferred ~~management.~~rent ~~Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits~~liability.

WeOperating ~~conducted~~leases ~~our~~are ~~audits~~recorded inon ~~accordance~~a ~~with~~straight-line ~~the~~basis ~~standards~~over of the ~~Public~~lease ~~Company Accounting Oversight Board (United States)~~term. ~~Those~~At ~~standards require that we plan and perform~~ the ~~audit~~inception ~~to obtain reasonable assurance about whether the financial statements are free~~ of ~~material~~a ~~misstatement. The Company is not required to have~~lease, ~~nor were~~ we ~~engaged~~determine tothe ~~perform,~~lease anterm ~~audit~~by ofassuming ~~its~~the ~~internal~~exercise ~~control over financial reporting. Our audits included consideration~~ of ~~internal~~ ~~control~~renewal ~~over~~options ~~financial reporting as a basis for designing audit procedures~~ that are ~~appropriate~~reasonably inassured ~~the~~if ~~circumstances,~~a ~~but~~significant ~~not~~economic ~~for~~penalty ~~the~~exists ~~purpose~~for ofnot ~~expressing~~exercising ansuch ~~opinion on the effectiveness of the Company’s internal control over financial reporting~~options. ~~Accordingly,~~The weexpected ~~express~~lease noterm ~~such~~is ~~opinion.~~used Anto ~~audit~~determine ~~also~~whether ~~includes examining, on~~ a ~~test~~lease ~~basis,~~is ~~evidence~~capital ~~supporting~~or ~~the~~operating ~~amounts~~ and ~~disclosures~~is ~~in the financial statements, assessing the accounting principles~~ used ~~and~~to ~~significant estimates~~calculate ~~made~~straight-line byrent ~~management, as well as evaluating the overall financial statement presentation~~expense. ~~We believe that our audits provide a reasonable basis for our opinion.~~

InRECENTLY ~~our~~ADOPTED ~~opinion,~~ACCOUNTING such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 29, 2011 and January 30, 2010, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 29, 2011 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. PRONOUNCEMENTS

~~/s/ Deloitte & Touche LLP New York, New York April 28, 2011~~None.

26Refer to Note 11 to the Consolidated Financial Statements entitled “RECENT ACCOUNTING PRONOUNCEMENTS” for a discussion of accounting standards which we have not yet been required to implement and may be applicable to our future operations, and their expected impact on the Consolidated Financial Statements.

~~Table~~ITEM 7A. ofQUANTITATIVE ~~Contents~~AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~TOYS~~We ~~“R”~~do USnot ~~PROPERTY~~participate ~~COMPANY~~in I,speculative ~~LLC~~derivative ~~AND SUBSIDIARIES~~ trading.

~~CONSOLIDATED~~Interest ~~STATEMENTS~~Rate ~~OF OPERATIONS~~ Exposure

	Fiscal Years Ended
(In thousands)	January 29,2011			January 30,2010		January 31,2009
Rental revenues:
Base rents	$	246,223		$	234,091	$	218,035
Tenant reimbursements		40,495			42,536		39,544
Total revenues		286,718			276,627		257,579
Depreciation		36,888			36,686		36,346
Rental expense		51,070			48,328		47,266
Common area maintenance expenses		40,495			42,536		39,544
Other operating expenses, net		6,396			8,433		7,333
Total operating expenses		134,849			135,983		130,489
Operating earnings		151,869			140,644		127,090
Interest expense, net		106,890			88,313		71,445
Earnings from continuing operations		44,979			52,331		55,645
(Loss) earnings from discontinued operations		(211	)		4,886		5,617
Net earnings	$	44,768		$	57,217	$	61,262

During fiscal 2011, the Company had only fixed rate debt and has not entered into any derivatives.

~~See Notes to the Consolidated Financial Statements.~~ 25

27Table of Contents

~~Table~~ITEM 8. FINANCIAL ofSTATEMENTS ~~Contents~~AND SUPPLEMENTARY DATA

TOYS “R” US PROPERTY COMPANY I, LLC AND SUBSIDIARIES




	PAGE
Report of Independent Registered Public Accounting Firm	27
Consolidated Statements of Operations	28
Consolidated Balance Sheets	29
Consolidated Statements of Cash Flows	30
Consolidated Statements of Changes in Member’s Capital (Deficit)	31
Notes to the Consolidated Financial Statements	32
Schedule III – Real Estate and Accumulated Depreciation	41

~~CONSOLIDATED BALANCE SHEETS~~ 26

(In thousands)	January 29,2011		January 30,2010
ASSETS
Current Assets:
Cash	$	39,708	$	25,037
Net properties held for sale		6,675		1,240
Prepaid expenses		6,151		6,251
Due from affiliates, net		6,649		5,892
Total current assets		59,183		38,420
Real Estate, Net:
Land		279,325		285,391
Buildings, net		512,510		533,688
Leasehold improvements, net		125,281		148,246
Total real estate, net		917,116		967,325
Straight-line rent receivable from affiliates		97,930		69,015
Debt issuance costs		18,938		21,400
Other assets		273		344
	$	1,093,440	$	1,096,504
LIABILITIES AND MEMBER’S CAPITAL
Current Liabilities:
Real estate taxes payable	$	10,383	$	9,601
Accrued interest		4,232		4,514
Deferred third party rent liabilities		846		422
Deferred related party revenue		925		465
Other current liabilities		923		1,416
Total current liabilities		17,309		16,418
Long-term debt		928,597		926,444
Deferred third party rent liabilities		104,421		91,321
Other non-current liabilities		28		28
Member’s capital		43,085		62,293
	$	1,093,440	$	1,096,504

Table of Contents

~~See~~REPORT ~~Notes~~OF toINDEPENDENT ~~the~~REGISTERED ~~Consolidated~~PUBLIC ~~Financial~~ACCOUNTING ~~Statements.~~ FIRM

28The Board of Directors and Member of

~~Table~~Toys of“R” ~~Contents~~Us Property Company I, LLC:

~~TOYS~~We have audited the accompanying consolidated balance sheets of Toys “R” USUs ~~PROPERTY~~Property ~~COMPANY~~Company I, LLC ~~AND~~and ~~SUBSIDIARIES~~ subsidiaries (the “Company”) as of January 28, 2012 and January 29, 2011, and the related consolidated statements of operations, changes in member’s capital (deficit) and cash flows for each of the three fiscal years in the period ended January 28, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

~~CONSOLIDATED~~We ~~STATEMENTS~~conducted OFour ~~CASH~~audits ~~FLOWS~~in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.

	Fiscal Years Ended
(In thousands)	January 29,2011			January 30,2010			January 31,2009
Cash Flows from Operating Activities:
Net earnings	$	44,768		$	57,217		$	61,262
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		38,215			38,338			41,945
Amortization and write-off of debt issuance costs		2,894			11,832			4,024
Amortization of original issue discount		2,153			1,154			—
Other non-cash charges		611			310			3,313
Loss on sale of real estate		1,534			—			640
Changes in operating assets and liabilities:
Prepaid expenses and Due from affiliates, net		(379	)		(280	)		15,297
Straight-line rent receivable from affiliates, other assets and deferred third party rent liabilities		(21,225	)		(17,715	)		(13,560	)
Real estate taxes payable, Accrued interest and other current liabilities		7			1,298			3,224
Deferred related party revenue		460			(13,716	)		973
Net cash provided by operating activities		69,038			78,438			117,118
Cash Flows from Investing Activities:
Proceeds from sale of fixed assets		4,442			54			—
Sales of net assets to affiliates at carrying values		—			58,800			—
Decrease (Increase) in restricted cash, net		—			112,775			(14,186	)
Net cash provided by (used in) investing activities		4,442			171,629			(14,186	)
Cash Flows from Financing Activities:
Long-term debt borrowings		—			925,291			—
Long-term debt repayments		—			(1,300,000	)		—
Capital contributions		—			141,920			—
Amounts received in excess of carrying values of net assets sold		—			65,634			—
Distributions		(58,377	)		(35,206	)		(99,415	)
Capitalized debt issuance/extension fees		(432	)		(22,999	)		(3,371	)
Net cash used in financing activities		(58,809	)		(225,360	)		(102,786	)
Cash:
Net increase during period		14,671			24,707			146
Cash at beginning of period		25,037			330			184
Cash at end of period	$	39,708		$	25,037		$	330
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	102,125		$	76,518		$	69,410
Non-Cash Financing Information:
Adjustment to the carrying value of net assets previously acquired	$	(5,599	)	$	—		$	—

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 28, 2012 and January 29, 2011, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 28, 2012 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

~~See~~/s/ ~~Notes~~Deloitte to& ~~the Consolidated~~Touche ~~Financial Statements.~~ LLP

29New York, New York

~~Table~~April 27, ~~of Contents~~2012

~~TOYS “R” US PROPERTY COMPANY I, LLC AND SUBSIDIARIES~~ 27

~~CONSOLIDATED~~Table ~~STATEMENTS~~of ~~OF CHANGES IN MEMBER’S CAPITAL (DEFICIT)~~ Contents

(In thousands)	Member's Capital(Deficit)			AccumulatedOtherComprehensiveLoss			Total Member'sCapital(Deficit)
Balance, February 2, 2008	$	(129,119	)	$	(584	)	$	(129,703	)
Net earnings for the period		61,262			-			61,262
Reclassification of unrealized losses on hedged transactions		-			584			584
Total comprehensive income								61,846
Distributions		(99,415	)		-			(99,415	)
Balance, January 31, 2009	$	(167,272	)	$	-		$	(167,272	)
Net earnings for the period		57,217			-			57,217
Capital contributions		141,920			-			141,920
Capital contribution in connection with the sale of properties		65,634			-			65,634
Distributions		(35,206	)		-			(35,206	)
Balance, January 30, 2010	$	62,293		$	-		$	62,293
Net earnings for the period		44,768			-			44,768
Adjustment to the carrying value of net assets previously acquired		(5,599	)		-			(5,599	)
Distributions		(58,377	)		-			(58,377	)
Balance, January 29, 2011	$	43,085		$	-		$	43,085

TOYS “R” US PROPERTY COMPANY I, LLC AND SUBSIDIARIES

~~See~~CONSOLIDATED ~~Notes~~STATEMENTS toOF ~~the Consolidated Financial Statements.~~ OPERATIONS



	Fiscal Years Ended
(In thousands)	January 28, 2012		January 29, 2011		January 30, 2010
Rental revenues:
Base rents	$	245,972	$	244,087	$	232,131
Tenant reimbursements	41,027		39,965		41,990
Total revenues	286,999		284,052		274,121
Depreciation	33,317		36,366		36,309
Rental expense	49,300		50,628		47,876
Common area maintenance expenses	41,027		39,965		41,990
Other operating expenses	5,895		6,396		8,433
Total operating expenses	129,539		133,355		134,608
Operating earnings	157,460		150,697		139,513
Interest expense	107,344		106,890		88,313
Earnings from continuing operations	50,116		43,807		51,200
Earnings from discontinued operations	10,884		961		6,017
Net earnings	$	61,000	$	44,768	$	57,217

~~Table~~See ofNotes ~~Contents~~to the Consolidated Financial Statements.

~~Toys “R” Us Property Company I, LLC and Subsidiaries~~ 28

~~Notes~~Table toof ~~Consolidated Financial Statements~~ Contents

~~NOTE~~TOYS 1“R” –US ~~SUMMARY~~PROPERTY OFCOMPANY ~~SIGNIFICANT~~I, ~~ACCOUNTING~~LLC ~~POLICIES~~AND SUBSIDIARIES

~~Business~~CONSOLIDATED ~~and~~BALANCE ~~Organization~~ SHEETS

As used herein the “Company,” “we,” “us,” or “our” means Toys “R” Us Property Company I, LLC (“TRU Propco I”) and its subsidiaries, except as expressly indicated or unless the context otherwise requires. TRU Propco I was formed on September 15, 2005 as part of a legal reorganization of the businesses of Toys “R” Us, Inc. (“TRU”). TRU operates and licenses Toys “R” Us and Babies “R” Us stores in the United States and foreign countries and jurisdictions. We are indirectly owned by TRU through our holding company, Wayne Real Estate Holding Company, LLC (“Wayne Holdings”), a direct wholly-owned subsidiary of TRU. The Company is one reportable segment.



(In thousands)	January 28, 2012		January 29, 2011
ASSETS
Current Assets:
Cash	$	72,111	$	39,708
Due from affiliate, net	9,882		6,649
Prepaid expenses	2,202		6,151
Net properties held for sale	—		6,675
Total current assets	84,195		59,183
Real Estate, Net:
Land	277,001		279,325
Buildings, net	493,883		512,510
Leasehold improvements, net	109,683		125,281
Total real estate, net	880,567		917,116
Straight-line rent receivable from affiliate	129,411		97,930
Debt issuance costs	16,007		18,938
Other assets	283		273
Total Assets	$	1,110,463	$	1,093,440

LIABILITIES AND MEMBER’S CAPITAL
Current Liabilities:
Accrued Interest	$	3,928	$	4,232
Real estate taxes payable	11,075		10,383
Deferred third party rent liabilities	1,175		846
Deferred related party revenue	1,365		925
Other current liabilities	1,422		923
Total current liabilities	18,965		17,309
Long-term debt	933,516		928,597
Deferred third party rent liabilities	110,159		104,421
Other non-current liabilities	1,537		28
Member’s capital	46,286		43,085
Total Liabilities and Member's Capital	$	1,110,463	$	1,093,440

InSee ~~connection~~Notes ~~with~~to ~~this reorganization,~~ the ~~Company~~Consolidated ~~received,~~Financial as contributions from Wayne Holdings, 100% ownership interests in Wayne Real Estate Company, LLC (“Wayne Real Estate”), which was formed on May 27, 2005, and MAP Real Estate LLC, which was formed on July 7, 2005, and we acquired from our affiliates 100% ownership interests in TRU 2005 RE I, LLC, which was formed on September 15, 2005, and TRU 2005 RE II Trust, which was formed on November 28, 2005Statements. Each of these entities became a wholly-owned subsidiary of the Company. As the reorganization was between entities under common control, the net assets transferred were recorded at their carrying value.

Through our wholly-owned subsidiaries, we own or lease 357 properties in the United States, which are leased or sub-leased by us to an affiliated entity and various third-party tenants. Our business consists solely of the ownership and leasing of these properties to Toys “R” Us–Delaware, Inc. (“Toys-Delaware”) and various third parties. 29

~~Principles~~Table of ~~Consolidation~~ Contents

~~The Consolidated~~TOYS ~~Financial~~“R” ~~Statements~~US ~~include~~PROPERTY ~~the~~COMPANY ~~accounts~~I, ofLLC ~~the~~AND ~~Company and its wholly-owned subsidiaries. We eliminate all inter-company balances and transactions.~~ SUBSIDIARIES

~~Fiscal~~CONSOLIDATED ~~Year~~STATEMENTS OF CASH FLOWS

Our fiscal year ends on the Saturday nearest to January 31. Unless otherwise stated, references to years in this report relate to the fiscal years ended below:



	Fiscal Years Ended
(In thousands)	January 28, 2012			January 29, 2011			January 30, 2010
Cash Flows from Operating Activities:
Net earnings	$	61,000		$	44,768		$	57,217
Adjustments to reconcile Net earnings to net cash provided by operating activities:
Depreciation	35,932			38,215			38,338
Amortization and write-off of debt issuance costs	2,931			2,894			11,832
Amortization of original issue discount	2,400			2,153			1,154
Loss on sale of real estate	1,385			1,534			—
Other non-cash charges	64			611			310
Changes in operating assets and liabilities:
Due from affiliate, net	(3,493		)	(479		)	(1,571		)
Prepaid expenses	3,949			100			1,291
Straight-line rent receivable from affiliate, Other assets and Deferred third party rent liabilities	(26,640		)	(21,225		)	(17,715		)
Accrued interest, Real estate taxes payable and Other current liabilities	887			7			1,298
Deferred related party revenue	440			460			(13,716		)
Net cash provided by operating activities	78,855			69,038			78,438
Cash Flows from Investing Activities:
Proceeds from sale of real estate	11,347			4,442			54
Capital expenditures	(1,667		)	—			—
Sales of net assets to affiliates at carrying values	—			—			58,800
Decrease in restricted cash	—			—			112,775
Net cash provided by investing activities	9,680			4,442			171,629
Cash Flows from Financing Activities:
Lease financing obligation	1,667			—			—
Long-term debt borrowings	—			—			925,291
Long-term debt repayments	—			—			(1,300,000		)
Capital contributions	—			—			141,920
Amounts received in excess of carrying values of net assets sold	—			—			65,634
Distributions	(57,799		)	(58,377		)	(35,206		)
Capitalized debt issuance costs	—			(432		)	(22,999		)
Net cash used in financing activities	(56,132		)	(58,809		)	(225,360		)
Cash:
Net increase during period	32,403			14,671			24,707
Cash at beginning of period	39,708			25,037			330
Cash at end of period	$	72,111		$	39,708		$	25,037

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	102,125		$	102,125		$	76,518
Non-Cash Investing and Financing Information:
Real estate assets acquired through lease financing obligations	$	2,361		$	—		$	—
Non-Cash Financing Information:
Adjustment to the carrying value of net assets previously acquired	$	—		$	(5,599	)	$	—

Fiscal Year	Number of Weeks	Ended
2010	52	January 29, 2011
2009	52	January 30, 2010
2008	52	January 31, 2009

See Notes to the Consolidated Financial Statements.

~~Use of Estimates~~ 30

~~The~~Table ~~preparation~~ of our Consolidated Financial Statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities as of the date of the Consolidated Financial Statements and during the applicable periods. We base these estimates on historical experience and other factors that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates and such differences could have a material impact on our Consolidated Financial Statements. Contents

~~Prior~~TOYS ~~Period~~“R” ~~Correction~~US PROPERTY COMPANY I, LLC AND SUBSIDIARIES

~~During~~CONSOLIDATED ~~fiscal 2010,~~STATEMENTS weOF ~~recorded~~CHANGES anIN approximate $8 million adjustment to increase Deferred third party rent liabilities on our Consolidated Balance Sheet to correct a cumulative prior period straight-line lease accounting error. A portion of this correction related to the understatement of straight-line lease expense that occurred prior to the fiscal 2005 reorganization transactions when the related assets were sold to us from affiliates. As a result, the carrying value of the net assets sold to us during these transactions was overstated by approximately $6 million and was recorded as a reduction of MemberMEMBER’sS ~~Capital.~~CAPITAL The remaining portion of the correction of approximately $2 million increased Rental expense on the Consolidated Statement of Operations. In addition, in connection with our master lease agreements, a corresponding correcting adjustment was recorded of approximately $2 million to increase Base rents on the Consolidated Statement of Operations and Straight-line rent receivable from affiliates on the Consolidated Balance Sheet for the period subsequent to the fiscal 2005 reorganization. Management concluded that this correction did not have a material impact on the current or any previously reported financial statements. (DEFICIT)

In addition, we have corrected the Consolidated Balance Sheet and related footnotes as of January 30, 2010 to reflect certain related party reimbursements and third party liabilities, since the Company is the primary obligor and no legal right of offset existed. As such, we have increased Current assets and liabilities by approximately $10 million for fiscal 2009, to correctly present these immaterial items. The items included primarily represent third party rent, property taxes and certain operating expenses which are paid directly by Toys-Delaware to the respective third party. The correction had no effect on our previously reported Results of Operations, Cash Flows and Member’s Capital.



(In thousands)	Member's Capital (Deficit)
Balance, January 31, 2009	$	(167,272	)
Net earnings for the period	57,217
Capital contribution	141,920
Capital contribution in connection with the sale of properties	65,634
Distributions	(35,206		)
Balance, January 30, 2010	$	62,293
Net earnings for the period	44,768
Adjustment to the carrying value of net assets previously acquired	(5,599		)
Distributions	(58,377		)
Balance, January 29, 2011	$	43,085
Net earnings for the period	61,000
Distributions	(57,799		)
Balance, January 28, 2012	$	46,286

31See Notes to the Consolidated Financial Statements.

~~Table of Contents~~31

~~Cash~~Table ~~and~~of ~~Cash Equivalents~~ Contents

WeToys ~~consider~~“R” ~~our~~Us ~~highly~~Property ~~liquid~~Company ~~investments~~I, ~~with~~LLC ~~original~~and ~~maturities of three months or less at acquisition to be cash equivalents.~~ Subsidiaries

~~Real~~Notes ~~Estate,~~to ~~Net~~the Consolidated Financial Statements

WeNOTE ~~record~~1 ~~depreciation~~– ~~using~~SUMMARY ~~the~~OF ~~straight-line~~SIGNIFICANT ~~method~~ACCOUNTING over the shorter of the estimated useful lives of the assets or the terms of the respective leases, if applicable, which for buildings is 50 years and for buildings on ground leases is the lesser of the lease term or 50 years, and for leasehold improvements is the lesser of the lease term or 25 years. POLICIES

~~Impairment~~Business ofand ~~Long-Lived Assets~~ Organization

WeAs ~~evaluate~~used herein the ~~carrying~~“Company,” ~~value~~“we,” of“us,” ~~all~~or ~~long-lived~~“our” ~~assets,~~means ~~which~~Toys ~~include~~“R” ~~land~~Us ~~and~~Property ~~buildings~~Company I, ~~for~~LLC ~~impairment~~and ~~whenever~~its ~~events~~subsidiaries or(“TRU ~~changes~~Propco inI”), ~~circumstances~~except ~~indicate~~as ~~that~~expressly indicated or unless the ~~carrying~~context ~~value~~otherwise ofrequires. anTRU ~~asset~~Propco ~~may~~I ~~not be~~was ~~recoverable~~formed on September 15, in2005 ~~accordance~~as ~~with~~part ~~the~~of ~~Financial~~a ~~Accounting~~legal ~~Standards~~reorganization ~~Board~~of ~~(“FASB”)~~the ~~Accounting~~businesses ~~Standards~~of ~~Codification~~Toys (“~~ASC~~R”) ~~Topic 360~~Us, Inc. (“~~Property,~~TRU”). ~~Plant~~TRU, ~~and~~through ~~Equipment.”~~various ~~This~~subsidiaries, ~~evaluation~~operates ~~requires~~or ~~management~~licenses toToys ~~make judgments~~“R” ~~relating~~Us toand anBabies ~~estimate~~“R” ofUs ~~undiscounted~~stores ~~future~~in ~~cash~~the ~~flows~~United toStates ~~determine~~and ~~whether~~foreign ancountries ~~asset~~and ~~group is recoverable~~jurisdictions. IfWe aare ~~long-lived~~indirectly ~~asset~~owned ~~group~~by isTRU ~~found~~through toour beholding ~~non-recoverable~~company, weWayne ~~record~~Real anEstate ~~impairment~~Holding ~~charge~~Company, ~~equal~~LLC to(“Wayne ~~the~~Holdings”), ~~difference~~a ~~between~~direct ~~the asset’s~~wholly-owned ~~carrying~~subsidiary ~~value~~of ~~and its fair value~~TRU. We ~~estimate~~generate ~~the~~substantially ~~fair~~all ~~value~~ of anour ~~asset~~revenues, ~~group~~earnings ~~using~~and ~~a valuation method such as discounted~~ cash flows by leasing or ~~relative,~~subleasing ~~market-based~~properties ~~approach.~~primarily ~~During~~to ~~fiscal~~our ~~2010~~affiliate, weToys ~~recorded~~“R” anUs–Delaware, ~~impairment~~Inc. ~~charge~~(“Toys-Delaware”). ~~of approximately~~The $1Company ~~million~~is ~~and~~one ~~there~~reportable ~~were no impairment charges in fiscals 2009 and 2008~~segment.

~~Rental~~In ~~Revenues~~connection with this reorganization, the Company received, as contributions from Wayne Holdings, 100% ownership interests in Wayne Real Estate Company, LLC (“Wayne Real Estate”), which was formed on May 27, 2005, and MAP Real Estate LLC, which was formed on July 7, 2005, and we acquired from our affiliates 100% ownership interests in TRU 2005 RE I, LLC, which was formed on September 15, 2005, and TRU 2005 RE II Trust, which was formed on November 28, 2005. Each of these entities became a wholly-owned subsidiary of the Company. As the reorganization was between entities under common control, the net assets transferred were recorded at their carrying value.

~~Base~~Through ~~rental~~our ~~revenues are recognized on a straight~~wholly-~~line~~owned ~~basis~~subsidiaries, ~~over~~we ~~the~~own ~~non-cancelable~~or ~~terms~~lease of351 ~~the~~properties ~~related~~in ~~leases. Differences between rental revenues recognized and amounts due per~~ the ~~respective~~United ~~lease~~States, ~~agreements~~which are ~~recorded~~leased onor ~~our~~sub-leased ~~Consolidated~~by ~~Balance~~us ~~Sheets~~to asan ~~Straight-line~~affiliated ~~rent~~entity ~~receivable~~and ~~from~~various ~~affiliates~~third-party tenants. ~~Tenant~~Our ~~reimbursements~~business ~~for~~consists ~~taxes,~~solely ~~insurance~~of ~~and~~the ~~other~~ownership ~~operating expenses are billed~~ and ~~recognized~~ asleasing ~~revenues~~of inthese ~~the~~properties ~~period~~to ~~the~~Toys-Delaware ~~applicable~~and ~~costs~~various ~~are~~third ~~incurred~~parties.

~~Debt~~Principles ~~Issuance~~of ~~Costs~~ Consolidation

WeThe ~~defer~~Consolidated ~~debt~~Financial ~~issuance~~Statements ~~costs~~include ~~and amortize such costs into Interest expense, net over~~ the ~~term~~accounts of the ~~related~~Company ~~debt facility. Debt issuance costs amortized to Interest expense, net were approximately $3 million, $12 million~~ and $4its ~~million~~wholly-owned ~~for fiscals 2010, 2009 and 2008, respectively~~subsidiaries. ~~Unamortized~~We ~~amounts~~eliminate atall ~~January 29,~~inter-company ~~2011~~balances and ~~January 30, 2010, were approximately $19 million and $21 million, respectively~~transactions. ~~Amortized amounts for fiscal 2009 include the write off of deferred financing costs of approximately $8 million related to the repayment of outstanding debt under our unsecured credit agreement.~~

~~Deferred~~Fiscal ~~Rent~~ Year

WeOur ~~recognize~~fiscal ~~fixed minimum~~year ~~rent~~ends ~~expense~~ on ~~non-cancelable leases on a straight-line basis over~~ the ~~term~~Saturday ofnearest ~~each~~to individual lease starting at the date of possession, including the build-out period, and record the difference between the recognized rental expense and amounts payable under the leases as deferred rent liability. Deferred third party rent liabilities are recorded in our Consolidated Balance Sheets in the total amounts of $105 million and $92 million at January ~~29,~~31. ~~2011~~Unless ~~and~~otherwise ~~January 30~~stated, ~~2010,~~ ~~respectively.~~references ~~Landlord~~to ~~incentives~~years ~~and abatements received are included~~ in ~~Deferred~~this ~~third~~report ~~party~~relate ~~rent~~to ~~liabilities and amortized over~~ the ~~term~~fiscal ofyears ~~the~~ended ~~lease.~~ below:

Leases for Lessee only



Fiscal Year	Number of Weeks	Ended
2011	52	January 28, 2012
2010	52	January 29, 2011
2009	52	January 30, 2010

WeUse ~~lease store locations and land used in our operations. We account for our leases under the provisions~~ of ~~ASC Topic 840, “Leases,” which require that leases be evaluated and classified as operating or capital leases for financial reporting purposes.~~ Estimates

~~Operating~~The ~~leases~~preparation ~~are~~of ~~recorded~~our onConsolidated aFinancial ~~straight-line~~Statements ~~basis~~requires ~~over~~us ~~the~~to ~~lease~~make ~~term.~~certain Atestimates ~~the~~and ~~inception~~assumptions ofthat aaffect ~~lease, we determine~~ the ~~lease~~reported ~~term~~amounts byof ~~assuming~~assets, ~~the exercise~~liabilities, ofrevenues ~~renewal~~and ~~options~~expenses, ~~that~~and ~~are~~the ~~reasonably~~related ~~assured~~disclosures ifof acontingent ~~significant~~assets ~~economic~~and ~~penalty~~liabilities ~~exists~~as ~~for~~of ~~not~~the ~~exercising~~date ~~such~~of ~~options.~~the ~~Renewal~~Consolidated ~~options~~Financial ~~are~~Statements ~~exercised~~and atduring ~~our~~the ~~sole~~applicable ~~discretion~~periods. ~~The~~We ~~expected~~base ~~lease~~these ~~term~~estimates ison ~~used~~historical toexperience ~~determine whether a lease is capital or operating~~ and isother ~~used~~factors tothat ~~calculate~~we ~~straight-line~~believe ~~rent~~are ~~expense.~~reasonable ~~Additionally,~~under the ~~useful~~circumstances. ~~life~~Actual ofresults ~~buildings~~may ~~and~~differ ~~leasehold~~materially ~~improvements~~from ~~are~~these ~~limited~~estimates byand ~~the~~such ~~expected~~differences ~~lease~~could ~~term.~~have ~~Refer~~a tomaterial ~~Note~~impact 4on ~~entitled~~our ~~“LEASES”~~Consolidated ~~for~~Financial ~~further details~~Statements.

~~Substantially~~Prior ~~all~~Period of our leases include options that allow us to renew or extend the lease term beyond the initial lease period, subject to terms and conditions agreed upon at the inception of the lease. Such terms and conditions include rental rates agreed upon at the inception of the lease that could represent below or above market rental rates later in the life of the lease, depending upon market conditions at the time of such renewal or extension. In addition, many leases include early termination options, which can be exercised under specified conditions, including upon damage, destruction or condemnation of a specified percentage of the value or land area of the property. Correction

32During fiscal 2011, we recorded an approximate $2 million adjustment to increase Straight-line rent receivable from affiliate on our Consolidated Balance Sheet to correct a non-cash cumulative prior period straight-line lease accounting error. In addition, a corresponding adjustment was recorded of approximately $2 million to increase Base rents in fiscal 2011 on the Consolidated Statement of Operations. Management concluded that this correction did not have a material impact on the current or any previously reported financial statements.

~~Table~~In ofaddition, ~~Contents~~during fiscal 2010, we recorded an approximate $8 million adjustment to increase Deferred third party rent liabilities on our Consolidated Balance Sheet to correct a cumulative prior period straight-line lease accounting error. A portion

~~Financial Instruments~~ 32

WeTable have entered into derivative financial arrangements such as interest rate swaps and interest rate caps to hedge interest rate risk associated with our long-term debt. We account for derivative financial instruments in accordance with ASC Topic 815, “Derivatives & Hedging” (“ASC 815”) and record the fair values of these instruments within our Consolidated Balance Sheets as Other assets and liabilities. ASC 815 defines requirements for designation and documentation of hedging relationships, as well as ongoing effectiveness assessments, which must be met in order to qualify for hedge accounting. We record the changes in fair value of derivative instruments which do not qualify for hedge accounting to Interest expense, net in our Consolidated Statements of Operations. If we determine that we do qualify for hedge accounting treatment, the following is a summary of the impact on our Consolidated Financial Statements: Contents

•of ~~For~~this ~~designated~~correction ~~cash~~related ~~flow~~to ~~hedges,~~the understatement of straight-line lease expense that occurred prior to the ~~effective~~fiscal ~~portion~~2005 ofreorganization transactions when the ~~changes~~related inassets were sold to us from affiliates. As a result, the ~~fair~~carrying value of ~~derivatives~~the ~~are~~net ~~recorded~~assets insold ~~Accumulated~~to ~~other~~us ~~comprehensive~~during ~~income~~these ortransactions ~~loss~~was overstated by approximately $6 million and ~~subsequently~~was recorded inas ~~Interest~~a reduction of Member’s capital. The remaining portion of this correction of approximately $2 million increased Rental expense on the Consolidated Statement of Operations for period ended January 29, ~~net~~2011. In addition, in connection with our master lease agreement, a corresponding correcting adjustment was recorded of approximately $2 million to increase Base rents on the Consolidated ~~Statements~~Statement of Operations atand Straight-line rent receivable from affiliate on the ~~time~~Consolidated Balance Sheet for the ~~hedged~~period ~~item~~subsequent ~~affects~~to ~~earnings~~the fiscal 2005 reorganization. Management concluded that this correction did not have a material impact on the financial statements for the period ended January 29, 2011 or any previously reported financial statements.

•Cash ~~For~~and ~~designated~~Cash ~~cash flow hedges, the ineffective portion of a hedged derivative instrument’s change in fair value is immediately recognized in Interest expense, net in the Consolidated Statements of Operations.~~Equivalents

~~During~~We ~~fiscals~~consider ~~2010,~~our ~~2009~~highly ~~and~~liquid ~~2008,~~investments wewith ~~did~~original ~~not~~maturities ~~have~~of ~~any designated~~three ~~fair~~months ~~value~~or ~~hedges.~~less at acquisition to be cash equivalents.

~~Income~~Real ~~Taxes~~Estate, Net

~~The~~We ~~Company~~record isdepreciation ausing ~~disregarded~~the ~~entity~~straight-line ~~for~~method ~~income~~over ~~tax~~the ~~purposes~~shorter ~~and,~~of ~~accordingly,~~ the ~~taxable~~estimated ~~income~~useful lives of the assets or ~~loss~~the terms of the ~~Company~~respective leases, if applicable, which for buildings is ~~reported~~50 inyears ~~the~~and ~~income~~for ~~tax~~buildings ~~returns~~on ground leases is the lesser of ~~TRU.~~the Nolease ~~tax~~term ~~provision~~or 50 years, and for leasehold improvements is ~~recognized~~the inlesser of the ~~accompanying~~ ~~Consolidated~~lease ~~Financial~~term ~~Statements.~~or 25 years.

~~NOTE~~Impairment 2of –Long-Lived ~~REAL ESTATE, NET~~ Assets

(In thousands)	January 29, 2011			January 30, 2010
Land	$	279,325		$	285,391
Buildings		755,558			764,172
Leasehold improvements		412,582			417,424
		1,447,465			1,466,987
Less: accumulated depreciation		(530,349	)		(499,662	)
Total	$	917,116		$	967,325

We evaluate the carrying value of all long-lived assets, which include land and buildings, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant, and Equipment”. This evaluation requires management to make judgments relating to an estimate of undiscounted future cash flows to determine whether an asset group is recoverable. If a long-lived asset group is found to be non-recoverable, we record an impairment charge equal to the amount which the asset group’s carrying value exceeds its fair value. We estimate the fair value of an asset group using a valuation method such as discounted cash flows or a relative, market-based approach. There were no impairment charges during fiscals 2011 and 2009. During fiscal 2010, we recorded an impairment charge of approximately $1 million.

~~Net~~Rental ~~properties held for sale~~ Revenues

~~Assets~~Base ~~held~~rental ~~for~~revenues ~~sale~~are ~~represent~~recognized ~~assets~~on ~~owned~~a bystraight-line usbasis ~~that~~over ~~our~~the ~~management~~non-cancelable ~~has~~terms ~~committed~~of tothe ~~sell~~related inleases. Differences between rental revenues recognized and amounts due per the ~~near~~respective ~~term~~lease agreements are recorded on our Consolidated Balance Sheets as Straight-line rent receivable from affiliate. ~~The~~Tenant ~~following~~reimbursements ~~assets~~for taxes, insurance and other operating expenses are ~~classified~~billed and recognized as ~~held~~revenues ~~for~~in ~~sale:~~the period the applicable costs are incurred.

(In thousands)	January 29, 2011			January 30, 2010
Land	$	3,649		$	1,021
Buildings		4,166			1,504
Leasehold improvements		1,359			65
		9,174			2,590
Less: accumulated depreciation		(2,499	)		(1,350	)
Total	$	6,675		$	1,240

The Amended and Restated Master Lease Agreement (the “TRU Propco I Master Lease”) requires Toys-Delaware to make a payment to the Company upon early termination of a lease, as set forth under the terms of the TRU Propco I Master Lease, or the successful execution of the sale of such properties by the Company to a third party if the proceeds from the sale are less than the net present value of the base rent for such property over the remaining term for such property, discounted at 10% per annum. We recorded termination payments of approximately $11 million and $1 million for the fiscal years ended January 28, 2012 and January 29, 2011 in Earnings from discontinued operations on the Consolidated Statements of Operations. There were no termination payments required to be made for the fiscal year ended January 30, 2010.

~~During~~Debt ~~fiscal~~Issuance 2010, we classified three owned properties, leased to Toys-Delaware, as assets held for sale. The Amended and Restated Master Lease Agreement (the “TRU Propco I Master Lease”) requires Toys-Delaware to make a payment to the Company upon termination of the lease in conjunction with the successful execution of the sale of such properties by the Company to a third party if the proceeds from the sale are less than the net present value of the base rent for such property over the remaining term for such property, discounted at 10% per annum. In fiscal 2010, we recorded an impairment loss of approximately $1 million for one of the properties, which is reflected in (Loss) earnings from discontinued operations in our Consolidated Statement of Operations. Costs

~~During~~We ~~fiscal~~defer ~~2010,~~debt weissuance ~~sold~~costs ~~two~~and ~~properties~~amortize ~~previously~~such ~~classified~~costs asinto ~~held~~Interest ~~for~~expense ~~sale~~over tothe ~~two~~term ~~unrelated~~of ~~third~~the ~~parties~~related ~~for~~debt ~~gross~~facility. ~~proceeds~~Debt ofissuance costs amortized to Interest expense were approximately $53 million, $3 million and ~~recorded~~$12 amillion ~~termination~~for ~~payment~~fiscals of2011, ~~$1 million~~2010 ~~from~~and ~~Toys-Delaware~~2009, asrespectively. ~~required~~Unamortized ~~under~~amounts ~~the~~at ~~TRU~~January 28, ~~Propco~~2012 Iand ~~Master~~January 29, ~~Lease~~2011, ~~for~~were ~~one~~approximately of$16 ~~these~~million ~~properties~~and $19 million, respectively. ~~The~~Amortized ~~sales~~amounts ~~resulted~~for infiscal a2009 ~~loss~~include the write off of ~~less~~deferred ~~than~~financing costs of approximately $18 million ~~and~~related ~~was~~to ~~recorded~~the inrepayment ~~Other~~of ~~operating~~outstanding ~~expenses.~~debt under our unsecured credit agreement.

33Deferred Rent

~~Table~~We recognize fixed minimum rent expense on non-cancelable leases on a straight-line basis over the term of ~~Contents~~each individual lease starting at the date of possession, including the build-out period, and record the difference between the recognized rental expense and amounts payable under the leases as deferred rent liability. Deferred third party rent liabilities are recorded in our Consolidated Balance Sheets in the total amounts of $111 million and $105 million at January 28, 2012 and January 29, 2011,

~~NOTE 3 – DISCONTINUED OPERATIONS~~ 33

~~During~~Table ~~fiscal 2010, we classified three owned properties as assets held for sale, one~~ of which was sold in fiscal 2010. We reported the operating results for these properties as (Loss) earnings from discontinued operations in the Consolidated Statements of Operations for all periods presented. In addition, during fiscal 2010, we recorded an impairment loss of approximately $1 million for one of the properties, which is reflected in (Loss) earnings from discontinued operations. Contents

~~The~~respectively. ~~operating~~Landlord ~~results~~incentives ofand ~~these~~abatements ~~three~~received ~~owned~~are ~~properties~~included ~~classified~~in asDeferred ~~discontinued~~third ~~operations~~party ~~through January 29,~~rent ~~2011~~liabilities ~~were derived from our historical financial information~~ and ~~have~~amortized ~~been~~over ~~segregated~~the ~~from~~term ~~continuing~~of ~~operations and reported separately in~~ the ~~Consolidated Statements for all periods presented~~lease. ~~These amounts have been summarized below:~~

	Fiscal Years Ended
(In thousands)	January 29,2011			January 30,2010		January 29,2009
Total revenues	$	2,001		$	1,922	$	1,777
(Loss) earnings from discontinued operations	$	(211	)	$	1,265	$	1,125

Leases for Lessee only

OnWe ~~July 9,~~lease ~~2009,~~buildings weand ~~sold~~land 11used ~~owned~~in ~~properties,~~our ~~including~~operations. ~~properties~~We ~~classified~~account ~~as held~~ for ~~sale,~~our ~~and~~leases ~~transferred~~under the ~~leasehold~~ ~~interest~~provisions inof 14ASC ~~leased~~Topic ~~properties (collectively~~840, ~~the~~ “~~Transferred Properties~~Leases”~~) to Toys-Delaware for $124 million. The carrying amount of the net assets transferred was approximately $59 million. Since this sale occurred between entities under common control~~, ~~the~~which ~~difference~~require ~~between~~that ~~the~~leases ~~cash~~be ~~received~~evaluated and ~~the~~classified ~~net~~as assets transferred of approximately $65 million was included in Capital contributions in connection with the sale of properties in the Consolidated Statements of Changes in Member’s Capital (Deficit) for the fiscal year ended January 30, 2010. We reported the operating ~~results~~or ~~for~~capital ~~the~~leases ~~Transferred Properties as (Loss) earnings from discontinued operations in the Consolidated Statements of Operations~~ for ~~fiscal~~financial ~~years~~reporting ~~ended January 30, 2010 and January 31, 2009~~purposes.

~~The~~Operating ~~following~~leases isare recorded on a ~~summary~~straight-line basis over the lease term. At the inception of a lease, we determine the ~~assets~~lease ~~and~~term ~~liabilities~~by assuming the exercise of renewal options that are reasonably assured if a significant economic penalty exists for not exercising such options. Renewal options are exercised at our sole discretion. The expected lease term is used to determine whether a lease is capital or operating and is used to calculate straight-line rent expense. Additionally, the ~~discontinued~~ ~~operations~~useful aslife of buildings and leasehold improvements are limited by the ~~disposal~~expected ~~date:~~lease term. Refer to Note 4 entitled “LEASES” for further details.

(In thousands)	July 9,2009
Land	$	21,775
Buildings		44,517
Leasehold improvements		29,689
		95,981
Less: accumulated depreciation		(35,267	)
Subtotal		60,714
Straight-line rent receivables from affiliates		5,269
Total assets	$	65,983
Deferred third party rent liabilities		7,183
Net assets transferred	$	58,800

Substantially all of our leases include options that allow us to renew or extend the lease term beyond the initial lease period, subject to terms and conditions agreed upon at the inception of the lease. Such terms and conditions include rental rates agreed upon at the inception of the lease that could represent below or above market rental rates later in the life of the lease, depending upon market conditions at the time of such renewal or extension. In addition, many leases include early termination options, which can be exercised under specified conditions, including upon damage, destruction or condemnation of a specified percentage of the value or land area of the property.

~~The~~Income operating results of the Transferred Properties classified as discontinued operations through July 9, 2009 were derived from our historical financial information and have been segregated from continuing operations and reported separately in the Consolidated Statements of Operations for fiscal years ended January 30, 2010 and January 31, 2009. These amounts have been summarized for fiscal years presented below: Taxes

	Fiscal Years Ended
(In thousands)	January 30,2010		January 31,2009
Total revenues	$	10,554	$	23,697
Earnings from discontinued operations	$	3,621	$	4,492

We are treated as a disregarded entity for income tax purposes and, accordingly, the taxable income or loss of the Company is reported in the income tax returns of TRU. No tax provision is recognized in the accompanying Consolidated Financial Statements.

34NOTE 2 – REAL ESTATE, NET



(In thousands)	January 28, 2012			January 29, 2011
Land	$	277,001		$	279,325
Buildings	751,744			755,558
Leasehold improvements	407,060			412,582
	1,435,805			1,447,465
Less: accumulated depreciation	(555,238		)	(530,349		)
Total	$	880,567		$	917,116

~~NOTE~~Net 4properties –held ~~LEASES~~for sale

AsAssets ~~lessor~~held for sale represent assets owned by us that our management has committed to sell in the near term. The following assets are classified as held for sale:

Our operations consist of leasing or subleasing properties primarily to our affiliate, Toys-Delaware under a master lease agreement.



(In thousands)	January 29, 2011
Land	$	3,649
Buildings	4,166
Leasehold improvements	1,359
	9,174
Less: accumulated depreciation	(2,499		)
Total	$	6,675

~~Prior~~During tofiscal ~~July 9~~2011, ~~2009,~~ we ~~leased~~sold ~~our~~all ~~retail~~ properties ~~under~~previously aheld ~~non-cancelable master~~for ~~operating~~sale ~~lease (the “Master Lease Agreement”) with Toys-Delaware, of which the underlying leases expired~~ in ~~various~~fiscal ~~years~~2010 ~~through~~to ~~fiscal~~unrelated ~~2020~~third parties.

OnNOTE ~~July 9,~~3 ~~2009,~~– weDISCONTINUED entered into the TRU Propco I Master Lease with Toys-Delaware under which the previous Master Lease Agreement was amended and restated. Among other changes from the previous Master Lease Agreement, the term of the TRU Propco I Master Lease was extended through June 30, 2029, except with respect to any property that is ground or space leased from a third party landlord to the Company with a term expiring prior to such date. In addition, we sold or transferred the Transferred Properties to Toys-Delaware. The Transferred Properties were subject to the previous agreement, and as such, have been excluded from the TRU Propco I Master Lease. Effective July 9, 2009, annual base rents under the TRU Propco I Master Lease increased to approximately $173 million per annum, net of rents due to third parties, and are scheduled to increase by 10% on July 1, 2014, July 1, 2019 and July 1, 2024. OPERATIONS

InDuring ~~addition~~fiscal ~~to base rents~~2011, ~~the~~we ~~TRU~~sold ~~Propco~~four Iowned ~~Master~~properties, ~~Lease provides for tenant reimbursements~~ of ~~specific~~which ~~property~~two ~~operating~~were ~~expenses~~previously ~~and real~~classified ~~estate~~as ~~taxes.~~held ~~Pursuant~~for tosale ~~the~~in ~~master~~fiscal ~~lease agreements~~2010, ~~we are also entitled~~ to ~~certain~~unrelated third ~~party~~parties ~~sublease~~for ~~payments~~gross ~~that~~proceeds ~~are~~of ~~collected~~approximately ~~by Toys-Delaware on our retail properties. During fiscals 2010, 2009 and 2008, we recorded~~ $311 million,. ~~$3 million~~Additionally, ~~and~~during $4fiscal ~~million~~2011, ~~respectively,~~the ofCompany ~~third party sublease income as Base rents in our Consolidated Statements of Operations.~~

Future base rents to be received by us under the TRU Propco I Master Lease as of January 29, 2011 are disclosed in the table below, which reflects the exclusion of the Transferred Properties and the impact of the amendment and restatement of the TRU Propco I Master Lease referred to above: 34

(In thousands)	Future Related PartyBase Rents		Future ThirdParty Base Rents		Total FutureBase Rents
2011	$	214,451	$	2,494	$	216,945
2012		203,678		1,813		205,491
2013		189,822		1,295		191,117
2014		184,316		650		184,966
2015		176,554		581		177,135
2016 and subsequent		1,905,954		1,253		1,907,207
Total	$	2,874,775	$	8,086	$	2,882,861

Table of Contents

~~Retail~~terminated ~~properties~~two ~~leased~~leases ~~to Toys-Delaware consist of locations which are owned outright by us (“Owned Locations”); locations which have buildings that are owned by us and land which is controlled through a ground lease~~ with an unrelated third party ~~(“Ground~~landlords ~~Lease~~prior ~~Locations”);~~to ~~and~~the ~~locations~~expiration ~~that~~of ~~are~~the ~~controlled through straight~~ leases ~~for land and building which we lease from unrelated third parties (“Straight Lease Locations”)~~. The ~~For Owned Locations, the~~ TRU Propco I Master Lease ~~agreement~~requires ~~contains~~Toys-Delaware ~~predetermined~~to ~~fixed~~make ~~escalations~~a ofpayment to the ~~minimum~~Company ~~rentals~~upon onearly ~~July 1, 2014, July 1,~~termination ~~2019~~of ~~and~~the ~~July 1~~lease, ~~2024.~~as ~~For~~set ~~Ground~~forth ~~Lease~~under ~~and Straight Lease Locations,~~ the ~~base~~terms ~~rents consist~~ of ~~a net lease payment plus~~ the ~~rent~~TRU onPropco ~~the~~I ~~underlying~~Master ~~ground~~Lease, ~~lease~~ or ~~straight lease with~~ the ~~third~~successful ~~party.~~execution Inof ~~addition,~~ the ~~predetermined~~ ~~fixed~~sale ~~escalations~~of ~~are~~such ~~applied~~properties ~~separately~~by tothe ~~these~~Company ~~locations.~~to ~~The~~a ~~net~~third ~~lease~~party ~~payments~~if ~~for~~the ~~ground~~proceeds ~~and~~from ~~straight~~the ~~leases~~sale ~~have~~are ~~fixed~~less ~~escalations~~than onthe ~~July 1,~~net ~~2014, July 1,~~present ~~2019~~value ~~and~~of ~~July 1, 2024 pursuant to~~ the ~~TRU~~base ~~Propco~~rent ~~I Master~~for ~~Lease.~~such ~~The~~property ~~escalation~~over ~~for~~ the ~~underlying~~remaining ~~ground~~term ~~and~~for ~~straight~~such ~~leases~~property, ~~occurs~~discounted asat ~~provided~~10% inper ~~each of the respective lease agreements~~annum. We ~~For~~recorded ~~substantially~~termination ~~all~~payments of ~~the~~approximately ~~Ground~~$11 ~~Lease~~million ~~and~~for ~~Straight~~four ~~Lease~~properties ~~Locations,~~sold ~~our~~and ~~lessee~~two ~~has~~early alease ~~unilateral~~terminations ~~right~~during ~~to have~~fiscal us2011 ~~take~~in ~~the~~Earnings ~~renewal~~from ~~option~~discontinued atoperations ~~the~~on ~~time~~ the ~~initial~~Consolidated ~~underlying~~Statement ~~lease~~of ~~term expires~~Operations. Termination ~~Current~~payments ~~Deferred~~are ~~related~~included ~~party~~in ~~revenue~~Cash ~~was~~Flows ~~approximately~~from $1Operating ~~million and less than $1 million at January 29, 2011 and January 30, 2010, respectively~~Activities.

~~The~~During ~~TRU~~fiscal ~~Propco~~2010, Iwe ~~Master~~sold ~~Lease~~two ~~includes~~owned ~~early~~properties ~~termination~~previously ~~options~~classified as held for sale to unrelated third parties for gross proceeds of approximately $5 million. In addition, ~~which~~during ~~can~~fiscal be2010, ~~exercised~~we byrecorded a termination payment of approximately $1 million from Toys-Delaware as required under ~~specified~~the ~~conditions, including,~~TRU ~~upon~~Propco ~~damage,~~I ~~destruction~~Master orLease ~~condemnation~~for one of athe ~~specified~~properties ~~percentage~~sold. We ofreported the ~~value~~operating orresults ~~land~~for ~~area~~the ofproperties sold in fiscal 2010 as Earnings from discontinued operations in the ~~property~~Consolidated Statements of Operations.

35The operating results of properties classified as discontinued operations through January 28, 2012 were derived from our historical financial information and have been segregated from continuing operations and reported separately in the Consolidated Statements for all periods presented. These amounts have been summarized below:



	Fiscal Years Ended
(In thousands)	January 28, 2012		January 29, 2011		January 30, 2010
Total revenues (1)	$	12,241	$	5,867	$	4,427
Earnings from discontinued operations	$	10,884	$	961	$	2,396

As (1) Includes ~~lessee~~termination payments received from Toys-Delaware.

~~Our~~On ~~minimum~~July 9, ~~rental~~2009, ~~commitments~~we ~~under~~sold ~~non~~11 owned properties, including properties classified as held for sale, and transferred the leasehold interest in 14 leased properties (collectively, the “Transferred Properties”) to Toys-~~cancelable~~Delaware ~~operating~~for ~~leases~~$124 ~~with~~million. ~~unaffiliated~~The ~~third~~carrying ~~parties~~amount ~~having~~of athe ~~term~~net assets transferred was approximately $59 million. Since this sale occurred between entities under common control, the difference between the cash received and the net assets transferred of ~~more~~approximately ~~than~~$65 ~~one~~million ~~year~~was asincluded in Capital contributions in connection with the sale of properties in the Consolidated Statements of Changes in Member’s Capital (Deficit) for the fiscal year ended January 2930, ~~2011~~2010. ~~are~~We reported the operating results for the Transferred Properties as ~~follows:~~Earnings from discontinued operations in the Consolidated Statements of Operations for fiscal year ended January 30, 2010.

(In thousands)	Future Minimum Rentals (1)
2011	$	43,445
2012		39,894
2013		34,613
2014		28,928
2015		22,802
2016 and subsequent		52,065
Total	$	221,747

The operating results of the Transferred Properties classified as discontinued operations through July 9, 2009 were derived from our historical financial information and have been segregated from continuing operations and reported separately in the Consolidated Statement of Operations for fiscal year ended January 30, 2010. These amounts have been summarized for fiscal year presented below and are included in the total amounts of Earnings from discontinued operations for fiscal 2009:

(1) Excluded from the minimum rental commitments displayed above are approximately $964 million related to options to extend ground lease terms that are reasonably assured of being exercised, the balance of which is predominantly relates to fiscals 2016 and thereafter. As of January 29, 2011, we had 113 ground leases.



	Fiscal Year Ended
(In thousands)	January 30, 2010
Total revenues	$	10,554
Earnings from discontinued operations	$	3,621

WeNOTE ~~recognize~~4 ~~rental~~– expense on a straight-line basis and record the difference between the recognized rental expense and amounts payable under the leases as Deferred third party rent liabilities. Deferred third party rent liabilities are recorded in our Consolidated Balance Sheets in the total amount of $105 million and $92 million at January 29, 2011 and January 30, 2010, respectively. LEASES

~~Substantially~~As all of our leases include options that allow us to renew or extend the lease term beyond the initial lease period, subject to terms and conditions agreed upon at the inception of the lease. Such terms and conditions include rental rates agreed upon at the inception of the lease that could represent below or above market rental rates later in the life of the lease, depending upon market conditions at the time of such renewal or extension. In addition, many leases include early termination options, which can be exercised by us under specified conditions, including, upon damage, destruction or condemnation of a specified percentage of the value or land area of the property. lessor

~~Lease~~Our ~~payments~~operations ~~that~~consist ~~depend on factors that are not measurable at the inception~~ of ~~the lease,~~leasing ~~such~~or assubleasing ~~future~~properties ~~sales~~primarily ~~volume,~~to ~~are~~our contingent rentals and are excluded from minimum lease payments and included in the determination of total rental expense when it is probable that the expense has been incurred and the amount is reasonably estimable. Contingent rent expense was less than $1 million for fiscal 2010 and $1 million for fiscals 2009 and 2008affiliate, respectively. Future payments for maintenance, insurance and real estate taxes to which we are obligated are excluded from minimum lease payments. Tenant allowances received upon entering into certain store leases are recognized on a straightToys-~~line~~Delaware ~~basis~~under as a ~~reduction~~master ~~to rent expense over the~~ lease ~~term~~agreement.

~~NOTE~~Prior 5to –July 9, ~~COMMITMENTS~~2009, ~~AND~~we ~~CONTINGENCIES~~leased our retail properties under a non-cancelable master operating lease (the “Master Lease Agreement”) with Toys-Delaware, under which the underlying leases expired in various years through fiscal 2020.

WeOn July 9, ~~along~~2009, ~~with~~we entered into the TRU, ~~are~~Propco ~~subject~~I toMaster ~~various claims~~Lease ~~and~~with ~~contingencies~~Toys-Delaware ~~related~~under towhich ~~lawsuits~~the previous Master Lease Agreement was amended and ~~real~~restated. ~~estate~~Among ~~taxes~~other changes from the previous Master Lease Agreement, asthe ~~well~~term asof ~~commitments~~the ~~under~~TRU ~~contractual~~Propco ~~and~~I ~~other~~Master ~~commercial~~Lease ~~obligations.~~was Weextended ~~recognize~~through ~~liabilities~~June 30, ~~for~~2029, ~~contingencies~~except ~~and~~with ~~commitments~~respect ~~when~~to aany ~~loss~~property that is ~~probable~~ground ~~and~~or ~~estimable.~~space ~~Refer~~leased from a third party landlord to ~~Note~~ 4the ~~entitled~~Company ~~“LEASES”~~with ~~for~~a ~~minimum~~term ~~rental~~expiring ~~commitments~~prior ~~under~~to ~~non~~such date. In addition, we sold or transferred the Transferred Properties to Toys-~~cancelable~~Delaware. ~~operating~~The ~~leases~~Transferred ~~having~~Properties awere ~~term~~subject ofto ~~more~~the ~~than~~previous ~~one~~agreement, ~~year~~and as ~~of January 29~~such, ~~2011.~~have

TRU self-insures a substantial portion of our property insurance risks, in addition to third party insurance coverage. Accordingly, TRU bills Toys-Delaware, which leases our retail properties, for our share of the insurance costs. As such, any property losses incurred by us would be reimbursed by Toys-Delaware. 35

~~NOTE~~Table 6of ~~– LONG-TERM DEBT~~ Contents

Asbeen ofexcluded ~~January 29,~~from ~~2011 and January 30, 2010,~~ the ~~carrying~~TRU ~~value~~Propco ofI ~~our~~Master ~~debt was $929 million and $926 million, respectively, with fair values of $1,090 million and $1,052 million, respectively~~Lease. ~~The fair value of our long-term debt was estimated based on a quoted market price and other pertinent information available to management as of the end of the respective periods.~~

Effective July 9, 2009, annual net base rents under the TRU Propco I Master Lease are scheduled to increase by 10~~.75~~% ~~Senior~~on ~~Notes~~July 1, ~~due~~2014, July 1, ~~fiscal~~2019 ~~2017~~and ~~($929~~July 1, ~~million~~2024. atFuture ~~January 29~~annual related party base rents may be reduced by payments received from Toys-Delaware by the Company as a result of an early termination of a lease, ~~2011)~~as set forth under the terms of the TRU Propco I Master Lease, or the successful execution of the sale of such properties by the Company to a third party. Refer to Note 3 entitled "DISCONTINUED OPERATIONS" for further details regarding the termination payments received from Toys-Delaware.

OnIn ~~July 9,~~addition ~~2009,~~to webase ~~completed~~rents, the ~~offering~~TRU ofPropco ~~$950~~I ~~million~~Master ~~aggregate~~Lease ~~principal~~provides ~~amount~~for oftenant ~~10.75%~~reimbursements ~~senior unsecured notes due fiscal 2017 (the “Notes”). The Notes were issued at a discount~~ of ~~approximately~~specific ~~$25~~property ~~million~~operating ~~which~~expenses ~~resulted~~and inreal ~~the~~estate ~~receipt of proceeds of $925 million~~taxes. WePursuant ~~used~~to the ~~proceeds~~master oflease ~~$925 million from the offering of the Notes~~agreements, ~~together~~we ~~with~~are ~~$138~~also ~~million~~entitled ofto ~~cash contributions~~certain ~~from~~third ~~TRU,~~party ~~proceeds~~sublease ofpayments ~~$124~~that ~~million~~are ~~from~~collected ~~the~~by ~~sale of the Transferred Properties to~~ Toys-Delaware, ~~$99~~on ~~million~~our ofretail ~~restricted~~properties. ~~cash~~During ~~released~~fiscals ~~from restrictions~~2011, 2010 and $12009, ~~million~~we ofrecorded ~~cash on hand to repay the outstanding loan balance under our unsecured credit agreement of~~ $~~1,267~~4 million, ~~plus accrued interest of approximately~~ $13 million and ~~fees at closing of approximately~~ $193 million., ~~Total~~respectively, ~~fees paid in connection with the sale~~ of ~~the~~third ~~Notes~~party ~~totaled~~sublease ~~approximately~~income ~~$23~~as ~~million~~Base ~~and~~rents ~~were deferred~~in ~~and expensed over the life of the Notes. As a result of the repayment of~~ our ~~unsecured~~Consolidated ~~credit~~Statements ~~agreement, we expensed approximately $8 million~~ of ~~deferred financing costs~~Operations. ~~At January 29, 2011, deferred financing expenses recorded for the Notes were $19 million.~~

36Future base rents to be received by us under the TRU Propco I Master Lease as of January 28, 2012 are disclosed in the table below, which reflects the exclusion of the Transferred Properties and the impact of the amendment and restatement of the TRU Propco I Master Lease referred to above:



(In thousands)	Future Related Party Base Rents		Future Third Party Base Rents		Total Future Base Rents
2012	$	214,252	$	2,814	$	217,066
2013	203,641		2,476		206,117
2014	199,947		1,680		201,627
2015	192,844		1,205		194,049
2016	174,870		740		175,610
2017 and subsequent	1,784,033		2,615		1,786,648
Total	$	2,769,587	$	11,530	$	2,781,117

~~The~~Retail ~~Notes~~properties ~~are~~leased ~~solely~~to ~~the~~Toys-Delaware ~~obligation~~consist of ~~the~~locations ~~Company~~which ~~and~~are ~~its~~owned ~~subsidiaries~~outright ~~(the~~by us (“~~Guarantors~~Owned Locations”); ~~and~~locations ~~are not~~which ~~guaranteed~~have bybuildings ~~TRU~~that ~~or Toys-Delaware. The Notes~~ are ~~guaranteed~~owned by ~~the~~us ~~Guarantors, jointly~~ and ~~severally,~~land ~~fully~~which ~~and~~is ~~unconditionally,~~controlled ~~and~~through ~~the~~a ~~indenture~~ground ~~governing~~lease ~~the~~with ~~Notes~~an ~~contains~~unrelated ~~covenants,~~third ~~including,~~party ~~among~~(“Ground ~~other~~Lease ~~things,~~Locations”); ~~covenants~~and locations that ~~restrict the~~are ~~ability~~controlled ofthrough usstraight ~~and~~leases ~~our~~for ~~Guarantors~~land toand ~~incur~~building ~~additional~~which ~~indebtedness,~~we ~~pay~~lease ~~dividends~~from orunrelated ~~make~~third ~~other~~parties ~~distributions,~~(“Straight ~~make~~Lease ~~other~~Locations”). ~~restricted~~For ~~payments~~Owned ~~and investments and create liens~~Locations, ~~and impose restrictions on~~ the ~~ability~~TRU ofPropco ~~the~~I ~~Guarantors~~Master toLease ~~pay dividends~~agreement orcontains ~~make~~predetermined ~~other~~fixed ~~payments. The~~escalations ~~amount~~ of ~~our~~the ~~net~~minimum ~~assets~~rentals ~~that~~on ~~were~~July 1, ~~subject~~2014, July 1, to2019 ~~these~~and ~~restrictions was approximately $43 million as of January~~July 291, ~~2011~~2024. ~~The~~For ~~indenture~~Ground ~~governing~~Lease ~~the~~and ~~Notes~~Straight ~~also~~Lease ~~contains~~Locations, ~~covenants~~the ~~that~~base ~~limit~~rents ~~the~~consist ~~ability~~ of ~~TRU~~a tonet ~~cause~~lease orpayment ~~permit~~plus ~~Toys-Delaware~~the torent ~~incur~~on ~~indebtedness~~the orunderlying ~~make~~ground ~~restricted~~lease ~~payments.~~or ~~These~~straight ~~covenants~~lease ~~are~~with ~~subject~~the tothird ~~a number of important qualifications and limitations~~party. ~~The~~In ~~Notes may be redeemed~~addition, ~~in whole or in part, at any time prior to July 15, 2013 at a price equal to 100% of~~ the ~~principal~~predetermined ~~amount~~fixed ~~plus~~escalations aare ~~“make-whole”~~applied ~~premium,~~separately ~~plus accrued and unpaid interest~~ to ~~the~~these ~~date of redemption~~locations. The ~~Notes~~net ~~will~~lease bepayments ~~redeemable,~~for inground ~~whole~~and orstraight inleases ~~part,~~have atfixed ~~any~~escalations ~~time~~ on ~~or after~~ July 151, ~~2013~~2014, ~~at the specified redemption prices~~ July 1, ~~plus~~2019 ~~accrued~~ and ~~unpaid interest~~July 1, if2024 ~~any.~~pursuant ~~In addition, we may redeem up~~ to ~~35% of~~ the ~~Notes~~TRU ~~before~~Propco ~~July 15,~~I ~~2012~~Master ~~with the net cash proceeds from certain equity offerings~~Lease. ~~Following specified~~The ~~kinds~~escalation offor ~~changes~~the ofunderlying ~~control~~ground ~~with~~and ~~respect~~straight toleases usoccurs oras ~~TRU,~~provided wein ~~will~~each beof ~~required to offer to purchase~~ the ~~Notes~~respective atlease aagreements. ~~purchase~~For ~~price~~substantially inall ~~cash~~of ~~equal~~the toGround ~~101%~~Lease ofand ~~their~~Straight ~~principal~~Lease ~~amount~~Locations, ~~plus~~Toys-Delaware ~~accrued~~has ~~and~~a ~~unpaid~~unilateral ~~interest,~~right ~~if any,~~ to ~~but~~have ~~not~~us ~~including~~ take the ~~purchase~~renewal ~~date.~~option ~~Interest~~at on the ~~Notes~~time isthe ~~payable~~initial inunderlying ~~cash~~lease ~~semi-annually~~term inexpires. ~~arrears~~Deferred ~~through~~related ~~maturity~~party onrevenue ~~January 15~~was ~~and~~approximately ~~July 15~~$1 ofmillion ~~each~~at ~~year~~January 28, ~~commencing~~2012 onand January 1529, ~~2010.~~2011, respectively.

OnThe ~~July 8,~~TRU ~~2010,~~Propco ~~pursuant~~I toMaster aLease ~~registration~~includes ~~rights~~early ~~agreement~~termination ~~between us and the initial purchasers of the Notes~~options, wewhich ~~completed~~can abe ~~registered~~exercised ~~exchange~~by ~~offer~~Toys-Delaware ~~with~~under ~~respect~~specified ~~to the Notes. In accordance with the indenture governing the Notes~~conditions, ~~we commenced a tender offer on June 25~~including, ~~2010~~upon ~~to purchase for cash~~damage, updestruction toor ancondemnation ~~aggregate~~ of ~~approximately~~a ~~$25~~specified ~~million~~percentage of the ~~Notes~~value ator ~~par.~~land ~~The~~area ~~tender~~of ~~offer~~the ~~expired on July 26, 2010 with no holders opting to tender at that time~~property.

~~NOTE 7 – FAIR VALUE MEASUREMENTS~~ 36

ToTable ~~determine the fair value~~ of our assets and liabilities, we utilize the established fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified with Level 3 of the hierarchy). Contents

~~Assets~~As ~~and Liabilities Measured at Fair Value on a Nonrecurring Basis~~ lessee

~~Certain~~Our ofminimum ~~our~~rental ~~assets~~commitments ~~and~~under ~~liabilities~~non-cancelable ~~are~~operating ~~measured~~leases atand ~~fair~~capital ~~value~~leases onwith aunaffiliated ~~nonrecurring~~third ~~basis,~~parties ~~that~~having is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, whenever events or changes in circumstances indicate that a ~~long-lived~~term ~~asset~~of ~~may~~more bethan ~~impaired).~~one ~~The~~year ~~fair value measurements related to long-lived assets held and used were determined using a valuation method such~~ as ~~discounted~~of ~~cash flow or a relative~~January 28, ~~market-based~~2012 ~~approach~~are ~~based on offers. We classify these measurements~~ as ~~Level 3 and Level 2, respectively.~~ follows:

During the fiscal year ended January 29, 2011, the fair value of our long-lived assets evaluated for impairment were approximately $5 million, and have been classified as Level 3 measurements in the fair value hierarchy. We recorded impairment charges of approximately $1 million in fiscal 2010 related to the fair value of our long-lived assets. Because these assets are not measured at fair value on a recurring basis, certain fair value measurements may reflect values at earlier measurement dates and may no longer represent their fair values at January 29, 2011. As of January 29, 2011, we did not have any long-lived assets classified as Level 1 or Level 2 within the fair value hierarchy. During the fiscal year ended January 30, 2010, we did not have any long-lived assets evaluated for impairment.



	Operating Leases	Capital Leases
(In thousands)	Future Minimum Rentals (1)	Lease Financing Obligation

Total Number of Properties

Ground-leased(1)

Space-leased

Filing Compare · Toys R Us Property Co I, LLC