Summary of Accounting Policies

Fiscal Year:The Company’s fiscal year ends on the last Saturday in January. The fiscal year ended January 31, 1998 (fiscal 1998) included 53 weeks. The fiscal years ended January 29, 2000 and January 30, 1999 each included 52 weeks.

Basis of Presentation:The consolidated financial statements of The TJX Companies, Inc. include the financial statements of all the Company’s wholly owned subsidiaries, including its foreign subsidiaries. The financial statements for the applicable periods present the Company’s former Chadwick’s of Boston (Chadwick’s) and Hit or Miss divisions as discontinued operations. The notes pertain to continuing operations except where otherwise noted.

Use of Estimates:The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities, at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash, Cash Equivalents and Short-Term Investments:The Company generally considers highly liquid investments with an initial maturity of three months or less to be cash equivalents. The Company’s investments are primarily high-grade commercial paper, institutional money market funds and time deposits with major banks. The fair value of cash equivalents approximates carrying value.

During September 1999, the Company received 693,537 common shares of Manulife Financial. The shares issued reflect ownership interest in the demutualized insurer due to policies held by the Company. These securities were recorded at market value upon receipt resulting in an $8.5 million pre-tax gain. The Company has classified these Manulife Financial common shares as available-for-sale and includes them in other current assets on the balance sheets. In years prior to fiscal 2000, the Company also held available-for-sale marketable securities received as proceeds from the sale of its former Chadwick’s division (see Note B). Available-for-sale securities are stated at fair market value with unrealized gains or losses, net of income taxes, included as a component of other comprehensive income (loss). Realized gains or losses are included in net income when the securities are sold or disposed of, resulting in a related reclassification adjustment to other comprehensive income (loss).

Merchandise Inventories:Inventories are stated at the lower of cost or market. The Company uses the retail method for valuing inventories on the first-in first-out basis.

Depreciation and Amortization:For financial reporting purposes, the Company provides for depreciation and amortization of property principally by the use of the straight-line method over the estimated useful lives of the assets. Buildings are depreciated over 33 years, leasehold costs and improvements are generally amortized over the lease term or their estimated useful life, whichever is shorter, and furniture, fixtures and equipment are depreciated over 3 to 10 years. Depreciation and amortization expense for property was $154.2 million, $130.4 million and $115.8 million for the fiscal years 2000, 1999 and 1998, respectively. Maintenance and repairs are charged to expense as incurred. Internal costs for the development of software are generally not material and the Company expenses them as incurred. Upon retirement or sale, the cost of disposed assets and the related depreciation are eliminated and any gain or loss is included in net income. Debt discount and related issue expenses are amortized to interest expense over the lives of the related debt issues. Pre-opening costs are expensed as incurred.

Goodwill and Tradename:Goodwill is primarily the excess of the purchase price incurred over the carrying value of the minority interest in the Company’s former 83%-owned subsidiary. The minority interest was acquired pursuant to the Company’s fiscal 1990 restructuring. In addition, goodwill includes the excess of cost over the estimated fair market value of the net assets of Winners Apparel Ltd., acquired by the Company in fiscal 1991. Goodwill, net of amortization, totaled $76.8 million and $79.3 million as of January 29, 2000 and January 30, 1999, respectively, and is being amortized over 40 years on a straight-line basis. Annual amortization of goodwill was $2.6 million in fiscal years 2000, 1999 and 1998. Cumulative amortization as of January 29, 2000 and January 30, 1999 was $27.7 million and $25.1 million, respectively.